SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

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

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

For the fiscal year ended November 28, 1998        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  23,  1999 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
$72,000,000.  Solely  for the  purposes  of  this  calculation,  shares  held by
directors  and  executive  officers  of the  Registrant  and  members  of  their
respective  immediate  families  sharing the same  household have been excluded.
Such  exclusion  should not be deemed a  determination  or an  admission  by the
Registrant that such individuals are, in fact, affiliates of the Registrant.

         Indicate the number of shares  outstanding of each of the  Registrant's
classes of common  stock,  as of the latest  practicable  date:  At February 23,
1999, there were outstanding 5,414,738 shares of Common Stock, $.20 par value.

Documents  Incorporated  by  Reference:  Certain  portions  of the  Registrant's
definitive proxy statement to be filed not later than March 29, 1999 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

<TABLE>
<CAPTION>
Item Number                                                                               Page
-----------                                                                               ----
<S>                                                                                         <C>
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.......................5


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 7A.  Quantitative and Qualitative Disclosures About Market Risk...............11
        Item 8.   Financial Statements and Supplementary Data..............................11
        Item 9.   Changes in and Disagreements with Accountants on Accounting and
                  Financial Disclosure.....................................................11


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

PART IV....................................................................................13
        Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K..........13

SIGNATURES.................................................................................17
</TABLE>


<PAGE>


                                     PART I

Item 1.   Business

         Fab Industries, Inc. (together with its subsidiaries, the "Company")
was incorporated on April 21, 1966, under the laws of the State of Delaware and
is a successor by merger to previously existing businesses.

         The Company is a major  manufacturer of warp and circular knit fabrics,
raschel laces, and polyurethane coated fabrics.

         The  Company's   textile   fabrics  are  sold  to  a  wide  variety  of
manufacturers of ready-to-wear and intimate apparel for men, women and children,
including dresses and sportswear, children's sleepwear, activewear and swimwear,
recreational apparel,  home furnishings,  over-the-counter  fabrics,  industrial
fabrics, upholstery fabrics for residential and contact markets, and health care
and consumer products. Fabrics are sold primarily in piece dyed form, as well as
"PFP" (Prepared For Printing), and heat transfer printed configurations.

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

         The  Company's  raschel  lace  products  are sold to  manufacturers  of
intimate  apparel through its Raval Designer - Wiener Lace divisions.  The Raval
Lace division also produces raschel laces for sale to manufacturers  and jobbers
of sportswear, dress, blouse and other related outerwear industries.

         The Company's subsidiary, SMS Textiles, Inc., manufactures wide elastic
fabrics for sale to manufacturers of intimate apparel and swimwear.

         The Company's  Lida Stretch  Fabrics  Division  specializes in products
utilizing spandex to create stretch fabrics. A wide variety of constructions and
fibers are combined  with spandex  fiber to create a  diversified  product line.
These fabrics are sold as piece dyes, yarn dyes and prints to the ready-to-wear,
aerobic wear, swimwear and intimate apparel markets.

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

         The Company's subsidiary, Gem Urethane Corporation,  produces a line of
polyurethane coated fabrics and a variety of flame,  adhesive and ultrasonically
bonded items for apparel, accessories, health care, environmental and industrial
products.  Gem also  markets a fire  resistant  material,  SANDEL,  through  its
subsidiary Sandel  International,  Inc. Sandel is a silica-based material coated
with high  performance  polymeric  compounds  that  enables it to stop fire from
spreading, even at temperatures of up to 1800 degrees Fahrenheit.

         The Company engages in research and product  development  activities to
create new fabrics and styles to meet the  continually  changing  demands of its
customers.  Direct  expenditures  in this area  aggregated  $3,875,000 in fiscal
1996,  $3,869,000 in fiscal 1997 and  $3,625,000  in fiscal 1998.  Through these
efforts,  the Company has developed a full line of proprietary  knitted  fabrics
for sale to


<PAGE>


manufacturers  of men's,  women's and  children's  apparel in both  domestic and
foreign  markets.  Similarly,  the  Company  has also  developed  a full line of
proprietary  sheets and blankets,  including  specialty blankets for the airline
industry.

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

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

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

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

         During fiscal 1998, no single customer or group of affiliated customers
accounted  for more than 10% of the  year's net sales or the  year-end  accounts
receivable balance. The Company's export sales are not material.

Supplies of Raw Materials

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

Inventories

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

Competition

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


                                        2

<PAGE>


manufactured  textile products and the number of domestic  manufacturers of such
products. As a result of significant  expenditures on production equipment,  the
Company's  strong financial  position and increased  capacity have enabled it to
capture a larger share of the now smaller domestic textile market.

Employees

         The Company employs  approximately  1,600 people, of whom approximately
1,500  are  employed  by the  Company's  subsidiaries.  The  employees  are  not
represented by unions. The Company considers  relations with its employees to be
satisfactory.

Acquisitions

         In April 1998, the Company  acquired certain assets and business of SMS
Textile Mills, Inc., which manufactured, marketed and distributed a full line of
wide elastic fabrics.

         In May 1998, the Company  acquired  substantially  all of the assets of
Lida  Stretch  Fabrics,  Inc.,  which was a  leading  domestic  manufacturer  of
circular knit stretch fabrics.


Item 2.   Properties.

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

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

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

         The  Company's  Allentown,  Pennsylvania  facility  is  devoted to wide
elastic fabric knitting.

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


                                       3

<PAGE>


<TABLE>
                                                          Approximate                 Lease
Location             Principal Use                        Floor Space            Expiration Date
--------             -------------                        -----------            ---------------
<S>                  <C>                                 <C>                        <C>
Lincolnton,          Dyeing and finishing,               630,550 sq.ft.                (1)
North Carolina       raschel and tricot
                     warp knitting, printing and
                     warehouse

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

Maiden,              Warping, circular single and        224,013 sq.ft.                (1)
North Carolina       double knitting and
                     warehouse

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

Amsterdam,           Polyurethane coating,               106,000 sq.ft.             12/31/99 (2)
New York             fire fighting material
                     manufacturing operations
                     and bonding and laminating

Amsterdam,           Warping, tricot knitting and        367,000 sq.ft.             12/31/06 (2)
New York             warehouse

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

Allentown,           Wide elastic fabric knitting         35,000 sq.ft.                (1)
Pennsylvania

New York,            Executive offices and                33,000 sq.ft               4/30/06
New York             showroom facilities
</TABLE>

----------

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

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


Item 3.   Legal Proceedings.

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


                                       4

<PAGE>


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

         Not Applicable

Executive Officers of the Company

         The  following  table sets forth  certain  information  concerning  the
executive officers of the Company as of February 23, 1999.
<TABLE>
<CAPTION>
Name                              Age        Positions and Offices
----                              ---        ---------------------
<S>                               <C>        <C>                                            
Samson Bitensky.................  79         Chairman of the Board of Directors and Chief
                                             Executive Officer

Stanley August..................  67         Vice Chairman

Steven Myers....................  50         Co-President, Chief Operating Officer

David A. Miller.................  61         Vice President-Finance, Treasurer and Chief Financial
                                             Officer

Jerry Deese.....................  47         Vice President-Controller of Plant Operations

Sam Hiatt.......................  51         Vice President-Sales

Sherman S. Lawrence.............  80         Secretary
</TABLE>


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

         Samson  Bitensky  was among the founders of the Company in 1966 and has
served as Chairman of the Board of Directors and Chief Executive  Officer of the
Company  since such time.  Mr.  Bitensky also served as President of the Company
from 1970 until May 1, 1997.

         Stanley  August  has  been  employed  by the  Company  since  1980  and
previously  served as General Sales Manager of its Circular Knit Division and as
Vice President - Sales. Mr. August served as Vice President - Fabric  Operations
from 1987 until 1992 and as Vice  President from March 1992 to May 1997, and has
served as Vice Chairman since May 1, 1997.

         Steven Myers, an attorney,  has been employed by the Company in various
senior  administrative  and managerial  capacities since 1979. He served as Vice
President  - Sales  for  more  than  five  years  prior  to May 1988 and as Vice
President  from May 1988 to May  1997,  and has  served as  Co-President,  Chief
Operating Officer since May 1, 1997. Mr. Myers is the son-in-law of Mr.
Bitensky.

         David A. Miller has been  employed  by the  Company  since 1966 and has
served as its  Controller  from 1973 until  December 7, 1995, as Vice  President
Finance and Treasurer  since  December 7, 1995, and as Chief  Financial  Officer
since May 1, 1997.

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


                                       5

<PAGE>


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

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


                                     PART II


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

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

        Fiscal 1998                                        High         Low
        -----------                                        ----         ---

First Quarter.........................................    $33 1/2      $30

Second Quarter........................................    $33 3/8      $26 15/16

Third Quarter.........................................    $29 1/2      $23 1/2

Fourth Quarter........................................    $23 3/4      $19 3/8

        Fiscal 1997
        -----------

First Quarter.........................................    $ 28 3/4     $26 1/8

Second Quarter........................................    $ 31 1/4     $28

Third Quarter.........................................    $ 33         $30 1/4

Fourth Quarter........................................    $ 32 1/2     $29 7/16

         At February 23, 1999, there were approximately 539 holders of record of
Common  Stock.  For fiscal  1997,  quarterly  dividends  of $.175 per share were
declared on February  27, 1997,  May 19, 1997,  August 13, 1997 and November 25,
1997. For fiscal 1998,  quarterly  dividends of $.175 per share were declared on
February 19,  1998,  May 12,  1998,  August 12, 1998 and November 24, 1998.  The
payment of further  cash  dividends  will be at the  discretion  of the Board of
Directors  and  will  depend  upon,  among  other  things,   earnings,   capital
requirements and the financial condition of the Company.


                                       6
<PAGE>


Item 6. Selected Consolidated Financial Data.
<TABLE>
<CAPTION>
                                                        As at or for the fiscal year ended
                                                        ----------------------------------

                                  November 28,     November 29,      November 30,       December 2,      December 3,
                                     1998             1997              1996              1995           1994 (2)
                                                           (In thousands, except share data)
<S>                             <C>               <C>               <C>               <C>               <C>       
Net Sales                       $  151,436        $  160,935        $  156,136        $  182,000        $  189,753
Income before taxes
  on income                          8,017            13,529            12,596            13,760            22,428
Net income                           6,017             9,394             8,796             9,410            15,093
Earnings per share:
     Basic                            1.07              1.65              1.52              1.57              2.44
     Diluted                          1.06              1.63              1.51              1.56              2.40
Total assets                       160,403           163,524           160,980           161,027           163,133
Long-term debt                         486               556               620               678               731
Stockholders' equity               137,527           137,892           133,888           132,932           129,533
Book value per
  share (1)                          24.63             24.26             23.25             22.42             21.52
Cash dividends
  per share                            .70               .70               .70              .685               .64
Weighted average
  number of shares
  outstanding:
     Basic                       5,627,788         5,705,624         5,797,228         5,981,690         6,189,831
     Diluted                     5,665,194         5,752,895         5,841,138         6,037,374         6,280,795
</TABLE>


----------

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


                                       7
<PAGE>


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

Results of Operations

         Fiscal 1998 Compared to Fiscal 1997

         Net sales for fiscal 1998 were $151,436,000 as compared to $160,935,000
in fiscal 1997, a decrease of 5.9%. The Asian  financial  crisis,  which began a
year ago,  is taking a  sustained  toll on the U.S.  manufacturing  sector  and,
because of steep currency devaluations, U.S. firms are forced to compete against
a flood of cheap  imports  and falling  demand for U.S.  goods  overseas.  These
factors have continued to exert downward pressure on the Company's sales level.

         Gross  margins as a percentage  of sales  declined from 14.6% to 12.1%.
Lower sales volume  reduced  operating  schedules at  manufacturing  plants.  In
addition,  the Company  incurred  start-up  costs in connection  with its recent
acquisitions  of Lida Stretch  Fabrics,  a manufacturer of circular knit stretch
fabrics,  and SMS Textiles,  a manufacturer of wide elastic  fabrics.  In fiscal
1998, a reduction in LIFO  inventory  reserves  arising  principally  from lower
average FIFO cost levels benefited margins in the amount of $1,703,000  compared
to $863,000 in fiscal 1997.

         Selling,  shipping  and  administrative  expenses  remained  relatively
constant  but as a percentage  of sales  increased  from 9.3% to 9.8%  primarily
because of lower sales volume.  An increase in selling expenses of approximately
$2.0  million,  attributable  primarily  to the  acquisitions  of  Lida  Stretch
Fabrics,  SMS Textiles and JBJ Fabrics (acquired in October 1997), was offset by
lower incentive-based compensation and other related expenses.

         Interest and dividend income decreased by $301,000 as a result of lower
average available balances.

         The  effective  income tax rate for the year was 24.9% as  compared  to
30.6%  in  fiscal   1997.   The  decline  was   primarily   attributable   to  a
proportionately  higher  percentage  of tax exempt  interest as a percentage  of
pre-tax income in fiscal 1998.

         As a result of these factors,  net income  declined to $6,017,000  from
$9,394,000 and as a percentage of sales decreased to 4.0% from 5.8%.

         In fiscal 1998, the Company adopted SFAS No. 128, "Earnings per Share."
Under SFAS No. 128, the Company is presenting  both basic earnings per share and
diluted  earnings  per  share and has  restated  the 1997 and 1996  fiscal  year
amounts to conform to the provisions of SFAS No. 128.

         For fiscal 1998,  basic earnings per share were $1.07 compared to $1.65
last  fiscal year and diluted  earnings  per share were $1.06  compared to $1.63
last year.

         Fiscal 1997 Compared to Fiscal 1996

         Net sales for the 1997  fiscal  year were  $160,935,000  as compared to
$156,136,000  in fiscal 1996, an increase of $4,799,000 or 3.1%.  Certain of the
Company's  products  enjoyed  stronger  customer  demand  during  the  year  and
divisional product mix was more favorable.


                                       8
<PAGE>


         Gross  profit  margins  for the  year  remained  fairly  constant  as a
percentage of sales.  The improved  product mix and the  Company's  cost control
programs more than offset lower plant  utilization  rates.  Due to lower average
FIFO cost levels,  LIFO inventory  reserves decreased by $863,000 in fiscal 1997
and $742,000 in fiscal 1996.

         Selling, shipping and administrative expenses increased by $771,000, or
5.4%,  and as a  percentage  of sales  remained  relatively  constant.  Selling,
shipping and administrative costs increased principally as a result of increased
selling expenses attributable to the Company's sales growth.

         Interest  and dividend  income  increased  by  $170,000,  or 4.6%.  The
Company  realized  gains from the sale of  investment  securities  of $1,139,000
compared to $540,000 in fiscal 1996.

         The  effective  income tax rate for the year was  relatively  unchanged
from fiscal 1996.

         As a result of these factors,  net income  increased to $9,394,000 from
$8,796,000 and as a percentage of sales increased to 5.8% from 5.6%.

         Earnings per share, which are based upon the weighted average number of
shares outstanding (5,705,624 vs. 5,797,228), were $1.65 as compared to $1.52 in
fiscal 1996. There was no stock option related dilution in either year.

         Liquidity and Capital Resources

         Net cash  provided by operating  activities  in fiscal 1998 amounted to
$4,573,000,  as  compared  to  $11,388,000  in fiscal  1997.  Of this  decrease,
$4,620,000 relates to comparative changes in inventories, $2,440,000 to accounts
payable,  accruals and other  liabilities,  and  $3,377,000 to lower net income.
These  decreases were offset by changes of $1,227,000 in deferred  income taxes,
$968,000 in accounts  receivable,  $948,000  in other  current  assets and other
assets and $491,000 in depreciation and amortization.

         In fiscal 1998, net proceeds from sales of investment  securities  were
approximately  $18.8  million,  as compared  to net  acquisition  of  investment
securities of approximately $4.0 million in fiscal 1997.

         The    Company's    investment    securities,    all    classified   as
available-for-sale,  had a fair market value of $48,233,000  and  $66,068,000 at
fiscal  year-end  1998 and 1997,  respectively.  See Note 2 to the  consolidated
financial   statements  for  further  details  about  the  Company's  investment
portfolio.

         In addition,  approximately  $15.6 million was invested in the purchase
of property,  plant and equipment,  including capital expenditures in connection
with the Lida Stretch Fabrics and SMS Textiles acquisitions.

         During fiscal 1998, the Company repurchased 114,699 shares of its
common stock at a cost of $3,524,000 (an average price of $30.72). Subsequent to
the end of fiscal 1998, the Company repurchased an additional 172,125 shares at
an average price of $18.57. The Company intends to continue to purchase its
shares of common stock from time-to-time, as market conditions warrant and price
criteria are met.

         During fiscal 1998, the Company  declared regular  quarterly  dividends
totaling $0.70 per share.


                                        9
<PAGE>


         Stockholders'  equity was  $137,527,000 or $24.63 book value per share,
as compared to  $137,892,000,  or $24.26 book value per share,  at the  previous
fiscal year-end.

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

         Inflation

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

         Compliance with Year 2000

         The Company has devoted significant resources and has taken steps in an
attempt to make the transition to the year 2000 successful and without incident.
Management  has  initiated  a Company  wide  program  to prepare  the  Company's
computer  systems,   hardware,   devices  and  other  equipment  for  year  2000
compliance.

         An inventory of hardware and software is being completed, including the
Company's centralized information system department,  distributed  technologies,
and process  control and  non-technical  components  such as checks and forms. A
primary plan for  remediation of the Company's  legacy systems is in place,  and
system and  program  changes  are being  implemented  and tested as they  become
ready.  The  Company  has  established  a  corporate  task force to monitor  the
progress toward the resolution of identified year 2000 issues.  All known system
corrections are expected to be completed by June 30, 1999.

         The  Company  expects to incur  internal  staff  costs as well as other
expenses necessary to prepare its systems for the year 2000, including costs for
outside consultants.  The Company expects to resolve year 2000 compliance issues
primarily  through normal upgrades of its software or, when  necessary,  through
replacement of existing  software with year 2000 compliant  applications.  As of
February 15, 1999,  the Company has incurred  approximately  $75,000 of external
costs to address the Company's  year 2000 issues.  The total cost of this effort
is still being  evaluated,  but is not expected to be material to the  Company's
results of operations or financial condition. However, there can be no assurance
that such  corrections can be completed on schedule or within estimated costs or
can successfully address the year 2000 compliance issues.

         The Company has provided  information  regarding the status of its year
2000  compliance  to customers who  requested.  The Company is in the process of
asking its major  customers  and  suppliers  to certify  that they are year 2000
compliant  or, if they are not yet so  compliant,  to provide the Company with a
description  of their plans to become so. If the  Company's  present  efforts to
address the year 2000  compliance  issues are not  successful,  or if customers,
suppliers  and other third parties with which the Company  conducts  business do
not  successfully  address  such  issues,  the  Company's  business,  results of
operations and financial condition could be materially and adversely affected.

FORWARD LOOKING INFORMATION

         Certain  statements  in this report are  "forward  looking  statements"
within the meaning of the Private Securities  Litigation Reform Act of 1995. All
forward looking statements involve risks and


                                       10
<PAGE>



uncertainties. In particular, any statement contained herein, in press releases,
written  statements or other  documents  filed with the  Securities and Exchange
Commission,  or in the Company's  communications  and discussions with investors
and analysts in the normal course of business through meetings,  phone calls and
conference   calls,   regarding   the   consummation   and  benefits  of  future
acquisitions,  as well as expectations  with respect to future sales,  operating
efficiencies  and product  expansion,  are  subject to known and unknown  risks,
uncertainties  and  contingencies,  many of which are beyond the  control of the
Company,  which may cause actual results,  performance or achievements to differ
materially from anticipated results, performances or achievements.  Factors that
might  affect such  forward  looking  statements  include,  among other  things,
overall economic and business conditions; the demand for the Company's goods and
services;  competitive  factors in the industries in which the Company competes;
changes in government  regulation;  changes in tax  requirements  (including tax
rate changes, new tax laws and revised tax law  interpretations);  interest rate
fluctuations  and other capital market  conditions,  including  foreign currency
rate fluctuations;  economic and political conditions in international  markets,
including  governmental  changes  and  restrictions  on the  ability to transfer
capital across borders;  the ability to achieve anticipated  synergies and other
cost  savings in  connection  with  acquisitions;  the timing,  impact and other
uncertainties  of  future  acquisitions;  and  the  Company's  ability  and  its
customers'  and  suppliers'  ability  to  replace,  modify or  upgrade  computer
programs in order to adequately address the Year 2000 issue.


Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.

     See Note 2 on page F-14.


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.


                                       11
<PAGE>


                                    PART III


Item 10.  Directors and Executive Officers of the Company.

         See  Part  I,  Item  4.  "Executive  Officers  of the  Company."  Other
information  required  by this  item  is  incorporated  by  reference  from  the
Company's  definitive  proxy statement to be filed not later than March 29, 1999
pursuant  to  Regulation  14A of the  General  Rules and  Regulations  under the
Securities Exchange Act of 1934, as amended ("Regulation 14A").


Item 11.  Executive Compensation.

         The information required by this item is incorporated by reference from
the Company's  definitive  proxy  statement to be filed not later than March 29,
1999 pursuant to Regulation 14A.


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

         The information required by this item is incorporated by reference from
the Company's  definitive  proxy  statement to be filed not later than March 29,
1999 pursuant to Regulation 14A.


Item 13.  Certain Relationships and Related Transactions.

         The information required by this item is incorporated by reference from
the Company's  definitive  proxy  statement to be filed not later than March 29,
1999 pursuant to Regulation 14A.


                                       12
<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 Company's Annual Report
                         on Form 10-K for the  fiscal  year ended  November  27,
                         1993 (the "1993 10-K").

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

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

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

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

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

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


                                       13
<PAGE>



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

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

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

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

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

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

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

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

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

     10.11          -    Amendment to the Profit Sharing Plan effective 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.


                                       14
<PAGE>


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

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

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

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

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

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

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

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

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

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

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


                                       15
<PAGE>


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

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

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

     *23            -    Consent of BDO Seidman, LLP.

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

----------

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

     (b)  Reports on Form 8-K: None


                                       16
<PAGE>




                      FAB INDUSTRIES, INC. AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS
                                FORM 10-K ITEM 8

             FISCAL YEARS ENDED NOVEMBER 28, 1998, NOVEMBER 29, 1997
                              AND NOVEMBER 30, 1996





                                       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-12

Notes to consolidated financial statements                           F-13 - F-31




                                       F-2
<PAGE>


Report Of Independent Certified Public Accountants


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

We have audited the  consolidated  balance  sheets of Fab  Industries,  Inc. and
subsidiaries  as of November 28, 1998 and  November  29,  1997,  and the related
consolidated statements of income,  stockholders' equity and cash flows for each
of the three fiscal years in the period  ended  November 28, 1998.  We have also
audited  the  schedule  listed  in the  index on page  S-2.  These  consolidated
financial  statements  and  schedule  are the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements and schedule based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the financial position of Fab Industries, Inc.
and  subsidiaries as of November 28, 1998 and November 29, 1997, and the results
of their  operations  and their cash flows for each of the three fiscal years in
the period  ended  November  28,  1998 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 16, 1999


                                                                             F-3

<PAGE>

<TABLE>
<CAPTION>
                                                                                                   Fab Industries, Inc.
                                                                                                      and Subsidiaries


                                                                                           Consolidated Balance Sheets


                                                                              November 28, 1998      November 29, 1997
========================================================================================================================
<S>                                                                              <C>                  <C>          
Assets
Current:
   Cash and cash equivalents (Note 1)                                            $   6,078,000        $   4,574,000
   Investment securities available-for-sale (Note 2)                                48,233,000           66,068,000
   Accounts receivable, net of allowance of $1,000,000 and $900,000
      for doubtful accounts (Note 13)                                               27,979,000           28,872,000
   Inventories (Note 3)                                                             32,213,000           28,270,000
   Other current assets                                                              1,727,000            2,051,000
------------------------------------------------------------------------------------------------------------------------
        Total current assets                                                       116,230,000          129,835,000
Property, plant and equipment - net (Note 4)                                        40,021,000           30,009,000
Other assets (Note 8)                                                                4,152,000            3,680,000
------------------------------------------------------------------------------------------------------------------------
                                                                                 $ 160,403,000        $ 163,524,000
========================================================================================================================
Liabilities and Stockholders' Equity
Current:
   Accounts payable                                                              $   9,110,000        $   8,862,000
   Corporate income and other taxes                                                    768,000            2,568,000
   Accrued payroll and related expenses                                              1,980,000            3,649,000
   Dividends payable                                                                   977,000              994,000
   Other current liabilities                                                           495,000              966,000
   Deferred income taxes (Note 9)                                                    1,538,000              778,000
------------------------------------------------------------------------------------------------------------------------
        Total current liabilities                                                   14,868,000           17,817,000
Obligations under capital leases, net of current maturities (Note 5)                   486,000              556,000
Other noncurrent liabilities (Note 8)                                                2,817,000            2,779,000
Deferred income taxes (Note 9)                                                       4,705,000            4,480,000
------------------------------------------------------------------------------------------------------------------------
        Total liabilities                                                           22,876,000           25,632,000
------------------------------------------------------------------------------------------------------------------------
Commitments (Notes 8 and 10) 
Stockholders' equity (Notes 2, 6, 7, 8 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 6,588,444 and 6,572,994                                                 1,318,000            1,315,000
   Additional paid-in capital                                                        6,903,000            6,562,000
   Retained earnings                                                               164,714,000          162,629,000
   Loan to employee stock ownership plan                                            (6,327,000)          (7,117,000)
   Net unrealized holding gain on investment securities
      available-for-sale, net of taxes                                                 550,000              636,000
   Unearned restricted stock compensation                                               (1,000)             (27,000)
   Cost of common stock  held in treasury - 1,005,081 and
      890,382 shares                                                               (29,630,000)         (26,106,000)
------------------------------------------------------------------------------------------------------------------------
        Total stockholders' equity                                                 137,527,000          137,892,000
------------------------------------------------------------------------------------------------------------------------
                                                                                 $ 160,403,000        $ 163,524,000
========================================================================================================================

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


                                                                                                                    F-4
</TABLE>
<PAGE>


<TABLE>
<CAPTION>
                                                                                         Fab Industries, Inc.
                                                                                             and Subsidiaries


                                                                            Consolidated Statements of Income


============================================================================================================
 Fiscal year ended
------------------------------------------------------------------------------------------------------------
                                                        November 28,       November 29,         November 30, 
                                                            1998               1997                1996
------------------------------------------------------------------------------------------------------------
<S>                                                   <C>                 <C>                 <C>          
Net sales (Note 13)                                   $ 151,436,000       $ 160,935,000       $ 156,136,000
Cost of goods sold                                      133,147,000         137,389,000         133,466,000
------------------------------------------------------------------------------------------------------------
        Gross profit                                     18,289,000          23,546,000          22,670,000
Selling, shipping and administrative expenses            14,872,000          14,921,000          14,150,000
------------------------------------------------------------------------------------------------------------
        Operating income                                  3,417,000           8,625,000           8,520,000
------------------------------------------------------------------------------------------------------------
Other income (expenses):
   Interest and dividend income (Note 12)                 3,529,000           3,830,000           3,660,000
   Interest expense                                         (75,000)            (65,000)           (124,000)
   Net gain on investment securities (Note 2)             1,146,000           1,139,000             540,000
------------------------------------------------------------------------------------------------------------
        Total other income                                4,600,000           4,904,000           4,076,000
------------------------------------------------------------------------------------------------------------
        Income before taxes on income                     8,017,000          13,529,000          12,596,000
Taxes on income (Note 9)                                  2,000,000           4,135,000           3,800,000
------------------------------------------------------------------------------------------------------------
Net income                                            $   6,017,000       $   9,394,000       $   8,796,000
============================================================================================================
Earnings per share (Note 14):
   Basic                                              $        1.07       $        1.65       $        1.52
   Diluted                                            $        1.06       $        1.63       $        1.51
============================================================================================================
Cash dividends declared per share                     $         .70       $         .70       $         .70
============================================================================================================

                                                See accompanying summary of accounting policies and notes to
                                                consolidated financial statements.
                                                                                                        F-5
</TABLE>
<PAGE>


<TABLE>
<CAPTION>
                                                                                         Fab Industries, Inc.
                                                                                             and Subsidiaries


                                                              Consolidated Statements of Stockholders' Equity

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

Fiscal years ended November 28, 1998, November 29, 1997 and November 30, 1996
-------------------------------------------------------------------------------------------------------------

                                                          Common stock                                                  
                                                    ------------------------                                 

                                                     Number                     Additional        Retained  
                                    Total           of shares      Amount     paid-in capital     earnings    
-------------------------------------------------------------------------------------------------------------
<S>                           <C>                  <C>         <C>             <C>             <C>            
Balance, December 2, 1995     $ 132,932,000        6,549,894   $   1,309,000   $   6,150,000   $ 152,473,000 
Net income - fiscal 1996          8,796,000             --              --              --         8,796,000 
Cash dividends                   (4,046,000)            --              --              --        (4,046,000)
Exercise of stock options           228,000           14,300           4,000         224,000            --   
Purchase of treasury stock       (5,401,000)            --              --              --              --   
Compensation under
   restricted stock plan
   (Note 6)                         206,000             --              --            36,000            --   
Change in net unrealized
   holding gain on
   investment securities
   available-for- sale, net
   of taxes                         383,000             --              --              --              --   
Payment of loan from ESOP
   (Note 8)                         790,000             --              --              --              --   
-------------------------------------------------------------------------------------------------------------
Balance, November 30, 1996      133,888,000        6,564,194       1,313,000       6,410,000     157,223,000 
Net income - fiscal 1997          9,394,000             --              --              --         9,394,000 
Cash dividends                   (3,988,000)            --              --              --        (3,988,000)
Exercise of stock options           154,000            8,800           2,000         152,000            --   
Purchase of treasury stock       (2,406,000)            --              --              --              --   
Compensation under
   restricted stock plan
   (Note 6)                          31,000             --              --              --              --   
Change in net unrealized
   holding gain on
   investment securities
   available-for- sale, net
   of taxes                          29,000             --              --              --              --   
Payment of loan from ESOP
   (Note 8)                         790,000             --              --              --              --   
-------------------------------------------------------------------------------------------------------------
Balance, November 29, 1997      137,892,000        6,572,994       1,315,000       6,562,000     162,629,000 
Net income - fiscal 1998          6,017,000             --              --              --         6,017,000 
Cash dividends                   (3,932,000)            --              --              --        (3,932,000)
Exercise of stock options           344,000           15,450           3,000         341,000            --   
Purchase of treasury stock       (3,524,000)            --              --              --              --   
Compensation under
   restricted stock plan
   (Note 6)                          26,000             --              --              --              --   
Change in net unrealized
   holding gain on
   investment securities
   available-for- sale, net
   of taxes                         (86,000)            --              --              --              --   
Payment of loan from ESOP
   (Note 8)                         790,000             --              --              --              --   
-------------------------------------------------------------------------------------------------------------
Balance, November 28, 1998    $ 137,527,000        6,588,444   $   1,318,000   $   6,903,000   $ 164,714,000 
-------------------------------------------------------------------------------------------------------------

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

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

F-6
<PAGE>


<TABLE>
<CAPTION>
                                                                                                    Fab Industries, Inc.
                                                                                                        and Subsidiaries


                                                                         Consolidated Statements of Stockholders' Equity

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

Fiscal years ended November 28, 1998, November 29, 1997 and November 30, 1996
------------------------------------------------------------------------------------------------------------------------

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


                                  Loan to                                                   Treasury stock
                                 employee        Net unrealized      Unearned           --------------------
                                   stock          holding gain   restricted stock        Number 
                               ownership plan        (loss)        compensation         of shares        Cost
------------------------------------------------------------------------------------------------------------------------
<S>                            <C>              <C>              <C>                   <C>         <C>           
Balance, December 2, 1995       $  (8,697,000)   $     224,000    $    (228,000)        (619,635)   $ (18,299,000)
Net income - fiscal 1996                 --               --               --               --               --
Cash dividends                           --               --               --               --               --
Exercise of stock options                --               --               --               --               --
Purchase of treasury stock               --               --               --           (186,804)      (5,401,000)
Compensation under
   restricted stock plan
   (Note 6)                              --               --            170,000             --               --
Change in net unrealized
   holding gain on
   investment securities
   available-for- sale, net
   of taxes                              --            383,000             --               --               --
Payment of loan from ESOP
   (Note 8)                           790,000             --               --               --               --
------------------------------------------------------------------------------------------------------------------------
Balance, November 30, 1996         (7,907,000)         607,000          (58,000)        (806,439)     (23,700,000)
Net income - fiscal 1997                 --               --               --               --               --   
Cash dividends                           --               --               --               --               --
Exercise of stock options                --               --               --               --               --
Purchase of treasury stock               --               --               --            (83,943)      (2,406,000)
Compensation under
   restricted stock plan
   (Note 6)                              --               --             31,000             --               --
Change in net unrealized
   holding gain on
   investment securities
   available-for- sale, net
   of taxes                              --             29,000             --               --               --
Payment of loan from ESOP
   (Note 8)                           790,000             --               --               --               --
------------------------------------------------------------------------------------------------------------------------
Balance, November 29, 1997         (7,117,000)         636,000          (27,000)        (890,382)     (26,106,000)
Net income - fiscal 1998                 --               --               --               --               --   
Cash dividends                           --               --               --               --               --
Exercise of stock options                --               --               --               --               --
Purchase of treasury stock               --               --               --           (114,699)      (3,524,000)
Compensation under
   restricted stock plan
   (Note 6)                              --               --             26,000             --               --   
Change in net unrealized
   holding gain on
   investment securities
   available-for- sale, net
   of taxes                              --            (86,000)            --               --               --   
Payment of loan from ESOP
   (Note 8)                           790,000             --               --               --               --
------------------------------------------------------------------------------------------------------------------------
Balance, November 28, 1998      $  (6,327,000)   $     550,000    $      (1,000)      (1,005,081)   $ (29,630,000)
------------------------------------------------------------------------------------------------------------------------

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

                                                            See accompanying summary of accounting policies and notes to
                                                            consolidated financial statements.
</TABLE>

F-6


<PAGE>
<TABLE>
<CAPTION>

                                                                                                   Fab Industries, Inc.
                                                                                                      And Subsididaries


                                                                                  Consolidated Statements of Cash Flows
                                                                                                              (Note 11)

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

Fiscal year ended
-----------------------------------------------------------------------------------------------------------------------
                                                                   November 28,        November 29,        November 30, 
                                                                      1998                 1997                1996
-----------------------------------------------------------------------------------------------------------------------
<S>                                                              <C>                  <C>                  <C>         
Cash flows from operating activities:
   Net income                                                    $  6,017,000         $  9,394,000         $  8,796,000
   Adjustments to reconcile net income to net cash
      provided by operating activities:
        Provision for doubtful accounts                               400,000              400,000              400,000
        Depreciation and amortization                               5,555,000            5,064,000            5,477,000
        Deferred income taxes                                       1,042,000             (185,000)              61,000
        Compensation under restricted stock plan                       26,000               31,000              206,000
        Net gain on investment securities                          (1,146,000)          (1,139,000)            (540,000)
        Decrease (increase) in:
           Accounts receivable                                        493,000             (475,000)           6,020,000
           Inventories                                             (3,943,000)             677,000           (1,680,000)
           Other current assets                                       324,000             (107,000)              26,000
           Other assets                                              (472,000)            (989,000)            (254,000)
        Increase (decrease) in:
           Accounts payable                                           248,000           (3,214,000)            (585,000)
           Accruals and other liabilities                          (3,971,000)           1,931,000             (704,000)
-----------------------------------------------------------------------------------------------------------------------
              Net cash provided by operating activities             4,573,000           11,388,000           17,223,000
-----------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
   Purchases of property, plant and equipment                     (15,567,000)          (4,870,000)          (4,101,000)
   Proceeds from sales of investment securities                    18,838,000            3,185,000            9,660,000
   Acquisition of investment securities                                  --             (7,183,000)         (14,687,000)
-----------------------------------------------------------------------------------------------------------------------
              Net cash provided by (used in) investing
                activities                                          3,271,000           (8,868,000)          (9,128,000)
-----------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
   Purchase of treasury stock                                      (3,524,000)          (2,406,000)          (5,401,000)
   Principal repayment on loan to employee stock
      ownership plan                                                  790,000              790,000              790,000
   Dividends                                                       (3,950,000)          (4,002,000)          (4,077,000)
   Exercise of stock options                                          344,000              154,000              228,000
-----------------------------------------------------------------------------------------------------------------------
              Net cash used in financing activities                (6,340,000)          (5,464,000)          (8,460,000)
-----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents                    1,504,000           (2,944,000)            (365,000)
Cash and cash equivalents, beginning of year                        4,574,000            7,518,000            7,883,000
-----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year                           $  6,078,000         $  4,574,000         $  7,518,000
 ========================================================================================================================
                                                            See accompanying summary of accounting policies and notes to
                                                            consolidated financial statements.

                                                                                                                    F-7

</TABLE>


<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 1998, 1997 and 1996, and such sales were
                              primarily   made  to  United   States   customers.
                              Accordingly,  the Company  considers  itself to be
                              operating in a single segment business.


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


 Fiscal Year                  The  Company's  fiscal  year ends on the  Saturday
                              closest to November 30. Fiscal 1998, 1997 and 1996
                              had fifty-two weeks.


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

                              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
                              receives   confirmation   indicating   that,  with
                              respect to investment  securities,  each custodian
                              (with  the  exception  of  one  custodian  holding
                              equity   securities   with  a   market   value  of
                              approximately  $6.9  million at November 28, 1998)
                              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,


                                                                             F-8
<PAGE>




                                                            Fab Industries, Inc.
                                                                and Subsidiaries


                                                  Summary of Accounting Policies

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



                              wholesalers  and  retailers  to whom  the  Company
                              sells  (see  Note  13).  The  Company   reviews  a
                              customer's credit history before extending credit.
                              The  Company  has  established  an  allowance  for
                              doubtful  accounts based upon factors  surrounding
                              the credit risk of specific customers,  historical
                              trends and other information.

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


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

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


 Inventories                  Inventories  are  valued  at the  lower of cost or
                              market. For a portion of the inventories,  cost is
                              determined by the last-in, first-out (LIFO) method
                              with the balance being determined by the first-in,
                              first-out (FIFO) method.


                                                                             F-9


<PAGE>




                                                            Fab Industries, Inc.
                                                                and Subsidiaries


                                                  Summary of Accounting Policies

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

 Property, Plant and          Property,  plant and equipment are stated at cost.
 Equipment                    Depreciation  is computed  using  principally  the
                              straight-line   method.  The  range  of  estimated
                              useful lives is 15 to 33 years for  buildings  and
                              building improvements, 4 to 10 years for machinery
                              and equipment, 10 years for leasehold improvements
                              and 5 years for trucks and automobiles.           

 Long-Lived Assets            The  Company  reviews the  carrying  values of its
                              long-lived and identifiable  intangible assets for
                              possible  impairment whenever events or changes in
                              circumstances indicate that the carrying amount of
                              the assets may not be recoverable.  Any long-lived
                              assets held for disposal are reported at the lower
                              of their carrying  amounts or fair value less cost
                              to sell.

 Research and                 Research  and  development  costs are  charged  to
 Development  Costs           expenses  in the year  incurred  and  amounted  to
                              $3,625,000,  $3,869,000  and  $3,875,000 in fiscal
                              1998, 1997 and 1996, respectively.                

Stock-Based                   In fiscal 1997, the Company became subject to SFAS
Compensation                  No. 123, "Accounting for Stock-Based Compensation"
                              ("SFAS  No.   123"),   which  allows   either  the
                              intrinsic  or fair  value  method.  SFAS  No.  123
                              encourages,  but does  not  require,  entities  to
                              adopt  the  fair  value  method  in  place  of the
                              intrinsic   value   method  as  provided   for  in
                              Accounting   Principles   Board  Opinion  No.  25,
                              "Accounting  for Stock Issued to Employees"  ("APB
                              No.  25"),  for  all   arrangements   under  which
                              employees  receive shares of stock or other equity
                              instruments of the employer or the employer incurs
                              liabilities  to employees in amounts  based on the
                              price of its stock.  When the Company adopted SFAS
                              No. 123, it elected to retain the intrinsic  value
                              method.  The required fair value  disclosures  are
                              included   in  the   notes  to  the   consolidated
                              financial statements.                             


                                                                            F-10
<PAGE>


                                                            Fab Industries, Inc.
                                                                and Subsidiaries


                                                  Summary of Accounting Policies

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

Taxes on Income               The  Company  follows  the  liability   method  of
                              accounting  for income  taxes in  accordance  with
                              SFAS No. 109, "Accounting for Income Taxes" ("SFAS
                              109").

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


 Earnings Per Share           Effective  in fiscal  1998,  earnings per share is
                              calculated  in  accordance   with  SFAS  No.  128,
                              "Earnings Per Share" ("SFAS 128"),  which requires
                              companies  to present  basic and diluted  earnings
                              per share.  Basic  earnings  per share is based on
                              the  weighted  average  number  of  common  shares
                              outstanding   during  the  fiscal  year.   Diluted
                              earnings  per  share  is  based  on  the  weighted
                              average  number  of  common  shares  and  dilutive
                              potential  common  shares  outstanding  during the
                              fiscal  year.  The  Company's  dilutive  potential
                              common shares outstanding during fiscal 1998, 1997
                              and 1996 resulted  entirely  from  dilutive  stock
                              options.  The Company has  restated  earnings  per
                              share for  fiscal  1997 and 1996 to conform to the
                              provisions of SFAS 128.


 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.


Pending Accounting            In June  1997,  the  FASB  issued  SFAS  No.  130,
Pronouncements                "Reporting  Comprehensive  Income." This Statement
                              establishes standards for reporting and displaying
                              comprehensive  income  and its  components  in the
                              financial   statements.   It  does  not,  however,
                              require a specific  format for the Statement,  but
                              requires   the   Company   to  display  an  amount
                              representing  total  comprehensive  income for the
                              period in that financial statement. The Company is
                              in  the  process  of  determining   its  preferred
                              format.  This  Statement is  effective  for fiscal
                              years beginning after December 15, 1997.          


                                                                            F-11
<PAGE>






                                                            Fab Industries, Inc.
                                                                and Subsidiaries


                                                  Summary of Accounting Policies

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

                              Also in June 1997,  the FASB  issued SFAS No. 131,
                              "Disclosures  about  Segments of an Enterprise and
                              Related  Information."  The Statement  establishes
                              standards for the manner in which public  business
                              enterprises  report  information  about  operating
                              segments  in  annual   financial   statements  and
                              requires  those  enterprises  to  report  selected
                              information  about  operating  segments in interim
                              financial  reports  issued to  stockholders.  This
                              Statement is effective  for  financial  statements
                              for periods beginning after December 15, 1997, and
                              the Company is currently  evaluating the impact of
                              the Statement on its financial reporting.

                              In  February   1998,   the  Financial   Accounting
                              Standards  Board issued SFAS No. 132,  "Employers'
                              Disclosures     about     Pensions    and    Other
                              Postretirement  Benefits",  which standardizes the
                              disclosure  requirements  for  pensions  and other
                              postretirement  benefits. The adoption of SFAS No.
                              132 in fiscal 1999 is not  expected to  materially
                              impact the Company'

                              In June 1998, the Financial  Accounting  Standards
                              Board  issued  SFAS  No.  133,   "Accounting   for
                              Derivative  Instruments  and Hedging  Activities".
                              SFAS No. 133 requires  companies to recognize  all
                              derivative  contracts  at their  fair  values,  as
                              either assets or liabilities on the balance sheet.
                              If certain conditions are met, a derivative may be
                              specifically  designated as a hedge, the objective
                              of which is to match  the  timing  of gain or loss
                              recognition  on the  hedging  derivative  with the
                              recognition  of (1) the  changes in the fair value
                              of  the  hedged  asset  or   liability   that  are
                              attributable  to  the  hedged  risk,  or  (2)  the
                              earnings   effect   of   the   hedged   forecasted
                              transaction.  For a derivative not designated as a
                              hedging instrument, the gain or loss is recognized
                              in income in the period of change. SFAS No. 133 is
                              effective for all fiscal  quarters of fiscal years
                              beginning after June 15, 1999. While management is
                              still  reviewing  the  statement,  it believes the
                              adoption  of  this   statement  will  not  have  a
                              material  effect  on  the  Company's  consolidated
                              financial position,  results of operations or cash
                              flows and any effect will  generally be limited to
                              the form and content of its disclosures.


                                                                            F-12
<PAGE>


                                                            Fab Industries, Inc.
                                                                and Subsidiaries


                                      Notes to Consolidated Financial Statements

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


1.   Cash and Cash            Cash and cash equivalents at November 28, 1998 and
     Equivalents              November 29, 1997  consisted of the  following (in
                              thousands):                                       






                                                          1998           1997
                 ------------------------------------------------------------
                 Cash                                   $1,458         $1,360
                 Tax-free short-term debt
                   instruments                           4,620          3,214
                 ------------------------------------------------------------
                                                        $6,078         $4,574
                 ============================================================



2.   Investment               Investment   securities    available-for-sale   at
     Securities               November 28, 1998 and November 29, 1997  consisted
                              of the following (in thousands):                  


                                                Gross         Gross
                                              unrealized    unrealized
                                     Cost      holding       holding      Fair
                                                gain          loss        value 
--------------------------------------------------------------------------------
1998:
   Equities                       $  9,885    $    331     $    (55)    $ 10,161
   U.S. Treasury
      obligations                       14        --           --             14
   Tax-exempt
      obligations                   32,719         686          (13)      33,392
   Corporate bonds                   4,698         139         (171)       4,666
--------------------------------------------------------------------------------
                                  $ 47,316    $  1,156     $   (239)    $ 48,233
================================================================================
1997:
   Equities                       $  8,568    $    389     $    (44)    $  8,912
   U.S. Treasury
      obligations                       24        --           --             24
   Tax-exempt
      obligations                   51,118         526          (26)      51,618
   Corporate bonds                   5,298         216         --          5,514
--------------------------------------------------------------------------------
                                  $ 65,008    $  1,131     $    (70)    $ 66,068
================================================================================


                                                                            F-13

<PAGE>


                                                            Fab Industries, Inc.
                                                                and Subsidiaries


                                      Notes to Consolidated Financial Statements

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


                              The carrying values and approximate fair values of
                              investments in debt securities available-for-sale,
                              at November 28, 1998 and  November  29,  1997,  by
                              contractual maturity are as shown below:


                                            November 28, 1998  November 29, 1997
                                            -----------------  -----------------
                                             Cost  Fair value   Cost  Fair value
                     -----------------------------------------------------------
                     Maturing in one
                       year or less        $ 1,927   $ 1,931   $ 8,377   $ 8,416
                     Maturing after one
                       year through
                       five years           28,126    28,745    39,704    40,269
                     Maturing after
                       five years
                       through ten years     7,378     7,396     8,359     8,471
                     -----------------------------------------------------------
                                           $37,431   $38,072   $56,440   $57,156
                     ===========================================================


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

                                                    1998       1997       1996
                       ---------------------------------------------------------
                       Gross realized gains       $ 3,826    $ 2,371    $ 1,518
                       Gross realized losses       (2,680)    (1,232)      (978)
                       ---------------------------------------------------------
                       Net realized gain          $ 1,146    $ 1,139    $   540
                       =========================================================


                              Approximately $6.9 million of the Company's equity
                              investment   securities   at  November   28,  1998
                              consists of a portfolio of Standard and Poor's 100
                              ("S&P 100") common stocks, the fair value of which
                              varies  consistently  with  changes in the S&P 100
                              index. To hedge against fluctuations in the market
                              value of the portfolio,  the Company has purchased
                              short-term  S&P 100  index  put  options  and sold
                              short-term  S&P 100 call options.  At November 28,
                              1998,  the  notional  amounts  of the put and call
                              options  were  $6.8  million  and  $6.9   million,
                              respectively.


                                                                            F-14

<PAGE>


                                                            Fab Industries, Inc.
                                                                and Subsidiaries


                                      Notes to Consolidated Financial Statements

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

3.  Inventories               Inventories  at November 28, 1998 and November 29,
                              1997  consisted of the  following  (in  thousands,
                              except for percentages):

                                                               1998       1997
                           ----------------------------------------------------
                           Raw materials                     $ 9,090    $ 9,132
                           Work-in-process                    14,177      9,781
                           Finished goods                      8,946      9,357
                           ----------------------------------------------------
                                                             $32,213    $28,270
                           ====================================================

                           Approximate percentage of
                             inventories valued under LIFO
                             method                              50%        65%
                           ====================================================
                           Excess of FIFO valuation over
                             LIFO valuation                  $ 4,595    $ 6,298
                           ====================================================

                              The  reduction in the LIFO reserve  during  fiscal
                              1998 was  primarily  attributable  to a decline in
                              the  average  cost of yarn  purchased  during  the
                              year.


4.  Property, Plant and       Property, plant and equipment at November 28, 1998
    Equipment                 and November 29, 1997  consisted of the  following
                              (in thousands):                                   


                                                                            F-15

<PAGE>


                                                            Fab Industries, Inc.
                                                                and Subsidiaries


                                      Notes to Consolidated Financial Statements

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


                                                               1998        1997
                     -----------------------------------------------------------
                     Owned by the Company:
                        Land and improvements               $    698    $    698
                        Buildings and improvements            13,877      13,041
                        Machinery and equipment              109,252      94,885
                        Trucks and automobiles                 1,662       1,631
                        Office equipment                         681         681
                        Leasehold improvements                   808         808
                     -----------------------------------------------------------
                                                             126,978     111,744
                     Property under capital leases:
                        Land                                      18          18
                        Buildings and improvements             1,432       1,432
                     -----------------------------------------------------------
                                                             128,428     113,194
                     Less:  Accumulated depreciation and
                               amortization                   88,407      83,185
                     -----------------------------------------------------------
                                                            $ 40,021    $ 30,009
                     ===========================================================



5.  Obligations Under         Obligations  under capital  leases at November 28,
    Capital Leases            1998  and  November  29,  1997  consisted  of  the
                              following (in thousands):

                                                                    1998    1997
                         -------------------------------------------------------
                         Obligations under capital leases
                           through 2006 payable in monthly
                           installments of $11 including
                           interest at 10% per annum                $514    $584
                         Less:  Current maturities (included
                                   with other current
                                   liabilities)                       28      28
                         -------------------------------------------------------
                                                                    $486    $556
                         =======================================================

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


                                                                            F-16

<PAGE>


                                                            Fab Industries, Inc.
                                                                and Subsidiaries


                                      Notes to Consolidated Financial Statements

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


                              Fiscal year ending (in thousands)
                              2000                                         $  79
                              2001                                            85
                              2002                                            91
                              2003                                            97
                              Thereafter                                     134
                              --------------------------------------------------
                                                                           $ 486
                              ==================================================


6.  Stock                     Stock Option Plan
    Compensation
    Plans                     Under the Company's 1987 stock option plan,  which
                              terminated  in May 1997,  the  Company was able to
                              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.

                              In May 1997,  the Board of  Directors  adopted and
                              the shareholders  approved a new stock option plan
                              providing for the grant of up to 175,000 shares of
                              common  stock at any time over the next ten years.
                              In general, the terms of the 1997 plan are similar
                              to the Company's previous stock option plans.

                              The  Company   has  adopted  the   disclosure-only
                              provisions  of  SFAS  No.  123,   "Accounting  for
                              Stock-Based   Compensation."    Accordingly,    no
                              compensation  cost  has  been  recognized  for the
                              Company's  stock option plans.  If the Company had
                              elected to recognize  compensation  costs based on
                              the fair  value of the  options  granted  at grant
                              date as prescribed by SFAS No. 123, net income and
                              earnings  per share would have been reduced to the
                              pro forma amounts indicated below:


                 (Dollars in thousands, except per
                 share data)                          1998       1997       1996
                 ---------------------------------------------------------------
                 Pro forma net income              $ 5,794    $ 9,233    $ 8,665
                 Pro forma earnings per share -
                   diluted                         $  1.02    $  1.60    $  1.48
                 ===============================================================



                                                                            F-17

<PAGE>


                                                            Fab Industries, Inc.
                                                                and Subsidiaries


                                      Notes to Consolidated Financial Statements

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


                              The weighted average fair value of options granted
                              was $7.04, $10.29, $8.30 per share in fiscal 1998,
                              1997 and 1996, respectively.

                              The fair value of each option  grant is  estimated
                              on the  date  of  grant  using  the  Black-Scholes
                              option-pricing    model    with   the    following
                              assumptions for fiscal 1998, 1997 and 1996 grants:

                              --------------------------------------------------
                              Dividends                           $.70 per share
                              Volatility                                   27.5%
                              Risk-free interest                   4.37% to 6.7%
                              Expected term                        5 to 10 years
                              ==================================================


                              Data  regarding  the  Company's  stock option plan
                              follows:

                                                                      Weighted
                                                                      average
                                                                  exercise price
                                                        Shares       per share
   -----------------------------------------------------------------------------
   Shares under option, December 2, 1995               129,200         $17.45
   Options granted                                      50,000          27.46
   Options exercised                                   (14,300)         15.96
   Options canceled                                    (10,000)         26.26
   -----------------------------------------------------------------------------
   Shares under option, November 30, 1996              154,900          20.25
   Options granted                                      64,000          29.77
   Options exercised                                    (8,800)         17.50
   Options canceled                                     (3,000)         33.88
   -----------------------------------------------------------------------------
   Shares under option, November 29, 1997              207,100          23.11
   Options granted                                      20,000          29.10
   Options exercised                                   (15,450)         22.32
   Options canceled                                    (39,000)        (30.29)
   -----------------------------------------------------------------------------
   Shares under option, November 28, 1998              172,650          22.26
   =============================================================================

   -----------------------------------------------------------------------------
   Options exercisable at:
      November 30, 1996                                113,700         $17.57
      November 29, 1997                                125,900          19.37
      November 28, 1998                                125,010          20.01
   =============================================================================



                                                                            F-18

<PAGE>


                                                            Fab Industries, Inc.
                                                                and Subsidiaries


                                      Notes to Consolidated Financial Statements

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


                              The following summarizes  information about shares
                              under  option  in the  respective  exercise  price
                              ranges at November 28, 1998:

<TABLE>
<CAPTION>
                                                                Weighted average                         Weighted average
 Range of exercise                         Weighted average      exercise price          Number           exercise price
  price per share    Number outstanding     remaining life         per share           exercisable          per share
---------------------------------------------------------------------------------------------------------------------------
<S>                        <C>                     <C>                <C>                <C>                   <C>   
    $15.44 - $19.00         84,050                 2.44               $16.06              84,050               $16.06
    22.06  -  31.44         88,600                 9.61                28.14              40,960                28.12
---------------------------------------------------------------------------------------------------------------------------
                           172,650                                                       125,010
===========================================================================================================================
</TABLE>

                              The shares  authorized  but not granted  under the
                              Company's  stock  option  plans  were  165,000  at
                              November  28,  1998 and  175,000 at  November  29,
                              1997.  Common stock  reserved for options  totaled
                              172,650  shares at  November  28, 1998 and 207,100
                              shares at November 29, 1997.


                                                                            F-19

<PAGE>


                                                            Fab Industries, Inc.
                                                                and Subsidiaries


                                      Notes to Consolidated Financial Statements

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

                              Restricted Stock Plan

                              The  Company  has a  restricted  stock  plan which
                              awards 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 are held by the Company
                              and vest over the same five-year period.

                              During fiscal 1991, 60,000 shares were awarded and
                              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 such  shares was
                              recognized ratably over the five-year  restriction
                              period.

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

                              Compensation   expense   related   to  the   above
                              restricted  shares for fiscal 1998,  1997 and 1996
                              was $26,000, $31,000 and $170,000, respectively.


7.  Stockholder               The  Company  has a  Stockholder  Rights Plan (the
    Rights Plan               "Plan")  whereby each  stockholder  has received a
                              distribution of rights for each common share held.
                              The rights will become exercisable and will detach
                              from the common shares a specified  time after any
                              person becomes the beneficial owner of 20% or more
                              of the  Company's  common  shares,  or commences a
                              tender or exchange  offer which,  if  consummated,
                              would result in any person becoming the beneficial
                              owner  of 30% or  more  of  the  Company's  common
                              shares. Once exercisable,  each right will entitle
                              the holder,  other than the acquiring  person,  to
                              purchase,  for the rights purchase  price,  common
                              shares  having a market value of twice the right's
                              purchase price.                                   


                                                                            F-20

<PAGE>


                                                            Fab Industries, Inc.
                                                                and Subsidiaries


                                      Notes to Consolidated Financial Statements

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


                              If, following an acquisition of 20% or more of the
                              Company's  common shares,  the Company is involved
                              in any  merger or other  business  combination  or
                              sells or transfers  more than 50% of its assets or
                              earnings power, each right will entitle the holder
                              to purchase, for the rights purchase price, common
                              shares  of the  other  party  to such  transaction
                              having  a  market   value  of  twice  the  right's
                              purchase price.

                              The  Company  may  redeem the rights at a price of
                              $0.01 per right at any time  prior to a  specified
                              period  of time  after a  person  has  become  the
                              beneficial  owner of 20% or more of the  Company's
                              common  shares.  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.


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 1998,
                              1997  and  1996  were   $308,000,   $429,000   and
                              $439,000, respectively.

                              The  Company  also  has  a  nonqualified,  defined
                              contribution retirement plan for key employees who
                              are   ineligible   for  the  salaried   employees'
                              qualified profit sharing plan.  Contributions  for
                              fiscal 1998,  1997 and 1996 were $59,000,  $94,000
                              and $98,000, respectively.  Benefits payable under
                              this plan  amounting to $2,501,000  and $2,047,000
                              at  November  28,  1998  and  November  29,  1997,
                              respectively,  are  included  in other  noncurrent
                              liabilities. These liabilities are fully funded by
                              plan assets of equal  amounts,  which are included
                              in other assets.

                              Pension Plan

                              The  Company'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.


                                                                            F-21

<PAGE>


                                                            Fab Industries, Inc.
                                                                and Subsidiaries


                                      Notes to Consolidated Financial Statements

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


                              The  net  periodic  pension  cost  of the  defined
                              benefit plan for fiscal 1998,  1997 and 1996 is as
                              follows (in thousands):

                                             1998           1997          1996
         -----------------------------------------------------------------------
         Service cost                      $  272        $   181       $   178
         Interest cost on projected                                             
           benefit obligation                 264            179           161
         Actual return on plan assets         119         (1,590)       (1,267)
         Net amortization and deferral       (687)         1,117           924
         -----------------------------------------------------------------------
         Net periodic pension cost         $  (32)       $  (113)      $    (4)
         =======================================================================


                              The following table presents a  reconciliation  of
                              the funded  status of the plan for fiscal 1998 and
                              1997 (in thousands):

                                                            1998           1997
           ---------------------------------------------------------------------
           Accumulated benefit obligations                                      
              including vested benefits of                                      
              $(3,970) and $(3,468)                      $(4,200)       $(3,690)
           =====================================================================
           Projected benefit obligation for                                     
              service rendered to date                   $(4,200)       $(3,690)
           Plans assets at fair value, primarily                                
              listed stocks                                4,987          5,593
           ---------------------------------------------------------------------
           Projected plan assets in excess of                                   
              benefit obligation                             787          1,903
           Unrecognized net gain from past                                      
              experience different from that                                    
              assumed and effects of changes in                                 
              assumptions                                 (1,573)        (2,766)
           Unrecognized prior service cost                   833            906
           Unrecognized net asset at transition                                 
              being recognized over 11 years                   -            (28)
           ---------------------------------------------------------------------
           Prepaid pension costs included in other                              
              current assets                             $    47        $    15
           =====================================================================


                                                                            F-22

<PAGE>


                                                            Fab Industries, Inc.
                                                                and Subsidiaries


                                      Notes to Consolidated Financial Statements

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


                              The  average  discount  rate was  6-1/2% in fiscal
                              1998, 7% in fiscal 1997 and 7-1/2% in fiscal 1996,
                              and the expected rate of return on assets for both
                              fiscal 1998 and 1997 was 8%.

                              Employee Stock Ownership Plan

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

                              Annual  principal  installments  of $790,000  plus
                              interest  at  prime  are  paid by the  ESOP to the
                              Company.  The balance on the ESOP  indebtedness at
                              November 28, 1998 of  $6,327,000 is reflected as a
                              reduction of the Company's stockholders' equity in
                              the consolidated balance sheets.

                              The  Company  accounts  for  the  ESOP  shares  in
                              accordance  with the  provisions  of the  American
                              Institute   of   Certified   Public   Accountants'
                              Statement of Position No. 76-3. ESOP contributions
                              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.


                                                                            F-23

<PAGE>


                                                            Fab Industries, Inc.
                                                                and Subsidiaries


                                      Notes to Consolidated Financial Statements

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


                              The portion of the common stock dividends declared
                              relating to ESOP shares totaled $218,000, $227,000
                              and  $232,000  for  fiscal  1998,  1997 and  1996,
                              respectively.  Of these amounts, $102,000, $89,000
                              and  $75,000  for  fiscal  1998,  1997  and  1996,
                              respectively,  related  to  allocated  shares  and
                              $116,000,  $138,000  and $157,000 for fiscal 1998,
                              1997   and   1996,   respectively,    related   to
                              unallocated  shares.  The dividends related to the
                              unallocated  shares are being applied  towards the
                              $790,000 annual principal installments referred to
                              above.

                              As of November  28, 1998 and  November  29,  1997,
                              ESOP shares information was as follows:

                                                               1998         1997
                     -----------------------------------------------------------
                     Allocated                              154,829      141,041
                     Committed to be released                24,488       26,716
                     In suspense                            128,966      151,226
                     -----------------------------------------------------------
                           Total shares held by ESOP        308,283      318,983
                     ===========================================================


                              The net charges to earnings for fiscal 1998,  1997
                              and 1996 were as follows (in thousands):

                                                      1998       1997       1996
               -----------------------------------------------------------------
               Contribution to ESOP                 $1,176     $1,242     $1,297
               Less:  Interest income on loan                                   
                         to ESOP                       605        691        738
               -----------------------------------------------------------------
               Net charge to earnings               $  571     $  551     $  559
               =================================================================


                              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.


                                                                            F-24

<PAGE>


                                                            Fab Industries, Inc.
                                                                and Subsidiaries


                                      Notes to Consolidated Financial Statements

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


9.  Income Taxes              Provisions  for  Federal,  state and local  income
                              taxes for fiscal 1998,  1997 and 1996 consisted of
                              the following components (in thousands):

                                                1998         1997          1996
                  -------------------------------------------------------------
                  Current:
                     Federal                 $   881       $3,876        $3,415
                     State and local              77          444           324
                  -------------------------------------------------------------
                                                 958        4,320         3,739
                  Deferred:
                     Federal and state         1,042         (185)           61
                  -------------------------------------------------------------
                                              $2,000       $4,135        $3,800
                  =============================================================


                              The net  deferred  tax  liability  at November 28,
                              1998  and  November  29,  1997  consisted  of  the
                              following (in thousands):

                                                               1998        1997
         -----------------------------------------------------------------------
         Long-term portion:
            Gross  deferred  tax  liability  (asset)
              for:
                 Excess depreciation for tax purposes        $5,989      $5,648
                 Future tax deductions for employee                             
                    benefit plans                            (1,284)     (1,168)
         -----------------------------------------------------------------------
                       Net long-term liability                4,705       4,480
         -----------------------------------------------------------------------
         Current portion:
            Gross  deferred  tax  liability  (asset)
              for:
                 Accounts receivable - Section 475                              
                    adjustment                                  855           -
                 Net unrealized holding gain on
                    investment securities
                    available-for-sale, included in                             
                    stockholders' equity                        367         424
                 ESOP contribution accrued for tax                              
                    purposes                                    422         408
                 Other                                         (106)        (54)
         -----------------------------------------------------------------------
                       Net current liability                  1,538         778
         -----------------------------------------------------------------------
         Net deferred tax liability                          $6,243      $5,258
         =======================================================================


                                                                            F-25

<PAGE>


                                                            Fab Industries, Inc.
                                                                and Subsidiaries


                                      Notes to Consolidated Financial Statements

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


                              The  differences  between the Company's  effective
                              tax rate and the  Federal  statutory  tax rate for
                              fiscal   1998,   1997  and  1996  arose  from  the
                              following:

                                            1998           1997            1996
         -----------------------------------------------------------------------
                                                    (% of pretax income)
         Federal tax expense at                                                 
           statutory rate                   34.0%          35.0%           35.0%
         State and local income taxes,                                          
           net of Federal benefit            2.3            2.5             2.4
         Tax-free interest income and                                           
           dividends received deduction    (11.1)          (6.5)           (6.4)
         Other                               (.3)           (.4)            (.8)
         -----------------------------------------------------------------------
         Effective tax rate                 24.9%          30.6%           30.2%
         =======================================================================


10. Commitments               Stock Repurchase

                              The Company has an agreement  with the Chairman of
                              the Board of Directors and President  ("Chairman")
                              which   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.   The   agreement   extends
                              automatically  from  year  to year  unless  either
                              party gives  notice of  cancellation  at least six
                              months prior to the then current  expiration date.
                              The current expiration date is March 2000.


                                                                            F-26

<PAGE>


                                                            Fab Industries, Inc.
                                                                and Subsidiaries


                                      Notes to Consolidated Financial Statements

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


                              Lease

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

                              Rental  expense  for  operating  leases  in fiscal
                              1998, 1997 and 1996 aggregated $986,000,  $605,000
                              and $643,000, respectively.

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

                              Fiscal year ending (in thousands)
                              --------------------------------------------------
                              1999                                     $  530
                              2000                                        559
                              2001                                        235
                              --------------------------------------------------
                                                                       $1,324
                              ==================================================


11.  Statement of Cash        Cash  outlays  for  corporate   income  taxes  and
     Flows                    interest  for fiscal  1998,  1997 and 1996 were as
                              follows (in thousands):

                                                  Corporate income            
                                                       taxes            Interest
                               -------------------------------------------------
                               1998                    $2,907              $  75
                               1997                     3,545                 65
                               1996                     3,840                124
                               =================================================


                                                                            F-27

<PAGE>


                                                            Fab Industries, Inc.
                                                                and Subsidiaries


                                      Notes to Consolidated Financial Statements

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


                              Noncash Investing and Financing Activities

                              In  fiscal  1998,  1997 and 1996,  net  unrealized
                              holding gains (losses) of $(143,000),  $48,000 and
                              $639,000,  respectively, less related income taxes
                              of $(57,000),  $19,000 and $256,000, on investment
                              securities  available-for-sale,  were  recorded as
                              increases (decreases) in stockholders' equity.


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

                                      Interest income  Dividend income   Total
                              --------------------------------------------------
                              1998         $3,184             $345       $3,529
                              1997          3,654              176        3,830
                              1996          3,505              155        3,660
                              ==================================================


13.  Major Customer           During fiscal 1998, no single customer or group of
                              affiliated  customers  accounted for more than 10%
                              of the year's net sales or the  year-end  accounts
                              receivable  balance.  For  fiscal  1997 and  1996,
                              sales to a group of customers  affiliated  through
                              common control accounted for approximately 10% and
                              12% of net sales,  respectively.  The  receivables
                              from   this   group   of   customers   represented
                              approximately   12%  of  the   November  29,  1997
                              accounts receivable balance.


                                                                            F-28

<PAGE>


                                                            Fab Industries, Inc.
                                                                and Subsidiaries


                                      Notes to Consolidated Financial Statements

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


14. Earnings Per              Basic  and  diluted  earnings  per  share  for the
    Share                     fiscal years ended November 28, 1998, November 29,
                              1997  and  November  30,  1996 are  calculated  as
                              follows:

                                                                       Weighed
                                                       Average       Per Share
                                     Net Income         Shares         Amount
  ------------------------------------------------------------------------------
  Fiscal year ended
    November 28, 1998:
     Basic earnings per share        $6,017,000       5,627,788         $1.07
                                                                    ============
     Effect of assumed                                                          
        conversion of employee                                                  
        stock options                                    37,406                 
  ------------------------------------------------------------------------------
     Diluted earnings per share      $6,017,000       5,665,194         $1.06
  ==============================================================================
  Fiscal year ended
    November 29, 1997:
     Basic earnings per share        $9,394,000       5,705,624         $1.65
                                                                    ============
     Effect of assumed                                                          
        conversion of employee                                                  
        stock options                                    47,271                 
  ------------------------------------------------------------------------------
     Diluted earnings per share      $9,394,000       5,752,895         $1.63
  ==============================================================================
  Fiscal year ended
    November 30, 1996:
      Basic earnings per share       $8,796,000       5,797,228         $1.52
                                                                    ============
     Effect of assumed                                                          
        conversion of employee                                                  
        stock options                                    43,910                 
  ------------------------------------------------------------------------------
     Diluted earnings per share      $8,796,000       5,841,138         $1.51
  ==============================================================================


                                                                            F-29

<PAGE>


                                                            Fab Industries, Inc.
                                                                and Subsidiaries


                                      Notes to Consolidated Financial Statements

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


                              Options  to  purchase  46,000,  52,000  and 13,000
                              shares of common  stock with prices  ranging  from
                              $28.50 to $33.88 were  outstanding  during  fiscal
                              1998,  1997 and 1996,  respectively,  but were not
                              included in the  computation  of diluted  earnings
                              per share  because the  options'  exercise  prices
                              were greater than the average  market price of the
                              common shares during such fiscal years.





                                                                            F-30

<PAGE>


                                                            Fab Industries, Inc.
                                                                and Subsidiaries


                                      Notes to Consolidated Financial Statements

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


15.  Quarterly                Quarterly  earnings were as follows (in thousands,
     Financial Data           except for earnings per share):                   
     (unaudited)

<TABLE>
<CAPTION>
                               First              Second               Third               Fourth
                              quarter             quarter              quarter             quarter*              Total
------------------------------------------------------------------------------------------------------------------------
<S>                          <C>                  <C>                 <C>                <C>                   <C>      
Fiscal 1998:
   Net sales                 $   34,251           $  39,761           $  39,571          $   37,853            $ 151,436
   Cost of goods sold            29,918              33,403              34,430              35,396              133,147
   Net income                     1,735               2,334               1,665                 283                6,017
   Earnings per share:
      Basic                  $     0.31           $    0.41           $    0.30          $      .05            $    1.07
      Diluted                $     0.30           $    0.41           $    0.30          $      .05            $    1.06
========================================================================================================================
Fiscal 1997:
   Net sales                 $   35,475           $  42,940           $  41,775          $   40,745            $ 160,935
   Cost of goods sold            31,427              36,601              35,009              34,352              137,389
   Net income                     1,650               2,395               2,640               2,709                9,394
   Earnings per share:
      Basic                  $     0.29           $    0.42           $    0.46          $     0.48            $    1.65
      Diluted                $     0.28           $    0.42           $    0.46          $     0.47            $    1.63
========================================================================================================================
</TABLE>

*    As a result of lower than previously  anticipated  operating  results,  the
     fourth  quarter of fiscal  1998  reflects a  reduction  of  incentive-based
     compensation expenses and effective income tax rates from amounts estimated
     in  prior  quarters,  the  aggregate  of  which  increased  net  income  by
     approximately $1,085.


                                                                            F-31

<PAGE>



                      FAB INDUSTRIES, INC. AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS
                                FORM 10-K ITEM 14

             FISCAL YEARS ENDED NOVEMBER 28, 1998, NOVEMBER 29, 1997
                              AND NOVEMBER 30, 1996










                                       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)
                                         Balance at     Charged to         (2)
                                        beginning of     costs and      Charged to                      Balance at
Description                                 year         expenses     other accounts    Deductions     end of year
------------------------------------------------------------------------------------------------------------------
<S>                                         <C>           <C>             <C>           <C>               <C>   
Fiscal year ended 
   November 28, 1998:
      Allowance for doubtful accounts       $900          $400(i)         $   -         $(300)(ii)        $1,000
Fiscal year ended
   November 29, 1997:
      Allowance for doubtful accounts       $600          $400(i)         $   -         $(100)(ii)       $   900
Fiscal year ended 
   November 30, 1996:
      Allowance for doubtful accounts       $500          $400(i)         $   -         $(300)(ii)       $   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 Company has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.


                                    FAB INDUSTRIES, INC.
                                    (Company)


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

                                    Date:  February 26, 1999


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

<TABLE>
<CAPTION>
Signature                   Date                   Capacity in Which Signed
---------                   ----                   ------------------------
<S>                         <C>                    <C>
/s/ Samson Bitensky         February 26, 1999      Chairman of the Board, Chief Executive   
------------------------                           Officer and Director (Principal Executive
    Samson Bitensky                                Officer)

/s/ David A. Miller         February 26, 1999      Vice President - Finance, Treasurer and
------------------------                           Chief Financial Officer
    David A. Miller                                (Principal Financial and Accounting
                                                   Officer)

/s/ Sherman S. Lawrence     February 26, 1999      Secretary and Director
------------------------
    Sherman S. Lawrence

/s/ Martin Bernstein        February 26, 1999      Director
------------------------
    Martin Bernstein

                            February 26, 1999      Director
------------------------
    Lawrence Bober

/s/ Frank Greenberg         February 26, 1999      Director
------------------------
    Frank Greenberg

/s/ Susan Lerner            February 26, 1999      Director
------------------------
    Susan Lerner

/s/ Richard Marlin          February 26, 1999      Director
------------------------
    Richard Marlin
</TABLE>

                                       17

<PAGE>

                                INDEX TO EXHIBITS


                                                                  Page Number In
                                                                  Sequentially
Exhibit             Description of Exhibit                        Numbered Copy

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

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

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

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

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

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

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

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

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

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

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

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

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

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

<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

<PAGE>

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

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

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

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

*23            -    Consent of BDO Seidman, LLP.

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

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