SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

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

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

For the fiscal year ended December 2, 1995     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 [ ]

         The  aggregate  market  value at  February  20,  1996 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
$130,984,000.  Solely  for the  purposes  of this  calculation,  shares  held by
directors  and  executive  officers  of the  Registrant  and  members  of  their
respective  immediate  families  sharing the same  household have been excluded.
Such  exclusion  should not be deemed a  determination  or an  admission  by the
Registrant that such individuals are, in fact, affiliates of the Registrant.

         Indicate the number of shares  outstanding of each of the  Registrant's
classes of common  stock,  as of the latest  practicable  date:  At February 20,
1996, there were outstanding 5,897,259 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 April 1, 1996 pursuant to
Regulation 14A are  incorporated by reference in Items 10 through 13 of Part III
of this Annual Report on Form 10-K.
<PAGE>



                              FAB INDUSTRIES, INC.

                               INDEX TO FORM 10-K



Item Number                                                   Page


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

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

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

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

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



<PAGE>



                                     PART I




ITEM 1.           BUSINESS


         Fab  Industries,   Inc.  and  its   subsidiaries   (collectively,   the
"Registrant")  are engaged in the business of  manufacturing  and marketing warp
knit  textile  fabrics,  raschel  laces,  circular  knits,  novelty  knits,  and
polyurethane  coated  bonded  fabrics.  In  addition,  the  Registrant  produces
comforters,  sheets,  blankets  and other  bedding  products.  The  Registrant's
products are generally  non-branded.  The Registrant was incorporated  under the
laws of the State of Delaware on April 21, 1966 and is a successor  by merger to
previously existing businesses.

         The Registrant's  textile  operations consist primarily of knitting and
finishing  synthetic  yarns on tricot and raschel  warp  knitting  machines  and
synthetic  and  natural  yarns on  circular  double  and single  knit  machines.
Products in which the Registrant's textile fabrics are used include a broad line
of ready to wear and intimate  apparel for men,  women and children;  children's
sleepwear;  activewear;  recreational  apparel;  home  furnishing  applications;
over-the-counter fabrics sold to major fabric specialty chain stores; industrial
fabrics; upholstery fabrics for the residential and contract markets; and health
care and consumer product related applications.

         The Registrant  also utilizes its own textile fabrics in its Salisbury,
North Carolina  manufacturing  facility to produce flannel and satin sheets,  as
well as blankets,  comforters  and other bedding  products  which the Registrant
sells to chain stores,  department stores,  specialty stores, catalogue and mail
order concerns,  and domestic and foreign airlines. The Registrant also sells to
the institutional health-care markets.

         The Registrant's Raval Lace Division manufactures raschel lace products
for sale to  manufacturers  of  women's  lingerie  and  women's  and  children's
apparel.  There are also sales in the ribbon  and  craft,  and home  furnishings
trades.  In addition,  the Raval Lace Division  produces  over-the-counter  lace
fabrics for sale to retailers.

         Through its Raval  Designer Lace Division,  the  Registrant  produces a
more intricately  designed lace on the Registrant's  state-of-the-art,  high-bar
electronic  machinery.  The Designer  Lace  products are used in women's  better
designer lingerie, bridal wear, dresses, blouses and sportswear.

         The Registrant's subsidiary, Gem Urethane Corporation,  produces a line
of   polyurethane   coated  fabrics  and  a  variety  of  flame,   adhesive  and
ultrasonically  bonded items.  Products in which the  Registrant's  polyurethane
fabrics are used include shoes, luggage, apparel, accessories, women's handbags,
belts, health care, industrial and automotive products.

         The Registrant engages in research and product  development  activities
which  are  directed  to the  creation  of new  fabrics  and  styles to meet the
continually changing demands of its customers.  Direct expenditures in this area
aggregated  $3,824,000,  $4,347,000 and $4,184,000 in fiscal 1993, 1994 and 1995
respectively. Through these efforts, the Registrant has developed a full line of
proprietary knitted fabrics for sale to manufacturers of

                                        1

<PAGE>



men's, women's and children's apparel, both domestically and in foreign markets.
Similarly,  the Registrant has also developed a full line of proprietary  sheets
and blankets, including specialty blankets for airlines.

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

         The Registrant's products are marketed primarily by its full-time sales
personnel,  although the  Registrant  also utilizes the services of  independent
representatives  located  throughout  much  of the  United  States  and  abroad.
Advertisements  in various media, in cooperation with producers of yarn utilized
by the Registrant, are also employed as a marketing tool.

         Historically,   the  Registrant's   business  reflects  minor  seasonal
variation.  Somewhat  higher  sales are  recorded in the second and third fiscal
quarters as a result of  purchases  by  customers  in  anticipation  of Fall and
Holiday  apparel  sales.  The fourth and first fiscal  quarter  sales tend to be
lower as they are derived from apparel  customer  orders limited to those needed
to replenish  smaller  inventory  requirements  after Fall and Holiday sales and
prior to customer reorders for Spring and Summer fabrications.

         The Registrant  does not deem  information  relating to backlog of firm
orders to be  material,  as goods  subject to such orders are  shipped  within a
relatively short time, usually  two-to-ten weeks,  depending on the availability
of yarn and other raw materials. On average, orders are filled within six weeks.

         For fiscal 1995, the  Registrant's  aggregate  sales to companies under
the common control of Sara Lee Corporation  accounted for  approximately  16% of
the  Registrant's  net  sales.  The  receivables  from this  group of  customers
represent  approximately  22% of the  Registrant's  December  2,  1995  accounts
receivable balance. The Registrant's export sales are not material.


SUPPLIES OF RAW MATERIALS

         The Registrant has not experienced difficulties in obtaining sufficient
chemicals,  dyes and other raw materials and supplies  required to maintain full
production;  nor has it experienced  difficulties in obtaining sufficient yarns.
The Registrant is not dependent upon any single source of supply and alternative
sources are  available  for most of the raw  materials  necessary to conduct its
business.


INVENTORIES

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


                                        2

<PAGE>



COMPETITION

         The  Registrant is engaged in a highly  competitive  business  which is
based largely upon product quality,  service and price and upon general consumer
demand for the finished goods in which the  Registrant's  products are utilized.
The Registrant  believes that there are in excess of 20 other  manufacturers for
its  products.  The  Registrant  believes  that it is one of the major  warp and
circular knit,  raschel lace and urethane  product  manufacturers  in the United
States.  The proportion of imported  textile goods sold in the United States has
increased  substantially in the past few years, and has had an adverse impact on
domestically   manufactured   textile   products  and  the  number  of  domestic
manufacturers of such products.  The Registrant's  strong financial position and
increased  capacity  (the  result of  significant  expenditures  for  production
equipment) have enabled it to capture a larger share of the now smaller domestic
textile market.

EMPLOYEES

         The  Registrant's  employees  who  number  approximately  1,600 are not
represented by unions. The Registrant  considers relations with its employees to
be satisfactory.


ITEM 2.           PROPERTIES.

         The Registrant's  manufacturing  operations are conducted in facilities
owned by the Registrant in Lincolnton,  Maiden, Cherryville and Salisbury, which
are all in  North  Carolina,  and in  facilities  leased  by the  Registrant  in
Amsterdam,  New York. All of the Registrant's  facilities are generally utilized
on a full-time, five to six day-a-week basis.

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

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

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


                                       3
<PAGE>
<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                Raschel and Tricot
Carolina             Warp Knitting, Printing
                     and Warehouse

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

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

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

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

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

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

New York,            Executive Offices and         33,000 sq. ft.           4/30/96 (3)
New York             Showroom Facilities

</TABLE>

------------------------
(1) Owned by the Registrant.
(2) Capitalized  building lease - See note 5 of Notes to Consolidated  Financial
    Statements.
(3) Registrant is currently negotiating a new lease.

         All of the Registrant's  facilities are constructed of brick,  steel or
concrete  and  are  considered  by the  Registrant  to be  adequate  and in good
operating condition and repair.


ITEM 3.           LEGAL PROCEEDINGS.

         There are no material pending legal proceedings to which the Registrant
or any of its  subsidiaries  is a party  or of  which  any of  their  respective
properties are the subject.

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

         Not Applicable


                                       4
<PAGE>



EXECUTIVE OFFICERS OF THE REGISTRANT

         The  following  table sets forth  certain  information  concerning  the
executive officers of the Registrant as of February 20, 1996.


NAME                  AGE    POSITIONS AND OFFICES

Samson Bitensky...... 76     Chairman of the Board of Directors, President and
                             Chief Executive Officer

David A. Miller...... 58     Vice President-Finance and Treasurer


Stanley August....... 64     Vice President

Steven Myers......... 47     Vice President

Sherman S. Lawrence.. 77     Secretary and Director


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

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

         DAVID A. MILLER has been employed by the Registrant  since 1966 and has
served as its Controller  from 1973 until December 7, 1995 and as Vice President
- Finance and Treasurer  since  December 7, 1995. On December 6, 1995 Mr. Howard
Soren,  Chief Financial  Officer,  Vice  President-Finance  and Treasurer of the
Registrant since 1972 retired from the Registrant.

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

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

         SHERMAN S.  LAWRENCE has served as a Director of the  Registrant  since
1966 and as  Secretary  since 1968.  Mr.  Lawrence  has been an attorney  for in
excess of the past five years and also serves as co-counsel to the Registrant.






                                       5
<PAGE>



                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

         The Registrant'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 1995

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

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

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

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

FISCAL 1994

First Quarter....................  $ 36            $ 33 3/8

Second Quarter...................  $ 36 1/8        $ 33 7/8

Third Quarter....................  $ 34 7/8        $ 31 7/8

Fourth Quarter...................  $ 32 3/4        $ 30 3/8



          At February 20, 1996, there were  approximately  736 holders of record
of Common  Stock.  For fiscal 1994,  quarterly  dividends of $.16 per share were
declared on March 18,  1994,  June 16,  1994,  August 18, 1994 and  November 28,
1994.  For fiscal 1995,  a quarterly  dividend of $.16 per share was declared on
February 13, 1995 and  quarterly  dividends of $.175 per share were  declared on
May 22, 1995, August 21, 1995 and November 27, 1995. The payment of further cash
dividends  will be at the  discretion  of the Board of Directors and will depend
upon,  among other  things,  earnings,  capital  requirements  and the financial
condition of the Registrant.



                                       6
<PAGE>



ITEM 6.           SELECTED CONSOLIDATED FINANCIAL DATA.

<TABLE>
<CAPTION>

                                                 As at or for the fiscal year ended
                        December 2,   December 3,  November 27,  November 28,    November 30,
                          1995         1994(3)       1993          1992              1991
                                           (In thousands, except share data)

<S>                    <C>         <C>          <C>          <C>              <C>  
Net Sales ..........   $  182,000   $  189,753   $  189,586   $  189,288       $  185,560

Income before taxes
  on income ........       13,760       22,428       25,531       25,767           23,088

Net income .........        9,410       15,093       17,006       16,917           15,488
 
Earnings per .......         1.57         2.44         2.75         2.65             2.52
share(1)

Total assets .......      161,027      163,133      157,499      138,952          140,119

Long-term debt .....          678          731          799          822              862

Stockholders' equity      132,932      129,533      124,326      109,172          109,450

Book value per
  share (1) (2) ....        22.42        21.52        19.98        18.01            17.70

Cash dividends
  per share(1) .....         .685          .64          .64          .50              .50

Weighted average
 number of shares
 outstanding(1) ....    5,981,690    6,189,831    6,181,186    6,390,706        6,141,495

</TABLE>

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

(1) Adjusted to give effect to a two-for-one stock split to holders of record as
    of May 24, 1991.

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

(3) Fifty-three weeks.


                                       7
<PAGE>



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


RESULTS OF OPERATIONS

         FISCAL 1995 COMPARED TO FISCAL 1994

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

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

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

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

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

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

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

         FISCAL 1994 COMPARED TO FISCAL 1993

         Net sales for the 1994  fiscal  year were  $189,753,000  as compared to
$189,586,000  in 1993. An increase of 11.2% in fourth quarter  shipments  offset
the sales  decline for the first nine months of fiscal 1994.  Mid-year  customer
demand, which had been adversely


                                       8
<PAGE>
         


affected by postponement  of scheduled  deliveries by several large customers as
well as weak consumer purchasing at the retail level,  strengthened in the final
quarter of fiscal 1994, which also contained an extra week. Improved comparative
shipments also continued into December and January of fiscal 1995.

         Average profit  margins  declined from 20.4% in fiscal 1993 to 19.7% in
1994,  primarily as a result of a less profitable  product mix. Plant operations
were also adversely  impacted by the changed  product mix as operating  rates at
certain related  manufacturing  facilities declined from fiscal 1993 levels. The
effect of changes in LIFO inventory reserves was negligible in both years.

         Selling, general and administrative expenses, as a percentage of sales,
increased from 8.9% in fiscal 1993 to 9.4% as dollar  expenditures  rose 5.3% on
similar volume. The increase relates primarily to higher consulting fees as well
as sales associated expenses.

         Other income decreased by $917,000 to $2,809,000. Although interest and
dividend  income  increased by 10% to  $3,410,000  (mainly as a result of larger
balances  available  for  investments),  losses on  marketable  securities  were
realized  in the amount of  $473,000 as compared to a gain of $738,000 in fiscal
1993. A series of increases in interest  rates by the Federal  Reserve  Board as
well as expectations by financial  markets of continued rising rates resulted in
declines  in  the  market  value  of  portions  of the  Registrant's  investment
portfolio.

         Notwithstanding  a slight increase in the Federal  statutory income tax
rate for fiscal 1994, the overall effective income tax rate declined to 32.7% as
against  33.4% for fiscal  1993.  An  increase  in  tax-exempt  interest  income
accounted for the decline.

         As a result  of  these  factors,  net  income  declined  by  11.2%,  to
$15,093,000 from $17,006,000 in fiscal 1993. Earnings per share, which are based
on the  average  number of shares  outstanding  during  the year,  were $2.44 in
fiscal  1994 as  compared to $2.75 in 1993.  There was no stock  option  related
dilution in either year.

         LIQUIDITY AND CAPITAL RESOURCES

         The  Registrant's  principal  source of funds continues to be cash flow
generated from operations.  Net cash provided by operating  activities in fiscal
1995 was $13,230,000 as compared to $18,587,000 in the comparative  1994 period.
This decrease relates principally to a decline of $5,683,000 in net income.

         Capital  expenditures  for the current  fiscal year were  $5,215,000 as
against  $7,364,000 in the 1994  comparable  period.  The  Registrant  purchased
additional  high speed knitting  machines and dyeing and finishing  equipment to
increase  manufacturing  efficiencies  and reduce unit costs, and also installed
energy conservation related equipment in its production facilities.

         During fiscal 1995,  the Registrant  repurchased  144,931 shares of its
Common  Stock at an average  price of $31.18 per  share,  for a total  outlay of
$4,519,000.  Subsequent to the fiscal  year-end,  the Registrant  repurchased an
additional 31,200 shares at an average price of $30.05 per share. The Registrant
intends to continue to purchase shares of its Common Stock from  time-to-time as
market conditions warrant and price criteria are met.



                                       9
<PAGE>



         During fiscal 1995, the Registrant declared regular quarterly dividends
totaling  $0.685 per  share.  In  addition,  the  Registrant  declared a regular
quarterly dividend of $0.175 per share payable March 8, 1996, to stockholders of
record as of February 23, 1996.

         Stockholders'  equity  rose to  $132,932,000,  or $22.42 book value per
share, from $129,533,000, or $21.52 per share, at the previous fiscal year-end.

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

         INFLATION

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

         RECENT ACCOUNTING STANDARDS

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

         In October  1995,  the  Financial  Accounting  Standards  Board  Issued
Statement of Financial  Accounting  Standard No. 123 "Accounting for Stock-Based
Compensation"  ("SFAS No. 123"). SFAS No. 123 encourages  entities to adopt that
method in place of the provisions of Accounting  Principles Board Opinion No. 25
"Accounting for Stock Issued to Employees"  ("APB No. 25"), for all arrangements
under which employees receive shares of stock or other equity instruments of the
employer or the employer incurs liabilities to employees in amounts based on the
price of its stock. The Registrant does not anticipate adopting SFAS No. 123 and
will continue to account for such transactions in accordance with APB No. 25.


ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         See pages F-1 and S-1.


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

         Not Applicable.


                                       10
<PAGE>



                                    PART III


ITEM 10.          DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

         See Part I,  Item 4.  "Executive  Officers  of the  Registrant."  Other
information  required  by this  item  is  incorporated  by  reference  from  the
Registrant's definitive proxy statement to be filed not later than April 1, 1996
pursuant  to  Regulation  14A of the  General  Rules and  Regulations  under the
Securities Exchange Act of 1934, as amended ("Regulation 14A").


ITEM 11.          EXECUTIVE COMPENSATION.

         The information required by this item is incorporated by reference from
the Registrant's  definitive proxy statement to be filed not later than April 1,
1996 pursuant to Regulation 14A.


ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The information required by this item is incorporated by reference from
the Registrant's  definitive proxy statement to be filed not later than April 1,
1996 pursuant to Regulation 14A.


ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         The information required by this item is incorporated by reference from
the Registrant's  definitive proxy statement to be filed not later than April 1,
1996 pursuant to Regulation 14A.




                                       11
<PAGE>



                                     PART IV


ITEM 14.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

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

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

       (3)        Exhibits.


         EXHIBIT                  DESCRIPTION OF EXHIBIT

         3.1     - Restated Certificate of Incorporation, incorporated by
                   reference to Exhibit 3.1 to the Registrant'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 Registrant's Annual Report on Form 10-K for the
                   fiscal year ended December 3, 1994 (the "1994 10-K").

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

         4.2     - Rights Agreement dated as of June 6, 1990 between
                   the Registrant 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
                   Registrant and Manufacturers Hanover Trust Company
                   dated as of May 24, 1991, incorporated by reference to
                   Exhibit 4.3 to the 1993 10-K.

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



                                       12
<PAGE>



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

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

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

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

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

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

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

         *10.9    - Amendment to the Retirement Plan dated September
                    21, 1995.

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

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

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

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

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


                                       13
<PAGE>




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

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

         *10.17  -  Amendment dated September 1, 1995 to the Profit
                    Sharing Plan.

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

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

         10.20    - 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.

         10.21    - 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.

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

         10.23    - Restricted Share Agreement dated October 1, 1991
                    between the Registrant and Steven Myers, incorporated
                    by reference to Exhibit 10.21 to the 1993 10-K.

         10.24    - Restricted Share Agreement dated October 1, 1991
                    between the Registrant and Howard Soren, incorporated
                    by reference to Exhibit 10.22 to the 1993 10-K.

         10.25    - Restricted Share Agreement dated October 1, 1991
                    between the Registrant and Stanley August, incor-
                    porated by reference to Exhibit 10.23 to the 1993 10-K.

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


                                       14
<PAGE>


         *10.27    -  Amendment dated September 21, 1995 to the
                      Employee Stock Ownership Plan.

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

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

         *23       - Consent of BDO Seidman, LLP.

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

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

*    Filed herewith
**   Filed with EDGAR version only

         (b)  Reports on Form 8-K: None



                                       15
<PAGE>
                      FAB INDUSTRIES, INC. AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS
                                FORM 10-K ITEM 8

              FISCAL YEARS ENDED DECEMBER 2, 1995, DECEMBER 3, 1994
                              AND NOVEMBER 27, 1993



                                       F-1

<PAGE>





                      FAB INDUSTRIES, INC. AND SUBSIDIARIES




                                    CONTENTS



REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS                          F-3

CONSOLIDATED FINANCIAL STATEMENTS:
  Balance sheets                                                            F-4
  Statements of income                                                      F-5
  Statements of stockholders' equity                                        F-6
  Statements of cash flows                                                  F-7

SUMMARY OF ACCOUNTING POLICIES                                        F-8 - F-9

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                          F-10 - F-20




                                       F-2

<PAGE>





               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



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



We have audited the  consolidated  balance  sheets of Fab  Industries,  Inc. and
subsidiaries  as of  December  2,  1995 and  December  3,  1994 and the  related
consolidated statements of income,  stockholders' equity and cash flows for each
of the three  fiscal years in the period  ended  December 2, 1995.  We have also
audited  the  schedule  listed  in the  index on page  S-2.  These  consolidated
financial  statements  and  schedule  are the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements and schedule based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable  assurance  about whether the financial  statements  and schedule are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence supporting the amounts and disclosures in the financial  statements and
schedule.  An audit also includes  assessing the accounting  principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
presentation  of the  financial  statements  and  schedule.  We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the financial position of Fab Industries, Inc.
and subsidiaries as of December 2, 1995 and December 3, 1994, and the results of
their  operations and their cash flows for each of the three fiscal years in the
period ended December 2, 1995 in conformity with generally  accepted  accounting
principles.

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


                                                   /s/ BDO Seidman, LLP

New York, New York
February 9, 1996


                                       F-3

<PAGE>



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

                                                                 December 2,            December 3,
                                                                    1995                   1994
ASSETS

CURRENT:
<S>                                                            <C>                    <C>          
    Cash and cash equivalents (Note 1)                         $   7,883,000          $  11,143,000
    Investment securities available-for-sale (Note 2)             54,674,000              6,181,000
    Investment securities held-to-maturity (Note 2)                        -             12,604,000
    Accounts receivable, net of allowance of $500,000
     and $950,000 for doubtful accounts (Note 13)                 35,217,000             32,590,000
    Inventories (Note 3)                                          27,267,000             29,994,000
    Deferred income taxes (Note 9)                                         -                274,000
    Other current assets                                           1,970,000              2,355,000
                                                                  ----------          -------------
       TOTAL CURRENT ASSETS                                      127,011,000             95,141,000

INVESTMENT SECURITIES HELD-TO-MATURITY,
 DUE AFTER ONE YEAR (NOTE 2)                                               -             33,873,000
PROPERTY, PLANT AND EQUIPMENT - NET (NOTE 4)                      31,579,000             31,932,000
OTHER ASSETS                                                       2,437,000              2,187,000
                                                                  ----------            -----------
                                                                $161,027,000           $163,133,000
                                                                ============           ============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT:
    Accounts payable                                            $ 12,661,000          $  14,289,000
    Corporate income and other taxes                               1,886,000              2,014,000
    Payable to broker (purchase of treasury stock)                         -              3,798,000
    Accrued payroll and related expenses                           4,295,000              4,787,000
    Dividends payable                                              1,038,000                963,000
    Other current liabilities                                        470,000                412,000
    Deferred income taxes (Note 9)                                   246,000                      -
                                                                  ----------              ---------
       TOTAL CURRENT LIABILITIES                                  20,596,000             26,263,000

OBLIGATIONS UNDER CAPITAL LEASES, NET OF CURRENT
 MATURITIES (NOTE 5)                                                 678,000                731,000
OTHER NONCURRENT LIABILITIES                                       1,961,000              1,469,000
DEFERRED INCOME TAXES (NOTE 9)                                     4,860,000              5,137,000
                                                                 -----------            -----------
       TOTAL LIABILITIES                                          28,095,000             33,600,000

COMMITMENTS (NOTES 8 AND 10)
STOCKHOLDERS' EQUITY (NOTES 2, 6, 7, 8, 9 AND 10): 
     Preferred stock, $1 par value
    - shares authorized
     2,000,000; none issued                                                -                      -
    Common stock, $.20 par value - shares authorized
     15,000,000; issued 6,549,894 and 6,493,494                    1,309,000              1,298,000
    Additional paid-in capital                                     6,150,000              5,214,000
    Retained earnings                                            152,473,000            147,154,000
    Loan to employee stock ownership plan                         (8,697,000)            (9,487,000)
    Net unrealized holding gain (loss) on investment
     securities available-for-sale, net of taxes                     224,000               (314,000)
    Unearned restricted stock compensation                          (228,000)              (552,000)
    Cost of common stock held in treasury - 619,635
     and 474,704 shares                                          (18,299,000)           (13,780,000)
                                                                ------------           ------------

       TOTAL STOCKHOLDERS' EQUITY                                132,932,000            129,533,000
                                                                ------------           ------------
                                                                $161,027,000           $163,133,000
                                                                ============           ============
</TABLE>
                                                     
                         See accompanying summary of accounting
                             policies and notes to consolidated 
                             financial statements.              
                          


                                       F-4

<PAGE>



                      FAB INDUSTRIES, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>

                                                                              Fiscal year ended

                                                            December 2,            December 3,          November 27,
                                                               1995                   1994                  1993

<S>                                                       <C>                   <C>                  <C>            
NET SALES (NOTE 13)                                       $ 182,000,000         $  189,753,000       $   189,586,000

COST OF GOODS SOLD                                          154,956,000            152,372,000           150,906,000
                                                           ------------           ------------          ------------

    GROSS PROFIT                                             27,044,000             37,381,000            38,680,000

SELLING, SHIPPING AND ADMINISTRATIVE
 EXPENSES                                                    17,342,000             17,762,000            16,875,000
                                                            -----------            -----------           -----------

    OPERATING INCOME                                          9,702,000             19,619,000            21,805,000
                                                            -----------            -----------           -----------

OTHER INCOME (EXPENSES):
    Interest and dividend income (Note 12)                    3,676,000              3,410,000             3,099,000
    Interest expense                                           (129,000)              (128,000)             (111,000)
    Net gain (loss) on investment securities (Note 2)           511,000               (473,000)              738,000
                                                             ----------            ------------         ------------

     TOTAL OTHER INCOME                                       4,058,000              2,809,000             3,726,000
                                                             ----------             ----------           -----------

INCOME BEFORE TAXES                                          13,760,000             22,428,000            25,531,000

TAXES ON INCOME (NOTE 9)                                      4,350,000              7,335,000             8,525,000
                                                             ----------             ----------            ----------

NET INCOME                                                $   9,410,000         $   15,093,000         $  17,006,000
                                                             ==========            ===========           ===========

EARNINGS PER SHARE                                        $        1.57         $         2.44        $         2.75
                                                             ==========          =============         =============

WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON
 STOCK OUTSTANDING                                            5,981,690              6,189,831             6,181,186
                                                             ==========          =============         =============

CASH DIVIDENDS DECLARED PER SHARE (NOTE 11)                  $     .685         $          .64       $           .64
                                                             ==========         ==============       ===============
</TABLE>
                       See accompanying summary of accounting 
                          policies and notes to consolidated  
                          financial statements.               
                       



                                       F-5

<PAGE>



                      FAB INDUSTRIES, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                        Common Stock                                                                       
       
                                                                                     Loan to        Net
                                                                                    employee     unrealized   Unearned
                                                            Additional                stock        holding    restricted
                                       Number of             paid-in     Retained   ownership       gain       stock       
                           Total         shares    Amount    capital     earnings     plan         (loss)   compensation   

<S>                     <C>            <C>       <C>        <C>        <C>          <C>           <C>       <C>     
Balance, November 28,
  1992                  $109,172,000   6,231,394 $1,246,000 $1,163,000 $122,971,000 $(11,067,000) $      -  $(1,144,000)   

  Net income -
   fiscal 1993            17,006,000           -          -          -   17,006,000            -         -           -     

  Cash dividends,
     $.64 per share       (3,983,000)          -          -          -   (3,983,000)           -         -           -     

  Exercise of stock
   options                 3,817,000     246,300     49,000  3,768,000            -            -         -           -     

  Purchase of treasury
   stock                  (2,788,000)          -          -          -            -            -         -           -     

  Compensation under
   restricted stock
   plan (Note 6)             312,000           -          -          -            -            -        -       312,000    

  Payment of loan from
   ESOP (Note 8)             790,000           -          -          -            -      790,000        -             -    
                         -----------  ----------  ---------  ---------  -----------  -----------   ------   -----------

Balance, November 27,
 1993                    124,326,000   6,477,694  1,295,000  4,931,000  135,994,000  (10,277,000)       -      (832,000)   

  Net income -
   fiscal 1994            15,093,000           -          -          -   15,093,000            -        -             -    

  Cash dividends,
   $.64 per share         (3,933,000)          -          -          -   (3,933,000)           -        -             -    

  Exercise of stock
   options                   279,000      15,800      3,000    276,000            -            -        -             -    

  Purchase of treasury
   stock                  (7,023,000)          -          -          -            -            -        -             -    

  Compensation under
   restricted stock
   plan (Note 6)             315,000           -          -          -            -            -        -       315,000    

  Payment of loan from
   ESOP (Note 8)             790,000           -          -          -            -      790,000        -             -    

  Issuance of treasury
    stock under restricted
    stock plan                     -           -          -      7,000            -            -        -       (35,000)   

  Net unrealized holding
   loss on investment
   securities  available-
   for-sale, net of taxes   (314,000)          -          -          -            -            - (314,000)            -    
                         -----------  ----------  ---------  ---------  -----------  -----------   ------   -----------

Balance, December 3,
 1994                    129,533,000   6,493,494  1,298,000  5,214,000  147,154,000   (9,487,000)(314,000)     (552,000)   

  Net income -
   fiscal 1995             9,410,000          -          -            -   9,410,000            -        -             -    

  Cash dividends,
   $.685 per share        (4,091,000)         -          -            -  (4,091,000)           -        -             -    

  Exercise of stock
   options                   947,000     56,400     11,000      936,000           -            -        -             -    

  Purchase of treasury
   stock                  (4,519,000)         -          -            -           -            -        -             -    

  Compensation under
   restricted stock
   plan (Note 6)             324,000          -          -           -            -            -        -       324,000    

  Change in net unrealized
   holding gain (loss) on
   investment securities
   available-for-sale,
   net of taxes              538,000          -          -           -            -            -  538,000             -    

  Payment of loan from
   ESOP (Note 8)             790,000          -          -           -            -      790,000        -             -    
                         -----------  ----------  ---------  ---------  -----------  -----------   ------   -----------

Balance, December 2,
 1995                   $132,932,000   6,549,894 $1,309,000 $6,150,000 $152,473,000 $ (8,697,000)$224,000   $  (228,000)   
                        ============   =========  ========= ==========  =========== ============  =======    ==========

</TABLE>

Note:  The Company has 2,000,000  shares of authorized,  but unissued  preferred
stock.


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


                                                  Treasury Stock      
                                                                      
                                                                      
                                              Number of               
                                               shares       Cost      
Balance, November 28,                                                 
  1992                                        (169,692)  $ (3,997,000)
                                                                      
  Net income -                                                        
   fiscal 1993                                       -              - 
                                                                      
  Cash dividends,                                                     
     $.64 per share                                  -              - 
                                                                      
  Exercise of stock                                                   
   options                                           -              - 
                                                                      
  Purchase of treasury                                                
   stock                                       (84,169)    (2,788,000)
                                                                      
  Compensation under                                                  
   restricted stock                                                   
   plan (Note 6)                                     -              - 
                                                                      
  Payment of loan from                                                
   ESOP (Note 8)                                     -              - 
                                               -------      ----------
                                                                      
Balance, November 27,                                                 
 1993                                         (253,861)    (6,785,000)
                                                                      
  Net income -                                                        
   fiscal 1994                                       -              - 
                                                                      
  Cash dividends,                                                     
   $.64 per share                                    -              - 
                                                                      
  Exercise of stock                                                   
   options                                           -              - 
                                                                      
  Purchase of treasury                                                
   stock                                      (221,843)    (7,023,000)
                                                                      
  Compensation under                                                  
   restricted stock                                                   
   plan (Note 6)                                     -              - 
                                                                      
  Payment of loan from                                                
   ESOP (Note 8)                                     -              - 
                                                                      
  Issuance of treasury                                                
    stock under restricted                                            
    stock plan                                   1,000         28,000 
                                                                      
  Net unrealized holding                                              
   loss on investment                                                 
   securities  available-                                             
   for-sale, net of taxes                            -              - 
                                               -------       ---------    
                                                                      
Balance, December 3,                                                  
 1994                                         (474,704)   (13,780,000)
                                                                      
  Net income -                                                        
   fiscal 1995                                       -              - 
                                                                      
  Cash dividends,                                                     
   $.685 per share                                   -              - 
                                                                      
  Exercise of stock                                                   
   options                                           -              - 
                                                                      
  Purchase of treasury                                                
   stock                                      (144,931)    (4,519,000)
                                                                      
  Compensation under                                                  
   restricted stock                                                   
   plan (Note 6)                                     -              - 
                                                                      
  Change in net unrealized                                            
   holding gain (loss) on                                             
   investment securities                                              
   available-for-sale,                                                
   net of taxes                                      -              - 
                                                                      
  Payment of loan from                                                
   ESOP (Note 8)                                     -              - 
                                              --------    -----------        
                                                                      
Balance, December 2,                                                  
 1995                                         (619,635)  $(18,299,000)
                                              =========   ===========

Note:  The Company has 2,000,000  shares of authorized,  but unissued  preferred
stock.

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

                                       F-6

<PAGE>



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

<TABLE>
<CAPTION>
                                                                        Fiscal year ended
                                                             December 2,            December 3,          November 27,
                                                                1995                   1994                  1993
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                        <C>                      <C>                   <C>        
    Net income                                             $   9,410,000            $15,093,000           $17,006,000
    Adjustments to reconcile net
       income to net cash provided
       by operating activities:
          Provision for doubtful accounts                        400,000                300,000               600,000
          Depreciation and amortization                        5,568,000              5,425,000             5,366,000
          Deferred income taxes                                 (121,000)               402,000              (696,000)
          Compensation under restricted
             stock plan                                          324,000                315,000               312,000
          Net (gain) loss on investment
             securities                                         (511,000)               473,000              (738,000)
          Decrease (increase) in:
             Accounts receivable                              (3,027,000)             2,793,000            (5,928,000)
             Inventories                                       2,727,000             (5,672,000)              128,000
             Other current assets                                385,000                (37,000)             (624,000)
             Other assets                                       (250,000)              (175,000)             (547,000)
          Increase (decrease) in:
             Accounts payable                                 (1,628,000)               777,000             2,330,000
             Accruals and other liabilities                     (122,000)            (1,107,000)            1,276,000


NET CASH PROVIDED BY OPERATING ACTIVITIES                     13,155,000             18,587,000            18,485,000


CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchases of property, plant and equipment                (5,215,000)            (7,364,000)           (4,942,000)
    Proceeds from sales of investment securities               9,746,000              7,110,000             4,760,000
    Acquisition of investment securities                     (10,350,000)            (8,429,000)          (26,057,000)


NET CASH USED IN INVESTING ACTIVITIES                         (5,819,000)            (8,683,000)          (26,239,000)


CASH FLOWS FROM FINANCING ACTIVITIES:
    Purchase of treasury stock                                (8,317,000)            (3,225,000)           (2,788,000)
    Principal repayment on loan to employee
       stock ownership plan                                      790,000                790,000               790,000
    Dividends                                                 (4,016,000)            (6,953,000)           (3,983,000)
    Exercise of stock options                                    947,000                279,000             3,817,000


NET CASH USED IN FINANCING ACTIVITIES                        (10,596,000)            (9,109,000)           (2,164,000)


INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS              (3,260,000)               795,000            (9,918,000)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                  11,143,000             10,348,000            20,266,000


CASH AND CASH EQUIVALENTS, END OF YEAR                     $   7,883,000            $11,143,000           $10,348,000

</TABLE>

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

                                       F-7

<PAGE>



                      FAB INDUSTRIES, INC. AND SUBSIDIARIES
                         SUMMARY OF ACCOUNTING POLICIES

BUSINESS:
   Fab  Industries,  Inc.  (the  "Company") is a major  manufacturer  of knitted
textile fabrics, laces and finished home products as well as polyurethane coated
fabrics. Sales of textile products comprised  substantially all of the Company's
sales in fiscal  1995,  1994 and 1993,  and such  sales were  primarily  made to
United  States  customers.  Accordingly,  the  Company  considers  itself  to be
operating in a single segment business.

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

FISCAL YEAR:
   The Company's fiscal year ends on the Saturday closest to November 30. Fiscal
1995 and 1993 had fifty- two weeks, and fiscal 1994 had fifty three weeks.

RISKS AND UNCERTAINTIES:

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

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

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

INVESTMENTS:
   Effective  as of the  fourth  quarter of fiscal  1994,  the  Company  adopted
Statement of Financial Accounting Standards No. 115 (SFAS 115),  "Accounting for
Certain  Investments  in  Debt  and  Equity  Securities".   SFAS  115  addresses
accounting and reporting for investments in equity  securities that have readily
determinable fair values and for all investments in debt securities. Investments
in such securities are to be classified as either held-to-maturity,  trading, or
available-for-sale.


                                       F-8

<PAGE>



                      FAB INDUSTRIES, INC. AND SUBSIDIARIES
                         SUMMARY OF ACCOUNTING POLICIES

  Investment  securities  classified as  available-for-sale  are carried at fair
value with unrealized holding gains and losses, net of any tax effect,  recorded
as a separate  component of  stockholders'  equity.  In fiscal 1994, the Company
classified certain investment securities as held-to-maturity.  Due to changes in
management's   investment   philosophy  during  fiscal  1995,  the  Company  has
transferred    investment   securities   from   the   held-tomaturity   to   the
available-for-sale  category.  As a result,  all  investment  securities are now
classified  as  available-for-sale.  The effect of this  change was to  increase
stockholders'  equity by $167,000,  representing the net unrealized holding gain
on these securities, net of taxes, at the date of the change.

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

   The cumulative effect of adopting SFAS 115 was not material.

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

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

RESEARCH AND DEVELOPMENT COSTS:
   Research and  development  costs are charged to expenses in the year incurred
and amounted to $4,184,000  $4,347,000 and  $3,824,000 in fiscal 1995,  1994 and
1993, respectively.

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

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

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

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

RECLASSIFICATION:
   Certain fiscal 1994 and 1993 balances were  reclassified  to conform with the
fiscal 1995 presentation.

                                       F-9

<PAGE>



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



NOTE 1 - CASH AND CASH EQUIVALENTS
--------------------------------------------------------------------------------


   Cash and cash  equivalents at December 2, 1995 and December 3, 1994 consisted
of the following (in thousands):

                                                  1995                1994
                                                 ------             ------
Cash                                             $1,335            $ 1,490
Tax-free short-term debt instruments              6,548              9,653
                                                 ------             ------

                                                 $7,883            $11,143
                                                 ======            =======

NOTE 2 - INVESTMENT SECURITIES
--------------------------------------------------------------------------------


   Investment securities  available-for-sale at December 2, 1995 and December 3,
1994 consisted of the following (in thousands):

                                           Gross          Gross
                                         Unrealized     Unrealized
                               Cost    Holding Gain   Holding Loss   Fair Value

       1995:

Equities                    $  1,814        $109          $(259)       $  1,664
U.S. Treasury obligations         52           -              -              52
Tax-exempt obligations        47,769         578            (79)         48,268
Corporate bonds                4,665         116            (91)          4,690
                             -------        ----          -----         -------

                             $54,300        $803          $(429)        $54,674
                             =======        ====          =====         =======


       1994:

Equities                    $  6,709        $313         $(841)        $  6,181
                             =======        ====          =====         =======


   At  December  3,  1994,  the  carrying  value and  estimated  fair  values of
investment securities held-to-maturity were as follows:
                                              Gross        Gross
                             Amortized     Unrealized   Unrealized
                               Cost           Gain         Loss       Fair Value

U.S. Government securities    $     69        $  -        $    -      $     69
Corporate bonds                  5,800           8          (346)        5,462
Tax exempt obligations          40,608          18          (617)       40,009
                            ----------       ------       -------     --------
                                                      
                               $46,477         $26         $(963)      $45,540
                               =======         ===         ======      =======
                                                         

                                      F-10

<PAGE>



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





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

                                                 Cost              Fair Value
Maturing in one year or less                    $11,321               $11,333
Maturing after one year through five years       31,711                32,117
Maturing after five years through ten years       9,454                 9,560
                                                -------               -------

                                                $52,486               $53,010
                                                =======               =======


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

                                          1995                  1994
                                          ----                  ----

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

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



NOTE 3 - INVENTORIES:
--------------------------------------------------------------------------------


   Inventories  at  December  2,  1995 and  December  3, 1994  consisted  of the
following (in thousands, except for percentages):

                                                    1995                  1994
                                                   -------               ------

Raw materials                                     $11,753               $12,817
Work-in process                                     7,675                 7,908
Finished goods                                      7,839                 9,269
                                                  -------               -------

                                                  $27,267               $29,994
                                                  =======               =======

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

Excess of FIFO valuation over LIFO valuation     $  7,903              $  7,010
                                                 ========               =======



                                      F-11

<PAGE>



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





NOTE 4 - PROPERTY, PLANT AND EQUIPMENT
--------------------------------------------------------------------------------


   Property,  plant and  equipment  at  December  2, 1995 and  December  3, 1994
consisted of the following (in thousands):

                                                       1995         1994
                                                     --------     ------
Owned by the Company:
    Land and improvements                            $    698     $    673
    Buildings and improvements                         12,668       12,362
    Machinery and equipment                            86,405       81,561
    Trucks and automobiles                              1,538        1,498
    Office equipment                                      656          656
    Leasehold improvements                                808          808
                                                     --------      -------

                                                      102,773       97,558
Property under capital leases:
    Land                                                   18           18
    Buildings and improvements                          1,432        1,432
                                                     --------     --------

                                                      104,223       99,008
Less: Accumulated depreciation and amortization        72,644       67,076
                                                     --------     --------

                                                     $ 31,579      $31,932
                                                     ========      =======

                                      F-12

<PAGE>



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


NOTE 5 - OBLIGATIONS UNDER CAPITAL LEASES
--------------------------------------------------------------------------------


   Obligations  under  capital  leases at December 2, 1995 and  December 3, 1994
consisted of the following (in thousands):

                                                                   1995    1994
                                                                   ----    ----
Obligations under capital leases through 2006 payable in monthly
  installments of $11 including interest at 10% per annum          $706    $759

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

                                                                   $678    $731
                                                                    ====   ====

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

Fiscal year ending (in thousands):
                                            1997           $  61
                                            1998              67
                                            1999              73
                                            2000              79
                                            Thereafter       398
                                                            ----
                                                            $678

NOTE 6 - STOCK COMPENSATION PLANS:
--------------------------------------------------------------------------------


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

   During  fiscal 1995 and 1993,  no options were  granted.  During fiscal 1994,
options covering 10,000 shares were granted.

   During fiscal 1995, 1994 and 1993 options covering 56,400, 15,800 and 246,300
shares,  respectively,  were  exercised  and during the same period  options for
1,800, 13,400 and 1,700 shares were cancelled.

   As of the end of fiscal 1995,  1994 and 1993,  respectively,  the Company had
outstanding  incentive  stock  options for the purchase of 129,200,  187,400 and
206,600  shares;  168,800,  167,000 and 163,600 shares were still  available for
future  grants.  The  exercise  prices  range  from  $15.44 to $33.88 per share,
expiring at various dates from 1996 to 2003.


                                      F-13

<PAGE>



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

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

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

   During  fiscal 1994,  an  additional  1,000  shares were awarded  under terms
similar to those described above.

   Compensation  expense related to the above restricted shares for fiscal 1995,
1994 and 1993 was $324,000, $315,000 and $312,000, respectively.


NOTE 7 - STOCKHOLDER RIGHTS PLAN
--------------------------------------------------------------------------------


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


NOTE 8 - BENEFIT PLANS
--------------------------------------------------------------------------------


Profit Sharing Plans:
   A qualified plan, which covers the majority of salaried  employees,  provides
for discretionary contributions up to a maximum of 15% of eligible salaries. The
distribution of the contribution to the Plan's  participants is based upon their
annual base  compensation.  Contributions  for fiscal  1995,  1994 and 1993 were
$415,000, $538,000 and $633,000, respectively.

   The Company established in fiscal 1990 a nonqualified,  defined  contribution
retirement plan for key employees who are ineligible for the salaried  employees
qualified profit sharing plan. Contributions for fiscal 1995, 1994 and 1993 were
$123,000, $156,000 and $189,000, respectively.


                                      F-14

<PAGE>




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




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

   The net periodic  pension  cost of the defined  benefit plan for fiscal 1995,
1994 and 1993 is as follows (in thousands):
                                                    1995      1994      1993
                                                    ----      ----      ----

Service cost                                      $  160    $  182    $ 152
Interest cost on projected benefit obligation        162       148      136
Actual return on plan assets                      (1,024)      213     (200)
Net amortization and deferral                        768      (525)     (58)
                                                  ------     -----     -----

Net periodic pension cost                         $   66    $   18    $  30
                                                  ======    ======    =====
 

   The following  table  presents a  reconciliation  of the funded status of the
Plan for fiscal 1995 and 1994 (in thousands):
                                              
                                              

                                                    1995              1994     
Accumulated benefit obligations including          -------           ------    
vested benefits of ($2,242) and ($1,533)           $(2,560)          $(1,826) 
                                                   =======           ======= 
                                                    
Projected benefit obligation for service              
  rendered to date                                 $(2,560)          $(1,826)  
Plans assets at fair value,                                   
  primarily listed stocks                            3,432             2,702
                                                   -------             ------ 
Projected plan assets in excess of benefit          
obligation                                             872               876   
                                                                               
Unrecognized net gain from past experience                                     
different from that assumed and effects of             
changes in assumptions                                (930)             (844) 
                                                           
Unrecognized prior service cost                         41                45  
                                                      
Unrecognized net asset at transition being            
recognized over 11 years                               (84)             (112) 
                                                  $  ------           ------  
                                                   
                                                   
Accrued pension costs included in other            
current liabilities                                   (101)         $    (35) 
                                                  ========          ========  
                                                                              
                                      F-15        

<PAGE>



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



   The average  discount  rate was 8% in fiscal 1995 and 7% in fiscal 1994,  and
the expected rate of return on assets for both fiscal 1995 and 1994 was 8%.

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

   Annual principal installments of $790,000 plus interest at prime were paid by
the ESOP to the  Company on August 1,  1995,  August 2, 1994 and August 2, 1993.
The  balance on the ESOP  indebtedness  at  December  2, 1995 of  $8,697,000  is
reflected  as  a  reduction  of  the  Company's   stockholders'  equity  in  the
consolidated balance sheet.

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

   The portion of the common stock  dividends  declared  relating to ESOP shares
totaled  $229,000,  $216,000  and  $217,000  for  fiscal  1995,  1994 and  1993,
respectively.  Of these amounts,  $60,000,  $50,000 and $33,000 for fiscal 1995,
1994 and 1993, respectively,  related to allocated shares and $169,000, $166,000
and  $184,000  for  fiscal  1995,  1994  and  1993,  respectively,   related  to
unallocated  shares.  The dividends related to the unallocated  shares are being
applied towards the $790,000 annual principal installments referred to above.

  As of December 2, 1995 and December 3, 1994,  ESOP shares  information  was as
follows:


                                                       1995            1994
                                                      -----            ----

    Allocated                                       102,281          77,312
    Committed to be released                         27,113          27,975
    In suspense                                     204,639         231,752
                                                   --------        --------

        Total shares held by ESOP                   334,033         337,039
                                                   ========        ========




                                      F-16

<PAGE>



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

   The net charges to earnings  for fiscal  1995,  1994 and 1993 were as follows
(in thousands):

                                             1995       1994         1993
                                             ----       ----         ----

Contribution to ESOP                         $1,513     $1,332       $1,252
Less: Interest income on loan to ESOP           840        708          646
                                            -------    -------      -------

Net charge to earnings                      $  673     $   624      $  606
                                            ======     =======      ======


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

NOTE 9 - INCOME TAXES
--------------------------------------------------------------------------------


   Provisions  for Federal,  state and local income taxes for fiscal 1995,  1994
and 1993 consisted of the following components (in thousands):

                                     1995             1994              1993
                                     ----             ----              ----

Current:
         Federal                   $3,924           $6,104            $8,279
         State and local              547              829             1,037
                                   ------           ------            ------
                                    4,471            6,933             9,316
Deferred:
         Federal and state           (121)             402              (791)
                                   ------           ------           -------

                                   $4,350           $7,335            $8,525
                                   ======           ======            ======

   The net  deferred  tax  liability  at December  2, 1995 and  December 3, 1994
consisted of the following (in thousands):

                                                              1995      1994
                                                              ----      ----
Long-term Portion:
  Gross deferred tax liability (asset) for:
   Excess depreciation for tax purposes                     $5,835    $5,728
   Future tax deductions for employee benefit plans           (933)     (596)
   Other                                                       (42)        5
                                                           -------    -------
                  Net long-term liability                    4,860     5,137
                                                            ------    ------

Current Portion:
  Gross deferred tax liability (asset) for:
   Allowance for doubtful accounts                             (92)     (175)
   Net unrealized holding (gain) loss on investment
    securities available-for-sale, 
    included in stockholders' equity                           150      (214)
   Other                                                       188       115
                                                           -------   -------
                  Net current liability (asset)                246      (274)
                                                           -------   -------

  Net deferred tax liability                                $5,106    $4,863
                                                            ======    ======

                                      F-17

<PAGE>



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


   The  differences  between  the  Company's  effective  tax  rate  and  Federal
statutory tax rate for fiscal 1995, 1994 and 1993 arose from the following:
                                           1995             1994         1993
                                                  (% of pretax income)

Federal tax expense at statutory rate      35.0%            35.0%        34.9%
State and local income taxes, 
  net of Federal benefit                    3.0              2.7          2.6
Tax-free interest income and 
  dividends received deduction             (6.2)            (3.3)        (2.6)
Other                                      (0.2)            (1.7)        (1.5)
                                           ----             ----         ----
Effective tax rate                         31.6%            32.7%        33.4%
                                           ====             ====         ====


NOTE 10 - COMMITMENTS
--------------------------------------------------------------------------------


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

Lease:
   The Company  leases its New York City offices and showrooms at minimum annual
rentals of $487,000  plus  escalation  and other  costs,  until April 1996 . The
Company is presently negotiating a new lease.

   Rental expense for operating  leases in fiscal 1995, 1994 and 1993 aggregated
$671,000, $662,000 and $644,000, respectively.


NOTE 11 - STATEMENT OF CASH FLOWS
--------------------------------------------------------------------------------


   Cash outlays for  corporate  income taxes and interest for fiscal 1995,  1994
and 1993 were as follows (in thousands):

                                      Corporate
                                      income taxes      Interest
                           1995          $4,634             $129
                           1994           7,865              128
                           1993           8,346              111


                                      F-18

<PAGE>



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


Non-cash investing and financing activities:
   In fiscal 1995,  a net  unrealized  holding  gain of  $374,000,  less related
income taxes of  $150,000,  on  investment  securities  available-for-sale,  was
recorded as an increase in stockholders' equity.

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

   As of December 3, 1994,  treasury stock costing $3,798,000 had been purchased
for which the broker was not paid until fiscal 1995.


NOTE 12 - INTEREST AND DIVIDEND INCOME
--------------------------------------------------------------------------------


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

                              Interest         Dividend
                               income           income             Total

              1995              $3,546             $130            $3,676
              1994               3,112              298             3,410
              1993               2,848              251             3,099


NOTE 13 - MAJOR CUSTOMER
--------------------------------------------------------------------------------


   For fiscal  1995,  1994 and 1993,  sales to a group of  customers  affiliated
through  common  control  accounted  for  approximately  16%, 10% and 10% of net
sales,  respectively.  The receivables from this group of customers  represented
approximately  22% and 11% of the December 2, 1995 and December 3, 1994 accounts
receivable balances, respectively.



                                      F-19

<PAGE>


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


NOTE 14 - QUARTERLY FINANCIAL DATA (UNAUDITED)
--------------------------------------------------------------------------------


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



                         First     Second     Third     Fourth
                       Quarter    Quarter   Quarter    Quarter        Total

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

Fiscal 1994:
Net sales              $40,584    $49,733   $47,595    $51,841     $189,753
Cost of goods sold      32,909     40,078    38,328     41,057      152,372
Net income               2,624      3,772     3,841      4,856       15,093
Earnings per share        $.42       $.61      $.62       $.79        $2.44




                                      F-20

<PAGE>

                      FAB INDUSTRIES, INC. AND SUBSIDIARIES

                          FINANCIAL STATEMENTS SCHEDULE
                                FORM 10-K ITEM 14

              FISCAL YEARS ENDED DECEMBER 2, 1995, DECEMBER 3, 1994
                              AND NOVEMBER 27, 1993



                                       S-1

<PAGE>





                      FAB INDUSTRIES, INC. AND SUBSIDIARIES




                                    CONTENTS



SCHEDULE:

  II. Valuation and qualifying accounts                 S-3





                                       S-2

<PAGE>


                                   SCHEDULE II
                      FAB INDUSTRIES, INC. AND SUBSIDIARIES
                        VALUATION AND QUALIFYING ACCOUNTS
                                 (IN THOUSANDS)



<TABLE>
<CAPTION>



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


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

<S>                                      <C>         <C>              <C>            <C>            <C>   

Fiscal year ended December 2, 1995:
   Allowance for doubtful accounts       $ 950       $400 (i)              -         $(850)(ii)       $500
                                          ====       ========         ========       ==========       ====
                                                                                   
                                                                                   
Fiscal year ended December 3, 1994:                                                
   Allowance for doubtful accounts       $1,600      $300 (i)              -         $(950)(ii)       $950
                                         ======      ========         ========       ==========       ====
                                                                                   
                                                                                   
Fiscal year ended November 27, 1993:                                               
   Allowance for doubtful accounts       $1,400      $600 (i)              -         $(400)(ii)     $1,600
                                         ======      ========         ========       ==========     ======
                                                                               

</TABLE>



(i) Current year's provision.

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



                                       S-3

<PAGE>




                                   SIGNATURES

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

                                         FAB INDUSTRIES, INC.
                                         (Registrant)


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

                                                   February  27, 1996
                                                   ------------------
                                                        Date

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

SIGNATURE               DATE                 Capacity in Which Signed  
                                          
/s/  Samson Bitensky   February 27, 1996  Chairman of the Board, Chief          
---------------------                     Executive Officer, President and      
     Samson Bitensky                      Director (Principal Executive Officer)
                                          

/s/ David A. Miller    February 27, 1996   Vice President-Finance and Treasurer 
---------------------                     (Principal Financial and Accounting
    David A. Miller                        Officer)   
          
                                
/s/ Sherman S.Lawrence February 27, 1996  Secretary and Director
----------------------
    Sherman S.Lawrence

/s/ Lawrence Bober     February 27, 1996  Director
------------------   
    Lawrence Bober

/s/  Richard Marlin    February 27, 1996  Director
--------------------   
     Richard Marlin

/s/  Louis Feil        February 27, 1996  Director
--------------------    
     Louis Feil

/s/ Oscar Kunreuther   February 27, 1996  Director
--------------------   
    Oscar Kunreuther


                                       16