---

| | Exhibit 99.2                     
| | ---------------------------------
| |                                  
| | CONSOLIDATED FINANCIAL STATEMENTS

MANAGEMENTS RESPONSIBILITY FOR FINANCIAL REPORTING

The accompanying Consolidated Financial Statements have been
prepared by management and approved by the Board of Directors of the Company.
The Consolidated Financial Statements were prepared in accordance with Canadian
generally accepted accounting principles and, where appropriate, reflect
managements best estimates and judgments. Where alternative accounting methods
exist, management has chosen those methods deemed most appropriate in the
circumstances. Management is responsible for the accuracy, integrity and
objectivity of the Consolidated Financial Statements within reasonable limits of
materiality, and for maintaining a system of internal controls over financial
reporting as described in Managements Annual Report on Internal Control Over
Financial Reporting on page 37 of the 2011 Annual Managements Discussion and
Analysis. Management is also responsible for the preparation and presentation of
other financial information included in the 2011 Annual Report and its
consistency with the Consolidated Financial Statements.

The Audit and Finance Committee, which is appointed annually by
the Board of Directors and comprised exclusively of independent directors, meets
with management as well as with the independent auditors and internal auditors
to satisfy itself that management is properly discharging its financial
reporting responsibilities and to review the Consolidated Financial Statements
and the independent auditors report. The Audit and Finance Committee reports
its findings to the Board of Directors for consideration in approving the
Consolidated Financial Statements for presentation to the shareholders. The
Audit and Finance Committee considers, for review by the Board of Directors and
approval by the shareholders, the engagement or reappointment of the independent
auditors.

The Consolidated Financial Statements have been independently
audited by KPMG LLP, Chartered Accountants, on behalf of the shareholders, in
accordance with Canadian generally accepted auditing standards and the standards
of the Public Company Accounting Oversight Board (United States). Their report
outlines the nature of their audit and expresses their opinion on the
Consolidated Financial Statements of the Company. In addition, our auditors have
issued an attestation report on the Companys internal controls over financial
reporting as at October 2, 2011. KPMG LLP has direct access to the Audit and
Finance Committee of the Board of Directors.

|(Signed: Glenn J. Chamandy)           | (Signed: Laurence G. Sellyn)              
|------------------------------------- | ------------------------------------------
|                                      |                                           
|Glenn J. Chamandy                     | Laurence G. Sellyn                        
|President and Chief Executive Officer | Executive Vice-President,                 
|                                      | Chief Financial and Administrative Officer
|                                      |                                           
|December  9, 2011                     |                                           



GILDAN 2011 REPORT TO SHAREHOLDERS P.50

---

CONSOLIDATED FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of Gildan Activewear
Inc.

We have audited the accompanying consolidated balance sheets of
Gildan Activewear Inc. (the "Company") and subsidiaries as at October 2, 2011
and October 3, 2010 and the related consolidated statements of earnings and
comprehensive income, shareholders equity and cash flows for the years ended
October 2, 2011, October 3, 2010 and October 4, 2009. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with Canadian generally
accepted auditing standards and 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.

In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of the
Company and subsidiaries as at October 2, 2011 and October 3, 2010, and the
results of their operations and their cash flows for the years ended October 2,
2011, October 3, 2010 and October 4, 2009, in conformity with Canadian generally
accepted accounting principles.

We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the Company's
internal control over financial reporting as at October 2, 2011, based on
criteria established in Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO), and our report dated November 30, 2011 expressed an unqualified
opinion on the effectiveness of the Company's internal control over financial
reporting.

|                     
|---------------------
|Chartered Accountants
|Montréal, Canada     
|November 30, 2011    





|*CA Auditor permit no 20408 | KPMG LLP is a Canadian limited
      liability partnership and a member firm of the KPMG network of                        
|--------------------------- | ---------------------------------------------------------------------------------------------------------------------------
|                            | independent member firms
      affiliated with KPMG International Cooperative ("KPMG International"), a
      Swiss entity.
|                            | KPMG Canada provides services to
      KPMG LLP.                                                                           



GILDAN 2011 REPORT TO SHAREHOLDERS P.51

---

CONSOLIDATED FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of Gildan Activewear
Inc.

We have audited Gildan Activewear Inc.'s internal control over
financial reporting as at October 2, 2011, based on the criteria established in
Internal Control - Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). Gildan
Activewear Inc.s management is responsible for maintaining effective internal
control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting as presented in the section entitled
Managements Annual Report on Internal Control over Financial Reporting
included in Managements Discussion and Analysis. Our responsibility is to
express an opinion on the Company's internal control over financial reporting
based on our audit.

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 the financial reporting was maintained
in all material respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our audit also
included performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our
opinion.

A company'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'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) 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) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the Company's assets that could have a
material effect on the financial statements.

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.

In our opinion, Gildan Activewear Inc. maintained, in all
material respects, effective internal control over financial reporting as at
October 2, 2011, based on criteria established in Internal Control -
IntegratedFramework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO).

Management has excluded from its assessment of the
effectiveness of internal control over financial reporting as of October 2, 2011
the internal control over financial reporting of Gold Toe Moretz Holdings Corp.
("Gold Toe Moretz") which Gildan Activewear Inc. acquired on April 15, 2011. The
total assets and total net sales of Gold Toe Moretz represent approximately 24%
of the  consolidated total assets and approximately 7% of the  consolidated
net sales included in the consolidated financial statements of Gildan Activewear
Inc. as of and for the year ended October 2, 2011. Our audit of internal control
over financial reporting of Gildan Activewear Inc. also excluded an evaluation
of the internal control over financial reporting of Gold Toe Moretz.

We also have conducted our audits on the consolidated financial
statements in accordance with Canadian generally accepted auditing standards and
the standards of the Public Company Accounting Oversight Board (United States).
Our report dated November 30, 2011 expressed an unqualified opinion on those
consolidated financial statements.

|                            |                                                                                                                            
|--------------------------- | ---------------------------------------------------------------------------------------------------------------------------
|Chartered Accountants       |                                                                                                                            
|Montréal, Canada            |                                                                                                                            
|November 30, 2011           |                                                                                                                            
|                            |                                                                                                                            
|                            |                                                                                                                            
|*CA Auditor permit no 20408 | KPMG LLP is a Canadian limited
      liability partnership and a member firm of the KPMG network of                        
|                            | independent member firms
      affiliated with KPMG International Cooperative ("KPMG International"), a
      Swiss entity.
|                            | KPMG Canada provides services to
      KPMG LLP.                                                                           



GILDAN 2011 REPORT TO SHAREHOLDERS P.52

---

| | CONSOLIDATED FINANCIAL STATEMENTS
| | ---------------------------------

|                                                             |  
|------------------------------------------------------------ | -
|GILDAN ACTIVEWEAR INC.                                       |  
|CONSOLIDATED BALANCE SHEETS                                  |  
|As at October 2, 2011 and October 3,
      2010              |  
|(in
      thousands of U.S. dollars)                         |  
|                                                             |  
|                                                             |  
|                                                             |  
|Current assets:                                              |  
|Cash and cash equivalents                                    | $
|Trade accounts receivable                                    |  
|Income taxes receivable                                      |  
|Inventories (note 3)                                         |  
|Prepaid expenses and deposits                                |  
|Future income taxes (note 15)                                |  
|Other current assets                                         |  
|                                                             |  
|Property, plant and equipment (note 4)                       |  
|Assets held for sale (note 16)                               |  
|Intangible assets (note 5(b))                                |  
|Goodwill (note 5(a))                                         |  
|Other assets (note 6)                                        |  
|Total assets                                                 | $
|                                                             |  
|Current liabilities:                                         |  
|Accounts payable and accrued liabilities                     | $
|Income taxes payable                                         |  
|                                                             |  
|Long-term debt (note 8)                                      |  
|Future income taxes (note 15)                                |  
|Non-controlling interest in consolidated
      joint venture |  
|                                                             |  
|Commitments and contingencies (note 13)                      |  
|                                                             |  
|Shareholders' equity (note 10):                              |  
|Share capital                                                |  
|Contributed surplus                                          |  
|                                                             |  
|Retained earnings                                            |  
|Accumulated other comprehensive income                       |  
|                                                             |  
|                                                             |  
|                                                             |  
|Total liabilities and shareholders' equity                   | $

|See accompanying notes to consolidated financial
      statements. |                              
|------------------------------------------------------------------ | -----------------------------
|                                                                   |                              
|On behalf of the Board of Directors:                               |                              
|                                                                   |                              
|                                                                   |                              
|                                                                   |                              
|(Signed: Glenn J. Chamandy)                                        | (Signed: William D. Anderson)
|Director                                                           | Director                     
|Glenn J. Chamandy                                                  | William D. Anderson          

GILDAN 2011 REPORT TO SHAREHOLDERS P.53

---

| | CONSOLIDATED FINANCIAL STATEMENTS
| | ---------------------------------

GILDAN ACTIVEWEAR INC.CONSOLIDATED STATEMENTS OF
EARNINGS AND COMPREHENSIVE INCOMEYears ended October 2, 2011, October
3, 2010 and October 4, 2009 (in thousands of U.S. dollars, except per share
data)

|                                                                               |   | 2011      |   |   | 2010      |   |   | 2009      |  
|------------------------------------------------------------------------------ | - | --------- | - | - | --------- | - | - | --------- | -
|Net sales                                                                      | $ | 1,726,041 |   | $ | 1,311,463 |   | $ | 1,038,319 |  
|Cost of sales (note 20(c))                                                     |   | 1,288,293 |   |   | 947,206   |   |   | 807,986   |  
|Gross profit                                                                   |   | 437,748   |   |   | 364,257   |   |   | 230,333   |  
|Selling, general and administrative expenses                                   |   | 199,132   |   |   | 154,674   |   |   | 134,785   |  
|Restructuring and acquisition-related costs
      (note 16)                    |   | 8,465     |   |   | 8,705     |   |   | 6,199     |  
|Operating income                                                               |   | 230,151   |   |   | 200,878   |   |   | 89,349    |  
|Financial expense (income), net (note
      22(b))                             |   | 5,485     |   |   | 751       |   |   | (304      | )
|Non-controlling interest in consolidated joint venture                         |   | 504       |   |   | 3,786     |   |   | 110       |  
|Earnings before income taxes                                                   |   | 224,162   |   |   | 196,341   |   |   | 89,543    |  
|Income taxes (note 15)                                                         |   | (15,742   | ) |   | (1,904    | ) |   | (5,786    | )
|Net earnings                                                                   |   | 239,904   |   |   | 198,245   |   |   | 95,329    |  
|Other comprehensive income (loss), net of related income taxes
      (note 17) |   | 1,034     |   |   | (1,710    | ) |   | -         |  
|Comprehensive income                                                           | $ | 240,938   |   | $ | 196,535   |   | $ | 95,329    |  
|                                                                               |   |           |   |   |           |   |   |           |  
|                                                                               |   |           |   |   |           |   |   |           |  
|Earnings per share:                                                            |   |           |   |   |           |   |   |           |  
|Basic EPS (note
      18)                                                      | $ | 1.97      |   | $ | 1.64      |   | $ | 0.79      |  
|Diluted EPS
      (note 18)                                                    | $ | 1.96      |   | $ | 1.63      |   | $ | 0.79      |  
|                                                                               |   |           |   |   |           |   |   |           |  
|See accompanying notes to
      consolidated financial statements.             |   |           |   |   |           |   |  

GILDAN 2011 REPORT TO SHAREHOLDERS P.54

---

| | CONSOLIDATED FINANCIAL STATEMENTS
| | ---------------------------------

|                                                                                               | 
|---------------------------------------------------------------------------------------------- | 
|GILDAN ACTIVEWEAR
      INC.                                                                   | 
|CONSOLIDATED STATEMENTS OF SHAREHOLDERS
      EQUITY                                          | 
|Years ended October 2, 2011, October 3,
      2010 and October 4, 2009                         | 
|(in thousands or thousands of U.S.
      dollars)                                              | 
|                                                                                               | 
|                                                                                               | 
|                                                                                               | 
|                                                                                               | 
|                                                                                               | 
|Balance, October 5, 2008                                                                       | 
|Stock-based compensation related to stock options and
      Treasury restricted share units    | 
|Shares issued under employee share purchase
      plan                                         | 
|Shares issued pursuant to exercise of stock options                                            | 
|Shares issued pursuant to vesting of
      Treasury restricted share units                     | 
|Net earnings                                                                                   | 
|Balance, October 4, 2009                                                                       | 
|Stock-based compensation related to stock options and
      Treasury restricted share units    | 
|Recovery related to repricing of stock
      options previously exercised (note 11(b))         | 
|Shares issued under employee share purchase plan                                               | 
|Shares issued pursuant to exercise of stock
      options                                      | 
|Shares issued pursuant to vesting of Treasury restricted
      share units                     | 
|Other comprehensive loss (note 17)                                                             | 
|Net earnings                                                                                   | 
|Balance, October 3, 2010                                                                       | 
|Stock-based compensation related to stock options and
      Treasury restricted share units    | 
|Shares issued under employee share purchase
      plan                                         | 
|Shares issued pursuant to exercise of stock options                                            | 
|Shares issued pursuant to vesting of
      Treasury restricted share units                     | 
|Shares issued as consideration for costs incurred in a
      business acquisition (note 19(c)) | 
|Shares repurchased and cancelled (note
      10(d))                                            | 
|Share repurchases (note 10(e))                                                                 | 
|Other comprehensive income (note 17)                                                           | 
|Dividends declared                                                                             | 
|Net earnings                                                                                   | 
|Balance, October 2, 2011                                                                       | 
|                                                                                               | 
|See accompanying notes to
      consolidated financial statements.                             | 

GILDAN 2011 REPORT TO SHAREHOLDERS P.55

---

| | CONSOLIDATED FINANCIAL STATEMENTS
| | ---------------------------------



|GILDAN ACTIVEWEAR INC.                                                                               |  
|---------------------------------------------------------------------------------------------------- | -
|CONSOLIDATED STATEMENTS OF CASH
      FLOWS                                                          |  
|Years ended October 2, 2011, October 3, 2010
      and October 4, 2009                               |  
|(in thousands of U.S.
      dollars)                                                                 |  
|                                                                                                     |  
|                                                                                                     |  
|Cash flows from (used in) operating
      activities:                                                |  
|Net earnings                                                                                         | $
|Adjustments for non-cash items (note
      19(a))                                                    |  
|                                                                                                     |  
|Changes in non-cash working capital
      balances:                                                  |  
|Trade accounts receivable                                                                            |  
|Inventories                                                                                          |  
|Prepaid expenses and deposits                                                                        |  
|Other current assets                                                                                 |  
|Accounts payable and accrued liabilities                                                             |  
|Income taxes payable                                                                                 |  
|                                                                                                     |  
|Cash flows from (used in) financing
      activities:                                                |  
|Increase (decrease) in amounts drawn under revolving
      long-term credit facility                 |  
|Dividends paid                                                                                       |  
|Increase in other long-term debt                                                                     |  
|Repayment of other long-term debt                                                                    |  
|Proceeds from the issuance of shares                                                                 |  
|Repurchase and cancellation of
      shares (note 10(d))                                             |  
|Repurchase of shares (note 10(e))                                                                    |  
|Recovery related to repricing of
      stock options previously exercised                            |  
|                                                                                                     |  
|Cash flows from (used in) investing
      activities:                                                |  
|Purchase of property, plant and equipment                                                            |  
|Purchase of intangible assets                                                                        |  
|Business acquisitions (note 2)                                                                       |  
|Payment of contingent consideration
      (note 19(d))                                               |  
|Restricted cash related to a business acquisition                                                    |  
|Purchase of corporate asset, net of
      proceeds (note 19(a))                                      |  
|Proceeds on disposal of assets held for sale                                                         |  
|Net (increase) decrease in other
      assets                                                        |  
|                                                                                                     |  
|Effect of exchange rate changes on cash and
      cash equivalents denominated in foreign currencies |  
|Net (decrease) increase in cash and cash equivalents during
      the year                           |  
|Cash and cash equivalents, beginning of
      year                                                   |  
|Cash and cash equivalents, end of year                                                               | $
|                                                                                                     |  
|Supplemental disclosure of cash flow
      information (note 19)                                     |  
|                                                                                                     |  
|See accompanying notes to consolidated
      financial statements.                                   |  

GILDAN 2011 REPORT TO SHAREHOLDERS P.56

---

| | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | ------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended October 2, 2011, October 3, 2010 and October 4,
2009(Tabular amounts in thousands or thousands of U.S. dollars
except per share data, unless otherwise indicated)

Gildan Activewear Inc. (the "Company") is incorporated under
the Canada Business Corporations Act. Its principal business activity is
the manufacture and sale of activewear, socks and underwear. The Companys
fiscal year ends on the first Sunday following September 28. All references to
2011, 2010 and 2009 represent the fiscal years ended October 2, 2011, October 3,
2010 and October 4, 2009, respectively.

1. SIGNIFICANT ACCOUNTING POLICIES:

The consolidated financial statements are expressed in U.S.
dollars and have been prepared in accordance with Canadian generally accepted
accounting principles. The Companys functional currency is the U.S. dollar. The
principal accounting policies of the Company are summarized as follows:

|(a) | Basis of presentation:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | The accompanying consolidated financial statements
      include the accounts of the Company and its subsidiaries. The consolidated
      financial statements also include the accounts of a yarn spinning joint
      venture with Frontier Spinning Mills, Inc., CanAm Yarns LLC (CanAm), as
      the Company is considered the primary beneficiary of this entity. All
      significant intercompany balances and transactions have been eliminated on
      consolidation.                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(b) | Future accounting standards:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | In February 2008, the Canadian Accounting Standards Board
      (AcSB) confirmed that International Financial Reporting Standards as
      issued by the International Accounting Standards Board (IFRS), will
      replace Canadian generally accepted accounting principles for publicly
      accountable enterprises effective for fiscal years beginning on or after
      January 1, 2011. As a result, the Company will be required to change over
      to IFRS for its fiscal 2012 interim and annual consolidated financial
      statements beginning October 3, 2011 with comparative information for
      fiscal 2011.                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(c) | Cash and cash equivalents:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | The Company considers all liquid investments with
      maturities of three months or less when acquired to be cash
      equivalents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(d) | Trade accounts receivable:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | Trade accounts receivable consist of amounts due from our
      normal business activities. We maintain an allowance for doubtful accounts
      to reflect expected credit losses. We provide for bad debts based on
      collection history and specific risks identified on a customer-by-customer
      basis. Uncollected accounts are written off through the allowance for
      doubtful accounts.                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(e) | Inventories:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | Inventories are stated at the lower of First-In First-Out
      cost and net realizable value. Inventory costs include the purchase price
      and other costs directly related to the acquisition of raw materials used
      in the manufacturing process, and the cost of purchased finished goods.
      Inventory costs also include the costs directly related to the conversion
      of materials to finished goods, such as direct labour, and a systematic
      allocation of fixed and variable production overhead, including
      manufacturing depreciation expense. The allocation of fixed production
      overheads to the cost of inventories is based on the normal capacity of
      the production facilities. Normal capacity is the average production
      expected to be achieved over a number of periods under normal
      circumstances.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(f) | Property, plant and equipment:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | Property, plant and equipment are initially recorded at
      cost. Depreciation and amortization are recorded on a straight-line basis
      over the following estimated useful lives:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

Asset
    Useful lifeBuildings and improvements
    5 to 40 yearsManufacturing equipment
    3 to 10 yearsOther equipment
    2 to 10 years


GILDAN 2011 REPORT TO SHAREHOLDERS P.57

---

| | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | ------------------------------------------

1. SIGNIFICANT ACCOUNTING POLICIES (continued):

|(f) | Property, plant and equipment
  (continued):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | Assets not yet utilized in operations include
      expenditures incurred to date for plant expansions which are still in
      process and equipment not yet placed into service as at the balance sheet
      date. Depreciation on these assets commences when the assets are put into
      service.                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(g) | Assets held for sale:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | Long-lived assets are classified as held for sale when
      certain criteria are met, which include: the Companys commitment to a
      plan to sell the assets; the assets are available for immediate sale in
      their present condition; an active program to locate buyers and other
      actions to sell the assets have been initiated; the sale of the assets is
      probable and their transfer is expected to qualify for recognition as a
      completed sale within one year; the assets are being actively marketed at
      reasonable prices in relation to their fair value; and it is unlikely that
      significant changes will be made to the plan to sell the assets or that
      the plan will be withdrawn.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | The Company measures assets held for sale at the lower of
      carrying amount or fair value less cost to sell. These assets are not
      depreciated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(h) | Intangible assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | Intangible assets include identifiable intangible assets
      acquired in a business combination, which are initially recorded at fair
      value at the date of acquisition, and include trademarks, license
      agreements, customer contracts and customer relationships, and non-compete
      agreements. Intangible assets also include the cost of computer software
      that is not an integral part of the related hardware. Intangible assets
      with finite lives are depreciated on a straight-line basis over the
      following estimated useful lives:                                                                                                                                                             

Asset
    Useful lifeCustomer contracts and customer
      relationships
    20 yearsLicense agreements
    7 yearsComputer software
    4 yearsNon-compete agreements
    2 years


Trademarks are not amortized as they
are considered to be indefinite life intangible assets, and are tested for
impairment annually, or more frequently if events or changes in circumstances
indicate that the asset might be impaired.

The costs of information technology
projects including internally developed computer software are capitalized and
included in intangible assets commencing at the point at which the following
criteria are met: the technical feasibility of completing the projects have been
achieved; the Company intends to complete the information technology projects
and is capable of using the software internally; the software will generate
probable future economic benefits; the Company has adequate technical, financial
and other resources to complete development of the projects; and the Company has
the ability to reliably measure the expenditures attributable to the information
technology projects during development. The Company does not capitalize pilot
projects where it believes that future economic benefits are less than probable
or projects that do not meet the above criteria. The costs of information
technology projects that are capitalized include the cost of software tools and
licenses used in the development of the projects as well as direct payroll and
consulting costs. The capitalization of costs ceases and depreciation commences
when the assets are put into service.

|(i) | Impairment of long-lived assets:
|--- | --------------------------------

Property, plant and equipment and
intangible assets with finite lives are reviewed for potential impairment if
events or changes in circumstances indicate that the carrying amounts of such
assets may not be recoverable. An impairment loss would be recognized when the
estimated undiscounted future cash flows expected to result from the use of an
asset (or asset group for which identifiable cash flows are largely independent
of the cash flows of other assets and liabilities) and its eventual disposition
are less than its carrying amount. The amount of the impairment loss recognized
is measured as the amount by which the carrying value for an asset exceeds the
fair value of the asset or asset group, with fair value being determined based
on the present value of expected future cash flows or appraised values,
depending on the nature of the asset or asset group. The annual impairment test
for trademarks, which are considered to be intangible assets with indefinite
lives, consists of a comparison of the fair value of the trademarks, using the
present value of expected future cash flows, with the carrying amount of the
trademarks. If the carrying amount of the trademarks exceeds their fair value,
an impairment loss is recognized in an amount equal to the excess.

GILDAN 2011 REPORT TO SHAREHOLDERS P.58

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| | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | ------------------------------------------

1. SIGNIFICANT ACCOUNTING POLICIES (continued):

|(i) | Impairment of long-lived assets (continued):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | Assessing the impairment of long-lived assets requires the Company to make significant estimates and assumptions, including, but not limited to, the expected future cash flows that the asset or asset group will generate based on
internal plans, which incorporate managements judgments as to the remaining service potential of the long-lived assets, and their fair value on an open market. Changes in circumstances, such as technological advances, adverse changes in third
party licensing arrangements, changes to the Companys business strategy, and changes in economic conditions can result in actual useful lives and future cash flows differing significantly from estimates
and could result in increased charges for
amortization or impairment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(j) | Goodwill:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | Goodwill recorded in connection with business combinations represents the excess of the purchase price over the fair value of net assets acquired, and is assigned to a reporting unit at the time of acquisition. Goodwill is not
amortized and is tested for impairment on an annual basis, or more frequently if an event or circumstance occurs that more likely than not reduces the fair value of a reporting unit below its carrying amount. The annual goodwill impairment test
involves a two-step process. First, the fair value of a reporting unit is compared with its carrying amount, including goodwill, in order to identify a potential impairment. The fair value of the reporting unit under the first step is determined
based on the present value of expected future cash flows. The second step is required if the carrying amount of a reporting unit exceeds its fair value as determined in the first step, in which case the estimated fair value of the reporting unit is
allocated to all of the assets and liabilities of the reporting unit, including the implied fair value of any intangible assets that would be recorded had the reporting unit been acquired in a business acquisition. Any fair value in excess of
amounts allocated to the reporting units net assets represents the implied fair value of goodwill for that reporting unit. If the carrying value of the goodwill exceeds the implied fair value, the carrying value is written down by an amount
equal to such excess.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | The goodwill impairment testing process involves the use of significant assumptions, estimates and judgments with respect to a variety of factors, including expected sales, gross margins, selling, general and administrative
expenses, capital expenditures, cash flows and the selection of an appropriate discount rate, all of which are subject to inherent uncertainties and subjectivity. The assumptions are based on annual business plans and other forecasted results as
well as discount rates which are used to reflect market-based estimates of the risks associated with the projected cash flows, based on the best information available as of the date of the impairment test. If the future was to adversely differ from
managements best estimate of key economic assumptions, and if associated cash flows were to materially decrease, the Company may be required to record impairment charges related to its goodwill.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
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|(k) | Foreign currency translation:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | Monetary assets and liabilities of the Canadian and foreign operations denominated in currencies other than U.S. dollars are translated at the rates of exchange at the balance sheet date. Other balance sheet items denominated in
currencies other than U.S. dollars are translated at the rates prevailing at the respective transaction dates. Income and expenses denominated in currencies other than U.S. dollars are translated at average rates prevailing during the year. Gains or
losses on foreign exchange are recorded in net earnings.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | The Companys foreign subsidiaries are considered to be integrated foreign operations, and their accounts have been translated using the temporal method with translation gains and losses included in net earnings. The Company
does not currently have any self-sustaining foreign subsidiaries.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(l) | Revenue recognition:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | Revenue is recognized upon shipment of products to customers, since title passes upon shipment, and to the extent that the selling price is fixed or determinable. At the time of sale, estimates are made for customer price
discounts and volume rebates based on the terms of existing programs. Accruals required for new programs, which relate to prior sales, are recorded at the time the new program is introduced. Sales are recorded net of these program costs and a
provision for estimated sales returns, which is based on historical experience, current trends and other known factors, and exclude sales taxes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

GILDAN 2011 REPORT TO SHAREHOLDERS P.59

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| | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | ------------------------------------------

1. SIGNIFICANT ACCOUNTING POLICIES (continued):

|(m) | Cost of sales and gross profit:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
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|    | Cost of sales includes all raw material costs, manufacturing conversion costs, including manufacturing depreciation expense, sourcing costs, inbound freight and inter-facility transportation costs, and outbound freight to
customers. Cost of sales also includes the cost of purchased finished goods, costs relating to purchasing, receiving and inspection activities, manufacturing administration, third-party manufacturing services, sales-based royalty costs, insurance,
inventory write-downs, and customs and duties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
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|    | Gross profit is the result of sales less cost of sales. The Companys gross profit may not be comparable to this metric as reported by other companies, since some entities exclude depreciation expense, outbound freight to
customers and royalty costs from cost of sales.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
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|(n) | Selling, general and administrative expenses:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | Selling, general and administrative (SG&A) expenses include warehousing and handling costs, selling and administrative personnel costs, advertising and marketing expenses, costs of leased facilities and equipment, professional
fees, non-manufacturing depreciation and amortization expense, and other general and administrative expenses. SG&A expenses also include bad debt expense, and amortization of customer-related intangible assets, license agreements and non-compete
agreements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(o) | Advertising and product introduction expenditures:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | Advertising and co-op advertising expenses are expensed as incurred in selling, general and administrative expenses. Product introduction expenditures are one-time fees paid to retailers to allow the Companys products to be
placed on store shelves. These fees are recognized as a reduction in revenue when incurred unless the Company receives a benefit over a period of time and certain other criteria are met, such as identifiable contractual rights which are enforceable
and recoverable. In this case, these fees are recorded as an asset and are amortized as a reduction of revenue over the term of the arrangement. The Company evaluates the recoverability of these assets on a quarterly basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
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|(p) | Cotton and yarn procurements:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | The Company contracts to buy cotton and yarn with future delivery dates at fixed prices in order to reduce the effects of fluctuations in the prices of cotton used in the manufacture of its products. These contracts are not used
for trading purposes and are not considered to be financial instruments. The Company commits to fixed prices on a percentage of its cotton and yarn requirements up to eighteen months in the future. If the cost of committed prices for cotton and yarn
plus estimated costs to complete production exceed current selling prices, a loss is recognized for the excess as a charge to cost of sales.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
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|(q) | Financial instruments and hedging relationships:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | All financial instruments are classified into one of the following five categories: held-for-trading, held-to-maturity investments, loans and receivables, available-for-sale financial assets or other financial liabilities. All
financial instruments, including derivatives, are included on the consolidated balance sheet and are measured at fair value with the exception of loans and receivables, held-to-maturity investments and other financial liabilities, which are measured
at amortized cost. Subsequent measurement and recognition of changes in fair value of financial instruments depend on their initial classification. Held-for-trading financial investments are measured at fair value and all gains and losses are
included in net earnings in the period in which they arise. Available-for-sale financial instruments are measured at fair value with revaluation gains and losses included in other comprehensive income until the asset is removed from the balance
sheet or is determined to be impaired. Financial assets and liabilities measured at fair value use a fair value hierarchy to prioritize the inputs used in measuring fair value. Level 1, defined as observable inputs such as quoted prices in active
markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to
develop its own assumptions.

GILDAN 2011 REPORT TO SHAREHOLDERS P.60

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| | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | ------------------------------------------

1. SIGNIFICANT ACCOUNTING POLICIES (continued):

|(q) | Financial instruments and hedging relationships (continued):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
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|    | Derivative instruments are recorded as either assets or liabilities measured at their fair value unless exempted from derivative treatment as a normal purchase and sale. Certain derivatives embedded in other contracts must also be
measured at fair value. All changes in the fair value of derivatives are recognized in net earnings unless specific hedge criteria are met, which requires that a company must formally document, designate and assess the effectiveness of transactions
that receive hedge accounting. Derivatives that qualify as hedging instruments must be designated as either a cash flow hedge, when the hedged item is a future cash flow, or a fair value hedge, when the hedged item is a
recognized asset or liability. The effective portion of unrealized gains and losses related to a cash flow hedge are included in other comprehensive income. For a cash flow hedge, when hedging instruments become ineffective before their maturity or
the hedging relationship is terminated, any gains, losses, revenues or expenses associated with the hedging item that had previously been recognized in other comprehensive income as a result of applying hedge accounting are carried forward to be
recognized in net earnings in the same period as the hedged item affects net earnings, to the extent that it is probable that the forecasted cash flows will occur. For a fair value hedge, both the derivative and the hedged item are recorded at fair
value in the consolidated balance sheet and the unrealized gains and losses from both items are included in net earnings. Any derivative instrument that does not qualify for hedge accounting is recorded at fair value at each reporting date with the
change in fair value for the period being included in net earnings.
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|    | When the Company utilizes derivatives in hedge accounting relationships, the Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for
undertaking various hedge transactions. This process includes linking all derivatives to specific assets and liabilities on the balance sheet or to specific firm commitments or anticipated transactions. The Company also formally assesses, both at
the hedges inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are effective in offsetting cash flows of hedged items.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
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|(r) | Comprehensive income:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | Comprehensive income, which consists of net earnings and other comprehensive income, is defined as the change in shareholders equity from transactions and other events from non-owner sources. Other comprehensive income
refers to items recognized in comprehensive income but that are excluded from net earnings calculated in accordance with generally accepted accounting principles and includes unrealized gains and losses on financial assets classified as available
for sale, unrealized foreign currency translation gains and losses arising from self-sustaining foreign subsidiaries and changes in the fair value of the effective portion of qualifying cash flow hedging instruments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(s) | Income taxes:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | The Company utilizes the asset and liability method for accounting for income taxes which requires the establishment of future tax assets and liabilities, measured at substantively enacted tax rates, for all temporary differences
caused when the tax bases of assets and liabilities differ from those reported in the financial statements. The Company recognizes future income tax assets only to the extent that, in managements opinion, it is more likely than not that the
future income tax assets will be realized, based on estimates of future taxable income in applicable jurisdictions and other assumptions. A valuation allowance is provided to the extent that it is determined that it is no longer more likely than not
that the asset will be realized. Future income tax assets and future income tax liabilities are offset if they relate to the same taxable entity and the same taxation authority.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
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|    | The Companys income tax provision is based on interpretations of applicable tax laws, including income tax treaties between various countries in which the Company operates as well as underlying rules and regulations with
respect to transfer pricing. These interpretations involve judgments and estimates and may be challenged through government taxation audits that the Company is regularly subject to. The Company recognizes the benefits of uncertain tax filing
positions in its financial statements when it is considered likely that the tax position will be sustained upon examination by tax authorities, including the resolution of any related appeals or litigation processes, based on the technical merits of
the position. The tax benefits recognized from such positions are measured at the best estimate of the amounts expected to be realized upon ultimate resolution. The Company periodically reviews and adjusts its estimates and assumptions of income tax
assets and liabilities as circumstances warrant, such as changes to tax laws, administrative guidance, change in managements assessment of the technical merits of its positions due to new information, and the resolution of uncertainties
through either the conclusion of tax audits or expiration of prescribed time limits within relevant statutes. Previously recognized tax benefits relating to uncertain tax filing positions are derecognized if it becomes likely that the Companys
tax position will no longer be upheld.                                                                                                                                                                                                                                                                                       

GILDAN 2011 REPORT TO SHAREHOLDERS P.61

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| | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | ------------------------------------------

1. SIGNIFICANT ACCOUNTING POLICIES (continued):

|(t) | Stock-based compensation and other stock-based payments:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
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|    | The Company follows the fair value-based method to account for all transactions where services are received in exchange for stock-based compensation and other stock-based payments. For stock options and Treasury restricted share
units, compensation cost is measured at the fair value at the date of grant, net of estimated forfeitures, and is expensed over the awards vesting period. The fair value of stock options granted is estimated on the date of grant using the
Black-Scholes pricing model, and the fair value of Treasury restricted share units granted is equal to the market price of the common shares of the Company on the date of grant. For non-Treasury restricted share units, the compensation cost is
ultimately measured based on the market price of the Company's shares at the vesting date, net of estimated forfeitures, and is expensed over the award's vesting period. The offsetting liability is marked to the underlying market price until the
vesting date with any changes in the market value of the Company's shares resulting in a change in the measure of compensation cost for these awards until vested, which is recorded in the periods in which these changes occur. The measurement of the
compensation cost for certain Treasury and non-Treasury restricted share units, for which the vesting is partially contingent on the achievement of performance conditions, includes the probability of achieving the performance conditions, net of
estimated forfeitures.                                                                                 
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|    | For employee share purchase plans, the Company's contribution, on the employee's behalf, is recognized as compensation expense with an offset to share capital, and consideration paid by employees on purchase of stock is also
recorded as an increase to share capital.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(u) | Employee future benefits:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | The Company offers group defined contribution plans to eligible employees whereby the Company matches employees' contributions up to a fixed percentage of the employee's salary. Contributions by the Company to trustee-managed
investment portfolios or employee associations are expensed as incurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | In connection with the acquisition of Gold Toe Moretz in April 2011 as described in note 2, the Company acquired a funded qualified defined benefit plan (Retirement Plan) covering certain employees of Gold Toe Moretz.
The Retirement Plan has been frozen since January 1, 2007, and as such no additional employees became participants in the Retirement Plan and existing participants in the Retirement Plan ceased accruing any additional benefits after that date. The
pension obligation is actuarially determined using the projected benefit method to determine plan obligations and related periodic costs. Assets of the Retirement Plan are invested in high quality money market funds and are recorded at fair value.
Plan valuations require economic assumptions, including expected rates of return on plan assets, discount rates to value plan obligations, and participant demographic assumptions including mortality rates. Because the Retirement Plan is frozen,
salary escalation is not considered in the actuarial valuation, and there are no current service costs incurred. The actuarial assumptions used may differ materially from actual results due to changing market and economic conditions. Actual results
that differ from the actuarial assumptions are reflected as unrecognized gains and losses. Unrecognized gains and losses that exceed 10% of the greater of the plans projected benefit obligations or market value of assets at the beginning of
the period are amortized to earnings over the estimated service life of the remaining plan participants.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | The Company also maintains a liability for statutory severance and pre-notice benefit obligations for active employees located in the Caribbean Basin and Central America which is payable to the employees in a lump sum payment upon
termination of employment. The liability is based on managements best estimates of the ultimate costs to be incurred to settle the liability and is based on a number of assumptions and factors, including historical trends, actuarial
assumptions and economic conditions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(v) | Earnings per share:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | Basic earnings per share are computed by dividing net earnings by the weighted average number of common shares outstanding for the year. Diluted earnings per share are computed using the treasury stock method. Under the treasury
stock method, the weighted average number of common shares outstanding for the period is increased to include additional shares from the assumed exercise of options and the issuance of Treasury restricted share units, if dilutive. The number of
additional shares is calculated by assuming that all outstanding options are exercised and all outstanding Treasury restricted share units have vested, and that the proceeds from such exercises, as well as the amount of unrecognized stock-based
compensation which is considered to be assumed proceeds under the treasury stock method, are used to repurchase common shares at the average share price for the period. For Treasury restricted share units, only the unrecognized stock-based
compensation is considered assumed proceeds since there is no exercise price paid by the holder.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

GILDAN 2011 REPORT TO SHAREHOLDERS P.62

---

| | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | ------------------------------------------

1. SIGNIFICANT ACCOUNTING POLICIES (continued):

|(w) | Environmental expenditures:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Environmental expenditures that relate to current
      operations are expensed or capitalized as appropriate. Expenditures that
      extend the life of the related property or mitigate or prevent future
      environmental contamination are capitalized in property, plant and
      equipment and are generally amortized over the remaining useful life of
      the underlying asset. Expenditures that relate to an existing condition
      caused by past operations and which are not expected to contribute to
      current or future operations are expensed. Liabilities are recorded when
      environmental assessments and/or remedial efforts are likely, and when the
      costs, based on a specific plan of action in terms of the technology to be
      used and the extent of the corrective action required, can be reasonably
      estimated.                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | The Company may be obliged to incur certain future
      removal and site restoration costs should it decide to discontinue some of
      its activities. Where there is a legal obligation associated with the
      retirement of property, plant and equipment, and the fair value of the
      obligation can be reasonably estimated, a liability is initially
      recognized at its estimated fair value and a corresponding asset
      retirement cost is added to the carrying value of the related asset and
      amortized over the remaining life of the underlying asset. The Company had
      no recognized asset retirement obligations as at October 2, 2011 and
      October 3, 2010, as the Company plans to continue its activities for an
      indeterminate period and the range of possible methods of restoration are
      not conclusive at this time. As such, the information available to the
      Company is insufficient to reasonably estimate the fair value of a
      conditional asset retirement obligation.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(x) | Business acquisitions:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | The Company accounts for business acquisitions using the
      purchase method. Accordingly, the purchase price of a business
      acquisition, including direct and incremental costs incurred to effect the
      business combination, is allocated to its identifiable net assets,
      including certain restructuring and integration costs of the acquired
      business, on the basis of estimated fair values as at the date of
      purchase, with any excess being assigned to goodwill. When the amounts
      assigned to identifiable net assets exceed the cost of the purchase,
      resulting in negative goodwill, the excess is applied, to the extent
      possible, to certain non-current assets, with the balance recorded as an
      extraordinary gain.                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(y) | Use of estimates:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | The preparation of financial statements in conformity
      with generally accepted accounting principles requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent liabilities and fair values of
      financial instruments at the date of the financial statements, and the
      reported amounts of revenues and expenses during the reporting period.
      These estimates involve varying degrees of judgment and uncertainty, and
      are based on a number of factors, including historical experience, current
      events and industry trends, information available from outside sources,
      managements business plans, and other assumptions that management
      believes are reasonable based on information available at the time they
      are made. Given the inherent uncertainty involved in making estimates,
      actual results reported in future periods could differ materially from
      these estimates.     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Significant areas requiring the use of management
      estimates and assumptions include: the allowance for doubtful accounts and
      accruals for sales promotional programs; the valuation of inventory at the
      lower of cost and net realizable value; the useful life and valuation of
      property, plant and equipment and intangible assets with finite lives;
      actuarial and economic assumptions used in determining pension costs and
      accrued pension liabilities; the composition and valuation of future
      income tax assets and liabilities; and the assumptions used in impairment
      tests on long-lived assets and indefinite life intangible assets and
      goodwill.                                                                                                                                                                                                                                                                                                                                   

2. BUSINESS ACQUISITIONS:

Gold Toe Moretz Holdings
Corp.

On April 15, 2011, the Company acquired
100% of the capital stock of Gold Toe Moretz Holdings Corp. (Gold Toe Moretz),
a leading supplier of high-quality branded athletic, casual and dress socks for
national chains, mass-market retailers, price clubs, department stores and
specialty sporting goods stores in the United States.

GILDAN 2011 REPORT TO SHAREHOLDERS P.63

---

| | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | ------------------------------------------

2. BUSINESS ACQUISITIONS (continued):

Gold Toe Moretz Holdings Corp. (continued)

The aggregate purchase price of $349.6 million, net of cash
acquired, included direct acquisition related costs of $7.3 million. The
purchase agreement provides for an additional purchase price consideration of up
to 150,000 common shares which have been issued in the form of treasury
restricted share units (Treasury RSUs) at closing, with a fair value of
approximately $4 million as at October 2, 2011. The vesting of the Treasury RSUs
is contingent on specified future events. This contingent consideration has not
been reflected in the purchase price of the acquisition on the basis that the
outcome of the contingency cannot be determined beyond a reasonable doubt at
this time. Any additional purchase price consideration paid by the Company will
be accounted for as an increase to goodwill. The Company financed the
acquisition by using approximately $100 million of cash on hand and
approximately $250 million drawn on the Companys revolving long-term credit
facility.

The Company accounted for this acquisition using the purchase
method and the results of Gold Toe Moretz have been consolidated with those of
the Company from the date of acquisition. The Company has allocated the purchase
price to the assets acquired and liabilities assumed based on managements best
estimate of their fair values and taking into account all relevant information
available at that time.

The following table summarizes the estimated fair value of
assets acquired and liabilities assumed at the date of acquisition:

|                                                                                                |   |         |  
|----------------------------------------------------------------------------------------------- | - | ------- | -
|Assets acquired:                                                                                |   |         |  
|Trade accounts receivable                                                                       | $ | 28,150  |  
|Income
      taxes receivable                                                                   |   | 208     |  
|Inventories                                                                                     |   | 57,549  |  
|Prepaid
      expenses and deposits                                                             |   | 2,080   |  
|Future income taxes,
      current                                                              |   | 10,810  |  
|Other
      current assets                                                                      |   | 122     |  
|Property, plant and
      equipment                                                             |   | 3,523   |  
|Intangible assets (i)                                                                           |   | 204,700 |  
|Other assets                                                                                    |   | 495     |  
|                                                                                                |   | 307,637 |  
|                                                                                                |   |         |  
|Liabilities assumed:                                                                            |   |         |  
|Accounts payable and
      accrued liabilities                                                  |   | (54,828 | )
|Future
      income taxes, net, non-current                                                     |   | (40,377 | )
|                                                                                                |   | (95,205 | )
|                                                                                                |   |         |  
|Net identifiable assets acquired                                                                |   | 212,432 |  
|Goodwill                                                                                        |   | 137,207 |  
|Purchase price                                                                                  | $ | 349,639 |  
|                                                                                                |   |         |  
|Consideration:                                                                                  |   |         |  
|Cash paid
      at closing, net of cash acquired of $3,576                                      | $ | 342,368 |  
|Direct acquisition costs                                                                        |   | 7,271   |  
|                                                                                                | $ | 349,639 |  
|                                                                                                |   |         |  
|Goodwill recorded in connection with this
      acquisition is not deductible for tax purposes. |   |         |  

GILDAN 2011 REPORT TO SHAREHOLDERS P.64

---

| | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | ------------------------------------------

2. BUSINESS ACQUISITIONS (continued):

Gold Toe Moretz Holdings Corp. (continued)

|(i) | The estimated fair value of intangible assets of $204.7
      million included in the purchase price allocation above consists of the
      following:
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------

Trademarks (not subject to amortization)
    $
    94,000License agreements
    
    51,000Customer relationships
    
    58,000Non-compete agreements
    
    1,700$
    204,700


Shahriyar Fabric Industries Limited

Effective March 31, 2010, the Company acquired 100% of the
common shares of Shahriyar Fabric Industries Limited ("Shahriyar"), a
vertically-integrated knitting, dyeing, finishing, cutting and sewing facility
for the manufacture of high-quality ring-spun T-shirts near Dhaka, Bangladesh,
for a total consideration of $15.9 million.

The Company accounted for this acquisition using the purchase
method and the results of Shahriyar have been consolidated with those of the
Company from the date of acquisition. The Company has allocated the purchase
price to the assets acquired based on their fair value and taking into account
all relevant information available at that time.

The following table summarizes the estimated fair value of
assets acquired and liabilities assumed at the date of acquisition:

|                                                                         |   |        |  
|------------------------------------------------------------------------ | - | ------ | -
|                                                                         |   |        |  
|Assets acquired:                                                         |   |        |  
|Trade
      accounts receivable                                          | $ | 1,392  |  
|Inventories                                                              |   | 1,120  |  
|Other
      current assets                                               |   | 1,383  |  
|Property, plant and
      equipment                                      |   | 12,181 |  
|                                                                         |   | 16,076 |  
|Liabilities assumed:                                                     |   |        |  
|Accounts payable and
      accrued liabilities                           |   | (3,714 | )
|                                                                         |   |        |  
|Net identifiable assets acquired                                         |   | 12,362 |  
|Goodwill                                                                 |   | 3,488  |  
|Purchase price                                                           | $ | 15,850 |  
|                                                                         |   |        |  
|Consideration:                                                           |   |        |  
|Payment
      to shareholders                                            | $ | 3,250  |  
|Repayment
      of debt on behalf of the selling shareholders at closing |   | 12,000 |  
|Direct acquisition costs                                                 |   | 600    |  
|                                                                         | $ | 15,850 |  

The Companys repayment of the debt on behalf of the selling
shareholders at closing was funded through a short-term banking facility of $12
million. This facility bore interest at 9.5% per annum, and was secured by a
restricted cash deposit. As at October 3, 2010 the amount drawn under the
short-term banking facility amounted to $9.9 million with a corresponding
restricted cash deposit of the same amount, and the Company offset these amounts
owing under the short-term banking facility against the collateral deposit in
the consolidated balance sheet since the Company had the legal right of offset
and used the collateral deposit to repay the bank facility in fiscal 2011. As at
October 2, 2011, there were no amounts drawn under the short-term banking
facility.

Goodwill recorded in connection with this acquisition is not
deductible for tax purposes.

GILDAN 2011 REPORT TO SHAREHOLDERS P.65

---

| | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | ------------------------------------------

|                                             |   |         |  |   |         | 
|-------------------------------------------- | - | ------- |  | - | ------- | 
|3. INVENTORIES:                              |   |         |  |   |         | 
|                                             |   |         |  |   |         | 
|Inventories were comprised of the following: |   |         |  |   |         | 
|                                             |   |         |  |   |         | 
|                                             |   | 2011    |  |   | 2010    | 
|                                             |   |         |  |   |         | 
|Finished goods                               | $ | 469,600 |  | $ | 240,884 | 
|Raw materials and spare parts inventories    |   | 74,284  |  |   | 54,353  | 
|Work in process                              |   | 31,710  |  |   | 37,305  | 
|                                             | $ | 575,594 |  | $ | 332,542 | 

The amount of inventory recognized as an expense and included
in cost of sales was $1,262.9 million (2010 - $928.9 million; 2009 - $795.0
million), which included an expense of $6.2 million (2010 - $7.1 million; 2009 -
$8.1 million) related to the write-down of inventory to net realizable value.

|4. PROPERTY,
      PLANT AND EQUIPMENT: |   |         |  |   |              |  |   |          | 
|--------------------------------------- | - | ------- |  | - | ------------ |  | - | -------- | 
|                                        |   |         |  |   |              |  |   |          | 
|                                        |   |         |  |   | Accumulated  |  |   | Net book | 
|2011                                    |   | Cost    |  |   | depreciation |  |   | value    | 
|                                        |   |         |  |   |              |  |   |          | 
|Land                                    | $ | 35,549  |  | $ | -            |  | $ | 35,549   | 
|Buildings and improvements              |   | 196,531 |  |   | 47,124       |  |   | 149,407  | 
|Manufacturing equipment                 |   | 511,543 |  |   | 227,935      |  |   | 283,608  | 
|Other equipment                         |   | 99,256  |  |   | 49,970       |  |   | 49,286   | 
|Assets not yet utilized in operations   |   | 47,548  |  |   | -            |  |   | 47,548   | 
|                                        | $ | 890,427 |  | $ | 325,029      |  | $ | 565,398  | 
|                                        |   |         |  |   |              |  |   |          | 
|                                        |   |         |  |   | Accumulated  |  |   | Net book | 
|2010                                    |   | Cost    |  |   | depreciation |  |   | value    | 
|                                        |   |         |  |   |              |  |   |          | 
|Land                                    | $ | 34,923  |  | $ | -            |  | $ | 34,923   | 
|Buildings and improvements              |   | 169,865 |  |   | 42,010       |  |   | 127,855  | 
|Manufacturing equipment                 |   | 413,287 |  |   | 176,686      |  |   | 236,601  | 
|Other equipment                         |   | 73,599  |  |   | 38,005       |  |   | 35,594   | 
|Assets not yet utilized in operations   |   | 44,319  |  |   | -            |  |   | 44,319   | 
|                                        | $ | 735,993 |  | $ | 256,701      |  | $ | 479,292  | 

Assets not yet utilized in operations include expenditures
incurred to date for plant expansions which are still in process and equipment
not yet placed into service as at the balance sheet date.

5. GOODWILL AND INTANGIBLE ASSETS:

|(a) | Goodwill:                                                         
|--- | ------------------------------------------------------------------
|    |                                                                   
|    | The change in the carrying amount of goodwill is as
      follows:

2011
    
    
    2010Balance, beginning of year
    $
    10,197
    
    $
    6,709Goodwill acquired (note 2)
    
    137,207
    
    
    3,488Payment of contingent consideration (note
      19(d))
    
    5,815
    
    
    -Balance, end of
      year
    $
    153,219
    
    $
    10,197


GILDAN 2011 REPORT TO SHAREHOLDERS P.66

---

| | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | ------------------------------------------

5. GOODWILL AND INTANGIBLE ASSETS (continued):

|(b) | Intangible assets:
|--- | ------------------

Accumulated
    
    
    Net book2011
    
    Cost
    
    
    amortization
    
    
    valueCustomer contracts and customer
      relationships
    $
    121,526
    
    $
    14,446
    
    $
    107,080Trademarks (not subject to amortization)
    
    94,000
    
    
    -
    
    
    94,000License agreements
    
    51,000
    
    
    3,484
    
    
    47,516Computer software
    
    26,038
    
    
    19,477
    
    
    6,561Non-compete agreements
    
    1,700
    
    
    390
    
    
    1,310$
    294,264
    
    $
    37,797
    
    $
    256,467Accumulated
    
    
    Net book2010
    
    Cost
    
    
    amortization
    
    
    valueCustomer contracts and customer
      relationships
    $
    63,526
    
    $
    9,966
    
    $
    53,560Computer software
    
    26,453
    
    
    18,692
    
    
    7,761$
    89,979
    
    $
    28,658
    
    $
    61,321


Computer software includes $3.9 million (2010  nil) of
expenditures incurred to date for information technology projects which are
still in process and not yet placed into service as at the balance sheet date.

6. OTHER ASSETS:

|                                                                         |   | 2011   |  |   | 2010   | 
|------------------------------------------------------------------------ | - | ------ |  | - | ------ | 
|                                                                         |   |        |  |   |        | 
|Prepaid lease deposit                                                    | $ | 6,073  |  | $ | 1,500  | 
|Long-term prepaid expenses and other                                     |   | 3,069  |  |   | 3,564  | 
|Deferred financing charges                                               |   | 2,789  |  |   | -      | 
|Long-term non-trade receivable                                           |   | 1,120  |  |   | 953    | 
|Restricted cash related to the acquisition of Prewett
      (note 19(d)) |   | -      |  |   | 5,788  | 
|                                                                         | $ | 13,051 |  | $ | 11,805 | 

7. REVOLVING LINE OF CREDIT:

The Company's joint venture, CanAm, has a revolving line of
credit in the amount of $4.0 million. Borrowings are due on demand and bear
interest at LIBOR plus 2.0%, with a minimum interest rate of 4.0%, resulting in
an initial rate of 4.0% per annum. The line of credit is secured by a first
ranking security interest on the assets of CanAm. There were no amounts drawn
under the line of credit at October 2, 2011 and October 3, 2010.

GILDAN 2011 REPORT TO SHAREHOLDERS P.67

---

| | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | ------------------------------------------

8. LONG-TERM DEBT:

In June 2011, the Company increased its existing unsecured
revolving long-term credit facility from $400 million to $800 million. The
amended facility has a maturity date of June 2016. Amounts drawn under the
revised facility bear interest at a variable bankers acceptance or U.S.
LIBOR-based interest rate plus a spread ranging from 125 to 200 basis points.
The Company incurred certain costs related to the revolving long-term credit
facility. These charges are recorded at cost and are being amortized as a
financial expense on a straight-line basis over the term of the related
facility. The deferred financing charges are included in other assets on the
consolidated balance sheet. At October 2, 2011, $209.0 million (October 3, 2010
- nil) was drawn under this facility bearing a combined effective interest rate
for the period of 2.3%, including the impact of interest rate swaps. In
addition, an amount of $5.8 million (October 3, 2010 -$12.7 million) has been
committed against this facility to cover various letters of credit as described
in note 14.

Under various financing arrangements with its bankers and other
long-term lenders, including the revolving long-term credit facility, the Company is
required to meet certain financial covenants. The revolving long-term credit facility
requires the Company to maintain a net debt to trailing twelve months EBITDA ratio below 3.0:1, although the facility provides that this limit may be
exceeded in the short term under certain circumstances, and to maintain an
interest coverage ratio. The Company was in compliance with all financial
covenants as at October 2, 2011 and October 3, 2010.

9. EMPLOYEE BENEFIT PLANS:

Defined Benefit Plan

The Company has a funded qualified defined benefit pension plan
(Retirement Plan) covering certain employees of Gold Toe Moretz. At the time
of the acquisition of Gold Toe Moretz in April 2011, the Retirement Plan was in
a net deficit position of $21.8 million, which was included in accounts payable
and accrued liabilities. Managements intention is to fully fund the deficit,
and subsequently liquidate and wind-up the Retirement Plan within the next
twelve months. An actuarial valuation was performed at the date of acquisition
and at October 2, 2011 with liabilities determined on a plan termination basis.
The last valuation for funding purposes was performed on January 1, 2011, and
the next valuation for funding purposes is expected to be performed on January
1, 2012. The Company has made funding contributions of $19 million, and has
begun de-risking the Retirement Plan through settlement payments totaling $39
million for the period from April 15, 2011 to October 2, 2011. The Company
expects to contribute approximately $5.5 million to the Retirement Plan in
fiscal 2012 followed by the termination and wind-up of the Retirement Plan
shortly thereafter.

|At October 2, 2011, the funded status of the Companys
      Retirement Plan was as follows: |   |                 |  
|-------------------------------------------------------------------------------------------- | - | --------------- | -
|                                                                                             |   |                 |  
|                                                                                             |   | October 2, 2011 |  
|                                                                                             |   |                 |  
|Benefit obligation at April 15, 2011                                                         | $ | 55,975          |  
|Interest cost                                                                                |   | 900             |  
|Actuarial loss                                                                               |   | 1,574           |  
|Settlement charge                                                                            |   | 545             |  
|Benefits paid                                                                                |   | (1,879          | )
|Plan settlements                                                                             |   | (39,004         | )
|Benefit obligation at end of year                                                            | $ | 18,111          |  
|                                                                                             |   |                 |  
|Fair value of plan assets at April 15, 2011                                                  | $ | 34,181          |  
|Employer contributions                                                                       |   | 19,000          |  
|Plan settlements                                                                             |   | (39,004         | )
|Actual return on plan assets                                                                 |   | 267             |  
|Benefits paid                                                                                |   | (1,879          | )
|Fair value of plan
      assets at end of year                                               | $ | 12,565          |  
|                                                                                             |   |                 |  
|Funded status - plan deficit                                                                 | $ | (5,546          | )
|Unamortized actuarial loss                                                                   |   | 1,574           |  
|Accrued benefit
      liability - included in accounts payable and accrued liabilities       | $ | (3,972          | )
|                                                                                             |   |                 |  
|The plan assets are invested entirely in
      high quality money market funds.              |   |                 |  

GILDAN 2011 REPORT TO SHAREHOLDERS P.68

---

| | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | ------------------------------------------

9. EMPLOYEE BENEFIT PLANS (continued):

Net periodic pension expense of the Companys Retirement Plan
for the year ended October 2, 2011 includes the following components:

|                                                                                             |   | 2011  |  
|-------------------------------------------------------------------------------------------- | - | ----- | -
|                                                                                             |   |       |  
|Interest cost                                                                                | $ | 900   |  
|Expected return on plan assets                                                               |   | (267  | )
|Settlement charge                                                                            |   | 545   |  
|Net periodic
      pension expense - included in restructuring and acquisition-related costs | $ | 1,178 |  

Weighted-average assumptions to determine benefit obligations
and net periodic benefit cost:

|                              |  | 2011  | 
|----------------------------- |  | ----- | 
|                              |  |       | 
|Benefit obligation:           |  |       | 
|Discount rate                 |  | 4.84% | 
|                              |  |       | 
|Net periodic benefit cost:    |  |       | 
|Discount rate                 |  | 3.74% | 
|Rate of return on plan assets |  | 3.50% | 

Defined Contribution PlanFor the year ended
October 2, 2011, defined contribution expenses were $2.0 million (October 3,
2010 - $1.4 million; October 4, 2009 - $1.4 million).

Statutory SeveranceDuring fiscal 2011, the
Company expensed $12.2 million (2010 - $9.1 million; 2009 - $7.1 million) in
cost of sales, representing managements best estimate of the cost of statutory
severance and pre-notice benefit obligations accrued for active employees
located in the Caribbean Basin and Central America. As at October 2, 2011, an
amount of $12.6 million (October 3, 2010 - $10.2 million) has been included in
accounts payable and accrued liabilities.

10. SHAREHOLDERS EQUITY:

|(a) | The Company has a shareholder
  rights plan which provides the Board of Directors and the shareholders with
  additional time to assess any unsolicited take-over bid for the Company and,
  where appropriate, pursue other alternatives for maximizing shareholder value.                                                                                                                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(b) | Accumulated other comprehensive
  income:                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | At the commencement of fiscal 2004, the Company adopted the
U.S. dollar as its functional and reporting currency. The change in the
functional currency for the prior periods resulted in a currency translation
adjustment of $26.2 million, which is reflected in the accumulated other
comprehensive income. In addition, accumulated other comprehensive income
includes the changes in the fair value of the effective portion of qualifying
cash flow hedging instruments outstanding at the end of the period.

GILDAN 2011 REPORT TO SHAREHOLDERS P.69

---

| | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | ------------------------------------------

10. SHAREHOLDERS EQUITY (continued):

|(c) | Share capital:                                                                                                                                                                                                                                                                                                                                                                                             
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                            
|    | Authorized:                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                            
|    | First preferred shares, without limit as to number and without par value, issuable in series and non-voting. Second preferred shares, without limit as to number and without par value, issuable in series and non-voting. As at
October 2, 2011 and October 3, 2010 none of the first and second preferred shares were issued. Common shares, authorized without limit as to number and without par value.
|    |                                                                                                                                                                                                                                                                                                                                                                                                            
|    | Issued:                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                            
|    | As at October 2, 2011, there were 121,330,544 common shares (October 3, 2010 - 121,351,998) issued and outstanding.                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                            
|(d) | Normal Course Issuer Bid:                                                                                                                                                                                                                                                                                                                                                                                  

In December 2010, the Company announced the reinstatement of a normal course issuer bid to repurchase up to one million outstanding common shares of the Company on the TSX and the NYSE (the NCIB). During fiscal 2011, the Company
repurchased and cancelled a total of 0.4 million common shares for a total cost of $10.5 million. Of the total cost, $0.3 million was charged to share capital and $10.2 million was charged to retained earnings as there was no amount of
contributed surplus attributable to these common shares. On December 2, 2011 the TSX approved the renewal of the Companys NCIB to purchase up to one million common shares, representing approximately 0.8% of its issued and outstanding common
shares, in accordance with the requirements of the TSX. Common shares purchased under the NCIB will be cancelled.

|(e) | Common shares purchased as settlement for
  Non-Treasury RSUs:
|--- | --------------------------------------------------------------

In September 2011, the Company established a trust for the purpose of purchasing 79,108 common shares on the open market for a total cost of $2.2 million which were used to settle the vesting of non-Treasury RSUs in lieu of cash. As such, the
common shares were held in trust for and on behalf of the holders of the vesting non-Treasury RSUs, and the Company reflected the common shares as held in treasury at October 2, 2011. The common shares held in treasury were subsequently re-issued in
October 2011, when the Non-Treasury RSUs vested. At the time the shares were purchased, the corresponding liability recorded in the amount of $2.2 million for the Non-Treasury RSUs initially expected to be settled in cash was reclassified to
contributed surplus.

11. STOCK-BASED COMPENSATION:

|(a) | Employee share purchase plans:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | The Company has employee share purchase plans which allow eligible employees to authorize payroll deductions of up to 10% of their salary to purchase from Treasury, common shares of the Company at a price of 90% of the then
current stock price as defined in the plans. Shares purchased under the plans prior to January 1, 2008 must be held for a minimum of one year. Employees purchasing shares under the plans subsequent to January 1, 2008 must hold the shares for a
minimum of two years. The Company has reserved 2,800,000 common shares for issuance under the plans. As at October 2, 2011, a total of 266,925 shares (2010 - 243,702) were issued under these plans. Included as compensation costs in selling, general
and administrative expenses is $0.1 million (2010 - $0.1 million; 2009 - $0.1 million) relating to the employee share purchase plans.

GILDAN 2011 REPORT TO SHAREHOLDERS P.70

---

| | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | ------------------------------------------

11. STOCK-BASED COMPENSATION (continued):

|(b) | Stock options and restricted share units:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | The Companys Long-Term Incentive Plan (the "LTIP") includes stock options and restricted share units. The LTIP allows the Board of Directors to grant stock options, dilutive restricted share units ("Treasury RSUs") and non-dilutive restricted share units ("non-Treasury RSUs") to officers and other key employees of the Company and its subsidiaries. On February 2, 2006, the shareholders of the Company approved an amendment to the LTIP to fix at 6,000,316 the number of
common shares that are issuable pursuant to the exercise of stock options and the vesting of Treasury RSUs. As at October 2, 2011, 2,530,322 common shares remained authorized for future issuance under this plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | The exercise price payable for each common share covered by a stock option is determined by the Board of Directors at the date of the grant, but may not be less than the closing price of the common shares of the Company on the
trading day immediately preceding the effective date of the grant. Stock options granted since fiscal 2007 vest equally beginning on the second, third, fourth and fifth anniversary of the grant date, with the exception of a special one-time award of
409,711 options which cliff vest on the fifth anniversary of the grant date, and expire no more than seven or ten years after the date of the grant. All stock options granted prior to fiscal 2007 have fully vested.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | As previously disclosed in fiscal 2010, an internal review of all stock option grants made by the Company since its initial public offering in 1998 was conducted by a special committee of independent directors of the Board. As a
result of this review, the Company determined that certain stock options granted to employees, officers and directors during fiscal years 1999 to 2003 had been awarded at prices which were inconsistent with the terms of the Companys LTIP in
effect at the time, as well as with certain requirements of the Toronto Stock Exchange. The special committee of the Board concluded that there had been no intention of wrongdoing on the part of any current or former director or senior officer in
the granting of stock options during the aforesaid period. However, current directors and senior executive officers who inadvertently benefitted from more favourable pricing of stock options have voluntarily reimbursed the Company for any excess
gains and have agreed to the repricing of unexercised options. In addition, the Company pursued all reasonable avenues for recoveries from other parties. The steps taken by the Company resulted in: (i) the Company increasing the exercise price of
261,440 unexercised vested stock options during the second quarter of fiscal 2010, resulting in a $0.2 million increase in the aggregate exercise value of the unexercised stock options, or representing an increase to the weighted average
exercise price for these stock options of $0.77 (from $6.18 to $6.95), and also resulting in an increase of $0.10 to the weighted average exercise price of all options outstanding as at April 4, 2010 (from $18.76 to $18.86),
and; (ii) the Company recovering $2.2 million in cash, including $1.1 million from current senior officers during the second quarter of fiscal 2010 relating to stock options that were previously exercised, and $1.1 million from other
parties during the first quarter of fiscal 2010. Amounts recovered in cash from current senior officers have been recorded as a credit to contributed surplus. No adjustment was required to prior year financial statements under either Canadian or
U.S. GAAP.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | Holders of Treasury RSUs, non-Treasury RSUs and deferred share units are entitled to dividends declared by the Company which are recognized in the form of additional equity awards equivalent in value to the dividends paid on
common shares. The vesting conditions of the additional equity awards are subject to the same performance objectives and other terms and conditions as the underlying equity awards. The additional awards related to outstanding Treasury RSUs are
credited to contributed surplus when the dividends are declared, whereas the additional awards related to outstanding non-Treasury RSUs and deferred share units are credited to accounts payable and accrued liabilities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

GILDAN 2011 REPORT TO SHAREHOLDERS P.71

---

| | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | ------------------------------------------

11. STOCK-BASED COMPENSATION (continued):

|(b) | Stock options and restricted share units (continued):
|--- | -----------------------------------------------------
|    |                                                      
|    | Outstanding stock options were as
  follows:         

Weighted averageNumber
    
    
    exercise price(in Canadian dollars)Stock options outstanding, October 4, 2009
    
    1,010
    
    $
    16.21Changes in outstanding stock options:Granted
    
    498
    
    
    21.77Exercised
    
    (183
    )
    
    7.06Forfeited
    
    (26
    )
    
    26.87Stock options outstanding, October 3, 2010
    
    1,299
    
    
    19.57Changes in outstanding stock options:Granted
    
    69
    
    
    28.64Exercised
    
    (379
    )
    
    8.72Forfeited
    
    (28
    )
    
    26.88Stock options outstanding, October 2, 2011
    
    961
    
    $
    24.28


The weighted average fair value of each
stock option granted was
estimated on the date of grant using the Black-Scholes pricing model with the
following weighted average assumptions:

2011
    
    
    2010
    
    
    2009Risk-free interest rate
    
    2.01%
    
    
    2.69%
    
    
    3.06%Expected volatility
    
    52.37%
    
    
    42.48%
    
    
    34.98%Expected life
    
    5.25 years
    
    
    7.1 years
    
    
    5.25 yearsExpected dividend
      yield
    
    -
    
    
    -
    
    
    -


The grant date weighted average fair value of
stock options granted
in fiscal 2011 was $13.36 (2010  $8.51; 2009 $9.24).

The following table summarizes information about stock options
outstanding and exercisable at October 2, 2011:

Options outstanding
    
    Options exercisableRange of exercise prices
    
    Number
    
    
    Weighted average
    
    exercise price
    
    
    Weighted average
    
    remaining
      contractual 
    life (yrs)
    
    
    Number
    
    
    Weighted average
    
    exercise price(in Canadian
      dollars)
    
    
    
    
    (in Canadian dollars)
    
    
    
    
    
    
    
    
    (in Canadian dollars)$ 5.40 - $ 5.72
    
    31
    
    $
    5.53
    
    
    0.25
    
    
    31
    
    $
    5.53$20.12 - $23.49
    
    667
    
    
    22.21
    
    
    6.60
    
    
    38
    
    
    23.49$27.17 - $39.39
    
    263
    
    
    31.75
    
    
    3.33
    
    
    175
    
    
    31.93961
    
    $
    24.28
    
    
    
    
    
    244
    
    $
    27.25


A Treasury RSU represents the right of an individual to receive
one common share on the vesting date without any monetary consideration being
paid to the Company. With the exception of a special, one-time award, which
vests at the end of an eight-year period, all other Treasury RSUs awarded to
date vest within a five-year vesting period. The vesting of at least 50% of each
Treasury RSU grant is contingent on the achievement of performance conditions
that are primarily based on the Companys average return on assets performance
for the period as compared to the S&P/TSX Capped Consumer Discretionary
Index, excluding income trusts, or as determined by the Board of Directors.

GILDAN 2011 REPORT TO SHAREHOLDERS P.72

---

| | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | ------------------------------------------

11. STOCK-BASED COMPENSATION (continued):

|(b) | Stock
      options and restricted share units (continued):
|--- | -----------------------------------------------------------
|    |                                                            
|    | Outstanding Treasury RSUs were as
  follows:               

Weighted averageNumber
    
    
    fair
      value per unitTreasury RSUs outstanding, October 4, 2009
    
    758
    
    $
    18.48Changes in outstanding Treasury RSUs:Granted
    
    202
    
    
    18.57Settled through the
      issuance of common shares
    
    (182
    )
    
    11.64Forfeited
    
    (30
    )
    
    24.17Treasury RSUs outstanding, October 3, 2010
    
    748
    
    
    19.93Changes in outstanding Treasury RSUs:Granted
    
    62
    
    
    35.40Granted
      for dividends declared
    
    6
    
    
    29.93Settled through the
      issuance of common shares
    
    (26
    )
    
    22.68Forfeited
    
    (29
    )
    
    25.78Treasury RSUs granted as contingent consideration
      (note 2)
    
    150
    
    
    35.40Treasury RSUs outstanding, October 2, 2011
    
    911
    
    $
    23.34


As at October 2, 2011 and October 3, 2010, none of the
outstanding Treasury RSUs were vested for which shares were issued subsequent to
year-end. The compensation expense included in selling, general and
administrative expenses and cost of sales, in respect of the options and
Treasury RSUs, was $4.9 million (2010 - $4.1 million; 2009 - $3.0 million). The
counterpart has been recorded as contributed surplus. When the shares are issued
to the employees, the amounts previously credited to contributed surplus are
transferred to share capital. As described in note 2, the compensation expense
excludes the value of 150,000 Treasury RSUs granted in connection with the
acquisition of Gold Toe Moretz as they are considered contingent consideration.

Outstanding non-Treasury RSUs were as follows:NumberNon-Treasury RSUs outstanding, October 4,
      2009
    
    185Changes in outstanding non-Treasury RSUs:Granted
    
    214Settled
    
    (70
    )Forfeited
    
    (16
    )Non-Treasury RSUs outstanding, October 3, 2010
    
    313Changes in outstanding non-Treasury RSUs:Granted
    
    151Granted
      for dividends declared
    
    3Settled
    
    (29
    )Forfeited
    
    (42
    )Non-Treasury RSUs
      outstanding, October 2, 2011
    
    396


GILDAN 2011 REPORT TO SHAREHOLDERS P.73

---

| | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | ------------------------------------------

11. STOCK-BASED COMPENSATION (continued):

|(b) | Stock options and restricted share units (continued):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | Non-Treasury RSUs have the same features as Treasury
      RSUs, except that their vesting period is a maximum of three years and
      they are expected to be settled in cash at the end of the vesting period.
      The settlement amount is based on the Company's stock price at the vesting
      date. Beginning in fiscal 2010, 100% of Non-Treasury RSUs awarded to
      executive officers are dependent upon the financial performance of the
      Company relative to a benchmark group of Canadian publicly listed
      companies. In addition, up to two times the actual number of Non- Treasury
      RSUs awarded to executive officers can vest if exceptional financial
      performance is achieved. As of October 2, 2011, the weighted average fair
      value per non-Treasury RSU was $25.84. Non-Treasury RSUs that are expected
      to be settled in cash are non-dilutive as no common shares are issued from
      treasury. As at October 2, 2011, none (2010  18,911) of the outstanding
      non-Treasury RSUs were vested.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | The compensation expense included in selling, general and
      administrative expenses and cost of sales, in respect of the non-Treasury
      RSUs, was $3.7 million (2010 - $2.9 million; 2009 - $0.8 million). The
      liability under this plan as at October 2, 2011, is $3.9 million (October
      3, 2010 - $3.1 million) and is recorded in accounts payable and accrued
      liabilities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

12. DEFERRED SHARE UNIT PLAN:

The Company has a deferred share unit plan for independent
members of the Companys Board of Directors who must receive at least 50% of
their annual board retainers in the form of deferred share units ("DSUs"). The
value of these DSUs is the market price of the Companys common shares at the
time of payment of the retainers or fees. DSUs granted under the plan will be
redeemable and the value thereof payable in cash only after the director ceases
to act as a director of the Company. As at October 2, 2011, there were 78,416
(2010 - 53,602) DSUs outstanding at a value of $2.0 million (2010 - $1.5
million). This amount is included in accounts payable and accrued liabilities.
The DSU obligation is adjusted each quarter based on the market value of the
Companys common shares. The Company includes the cost of the DSU plan in
selling, general and administrative expenses.

|Changes in outstanding DSUs were as follows: |  |        | 
|-------------------------------------------- |  | ------ | 
|                                             |  |        | 
|                                             |  | Number | 
|                                             |  |        | 
|DSUs outstanding, October 4, 2009            |  | 36     | 
|Granted                                      |  | 18     | 
|DSUs outstanding, October 3, 2010            |  | 54     | 
|Granted                                      |  | 24     | 
|DSUs outstanding, October 2, 2011            |  | 78     | 

13. COMMITMENTS AND CONTINGENCIES:

|(a) | The minimum annual lease payments under operating leases
      for premises, equipment and aircraft are approximately as
  follows:
|--- | -----------------------------------------------------------------------------------------------------------------------------------

Fiscal year2012
    $
    12,2102013
    
    9,1122014
    
    6,5552015
    
    5,0322016
    
    4,316Thereafter
    
    10,750$
    47,975


GILDAN 2011 REPORT TO SHAREHOLDERS P.74

---

| | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | ------------------------------------------

13. COMMITMENTS AND CONTINGENCIES (continued):

|(b) | As at October 2, 2011, there were contractual obligations outstanding of approximately $54.9 million for the acquisition of property, plant and equipment (2010 - $76.1 million).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(c) | During fiscal 2011, the United States Department of Agriculture advanced $3.3 million (2010 - $3.1 million; 2009 - $4.3 million) to CanAm, in connection with a subsidy program with the intent of assisting domestic
spinning and textile manufacturers. Amounts received under this program are based on U.S. cotton consumption. The assistance provided is not repayable, provided that eligible capital investments are incurred over a certain period of time for amounts
equivalent to the assistance received. All amounts received are recorded as deferred income and are included in accounts payable and accrued liabilities until there is reasonable assurance that eligible capital investments will be incurred. Once
reasonable assurance is obtained, the amounts recorded in deferred income are recognized and proportionately allocated as a reduction of cost of goods sold and property, plant and equipment, using the intent of the subsidy program as a basis for the
allocation. During fiscal 2011, the Company recognized $3.2 million of the subsidies received as a reduction of cost of goods sold (2010 - $6.0 million; 2009 - nil), partially offset by a charge of $1.6 million (2010 - $3.0 million;
2009 - nil) to non-controlling interest in the Companys consolidated statement of earnings to reflect the 50% non-controlling interest of the amount recognized. In addition, the Company recorded $0.5 million (October 3, 2010 - $0.7
million; October 4, 2009 - nil) as a reduction of capital expenditures as at October 2, 2011. As at October 2, 2011, financial assistance received in the amount of $0.8 million, $3.3 million, and $0.6 million is to be disbursed by CanAm
no later than February 2012, February 2013 and February 2014, respectively, to finance eligible capital expenditures.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(d) | Securities Class Actions:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | The Company and certain of its senior officers were named as defendants in a number of class action lawsuits filed in the United States District Court for the Southern District of New York, which were subsequently consolidated,
alleging claims under the U.S. securities laws, as well as in class action lawsuits filed in the Ontario Superior Court of Justice and in the Quebec Superior Court. Each of these U.S. and Canadian lawsuits alleged, among other things, that the
defendants misrepresented the Companys financial condition and its financial prospects in its earnings guidance concerning the 2008 fiscal year, which guidance was subsequently revised on April 29, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | On August 3, 2010, the Company announced that it had entered into an agreement to settle all claims raised in these class action lawsuits, subject to final approval from the courts, on behalf of all persons who acquired the
Companys common shares between August 2, 2007 and April 29, 2008 (the Class Members). Final court approval of the settlement was obtained from each of the courts in February and March 2011 and all of the actions have been dismissed
on terms including releases from Class Members of the claims against the Company and the named senior officers. The settlement agreement provided for a total settlement amount of $22.5 million, which has been entirely funded by the
Companys insurers. Therefore no provision has been recorded in the consolidated financial statements and no amounts have been disbursed by the Company in respect of the settlement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(e) | The Company is a party to other claims and litigation arising in the normal course of operations. The Company does not expect the resolution of these matters to have a material adverse effect on the financial position or results
of operations of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

14. GUARANTEES:

The Company, and some of its subsidiaries, have granted corporate guarantees, irrevocable standby letters of credit and surety bonds, to third parties to indemnify them in the event the Company and some of its subsidiaries do not perform their
contractual obligations. As at October 2, 2011, the maximum potential liability under these guarantees was $15.1 million (2010 - $21.8 million), of which $5.0 million (2010 - $5.1 million) was for surety bonds and $10.1 million
(2010 - $16.7  million) was for corporate guarantees and standby letters of credit. The surety bonds are automatically renewed on an annual basis, the corporate guarantees and standby letters of credit mature at various dates in fiscal 2012.

As at October 2, 2011, the Company has recorded no liability with respect to these guarantees, as the Company does not expect to make any payments for the aforementioned items. Management has determined that the fair value of the non-contingent
obligations requiring performance under the guarantees in the event that specified triggering events or conditions occur approximates the cost of obtaining the standby letters of credit and surety bonds.

GILDAN 2011 REPORT TO SHAREHOLDERS P.75

---

| | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | ------------------------------------------

15. INCOME TAXES:

The income tax provision differs from the amount computed by
applying the combined Canadian federal and provincial tax rates to earnings
before income taxes. The reasons for the difference and the related tax effects
are as follows:

|                                                                        |   | 2011    |   |   | 2010    |   |   | 2009    |  
|----------------------------------------------------------------------- | - | ------- | - | - | ------- | - | - | ------- | -
|                                                                        |   |         |   |   |         |   |   |         |  
|Combined basic Canadian federal and
      provincial income taxes       | $ | 64,514  |   | $ | 59,533  |   | $ | 27,884  |  
|                                                                        |   |         |   |   |         |   |   |         |  
|(Decrease) increase in income taxes
      resulting from:               |   |         |   |   |         |   |   |         |  
|Effect of different tax rates on
      earnings of foreign subsidiaries |   | (82,407 | ) |   | (70,105 | ) |   | (32,181 | )
|Income tax (recovery)
      charge for prior taxation years             |   | (413    | ) |   | 2,322   |   |   | (6,085  | )
|Effect of non-deductible expenses and other                             |   | 2,564   |   |   | 6,346   |   |   | 4,596   |  
|                                                                        | $ | (15,742 | ) | $ | (1,904  | ) | $ | (5,786  | )

The income tax recovery of $6.1 million in fiscal 2009, relates
to previously unrecognized tax positions of prior taxation years.

The components of income taxes are as follows:

|                                                                                                       |   | 2011    |   |   | 2010    |   |   | 2009    |  
|------------------------------------------------------------------------------------------------------ | - | ------- | - | - | ------- | - | - | ------- | -
|                                                                                                       |   |         |   |   |         |   |   |         |  
|Current income taxes                                                                                   | $ | 3,376   |   | $ | 9,523   |   | $ | (3,352  | )
|Future income
      taxes                                                                              |   | (19,118 | ) |   | (11,427 | ) |   | (2,434  | )
|                                                                                                       | $ | (15,742 | ) | $ | (1,904  | ) | $ | (5,786  | )
|                                                                                                       |   |         |   |   |         |   |   |         |  
|Significant components of the
      Companys future income tax assets and liabilities are as follows: |   |         |   |  
|                                                                                                       |   |         |   |   |         |   |   |         |  
|                                                                                                       |   |         |   |   | 2011    |   |   | 2010    |  
|                                                                                                       |   |         |   |   |         |   |   |         |  
|Future income tax assets (liabilities)                                                                 |   |         |   |   |         |   |   |         |  
|Non-capital losses                                                                                     |   |         |   | $ | 67,853  |   | $ | 12,778  |  
|Taxable temporary
      differences related to:                                                        |   |         |   |   |         |   |   |         |  
|Reserves and accruals                                                                                  |   |         |   |   | 11,666  |   |   | 6,340   |  
|Property, plant and equipment                                                                          |   |         |   |   | (6,428  | ) |   | (5,863  | )
|Intangible assets                                                                                      |   |         |   |   | (91,428 | ) |   | (19,751 | )
|Other                                                                                                  |   |         |   |   | 3,428   |   |   | 2,020   |  
|Net future income tax liability                                                                        |   |         |   | $ | (14,909 | ) | $ | (4,476  | )
|                                                                                                       |   |         |   |   |         |   |   |         |  
|Presented as:                                                                                          |   |         |   |   |         |   |   |         |  
|Current assets                                                                                         |   |         |   | $ | 11,666  |   | $ | 6,340   |  
|Long-term liabilities                                                                                  |   |         |   |   | (26,575 | ) |   | (10,816 | )

As at October 2, 2011, the Company has non-capital loss
carryforwards and taxable temporary differences available to reduce future
taxable income for Canadian, and U.S. tax purposes of approximately CAD$4.9
million and $1.4 million, respectively, for which no future tax asset has been
recognized. The non-capital loss carryforwards expire between 2022 and 2031.

The Company has not recognized a future income tax liability
for the undistributed profits of its subsidiaries in the current or prior years
because the Company currently does not expect to sell those investments, and for
those undistributed profits that would become taxable, there is no intention to
repatriate the profits.

GILDAN 2011 REPORT TO SHAREHOLDERS P.76

---

| | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | ------------------------------------------

16. RESTRUCTURING AND ACQUISITION-RELATED COSTS, AND ASSETS
HELD FOR SALE:

|                                                                   |   | 2011  |  |   | 2010  |   |   | 2009  |  
|------------------------------------------------------------------ | - | ----- |  | - | ----- | - | - | ----- | -
|                                                                   |   |       |  |   |       |   |   |       |  
|Loss (gain) on disposal of assets held for
      sale              | $ | 634   |  | $ | 37    |   | $ | (619  | )
|Accelerated depreciation                                           |   | -     |  |   | 2,488 |   |   | -     |  
|Asset impairment loss and write-down of
      assets held for sale |   | 1,722 |  |   | 1,826 |   |   | 1,595 |  
|Employee termination costs and other benefits                      |   | 2,887 |  |   | 744   |   |   | 2,180 |  
|Other exit costs                                                   |   | 3,222 |  |   | 3,705 |   |   | 3,120 |  
|Adjustment for
      employment contract                           |   | -     |  |   | (95   | ) |   | (77   | )
|                                                                   | $ | 8,465 |  | $ | 8,705 |   | $ | 6,199 |  

During the first quarter of fiscal 2010, the Company announced
plans to consolidate its distribution centres servicing retail customers at its
new retail distribution centre in Charleston, South Carolina, and to close its
leased retail distribution facility in Martinsville, Virginia and its retail
distribution facilities in Fort Payne, Alabama. In February 2009, the Company
closed its U.S. sock finishing operations in Fort Payne, Alabama, and in
February 2011 the Company announced the closure of the remaining U.S. sock
knitting operations in Fort Payne, Alabama.

For fiscal 2011, restructuring and acquisition-related costs
totalled $8.5 million, mainly relating to the closure of the U.S. sock knitting
operations mentioned above, including $2.9 million of employee termination
costs, other exit costs of $2.0 million related to carrying and dismantling
costs and $1.7 million of asset write-downs mainly for assets held for sale.
Other exit costs also included net pension expense of $1.2 million related to
Gold Toe Moretz's defined benefit pension plan which was
incurred primarily as a result of the Companys plan to fully fund and de-risk
the plan, and reduce future pension costs.

For fiscal 2010, restructuring and acquisition-related costs
totalled $8.7 million, mainly relating to the consolidation of retail
distribution facilities mentioned above, including $2.5 million of accelerated
depreciation, an asset impairment loss of $1.8 million, and $0.7 million of
employee termination costs. The Company also incurred other exit costs of $3.7
million for fiscal 2010 including inventory transfer costs, carrying and
dismantling costs, and lease termination costs.

For fiscal 2009, restructuring and acquisition-related costs
totalled $6.2 million which included $3.7 million for the closure of the
Company's U.S. sock finishing operations, and $3.1 million primarily related to
facility closures that occurred in previous fiscal years, including carrying
costs and asset write-downs, net of a gain of $0.6 million relating to assets
held for sale.

Assets held for sale of $13.1 million as at October 2, 2011
(October 3, 2010 - $3.2 million) include property, plant and equipment primarily
relating to closed facilities. The Company expects to incur additional carrying
costs relating to the closed facilities, which will be accounted for as
restructuring charges as incurred until all property, plant and equipment
related to the closures are disposed. Any gains or losses on the disposal of the
assets held for sale relating to closed facilities will also be accounted for as
restructuring charges as incurred.

Accounts payable and accrued liabilities include amounts
relating to restructuring activities and charges to comply with an employment
contract with a former officer of the Company, as follows:

|Balance, October 4, 2009                | $ | 1,686  |  
|--------------------------------------- | - | ------ | -
|Employee termination and other benefits |   | 744    |  
|Adjustment for employment contract      |   | (95    | )
|Foreign exchange adjustment             |   | 34     |  
|Payments                                |   | (915   | )
|Balance, October 3, 2010                |   | 1,454  |  
|Employee termination and other benefits |   | 2,887  |  
|Payments                                |   | (3,351 | )
|Balance, October 2, 2011                | $ | 990    |  

GILDAN 2011 REPORT TO SHAREHOLDERS P.77

---

| | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | ------------------------------------------

17. OTHER COMPREHENSIVE INCOME (LOSS):

|Other comprehensive income (loss) was comprised of the
      following: |   |        |   |   |        |   |   |      | 
|----------------------------------------------------------------------- | - | ------ | - | - | ------ | - | - | ---- | 
|                                                                        |   |        |   |   |        |   |   |      | 
|                                                                        |   | 2011   |   |   | 2010   |   |   | 2009 | 
|                                                                        |   |        |   |   |        |   |   |      | 
|Net (loss) gain on derivatives designated
      as cash flow hedges     | $ | (4,448 | ) | $ | 2,151  |   | $ | -    | 
|Income taxes                                                            |   | 45     |   |   | (22    | ) |   | -    | 
|                                                                        |   |        |   |   |        |   |   |      | 
|Amounts reclassified from other comprehensive income to net             |   |        |   |   |        |   |   |      | 
|earnings, and included
      in:                                        |   |        |   |   |        |   |   |      | 
|Net sales                                                               |   | 5,177  |   |   | (2,688 | ) |   | -    | 
|Selling, general and administrative expenses                            |   | (1,045 | ) |   | (701   | ) |   | -    | 
|Financial expense
      (income), net                                   |   | 1,360  |   |   | (489   | ) |   | -    | 
|Income taxes                                                            |   | (55    | ) |   | 39     |   |   | -    | 
|Other
      comprehensive income (loss)                                 | $ | 1,034  |   | $ | (1,710 | ) | $ | -    | 

As at October 2, 2011, approximately $2.3 million of net gains
presented in accumulated other comprehensive income are expected to be
reclassified to net earnings within the next twelve months.

18. EARNINGS PER SHARE:

A reconciliation between basic and diluted earnings per share
is as follows:

|                                                                 |   | 2011    |  |   | 2010    |  |   | 2009    | 
|---------------------------------------------------------------- | - | ------- |  | - | ------- |  | - | ------- | 
|                                                                 |   |         |  |   |         |  |   |         | 
|Basic earnings per share:                                        |   |         |  |   |         |  |   |         | 
|Basic weighted average number of common shares outstanding       |   | 121,526 |  |   | 121,159 |  |   | 120,811 | 
|Basic earnings per share                                         | $ | 1.97    |  | $ | 1.64    |  | $ | 0.79    | 
|                                                                 |   |         |  |   |         |  |   |         | 
|Diluted earnings per share:                                      |   |         |  |   |         |  |   |         | 
|Basic weighted average number of common
      shares outstanding |   | 121,526 |  |   | 121,159 |  |   | 120,811 | 
|Plus dilutive impact of stock options
      and Treasury RSUs    |   | 757     |  |   | 821     |  |   | 624     | 
|Diluted weighted
    average number of common shares outstanding |   | 122,283 |  |   | 121,980 |  |   | 121,435 | 
|Diluted earnings per share                                       | $ | 1.96    |  | $ | 1.63    |  | $ | 0.79    | 

Excluded from the above calculation for the year ended October
2, 2011 are 155,848 stock options (2010 - 612,144; 2009 - 452,093) and nil
Treasury RSUs (2010 - 16,375; 2009 - 236,934) which were deemed to be
anti-dilutive.

GILDAN 2011 REPORT TO SHAREHOLDERS P.78

---

| | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | ------------------------------------------

19. SUPPLEMENTAL CASH FLOW
      DISCLOSURE:

|(a) | Adjustments for non-cash items:
|--- | -------------------------------

2011
    
    
    2010
    
    
    2009Depreciation and amortization (note 20(a))
    $
    79,808
    
    $
    66,472
    
    $
    65,407Variation of depreciation included in inventories (note
      20(a))
    
    (3,423
    )
    
    2,725
    
    
    (2,437
    )Restructuring charges related to assets
      held for sale and property,
      plant and equipment (note 16)
    
    2,356
    
    
    4,351
    
    
    976Loss on disposal of long-lived assets
    
    1,877
    
    
    842
    
    
    561Loss on disposal of corporate asset (i)
    
    3,693
    
    
    -
    
    
    -Stock-based compensation costs
    
    4,899
    
    
    4,081
    
    
    3,007Future income taxes
    
    (19,118
    )
    
    (11,427
    )
    
    (2,434
    )Non-controlling interest in consolidated
      joint venture
    
    504
    
    
    3,786
    
    
    110Unrealized net loss (gain) on foreign
      exchange and financial derivatives
      not designated as cash flow hedges
    
    255
    
    
    846
    
    
    (1,012
    )Adjustments to financial
    derivatives included in other comprehensive income, net of amounts
    reclassified to net
      earnings
    
    -
    
    
    684
    
    
    -$
    70,851
    
    $
    72,360
    
    $
    64,178


| | (i) | During fiscal 2011 the Company purchased a corporate
      aircraft pursuant to an early purchase option under its operating lease
      for approximately $16.9 million. Immediately following the purchase, the
      Company sold the corporate aircraft to an unrelated third party for
      proceeds of $13.2 million, resulting in a loss of $3.7 million which is
      included in selling, general and administrative expenses. The Company has
      leased a new corporate aircraft which is being accounted for as an
      operating lease.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | Cash
      paid during the period for:
|--- | --------------------------------------
|    |                                       
|    |                                       
|    | Interest                              
|    | Income
      taxes                    

GILDAN 2011 REPORT TO SHAREHOLDERS P.79

---

| | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | ------------------------------------------

19. SUPPLEMENTAL CASH FLOW DISCLOSURE (continued):

|(c) | Non-cash transactions:
|--- | ----------------------

2011
    
    
    2010
    
    
    2009Balance of non-cash transactions:Additions to property, plant and equipment
    included in accounts payable and accrued liabilities
    $
    5,026
    
    $
    2,099
    
    $
    627Proceeds on disposal of long-lived assets included in other assets
    
    -
    
    
    427
    
    
    808Proceeds on disposal of long-lived assets included in other
      current assets
    
    -
    
    
    -
    
    
    456Treasury RSUs issued in lieu of cash dividends
    $
    191
    
    $
    -
    
    $
    -Non-cash ascribed value credited to share capital from
    shares issued pursuant to vesting of Treasury RSUs and exercise of
      stock options
    
    807
    
    
    2,125
    
    
    2,759Shares issued as consideration for lease termination costs incurred as
      part of the acquisition of Gold Toe Moretz
    
    1,065
    
    
    -
    
    
    -


|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(d) | In connection with the acquisition of V.I. Prewett &
      Son Inc. in fiscal 2008, the purchase agreement provided for an additional
      purchase consideration of up to $10.0 million contingent on specified
      future events. This amount was initially paid into escrow by the Company,
      but events occurring subsequent to the acquisition resulted in a reduction
      of the contingent purchase price and escrow deposit balance to $5.8
      million. During fiscal 2011, the contingent purchase consideration was
      settled and paid to the selling shareholders in the amount of $5.8 million
      from the escrow deposit. The additional purchase price consideration paid
      by the Company has been accounted for as an increase in goodwill and a
      corresponding decrease in other assets.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(e) | Cash and cash equivalents consist
of:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

2011
    
    
    2010
    
    
    2009Cash balances with banks
    $
    87,251
    
    $
    196,279
    
    $
    92,608Short-term investments, bearing interest at ratesbetween 0.12% and 1.05%
    
    1,551
    
    
    62,163
    
    
    7,124$
    88,802
    
    $
    258,442
    
    $
    99,732


GILDAN 2011 REPORT TO SHAREHOLDERS P.80

---

| | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | ------------------------------------------

20. OTHER INFORMATION:

|(a) | Depreciation and amortization (excluding accelerated
      depreciation, which is included in restructuring and acquisition-related
      costs):
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------

2011
    
    
    2010
    
    
    2009Depreciation and amortization of property, plant and equipment and intangible assets
    $
    79,808
    
    $
    66,472
    
    $
    65,407Adjustment for the variation of depreciation of property, plant and equipment and intangible assets
      included in inventories at the beginning and end of the
      period
    
    (3,423
    )
    
    2,725
    
    
    (2,437
    )Depreciation and amortization included in the consolidated statements of earnings and comprehensive income
    $
    76,385
    
    $
    69,197
    
    $
    62,970Comprised of:Depreciation of property, plant and equipment
    $
    63,283
    
    $
    60,378
    
    $
    53,925Amortization of intangible assets
    
    13,087
    
    
    8,797
    
    
    8,843Amortization of financing costs and other
    
    15
    
    
    22
    
    
    202Depreciation and amortization included in the consolidated
    statements of earnings and comprehensive income
    $
    76,385
    
    $
    69,197
    
    $
    62,970


|(b) | The Company recorded bad debt expense, net of recoveries,
      of $0.6 million (2010  $2.4 million; 2009  $6.0 million) which is
      included in selling, general and administrative expenses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(c) | During the fourth quarter of fiscal 2010, the Company
      received business interruption insurance proceeds of $8.0 million,
      reflecting the maximum insurance recovery available under its insurance
      policy related to the earthquake which struck Haiti on January 12, 2010.
      The earthquake impacted the Companys third-party contractor operations
      used to sew the majority of the fabric produced at its Dominican Republic
      textile facility, which resulted in lost sales opportunities due to a
      temporary loss of production, as well as incremental costs related to
      supply chain inefficiencies. Business interruption proceeds have been
      recorded as a reduction of cost of sales in the statement of earnings and
      comprehensive income.

21. RELATED PARTY TRANSACTIONS:

The Company has transactions with Frontier Spinning Mills,
Inc., which manages the operations of CanAm. These transactions are in the
normal course of operations and are measured at the exchange amount, which is
the amount of consideration established and agreed to by the related parties.
The following is a summary of the related party transactions and balances owed:

|                                         |   | 2011    |  |   | 2010    |  |   | 2009    | 
|---------------------------------------- | - | ------- |  | - | ------- |  | - | ------- | 
|                                         |   |         |  |   |         |  |   |         | 
|Transactions:                            |   |         |  |   |         |  |   |         | 
|Yarn purchases                           | $ | 297,495 |  | $ | 156,761 |  | $ | 149,754 | 
|Management fee expense                   |   | 750     |  |   | 750     |  |   | 750     | 
|                                         |   |         |  |   |         |  |   |         | 
|Balances outstanding:                    |   |         |  |   |         |  |   |         | 
|Accounts payable and accrued liabilities |   | 63,132  |  |   | 30,050  |  |   | 22,129  | 

The Company leases warehouse and office space from an officer
of a subsidiary of the Company under operating leases. The payments made on
these leases were in accordance with the terms of the lease agreements
established and agreed to by the related parties, which amounted to $0.6 million
for fiscal 2011 (2010 - nil). There were no amounts owing as at October 2, 2011.

GILDAN 2011 REPORT TO SHAREHOLDERS P.81

---

| | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | ------------------------------------------

22. FINANCIAL INSTRUMENTS:

Disclosures relating to exposure to risks, in particular credit
risk, liquidity risk, foreign currency risk and interest rate risk, are included
in the section entitled Financial Risk Management of the Managements
Discussion and Analysis of the Companys operations, performance and financial
condition as at October 2, 2011, which is included in the Report to Shareholders
along with these consolidated financial statements. Accordingly, these
disclosures are incorporated into these consolidated financial statements by
cross-reference.

|(a) | Financial instruments  carrying values and fair
      values:                                                                                                  
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                 
|    | The fair values of financial assets and liabilities,
      together with the carrying amounts included in the consolidated balance
      sheets, are as follows:

2011
    
    
    
    
    
    2010Carrying
    
    
    
    
    
    Carryingamount
    
    
    Fair
      value
    
    
    amount
    
    
    Fair
      valueFinancial assetsHeld-for-trading financial assets:Cash and cash equivalents
    $
    88,802
    
    $
    88,802
    
    $
    258,442
    
    $
    258,442Loans and receivables:Trade accounts receivable
    
    191,594
    
    
    191,594
    
    
    145,684
    
    
    145,684Other current assets
    
    6,008
    
    
    6,008
    
    
    7,980
    
    
    7,980Long-term non-trade receivable
      included in other assets
    
    1,120
    
    
    1,120
    
    
    953
    
    
    953Restricted cash related to the acquisition of
      Prewett included in other assets
    
    -
    
    
    -
    
    
    5,788
    
    
    5,788Derivative assets
    
    3,299
    
    
    3,299
    
    
    1,099
    
    
    1,099Financial liabilitiesOther financial liabilities:Accounts payable and accrued
      liabilities
    $
    311,262
    
    $
    311,262
    
    $
    183,117
    
    $
    183,117Long-term debt - bearing interest at variable
      rates
    
    209,000
    
    
    209,000
    
    
    -
    
    
    -Derivative liabilities
    
    4,007
    
    
    4,007
    
    
    3,088
    
    
    3,088


Derivative assets and derivative liabilities consist of the
fair values of forward foreign exchange contracts, interest rate swap contracts
and zero-cost collar options outstanding at October 2, 2011. The Company has
determined that the fair value of its short-term financial assets and
liabilities approximates their respective carrying amounts as at the balance
sheet dates because of the short-term maturity of those instruments. The fair
values of the long-term receivable and the restricted cash included in other
assets, and the Companys interest-bearing financial liabilities also
approximate their respective carrying amounts. The fair values of cash and cash
equivalents and derivative instruments were measured using Level 2 inputs in the
fair value hierarchy. In determining the fair value of financial assets and
financial liabilities, including derivative financial instruments, the Company
takes into account its own credit risk and the credit risk of the
counterparty.

GILDAN 2011 REPORT TO SHAREHOLDERS P.82

---

| | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | ------------------------------------------

22. FINANCIAL INSTRUMENTS (continued):

|(b) | Financial expense (income), net:
|--- | --------------------------------

| |                                                                                           |  |   |        |   |   |        |   |   |        |  
| | ----------------------------------------------------------------------------------------- |  | - | ------ | - | - | ------ | - | - | ------ | -
| |                                                                                           |  |   | 2011   |   |   | 2010   |   |   | 2009   |  
| |                                                                                           |  |   |        |   |   |        |   |   |        |  
| | Interest expense (i)                                                                      |  | $ | 2,856  |   | $ | 436    |   | $ | 1,824  |  
| | Bank and other financial charges                                                          |  |   | 2,216  |   |   | 1,504  |   |   | 1,039  |  
| | Foreign exchange gain (ii)                                                                |  |   | (1,098 | ) |   | (1,084 | ) |   | (3,085 | )
| | Derivative loss (gain) on financial instruments not designated
      for hedge accounting |  |   | 1,511  |   |   | (105   | ) |   | (82    | )
| |                                                                                           |  | $ | 5,485  |   | $ | 751    |   | $ | (304   | )
| |                                                                                           |  |   |        |   |   |        |   |   |        |  

| | (i)  | Interest expense (income):                                                                                                                                                                                                                                                                                   |  |   |        |   |   |        |   |   |        |  
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | - | ------ | - | - | ------ | - | - | ------ | -
| |      |                                                                                                                                                                                                                                                                                                              |  |   |        |   |   |        |   |   |        |  
| |      |                                                                                                                                                                                                                                                                                                              |  |   | 2011   |   |   | 2010   |   |   | 2009   |  
| |      |                                                                                                                                                                                                                                                                                                              |  |   |        |   |   |        |   |   |        |  
| |      | Interest expense on long-term debt                                                                                                                                                                                                                                                                           |  | $ | 3,246  |   | $ | 88     |   | $ | 1,800  |  
| |      | Interest expense on short-term indebtedness                                                                                                                                                                                                                                                                  |  |   | 27     |   |   | 463    |   |   | 142    |  
| |      | Interest income on held-for-trading financial
      assets                                                                                                                                                                                                                                                   |  |   | (434   | ) |   | (132   | ) |   | (103   | )
| |      | Interest income on loans and receivables                                                                                                                                                                                                                                                                     |  |   | (80    | ) |   | (80    | ) |   | (80    | )
| |      | Other interest expense                                                                                                                                                                                                                                                                                       |  |   | 97     |   |   | 97     |   |   | 65     |  
| |      |                                                                                                                                                                                                                                                                                                              |  | $ | 2,856  |   | $ | 436    |   | $ | 1,824  |  
| |      |                                                                                                                                                                                                                                                                                                              |  |   |        |   |   |        |   |   |        |  
| |      | Interest income on held-for-trading
      financial assets consists of interest earned from cash and cash
      equivalents invested in short-term deposits. Interest income on loans and
      receivables relates to interest earned on the Companys long-term
      receivable included in other assets. | 
| |      |                                                                                                                                                                                                                                                                                                              |  |   |        |   |   |        |   |   |        |  
| | (ii) | Foreign exchange gain:                                                                                                                                                                                                                                                                                       |  |   |        |   |   |        |   |   |        |  
| |      |                                                                                                                                                                                                                                                                                                              |  |   |        |   |   |        |   |   |        |  
| |      |                                                                                                                                                                                                                                                                                                              |  |   | 2011   |   |   | 2010   |   |   | 2009   |  
| |      |                                                                                                                                                                                                                                                                                                              |  |   |        |   |   |        |   |   |        |  
| |      | Gain relating to financial assets and
      liabilities                                                                                                                                                                                                                                                      |  | $ | (219   | ) | $ | (1,154 | ) | $ | (220   | )
| |      | Other foreign exchange (gain) loss                                                                                                                                                                                                                                                                           |  |   | (879   | ) |   | 70     |   |   | (2,865 | )
| |      |                                                                                                                                                                                                                                                                                                              |  | $ | (1,098 | ) | $ | (1,084 | ) | $ | (3,085 | )

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(c) | Derivative instruments:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | The Company has entered into forward foreign exchange
      contracts and zero-cost collar options in order to reduce the exposure of
      forecasted cash flows in currencies other than the U.S. dollar. The
      forward foreign exchange contracts and the intrinsic value of zero-cost
      collar options were designated as cash flow hedges and qualified for hedge
      accounting. As such, the effective portion of unrealized gains and losses
      related to the fair value of the cash flow hedges are included in other
      comprehensive income, and are recognized in net earnings in the same
      period in which the foreign exchange impact of the forecasted cash flow
      affects net earnings. The gains and losses related to the time value of
      zero-cost collar options are immediately recognized in earnings in the
      same caption as the items being hedged. The forward foreign exchange
      contracts and zero-cost collar options outstanding as at October 2, 2011
      consisted primarily of contracts to reduce the exposure to fluctuations in
      Mexican pesos, Euros, Australian dollars, Canadian dollars, and Pounds
      sterling against the U.S. dollar. As at October 2, 2011, the derivatives
      designated as cash flow hedges were considered to be fully effective with
      no resulting portions being ineffective.

GILDAN 2011 REPORT TO SHAREHOLDERS P.83

---

| | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | ------------------------------------------

22. FINANCIAL INSTRUMENTS (continued):

|(c) | Derivative instruments (continued):
|--- | -----------------------------------
|    |                                    

Carrying and fair value
    
    
    
    
    
    MaturityNotional
    
    
    
    
    
    
    
    
    
    
    
    Accountsforeign
    
    
    
    
    
    
    
    
    
    
    
    payablecurrency
    
    
    Average
    
    
    Notional
    
    
    Other
    
    
    andamount
    
    
    exchange
    
    
    U.S. $
    
    
    current
    
    
    accrued
    
    
    0 to 6
    
    
    7 to 12October 2, 2011
    
    equivalent
    
    
    rate
    
    
    equivalent
    
    
    assets
    
    
    liabilities
    
    
    months
    
    
    monthsForward foreign exchange
      contracts designated as cash flow hedges:Sell MXN/Buy USD
    
    112,800
    
    
    0.0832
    
    $
    9,389
    
    $
    1,308
    
    $
    -
    
    $
    515
    
    $
    793Sell CAD/Buy USD
    
    17,100
    
    
    1.0438
    
    
    17,849
    
    
    1,378
    
    
    -
    
    
    647
    
    
    731Buy CAD/Sell USD
    
    10,006
    
    
    0.9594
    
    
    9,600
    
    
    31
    
    
    (16
    )
    
    13
    
    
    2Zero-cost collar options designated as cash flows
      hedges:Put OptionsSell AUD/Buy USD
    
    1,500
    
    
    0.9200
    
    
    1,380
    
    
    84
    
    
    -
    
    
    84
    
    
    -Sell GBP/Buy USD
    
    3,900
    
    
    1.5636
    
    
    6,098
    
    
    291
    
    
    -
    
    
    291
    
    
    -Sell EUR/Buy USD
    
    3,000
    
    
    1.3300
    
    
    3,990
    
    
    207
    
    
    -
    
    
    207
    
    
    -Call OptionsSell AUD/Buy USD
    
    1,500
    
    
    1.0193
    
    
    1,529
    
    
    -
    
    
    (56
    )
    
    (56
    )
    
    -Sell GBP/Buy USD
    
    3,900
    
    
    1.6259
    
    
    6,341
    
    
    -
    
    
    (118
    )
    
    (118
    )
    
    -Sell EUR/Buy USD
    
    3,000
    
    
    1.3880
    
    
    4,164
    
    
    -
    
    
    (178
    )
    
    (178
    )
    
    -$
    60,340
    
    $
    3,299
    
    $
    (368
    )
    $
    1,405
    
    $
    1,526


Carrying and fair value
    
    
    
    
    
    MaturityNotional
    
    
    
    
    
    
    
    
    
    
    
    Accountsforeign
    
    
    
    
    
    
    
    
    
    
    
    payablecurrency
    
    
    Average
    
    
    Notional
    
    
    Other
    
    
    andamount
    
    
    exchange
    
    
    U.S. $
    
    
    current
    
    
    accrued
    
    
    0 to 6
    
    
    7 to 12October 3, 2010
    
    equivalent
    
    
    rate
    
    
    equivalent
    
    
    assets
    
    
    liabilities
    
    
    months
    
    
    monthsForward foreign exchange
      contracts designated as cash flow hedges:Sell AUD/Buy USD
    
    7,908
    
    
    0.8704
    
    $
    6,883
    
    $
    -
    
    $
    (570
    )
    $
    (334
    )
    $
    (236
    )Sell GBP/Buy USD
    
    24,900
    
    
    1.5443
    
    
    38,454
    
    
    -
    
    
    (511
    )
    
    (210
    )
    
    (301
    )Sell EUR/Buy USD
    
    33,150
    
    
    1.2964
    
    
    42,977
    
    
    -
    
    
    (2,007
    )
    
    (813
    )
    
    (1,194
    )Sell CAD/Buy USD
    
    16,000
    
    
    0.9938
    
    
    15,900
    
    
    393
    
    
    -
    
    
    393
    
    
    -Buy CAD/Sell USD
    
    21,222
    
    
    0.9330
    
    
    19,800
    
    
    706
    
    
    -
    
    
    368
    
    
    338$
    124,014
    
    $
    1,099
    
    $
    (3,088
    )
    $
    (596
    )
    $
    (1,393
    )


GILDAN 2011 REPORT TO SHAREHOLDERS P.84

---

| | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | ------------------------------------------

22. FINANCIAL INSTRUMENTS (continued):

|(c) | Derivative instruments (continued):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | During fiscal 2011, the Company entered into a series of
      interest rate swap contracts to fix the variable interest rates on a
      designated portion of the borrowings under the revolving long-term credit
      facility. As at October 2, 2011, the interest rate swap contracts were
      designated as cash flow hedges and qualified for hedge accounting. As
      such, the effective portion of unrealized gains and losses related to the
      fair value of the interest rate swap contracts are included in other
      comprehensive income, and are recognized in earnings as a charge or credit
      to financial expense, in the same period as the interest payments on the
      amounts drawn under the revolving long- term credit facility are
      recognized. The following table summarizes the outstanding interest rate
      swap contracts as at October 2, 2011:

Carrying and fair valueNotional 
    amount
    
    Maturity date
    
    
    Pay /
      Receive
    
    
    Fixed 
    rate
    
    
    Floating 
    rate
    
    
    Other current assets
    
    
    Accounts payable and accrued
    liabilitiesPay fixed rate /
    
    
    
    
    
    1-month$ 100,000
    
    June 3, 2016
    
    
    Receive floating rate
    
    
    1.88%
    
    
    U.S. LIBOR
    
    $
    -
    
    $
    (3,623
    )Pay fixed rate /
    
    
    
    
    
    1-month15,000
    
    June 3, 2016
    
    
    Receive floating rate
    
    
    1.10%
    
    
    U.S. LIBOR
    
    
    -
    
    
    (13
    )Pay fixed rate /
    
    
    
    
    
    1-month10,000
    
    June
      3, 2016
    
    
    Receive floating rate
    
    
    1.08%
    
    
    U.S.
      LIBOR
    
    
    -
    
    
    (3
    )$ 125,000
    
    
    
    
    
    
    
    
    
    
    
    
    $
    -
    
    $
    (3,639
    )


23. CAPITAL DISCLOSURES:

The Companys objective in managing capital is to ensure
sufficient liquidity to pursue its organic growth strategy and undertake
selective acquisitions, while at the same time taking a conservative approach
towards financial leverage and management of financial risk.

The Companys capital is composed of net debt and shareholders
equity. Net debt consists of interest-bearing debt less cash and cash
equivalents. The Companys primary uses of capital are to finance capital
expenditures for manufacturing and distribution facilities, working capital
requirements, payment of dividends, and business acquisitions. The Company
currently funds these requirements out of its internally-generated cash flows
and the periodic use of its revolving long-term bank credit facility.

The primary measure used by the Company to monitor its
financial leverage is its ratio of net debt to earnings before interest, taxes,
depreciation and amortization, non-controlling interest, and restructuring and
acquisition-related costs (EBITDA), which it aims to maintain at less than a
maximum of 3.0:1. Net debt is computed as at the most recent quarterly balance
sheet date. EBITDA is based on the last four quarters ending on the same date as
the balance sheet date used to compute net debt. The computations of net
debt/cash in excess of total indebtedness and EBITDA as at October 2, 2011,
October 3, 2010 and October 4, 2009 were as follows:

GILDAN 2011 REPORT TO SHAREHOLDERS P.85

---

| | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | ------------------------------------------

|                                                       |   |                                           |   |   |            |   |   |            |  
|------------------------------------------------------ | - | ----------------------------------------- | - | - | ---------- | - | - | ---------- | -
|23. CAPITAL DISCLOSURES (continued):                   |   |                                           |   |   |            |   |   |            |  
|                                                       |   |                                           |   |   |            |   |   |            |  
|                                                       |   | 2011                                      |   |   | 2010       |   |   | 2009       |  
|Current portion of long-term debt                      | $ | -                                         |   | $ | -          |   | $ | 2,803      |  
|Long-term debt                                         |   | 209,000                                   |   |   | -          |   |   | 1,584      |  
|Less: cash and cash equivalents                        |   | (88,802                                   | ) |   | (258,442   | ) |   | (99,732    | )
|Net debt (Cash in
      excess of total indebtedness)  | $ | 120,198                                   |   | $ | (258,442   | ) | $ | (95,345    | )
|                                                       |   |                                           |   |   |            |   |   |            |  
|                                                       |   |                                           |   |   |            |   |   |            |  
|                                                       |   | For the last four
      quarters ended on |  
|                                                       |   | October 2,                                |   |   | October 3, |   |   | October 4, |  
|                                                       |   | 2011                                      |   |   | 2010       |   |   | 2009       |  
|Net earnings                                           | $ | 239,904                                   |   | $ | 198,245    |   | $ | 95,329     |  
|Restructuring and acquisition-related costs            |   | 8,465                                     |   |   | 8,705      |   |   | 6,199      |  
|Depreciation and amortization                          |   | 79,808                                    |   |   | 66,472     |   |   | 65,407     |  
|Variation of depreciation included in inventories      |   | (3,423                                    | ) |   | 2,725      |   |   | (2,437     | )
|Interest, net                                          |   | 2,856                                     |   |   | 436        |   |   | 1,824      |  
|Income tax recovery                                    |   | (15,742                                   | ) |   | (1,904     | ) |   | (5,786     | )
|Non-controlling interest in consolidated joint venture |   | 504                                       |   |   | 3,786      |   |   | 110        |  
|EBITDA                                                 | $ | 312,372                                   |   | $ | 278,465    |   | $ | 160,646    |  
|                                                       |   |                                           |   |   |            |   |   |            |  
|Net debt to EBITDA
      ratio                         |   | 0.4:1                                     |   |   | n/a        |   |   | n/a        |  

The Company does not currently plan to refinance its revolving
credit facility, or a portion thereof, with debt of longer maturities or to
raise additional equity capital, unless uses of cash arise which are currently
not anticipated. In the third quarter of fiscal 2011, the Company used its
revolving credit facility to partially finance the acquisition of Gold Toe
Moretz.

In order to maintain or adjust its capital structure, the
Company, upon approval from its Board of Directors, may issue or repay long-term
debt, issue shares, repurchase shares, pay dividends or undertake other
activities as deemed appropriate under the specific circumstances.

In December 2010, the Board of Directors approved the
introduction of a quarterly cash dividend. During fiscal 2011, the Company has
paid an aggregate of $27.5 million of dividends. On November 29, 2011, the Board
of Directors declared a quarterly dividend of $0.075 per share for an expected
aggregate payment of $9.1 million which will be paid on January 6, 2012 on all
of the issued and outstanding common shares of the Company, rateably and
proportionately to the holders of record on December 15, 2011. The Board of
Directors will consider several factors when deciding to declare quarterly cash
dividends, including the Company’s present and future earnings, cash flows,
capital requirements and present and/or future regulatory and legal
restrictions. There can be no assurance as to the declaration of future
quarterly cash dividends. Although the Company’s revolving long-term credit
facility requires compliance with lending covenants in order to pay dividends,
these covenants are not currently, and are not expected to be, a constraint to
the payment of dividends under the Company’s dividend policy.

The Company is not subject to any capital requirements imposed
by a regulator.

GILDAN 2011 REPORT TO SHAREHOLDERS P.86

---

| | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | ------------------------------------------

24. SEGMENTED INFORMATION:

The Company manufactures and sells activewear, socks and
underwear. The Company operates in one business segment, being high-volume,
basic, frequently replenished, non-fashion apparel.

|(a) | Net sales by major product group:
|--- | ---------------------------------

2011
    
    
    2010
    
    
    2009Activewear and underwear
    $
    1,406,036
    
    $
    1,084,953
    
    $
    795,535Socks
    
    320,005
    
    
    226,510
    
    
    242,784$
    1,726,041
    
    $
    1,311,463
    
    $
    1,038,319


|(b) | Major customers and revenues by geographic
area:
|--- | ------------------------------------------------
|    |                                                 
|    | (i)                                             

2011
    
    
    2010
    
    
    2009Customer A
    
    19.4%
    
    
    21.0%
    
    
    18.6%Customer B
    
    12.1%
    
    
    14.3%
    
    
    15.5%


| | 
| | 

| | (ii) | Net sales were derived from customers located in the following
    geographic areas:
| | ---- | ------------------------------------------------------------------------------------
| |      |                                                                                     

2011
    
    
    2010
    
    
    2009United States
    $
    1,536,670
    
    $
    1,154,776
    
    $
    939,717Canada
    
    63,422
    
    
    54,160
    
    
    35,134Europe and other
    
    125,949
    
    
    102,527
    
    
    63,468$
    1,726,041
    
    $
    1,311,463
    
    $
    1,038,319


| | 
| | 

|(c) | Property, plant and equipment by geographic area are as follows:
|--- | ----------------------------------------------------------------
|    |                                                                 

2011
    
    
    2010Honduras
    $
    333,143
    
    $
    243,033Caribbean Basin
    
    115,582
    
    
    118,876United States
    
    84,873
    
    
    81,555Bangladesh
    
    12,391
    
    
    12,124Canada
    
    8,537
    
    
    10,051Other
    
    10,872
    
    
    13,653$
    565,398
    
    $
    479,292


| | 
| | 

|(d) | Intangible assets by geographic area are as follows:
|--- | ----------------------------------------------------
|    |                                                     

2011
    
    
    2010United States
    $
    250,060
    
    $
    54,650Canada
    
    5,294
    
    
    5,456Honduras
    
    951
    
    
    907Other
    
    162
    
    
    308$
    256,467
    
    $
    61,321


GILDAN 2011 REPORT TO SHAREHOLDERS P.87

---

| | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | ------------------------------------------




24. SEGMENTED INFORMATION (continued):

|(e) | Goodwill by
      geographic area is as follows:
|--- | ------------------------------------------------
|    |                                                 

2011
    
    
    2010United
      States
    $
    149,731
    
    $
    6,709Bangladesh
    
    3,488
    
    
    3,488$
    153,219
    
    $
    10,197


25. COMPARATIVE FIGURES:

The Company reclassified $6.3 million of future income taxes
between current and non-current as at October 3, 2010.

26. SUBSEQUENT EVENT:

On November 30, 2011, the Company announced a reduction in its

selling prices in the U.S. wholesale distributor channel. The Company also
concurrently announced that the reduction in selling prices will be applied to
existing distributor inventories, which is projected to result in a distributor inventory devaluation discount of
approximately $17 million, and which will be
recorded as a reduction to trade accounts receivable and net sales in the first
quarter of fiscal 2012.

GILDAN 2011 REPORT TO SHAREHOLDERS P.88

---