<SUBMISSION>
<ACCESSION-NUMBER>0000950152-06-001857
<TYPE>10-K
<PUBLIC-DOCUMENT-COUNT>7
<PERIOD>20051231
<FILING-DATE>20060308
<DATE-OF-FILING-DATE-CHANGE>20060308
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>BLAIR CORP
<CIK>0000071525
<ASSIGNED-SIC>5961
<IRS-NUMBER>250691670
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-K
<ACT>34
<FILE-NUMBER>001-00878
<FILM-NUMBER>06673632
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>220 HICKORY ST
<CITY>WARREN
<STATE>PA
<ZIP>16366
<PHONE>8147233600
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>220 HICKORY STREET
<CITY>WARREN
<STATE>PA
<ZIP>16366
</MAIL-ADDRESS>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>NEW PROCESS CO
<DATE-CHANGED>19890507
</FORMER-COMPANY>
</FILER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>j1821001e10vk.htm
<DESCRIPTION>BLAIR CORPORATION   10-K/FYE 12-31-05
<TEXT>
<HTML>
<HEAD>
<TITLE>Blair Corp.  10-K</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>




<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>UNITED STATES SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>WASHINGTON, D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>FORM 10-K</B>
</DIV>


<DIV align="center" style="font-size: 12pt; margin-top: 12pt"><B>ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF<BR>
THE SECURITIES EXCHANGE ACT OF 1934</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>For the fiscal year ended December&nbsp;31, 2005<BR>
Commission file number 1-878</B></DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 12pt"><B>BLAIR CORPORATION</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top">Incorporated in Delaware
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">I.R.S. Employer Identification Number:</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">220 Hickory Street
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">25-0691670</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Warren, Pennsylvania 16366</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">(814) 723-3600</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>Securities registered pursuant to Section&nbsp;12(b) of the Act:</B></DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
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    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
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<TR valign="bottom">
    <TD align="center" valign="top">TITLE OF EACH CLASS
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">NAME OF EACH EXCHANGE ON WHICH REGISTERED</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Common Stock, without nominal or par value
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">American Stock Exchange</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>Securities registered pursuant to Section&nbsp;12(g) of the Act: None</B></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule&nbsp;405 of the
Securities Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 0pt"><FONT face="Wingdings">&#111;</FONT> Yes <FONT face="Wingdings">&#254;</FONT> No
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark if the registrant is not required to file reports pursuant to Section&nbsp;13 or
15(d) of the Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 0pt"><FONT face="Wingdings">&#111;</FONT> Yes <FONT face="Wingdings">&#254;</FONT> No
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark whether the registrant (1)&nbsp;has filed all reports required to be filed by
Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12&nbsp;months (or for
such shorter period that the registrant was required to file such reports), and (2)&nbsp;has been
subject to such filing requirements for the past 90&nbsp;days.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 0pt"><FONT face="Wingdings">&#254;</FONT> Yes <FONT face="Wingdings">&#111;</FONT> No
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark if disclosure of delinquent filers pursuant to Item&nbsp;405 of Regulation&nbsp;S-K is
not contained herein, and will not be contained, to the best of the registrant&#146;s knowledge, in
definitive proxy or information statements incorporated by reference in Part&nbsp;III of this Form 10-K
or any amendment to this Form 10-K. <FONT face="Wingdings">&#111;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
or a nonaccelerated filer. See definition of &#147;accelerated filer and large accelerated filer&#148; in
Rule&nbsp;12b-2 of the Exchange Act. (check one):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%"></TD>
    <TD width="1%"></TD>
    <TD width="30%"></TD>
    <TD width="1%"></TD>
    <TD width="28%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Large
accelerated filer&nbsp;&nbsp;<FONT face="Wingdings">&#111;</FONT>

</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Accelerated
filer&nbsp;&nbsp;<FONT face="Wingdings">&#254;</FONT>

</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Non-accelerated filer&nbsp;&nbsp;<FONT face="Wingdings">&#111;</FONT>
</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark whether the registrant is a shell company (as defined in Rule&nbsp;12b-2 of the
Act).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 0pt"><FONT face="Wingdings">&#111;</FONT> Yes <FONT face="Wingdings">&#254;</FONT> No
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The aggregate market value, based upon the last sales price of $39.50 as quoted on The American
Stock Exchange for June&nbsp;30, 2005, of the common stock held by non-affiliates of the registrant,
i.e., persons other than directors and executive officers of the registrant is approximately
$326,163,864.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The registrant had 3,957,157 shares of common stock outstanding as of February&nbsp;23, 2006.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>DOCUMENTS INCORPORATED BY REFERENCE</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Portions of the Proxy Statement for the 2006 Annual Meeting of Stockholders (the &#147;2006 Proxy
Statement&#148;) are incorporated by reference into Part&nbsp;III of this Form 10-K.
</DIV>


<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>





<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<!-- TOC -->
<A name="toc"><DIV align="CENTER" style="page-break-before:always"><U><B>TABLE OF CONTENTS</B></U></DIV></A>

<P><CENTER>
<TABLE border="0" width="90%" cellpadding="0" cellspacing="0">
<TR>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
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</TR>
<TR><TD colspan="9"><A HREF="#000"> PART I</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#001">ITEM 1. BUSINESS</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#002">ITEM 1A. RISK FACTORS</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#003">ITEM 1B. UNRESOLVED STAFF COMMENTS</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#004">ITEM 2. PROPERTIES</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#005">ITEM 3. LEGAL PROCEEDINGS</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#006">ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#007"> PART II</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#008">ITEM 5. MARKET FOR THE REGISTRANT&#146;S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#009">ITEM 6. SELECTED FINANCIAL DATA</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#010">ITEM 7. MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#011">ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#012">ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#013">ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#014">ITEM 9A. CONTROLS AND PROCEDURES</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#015">ITEM 9B. OTHER INFORMATION</A></TD></TR>
<TR><TD colspan="9"><A HREF="#016">PART III</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#017">ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#018">ITEM 11. EXECUTIVE COMPENSATION</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#019">ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#020">ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#021">ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES</A></TD></TR>
<TR><TD colspan="9"><A HREF="#022">PART IV</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#023">ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES</A></TD></TR>
<TR><TD colspan="9"><A HREF="#024">SIGNATURES</A></TD></TR>
<TR><TD colspan="9"><A HREF="j1821001exv21.htm">EX-21</A></TD></TR>
<TR><TD colspan="9"><A HREF="j1821001exv23.htm">EX-23</A></TD></TR>
<TR><TD colspan="9"><A HREF="j1821001exv31w1.htm">EX-31.1</A></TD></TR>
<TR><TD colspan="9"><A HREF="j1821001exv31w2.htm">EX-31.2</A></TD></TR>
<TR><TD colspan="9"><A HREF="j1821001exv32w1.htm">EX-32.1</A></TD></TR>
<TR><TD colspan="9"><A HREF="j1821001exv32w2.htm">EX-32.2</A></TD></TR>
</TABLE>
</CENTER>
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<!-- link1 " PART I" -->
<DIV align="left"><A NAME="000"></A></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">PART I
</DIV>

<!-- link2 "ITEM 1. BUSINESS " -->
<DIV align="left"><A NAME="001"></A></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>ITEM 1. BUSINESS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(a)&nbsp;GENERAL.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Blair Corporation (the &#147;Company&#148;) was founded in 1910 by John L. Blair, Sr., and was incorporated
in 1924 under the laws of the State of Delaware. The Company&#146;s business consists of the sale of
fashion apparel for men and women, plus a wide range of home products. Although the Company&#146;s
revenues are generated primarily through direct mail merchandising, the Company has transitioned
into a multi-channel direct marketer, as an increasing amount of total sales revenue, approximately
17.9% in 2005, is being generated through its e-commerce Web sites, which were launched in 2000.
The Company operates three retail stores, two in Pennsylvania and one in Delaware. The Company
employs approximately 1,900 people. None of the Company&#146;s employees are subject to collective
bargaining agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(b)&nbsp;INFORMATION REGARDING INDUSTRY SEGMENTS.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company operates as one reporting segment in the business of selling women&#146;s and men&#146;s fashion
apparel and accessories and home furnishing items primarily through direct marketing sales. The
Company has one operating segment. Retail store sales comprise less than 1% of the Company&#146;s total
net sales and the method used to distribute the Company&#146;s products (United States Postal Service or
United Parcel Service) is the same for 99% of the business (i.e., direct mail and internet). The
Company&#146;s customer base is comprised of individuals throughout the United States and is diverse in
both geographic and demographic terms. Advertising is done mainly by means of catalogs, direct mail
letters and the internet, which offer the Company&#146;s merchandise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The format of the information used by the Company&#146;s CEO is consistent with the reporting format
used in the Company&#146;s 2005 Form 10-K and other external financial information. In addition, the
Company utilizes one general ledger and one budget (which is categorized only by product line such
as Womenswear, Menswear, Home and the stores) and does not operate by divisions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The direct mail business represents approximately 81% of net sales, the internet accounts for
approximately 18% and the retail component accounts for approximately 1%. The Company considers
all of these components to be engaged in business activities from which revenues are earned and
expenses are incurred relating to transactions of the same enterprise. Additionally, the Company&#146;s
segment reporting is consistent with the presentation made to the Company&#146;s chief operating
decision maker. For these reasons, the Company believes it has one reportable segment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(c)&nbsp;DESCRIPTION OF BUSINESS.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company markets a wide range of merchandise, manufactured by a number of independent suppliers,
both domestic and foreign. Suppliers located outside of the United States provided approximately
32% of the Company&#146;s merchandise. Most of these suppliers have been associated with the Company
for many years and manufacture products based upon the Company&#146;s specifications. Suppliers are
selected in accordance with their ability to produce high quality products in a cost-effective
manner.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company markets its products mainly by direct mail. Catalogs and letters containing color
folders depict the current styles of Womenswear (such as coordinates, dresses, tops, pants, skirts,
lingerie, sportswear, suits, jackets, outerwear and shoes), Menswear (such as suits, shirts,
outerwear, active wear, slacks, shoes, and accessories), and Home (such as bedspread ensembles,
draperies, furniture covers, area rugs, bath accessories, kitchenware, gifts, collectibles and
personal care items) are mailed directly to existing and prospective customers. Sales of the
Menswear and Womenswear products accounted for 85% of the Company&#146;s total sales in 2005, and sales
of home products accounted for the remaining 15%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The environment for our products is very competitive and the Company has numerous competitors
throughout various channels within the industry. Our current and potential competitors include
brick and mortar retailers and catalog retailers, many of which possess significant brand
awareness, sales volume, and customer bases. Some of these competitors currently sell products
through the internet, mail order, or direct marketing. We believe that the principal competitive
factors in our market segments include value, credit, availability, convenience, brand recognition,
customer service, and reliability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company considers its merchandise to be value-priced and competes for sales with other direct
marketers, retail department stores, specialty shops, discount store chains and e-commerce and
multi-channel marketers. The Company competes based on its sales expertise and its unique
combination of product, quality, price, credit, guarantee and service.
</DIV>


<P align="center" style="font-size: 10pt">2
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of December&nbsp;31, 2005 the Company had $4,866,035 of backlog orders of which the Company
reasonably did not expect to fill $511,420, compared to $5,946,766 of backlog orders as of December
31, 2004 of which the Company reasonably did not expect to fill $683,878. The majority of the
backlog orders were the result of ordered items being out of stock at the time the order was
originally placed. The reduction in backlog orders is the result of the Company&#146;s enhanced
inventory management efforts. Emphasis was placed on carrying greater quantities of recurring or
staple products and, conversely, lower levels of newly introduced or untested products were
maintained.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Media and co-op prospect advertising programs continue to be used as components of the Company&#146;s
customer acquisition strategy. The Company continued to expand its internet presence in 2005
generating $94.9&nbsp;million in sales demand, approximately 18% of the Company&#146;s total gross sales, as
compared to approximately $91&nbsp;million in sales demand or 16% in 2004. The Company launched its
e-commerce Web sites in the third quarter of 2000 and has continued to expand its affiliate
partnerships to extend the reach of the Web sites. The Company&#146;s Web sites have also become an
effective way to help liquidate excess inventory.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Both catalog mailings and letter mailings are mailed from commercial printers engaged by the
Company. Orders for merchandise are processed at the Company&#146;s corporate offices in Warren,
Pennsylvania (telephone orders via the call centers in Franklin, Pennsylvania, Erie, Pennsylvania
and Warren, Pennsylvania) and orders are filled and mailed from the Company&#146;s Distribution Center
in Irvine, Pennsylvania. All of the Company&#146;s products are warehoused in its Irvine, Pennsylvania
Distribution Center. Merchandise returns operations are located in Erie, Pennsylvania. The
Company serves customers throughout the United States.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company has retail facilities in Grove City, Pennsylvania and Wilmington, Delaware.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(d)&nbsp;FOREIGN OPERATIONS AND EXPORT SALES.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company does not conduct export sales of merchandise from the United States.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company conducts its foreign operations through foreign offices maintained in Hong Kong,
Taiwan, Singapore, India and China that directly source more than 32% of the Company&#146;s merchandise
from foreign suppliers. All activity is intercompany and the foreign offices have insignificant
amounts of cash and fixed assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(e)&nbsp;AVAILABLE INFORMATION.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company makes available free of charge copies of its Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K, and any amendments made to these reports
pursuant to Section 13(a) and 15(d) of the Exchange Act, on its Web site at www.blair.com. Such
reports are posted as soon as reasonably practicable after being filed with the SEC.
</DIV>

<!-- link2 "ITEM 1A. RISK FACTORS" -->
<DIV align="left"><A NAME="002"></A></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>ITEM 1A. RISK FACTORS </B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Significant increases in the costs associated with its direct mail business could negatively affect
results of operations.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company incurs substantial costs associated with its catalog mailings, including paper,
postage, and human resource costs associated with catalog layout and design, production and
circulation and increased inventories. The cost of printing, paper and postage are governed by
contracts and other long term arrangements which serve to mitigate the risk of sudden or unexpected
increases. Most of these costs are incurred prior to mailing. As a result, it is not possible to
adjust the costs of a particular advertising mailing to reflect the actual subsequent performance
of the mailing. Since the direct mail business accounts for the majority of total net sales, any
performance shortcomings experienced by the direct mail business, such as the damage or delay of
delivery of catalogs or errors therein, would likely have a material adverse effect on the overall
business, financial condition, results of operations and cash flows.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Net sales could be negatively impacted by a decline in response rates to advertising promotions, by
a decline in operating results or a reduction in the customer file.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Response rates are impacted by the Company&#146;s ability to continually develop and/or select the right
merchandise assortment, maintain appropriate inventory levels and creatively present merchandise in
a way that is appealing to customers. Consumer preferences cannot be predicted with certainty, as
they continually change and vary from region to region. On average, the design process for apparel
is initiated nine to ten months before merchandise is available to customers. Further, purchase
commitments are made four to six months in advance. These lead times make it difficult to respond
quickly to changing consumer preferences and magnify the consequences of any misjudgments made in
anticipating customer preferences. Consequently, if the Company misjudges customer merchandise
preferences or purchasing habits, sales may decline
</DIV>


<P align="center" style="font-size: 10pt">3
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">significantly, and markdowns may be required to
significantly lower prices in order to sell excess inventory, which would result in lower margins.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Response rates to advertising promotions and, as a result, the net sales generated by each
promotion, can be affected by other factors beyond the Company&#146;s control such as weak economic
conditions, and unseasonable weather in key geographic markets. In addition, a portion of all
advertising promotions are to prospective customers. These promotions involve risks not present in
promotions to existing customers, including lower and less predictable response rates.
Additionally, it has become more difficult for the Company and other direct marketers to obtain
quality prospect mailing lists, which may limit the Company&#146;s ability to maintain the size of its
active customer file. Lower response rates could result in lower-than-expected full-price sales,
higher inventory levels and/or subsequently higher-than-expected clearance sales at substantially
reduced margins.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition, the Company faces substantial competition from discount retailers for basic elements
in the merchandise lines, and net sales may decline or grow at a reduced pace if it is unable to
differentiate its merchandise and shopping experience from discount retailers. Further, the retail
apparel industry has experienced significant price deflation over the past several years largely
due to the downward pressure on retail prices caused by discount retailers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>The Company&#146;s sales, revenue and operating income may be adversely impacted by changes in minimum
customer credit scores determined by a third party.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Historically, Blair has managed its own credit portfolio and set the minimum credit scores a
consumer must have to be entitled to purchase Blair merchandise on credit. Blair sold its
receivables portfolio to World Financial Capital Bank, an industrial bank subsidiary of Alliance
Data Systems Corporation in November, 2005, and going forward they will have discretion over the
minimum credit score necessary to be eligible to purchase Blair merchandise on credit. If the bank
decides to raise the applicable credit rating standards, certain consumers will no longer qualify
to purchase Blair merchandise on credit, which could lower sales thereby lowering revenue and
operating income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Consumer concerns about purchasing items via the Internet as well as external or internal
infrastructure system failures could negatively impact e-commerce sales and costs.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The e-commerce business is vulnerable to consumer privacy concerns relating to purchasing items
over the Internet, security breaches, and failures of Internet infrastructure and communications
systems. If consumer confidence in making purchases over the Internet declines as a result of
privacy or other concerns, e-commerce sales could decline. The Company may be required to incur
increased costs in order to address any system failures or security breaches.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>The Company&#146;s net sales, operating income and inventory levels fluctuate on a seasonal basis.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company experiences seasonal fluctuations in its net sales and operating income. Seasonal
fluctuations also affect our inventory levels, since we usually order merchandise in advance of
peak selling periods and sometimes before new fashion trends are confirmed by customer purchases.
We must carry a significant amount of inventory. If we are not successful in selling inventory we
may have to sell the inventory at significantly reduced prices or we may not be able to sell the
inventory at all.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>The Company&#146;s sales and reputation depend on key vendors for timely and effective sourcing and
delivery of quality merchandise.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As a direct marketer, business depends largely on the ability to fulfill orders on a timely basis.
The Company generally maintains non-exclusive relationships with multiple vendors that manufacture
its merchandise. However, there are no contractual assurances of continued supply, pricing or
access to new products, and any vendor could discontinue selling to the Company at any time. If the
Company was required to change vendors or if a key vendor was unable to timely supply desired
merchandise in sufficient quantities on acceptable terms, delays in filling customer orders could
be experienced resulting in lost sales and a decline in customer satisfaction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>The Company&#146;s increasing reliance on direct sourcing from foreign vendors may negatively impact the
cost to source and deliver merchandise.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As it continues to diversify merchandise sourcing opportunities, the Company expects to increase
its investment in product development and source more merchandise directly from foreign vendors.
For the year ended December&nbsp;31, 2005, the Company was importer of record on approximately 32% of
total merchandise purchases. The increased volume of purchases will further expose the Company to
new and greater risks and uncertainties, the occurrence of which could substantially impact the
Company&#146;s ability to source merchandise through foreign vendors and to realize any perceived cost
savings. Considerations include, among other things:
</DIV>


<P align="center" style="font-size: 10pt">4
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Failure of foreign vendors to adhere to quality assurance standards or standards for conducting business;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Changing or uncertain economic conditions, political uncertainties or unrest, or epidemics or other health or
weather-related events in foreign countries resulting in the disruption of trade from exporting countries;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Restrictions on the transfer of funds or transportation delays or interruptions; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Delays or cancellation of shipments as a result of geopolitical factors or other events related to factory or
shipping lines.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company enforces a code of conduct that sets guidelines for vendors regarding employment
practices such as wages and benefits, health and safety, working hours and working age, and for
environmental, ethical and legal matters. Although management believes it is allocating appropriate
resources to monitor compliance with such standards, if management or an outside third party
discovers that any of the Company&#146;s vendors are engaged in practices that materially violate vendor
code of conduct or other generally accepted social responsibility standards, sales could be
materially affected by any resulting negative publicity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>The Company may be unable to fill customer orders efficiently, which could negatively impact
customer satisfaction.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If the Company is unable to efficiently process and fill customer orders, customers may cancel or
refuse to accept orders, and customer satisfaction could be harmed. Considerations include, among
other things:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Failures in the efficient and uninterrupted operation of
customer service call centers or the Company&#146;s sole
distribution center, including system failures caused by
telecommunications systems providers and order volumes
that exceed present telephone or Internet system
capabilities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Delays or failures in the performance of third parties,
such as shipping companies and the U.S. postal and
customs services, including delays associated with labor
disputes, labor union activity, inclement weather,
natural disasters, health epidemics and possible acts of
terrorism; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Disruptions or slowdowns in order processing or
fulfillment systems resulting from increased security
measures implemented by U.S. customs, or from homeland
security measures, telephone or Internet down times,
system failures, computer viruses, electrical outages,
mechanical problems, human error or accidents, fire,
natural disasters or comparable events.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>The Company&#146;s success is dependent upon its senior management team.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The loss of key personnel could have a material adverse effect on the business. Furthermore, the
location of the Company&#146;s corporate headquarters outside of a major metropolitan area may make it
more difficult to replace key employees who leave, or to add qualified employees needed to manage
growth opportunities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Any determination that the Company has a material weakness in its internal control over financial
reporting could have a negative impact on stock price.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Management continues to apply significant management and financial resources to document, test,
monitor and enhance internal control over financial reporting in order to meet the ongoing
requirements of the Sarbanes-Oxley Act of 2002. All internal control systems, no matter how well
designed, have inherent limitations. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement preparation and presentation.
In addition, because of changes in conditions, the effectiveness of internal control may vary over
time. Management cannot be certain that internal control systems will be adequate or effective in
preventing fraud or human error. Any failure in the effectiveness of internal control over
financial reporting could have a material effect on financial reporting or cause the Company to
fail to meet reporting obligations, which upon disclosure, could negatively impact the market price
of the Company&#146;s common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>The Company&#146;s stock price is susceptible to significant fluctuation.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Blair&#146;s stock price may fluctuate substantially as a result of limited public float or as a result
of quarter-to-quarter variations in the actual or anticipated financial results of Blair or other
companies in the retail industry or markets served by Blair. In addition, the stock market has
experienced price and volume fluctuations that have affected the market price of many retail and
other stocks and that have often been unrelated or disproportionate to the operating performance of
these companies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Changes in the Company&#146;s business model will distort comparison of prior year financial results.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In November&nbsp;2005, the Company sold its proprietary credit portfolio to a third party. As a result
of this sale, the financial results of the Company will no longer reflect finance charge revenue on
time payment accounts, provisions for doubtful accounts and overhead costs associated with
servicing the proprietary credit program. As a result, 2006 period-to-period comparisons of its
prior year results may be viewed negatively.
</DIV>


<P align="center" style="font-size: 10pt">5
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s business, results of operations and future financial performance will depend on the
risk factors listed above, as well as other risk factors not currently known to management and the
board of directors that may arise in the future. Any one or more of these risk factors could have
a material adverse effect on the Company.
</DIV>

<!-- link2 "ITEM 1B. UNRESOLVED STAFF COMMENTS" -->
<DIV align="left"><A NAME="003"></A></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>ITEM 1B. UNRESOLVED STAFF COMMENTS</B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Not applicable.
</DIV>

<!-- link2 "ITEM 2. PROPERTIES" -->
<DIV align="left"><A NAME="004"></A></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 2. PROPERTIES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company owns the following properties:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Blair Headquarters (220 Hickory Street, Warren, Pennsylvania).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Blair Distribution Center South (Route 62, Irvine, Pennsylvania).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Blair Distribution Center North (Route 62, Irvine, Pennsylvania).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Blair Warehouse Outlet (Route 62, Starbrick, Pennsylvania).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Blair Warehouse Outlet (Millcreek Mall, Erie, Pennsylvania).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">6.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Bell Warehouse Building (Liberty Street, Warren, Pennsylvania).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">7.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Starbrick Warehouse Building (Route 62, Starbrick, Pennsylvania).</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company is not currently using the Blair Warehouse Outlet building in Erie, Pennsylvania. The
Company is seeking prospective buyers for the Erie facility. A $300,773 impairment charge was
taken in 2003 to reduce the value of this asset to its fair value less costs to sell. Subsequent
to December&nbsp;31, 2005, the Company received an offer to purchase the building. The Company&#146;s Board
of Directors has accepted the offer. The closing process is anticipated to be completed in the
first half of 2006. The offer price, less estimated costs to sell, approximates net carrying value
at December&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Upon review of the Company&#146;s inventory liquidation strategy, the Company made the decision in
January, 2004, to close its Starbrick warehouse outlet located in Starbrick, Pennsylvania. This
closure was effective at the close of business on January&nbsp;16, 2004. Evolvement of the Company&#146;s
inventory liquidation strategy into more rapid and profitable methods of disposing obsolete and
excess inventory led to this decision. Over the past three years, package insertions, telephone
upsell promotions, sale catalogs and the e-commerce channel have proven to be more successful and
profitable in moving inventory than the traditional outlet sales process. The outlet building is
a sheet metal warehouse design and the Company has considered the possible impairment of the
facility. It is continuing to be used and maintained in an operating condition and several options
for additional and/or alternative uses are being explored for its future use. An independent
appraisal was performed on this property during the fourth quarter of 2005. Based on the results
of the appraisal, the market value was $150,000 less than book value. Accordingly, a $150,000
impairment charge was taken in 2005. For all of these reasons, the Company does not believe
further impairment of the facility is appropriate. The facility will continue to be depreciated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company leases the following properties:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Blair Retail Store (Wilmington, Delaware).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Telephone Call Center (Erie, Pennsylvania).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Telephone Call Center (Franklin, Pennsylvania).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Blair Retail Store (Grove City, Pennsylvania).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Blair Returns Center (Erie, Pennsylvania).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">6.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>International Trade Offices (Hong Kong, Taiwan, Singapore, India, and China).</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition, four of the Company&#146;s wholly-owned subsidiaries lease office space in the Wilmington,
Delaware area, which they use as their principal offices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Management believes that these properties are capable of meeting the Company&#146;s anticipated needs
for the near future.
</DIV>


<P align="center" style="font-size: 10pt">6
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<!-- link2 "ITEM 3. LEGAL PROCEEDINGS" -->
<DIV align="left"><A NAME="005"></A></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>ITEM 3. LEGAL PROCEEDINGS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company is not involved in any pending legal proceedings other than legal proceedings occurring
in the ordinary course of business. Management believes that none of these legal proceedings,
individually or in the aggregate, will have a material adverse impact on the results of operations
or financial condition of the Company.
</DIV>

<!-- link2 "ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS" -->
<DIV align="left"><A NAME="006"></A></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">No matters were submitted to a vote of security holders, through the solicitation of proxies or
otherwise, during the fourth quarter of the fiscal year covered by this report.
</DIV>

<!-- link1 " PART II " -->
<DIV align="left"><A NAME="007"></A></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART II</B>
</DIV>

<!-- link2 "ITEM 5. MARKET FOR THE REGISTRANT&#146;S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES" -->
<DIV align="left"><A NAME="008"></A></DIV>

<DIV style="font-size: 10pt; margin-left:49px; text-indent:-49px; margin-top: 6pt"><B>ITEM 5. MARKET FOR THE REGISTRANT&#146;S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES</B></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s common stock is traded on the American Stock Exchange (symbol: BL). The number of
record holders of the Company&#146;s common stock at December&nbsp;31, 2005, was 1,929.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 0px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 0px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000">Sales Price</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Dividends</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000">Sales Price</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Dividends</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">High</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Low</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Declared</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">High</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Low</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Declared</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">First Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">38.89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">32.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">.15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">26.94</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">23.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">.15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Second Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29.86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29.35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Third Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36.89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25.31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fourth Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41.58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35.29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.15</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In August, 2005, the Company completed a tender offer for the purchase of 4,400,000 shares, or
approximately 53% of its outstanding common stock, at $42.00 per share, and an aggregate price of
$184.8&nbsp;million. The total purchase price of the stock of $184.8&nbsp;million, plus related expenses of
$4.2&nbsp;million, was recorded as treasury stock effective August&nbsp;16, 2005. Neither the Company nor
any of its affiliates repurchased any Company securities during the year ended December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company currently intends to continue its policy of paying regular cash dividends; however, the
Company will evaluate its dividend policy on an ongoing basis. The payment of future dividends is
dependent on future earnings, capital requirements and financial condition.
</DIV>

<!-- link2 "ITEM 6. SELECTED FINANCIAL DATA" -->
<DIV align="left"><A NAME="009"></A></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>ITEM 6. SELECTED FINANCIAL DATA</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Year Ended December 31</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2001</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">456,625,397</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">496,120,207</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">581,939,971</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">568,545,582</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">580,700,163</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,545,937</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,868,647</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,526,182</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,135,556</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,292,146</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">193,094,287</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">351,238,844</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">345,975,803</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">344,097,432</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">324,113,329</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term debt </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">-0-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">-0-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">-0-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">-0-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">-0-</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.79</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash dividends
declared</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.60</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<!-- link2 "ITEM 7. MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION" -->
<DIV align="left"><A NAME="010"></A></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>ITEM 7. MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Comparison of 2005 and 2004</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Overview</B></U>
</DIV>




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During 2005, the Company made significant progress towards its strategy of
focusing on its core customers in an effort to improve profitability and enhance
shareholder value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Net sales for 2005 decreased by 8.0% to $456.6&nbsp;million from $496.1&nbsp;million in
2004. Net income for 2005 was $31.5&nbsp;million, $4.79 per basic share and $4.71 per
diluted
</DIV>


<P align="center" style="font-size: 10pt">7
</DIV>

<!-- PAGEBREAK -->
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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">share, compared to $14.9&nbsp;million, or $1.83 per basic share and $1.80 per
diluted share, for 2004. Two major events took place in 2005 that account for the
significant increase in net income and earnings per share from 2004 to 2005. These
events, a tender offer and the sale of the Company&#146;s credit portfolio, resulted in a
significant increase in the Company&#146;s return on invested capital.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In August&nbsp;2005, the Company completed a tender offer to purchase 4,400,000 shares, or approximately
53% of its outstanding common stock, at $42 per share and aggregate price of $184.8&nbsp;million. The
total purchase price of the stock of $184.8&nbsp;million, plus related expenses of $4.2&nbsp;million, was
recorded as treasury stock effective August&nbsp;16, 2005. The significant reduction in weighted
average shares outstanding has increased the ownership interest of the remaining shareholders and
earnings per share. Without the reduction in outstanding shares, earnings per basic and diluted
share, for 2005 were $3.83 and $3.78, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In November, 2005, the Company announced the completion of the sale of its credit portfolio to
World Financial Capital Bank, an industrial bank subsidiary of Alliance Data Systems Corporation.
The agreement between the two companies was announced on April&nbsp;27, 2005, with the closing of the
transaction occurring on November&nbsp;4, 2005. Gross sale proceeds were $166.2&nbsp;million, of which the
Company used $143&nbsp;million to repay debt primarily incurred in association with its August&nbsp;2005
tender offer of 4.4&nbsp;million shares. The net result of this transaction was a one-time gain of
$27.7&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Net income and earnings per share results for the twelve months ended December&nbsp;31, 2005, were
favorably impacted by the one-time gain of $27.7&nbsp;million from the sale of the Company&#146;s credit
portfolio. Further, net income was impacted by expenses of $4.9&nbsp;million, or $0.48 per basic share
and $0.47 per diluted share, based on weighted basic and diluted outstanding shares of 6,579,876
and 6,699,406, respectively, associated with the Company&#146;s tender offer and severance costs.
Expenses associated with the tender offer include loan origination fees and interest expense
related to a credit facility to fund the tender offer, and a compensation expenditure resulting
from the Company&#146;s decision to repurchase stock acquired by employees under its stock option award
program. Expenses also included severance costs for former employees who have separated from the
company. Without the favorable impact of the aforementioned gain and the expenses noted in this
paragraph, net income for 2005 was $16.9&nbsp;million or $2.57 per basic share and $2.52 per diluted
share as compared to $14.9&nbsp;million or $1.83 per basic share and $1.80 per diluted share for 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The financial performance of recurring operations was mixed in 2005. Net sales did not meet
internal expectations. Lower response rates than was anticipated to catalog and especially letter
mailings were a major contributing factor. Management believes the lower sales volume is
attributable to several factors, including tightening of credit granting parameters for the first
ten months of the year, customers&#146; acceptance of the fashion colors and styles that were featured
during each mailing season and reduced customer file counts from reduced prospecting in 2004.
Management also believes that the devastation and destruction caused by hurricanes Katrina and
Rita, which hit the Gulf region within a few weeks of one another in August and September of 2005,
contributed to the decline in the Company&#146;s net sales during the last six months of 2005. In
addition, it is management&#146;s belief that the widespread economic effects of the sharp increase in
gasoline prices during the third quarter 2005 may have had a negative effect on customer demand in
the northern region of the country, which accounts for approximately 40% of the Company&#146;s total
demand.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Management continually evaluates its mailing contact strategy, including circulation plans, page
counts and catalog density. There can be no assurance that the implementation of new initiatives
in this area will improve sales productivity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Offsetting the decline in profitability resulting from the net sales reduction were significant
improvements in both margins and bad debt experience. Margins improved significantly due to
deflationary experience on merchandise purchases, fewer promotions and less inventory liquidation
costs. In the fourth quarter of 2004, the Company raised the acceptable FICO (Beacon) credit
score that a customer is required to have in order to be eligible for Blair credit. This action
favorably impacted delinquency rates and related bad debt experience for the ten months of 2005
prior to the sale of the Company&#146;s proprietary credit portfolio to World Financial Capital Bank.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Finally, in furtherance of the Company&#146;s decision to focus on core operations, on January&nbsp;25, 2005,
the Company decided to phase out its Allegheny Trail wholesale business. This process was
substantially completed by April&nbsp;30, 2005. The Company has evaluated the impact of phasing out the
Allegheny Trail business on all assets associated with this operation. All appropriate reserves
have been recorded. This decision did not have a significant negative effect on 2005
profitability. The Company&#146;s intention is to more fully focus new business development efforts on
the core Blair brand and its proven appeal to significant market segments. The decision to focus
on core operations is based in part on the historical success of the Blair brand and an extensive
consumer and brand strategy study undertaken by the Company in 2004 as part of its efforts to
enhance profitability and shareholder value. Similar studies are planned in 2006 for the Menswear
and Home product lines.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Results of Operation</B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Net income for 2005 increased 112.2% to $31.5&nbsp;million or $4.79 basic earnings per share and $4.71
diluted earnings per share, compared to $14.9&nbsp;million, or $1.83 basic earnings per share and $1.80
diluted earnings per share, in 2004. The significant increase in earnings is primarily related to
the one-time gain on the sale of the Company&#146;s proprietary credit program of $27.7&nbsp;million.
</DIV>


<P align="center" style="font-size: 10pt">8
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Net sales for 2005 decreased $39.5&nbsp;million to $456.6&nbsp;million or 8.0% less than net sales for 2004.
In addition to the internal and external factors discussed in the overview, in May, 2004, the
Company announced that it would be discontinuing its Crossing Pointe catalog title at the end of
2004 and would be more fully focusing new business development efforts on the core Blair brand and
its proven appeal to significant market segments. The elimination of the Crossing Pointe catalog
title accounted for approximately $20&nbsp;million of the net sales reduction. Further, on January&nbsp;25,
2005, the Company decided to phase out its Allegheny Trail wholesale business. This process was
substantially completed by April&nbsp;30, 2005. The elimination of the Allegheny Trail wholesale
business accounted for approximately $837,000 of the net sales reduction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The provision for returned merchandise of $61.4&nbsp;million as a percentage of gross sales decreased
66 basis points or $3.5&nbsp;million in 2005 as compared to 2004. Management attributes this favorable
change to improved product quality and fit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Other revenue decreased approximately $8.6&nbsp;million or 19.3% to $36.1&nbsp;million in 2005 as compared
to 2004. The decrease was primarily due to the elimination of finance charge revenues associated
with the Company&#146;s proprietary credit program. Subsequent to the sale of the Company&#146;s
proprietary credit program on November&nbsp;4, 2005, the Company no longer realizes finance charge
revenues on time payment accounts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cost of goods sold decreased $30.9&nbsp;million or 13.1% to $204.1&nbsp;million in 2005 compared to 2004. As
a percentage of net sales, cost of goods sold was 44.7% in 2005 compared to 47.4% in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s gross profit, net sales less cost of goods sold, may not be comparable to that of
other direct marketers, as some direct marketers include all costs related to their distribution
network in cost of goods sold and others, such as Blair Corporation, may exclude a portion of these
costs from cost of goods sold, including them in a line item such as general and administrative
expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The improvement in cost of goods sold as a percentage of net sales reflects an increase in direct
sourcing, which significantly lowered merchandise acquisition costs. The Company plans to continue
to expand internal product development and direct sourcing as part of its strategic initiatives to
further reduce cost of goods and increase profitability. The Company&#146;s direct sourcing offices,
the Company&#146;s only foreign operations, directly sourced more than 32% of the Company&#146;s merchandise
from foreign suppliers in 2005 as compared to 28% in 2004. The existence of these offices serves
to lower the Company&#146;s cost of acquiring merchandise. Other factors that contributed to
improvement in the above percentage include a reduction in customer returns reflecting ongoing
programs to improve merchandise quality, internal efforts to lower overall shipping costs and
initiatives to lower overall inventory liquidation costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Advertising expense in 2005 decreased $9.0&nbsp;million or 7.0% to $119.3&nbsp;million. The Company&#146;s more
targeted mailings led to strategic adjustments to catalog and letter mailings, which resulted in
slight increases in circulation. A significant reduction in Crossing Pointe catalog mailings, as
a result of the Company&#146;s decision to discontinue circulation of its 4&nbsp;year old Crossing Pointe
catalog title at the end of 2004, was offset by increases in catalog mailings to the Company&#146;s
core customers. The reduction in advertising expenses
is the result of multiple initiatives undertaken by the Company
in 2005 to reduce this cost. Increased use of the Company&#146;s photo studio, implementing an
in-house pre-press, and experiencing increased postal discounts that resulted from co-mailing of
catalogs all contributed to the reduction in selling expenses. In addition to these factors, the
Company&#146;s long-term print contract with its primary printing vendor delivered significant savings
in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The total number of catalog mailings released in 2005 was 711,000 or .4% greater than those
released in 2004. The total number of letter mailings released in 2005 was 1.6&nbsp;million or 4.7%
greater than those released in 2004. The Company&#146;s more targeted mailing strategy led to an
increase in customer catalog mailings of 9.2&nbsp;million or 6.5% and a reduction in prospect mailings
of 8.4&nbsp;million or 19.0%. The reduced prospect catalog circulation was attributable to reduced
Crossing Pointe circulation in 2005 compared to 2004. Total circulation of the co-op and media
advertising programs increased by 267.5&nbsp;million pieces or 32.4% in 2005 as compared to 2004. The
co-op and media advertising programs are primary resources for acquiring new customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company launched its e-commerce sites in the third quarter of 2000. In 2005, the Company
generated $94.9&nbsp;million in e-commerce sales demand as compared to $91.7&nbsp;million in 2004. This
increase in the e-commerce channel demand was achieved despite the discontinued Crossing Pointe
catalog generating $8.3&nbsp;million less online sales demand in 2005 compared to 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">General and administrative expense increased by $4.2&nbsp;million or 3.2% in 2005 as compared to 2004.
As a percent of net sales, general and administrative expenses were 29.7% for 2005 compared to
26.5% for 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The 2005 general and administrative expenses include approximately $2.0&nbsp;million of costs associated
with financing the Company&#146;s tender offer and the sale of the Company&#146;s proprietary credit
portfolio, which closed on November&nbsp;4, 2005. Expenses associated with these events include the
amortization of loan origination fees of $1.6&nbsp;million, and a compensation expenditure of $427,000
resulting from the Company&#146;s decision to repurchase stock acquired by employees under its stock
</DIV>


<P align="center" style="font-size: 10pt">9
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">option award program as part of the tender offer. Expenses also included severance costs of $2.6
million for former employees who have separated from the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">After excluding these additional expenses referred to in the previous paragraph, general and
administrative expenses as a percent of net sales were 28.7% for the year ended December&nbsp;31, 2005
compared to 26.5% for the year ended December&nbsp;31, 2004. Reduced variable employee costs associated
with lower sales volume served to lower general and administrative expense by $2.4&nbsp;million and were
more than offset by increased employee costs. Increased employee costs resulted from unfavorable
health and workers compensation claims experience of $2.1&nbsp;million and increased employee benefits
associated with incentives and profit sharing related to improved earnings of $2.6&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The provision for doubtful accounts decreased $11.0&nbsp;million from $22.7&nbsp;million to $11.7&nbsp;million or
48.5% in 2005 compared to 2004. The 2005 amount represents ten months of operation as the
Company&#146;s proprietary credit portfolio was sold to World Financial Capital Bank, an industrial
bank subsidiary of Alliance Data Systems Corporation on November&nbsp;4, 2005. In addition to having
two less months of operations, the decrease is attributable to an 18.6% decrease in credit sales.
The reduction in credit sales primarily relates to a change in credit granting philosophy and the
elimination of the Crossing Pointe catalog title, which realized sales primarily via proprietary
credit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The estimated bad debt rate used in 2005 was 129 basis points lower than the bad debt rate used in
2004. The estimated bad debt rate decreased primarily due to reduced credit offers to prospects
as well as improved delinquency and charge-off experience. Prospect credit offers traditionally
result in higher bad debts. In the fourth quarter of 2004, the Company raised the acceptable FICO
(Beacon) credit score that a customer is required to have in order to be eligible for Blair
credit. This action positively impacted delinquency rates and related bad debt experience in
2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The net of interest expense and (income)&nbsp;increased by $691,223 in 2005 compared to 2004 and
resulted in net interest expense of $568,466. Interest expense primarily reflects the impact of
$85&nbsp;million of borrowings under the receivables securitization and $58&nbsp;million of borrowings under
the revolving credit facility incurred to finance the tender offer. Furthermore, interest rates
were higher in 2005 than in 2004. Interest income increased due to higher average cash balances
and increased interest rates. At December&nbsp;31, 2005, inventories were 1.1% lower. Further, gross
customer accounts receivable have been eliminated as a result of the sale of the Company&#146;s
proprietary credit program in November of 2005. Average borrowings were up considerably in 2005
compared to 2004 as a result of the borrowings associated with the tender offer. The interest rate
increases are due to the facilities&#146; varying interest rates that fluctuated based on certain LIBOR
indices, which tend to follow the recent increases in Federal Reserve rates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Other expense, net, decreased $174,866 or 78.9% to $46,833 in 2005 as compared to 2004. In 2004
the Company charged off approximately $300,000 of construction in progress related to its decision
to phase out the Allegheny Trail business by April&nbsp;30, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The gain on sale of the receivables portfolio was generated as a result of the Company&#146;s decision
to sell its proprietary credit portfolio at a premium to World Financial Capital Bank, an
industrial bank subsidiary of Alliance Data Systems Corporation. The agreement between the two
companies was announced on April&nbsp;27, 2005, with the closing of the transaction occurring on
November&nbsp;4, 2005. Gross sale proceeds were $166.2&nbsp;million, of which the Company used $143&nbsp;million
to repay debt primarily incurred in association with its August&nbsp;2005 tender offer of 4.4&nbsp;million shares. The favorable
components of the gain include the premium received for the portfolio and the reversal of the
allowance for doubtful accounts on the receivables sold. The gain was reduced by professional fees
incurred to close the transaction and severance costs due to those employees who were terminated as
part of transaction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Income taxes as a percentage of income before income taxes were 35.8% in 2005 and 36.4% in 2004.
The statutory federal income tax rate of 35% was impacted in 2005 by a change in estimated foreign
tax credits and a lower effective state income tax rate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Comparison of 2004 and 2003</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Overview</B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During 2004, the Company laid the groundwork for its efforts to focus on
profitability and enhance shareholder value. Margins were maintained due to
deflationary experience on merchandise purchases, fewer promotions and less inventory
liquidation costs. All of these factors were offset by higher outbound freight
costs. The planned elimination of unprofitable circular mailings and a reduction in
Crossing Pointe mailings served to reduce net sales, but improve selling expense
efficiency. The Company also experienced reduced provisions for doubtful accounts.
</DIV>


<P align="center" style="font-size: 10pt">10
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company discontinued circulation of its Crossing Pointe catalog title as
of December&nbsp;31, 2004 and plans to phase out its Allegheny Trail wholesale business by
April&nbsp;30, 2005. The Company&#146;s intention is to more fully focus on core operations.
These decisions are based in part on the historical success of the Blair brand and
its proven appeal to significant market segments.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Also contributing to the Company&#146;s decision to focus on core operations were
the findings of an extensive consumer and brand strategy study undertaken by the
Company as part of its efforts to enhance profitability and shareholder value. The
study, conducted with the assistance of a national marketing and strategy consulting
firm, provided a deeper understanding of who the customer is, well beyond the
demographics of age and income. The study suggests the Company&#146;s core customer
comprises a significant portion of the identified customer profiles. The Company
believes that by focusing on these customer profiles it will be better positioned for
increased profitability and enhanced shareholder value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Results of Operation</B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Net income for 2004 increased 2.4% to $14.9&nbsp;million or $1.83 basic earnings per share and $1.80
diluted earnings per share, compared to $14.5&nbsp;million, or $1.82 basic earnings per share and $1.81
diluted earnings per share, in 2003. The Company realized advertising efficiency and improved bad
debt experience in 2004. This positive experience was primarily offset by lower net sales
attributed to lower response rates, the planned elimination of unprofitable letter mailings, and
reduced Crossing Pointe mailings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Net sales for 2004 decreased $85.8&nbsp;million to $496.1&nbsp;million or 14.8% less than net sales for
2003. The decrease in net sales was primarily attributable to strategic decreases in catalog and
letter mailings in an attempt to focus on the Company&#146;s core Blair brand. In support of this
strategic decision, during 2004, the Company eliminated unprofitable letter mailings and reduced
the number of Crossing Pointe mailings. These efforts resulted in slightly improved advertising
efficiency and reduced provisions for doubtful accounts. In May, 2004 the Company announced that
it would be discontinuing its Crossing Pointe catalog title at the end of 2004 and would be more
fully focusing new business development efforts on the core Blair brand and its proven appeal to
significant market segments. The decision to focus on core operations is based in part on the
historical success of the Blair brand and an extensive consumer and brand strategy study
undertaken by the Company as a component of its efforts to enhance profitability and shareholder
value. Actual response rates in 2004 were lower than in 2003 and were lower than
expected levels for 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The provision for returned merchandise ($71.7&nbsp;million) as a percentage of gross sales decreased 57
basis points or $3.3&nbsp;million in 2004 as compared to 2003. Management attributes this favorable
change to improved product quality and fit, and to delivery efficiencies driven by its new
fulfillment equipment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Other revenue increased approximately $3.2&nbsp;million or 7.6% to $44.7&nbsp;million in 2004 as compared to
$41.6&nbsp;million in 2003. The increase was primarily due to increased finance charge revenues
associated with the establishment of JLB Service Bank on August&nbsp;20, 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cost of goods sold decreased $40.7&nbsp;million or 14.8% to $235.0&nbsp;million in 2004 compared to $275.7
million in 2003 as a result of decreased sales as described above. As a percentage of net sales,
cost of goods sold was 47.4% in both 2004 and 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s gross profit, net sales less cost of goods sold, may not be comparable to that of
other direct marketers, as some direct marketers include all costs related to their distribution
network in cost of goods sold and others, such as Blair Corporation, may exclude a portion of these
costs from cost of goods sold, including them in a line item such as general and administrative
expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">While costs of goods sold as a percent of net sales remained consistent with the prior year,
multiple variables were considered in 2004. Serving to positively impact cost of goods sold by
approximately $1.6&nbsp;million were: deflationary experience on merchandise purchases, effective
inventory management resulting in lower inventory liquidation costs, fewer promotions and lower
customer merchandise returns. Cost of goods sold was negatively impacted by approximately $1.6
million in 2004 as a result of shipping a greater mix of packages in excess of one pound that
increased shipping costs. The Company&#146;s decision to carry more inventory led to fewer
cancellations and provided the ability to ship more multiple unit orders. This led to increased
shipping costs that were more than offset by reduced order fulfillment costs, resulting in lower
warehouse staffing requirements. In addition, the basic profile of the products ordered by the
customer also contributed to the increased average package weight in 2004. The Company&#146;s
International Trade Offices, the Company&#146;s only foreign operations, directly sourced more than 28%
of the Company&#146;s merchandise from foreign suppliers in 2004 as compared to 33% in 2003. The
existence of these offices serves to lower the Company&#146;s cost of acquiring merchandise. All
activity is intercompany and all merchandise is purchased in U.S. dollars. The foreign offices
have insignificant amounts of cash and fixed assets, which are converted to U.S. dollars for
financial statement purposes.
</DIV>


<P align="center" style="font-size: 10pt">11
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Advertising expense in 2004 decreased $28.1&nbsp;million or 18.0% to $128.3&nbsp;million. The Company&#146;s
more targeted mailings led to strategic decreases in catalog and letter mailings. This reduction
includes the reduction in Crossing Pointe mailings as a result of the Company&#146;s decision to
discontinue circulation of its 4&nbsp;year old Crossing Pointe catalog at December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The total number of catalog mailings released in 2004 was 24.8&nbsp;million or 11.8% less than those
released in 2003. The total number of letter mailings released in 2004 was 23.8&nbsp;million or 41.4%
less than those released in 2003. The more targeted mailing strategy led to a reduction in
customer catalog mailings of 7.9&nbsp;million or 5.3% and prospect mailings of 16.9&nbsp;million or 27.6%.
The reduced prospect catalog circulation was primarily attributable to reduced Crossing Pointe
circulation in 2004 compared to 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Total circulation of the co-op and media advertising programs decreased by 180.3&nbsp;million pieces or
17.9% in 2004 as compared to 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company launched its e-commerce sites in the third quarter of 2000. In 2004, the Company
generated $91.7&nbsp;million in e-commerce sales demand as compared to $84.3&nbsp;million in 2003. This
increase was achieved after considering the reduction in Crossing Pointe web demand associated with
the Company&#146;s decision to reduce Crossing Pointe mailings in 2004 as a precursor to discontinuing
this catalog title in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">General and administrative expense decreased by $4.8&nbsp;million or 3.5% in 2004 as compared to 2003.
Reduced variable employee costs associated with lower sales volume served to lower general and
administrative expense by $6.8&nbsp;million. As a percent of net sales, general and administrative
expenses were 26.5% for 2004 compared to 23.4% for 2003. The increase in percentage of net sales
is primarily attributable to increased fees for professional services. $1.1&nbsp;million is due to the
added expense of complying with Section&nbsp;404 of the Sarbanes-Oxley Act. Another component of the
increased professional fees was the cost associated with an extensive consumer and brand strategy
study conducted by the Company in 2004 of $1.9&nbsp;million. The study concluded the Company would
enhance profitability and improve shareholder value by focusing new business developments on the
core Blair brand and its proven appeal to significant customer profiles.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The provision for doubtful accounts decreased $9.1&nbsp;million from $31.8&nbsp;million to $22.6&nbsp;million or
28.8% in 2004 compared to 2003. The decrease is primarily the result of a 14.0% decrease in
credit sales. The estimated bad debt rate used in 2004 was 124 basis points lower than the bad
debt rate used in 2003. The estimated bad debt rate has decreased primarily due to reduced
credit offers to both Blair and Crossing Pointe prospects as well as improved delinquency and
charge-off experience. Prospect credit offers traditionally result in higher bad debts. In the
fourth quarter of 2004, the Company raised the acceptable FICO (Beacon) credit score that a
customer is required to have in order to be eligible for Blair credit. This action began to
improve the creditworthiness of the portfolio in the fourth quarter and is expected to positively
impact delinquency rates and related bad debt experience in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The provision for doubtful accounts is based on current expectations (consumer credit and economic
trends, etc.), sales mix (prospect/customer) and current and prior years&#146; experience, especially
delinquencies (accounts over 30&nbsp;days past due) and actual charge-offs (accounts removed from
accounts receivable for non-payment). At December&nbsp;31, 2004, the delinquency rate on open accounts
receivable was 96 basis points lower than at December&nbsp;31, 2003. Further, the charge-off rate for
2004 was 11 basis points less than the charge-off rate for 2003. The reduced charge off
experience is the result of reduced customer and prospect credit marketing initiatives implemented
in the second half of the year. The initial impact of raising the acceptable FICO (Beacon) score
also contributed to reduced delinquencies. Due to the reduced credit risk associated with these
initiatives, bad debt and related charge off experience decreased.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Recoveries of bad debts previously charged off have been credited back against the allowance for
doubtful accounts. The allowance for doubtful accounts as a percentage of delinquent accounts is
2.8% lower than the prior year. At December&nbsp;31, 2004, the allowance for doubtful accounts as a
percentage of open accounts is 204 basis points less than December&nbsp;31, 2003. Both statistics
reflect the greater mix of customer (versus prospect) open accounts at year-end and a much smaller
Crossing Pointe credit portfolio associated with the Company&#146;s decision to discontinue its
Crossing Pointe catalog title.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At this time, the Company feels that the allowance for doubtful accounts is sufficient to cover
the charge-offs from the current customer accounts receivable portfolio. Also, credit granting,
collection and behavior models continue to be updated and improved, and, along with expanding
database capabilities, provide valuable credit-marketing opportunities and improve the ability to
forecast doubtful accounts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Interest income, net of interest expense, increased $43,000 or 54.2% to $122,757 in 2004 as
compared to $79,613 in 2003. Interest income results from the Company&#146;s investment of surplus
cash into money market securities and other investments with a maturity of three months or less
when purchased. Interest expense primarily reflects the impact of $15&nbsp;million of borrowings that
are required under the receivables securitization. At December&nbsp;31, 2004, inventories were 1.5%
lower and gross customer accounts receivable were 4.2% lower as compared to December&nbsp;31, 2003.
Average borrowings were comparable in 2004 to 2003. Interest rates trended up throughout 2004.
</DIV>


<P align="center" style="font-size: 10pt">12

</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Other expense, net, decreased $38,000 or 14.7% to $221,699 in 2004 as compared to $260,035 in 2003.
In 2004 the Company charged off $240,000 of construction in progress related to its decision to
phase out the Allegheny Trail business by April&nbsp;30, 2005. In 2003 the Company closed its outlet
store in Erie, Pennsylvania. This facility is held for sale. A $300,773 impairment charge was
taken in 2003 to reduce the value of the asset to its fair value less costs to sell. The balance
of this line item is gain on foreign currency translation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Income taxes as a percentage of income before income taxes were 36.4% in 2004 and 37.3% in 2003.
The statutory federal income tax rate of 35% was favorably impacted in 2004 by a change in
estimated foreign tax credits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Liquidity and Sources of Capital</B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company has access to a $75&nbsp;million credit facility pursuant to the terms of an amended
and restated credit agreement dated as of July&nbsp;15, 2005, by and among the Company, PNC Capital
Markets, Inc. as lead arranger and PNC Bank, N.A. and three other lending institutions. The amended
and restated credit agreement provides a senior secured first lien revolving credit facility not to
exceed $75&nbsp;million, which matures in July, 2010. Upon the occurrence of an Event of Default (as
such term is defined in the amended and restated credit agreement), PNC and/or the other lending
institutions may declare a default of the credit agreement and accelerate the loan pursuant to the
terms of the credit agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The collateral for the amended and restated credit agreement&#146;s revolving credit facility consists
of all of the Company&#146;s and certain of its subsidiaries assets, including, but not limited to,
inventory, equipment, furniture, general intangibles, intellectual property, fixtures, certain real
property and improvements, and the common stock of Blair&#146;s domestic subsidiaries, as well as a
negative and double negative pledge of the assets of the Company&#146;s direct and indirect foreign
subsidiaries. At our option, any loan under the revolving credit facility shall bear interest at
the Euro-Rate (calculated with reference to a LIBOR-based formula in accordance with the amended
and restated credit agreement) or a Base Rate (as that term is defined in the amended and restated
credit agreement), plus a margin, such margin to be calculated in accordance with a
performance-based pricing grid. We are also required to pay a commitment fee and reasonable
out-of-pocket expenses pursuant to the amended and restated credit agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At December&nbsp;31, 2005, the Company had no borrowings outstanding under the credit facility. The
Company had letters of credit totaling $19.6&nbsp;million outstanding, which reduces the amount of
borrowings available under the amended and restated credit agreement. Outstanding letters of
credit totaled $16.1&nbsp;million at December&nbsp;31, 2004. Letters of credit are comprised mainly of two
categories. One such category is comprised of commercial letters of credit used for the purpose of
purchasing goods from non-U.S. suppliers. The other category is comprised of performance guarantees
for a consolidated subsidiary and insurance bonding purposes. All letters of credit have a term of
one year or less.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Interest paid during 2005, 2004, and 2003 was approximately $1,196,000, $339,000, and $282,000,
respectively. The higher level of interest in 2005 is primarily due to higher outstanding
borrowings during the third quarter as the company partially financed a stock tender offer with
debt.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table and narrative highlight significant changes in cash and cash equivalents for
the years ended December&nbsp;31, 2005 and 2004.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 0px solid #000000">Twelve Months Ended</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000">December 31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Increase/</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(decrease)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided by operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">48,824,657</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">21,342,668</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">27,481,989</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided by (used in) investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">158,836,384</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,623,552</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">163,459,936</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash (used in) financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(205,192,252</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,436,554</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(202,755,698</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of exchange rate changes on cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,345</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(102,616</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">172,961</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net increase (decrease)&nbsp;in cash and cash
equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,539,134</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,179,946</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(11,640,812</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Net cash provided by operating activities was $48.8&nbsp;million for the year ended December&nbsp;31, 2005, a
$27.5&nbsp;million increase over the same period in fiscal 2004. This increase is primarily
attributable to favorable year-over-year changes in three primary components of working capital.
The primary elements of improved working capital are favorable changes to accounts receivable
($14.5&nbsp;million) and trade accounts payable ($14.6&nbsp;million). In 2005, accounts receivable were
eliminated as a result
</DIV>


<P align="center" style="font-size: 10pt">13
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">of the sale of the Company&#146;s proprietary credit portfolio. These positive
impacts were offset somewhat by an unfavorable change ($3.3&nbsp;million) in prepaid expenses and other
assets resulting from the timing of these expenditures.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Net cash provided by investing activities was greater by $163.5&nbsp;million primarily due to the
proceeds from the sale of the Company&#146;s proprietary credit portfolio.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The $205.1&nbsp;million reduction in net cash used in financing activities for the twelve months ended
December&nbsp;31, 2005 over the comparable period in 2004 is primarily attributable to the cost and
related expenses of $189&nbsp;million for the purchase of 4.4&nbsp;million outstanding shares of the
Company&#146;s common stock in connection with a tender offer that was completed on August&nbsp;16, 2005.
The balance of the change pertains to the repayment of the $15&nbsp;million borrowing under a Receivable
Purchase Agreement. This agreement was terminated in November&nbsp;2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cash funding requirements in 2005 were primarily for the tender offer, capital expenditures and
shareholder dividend payments. The Company expects to fund 2006 requirements with cash provided
from operations, cash on hand supplemented as needed by borrowings under the current credit
facility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company was in compliance with all debt covenants as of December&nbsp;31, 2005. The Company
believes it has adequate financial resources to support anticipated short-term and long-term
capital needs and commitments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Merchandise inventory turnover was 2.4 at December&nbsp;31, 2005, 2.6 at December&nbsp;31, 2004, and 3.4 at
December&nbsp;31, 2003. Merchandise inventory as of December&nbsp;31, 2005, increased 5.4% from December&nbsp;31,
2004, and increased 7.9% from December&nbsp;31, 2003. Merchandise inventory levels have been generally
higher from December&nbsp;31, 2004, through December&nbsp;31, 2005, due to strategic efforts to increase
inventory levels for recurring merchandise items in an effort to improve fill rates and related
customer service levels.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The merchandise inventory levels are net of the Company&#146;s reserve for inventory obsolescence. The
reserve totaled $1.5&nbsp;million at December&nbsp;31, 2005, $3.6&nbsp;million at December&nbsp;31, 2004 and $3.6
million at December&nbsp;31, 2003. Inventory write-offs and write-downs (reductions to below cost)
charged against the reserve for obsolescence were $2.6&nbsp;million in 2005, $6.3&nbsp;million in 2004 and
$4.9&nbsp;million in 2003. The Company&#146;s decisions to discontinue its Crossing Pointe catalog title in
late 2004 and to phase out the Allegheny Trail wholesale business by April&nbsp;30, 2005, resulted in writedowns
of approximately $1.9&nbsp;million. These writedowns were primarily provided for in the December&nbsp;31,
2004, inventory obsolescence reserve. In addition, the Company focused on reducing inventory
liquidation costs in 2005. The combination of enhanced Internet clearance activity and improved
merchandise purchasing strategies resulted in less liquidation inventory on hand and greater
recovery rates as a percent of cost for the inventory that required liquidation. Due to the
nonrecurring nature of the Crossing Pointe and Allegheny Trail write-downs and improved recovery
rates on liquidated merchandise, the obsolescence reserve at December&nbsp;31, 2005, is appropriately
lower than the reserve at December&nbsp;31, 2004, on comparable inventory levels. Management believes
that the amount of the reserve for obsolescence is appropriate. A monthly provision for obsolete
inventory is added to the reserve and expensed to cost of goods sold, based on the levels of
merchandise inventory and merchandise purchases.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company operates as one business segment consisting of the Womenswear, Menswear, Home and
Stores product lines. An operating segment is identified as a component of an enterprise for which
separate financial information is available for evaluation by the chief decision-maker, or
decision-making group, in deciding on how to allocate resources and assess performance. The Stores
product line was added in the first quarter of 2004 reflecting a reclassification within the
segment from the other product lines to this product line. The Crossing Pointe and Allegheny Trail
product lines were discontinued as of April&nbsp;30, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On January&nbsp;25, 2005, the Company decided to phase out its Allegheny Trail wholesale business by
April&nbsp;30, 2005. The Company&#146;s intention is to more fully focus new business development efforts on
the core Blair brand and its proven appeal to significant market segments. The decision to focus
on core operations is based in part on the historical success of the Blair brand and an extensive
consumer and brand strategy study undertaken by the Company as part of its efforts to enhance
profitability and shareholder value. Inventory remaining after the phase out of Allegheny Trail
was sold to a third party below cost. The write-down below cost associated with this inventory
liquidation effort was $1.5&nbsp;million. These writedowns were provided for in the December&nbsp;31, 2004
inventory obsolescence reserve. The Company has evaluated the impact of phasing out the Allegheny
Trail business on all assets associated with its operation. Management believes all appropriate
reserves have been recorded. This decision did not have a negative effect on 2005 profitability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The table below also reflects the Company&#146;s decision to discontinue its 4&nbsp;year old Crossing Pointe
catalog title at December&nbsp;31, 2004. This decision positively impacted 2005 performance by $5.4
million as a result of eliminating unprofitable sales. Crossing Pointe sales, due to the start up
nature of the catalog, typically realized lower margins, higher selling expenses and higher bad
debt rates.
</DIV>


<P align="center" style="font-size: 10pt">14
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following tables illustrate the percent of net sales and merchandise inventory that each
product line represents.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">12/31/05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Percent of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">12/31/04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Percent of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">12/31/03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Percent of</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Net Sales</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Total Net</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Net Sales</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Total Net</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Net Sales</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Total Net</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Product Line</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(in millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Sales</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(in millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Sales</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(in millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Sales</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Womenswear</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">293.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">64.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">310.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">62.6</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">365.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">62.9</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Menswear</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">19.8</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">96.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">19.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">17.3</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Home</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">14.8</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">13.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">11.8</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Crossing Pointe</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">4.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">6.8</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stores</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.6</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.6</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1.1</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Allegheny Trail</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">456.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">496.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">581.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">12/31/05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">12/31/04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">12/31/03</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Merchandise</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Merchandise</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Merchandise</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Inventory</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Inventory</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Inventory</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Product Line</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(in millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(in millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(in millions)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Womenswear</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">47.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">42.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">41.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Menswear</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Home</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Crossing Pointe</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stores</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Allegheny Trail</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">71.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">67.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">66.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company has added new facilities, modernized its existing facilities and acquired new
cost-saving equipment during the last several years. Capital expenditures for property, plant and
equipment totaled $8.0&nbsp;million during 2005, $4.6&nbsp;million during 2004 and $7.2&nbsp;million during 2003.
Most of the $8.0&nbsp;million of capital expenditures in 2005 were attributable to the previously
announced modernization and enhancement of the Company&#146;s fulfillment operations of $2.2&nbsp;million and
necessary investment in equipment and programs of $3.0&nbsp;million to facilitate the conversion of the
Company&#146;s legacy systems for its credit portfolio in connection with the sale of the credit
portfolio to World Financial Bank, a wholly owned subsidiary of Alliance Data Systems.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Capital expenditures are projected to be approximately $25.9&nbsp;million in total for the years 2006,
2007, 2008. Approximately $18.7&nbsp;million of the $25.9&nbsp;million is attributable to improving our
information services capabilities as they support the order taking and order fulfillment functions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Upon review of the Company&#146;s inventory liquidation strategy, the Company made the decision in
January, 2004, to close its outlet store located in Warren, Pennsylvania. This closure was
effective at the close of business on January&nbsp;16, 2004. Evolvement of the Company&#146;s inventory
liquidation strategy into more rapid and profitable methods of disposing obsolete and excess
inventory led to this decision. Over the past three years, package insertions, telephone upsell
promotions, sale catalogs and the e-commerce channel have proven to be more successful and
profitable in moving inventory than the traditional outlet sales process. The store building is a
sheet metal warehouse design and the Company has considered the possible impairment of the
facility. It is continuing to be used and maintained in an operating condition and several options
for additional and/or alternative uses are being explored for its future use. An independent
appraisal was performed on this property during the fourth quarter of 2005. Based on the results
of the appraisal, the market value was $150,000 less than book value. Accordingly, a $150,000
impairment charge was taken in 2005. For all of these reasons, the Company does not believe
further impairment of the facility is appropriate. The facility will continue to be depreciated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company is not currently using the Blair Warehouse Outlet building in Erie, Pennsylvania.
Because the sales process has taken longer than anticipated, the asset is no longer being
classified as Held for Sale in accordance with SFAS No.&nbsp;144. An independent appraisal was
performed on this property during the fourth quarter of 2005. Based on the results of the
appraisal, the market value exceeds carrying value. Therefore, the carrying value of the asset,
after considering a $300,773 impairment charge taken in 2003 to reduce the value of the asset to
its fair value less costs to sell, is deemed to be stated fairly at December&nbsp;31, 2005. The
facility will continue to be depreciated. Subsequent to December&nbsp;31, 2005, the Company received an
offer to
</DIV>



<P align="center" style="font-size: 10pt">15
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">purchase the Erie facility. The offer price, less estimated costs to sell, approximates
net carrying value at December&nbsp;31, 2005. The closing process is anticipated to be completed in the
first half of 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Off-Balance Sheet Arrangements</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company has no off-balance sheet arrangements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Contractual Obligations</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company has contractual obligations consisting of capital leases for office and digital
camera equipment, operating leases for buildings, data processing, office and telephone equipment,
revolving credit facility and receivables purchase agreement.
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><U>Payments Due By Period</U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Less than</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">1 &#150; 3</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">4 &#150; 5</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">More than 5</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Contractual Obligations</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Total</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">1 year</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">years</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">years</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">years</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital Lease
Obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">37,262</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">21,568</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">15,694</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating Leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,638,901</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,134,551</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,909,201</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,538,196</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,953</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unconditional
Purchase
Obligations &#150;
Outstanding Letters
of Credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,600,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,600,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Revolving Credit
Facility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">29,276,163</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">22,756,119</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,924,895</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,538,196</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">56,953</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company has commercial commitments consisting of a revolving credit facility of $75&nbsp;million.
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 6pt">Amount of Commitment<br>
<u>Expiration Per Period</u>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Other Commercial</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Total Amounts</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Less than</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">1 &#150; 3</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">4 &#150; 5</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">After 5</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Commitments</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Committed</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">1 year</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">years</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">years</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">years</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Revolving Credit
Facility -
effective 7/15/05</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">75,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">75,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">75,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">75,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If an event of default should occur, payments and/or maturity of the lines of credit could be
accelerated. The Company is not in default and does not expect to be in default of any of the
provisions of the credit facility. (See &#147;Liquidity and Sources of Capital&#148; for details of the
Company&#146;s credit facility).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company recently declared a quarterly dividend of $.30 per share payable on March&nbsp;15, 2006
which represents an increase of $.15 per share from its prior regular cash dividend of $.15 per
share. The Company has declared dividends for 289 consecutive quarters. It is the Company&#146;s
intent to continue paying dividends; however, the Company will evaluate its dividend practice on an
ongoing basis. (See &#147;Future Considerations.&#148;)
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Future cash needs beyond 2005 will be financed by cash flow from operations, available cash on
hand, existing borrowing arrangements and, if needed, other financing arrangements that may be
available to the Company. The Company&#146;s current projection of future cash requirements may be
affected by numerous factors, including changes in sales volume, operating cost fluctuations and
revised capital spending activities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Critical Accounting Policies</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Preparation of the Company&#146;s financial statements requires the application of a number of
accounting policies, which are described in &#147;Note 1. Significant Accounting Policies&#148; in the &#147;Notes
to Consolidated Financial Statements.&#148; The critical accounting policies, which if interpreted
differently under different conditions or circumstances could result in material changes to the
reported results; deal with properly valuing accounts receivable and inventory. Properly valuing
accounts receivable and inventory requires establishing proper reserve and allowance levels,
specifically the allowances for doubtful accounts and returns, and the reserve for inventory
obsolescence. The Company&#146;s senior financial management and the
</DIV>

<P align="center" style="font-size: 10pt">16
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Company&#146;s auditors (Ernst &#038; Young)
review the critical accounting policies and estimates with the Audit Committee of the Board of
Directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s revenue recognition policy is as follows: Sales (cash, Blair Credit, or third party
credit card) are recorded when the merchandise is shipped to the customer in accordance with the
provisions of Staff Accounting Bulletin No.&nbsp;104, <I>Revenue Recognition.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Finance charges on time payment accounts are recognized on an accrual basis of accounting. As a
result of the sale of the Company&#146;s proprietary credit portfolio in November, 2005, finance charges
on time payment accounts are no longer recognized.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The allowance for doubtful accounts and related items, provision for doubtful accounts and Blair
Credit, are discussed in &#147;Results of Operations,&#148; &#147;Liquidity and Sources of Capital&#148; and &#147;Future
Considerations.&#148; A change in the bad debt rate would cause changes in the provision for doubtful
accounts and the allowance for doubtful accounts. Based on the Company&#146;s 2005 level of credit
sales and finance charges for the ten months prior to the sale of the credit portfolio, net income
would change by approximately $1.6&nbsp;million, or $.25 per share, from a one percentage point change
in the bad debt rate. As a result of the sale of the Company&#146;s proprietary credit portfolio in
November, 2005, provisions for doubtful accounts are no longer provided.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The allowance for returns is recorded as a current liability. A monthly provision for anticipated
returns is recorded as a percentage of gross sales, based upon historical experience. The
provision is charged against gross sales to arrive at net sales, and actual returns are charged
against the allowance for returns. Returns are generally more predictable as they settle within
two-to-three months but are impacted by season, new products and/or product lines, type of sale
(cash, credit card, Blair Credit) and sales mix (prospect/customer). The Company feels that the
allowance for returns is sufficient to cover the actual returns that will occur in 2006 on 2005
sales. A change in the returns rate would cause changes in the provision for returns and the
allowance for returns. Based on the Company&#146;s 2005 level of sales, net income would change by
approximately $1.5&nbsp;million, or $.23 per share, from a one percentage point change in return rate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The reserve for inventory obsolescence and related items, inventory levels and write-downs, are
discussed in &#147;Liquidity and Sources of Capital&#148; and &#147;Future Considerations.&#148; The Company feels
that the reserve for inventory obsolescence is sufficient to cover the write-offs that will occur
in future years on merchandise in inventory as of December&nbsp;31, 2005. A change in the obsolescence
rate would cause changes in cost of goods sold and the reserve for inventory obsolescence. Based
on the Company&#146;s 2005 level of merchandise subject to obsolescence, net income would change by
approximately $1.6&nbsp;million, or $.24 per share, from a one percentage point change in the
obsolescence rate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s advertising expense policy is as follows: Advertising and shipping supply
inventories include printed advertising material and related mailing supplies for promotional
mailings, which are generally scheduled to occur within two months. These direct-response
advertising costs are then expensed over the period of expected future benefit, generally nine
weeks.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At December&nbsp;31, 2005, the Company had total net current deferred tax assets of $731,000. These
assets relate principally to asset valuation reserves including returns and inventory obsolescence.
Based on recent historical earnings performance and current projections, management believes that
a valuation allowance is not required against these deferred tax assets, except for the valuation
allowances against state net operating losses. The state net operating loss valuation allowance
was provided due to its uncertainty of realization based upon the state&#146;s net operating loss
carryforward rules.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Impact of Inflation and Changing Prices </B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Although inflation has moderated in our economy, the Company is continually seeking ways to
cope with its impact. To the extent permitted by competition, increased costs are passed on to
customers by selectively increasing selling prices over a period of time. Historically, profit
margins have been pressured by postal and paper rate increases. Paper rates increased
approximately 2% in 2005, realized a 5% increase in 2004 and were flat in 2003. Postal rates
increased on January&nbsp;7, 2001, on July&nbsp;1, 2001, on June&nbsp;30, 2002 and again on January&nbsp;9, 2006. The
Company spent approximately $76.7&nbsp;million for postage and delivery services in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company principally uses the LIFO method of accounting for its merchandise inventories. Under
this method, the cost of products sold reported in the financial statements approximates current
costs and thus reduces distortion in reported income due to increasing costs. However, the Company
has been experiencing declining merchandise costs and the LIFO reserve has fallen to $1.2&nbsp;million
at December&nbsp;31, 2005, from $3.8&nbsp;million at December&nbsp;31, 2004. The LIFO reserve was $4.5&nbsp;million at
December&nbsp;31, 2003.
</DIV>

<P align="center" style="font-size: 10pt">17
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Under the &#147;General Agreements on Tariffs and Trade,&#148; textile quotas were eliminated from all
participating &#147;World Trade Organization&#148; countries on January&nbsp;1, 2005. The elimination of textile
quotas resulted in the reduction of apparel costs that varied from 5 &#151; 20% worldwide. This also
forced countries that had previous &#147;Free Trade Agreements&#148; with the United States to reduce costs
in order to remain competitive and maintain market share. The reduction in costs has resulted in
lower cost of merchandise for American importers of apparel.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Property, plant and equipment are continuously being expanded and updated. Major projects are
discussed under &#147;Liquidity and Sources of Capital&#148;. Assets acquired in prior years will be
replaced at higher costs but this will take place over many years. New assets, when acquired, will
result in higher depreciation charges, but in many cases, due to technological improvements,
savings in operating costs should result. The charges to operations for depreciation represent the
allocation of historical costs incurred over past years and are significantly less than if they
were based on the current cost of productive capacity being used.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Accounting Pronouncements</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On December&nbsp;16, 2004, the Financial Accounting Standards Board (FASB)&nbsp;issued Statement of
Financial Accounting Standards (SFAS)&nbsp;No.&nbsp;123 (revised 2004), <I>Share-Based Payment, </I>which is a
revision of SFAS No.&nbsp;123, <I>Accounting for Stock-Based Compensation. </I>SFAS No.&nbsp;123(R) supersedes
Accounting Principles Board (APB)&nbsp;Opinion No.&nbsp;25, <I>Accounting for Stock Issued to Employees, </I>and
amends SFAS No.&nbsp;95, <I>Statement of Cash Flows. </I>Generally, the approach in SFAS No.&nbsp;123(R) is similar
to the approach described in SFAS No.&nbsp;123. However, SFAS No.&nbsp;123(R) requires all share-based
payments to employees, including grants of employee stock options, to be recognized in the income
statement based on fair values. Pro forma disclosure is no longer an alternative. SFAS No.&nbsp;123(R)
must be adopted no later than January&nbsp;1, 2006. The Company plans to adopt SFAS No.&nbsp;123(R) on
January&nbsp;1, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As permitted by SFAS No.&nbsp;123, the Company currently accounts for share-based payments to employees
using Opinion 25&#146;s intrinsic value method and, as such, generally recognizes no compensation cost
for employee stock options. Accordingly, the
adoption of SFAS No.&nbsp;123(R)&#146;s fair value method will have a significant impact on our results of
operations, although it will have no impact on our overall financial position. The impact of
adoption of SFAS No.&nbsp;123(R) cannot be predicted at this time because it will depend on levels of
share-based payments, including stock options, granted in the future. However, had we adopted SFAS
No.&nbsp;123(R) in prior periods, the impact of that standard would have approximated the impact of SFAS
No.&nbsp;123 as described in the disclosure of pro forma net income and earnings per share in Note 1 to
our consolidated financial statements. Upon adoption of SFAS No.&nbsp;123(R) in 2006, the company will
recognize expenses of approximately $100,000 related to the unvested stock options at December&nbsp;31,
2005. SFAS No.&nbsp;123(R) also requires the benefits of tax deductions in excess of recognized
compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as
required under current literature. This requirement will reduce net operating cash flows and
increase net financing cash flows in periods after adoption. While the company cannot estimate
what those amounts will be in the future (because they depend on, among other things, when
employees exercise stock options), the amount of operating cash flows recognized in prior periods
for such excess tax deductions were $660,000, $411,000, and $129,000 in 2005, 2004 and 2003,
respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Future Considerations</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company is faced with the ever-present challenge of maintaining and expanding its customer
file. This involves the acquisition of new customers (prospects), the conversion of new customers
to established customers (active repeat buyers) and the retention and/or reactivation of
established customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">These actions are vital in growing the business but are being negatively impacted by increased
operating costs, increased competition in the retail sector, high levels of consumer debt, varying
consumer response rates and an uncertain economy. The preceding factors can also negatively impact
the Company&#146;s ability to properly value inventories by making it more difficult to establish proper
reserve and allowance levels, specifically, the allowances for returns and the reserve for
inventory obsolescence.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s marketing strategy includes targeting customers in the &#147;40 to 75, low-to-moderate
income&#148; market. Success of the Company&#146;s marketing strategy requires investment in database
management, digital asset management, campaign management, financial and operating systems,
prospecting programs, catalog marketing, new product lines, telephone call centers, e-commerce and
fulfillment operations. Management believes that these investments should improve Blair
Corporation&#146;s position in new and existing markets and provide opportunities for future earnings
growth.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Requirements adopted by the Securities and Exchange Commission in response to the passage of the
Sarbanes-Oxley Act of 2002 require an ongoing review and evaluation of our internal control systems
and attestation of these systems by our independent auditors. We will review our internal control
procedures and consider further documentation of such procedures that may be necessary in the
future on an ongoing basis. While we currently believe we have identified and committed the
</DIV>

<P align="center" style="font-size: 10pt">18
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">appropriate resources to meet all of the requirements, there is always a risk inherent in any
control system that not all errors or misstatements will be detected. Any improvements in our
internal control systems or in documentation of such control systems could be costly to prepare or
implement, could divert attention of management of our finance staff, and may cause our operating
expenses to increase over the ensuing year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Forward-looking statements in this report, including without limitation, statements relating
to the Company&#146;s plans, strategies, objectives, expectations, intentions and adequacy of resources,
are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of
1995. Words such as &#147;believes,&#148; &#147;anticipates,&#148; &#147;plans,&#148; &#147;expects,&#148; and similar expressions are
intended to identify forward-looking statements. Any statements contained in this report that are
not statements of historical fact may be deemed to be forward-looking statements. Such
forward-looking statements are included in, but not limited to, this ITEM 7.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Investors are cautioned that such forward-looking statements involve risks and uncertainties which
could cause actual results to differ materially from those in the forward-looking statements,
including without limitation the following: (i)&nbsp;the Company&#146;s plans, strategies, objectives,
expectations and intentions are subject to change at any time at the discretion of the Company;
(ii)&nbsp;the Company&#146;s plans and results of operations will be affected by the Company&#146;s ability to
manage its growth and inventory; (iii)&nbsp;external factors such as, but not limited to, changes in
consumer response rates, success of new business lines and increases in postal, paper and printing
costs; and (iv)&nbsp;other risks and uncertainties indicated from time to time in the Company&#146;s filings
with the Securities and Exchange Commission.
</DIV>
<!-- link2 "ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK" -->
<DIV align="left"><A NAME="011"></A></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The carrying amounts of cash, accounts payable and accrued liabilities approximate fair value due
to the short-term maturities of these assets and liabilities. The interest rates on the Company&#146;s
securitized and revolving credit facilities are adjusted regularly to reflect current market
rates. Accordingly, the carrying amounts of the Company&#146;s borrowings also approximate fair value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company is subject to market interest rate risk from exposure to changes in interest rates
based upon its financing, investing and cash management activities. The Company utilizes
variable-rate debt to manage its exposure to changes in interest rates. The Company does not expect
changes in interest rates to have a material adverse effect on its income or cash flow in 2006. A
change of one percentage point in the interest rate would cause a change in interest expense, based
on the Company&#146;s levels of debt for the years 2005 and 2004, of approximately $268,301 and
$150,000, respectively.
</DIV>
<!-- link2 "ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA" -->
<DIV align="left"><A NAME="012"></A></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">See Item&nbsp;15 of this Report.
</DIV>
<!-- link2 "ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE" -->
<DIV align="left"><A NAME="013"></A></DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>ITEM 9.</B></TD>
    <TD>&nbsp;</TD>
    <TD><B>CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">None.
</DIV>
<!-- link2 "ITEM 9A. CONTROLS AND PROCEDURES" -->
<DIV align="left"><A NAME="014"></A></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 9A. CONTROLS AND PROCEDURES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of the end of the period covered by this report, based on an evaluation of the Company&#146;s
disclosure controls and procedures (as defined in Exchange Act Rules&nbsp;13a-15(e) and 15d-15(e)), each
of the Chief Executive Officer and the Chief Financial Officer of the Company has concluded that
the Company&#146;s disclosure controls and procedures are effective to ensure that information required
to be disclosed by the Company in its Exchange Act reports is recorded, processed, summarized and
reported within the applicable time periods specified by the SEC&#146;s rules and forms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">There were no significant changes in the Company&#146;s internal controls or in any other factors that
could significantly affect those controls subsequent to the date of the most recent evaluation of
the Company&#146;s internal controls by the Company, including any corrective actions with regard to any
significant deficiencies or material weaknesses.
</DIV>
<!-- link2 "ITEM 9B. OTHER INFORMATION" -->
<DIV align="left"><A NAME="015"></A></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 9B. OTHER INFORMATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">None.
</DIV>

<P align="center" style="font-size: 10pt">19
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<!-- link1 "PART III" -->
<DIV align="left"><A NAME="016"></A></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART III</B>
</DIV>

<!-- link2 "ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT" -->
<DIV align="left"><A NAME="017"></A></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On February&nbsp;26, 2004, the Company adopted a Code of Ethics for its Principal Executive Officer and
Senior Financial Officer (the &#147;Code of Ethics&#148;). A copy of the Code of Ethics is filed as Exhibit
14 to the 2003 Annual Report of Form 10-K. The Code of Ethics is also available free of charge by
writing to the Secretary of Blair Corporation, 220 Hickory Street, Warren, Pennsylvania, 16366.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Information regarding directors and executive officers of the Company appearing under the caption
&#147;Election of Directors&#148; in the 2006 Proxy Statement for the 2006 Annual Meeting of Stockholders to
be filed with the Securities and Exchange Commission on March&nbsp;20, 2006, is hereby incorporated by
reference.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Certain information regarding section 16 of the Exchange Act reporting by directors, officers and
beneficial owners of more than ten percent (10%) of the Company&#146;s common stock appearing under
caption &#147;Section&nbsp;16(a) Beneficial Ownership Reporting Compliance&#148; in the 2005 Proxy Statement is
hereby incorporated by reference.
</DIV>
<!-- link2 "ITEM 11. EXECUTIVE COMPENSATION" -->
<DIV align="left"><A NAME="018"></A></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 11. EXECUTIVE COMPENSATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Information appearing under the caption &#147;Executive Compensation&#148; in the 2006 Proxy Statement is
hereby incorporated by reference.
</DIV>
<!-- link2 "ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS" -->
<DIV align="left"><A NAME="019"></A></DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>ITEM 12.</B></TD>
    <TD>&nbsp;</TD>
    <TD><B>SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">EQUITY COMPENSATION PLAN INFORMATION
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table gives information about the Company&#146;s Common Stock that may be issued upon the
exercise of options, warrants and rights under all existing equity compensation plans as of
December&nbsp;31, 2005.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Equity Compensation Plan Information</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="2">(c)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Number of Securities</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(a)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(b)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Remaining</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Number of Securities</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted Average</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Available for Future</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">to be Issued Upon</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Exercise Price of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Issuance</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Exercise of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Outstanding</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Under Equity Compensation</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Outstanding Options,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Options, Warrants</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Plans (Excluding Securities</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Plan Category</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Warrants and Rights</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">and Rights</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Reflected in Column (a)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity Compensation Plans
Approved by Stockholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">111,608</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">530,278</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity Compensation Plans
Not Approved by Stockholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">111,608</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">530,278</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Information setting forth the security ownership of certain beneficial owners and management
appearing under the captions &#147;Security Ownership of Certain Beneficial Owners,&#148; &#147;Security Ownership
of Management&#148; and &#147;Equity Compensation Plan Information&#148; in the 2006 Proxy Statement is hereby
incorporated by reference.
</DIV>
<!-- link2 "ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" -->
<DIV align="left"><A NAME="020"></A></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Not applicable.
</DIV>
<!-- link2 "ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES" -->
<DIV align="left"><A NAME="021"></A></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Information appearing under the caption &#147;Principal Accountant Fees and Services&#148; in the 2006 Proxy
Statement is hereby incorporated by reference.
</DIV>

<P align="center" style="font-size: 10pt">20
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<!-- link1 "PART IV" -->
<DIV align="left"><A NAME="022"></A></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART IV</B>
</DIV>

<!-- link2 "ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES" -->
<DIV align="left"><A NAME="023"></A></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(a)&nbsp;EXHIBITS AND FINANCIAL STATEMENTS AND SCHEDULES.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="92%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Financial Statements. The Company&#146;s consolidated financial statements are included at pages
F-1 to F-24.</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Management&#146;s Annual Report on Internal Control Over Financial
Reporting
</DIV></TD>
    <TD align="left" valign="top">F-1</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Report of Independent Registered Public Accounting
Firm
</DIV></TD>
    <TD align="left" valign="top">F-2</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Report of Independent Registered Public Accounting Firm on Internal
Control over Financial Reporting
</DIV></TD>
    <TD align="left" valign="top">F-3</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Consolidated Balance Sheets &#151; December&nbsp;31, 2005 and
2004
</DIV></TD>
    <TD align="left" valign="top">F-4</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Consolidated Statements of Income &#151; Years ended December&nbsp;31, 2005,
2004 and 2003
</DIV></TD>
    <TD align="left" valign="top">F-6</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Consolidated Statements of Stockholders&#146; Equity &#151; Years ended
December&nbsp;31, 2005, 2004 and 2003
</DIV></TD>
    <TD align="left" valign="top">F-7</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Consolidated Statements of Cash Flows &#151; Years ended December&nbsp;31,
2005, 2004 and 2003
</DIV></TD>
    <TD align="left" valign="top">F-9</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Notes to Consolidated Financial Statements &#151; December&nbsp;31,
2005
</DIV></TD>
    <TD align="left" valign="top" nowrap>F-10</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Financial Statement Schedules. SCHEDULE II &#151; VALUATION AND QUALIFYING ACCOUNTS is being
filed as part of this report on Form 10-K pursuant to Item&nbsp;15(c), and should be read in
conjunction with the consolidated financial statements of the Company described in Item
15(a)(1) above, which such Schedule&nbsp;II follows at page F-25.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">All other schedules set forth in the applicable accounting regulations of the Securities and
Exchange Commission either are not required under the related instructions or are not applicable
and, therefore, have been omitted.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(3)&nbsp;List of Exhibits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The exhibits filed as a part of this Form 10-K are as follows (filed herewith unless otherwise
noted):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="89%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">3.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Restated Certificate of Incorporation of the Company (1)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">3.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Bylaws of Blair Corporation (2)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Specimen Common Stock Certificate (3)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">10.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Stock Accumulation and Deferred Compensation Plan for Directors (4)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">10.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Blair Corporation 2000 Omnibus Stock Plan (5)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">10.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Blair Credit Agreement (6)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">10.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment No. 2 to Credit Agreement (7)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">10.5</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment No. 3 to Credit Agreement (8)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">10.6</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment No. 4 to Credit Agreement (9)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">10.7</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment No. 5 to Credit Agreement (10)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">10.8</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Change in Control Severance Agreement &#150; Vice Presidents (11)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">10.9</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Change in Control Severance Agreement &#150; CEO and Senior Vice
Presidents (12)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">10.10</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Purchase, Sale and Capital Servicing Transfer Agreement (13)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">10.11</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Private Label Credit Program Agreement (14)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">10.12</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment Agreement, dated as of July 15, 2005, which amends the
Receivables Purchase Agreement (15)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">21
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>



<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="89%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">10.13</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Credit
Agreement, dated as of July 15, 2005 (16)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">10.14</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Agreement among Blair Corporation
and Loeb, dated as of May 24, 2005 (17)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">10.15</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Agreement among Blair Corporation
and Mr. Phillip Goldstein and Mr. Andrew Dakos, dated as of May 24, 2005 (18)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">10.16</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Agreement among Blair Corporation
and Santa Monica and Mr. Lawrence Goldstein, dated as of May 25, 2005 (19)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">11</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Statement regarding computation of per share earnings (20)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">14</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Code of Ethics (21)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">21</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Subsidiaries of Blair Corporation</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">23</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Independent Registered Public Accounting Firm</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">31.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CEO Certification pursuant to Section 302</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">31.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CFO Certification pursuant to Section 302</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">32.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CEO Certification pursuant to Section 906</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">32.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CFO Certification pursuant to Section 906</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated herein by reference to Exhibit&nbsp;A to the Company&#146;s Quarterly Report
on Form 10-Q filed with the SEC on August&nbsp;10, 1995 (SEC File No.&nbsp;1-878).</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated herein by reference to Exhibit&nbsp;4.3 to the Company&#146;s Registration
Statement on Form S-8 filed with the SEC on July&nbsp;19, 2000 (SEC File No.&nbsp;333-41772).</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated herein by reference to Exhibit&nbsp;4.1 to the Company&#146;s Registration
Statement on Form S-8 filed with the SEC on July&nbsp;19, 2000 (SEC File No.&nbsp;333-41770).</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated herein by reference to Exhibit&nbsp;A to the Company&#146;s Proxy Statement
filed with the SEC on March&nbsp;20, 1998 (SEC File <BR>
No.&nbsp;1-878).</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated herein by reference to Appendix&nbsp;A to the Company&#146;s Proxy Statement
filed with the SEC on March&nbsp;14, 2003 (SEC File No.&nbsp;1-878).</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(6)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated herein by reference to Exhibit&nbsp;99.1 to the Company&#146;s Form 8-K
filed with the SEC on January&nbsp;9, 2002 (SEC File <BR>
No.&nbsp;1-878).</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(7)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to Exhibit&nbsp;10.4 to the Quarterly Report on Form 10-Q
of the Company filed with the SEC on August&nbsp;8, 2003 (SEC File No.&nbsp;1-878). Certain
schedules to the agreement have been omitted.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(8)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to Exhibit&nbsp;10.5 to the Quarterly Report on Form 10-Q
of the Company filed with the SEC on November&nbsp;9, 2004 (SEC File No.&nbsp;1-878). Certain
schedules to the agreement have been omitted.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(9)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to Exhibit&nbsp;10.6 to the Annual Report on Form 10-K of
the Company filed with the SEC on March&nbsp;1, 2005 (SEC File No.&nbsp;1-878). Certain
schedules to the Agreement have been omitted.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(10)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to Exhibit&nbsp;10.7 to the Quarterly Report on Form 10-Q
of the Company filed with the SEC on May&nbsp;6, 2005 (SEC File No.&nbsp;1-878). Certain
schedules to the Agreement have been omitted.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(11)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to Exhibit&nbsp;10.6 to the Quarterly Report on Form 10-Q
of the Company filed with the SEC on November&nbsp;9, 2004 (SEC File No.&nbsp;1-878).</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(12)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to Exhibit&nbsp;10.7 to the Quarterly Report on Form 10-Q
of the Company filed with the SEC on November&nbsp;9, 2004 (SEC File No.&nbsp;1-878).</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(13)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated herein by reference to Exhibit&nbsp;10.1 to the Company&#146;s Form 8-K
filed with the SEC on April&nbsp;27, 2005 (SEC File No.&nbsp;1-878). Certain schedules to the
agreement have been omitted.</TD>
</TR>
<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>
<TR valign="top">
    <TD nowrap align="left">(14)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated herein by reference to Exhibit&nbsp;10.2 to the Company&#146;s Form 8-K
filed with the SEC on April&nbsp;27, 2005 (SEC File No.&nbsp;1-878). Certain schedules to the
agreement have been omitted.</TD>
</TR>



</TABLE>


<P align="center" style="font-size: 10pt">22
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">





<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>


<TR valign="top">
    <TD nowrap align="left">(15)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated herein by reference to Exhibit (b) (i)&nbsp;to the Company&#146;s Schedule
TO filed with the SEC on July&nbsp;20, 2005 (SEC File No.&nbsp;1-878). Certain schedules to the
agreement have been omitted.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(16)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated herein by reference to Exhibit (b) (ii)&nbsp;to the Company&#146;s Schedule
TO filed with the SEC on July&nbsp;20, 2005 (SEC File No.&nbsp;1-878). Certain schedules to the
agreement have been omitted.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(17)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to Exhibit&nbsp;10.1 to the Company&#146;s Form 8-K filed with
the SEC on May&nbsp;27, 2005 (SEC File No.&nbsp;1-878).</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(18)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to Exhibit&nbsp;10.2 to the Company&#146;s Form 8-K filed with
the SEC on May&nbsp;27, 2005 (SEC File No.&nbsp;1-878).</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(19)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to Exhibit&nbsp;10.3 to the Company&#146;s Form 8-K filed with
the SEC on May&nbsp;27, 2005 (SEC File No.&nbsp;1-878).</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(20)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to Note 5 of the financial statements included
herein.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(21)</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference to Exhibit&nbsp;14 to the 2003 Annual Report on Form 10-K
of the Company filed with the SEC on March&nbsp;15, 2004 (SEC File No.&nbsp;1-878).</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">23
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">





<!-- link1 "SIGNATURES" -->
<DIV align="left"><A NAME="024"></A></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SIGNATURES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Pursuant to the requirements of Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>BLAIR CORPORATION (Registrant)</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="53%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Date: March&nbsp;8, 2006
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">/s/ John E. Zawacki</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">John E. Zawacki</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">President and</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Chief Executive Officer</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">/s/ Larry J. Pitorak</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Larry J. Pitorak</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Interim Chief Financial Officer</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">/s/ Michael R. DelPrince</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Michael R. DelPrince</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Controller</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has
been signed below by the following persons on behalf of the registrant and in the capacities and on
the date indicated.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="53%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Date: March&nbsp;8, 2006
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">/s/ Craig N. Johnson</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Craig N. Johnson</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Chairman of the Board of Directors</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Date: March&nbsp;8, 2006
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">/s/ John E. Zawacki</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">John E. Zawacki</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">President, Chief Executive Officer</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">and Director</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(Principal Executive Officer)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Date: March&nbsp;8, 2006
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">/s/ John O. Hanna</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">John O. Hanna</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Director</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Date: March&nbsp;8, 2006
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">/s/ Michael A. Schuler</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Michael A. Schuler</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Director</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Date: March&nbsp;8, 2006
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">/s/ Murray K. McComas</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Murray K. McComas</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Director</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">24
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Management&#146;s Annual Report on Internal Control Over Financial Reporting
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The management of Blair Corporation and Subsidiaries is responsible for establishing and
maintaining adequate internal control over financial reporting. The Company&#146;s management utilizes
the <I>Internal Control &#150; Integrated Framework </I>issued by the Committee of Sponsoring Organizations of
the Treadway Commission to evaluate the effectiveness of the Company&#146;s internal control over
financial reporting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of December&nbsp;31, 2005, based on management&#146;s evaluation of the effectiveness of the Company&#146;s
internal control over financial reporting, the Company has concluded that its internal control over
financial reporting is effective for the purpose of providing reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Because of its inherent limitations, a system of internal control over financial reporting can
provide only reasonable assurance and may not prevent or detect misstatements. In addition,
because of changes in conditions, effectiveness of internal controls over financial reporting may
vary over time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Ernst &#038; Young, the registered public accounting firm that audited the financial statements included
in this annual report, has issued an attestation report on management&#146;s assessment of the Company&#146;s
internal control over financial reporting.
</DIV>

<P align="center" style="font-size: 10pt">F-1
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Report of Independent Registered Public Accounting Firm
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The Board of Directors and Stockholders of Blair Corporation and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have audited the accompanying consolidated balance sheets of Blair Corporation and Subsidiaries
as of December&nbsp;31, 2005 and 2004, and the related consolidated statements of income, stockholders&#146;
equity, and cash flows for each of the three years in the period ended December&nbsp;31, 2005. Our
audits also included the financial statement schedule listed in the Index at Item&nbsp;15(a). These
financial statements and schedules are the responsibility of the Company&#146;s management. Our
responsibility is to express an opinion on these financial statements and schedule based on our
audits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In our opinion, the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Blair Corporation and Subsidiaries at December&nbsp;31,
2005 and 2004, and the consolidated results of their operations and their cash flows for each of
the three years in the period ended December&nbsp;31, 2005, in conformity with U.S. generally accepted
accounting principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the effectiveness of Blair Corporation and Subsidiaries&#146; internal control
over financial reporting as of December&nbsp;31, 2005, based on criteria established in <I>Internal
Control&#151;Integrated Framework </I>issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated February&nbsp;21, 2006 expressed an unqualified opinion thereon.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="54%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Ernst &#038; Young LLP</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Buffalo, New York<BR>
February&nbsp;21, 2006

</DIV>

<P align="center" style="font-size: 10pt">F-2
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The Board of Directors and Stockholders of Blair Corporation and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have audited management&#146;s assessment, included in the accompanying Management&#146;s Annual Report on
Internal Control Over Financial Reporting, that Blair Corporation and Subsidiaries maintained
effective internal control over financial reporting as of December&nbsp;31, 2005, based on criteria
established in <I>Internal Control&#151;Integrated Framework </I>issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the COSO criteria). Blair Corporation and Subsidiaries&#146;
management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting. Our
responsibility is to express an opinion on management&#146;s assessment and an opinion on the
effectiveness of the company&#146;s internal control over financial reporting based on our audit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating management&#146;s assessment, testing and evaluating the
design and operating effectiveness of internal control, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis
for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A company&#146;s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
company&#146;s internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2)&nbsp;provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (3)&nbsp;provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company&#146;s assets that could have a material effect on the
financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In our opinion, management&#146;s assessment that Blair Corporation and Subsidiaries maintained
effective internal control over financial reporting as of December&nbsp;31, 2005, is fairly stated, in
all material respects, based on the COSO criteria. Also, in our opinion, Blair Corporation and
Subsidiaries maintained, in all material respects, effective internal control over financial
reporting as of December&nbsp;31, 2005, based on the COSO criteria.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheets of Blair Corporation and Subsidiaries as of
December&nbsp;31, 2005 and 2004, and the related consolidated statements of income, stockholders&#146;
equity, and cash flows for each of the three years in the period ended December&nbsp;31, 2005 and our
report dated February&nbsp;21, 2006 expressed an unqualified opinion thereon.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="54%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Ernst &#038; Young LLP</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Buffalo, New York<BR>
February&nbsp;21, 2006

</DIV>

<P align="center" style="font-size: 10pt">F-3
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Blair Corporation and Subsidiaries
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt">Consolidated Balance Sheets
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #ffffff"><B>December 31</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>53,099,129</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">50,559,995</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Customer accounts receivable, less allowances
for doubtful accounts of $33,534,380 in 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">151,196,475</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Receivables, less allowances for doubtful accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,987,832</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,072,817</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Inventories:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Merchandise</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>71,217,282</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67,597,084</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Advertising and shipping supplies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>12,146,732</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,697,349</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>83,364,014</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84,294,433</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred income taxes <I>(Note 6)</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>731,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,657,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Prepaid expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,781,777</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,210,181</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>142,963,752</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">300,990,901</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Property, plant, and equipment:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Land</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,142,144</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,142,144</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Buildings and leasehold improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>66,609,565</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66,803,458</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>75,320,297</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,793,330</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Construction in progress</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,961,206</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,686,408</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>147,033,212</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">144,425,340</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Less allowances for depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>98,350,258</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95,066,355</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>48,682,954</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,358,985</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Trademarks</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>343,678</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">415,921</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other long-term assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,103,903</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">473,037</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>193,094,287</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">351,238,844</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>See accompanying notes.</I>
</DIV>

<P align="center" style="font-size: 10pt">F-4
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="74%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 0px solid #000000"><B>December 31</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Liabilities and Stockholders&#146; Equity</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Notes payable <I>(Note 2</I>)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">15,000,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Trade accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>29,137,285</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,831,335</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Advance payments from customers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,873,803</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,854,086</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Reserve for sales returns</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,602,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,098,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued expenses <I>(Note 3)</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>20,994,747</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,406,631</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued federal and state taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,782,444</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,689,994</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current portion of capital lease obligations <I>(Note 4)</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>19,198</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">111,254</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>63,409,477</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,991,300</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital lease obligations, less current portion <I>(Note 4)</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>14,695</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,270</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred income taxes <I>(Note 6)</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,582,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,668,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other long-term liability</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>679,720</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stockholders&#146; equity <I>(Note 5)</I>:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common stock without par value:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Authorized 12,000,000 shares
issued 10,075,440 shares (including shares
held in treasury) &#151; stated value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>419,810</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">419,810</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Additional paid-in capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>13,553,937</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,238,311</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Retained earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>334,023,925</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">306,544,284</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accumulated other comprehensive (loss)&nbsp;income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(48,579</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(118,634</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>347,949,093</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">320,083,771</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Less 6,124,818 shares in 2005 and 1,846,542
shares in 2004 of common stock
in treasury &#151; at cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>221,381,619</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,955,582</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Less receivable and deferred compensation
from stock plans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>159,079</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,560,915</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>126,408,395</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">282,567,274</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total liabilities and stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>193,094,287</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">351,238,844</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>See accompanying notes.</I>
</DIV>


<P align="center" style="font-size: 10pt">F-5
</DIV>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Blair Corporation and Subsidiaries
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt">Consolidated Statements of Income
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 0px solid #000000"><B>Years ended December 31</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2003</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>456,625,397</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">496,120,207</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">581,939,971</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other revenue <I>(Note 7)</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>36,072,657</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,714,912</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,563,467</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>492,698,054</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">540,835,119</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">623,503,438</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost and expenses:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cost of goods sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>204,121,644</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">234,972,079</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">275,708,662</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Advertising</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>119,321,916</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">128,324,650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">156,412,869</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">General and administrative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>135,588,219</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">131,408,753</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">136,211,667</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Provision for doubtful accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>11,669,552</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,664,048</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,826,636</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gain on sale of receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(27,747,513</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest expense (income), net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>568,466</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(122,757</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(79,613</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other expense, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>46,833</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">221,699</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">260,035</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>443,569,117</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">517,468,472</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">600,340,256</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income before income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>49,128,937</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,366,647</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,163,182</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income taxes <I>(Note 6)</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>17,583,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,498,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,637,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>31,545,937</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,868,647</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,526,182</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic earnings per share based on
weighted average shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>4.79</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.82</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted earnings per share based on
weighted average shares outstanding
and assumed conversions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>4.71</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.81</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>See accompanying notes.</I>
</DIV>



<P align="center" style="font-size: 10pt">F-6
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Blair Corporation and Subsidiaries
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt">Consolidated Statements of Stockholders&#146; Equity
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 0px solid #000000"><B>Years ended December 31</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2003</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Common Stock</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>419,810</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">419,810</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">419,810</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Additional Paid-in Capital:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>13,238,311</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,134,983</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,428,903</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of 5,550 shares in 2005, 4,050 shares in 2004
and 5,375 shares in 2003 of common stock to
non-employee directors</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,044</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(24,358</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,355</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of 0 shares in 2005 and 2004 and 13,350 shares
in 2003 of common stock under Omnibus Stock
Plan &#151; Restricted Stock Awards <I>(Note 5)</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,695</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of 22,373 shares in 2005, 3,000 shares in 2004
and 0 shares in 2003 of common stock under Omnibus
Stock Plan &#151; Executive Officer Stock Awards <I>(Note 5)</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(38,074</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18,509</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forfeitures of 9,400 shares in 2005, 19,700 shares in 2004
and 2,700 shares in 2003 of common stock under Omnibus
Stock and Employee Stock Purchase Plans <I>(Note 5)</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(4,645</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(107,644</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18,055</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercise of 103,201 shares in 2005, 128,547 shares in 2004
and 54,146 shares in 2003 of common stock under Omnibus
Stock Plan &#151; Non-Qualified Stock Options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(306,699</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,157,161</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(409,205</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax benefit on exercise of Non-Qualified Stock Options
and executive officer awards</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>660,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">411,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">129,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>13,553,937</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,238,311</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,134,983</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Retained Earnings:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>306,544,284</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">296,397,999</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">286,511,847</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>31,545,937</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,868,647</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,526,182</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash dividends per share &#151;  $.75 in 2005, $.60 in 2004 and 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(4,066,296</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,722,362</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,640,030</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>334,023,925</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">306,544,284</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">296,397,999</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Accumulated Other Comprehensive (Loss) Income:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(118,634</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(20,016</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,686</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign currency translation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>70,055</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(98,618</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(32,702</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(48,579</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(118,634</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(20,016</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Treasury Stock:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(35,955,582</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(39,514,841</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(41,264,330</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase of 4,400,000 in 2005, 0 shares in 2004
and in 2003 of common stock for treasury</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(188,976,494</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of 5,550 shares in 2005, 4,050 shares in 2004
and 5,375 shares in 2003 of common stock to
non-employee directors</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>158,868</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">126,509</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">130,219</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of 0 in 2005 and 2004 and 13,350 shares
in 2003 of common stock under Omnibus Stock
Plan &#151; Restricted Stock Awards <I>(Note 5)</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">275,663</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of 22,373 shares in 2005, 3,000 shares in 2004 and 0
shares in 2003 of common stock under Omnibus Stock Plan &#151;
Executive Officer Stock Awards <I>(Note 5)</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>656,398</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,875</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forfeitures of 9,400 shares in 2005, 19,700 shares in 2004
and 2,700 shares in 2003 of common stock under Omnibus
Stock and Employee Stock Purchase Plans <I>(Note 5)</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(222,196</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(332,770</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(45,696</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercise of 103,201 shares in 2005, 128,547 shares in 2004
and 54,146 shares in 2003 of common stock under Omnibus
Stock Plan &#151; Non-Qualified Stock Options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,957,387</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,679,645</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,389,303</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(221,381,619</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(35,955,582</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(39,514,841</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>See accompanying notes.</I>
</DIV>



<P align="center" style="font-size: 10pt">F-7
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Blair Corporation and Subsidiaries
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt">Consolidated Statements of Stockholders&#146; Equity
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 0px solid #000000"><B>Years ended December 31</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2003</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Receivable and Deferred Compensation from Stock Plans:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(1,560,915</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,616,826</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,775,102</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance (net of forfeitures) of common stock under<br>
Omnibus Stock Plan &#150; Restricted Stock Awards and<br>
Executive Officer Awards: <I>(Note 5)</I>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>50,120</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,263</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(77,763</TD>
    <TD nowrap>)</TD></TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Deferred compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(192,907</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of deferred compensation, net of forfeitures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>197,360</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">245,575</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">163,495</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of Executive Officer Stock Awards, net of
vesting
and forfeitures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>685,064</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">407,854</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,357</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Applications of dividends and cash repayments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>469,292</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">302,219</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">230,094</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(159,079</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,560,915</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,616,826</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>126,408,395</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">282,567,274</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">268,801,109</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Comprehensive Income:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>31,545,937</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,868,647</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,526,182</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Adjustment from foreign currency translation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>70,055</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(98,618</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(32,702</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>31,615,992</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,770,029</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,493,480</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>See accompanying notes.</I>
</DIV>



<P align="center" style="font-size: 10pt">F-8
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Blair Corporation and Subsidiaries
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt">Consolidated Statements of Cash Flows
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 0px solid #000000"><B>Years ended December 31</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2003</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Operating activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>31,545,937</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,868,647</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,526,182</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Adjustments to reconcile net income to net cash
provided by (used in) operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7,937,228</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,825,999</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,988,722</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,006,565</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">329,497</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">342,903</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Impairment of assets held for sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>150,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">300,773</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">(Gain) loss on disposal of assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(27,780,579</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">320,905</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Provision for doubtful accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>11,669,552</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,664,048</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,826,636</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Provision for deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9,840,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,673,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">350,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Tax benefit on exercise of non-qualified
stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>660,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">411,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">129,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Compensation expense (net of forfeitures)
for stock awards</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,667,750</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">664,798</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">470,667</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Changes in operating assets and liabilities
providing (using)&nbsp;cash:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Customer accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,776,287</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,545,135</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(36,477,032</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(1,631,364</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(604,779</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(835,375</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>930,419</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,306,405</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,383,533</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Prepaid expenses and other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(698,886</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,234</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(433,304</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Line of Credit &#151; Revolving</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(2,438,947</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(172,972</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(76,124</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Trade accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,306,057</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,297,653</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,676,968</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Advance payments from customers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>19,717</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(431,969</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,673,746</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accrued returns</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(496,000</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,025,151</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,186</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accrued expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,267,856</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,326,843</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,365,447</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Federal and state taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,093,065</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(307,895</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(459,152</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided by (used in) operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>48,824,657</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,342,668</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,390,612</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Investing activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchases of property, plant, and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(8,025,850</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,623,552</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,191,272</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proceeds from sale of assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>166,862,234</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided by (used in) investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>158,836,384</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,623,552</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,191,272</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Financing activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net proceeds/(repayments) from bank borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(15,000,000</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Principal repayments on capital lease obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(89,631</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(356,891</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(350,171</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividends paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(4,066,296</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,722,362</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,640,030</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase of common stock for treasury</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(188,976,494</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercise of non-qualified stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,650,689</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,522,484</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">980,098</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Repayments of notes receivable from stock plans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>289,480</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120,215</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,081</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash used in financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(205,192,252</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,436,554</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,976,022</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of exchange rate changes on cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>70,345</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(102,616</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(37,548</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net increase (decrease)&nbsp;in cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,539,134</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,179,946</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,595,454</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents at beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>50,559,995</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,380,049</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,975,503</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents at end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>53,099,129</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">50,559,995</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">36,380,049</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>See accompanying notes.</I>
</DIV>





<P align="center" style="font-size: 10pt">F-9
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Blair Corporation and Subsidiaries</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>Notes to Consolidated Financial Statements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>1. Significant Accounting Policies</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Organization</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The consolidated financial statements include the accounts of Blair Corporation and its wholly
owned subsidiaries. All significant intercompany accounts are eliminated upon consolidation.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Significant Transactions</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On January&nbsp;25, 2005, the Company decided to phase out its Allegheny Trail wholesale business by
April&nbsp;30, 2005. Certain products were transferred to other existing product lines. The Company&#146;s
intention is to more fully focus new business development efforts on the core Blair brand and its
proven appeal to significant market segments. The decision to focus on core operations is based in
part on the historical success of the Blair brand and an extensive consumer and brand strategy
study undertaken by the Company as part of its efforts to enhance profitability and shareholder
value. The Company has evaluated the impact of phasing out the Allegheny Trail business on all
assets associated with this operation. All appropriate reserves have been recorded. This decision
did not have a negative effect on 2005 profitability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On April&nbsp;26, 2005, the Company, Blair Factoring Company, Blair Credit Services Corporation, and JLB
Service Bank, each a wholly-owned subsidiary of the Company, entered into a Purchase, Sale and
Servicing Transfer Agreement (the &#147;Purchase Agreement&#148;) with World Financial Capital Bank (&#147;World
Financial&#148;), a wholly-owned subsidiary of Alliance Data Systems Corporation (&#147;Alliance&#148;). Pursuant
to the Purchase Agreement, the Company&#146;s credit portfolio was sold at par plus a premium.
Additionally, on April&nbsp;26, 2005, the Company and World Financial entered into an agreement to form
a long-term marketing and servicing alliance under a Private Label Credit Program Agreement (the
&#147;Program Agreement&#148;) having a term of ten (10)&nbsp;years. The agreement has renewal provisions that
require the mutual consent of the Company and World Financial.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On July&nbsp;20, 2005, the Company commenced a tender offer at $42.00 per share, for the purchase of 4.4
million shares of its outstanding common stock, or approximately 53% at an aggregate price of
$184.8&nbsp;million. The total purchase price of the stock of $184.8&nbsp;million, plus related expenses of
$4.2&nbsp;million, was recorded as treasury stock effective August&nbsp;16, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On November&nbsp;4, 2005, the Company closed the sales transaction of its credit portfolio to World
Financial. Gross sale proceeds were $166.2&nbsp;million. The Company used $143&nbsp;million of the proceeds
to repay debt primarily incurred in association with its August&nbsp;2005 tender offer for 4.4&nbsp;million
shares. The Company had reserved $750,000 to provide for any adjustments, which may occur under the
purchase price adjustments provisions of the Purchase Agreement. Subsequent to December&nbsp;31, 2005,
the Company received final settlement for purchase price adjustments totaling $2.1&nbsp;million. The
difference between the $750,000 estimated reserve and actual adjustment of $2.1&nbsp;million was
recorded as an additional reduction to the gain. The final accounting treatment for this
transaction resulted in a gain on the sale of $27.7&nbsp;million. The gain on the sale included the
reversal of the allowance for doubtful accounts of $23.2&nbsp;million. The gain was reduced by legal,
professional and severance costs associated with closing the transaction. The total of these costs
was $2.8&nbsp;million.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Revenue Recognition</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Sales (cash, Blair credit, or third-party credit card) are recorded when the merchandise is shipped
to the customer, in accordance with the provisions of Staff Accounting Bulletin No.&nbsp;101, <I>Revenue
Recognition in Financial Statements </I>and Staff Accounting Bulletin No.&nbsp;104, <I>Revenue Recognition, </I>as
issued by the Securities &#038; Exchange Commission. Prior to the sale of the Company&#146;s credit portfolio
in November&nbsp;2005, Blair credit sales were made under Easy Payment Plan sales arrangements. Monthly,
a provision for potentially doubtful accounts was historically charged against income based on
management&#146;s estimate of realization. Any recoveries of bad debts previously written-off were
credited back against the allowance for doubtful accounts in the period received. As reported in
the balance sheet, the carrying amount, net of allowances for doubtful accounts and returns, for
customer accounts receivable on Blair credit sales approximates fair value. Subsequent to the sale
of the Company&#146;s credit portfolio in November&nbsp;2005, the financial statements no longer realize
provisions for doubtful accounts.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Shipping and processing revenue is included in net sales.
</DIV>


<P align="center" style="font-size: 10pt">F-10
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Blair Corporation and Subsidiaries</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>Notes
to Consolidated Financial Statements &#151; (Continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Revenue
Recognition &#151; Continued</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Finance charges on time payment accounts were historically recognized as other revenue on an
accrual basis of accounting. The decrease in finance charges compared to the prior year is
primarily the result of lower accounts receivable balances and less than a full year&#146;s finance
charge revenues. Subsequent to the sale of the Company&#146;s credit portfolio in November&nbsp;2005, the
financial statements no longer realize finance charges on time payment accounts. Accounts
receivable from employees were $610,000 and $691,000 at December&nbsp;31, 2005 and 2004.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Costs and Expenses</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company includes the following costs in the line items listed below in its Consolidated
Statements of Income:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Cost of Goods Sold</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cost of goods sold consists of merchandise costs, including sourcing, importing and inbound freight
costs. In addition, cost of goods sold includes writedowns, shipping cartons, shipping supplies
and merchandise samples.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company records internally incurred shipping and handling costs in cost of sales.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>General and Administrative Expenses</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Occupancy and warehousing costs consist of compensation, employee benefit expenses and related
building costs. Examples of building costs include depreciation, repairs and maintenance,
utilities, rent, real estate taxes and maintenance contracts. Occupancy and warehousing costs
incurred in support of the Company&#146;s order fulfillment process were $38,376,779, $37,345,543 and
$40,845,998 for the years ended December&nbsp;31, 2005, 2004 and 2003 respectively. The Company does
not separately track purchasing and related costs which are also included in general and
administrative expenses. In addition, the general and administrative costs incurred to support the
Company&#146;s product development; circulation planning and customer file maintenance efforts are also
included in general and administrative expenses.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Interest (Income) Expense, Net</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Interest (income)&nbsp;expense, net, consists of the following:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 0px solid #000000"><B>Years ended December 31</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2003</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>1,909,979</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">370,474</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">351,120</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(1,341,513</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(493,231</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(430,733</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest (income)&nbsp;expense, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>568,466</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(122,757</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(79,613</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Interest expense primarily reflects the impact of $85&nbsp;million of borrowings under the receivables
securitization and $58&nbsp;million of borrowings under the revolving credit facility. These borrowings
were primarily used to finance the tender offer as described in Note 5 &#150; STOCKHOLDERS&#146; EQUITY.
Interest income results from the Company&#146;s investment of surplus cash into money market securities.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Use of Estimates</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The preparation of financial statements in conformity with U.S. generally accepted accounting
principles requires management to make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual results could differ from those
estimates.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cash and Cash Equivalents</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cash and cash equivalents consist of available cash and money market securities with a maturity of
three months or less when purchased. Amounts reported in the Consolidated Balance Sheets
approximate fair values.
</DIV>


<P align="center" style="font-size: 10pt">F-11
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Blair Corporation and Subsidiaries</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>Notes
to Consolidated Financial Statements &#151; (Continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Returns</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A provision for anticipated returns is recorded monthly as a percentage of gross sales based upon
historical experience. This provision is charged directly against gross sales to arrive at net
sales as reported in the Consolidated Statements of Income. Actual returns are charged against the
allowance for returns, which is recorded as a current liability in the balance sheet. The provision
for returns charged against income in 2005, 2004 and 2003 amounted to $61,402,712, $71,666,391 and
$87,238,648, respectively. Management believes these provisions are adequate based upon the
relevant information presently available. However, changes in facts or circumstances could result
in additional adjustment to the Company&#146;s provisions.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Doubtful Accounts</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Prior to the sale of the Company&#146;s credit portfolio in November&nbsp;2005, a provision for doubtful
accounts was recorded monthly as a percentage of gross credit sales based upon experience of
delinquencies (accounts over 30&nbsp;days past due) and charge-offs (accounts removed from accounts
receivable for non-payment) and current credit market conditions. Subsequent to the sale of the
Company&#146;s credit portfolio, the financial statements no longer realize provisions for doubtful
accounts.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Inventories</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Inventories are valued at the lower of cost or market. Cost of merchandise inventories is
determined principally on the last-in, first-out (LIFO)&nbsp;method. If the FIFO method had been used,
merchandise inventories would have increased by approximately $1,160,000 and $3,776,000 at December
31, 2005 and 2004, respectively. Cost of advertising and shipping supplies is determined on the
first-in, first-out (FIFO)&nbsp;method. Advertising and shipping supplies include printed advertising
material and related mailing supplies for promotional mailings, which are generally scheduled to
occur within two months. Direct response publications and related materials inventory were
$9,782,000 and $14,208,000 at December&nbsp;31, 2005 and 2004. These direct response advertising costs
are then expensed over the period of expected future benefit, based on buying patterns, generally
nine weeks or less and amounted to $63,211,000, $69,975,000 and $79,045,000 for the years ended
December&nbsp;31, 2005, 2004 and 2003. The Company has a reserve for slow moving and obsolete inventory
amounting to $1,500,000 and $3,600,000 at December&nbsp;31, 2005 and 2004, respectively. A monthly
provision for obsolete inventory is added to the reserve and expensed to cost of goods sold, based
on the levels of merchandise inventory and merchandise purchases. The Company&#146;s decisions to
discontinue its Crossing Pointe catalog title in 2005 and to phase out the Allegheny Trail
wholesale business by April&nbsp;30, 2005 resulted in writedowns of approximately $1.9&nbsp;million. These
writedowns were provided for in the December&nbsp;31, 2004 inventory obsolescence reserve. In addition,
the Company focused on reducing liquidation costs in 2005. The combination of enhanced internet
clearance activity and improved merchandise purchasing strategies resulted in less liquidation
inventory on hand and greater recovery rates as a percent of cost for that inventory which did
require liquidation. Due to the nonrecurring nature of the Crossing Pointe and Allegheny Trail
writedowns and improved recovery rates on liquidated merchandise, the obsolescence reserve at
December&nbsp;31, 2005 is lower than the reserve at December&nbsp;31, 2004 on comparable inventory levels.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Property, Plant and Equipment</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Property, plant and equipment are stated on the basis of cost. Depreciation has been provided
principally by the straight-line method using rates, which are estimated to be sufficient to
depreciate the cost of the assets over their period of usefulness. Amortization of assets recorded
under capital lease obligations is included with depreciation expense. Estimated useful lives of
buildings and leasehold improvements range from 15 to 39&nbsp;years. Estimated useful lives of
equipment range from 3 to 7&nbsp;years. Maintenance and repairs are charged to expense as incurred.
Computer software development costs are accounted for under AICPA Statement of Position 98-1 and
were $6.2&nbsp;million at December&nbsp;31, 2005.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Trademark</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Trademark, net of accumulated amortization of $739,971 at December&nbsp;31, 2005 and $667,728 at
December&nbsp;31, 2004, are stated on the basis of cost. The Company has one trademark which is being
amortized by the straight-line method for a period of 15&nbsp;years. Amortization expense amounted to
$72,243 in 2005, 2004 and 2003, respectively.
</DIV>


<P align="center" style="font-size: 10pt">F-12
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Blair Corporation and Subsidiaries</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>Notes
to Consolidated Financial Statements &#151; (Continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Asset Impairment</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company analyzes its long-lived and intangible assets for events and circumstances that might
indicate that the assets may be impaired and the undiscounted net cash flows estimated to be
generated by those assets are less than their carrying amounts. During 2005, the Company recorded
writedowns of $150,000 related to two idle facilities based on appraised values.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Employee Benefits</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s employee benefits include a profit sharing and retirement feature available to all
eligible employees. Contributions are dependent on net income of the Company and recognized on an
accrual basis of accounting. The contributions to the plan charged against income in 2005, 2004 and
2003 amounted to $2,363,969, $1,525,408, and $1,436,117, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As part of the same benefit plan, the Company has a contributory savings feature whereby all
eligible employees may contribute up to 25% of their annual base salaries. The Company&#146;s matching
contribution to the plan is based upon a percentage formula as set forth in the plan agreement. The
Company&#146;s matching contributions to the plan charged against income in 2005, 2004 and 2003 amounted
to $2,001,224, $1,826,706, and $2,033,288, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Annually, the Compensation Committee of the Board of Directors approves an incentive award
schedule. Payout of the award is based on the Company achieving a threshold income before income
taxes level. In accordance with the provisions of the incentive award plan, the Board of Directors
has the discretion to adjust income before income taxes for unusual and/or non-recurring items
under a Plan amendment made in 2005. In 2005, income and expenses associated with the sale of the
Company&#146;s credit portfolio and the tender offer have not been included in calculating the Company&#146;s
income before taxes. Incentive awards charged against income in 2005, 2004 and 2003 amounted to
$3.8&nbsp;million, $2.4&nbsp;million and $2.4&nbsp;million, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2005, 2004 and 2003, under the provisions of certain stock awards granted to executive officers
and other associates, shares vest at the rate of 20% per year over the five-year vesting period.
The Company records equity and expense during the vesting periods of the awards based on the number
of eligible shares and the market value of the shares on the grant date. Upon vesting, shares are
issued out of treasury stock. The Company recorded expense of $1,313,632, $489,232 and $21,344 in
2005, 2004 and 2003, respectively. When the awards vest, the Company also pays a cash bonus to the
recipient to assist in the income tax obligation related to the awards. Total compensation expense
recognized in income was $2,434,392, $977,967 and $35,357 in 2005, 2004 and 2003, respectively.
The increase in compensation expense was due to the immediate vesting of stock awards for certain
executive officers who separated from the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As part of the Company&#146;s long term incentive program, executive officers are awarded performance
share opportunities based on the achievement of incentive goals over a three year period. Each
year a new three year plan and targeted performance levels are adopted. The Compensation Committee
will determine whether the officers receive shares, cash or a combination thereof based on the
initial award value. The award is a fixed dollar value award based on the annual award date. The
actual performance shares to be issued will be based on the market price of the stock at the date
of issuance (at the end of the three year plan). Total compensation expense recognized in income
was $823,397, $-0- and $-0- in 2005, 2004 and 2003, respectively.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Financial Instruments</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The carrying amounts of cash, customer accounts receivable, accounts payable and accrued
liabilities approximate fair value due to the short-term maturities of these assets and
liabilities. The interest rates on the Company&#146;s securitized and
revolving credit facilities are adjusted regularly to reflect current market rates. Accordingly,
the carrying amounts of the Company&#146;s borrowings also approximate fair value.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>New Accounting Pronouncements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On December&nbsp;16, 2004, the Financial Accounting Standards Board (FASB)&nbsp;issued Statement of Financial
Accounting Standards (SFAS)&nbsp;No.&nbsp;123 (revised 2004), <I>Share-Based Payment, </I>which is a revision of
SFAS No.&nbsp;123, <I>Accounting for Stock-Based Compensation. </I>SFAS No.&nbsp;123(R) supersedes Accounting
Principles Board (APB)&nbsp;Opinion No.&nbsp;25, <I>Accounting for Stock Issued to Employees, </I>and amends SFAS
No.&nbsp;95, <I>Statement of Cash Flows. </I>Generally, the approach in SFAS No.
</DIV>



<P align="center" style="font-size: 10pt">F-13
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Blair Corporation and Subsidiaries</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>Notes
to Consolidated Financial Statements &#151; (Continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>New
Accounting Pronouncements &#151; Continued</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">123(R) is similar to the approach described in SFAS No.&nbsp;123. However, SFAS No.&nbsp;123(R) requires all
share-based payments to employees, including grants of employee stock options, to be recognized in
the income statement based on fair values. Pro forma disclosure is no longer an alternative. SFAS
No.&nbsp;123(R) must be adopted no later than January&nbsp;1, 2006. The Company plans to adopt SFAS No.
123(R) on July&nbsp;1, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As permitted by SFAS No.&nbsp;123, the Company currently accounts for share-based payments to employees
using Opinion 25&#146;s intrinsic value method and, as such, generally recognizes no compensation cost
for employee stock options. Accordingly, the adoption of SFAS No.&nbsp;123(R)&#146;s fair value method will
have a significant impact on our results of operations, although it will have no impact on our
overall financial position. The impact of adoption of SFAS No.&nbsp;123(R) cannot be predicted at this
time because it will depend on levels of share-based payments, including stock options, granted in
the future. However, had we adopted SFAS No.&nbsp;123(R) in prior periods, the impact of that standard
would have approximated the impact of SFAS No.&nbsp;123 as described in the disclosure of pro forma net
income and earnings per share in Note 1 to our consolidated financial statements. Upon adoption of
SFAS No.&nbsp;123(R) in 2006, the Company will recognize expenses of approximately $100,000 related to
the unvested stock options at December&nbsp;31, 2005. SFAS No.&nbsp;123(R) also requires the benefits of tax
deductions in excess of recognized compensation cost to be reported as a financing cash flow,
rather than as an operating cash flow as required under current literature. This requirement will
reduce net operating cash flows and increase net financing cash flows in periods after adoption.
While the company cannot estimate what those amounts will be in the future (because they depend on,
among other things, when employees exercise stock options), the amount of operating cash flows
recognized in prior periods for such excess tax deductions were $660,000, $411,000 and $129,000 in
2005, 2004 and 2003, respectively.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Stock Compensation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In accordance with the provisions of SFAS No.&nbsp;123 the Company has elected to continue applying the
provisions of Accounting Principles Board Opinion No.&nbsp;25 and related interpretations in accounting
for its stock-based compensation plans. Accordingly, the Company does not recognize compensation
expense for stock options when the stock option price at the grant date is equal to or greater than
the fair market value of the stock at that date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Stock activity in 2005, 2004 and 2003 generally includes transactions pertaining to stock awarded
to non-employee directors as well as stock awarded and forfeited via the Company&#146;s Omnibus Stock
and Employee Stock Purchase Plans. Activity is accounted for by comparing the market value of the
awards, as required by the Plans, to the cost of the treasury shares used for these transactions.
The difference is booked to additional paid-in capital. The following illustrates the pro forma
effect on net income and earnings per share if the Company had applied the fair value recognition
provisions of SFAS No.&nbsp;123 for the years ended December&nbsp;31:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Pro Forma</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2003</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>31,545,937</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,868,647</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,526,182</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Add: Total stock-based employee compensation expense
recorded for all awards, net of related tax effects</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,057,325</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">532,104</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">313,138</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deduct: Total stock-based employee compensation expense
determined under fair value method for all awards, net of
related tax effects</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(1,488,999</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,243,583</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,057,347</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pro forma net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>31,114,263</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,157,168</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13,781,973</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Earnings per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic &#151; as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>4.79</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.82</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic &#151; pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>4.73</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.73</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted &#151; as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>4.71</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.81</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted &#151; pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>4.65</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.74</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.72</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">F-14
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Blair Corporation and Subsidiaries</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>Notes
to Consolidated Financial Statements &#151; (Continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Stock
Compensation &#151; Continued</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Pro forma information regarding net income and earnings per share is required by SFAS No.&nbsp;123, and
has been determined as if the Company had accounted for its stock options under the fair value
method of SFAS No.&nbsp;123. The fair value for these options was estimated at the date of grant using
a Black-Scholes option pricing model with the following weighted-average assumptions:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Risk-free interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3.49</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividend yields</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2.54</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Volatility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.540</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted-average expected life</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">7 years</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Per share fair value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10.63</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Reclassifications</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Certain amounts in the prior year financial statements have been reclassified to conform with the
current year presentation.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Contingencies</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company is involved in certain items of litigation, arising in the normal course of business.
While it cannot be predicted with certainty, management believes that the outcome will not have a
material effect on the Company&#146;s financial condition or results of operations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>2. Financing Arrangements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company has access to a $75&nbsp;million credit facility pursuant to the terms of an amended and
restated credit agreement dated as of July&nbsp;15, 2005 by, between and amongst the Company, and PNC
Capital Markets, Inc. as lead arranger and PNC Bank, N.A. and three other lending institutions. The
amended and restated credit agreement provides a senior secured first lien revolving credit
facility not to exceed $75&nbsp;million, which matures in July&nbsp;2010. Upon the occurrence of an Event of
Default (as such term is defined in the amended and restated credit agreement), PNC and/or the
other lending institutions may declare a default of the credit agreement and accelerate the loan
pursuant to the terms of the credit agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The collateral for the amended and restated credit agreement&#146;s revolving credit facility consists
of all of the Company&#146;s and its subsidiaries assets, including, but not limited to, inventory,
equipment, furniture, general intangibles, intellectual property, fixtures, certain real property
and improvements, the common stock of Blair&#146;s domestic subsidiaries, as well as a negative and
double negative pledge on the assets of the Company&#146;s direct and indirect foreign subsidiaries. At
the Company&#146;s option, any loan under the revolving credit facility shall bear interest at the
Euro-Rate (calculated with reference to a LIBOR-based formula in accordance with the amended and
restated credit agreement) or a Base Rate (as that term is defined in the amended and restated
credit agreement), plus a margin, such margin to be calculated in accordance with a performance
based pricing grid. The Company is also required to pay a commitment fee and reasonable
out-of-pocket expenses pursuant to the amended and restated credit agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At December&nbsp;31, 2005, the Company had no borrowings outstanding under the credit facility. The
Company had letters of credit totaling $19.6&nbsp;million outstanding, which reduces the amount of
borrowings available under the amended and restated credit agreement. Outstanding letters of
credit totaled $16.1&nbsp;million at December&nbsp;31, 2004. Letters of credit are comprised mainly of two
categories. One such category is comprised of commercial letters of credit used for the purpose of
purchasing goods from non-U.S. suppliers. The other category is comprised of performance guarantees
for a consolidated subsidiary and insurance bonding purposes. All letters of credit have a term of
one year or less.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Interest paid during 2005, 2004 and 2003 was approximately $1,903,000, $339,000 and $282,000,
respectively. The higher level of interest in 2005 is primarily due to higher outstanding
borrowings during the third quarter as the company partially financed its August&nbsp;2005 stock tender
offer with debt. The debt was repaid with the proceeds from the sale of the Company&#146;s credit
portfolio in November&nbsp;2005.
</DIV>


<P align="center" style="font-size: 10pt">F-15
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Blair Corporation and Subsidiaries</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>Notes
to Consolidated Financial Statements &#151; (Continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>3. Accrued Expenses</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Accrued expenses consist of:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000"><B>December 31</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Employee compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>14,382,520</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,904,200</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Contribution to profit sharing and retirement plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,362,411</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,525,158</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Health insurance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,095,091</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">809,297</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Voluntary Separation Program</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>127,537</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">494,790</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Taxes, other than taxes on income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>687,233</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">325,335</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other accrued items</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,339,955</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,347,851</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>20,994,747</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,406,631</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>4. Leases</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Capital Leases</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company leases certain data processing equipment under agreements that expire in various years
through 2008. The following is a schedule by year of future minimum capital lease payments required
under capital leases that have initial or remaining noncancelable lease terms in excess of one year
as of December&nbsp;31, 2005:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">21,567</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,351</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,343</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,261</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less amount representing interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,368</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Present value of minimum lease payments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,893</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,198</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term portion of capital lease obligation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,695</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company entered into capital lease obligations amounting to $27,843 and $29,224 in 2005 and
2004, respectively. Capital leases are amortized over the life of the underlying leases, generally
3 to 5&nbsp;years, and the related expense is included with depreciation expense. Amortization expense
was $57,263, $278,906 and $274,522 for the years ended December&nbsp;31, 2005, 2004 and 2003.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Operating Leases</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company leases certain data processing, office and telephone equipment under agreements that
expire in various years through 2010. The Company has also entered into several lease agreements
for buildings, expiring in various years through 2012. Rent expense for the Company for 2005, 2004
and 2003 was $3,522,071, $3,474,281 and $4,099,730, respectively. The following is a schedule by
years of future minimum rental payments required under operating leases that have initial or
remaining noncancelable lease terms in excess of one year as of December&nbsp;31, 2005:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,134,552</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,273,898</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,507,975</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,127,327</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,028,874</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">566,275</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,638,901</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-16
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Blair Corporation and Subsidiaries</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>Notes
to Consolidated Financial Statements &#151; (Continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>5. Stockholders&#146; Equity</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Earnings Per Share and Weighted Average Shares Outstanding</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On July&nbsp;20, 2005, the Company commenced a tender offer at $42.00 per share, for the purchase of
4.4&nbsp;million shares of its outstanding common stock, or approximately 53% at an aggregate price of
$184.8&nbsp;million. The tender offer expired on August&nbsp;16, 2005. The total cost of $184.8&nbsp;million,
plus related expenses of $4.2&nbsp;million, were recorded as treasury stock effective August&nbsp;16, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following per share results for the year ending December&nbsp;31, 2005 reflect the reduction of
weighted average shares outstanding during the third and fourth quarters resulting from the tender
offer. In part, the Company financed the tender offer with cash on hand supplemented by borrowings
under its credit facilities. See Note 2 &#150; Financing Arrangements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table sets forth the computations of basic and diluted earnings per share as required
by Statement of Financial Accounting Standards No.&nbsp;128:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 0px solid #000000"><B>Years ended December 31</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2003</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Numerator:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>31,545,937</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,868,647</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,526,182</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Denominator:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Weighted average shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,632,162</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,172,711</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,058,039</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Contingently
issueable shares &#151;
Omnibus Stock Purchase Plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(52,286</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(65,136</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(74,861</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Denominator for basic earnings per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,579,876</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,107,575</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,983,178</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Effect of dilutive securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Employee stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>119,530</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">133,940</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,426</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Denominator for diluted earnings per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,699,406</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,241,515</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,017,604</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic earnings per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>4.79</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.82</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted earnings per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>4.71</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.81</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Dividends</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2005, the Company declared dividends of $.75 per share or $4,246,109, of which $4,066,297 was
paid directly to shareholders and charged to retained earnings. In 2004 and 2003, the Company
declared dividends of $.60 per share or $4,904,606 and $4,835,912, of which $4,722,362 and
$4,640,030 was paid directly to shareholders and charged to retained earnings. The remaining
dividends declared, $179,812 in 2005, $182,244 in 2004 and $195,882 in 2003 were associated with
the shares of stock held by the Company according to the provisions of the restricted stock awards.
These remaining dividends were applied against the receivable from stock plans and were charged to
compensation in the financial statements.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Restricted Stock Awards</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During 2000, the Company adopted, with stockholder approval, an Omnibus Stock Plan (Omnibus Plan)
that provided for 750,000 shares of the Company&#146;s treasury stock to be reserved for sale and
issuance to employees at a price to be established by the Omnibus Stock Plan Committee. In April
2003, the Company reserved, with stockholder approval, 400,000 additional shares. At December&nbsp;31,
2005, 2004 and 2003, 530,278, 562,914 and 599,852 shares were available to be issued under the
Plan, respectively. The difference between the purchase price and the market price of the shares
awarded is recorded as compensation, which amounted to $-0- in 2005, 2004 and 2003, respectively.
Under the Omnibus Plan, no awards were granted in 2005 or 2004 and awards for 13,350 shares were
granted on one date in 2003. Approximately one third of the award amount is set up as a
receivable (which is netted against shareholders&#146; equity) and is paid off with the application of
dividends on such stock or by cash payment from the employee after seven years from the date of the
award. The related receivable was $703,931 and $1,234,067 as of December&nbsp;31, 2005 and 2004. In
2005, 2004
</DIV>


<P align="center" style="font-size: 10pt">F-17
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Blair Corporation and Subsidiaries</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>Notes
to Consolidated Financial Statements &#151; (Continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Restricted
Stock Awards &#151; Continued</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">and 2003, under the provisions of certain awards granted, compensation of $-0-, $-0- and $192,907,
net of forfeitures, respectively, was recorded as deferred expense and will be amortized over the
vesting period of seven years. Amortization expense was $133,210, $147,145 and $153,085 in 2005,
2004 and 2003, respectively. Total compensation expense for the application of dividends to
receivable and amortization of deferred compensation from restricted stock awards recognized for
2005, 2004 and 2003 was $313,022, $329,389 and $348,967, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A summary of the restricted stock activity under the Omnibus Plan is as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="5" style="border-bottom: 0px solid #000000"><B>Years ended December 31</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>2003</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shares granted and issued</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">13,350</TD>
</TR>
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Grant and issue price per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$7.00</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Market value per share at date of issue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$21.45</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted
average
market price
per share at
date of issue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$21.45</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shares
canceled and
forfeited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>8,450</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">10,100</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">1,200</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Original price per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" nowrap><B>$6.50 - $8.00</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" nowrap>$6.50 - $8.00</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" nowrap>$8.00 - $10.50</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Weighted average price per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>$7.64</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$7.21</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$7.63</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Five Year Vesting Stock Awards</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2005, 2004 and 2003, under the provisions of certain awards granted to executive officers and
other associates, shares vest at the rate of 20% per year over the five-year vesting period. The
Company records equity and expense during the vesting periods of the awards based on the number of
eligible shares and the market value of the shares on the grant date.
Upon vesting, shares are issued out of treasury stock. The Company recorded expense of $1,313,632,
$489,232 and $21,344 in 2005, 2004 and 2003, respectively. When the awards vest, the Company also
pays a cash bonus to the recipient to assist in the income tax obligation related to the awards.
Total compensation expense recognized in income was $2,434,392, $977,967 and $35,357 in 2005, 2004
and 2003, respectively. The increase in compensation expense was due to the immediate vesting of
stock awards for certain executive officers who separated from the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A summary of the five-year vesting award stock activity under the Omnibus Plan is as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="35%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="27%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="5" style="border-bottom: 0px solid #000000"><B>Years ended December 31</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>2003</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shares granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>18,575, 5,000,15,350, 5,000</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">27,275, 15,000 and</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">10,650 and 4,848</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>and 7,821</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">13,925</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Market value per share at date of issue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>$36.50, $30.35, $39.79, $39.79</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$24.20, $26.74 and</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$21.44 and $24.58</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>and $39.79</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$36.50</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average market value
per share at date of issue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>$37.70</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$27.93</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$22.42</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shares canceled and forfeited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>4,660</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">1,525</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&#151;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Original price per share of cancelled</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>$21.44, $24.58, $24.20,</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>$36.50</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$21.44, $24.20</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&#151;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Weighted average price per share of
cancelled shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>$28.12</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$23.29</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&#151;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-18
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Blair Corporation and Subsidiaries</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>Notes
to Consolidated Financial Statements &#151; (Continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Non-Qualified Stock Options</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Under the Omnibus Plan, the Company also may provide non-qualified stock options. The price of
option shares granted under the Omnibus Plan shall not be less than the fair market value of common
stock on the date of grant, and the term of the stock option shall not exceed ten years from date
of grant. Options vest over a three-year period. The Company did not issue options in 2005 or 2004
and 170,427 were granted in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A summary of the stock options activity in the Company&#146;s Omnibus Plan is as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Weighted</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Average</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Options</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Exercise Price</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding at January&nbsp;1, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">240,712</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">18.59</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Granted in 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">170,427</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23.60</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercised in 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(54,146</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18.10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forfeited in 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding at December&nbsp;31, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">356,993</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21.05</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Granted in 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercised in 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(128,547</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.62</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forfeited in 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,637</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22.19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding at December&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">220,809</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21.85</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Granted in 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercised in 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(103,201</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>21.55</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forfeited in 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(6,000</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>23.60</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding at December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>111,608</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>22.02</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The exercise price of options outstanding ranged from $17.10 to $23.60, with a weighted-average
remaining contractual life of 6.90&nbsp;years at December&nbsp;31, 2005. The Company does not presently
recognize compensation expense on the income statement for any of its stock options; however, upon
adoption of SFAS No.&nbsp;123(R) in 2006, compensation expense will be recorded.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Weighted</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Average</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Exercisable at the end of the year:</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Options</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Exercise Price</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">December&nbsp;31, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,614</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">18.19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">December&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,041</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">20.58</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>December&nbsp;31, 2005</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>72,167</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>21.16</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Long Term Compensation Program</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As part of the Company&#146;s long-term incentive program, executive officers are awarded performance
share opportunities based on the achievement of incentive goals over a three-year period. Each
year a new three-year plan and targeted performance levels are adopted. The Compensation Committee
will determine whether the officers receive shares, cash or combination thereof based on the
initial award value. The award is a fixed dollar value award based on the annual award date. The
actual performance shares to be issued will be based on the market price of the stock at the date
of issuance (at the end of the three-year plan). Total compensation expense amounted to $823,397
in 2005 and is based on the projected achievement of predetermined target levels, which is
recognized ratably over the three year period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Certain awards are subject to acceleration of vesting upon retirement and are expensed accordingly
upon retirement. Upon the adoption of SFAS No.&nbsp;123(R), the Company will comply with the related
requirements; however, the amounts are not expected to be materially different.
</DIV>


<P align="center" style="font-size: 10pt">F-19
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Blair Corporation and Subsidiaries</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>Notes
to Consolidated Financial Statements &#151; (Continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>6. Income Taxes</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The liability method is used in accounting for income taxes. Under this method, deferred tax
assets and liabilities are determined based on the difference between the financial statement and
tax basis of assets and liabilities using the enacted tax rate(s) expected to apply to taxable
income in the periods in which the deferred tax liability or asset is expected to be settled or
realized.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company accounts for the tax benefit from the exercise of non-qualified stock options by
reducing its accrued income tax liability and increasing additional paid-in capital. This will
change with the adoption of SFAS No.&nbsp;123 (R)&nbsp;in 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The components of income tax expense are as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 0px solid #000000"><B>Years ended December 31</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2003</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Currently payable:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Federal</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>7,255,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,914,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,045,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Foreign</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>102,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">280,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">State</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>386,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">835,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">962,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7,743,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,825,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,287,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9,840,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,673,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">350,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>17,583,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,498,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,637,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The differences between total tax expense and the amount computed by applying the statutory Federal
income tax rate of 35% to income before income taxes are as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 0px solid #000000"><B>Years ended December 31</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2003</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Statutory rate applied to pretax income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>17,195,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,178,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,107,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">State income taxes, net of Federal benefit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(1,000</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">842,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">825,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other items</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>389,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(522,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(295,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>17,583,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,498,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,637,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company has approximately $3.5&nbsp;million of a Pennsylvania net operating loss carryforward that
can be used to offset future Pennsylvania taxable income. A deferred tax asset has been established
based on the $3.5&nbsp;million net operating loss available to be carried forward. The deferred tax
asset is offset by a valuation allowance because it is uncertain as to whether the Company will
generate sufficient income in the state of Pennsylvania in the future to absorb the net operating
losses before they expire in 2011.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Income taxes paid during 2005, 2004 and 2003 amounted to $3,956,175, $6,703,349 and $8,807,997,
respectively.
</DIV>


<P align="center" style="font-size: 10pt">F-20
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Blair Corporation and Subsidiaries</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>Notes
to Consolidated Financial Statements &#151; (Continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>6.
Income Taxes &#151; Continued</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Components of the deferred tax assets and liabilities under the liability method are as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000"><B>December 31</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Current deferred tax assets:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Doubtful accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>9,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11,737,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Returns allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,334,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,922,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Inventory obsolescence</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>573,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,374,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">State net operating loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>110,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Vacation pay</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,411,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,466,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Group insurance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>543,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">431,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued severance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,129,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other items</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>894,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">946,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>Gross current deferred tax assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,003,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,948,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">State valuation allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(110,000</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(121,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,893,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,827,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Current deferred tax liabilities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Advertising costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>4,462,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,152,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Inventory costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>445,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">776,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other items</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>255,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">242,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>Gross current deferred tax liabilities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>5,162,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,170,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net current deferred tax asset</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>731,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10,657,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>Long-term deferred tax liability:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Property, plant, and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>2,582,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,668,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>7. Other Revenue</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Other revenue consists of:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 0px solid #000000"><B>Years ended December 31</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2003</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Finance charges on time payment accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>31,550,011</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">40,165,327</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">36,163,981</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commissions earned</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,247,686</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,732,026</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,493,579</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other items</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,274,960</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,817,559</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,905,907</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>36,072,657</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">44,714,912</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">41,563,467</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The decrease in finance charges in 2005 compared to 2004 primarily resulted from reduced finance
charge revenues associated with lower credit sales and less than a full year&#146;s finance charge
revenue on time payment accounts. Subsequent to the sale of the credit portfolio in November&nbsp;2005,
the Company no longer realizes finance charges on time payment accounts. As part of the marketing
and servicing alliance under the 10&nbsp;year Program Agreement, the Company will receive certain
monetary benefits arising from future credit sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Commissions earned result from an arrangement under which a third party sells jewelry to the
Company&#146;s customers and all related significant activities are conducted by, and are the
responsibility of, the third party. The Company receives payments from the customer and makes
remittances, net of commissions, to the third party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Other items are comprised of items such as customer list rentals, dishonored check service charges
and package insert income.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>8. Business Segment and Concentration of Business Risk</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company operates as one segment in the business of selling women&#146;s and men&#146;s fashion wearing
apparel and accessories and home furnishing items. Specifically, the segment includes the
Womenswear, Menswear, Home, Crossing Pointe, Stores and Allegheny Trail product lines. The Stores
product line was added in the first quarter of 2004 reflecting a
</DIV>



<P align="center" style="font-size: 10pt">F-21
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Blair Corporation and Subsidiaries</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>Notes
to Consolidated Financial Statements &#151; (Continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>8.
Business Segment and Concentration of Business Risk &#151; Continued</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">reclassification within the segment from the other product lines to this product line. As
previously announced on May&nbsp;3, 2004, the Company formally discontinued circulation of its Crossing
Pointe catalog title as of March&nbsp;31, 2005. The Company&#146;s intention is to more fully focus new
business development efforts on the core Blair brand and its proven appeal to significant market
segments. The decision to focus on core operations is based in part on the historical success of
the Blair brand and an extensive consumer and brand strategy study undertaken by the Company in
2004 as part of its efforts to enhance profitability and shareholder value. The Company has
evaluated the impact of discontinuing circulation of the Crossing Pointe catalog title on all
assets associated with this operation. All appropriate reserves have been recorded. This decision
did not have a negative effect on 2004 profitability, and moderately benefited 2005 performance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On January&nbsp;25, 2005, the Company decided to phase out its Allegheny Trail wholesale business. This
process was substantially completed by April&nbsp;30, 2005. This decision is consistent with the
Company&#146;s intention to more fully focus new business development efforts on the core Blair brand
and its proven appeal to significant market segments. The Company has evaluated the impact of
phasing out the Allegheny Trail business on all assets associated with this operation. All
appropriate reserves have been recorded. This decision did not have a significant negative effect
on 2005 profitability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s segment reporting is consistent with the presentation made to the Company&#146;s chief
operating decision-maker. The Company&#146;s customer base is comprised of individuals throughout the
United States and is diverse in both geographic and demographic terms. Advertising is done mainly
by means of catalogs, direct mail letters and the internet, which offer the Company&#146;s merchandise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table illustrates the percent of net sales that each product line represents.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">12/31/05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Percent</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">12/31/04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Percent</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">12/31/03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Percent</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Net Sales</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Of Total</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Net Sales</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Of Total</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Net Sales</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Of Total</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Product Line</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(in Millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Net Sales</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(in Millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Net Sales</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(in Millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Net Sales</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Womenswear</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">293.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">64.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">310.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">62.6</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">365.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">62.9</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Menswear</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">19.8</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">96.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">19.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">17.3</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Home</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">14.8</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">13.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">11.8</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Crossing Pointe</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">4.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">6.8</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stores</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.6</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.6</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1.1</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Allegheny Trail</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">456.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">496.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">581.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>9. Long-Lived Assets Previously Classified as Held for Sale</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In January&nbsp;2003, the Company made the decision to close its liquidation outlet store located in
Erie, Pennsylvania. This closure was effective at the close of business on March&nbsp;28, 2003. While
the Company continues to hold the assets for sale, the sales process has taken longer than
anticipated and the assets are no longer being classified as Held for Sale in accordance with SFAS
No.&nbsp;144. An independent appraisal was performed on this property during the fourth quarter of
2005. The results of the appraisal support the $1.3&nbsp;million carrying value of the asset, which was
previously adjusted by $300,773 representing an impairment charge taken in 2003 to reduce the value
of the asset to its fair value less costs to sell. The $300,773 impairment charge was included in
other expense, net in the 2003 Consolidated Statement of Income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the first quarter of 2004, the Company announced the closing of its Outlet Store located in
Warren, Pennsylvania. An independent appraisal was performed on this property during the fourth
quarter of 2005. The results of the appraisal warranted a $150,000 impairment charge, which was
recorded in the fourth quarter of 2005 to reduce the value of the asset
to its fair value less costs to sell. The $150,000 impairment charge was included in other expense,
net in the 2005 Consolidated Statement of Income.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>10. Separation Programs</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2005, the Company accrued and charged to expense $933,000 in separation costs. The costs were
charged against the gain on the sale of the credit portfolio in the income statement. The $933,000
charge represents severance pay and related
</DIV>


<P align="center" style="font-size: 10pt">F-22
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Blair Corporation and Subsidiaries</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>Notes
to Consolidated Financial Statements &#151; (Continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>10.
Separation Programs &#151; Continued</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">payroll taxes for personnel whose services were no longer required after the sale of the credit
portfolio. The total liability was $933,000. As of December&nbsp;31, 2005, $538,475 of the $933,000
remains unpaid and recognized as an accrued liability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2005, the Company accrued and charged to expense a total of $2.6&nbsp;million in separation costs.
The costs were charged to General and Administrative Expense in the income statement. The $2.6
million charge represents severance pay, related payroll taxes and medical benefits due to former
employees who have separated from the Company. These charges are in connection with the previously
announced changes to the Company&#146;s organizational structure and leadership team. Going forward,
the Company&#146;s business operations will consist of three principal groups: Merchandising and Design,
Merchandise Procurement and Marketing Services. For more than a year, the Company has been
refocusing its energies on its core businesses in an effort to better position itself for long-term
growth and to increase shareholder value. This focus has been the impetus for recent major business
decisions made by the Company, which include selling its credit portfolio to World Financial,
expanding its internal marketing and advertising capabilities, closing its Crossing Pointe and
Allegheny Trail divisions and investing in its distribution center. As of December&nbsp;31, 2005, $2.2
million of the $2.6&nbsp;million remains unpaid and recognized as an accrued liability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the first quarter of 2004, the Company accrued and charged to expense $67,000 in separation
costs. The costs were charged to General and Administrative Expense in the income statement. The
$67,000 charge represents severance pay, related payroll taxes and medical benefits due the 33
eligible employees who accepted the voluntary separation program offered in connection with closing
the Company&#146;s Outlet Store located in Warren, Pennsylvania on January&nbsp;16, 2004. As of the end of
the first quarter of 2004, $67,000 had been paid. This liability is considered satisfied.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the first quarter of 2003, the Company accrued and charged to expense $75,000 in separation
costs. The costs were charged to General and Administrative Expense in the income statement. The
$75,000 charge represents severance pay, related payroll taxes and medical benefits due the 32
eligible employees who accepted the voluntary separation program offered in connection with closing
the Company&#146;s Outlet Store located in Erie, Pennsylvania on March&nbsp;28, 2003. As of the
end of the second quarter of 2003, $53,000 had been paid. This liability is considered satisfied
and resulted in $22,000 being taken back to income in the second quarter of 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the first quarter of 2001, the Company accrued and charged to expense $2.5&nbsp;million in separation
costs. The costs were charged to General and Administrative Expense in the income statement. The
one-time $2.5&nbsp;million charge represents severance pay, related payroll taxes and medical benefits
due the 56 eligible employees who accepted the voluntary
separation program rather than relocate or accept other positions in the Company. The program was
offered to eligible employees of the Blair Mailing Center from which the merchandise returns
operations have been relocated and the mailing
operations have been outsourced. As of December&nbsp;31, 2005, approximately $2.4&nbsp;million of the $2.5
million has been paid. Approximately $367,000, $267,000 and $336,000 were paid out during 2005,
2004 and 2003, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes the charges to income and related accruals as of December&nbsp;31, 2005,
2004 and 2003 pertaining to the separation programs described above. The total liability is
recognized in the balance sheet as accrued expenses.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Changes in</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Blair Mailing</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Credit Portfolio</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Organizational</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Center</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Sale</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Structure</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accrual at December&nbsp;31, 2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,098,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Payments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">336,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accrual at December&nbsp;31, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">762,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Payments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">267,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accrual at December&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">495,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">933,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,600,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Payments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">367,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">395,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">416,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD align="left" valign="top">&nbsp;</TD></TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accrual at December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">128,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">538,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,184,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-23
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Blair Corporation and Subsidiaries</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>Notes
to Consolidated Financial Statements &#151; (Continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>11. Quarterly Results of Operations (Unaudited)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following is a summary of unaudited quarterly results of operations for the years
ended December&nbsp;31, 2005 and 2004.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 0px solid #000000">Quarter Ended</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 0px solid #000000">Quarter Ended</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">March 31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">June 30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">September 30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">December 31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">March 31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">June 30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">September 30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">December 31</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net Sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">107,558</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">120,835</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">98,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">130,125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">128,642</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">126,993</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">107,074</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">133,411</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of goods sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,775</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,634</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,087</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,892</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,869</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,064</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,415</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,417</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">571</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,011</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,941</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,346</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic earnings per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.74</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.78</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted
earnings per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.73</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.87</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.77</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The per share results for the third and fourth quarters of 2005 reflect the reduction of
weighted average shares outstanding resulting from Blair&#146;s tender offer for the repurchase of 4.4
million outstanding shares on August&nbsp;16, 2005. The Company had 3.9&nbsp;million shares of common stock
outstanding at December&nbsp;31, 2005, compared to 8.2&nbsp;million shares at December&nbsp;31, 2004. Without the
reduction in outstanding shares, basic and diluted earnings per share for the third quarter of 2005
would have been $.17. Without the reduction in outstanding shares, basic and diluted earnings per
share for the fourth quarter of 2005 would have been $2.82 and $2.79, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Net income and earnings per share results for the fourth quarter of 2005 were favorably affected by
the one-time gain of $27.7&nbsp;million (pre-tax) from the sale of Blair&#146;s credit portfolio or $4.61 per
basic share and $4.49 per diluted share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Net income for the third and fourth quarters of 2005 was negatively impacted by expenses of $3.8
million (pre-tax) and $1.1&nbsp;million (pre-tax), respectively, associated with the Company&#146;s tender
offer and severance costs. Expenses associated with the tender offer include the amortization of
loan origination fees and interest expense related to a lending facility utilized to finance the
tender offer. Basic and diluted earnings per share for the third quarter of 2005 were negatively
affected by $.32. Basic and diluted earnings per share for the fourth quarter were negatively
affected by $.19 and $.18, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Quarter ended December&nbsp;31, 2005 includes additional net income of $228,000, $.06 per basic and
diluted share. The additional net income and increase in basic and diluted earnings per share in
the quarter was due to reductions in the provisions for returns resulting from actual returns
experience bettering prior estimates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Quarter ended December&nbsp;31, 2004 includes additional net income of $1,000,000, $.12 per basic and
diluted share. The additional net income and basic and diluted earnings per share in the quarter
was due to reductions in the provisions for doubtful accounts and returns resulting from actual bad
debt and returns experience bettering prior estimates.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>12. Subsequent Event</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On February&nbsp;10, 2006, the Board of Directors unanimously approved an amendment to the Restated
Certificate of Incorporation of the Company, authorizing five million shares of preferred stock and
permitting the Board of Directors to issue shares of preferred stock having whatever voting powers,
designations, preferences, limitations, restrictions, dividend rates, conversion prices, redemption
prices and relative rights as the directors shall establish from time to time, in a resolution or
resolutions approving the issuance of such preferred stock. The Board of Directors has directed
that the amendment be put to a vote of the stockholders at the 2006 Annual Meeting. The Board of
Directors has no present intention to issue shares of preferred stock if the amendment is approved.
</DIV>


<P align="center" style="font-size: 10pt">F-24
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>



<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Blair Corporation and Subsidiaries</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Schedule&nbsp;II</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Valuation and Qualifying Accounts<BR>
December&nbsp;31, 2005</B>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
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<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"  style="border-bottom: 1px solid #000000">COLUMN A</TD>
<TD>&nbsp;</TD>

    <TD nowrap align="center" colspan="4" style="border-bottom: 1px solid #000000">COLUMN B</TD>

    <TD>&nbsp;</TD>

    <TD nowrap align="center" colspan="4" style="border-bottom: 1px solid #000000">COLUMN C</TD>

    <TD>&nbsp;</TD>

    <TD nowrap align="center" colspan="5" style="border-bottom: 1px solid #000000">COLUMN D</TD>

    <TD>&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">COLUMN E</TD>

</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD nowrap align="center" colspan="4">ADDITIONS-</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">BALANCE</TD>

</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>

    <TD nowrap align="center" colspan="4">BALANCE AT</TD>
    <TD>&nbsp;</TD>


    <TD nowrap align="center" colspan="4">CHARGED TO COSTS</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">AT END</TD>

</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>

    <TD nowrap align="center" colspan="4" style="border-bottom: 1px solid #000000">BEGINNING OF PERIOD</TD>

    <TD>&nbsp;</TD>

    <TD nowrap align="center" colspan="4" style="border-bottom: 1px solid #000000">AND EXPENSES</TD>
    <TD>&nbsp;</TD>



<TD nowrap align="center" colspan="5" style="border-bottom: 1px solid #000000">DEDUCTIONS &#151; DESCRIBE</TD>

    <TD>&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">OF PERIOD</TD>

</TR>

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<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Description</DIV></TD>
<TD>&nbsp;</TD>
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<TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
<TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap><DIV style="margin-left:15px; text-indent:-15px">Year ended December&nbsp;31, 2005:</DIV></TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
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<TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap><DIV style="margin-left:30px; text-indent:-15px">Allowance deducted from asset account</DIV></TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap><DIV style="margin-left:30px; text-indent:-15px">(customer accounts receivable):</DIV></TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">For doubtful accounts</DIV></TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD align="right">33,826,914</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD nowrap>$</TD>
    <TD align="right">11,669,552</TD>
    <TD nowrap>(A)</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD nowrap>$</TD>
    <TD align="right">45,472,955</TD>
    <TD nowrap>(B)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD align="right">23,511</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">For estimated loss on returns</DIV></TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,098,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,593,402</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">62,089,402</TD>
    <TD nowrap>(C)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,602,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="1" align="right">&nbsp;</TD>
<TD>&nbsp;</TD>

    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD nowrap  ALIGN="RIGHT">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD nowrap colspan="1" align="right">&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Total</DIV></TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,924,914</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73,262,954</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">107,562,357</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,625,511</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Allowance deducted from asset account</DIV></TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">(merchandise inventories)</DIV></TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:90px; text-indent:-15px">For obsolete inventory</DIV></TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,600,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">484,222</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2,584,222</TD>
    <TD nowrap>(D)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,500,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="1" align="right">&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD nowrap  ALIGN="RIGHT">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD nowrap colspan="1" align="right">&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD align="right">42,524,914</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>$</TD>
    <TD align="right">73,747,176</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>$</TD>
    <TD align="right">110,146,579</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD align="right">6,125,511</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="1" align="right">&nbsp;</TD>
<TD>&nbsp;</TD>

    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD nowrap  ALIGN="RIGHT">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD nowrap colspan="1" align="right">&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>

<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
<TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Year ended December&nbsp;31, 2004:</DIV></TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
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<TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Allowance deducted from asset account</DIV></TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">(customer accounts receivable):</DIV></TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">For doubtful accounts</DIV></TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD align="right">40,349,957</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD nowrap>$</TD>
    <TD align="right">22,664,048</TD>
    <TD nowrap>(A)</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">29,187,091</TD>
    <TD nowrap>(B)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD align="right">33,826,914</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">For estimated loss on returns</DIV></TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,123,151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,666,392</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">73,691,543</TD>
    <TD nowrap>(C)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,098,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="1" align="right">&nbsp;</TD>
<TD>&nbsp;</TD>

    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD nowrap  ALIGN="RIGHT">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD nowrap colspan="1" align="right">&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Total</DIV></TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,473,108</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94,330,440</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102,878,634</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,924,914</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Allowance deducted from asset account</DIV></TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">(merchandise inventories)</DIV></TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:90px; text-indent:-15px">For obsolete inventory</DIV></TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,600,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,329,398</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">6,329,398</TD>
    <TD nowrap>(D)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,600,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="1" align="right">&nbsp;</TD>
<TD>&nbsp;</TD>

    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD nowrap  ALIGN="RIGHT">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD nowrap colspan="1" align="right">&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD align="right">51,073,108</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>$</TD>
    <TD align="right">100,659,838</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>$</TD>
    <TD align="right">109,208,032</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD align="right">42,524,914</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="1" align="right">&nbsp;</TD>
<TD>&nbsp;</TD>

    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD nowrap  ALIGN="RIGHT">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD nowrap colspan="1" align="right">&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Year ended December&nbsp;31, 2003:</DIV></TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Allowance deducted from asset account</DIV></TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">(customer accounts receivable):</DIV></TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">For doubtful accounts</DIV></TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD align="right">40,138,263</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD nowrap>$</TD>
    <TD align="right">31,826,636</TD>
    <TD nowrap>(A)</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD nowrap>$</TD>
    <TD align="right">31,614,942</TD>
    <TD nowrap>(B)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD align="right">40,349,957</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">For estimated loss on returns</DIV></TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,067,965</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">87,238,648</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">87,183,462</TD>
    <TD nowrap>(C)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,123,151</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="1" align="right">&nbsp;</TD>
<TD>&nbsp;</TD>

    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD nowrap  ALIGN="RIGHT">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD nowrap colspan="1" align="right">&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Total</DIV></TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,206,228</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119,065,284</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">118,798,404</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,473,108</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Allowance deducted from asset account</DIV></TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">(merchandise inventories)</DIV></TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:90px; text-indent:-15px">For obsolete inventory</DIV></TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,515,882</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4,915,882</TD>
    <TD nowrap>(D)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,600,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="1" align="right">&nbsp;</TD>
<TD>&nbsp;</TD>

    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD nowrap  ALIGN="RIGHT">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD nowrap colspan="1" align="right">&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD align="right">51,206,228</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>$</TD>
    <TD align="right">123,581,166</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD>$</TD>
    <TD align="right">123,714,286</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD align="right">51,073,108</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
<TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="1" align="right">&nbsp;</TD>
<TD>&nbsp;</TD>

    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD nowrap  ALIGN="RIGHT">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD nowrap colspan="1" align="right">&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="100%"></TD>
</TR>

<TR valign="top">
    <TD>Note (A) &#151; Current year provision for doubtful accounts, charged against income.</TD>
</TR>

<TR style="font-size: 3pt"></TR>

<TR valign="top">
    <TD><DIV style="margin-left:65px; text-indent:-65px">Note (B) &#151; Accounts charged off, net of recoveries. On November&nbsp;4, 2005, the Company sold
its proprietary credit program to an industrial bank subsidiary of Alliance Data Systems
Corporation. The proceeds of the sales were for par plus a premium. The sales transaction
resulted in reversing the then allowance for doubtful accounts of $23.2&nbsp;million. The
balance of the amount in this column ($22.3&nbsp;million) relates to accounts charged off, net of
recoveries, prior to the sale of the credit portfolio.</DIV></TD>
</TR>

<TR style="font-size: 3pt"></TR>

<TR valign="top">
    <TD>Note (C) &#151; Sales value of merchandise returned.</TD>
</TR>

<TR style="font-size: 3pt"></TR>

<TR valign="top">
    <TD>Note (D) &#151; Inventory liquidated, net of proceeds received.</TD>
</TR>

</TABLE>




<P align="center" style="font-size: 10pt">F-25
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>2
<FILENAME>j1821001exv21.htm
<DESCRIPTION>EX-21
<TEXT>
<HTML>
<HEAD>
<TITLE>EX-21</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXHIBIT 21</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>SUBSIDIARIES OF BLAIR CORPORATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Blair Holdings Incorporated (a Delaware corporation); Blair Factoring Company (a Delaware
corporation); Blair Payroll LLC (a Delaware limited liability company); Blair Credit Services Corp.
(a Delaware corporation); Blair International Holding, Inc. (a Delaware corporation); Blair
International Limited (a Hong Kong corporation); Blair International Singapore Pte. Ltd. (a
Singapore corporation); JLB Service Bank (a Delaware corporation); Allegheny Trail Corporation (a
Delaware corporation).
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>3
<FILENAME>j1821001exv23.htm
<DESCRIPTION>EX-23
<TEXT>
<HTML>
<HEAD>
<TITLE>EX-23</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXHIBIT 23</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We consent to the incorporation by reference in the Registration Statement on Form S-8 dated July
19, 2000 pertaining to the Blair Corporation Employee Stock Purchase Plan and in the Registration
Statement on Form S-8 dated July&nbsp;19, 2000 pertaining to the Blair Corporation 2000 Omnibus Stock
Plan of our reports dated February&nbsp;21, 2006, with respect to the consolidated financial statements
and schedule of Blair Corporation and Subsidiaries, Blair Corporation and Subsidiaries management&#146;s
assessment of the effectiveness of internal control over financial reporting, and the effectiveness
of internal control over financial reporting of Blair Corporation and Subsidiaries, included in the
Annual Report (Form 10-K) for the year ended December&nbsp;31, 2005.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">     /s/ Ernst &#038; Young LLP
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>
<DIV align="left" style="font-size: 10pt; margin-left: 3%; margin-top: 6pt">Buffalo, New York<BR>
March&nbsp;8, 2006
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>4
<FILENAME>j1821001exv31w1.htm
<DESCRIPTION>EX-31.1
<TEXT>
<HTML>
<HEAD>
<TITLE>EX-31.1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXHIBIT 31.1</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>CERTIFICATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">I, John E. Zawacki, certify that:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>I have reviewed this annual report on Form 10-K of Blair Corporation;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on my knowledge, this annual report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this annual report;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on my knowledge, the financial statements, and other financial information included in
this annual report, fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the periods presented in this
annual report;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officers and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules&nbsp;13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in
which this report is being prepared;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Evaluated the effectiveness of the registrant&#146;s disclosure controls and
procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Disclosed in this report any change in the registrant&#146;s internal control over
financial reporting that occurred during the registrant&#146;s most recent fiscal quarter
(the registrant&#146;s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant&#146;s
internal control over financial reporting; and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant&#146;s auditors and the
audit committee of the registrant&#146;s board of directors (or persons performing the equivalent
functions):</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>All significant deficiencies and material weaknesses in the design or operation
of internal control over financial reporting which are reasonably likely to adversely
affect the registrant&#146;s ability to record, process, summarize and report financial
information; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrant&#146;s internal control over financial
reporting.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="80%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="46%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Date: March&nbsp;8, 2006
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">/s/ John E. Zawacki</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">John E. Zawacki</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">President, Chief Executive Officer</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">and Director</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(Principal Executive Officer)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>5
<FILENAME>j1821001exv31w2.htm
<DESCRIPTION>EX-31.2
<TEXT>
<HTML>
<HEAD>
<TITLE>EX-31.2</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXHIBIT 31.2</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>CERTIFICATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">I, Larry J. Pitorak, certify that:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>I have reviewed this annual report on Form 10-K of Blair Corporation;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on my knowledge, this annual report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this annual report;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on my knowledge, the financial statements, and other financial information included in
this annual report, fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the periods presented in this
annual report;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officers and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules&nbsp;13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in
which this report is being prepared;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Evaluated the effectiveness of the registrant&#146;s disclosure controls and
procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Disclosed in this report any change in the registrant&#146;s internal control over
financial reporting that occurred during the registrant&#146;s most recent fiscal quarter
(the registrant&#146;s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant&#146;s
internal control over financial reporting; and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant&#146;s auditors and the
audit committee of the registrant&#146;s board of directors (or persons performing the equivalent
functions):</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>All significant deficiencies and material weaknesses in the design or operation
of internal control over financial reporting which are reasonably likely to adversely
affect the registrant&#146;s ability to record, process, summarize and report financial
information; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrant&#146;s internal control over financial
reporting.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="80%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="46%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Date: March&nbsp;8, 2006
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">/s/ Larry J. Pitorak</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Larry J. Pitorak</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Interim Chief Financial Officer and Director</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(Principal Financial Officer)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>6
<FILENAME>j1821001exv32w1.htm
<DESCRIPTION>EX-32.1
<TEXT>
<HTML>
<HEAD>
<TITLE>EX-32.1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXHIBIT 32.1</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>CERTIFICATION PURSUANT TO<BR>
18 U.S.C. SECTION 1350,<BR>
AS ADOPTED PURSUANT TO<BR>
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In connection with the Annual Report of Blair Corporation (the &#147;Company&#148;) on Form 10-K for the
period ending December&nbsp;31, 2005 as filed with the Securities and Exchange Commission on the date
hereof (the &#147;Report&#148;), I, John E. Zawacki, Chief Executive Officer of the Company, certify,
pursuant to 18 U.S.C. Section&nbsp;1350, as adopted pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of
2002, that:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The information contained in the Report fairly presents, in all material respects, the
financial condition and result of operations of the Company.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="80%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="46%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Date: March&nbsp;8, 2006
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">/s/ John E. Zawacki</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">John E. Zawacki</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">President and Chief Executive Officer</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A signed original of this written statement required by Section&nbsp;906, or other document
authentication, acknowledging, or otherwise adopting the signature that appears in typed form
within the electronic version of this written statement required by section 906, has been provided
to Blair Corporation and will be retained by Blair Corporation and furnished to the Securities and
Exchange Commission or its staff upon request.
</DIV>



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.2
<SEQUENCE>7
<FILENAME>j1821001exv32w2.htm
<DESCRIPTION>EX-32.2
<TEXT>
<HTML>
<HEAD>
<TITLE>EX-32.2</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXHIBIT 32.2</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>CERTIFICATION PURSUANT TO<BR>
18 U.S.C. SECTION 1350,<BR>
AS ADOPTED PURSUANT TO<BR>
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In connection with the Annual Report of Blair Corporation (the &#147;Company&#148;) on Form 10-K for the
period ending December&nbsp;31, 2005 as filed with the Securities and Exchange Commission on the date
hereof (the &#147;Report&#148;), I, Larry J. Pitorak, Chief Financial Officer of the Company, certify,
pursuant to 18 U.S.C. Section&nbsp;1350, as adopted pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of
2002, that:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The information contained in the Report fairly presents, in all material respects, the
financial condition and result of operations of the Company.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="80%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="46%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Date: March&nbsp;8, 2006
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">/s/ Larry J. Pitorak</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Larry J. Pitorak</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Interim Chief Financial Officer and Director</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(Principal Financial Officer)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A signed original of this written statement required by Section&nbsp;906, or other document
authentication, acknowledging, or otherwise adopting the signature that appears in typed form
within the electronic version of this written statement required by section 906, has been provided
to Blair Corporation and will be retained by Blair Corporation and furnished to the Securities and
Exchange Commission or its staff upon request.
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>


</BODY>
</HTML>
</TEXT>
</DOCUMENT>
</SUBMISSION>
