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 32 of the 2009 Annual Managements Discussion and
Analysis. Management is also responsible for the preparation and presentation of
other financial information included in the 2009 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 4, 2009. 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, 2009                      |                                           

GILDAN 2009 REPORT TO SHAREHOLDERS P.43

---

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 4, 2009
and October 5, 2008 and the related consolidated statements of earnings and
comprehensive income, shareholders equity and cash flows for the years ended
October 4, 2009, October 5, 2008 and September 30, 2007. 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 4, 2009 and October 5, 2008, and the
results of their operations and their cash flows for the years ended October 4,
2009, October 5, 2008 and September 30, 2007, 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 4, 2009, based on
criteria established inInternal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO), and our report dated December 8, 2009 expressed an unqualified
opinion on the effectiveness of the Company's internal control over financial
reporting.

/s/ KPMG LLPChartered Accountants 
Montréal, Canada 
December 8, 2009

|* | 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, a Swiss cooperative. KPMG Canada provides
      services to KPMG LLP.

GILDAN 2009 REPORT TO SHAREHOLDERS P.44

---

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 (the "Company") internal control over financial reporting as at October 4, 2009, based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The Company'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, the Company maintained, in all material respects, effective internal control over financial reporting as at October 4, 2009, based on criteria established in Internal Control - Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO).

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
December 8, 2009 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLPChartered Accountants 
Montréal, Canada 
December 8, 2009

|* | 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, a Swiss cooperative. KPMG Canada provides services to KPMG LLP.

GILDAN 2009 REPORT TO SHAREHOLDERS P.45

---

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

|GILDAN ACTIVEWEAR INC.
      CONSOLIDATED BALANCE SHEETS As at October 4, 2009 and
      October 5, 2008 (in thousands of U.S. dollars)
|---------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Current assets:                                                                                                                        
|Cash and cash equivalents                                                                                                              
|Accounts receivable                                                                                                                    
|Inventories (note 3)                                                                                                                   
|Prepaid expenses and deposits                                                                                                          
|                                                                                                                                       
|                                                                                                                                       
|Property, plant and equipment (note 4)                                                                                                 
|Intangible assets (note 5)                                                                                                             
|Other assets (note 6)                                                                                                                  
|Assets held for sale (note 16)                                                                                                         
|Goodwill (note 2)                                                                                                                      
|Future income taxes (note 14)                                                                                                          
|                                                                                                                                       
|Total assets                                                                                                                           
|                                                                                                                                       
|Current liabilities:                                                                                                                   
|Accounts payable and accrued
      liabilities                                                                                         
|Income taxes payable                                                                                                                   
|Current portion of long-term
      debt (note 8)                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Long-term debt (note 8)                                                                                                                
|Future income taxes (note 14)                                                                                                          
|Non-controlling interest in consolidated joint venture                                                                                 
|                                                                                                                                       
|Commitments and contingencies (note 12)                                                                                                
|                                                                                                                                       
|Shareholders' equity (note 9):                                                                                                         
|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 2009 REPORT TO SHAREHOLDERS P.46

---

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

GILDAN ACTIVEWEAR INC. CONSOLIDATED STATEMENTS OF
EARNINGS AND COMPREHENSIVE INCOMEYears ended October 4, 2009, October
5, 2008 and September 30, 2007 (in thousands of U.S. dollars, except per
share data)

|                                                                   |   | 2009      |   |   | 2008              |  |   | 2007              |  
|------------------------------------------------------------------ | - | --------- | - | - | ----------------- |  | - | ----------------- | -
|                                                                   |   |           |   |   | *(recast-note 1)* |  |   | *(recast-note 1)* |  
|                                                                   |   |           |   |   |                   |  |   |                   |  
|Net sales                                                          | $ | 1,038,319 |   | $ | 1,249,711         |  | $ | 964,429           |  
|Cost of sales                                                      |   | 807,986   |   |   | 911,242           |  |   | 705,546           |  
|                                                                   |   |           |   |   |                   |  |   |                   |  
|Gross profit                                                       |   | 230,333   |   |   | 338,469           |  |   | 258,883           |  
|                                                                   |   |           |   |   |                   |  |   |                   |  
|Selling, general and administrative expenses                       |   | 134,785   |   |   | 142,760           |  |   | 99,926            |  
|Restructuring and other charges (note 16)                          |   | 6,199     |   |   | 5,489             |  |   | 28,012            |  
|                                                                   |   |           |   |   |                   |  |   |                   |  
|Operating income                                                   |   | 89,349    |   |   | 190,220           |  |   | 130,945           |  
|                                                                   |   |           |   |   |                   |  |   |                   |  
|Financial (income) expense, net (note 19(b))                       |   | (304      | ) |   | 9,240             |  |   | 5,420             |  
|Non-controlling interest in consolidated joint venture             |   | 110       |   |   | 230               |  |   | 1,278             |  
|                                                                   |   |           |   |   |                   |  |   |                   |  
|Earnings before income taxes                                       |   | 89,543    |   |   | 180,750           |  |   | 124,247           |  
|Income taxes (note 14)                                             |   | (5,786    | ) |   | 34,400            |  |   | (4,815            | )
|                                                                   |   |           |   |   |                   |  |   |                   |  
|Net earnings and comprehensive income                              | $ | 95,329    |   | $ | 146,350           |  | $ | 129,062           |  
|                                                                   |   |           |   |   |                   |  |   |                   |  
|Earnings per share (note 15):                                      |   |           |   |   |                   |  |   |                   |  
|Basic EPS                                                          | $ | 0.79      |   | $ | 1.21              |  | $ | 1.07              |  
|Diluted EPS                                                        |   | 0.79      |   |   | 1.20              |  |   | 1.06              |  
|                                                                   |   |           |   |   |                   |  |   |                   |  
|See accompanying notes to consolidated financial
      statements. |   |           |   |   |                   |  |  

GILDAN 2009 REPORT TO SHAREHOLDERS P.47

---

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



|                                                                                                                                                                                                      |               |         |             |   |        |               |   |         |          |   |             |               |   |          |   |   |         |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------- | ------- | ----------- | - | ------ | ------------- | - | ------- | -------- | - | ----------- | ------------- | - | -------- | - | - | ------- | -
|GILDAN ACTIVEWEAR
      INC.CONSOLIDATED STATEMENTS OF
      SHAREHOLDERS EQUITYYears ended October 4,
      2009, October 5, 2008 and September 30, 2007(in thousands or thousands of U.S. dollars)
|                                                                                                                                                                                                      |               |         |             |   |        |               |   |         |          |   |             |               |   |          |   |   |         |  
|                                                                                                                                                                                                      |               |         |             |   |        |               |   |         |          |   | Accumulated |               |   |          |   |   |         |  
|                                                                                                                                                                                                      |               |         |             |   |        |               |   |         |          |   | other       |               |   |          |   |   | Total   |  
|                                                                                                                                                                                                      | Share capital |         | Contributed |   |        | comprehensive |   |         | Retained |   |             | shareholders' |  
|                                                                                                                                                                                                      |               | Number  |             |   | Amount |               |   | surplus |          |   | income      |               |   | earnings |   |   | equity  |  
|                                                                                                                                                                                                      |               |         |             |   |        |               |   |         |          |   |             |               |   |          |   |   |         |  
|Balance, October 1, 2006, as previously
      reported                                                                                                                                                |               | 120,228 |             | $ | 86,584 |               | $ | 2,365   |          | $ | 26,248      |               | $ | 415,368  |   | $ | 530,565 |  
|                                                                                                                                                                                                      |               |         |             |   |        |               |   |         |          |   |             |               |   |          |   |   |         |  
|Cumulative effect of adopting a new
      accounting policy (note 1(b))                                                                                                                               |               | -       |             |   | -      |               |   | -       |          |   | -           |               |   | (1,590   | ) |   | (1,590  | )
|                                                                                                                                                                                                      |               |         |             |   |        |               |   |         |          |   |             |               |   |          |   |   |         |  
|Balance, October 1, 2006, as recast                                                                                                                                                                   |               | 120,228 |             |   | 86,584 |               |   | 2,365   |          |   | 26,248      |               |   | 413,778  |   |   | 528,975 |  
|                                                                                                                                                                                                      |               |         |             |   |        |               |   |         |          |   |             |               |   |          |   |   |         |  
|Stock-based compensation related to stock
      options and Treasury restricted share units                                                                                                           |               | -       |             |   | -      |               |   | 1,814   |          |   | -           |               |   | -        |   |   | 1,814   |  
|Shares issued under employee share purchase
      plan                                                                                                                                                |               | 18      |             |   | 530    |               |   | -       |          |   | -           |               |   | -        |   |   | 530     |  
|Shares issued pursuant to exercise of stock
      options                                                                                                                                             |               | 149     |             |   | 786    |               |   | -       |          |   | -           |               |   | -        |   |   | 786     |  
|Shares issued pursuant to vesting of Treasury
      restricted share units                                                                                                                            |               | 27      |             |   | 226    |               |   | (226    | )        |   | -           |               |   | -        |   |   | -       |  
|Share repurchases                                                                                                                                                                                     |               | (3      | )           |   | (65    | )             |   | -       |          |   | -           |               |   | -        |   |   | (65     | )
|Net earnings, recast (note 1(b))                                                                                                                                                                      |               | -       |             |   | -      |               |   | -       |          |   | -           |               |   | 129,062  |   |   | 129,062 |  
|                                                                                                                                                                                                      |               |         |             |   |        |               |   |         |          |   |             |               |   |          |   |   |         |  
|Balance, September 30, 2007, as recast                                                                                                                                                                |               | 120,419 |             | $ | 88,061 |               | $ | 3,953   |          | $ | 26,248      |               | $ | 542,840  |   | $ | 661,102 |  
|                                                                                                                                                                                                      |               |         |             |   |        |               |   |         |          |   |             |               |   |          |   |   |         |  
|Stock-based compensation related to stock
      options and Treasury restricted share units                                                                                                           |               | -       |             |   | -      |               |   | 2,965   |          |   | -           |               |   | -        |   |   | 2,965   |  
|Shares issued under employee share purchase
      plan                                                                                                                                                |               | 21      |             |   | 720    |               |   | -       |          |   | -           |               |   | -        |   |   | 720     |  
|Shares issued pursuant to exercise of stock
      options                                                                                                                                             |               | 81      |             |   | 418    |               |   | -       |          |   | -           |               |   | -        |   |   | 418     |  
|Shares issued pursuant to vesting of Treasury
      restricted share units                                                                                                                            |               | 15      |             |   | 190    |               |   | (190    | )        |   | -           |               |   | -        |   |   | -       |  
|Share repurchases                                                                                                                                                                                     |               | -       |             |   | (12    | )             |   | -       |          |   | -           |               |   | -        |   |   | (12     | )
|Net earnings, recast (note 1(b))                                                                                                                                                                      |               | -       |             |   | -      |               |   | -       |          |   | -           |               |   | 146,350  |   |   | 146,350 |  
|                                                                                                                                                                                                      |               |         |             |   |        |               |   |         |          |   |             |               |   |          |   |   |         |  
|Balance, October 5, 2008, as recast                                                                                                                                                                   |               | 120,536 |             | $ | 89,377 |               | $ | 6,728   |          | $ | 26,248      |               | $ | 689,190  |   | $ | 811,543 |  
|                                                                                                                                                                                                      |               |         |             |   |        |               |   |         |          |   |             |               |   |          |   |   |         |  
|Stock-based compensation related to stock
      options and Treasury restricted share units                                                                                                           |               | -       |             |   | -      |               |   | 3,007   |          |   | -           |               |   | -        |   |   | 3,007   |  
|Shares issued under employee share purchase
      plan                                                                                                                                                |               | 58      |             |   | 781    |               |   | -       |          |   | -           |               |   | -        |   |   | 781     |  
|Shares issued pursuant to exercise of stock
      options                                                                                                                                             |               | 54      |             |   | 125    |               |   | -       |          |   | -           |               |   | -        |   |   | 125     |  
|Shares issued pursuant to vesting of Treasury
      restricted share units                                                                                                                            |               | 315     |             |   | 2,759  |               |   | (2,759  | )        |   | -           |               |   | -        |   |   | -       |  
|Net earnings                                                                                                                                                                                          |               | -       |             |   | -      |               |   | -       |          |   | -           |               |   | 95,329   |   |   | 95,329  |  
|                                                                                                                                                                                                      |               |         |             |   |        |               |   |         |          |   |             |               |   |          |   |   |         |  
|Balance, October 4, 2009                                                                                                                                                                              |               | 120,963 |             | $ | 93,042 |               | $ | 6,976   |          | $ | 26,248      |               | $ | 784,519  |   | $ | 910,785 |  
|                                                                                                                                                                                                      |               |         |             |   |        |               |   |         |          |   |             |               |   |          |   |   |         |  
|See accompanying notes
      to consolidated financial statements.                                                                                                                                    |               |         |             |   |        |               |   |         |          |   |             |               |   |          |   |  

GILDAN 2009 REPORT TO SHAREHOLDERS P.48

---

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



|                                                                                                                                                                                  |   |         |   |   |                      |   |   |                      |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ------- | - | - | -------------------- | - | - | -------------------- | -
|GILDAN ACTIVEWEAR INC.
      CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended
      October 4, 2009, October 5, 2008 and September 30, 2007 (in
      thousands of U.S. dollars)
|                                                                                                                                                                                  |   |         |   |   |                      |   |   |                      |  
|                                                                                                                                                                                  |   | 2009    |   |   | 2008                 |   |   | 2007                 |  
|                                                                                                                                                                                  |   |         |   |   | *(recast-note 1(b))* |   |   | *(recast-note 1(b))* |  
|Cash flows from (used in) operating activities:                                                                                                                                   |   |         |   |   |                      |   |   |                      |  
|Net earnings                                                                                                                                                                      | $ | 95,329  |   | $ | 146,350              |   | $ | 129,062              |  
|Adjustments for:                                                                                                                                                                  |   |         |   |   |                      |   |   |                      |  
|Depreciation and amortization (note 17(b))                                                                                                                                        |   | 65,407  |   |   | 57,135               |   |   | 37,268               |  
|Variation of depreciation included in
      inventories (note 17(b))                                                                                                              |   | (2,437  | ) |   | (957                 | ) |   | (1,837               | )
|Restructuring charges related to assets held
      for sale and property, plant and equipment (note 16)                                                                           |   | 976     |   |   | 2,174                |   |   | 5,523                |  
|Loss on disposal of property, plant and
      equipment                                                                                                                           |   | 561     |   |   | 1,369                |   |   | 332                  |  
|Stock-based compensation costs                                                                                                                                                    |   | 3,007   |   |   | 2,965                |   |   | 1,814                |  
|Future income taxes (note 14)                                                                                                                                                     |   | (2,434  | ) |   | (15,885              | ) |   | (8,919               | )
|Non-controlling interest                                                                                                                                                          |   | 110     |   |   | 230                  |   |   | 1,278                |  
|Unrealized net (gain) loss on foreign exchange and
      financial derivatives                                                                                                    |   | (1,012  | ) |   | (2,222               | ) |   | 3,226                |  
|                                                                                                                                                                                  |   | 159,507 |   |   | 191,159              |   |   | 167,747              |  
|Changes in non-cash working capital balances:                                                                                                                                     |   |         |   |   |                      |   |   |                      |  
|Accounts receivable                                                                                                                                                               |   | 48,351  |   |   | 10,263               |   |   | (34,919              | )
|Inventories                                                                                                                                                                       |   | 16,742  |   |   | (31,178              | ) |   | (37,473              | )
|Prepaid expenses and deposits                                                                                                                                                     |   | (1,191  | ) |   | (881                 | ) |   | (2,202               | )
|Accounts payable and accrued liabilities                                                                                                                                          |   | (22,731 | ) |   | 25,700               |   |   | (4,800               | )
|Income taxes payable                                                                                                                                                              |   | (31,499 | ) |   | 43,802               |   |   | 343                  |  
|                                                                                                                                                                                  |   | 169,179 |   |   | 238,865              |   |   | 88,696               |  
|                                                                                                                                                                                  |   |         |   |   |                      |   |   |                      |  
|Cash flows from (used in) financing activities:                                                                                                                                   |   |         |   |   |                      |   |   |                      |  
|(Decrease) increase in amounts drawn under revolving
      long-term credit facility                                                                                              |   | (45,000 | ) |   | (4,000               | ) |   | 49,000               |  
|Decrease in bank indebtedness                                                                                                                                                     |   | -       |   |   | (2,739               | ) |   | (3,500               | )
|Increase in other long-term debt                                                                                                                                                  |   | 44      |   |   | 2,805                |   |   | -                    |  
|Repayment of other long-term debt                                                                                                                                                 |   | (3,661  | ) |   | (5,461               | ) |   | (23,201              | )
|Proceeds from the issuance of shares                                                                                                                                              |   | 906     |   |   | 1,138                |   |   | 1,316                |  
|Repurchase of shares                                                                                                                                                              |   | -       |   |   | (12                  | ) |   | (65                  | )
|                                                                                                                                                                                  |   | (47,711 | ) |   | (8,269               | ) |   | 23,550               |  
|                                                                                                                                                                                  |   |         |   |   |                      |   |   |                      |  
|Cash flows from (used in) investing activities:                                                                                                                                   |   |         |   |   |                      |   |   |                      |  
|Purchase of property, plant and equipment                                                                                                                                         |   | (44,938 | ) |   | (97,030              | ) |   | (134,282             | )
|Business acquisition (note 2)                                                                                                                                                     |   | (1,196  | ) |   | (126,819             | ) |   | -                    |  
|Restricted cash related to business acquisition (note
      2)                                                                                                                    |   | 3,958   |   |   | (10,000              | ) |   | -                    |  
|Proceeds on disposal of assets held for sale                                                                                                                                      |   | 6,349   |   |   | 3,736                |   |   | 6,668                |  
|Net decrease (increase) in other assets                                                                                                                                           |   | 1,629   |   |   | 2,826                |   |   | (4,608               | )
|                                                                                                                                                                                  |   | (34,198 | ) |   | (227,287             | ) |   | (132,222             | )
|                                                                                                                                                                                  |   |         |   |   |                      |   |   |                      |  
|Effect of exchange rate changes on cash and cash
      equivalents denominated in foreign currencies                                                                              |   | 105     |   |   | (202                 | ) |   | 219                  |  
|Net increase (decrease) in cash and cash equivalents during
      the year                                                                                                        |   | 87,375  |   |   | 3,107                |   |   | (19,757              | )
|                                                                                                                                                                                  |   |         |   |   |                      |   |   |                      |  
|Cash and cash equivalents, beginning of year                                                                                                                                      |   | 12,357  |   |   | 9,250                |   |   | 29,007               |  
|Cash and cash equivalents, end of year                                                                                                                                            | $ | 99,732  |   | $ | 12,357               |   | $ | 9,250                |  
|                                                                                                                                                                                  |   |         |   |   |                      |   |   |                      |  
|Supplemental disclosure of cash flow information (note
      17(a))                                                                                                               |   |         |   |   |                      |   |   |                      |  
|                                                                                                                                                                                  |   |         |   |   |                      |   |   |                      |  
|See accompanying notes to consolidated financial
      statements.                                                                                                                |   |         |   |   |                      |   |   |                      |  

GILDAN 2009 REPORT TO SHAREHOLDERS P.49

---

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



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended October 4, 2009, October 5, 2008 and September 30, 2007 
(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 2009, 2008 and 2007 represent the fiscal years ended October 4, 2009, October 5, 2008 and September 30, 2007, 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.

Statement of earnings classification:

Effective the first quarter of fiscal 2009, the Company changed certain classifications of its statement of earnings and comprehensive income with retrospective application to comparative figures presented for prior periods. These new
classifications align the results of operations by function and incorporate presentation requirements under the Canadian Institute of Chartered Accountants (CICA) Handbook Section 3031, Inventories, which has been adopted effective the first
quarter of fiscal 2009. Pursuant to the requirements of Section 3031, depreciation expense related to manufacturing activities is now included in cost of sales. The remaining depreciation and amortization expense has been reclassified to selling,
general and administrative expenses. Depreciation and amortization expense is therefore no longer presented as a separate caption on the statement of earnings and comprehensive income. In addition, the Company reclassified certain other items in its
statement of earnings and comprehensive income. Outbound freight to customers, previously classified within selling, general and administrative expenses, is now reported within cost of sales. Also, a new caption is now presented for financial
expenses and income, which includes interest income and expenses (including mark-to-market adjustments of interest rate swap contracts), foreign exchange gains and losses (including mark-to-market adjustments of forward foreign exchange contracts),
and other financial charges. Interest expense net of interest income was previously reported as a separate caption, while foreign exchange gains and losses were previously included in cost of sales. Other financial charges were previously reflected
in selling, general and administrative expenses. For the year ended October 5, 2008 these changes in classification have resulted in a decrease of $63.8 million (2007 - $47.8 million) and $8.7 million (2007 - $11.1 million) in gross
profit and selling, general and administrative expenses, respectively, compared to the amounts previously reported. The decrease of $63.8 million (2007 - $47.8 million) in gross profit is due to reclassifications of $44.1 million (2007 -
$30.4 million) of depreciation and amortization expense, $20.6 million (2007 - $16.7 million) of outbound freight to customers less $0.9 million (2007  plus $0.7 million of foreign exchange gain) of foreign exchange loss
and other financial income. There was no impact on net earnings as a result of these changes in classification.

GILDAN 2009 REPORT TO SHAREHOLDERS P.50

---

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



1. SIGNIFICANT ACCOUNTING POLICIES (continued):

(b)

Adoption of new accounting standards:

Inventories:

Effective the commencement of its 2009 fiscal year, the Company adopted CICA Handbook Section 3031, Inventories, which replaced Section 3030, Inventories, and harmonized the Canadian standards related to inventories with International
Financial Reporting Standards (IFRS). This Section, which was issued in June 2007, provides changes to the measurement of, and more extensive guidance on, the determination of cost, including allocation of overhead; narrows the permitted cost
formulas; requires impairment testing; clarifies that major spare parts not in use should be included in property, plant and equipment; and expands the disclosure requirements to increase transparency. The Company compared the requirements of this
new Section with its current measurement and determination of costs and concluded that the new Section did not have a significant impact on the results of operations. The Company previously included and will continue to include the amount of
depreciation related to manufacturing activities as a component of the cost of inventories. However, the new Section requires depreciation expense related to inventories which have been sold to be presented in cost of sales. As a result, effective
the first quarter of fiscal 2009, depreciation expense related to manufacturing activities was reclassified to cost of sales.

See the section, Statement of earnings classification, in note 1(a) above and note 3 for the new disclosure requirements related to the adoption of Section 3031.

General Standards of Financial Statement Presentation:

Effective the commencement of its 2009 fiscal year, the Company adopted the amendment of CICA Handbook Section 1400, General Standards of Financial Statement Presentation, which is effective for fiscal years beginning on or after
October 1, 2008 and which includes requirements to assess and disclose the Companys ability to continue as a going concern. The adoption of the amended Section did not have an impact on the consolidated financial statements of the Company.

Goodwill and intangible assets:

In February 2008, Canadas Accounting Standards Board (AcSB) issued CICA Handbook Section 3064, Goodwill and Intangible Assets, replacing Section 3062, Goodwill and Other Intangible Assets, and Section 3450, Research and
Development Costs. Section 3064 establishes revised standards for the recognition, measurement, presentation and disclosure of goodwill and intangible assets. The new Section also provides guidance for the treatment of preproduction and start-up
costs and requires that these costs be expensed as incurred. This Section applies to annual financial statements relating to the Companys fiscal year beginning on October 6, 2008 and has been adopted on a retrospective basis effective from the
first quarter of fiscal 2009.

Prior to the adoption of Section 3064, the Company deferred and amortized plant start-up costs on a straight-line basis over two years. The impact of adopting this Section, on a retrospective basis, was an increase of $1.8 million in net
earnings for fiscal 2008 (increase of $0.01 in basic and diluted earnings per share), and a decrease in net earnings of $1.0 million for fiscal 2007 (decrease of $0.01 in basic and diluted earnings per share). The adoption of this
Section also resulted in a decrease of $0.8 million in other assets as at October 5, 2008 and a decrease of $1.6 million in shareholders equity as at October 1, 2006.

Credit risk and the fair value of financial assets and financial liabilities:

On January 20, 2009, the Emerging Issues Committee (EIC) of the AcSB issued EIC Abstract 173, Credit Risk and Fair Value of Financial Assets and Financial Liabilities, which establishes that an entitys own credit risk and the credit
risk of the counterparty should be taken into account in determining the fair value of financial assets and financial liabilities, including derivative instruments. EIC 173 should be applied retrospectively without restatement of prior years to all
financial assets and liabilities measured at fair value in interim and annual financial statements for periods ending on or after January 20, 2009 and was applicable to the Company for its second quarter of fiscal 2009 with retrospective
application, if any, to the beginning of its current fiscal year. The adoption of EIC 173 did not have an impact on the consolidated financial statements of the Company.

GILDAN 2009 REPORT TO SHAREHOLDERS P.51

---

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



1. SIGNIFICANT ACCOUNTING POLICIES (continued):

|(b) | Adoption of new accounting standards (continued):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | Financial Instruments  Disclosures:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | In June 2009, the AcSB issued amendments to CICA Handbook Section 3862, Financial Instruments  Disclosuresin order to align with International Financial Reporting Standard IFRS 7, Financial Instruments:
Disclosures. This Section has been amended to include additional disclosure requirements about fair value measurements of financial instruments and to enhance liquidity risk disclosure. The amendments establish a three-tier fair value hierarchy,
which prioritizes the inputs used in measuring fair value. These tiers include: 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. The amendments apply to annual financial statements relating to
fiscal years ended after September 30, 2009 and are applicable to the Company as at October 4, 2009. The amended Section relates to disclosure only and did not impact the financial results of the Company. As at October 4, 2009, the Company held no
assets or liabilities required to be measured at fair value except for cash and cash equivalents which was measured using Level 2 inputs in the fair value hierarchy.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(c) | Future accounting standards:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | Business combinations:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | In January 2009, the AcSB issued CICA Handbook Section 1582, Business Combinations, which replaces Section 1581, Business Combinations, and provides the equivalent to IFRS 3, Business Combinations(January
2008). The new Section expands the definition of a business subject to an acquisition and establishes significant new guidance on the measurement of consideration given, and the recognition and measurement of assets acquired and liabilities assumed
in a business combination. The new Section requires that all business acquisitions be measured at the full fair value of the acquired entity at the acquisition date even if the business combination is achieved in stages, or if less than 100 percent
of the equity interest in the acquiree is owned at the acquisition date. The measurement of equity consideration given in a business combination will no longer be based on the average of the fair value of the shares a few days before and after the
day the terms and conditions have been agreed to and the acquisition announced, but rather at the acquisition date. Subsequent changes in fair value of contingent consideration classified as a liability will be recognized in earnings and not as an
adjustment to the purchase price. Restructuring and other direct costs of a business combination are no longer considered part of the acquisition accounting. Instead, such costs will be expensed as incurred, unless they constitute the costs
associated with issuing debt or equity securities. The Section applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2011.
Earlier adoption is permitted. This new Section will only have an impact on our consolidated financial statements for future acquisitions that will be made in periods subsequent to the date of adoption. The Company is currently considering early
adoption of Section 1582.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | Consolidated financial statements and non-controlling interests:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | In January 2009, the AcSB issued CICA Handbook Section 1601, Consolidated Financial Statements, and Handbook Section 1602, Non-Controlling Interests, which together replace Section 1600, Consolidated Financial
Statements. These two Sections are the equivalent to the corresponding provisions of International Accounting Standard 27, Consolidated and Separate Financial Statements(January 2008) under IFRS. Section 1602 applies to the accounting
for non-controlling interests and transactions with non-controlling interest holders in consolidated financial statements. The new Sections require that, for each business combination, the acquirer measure any non-controlling interest in the
acquiree either at fair value or at the non-controlling interest's proportionate share of the acquiree's identifiable net assets. The new Sections also require non-controlling interest to be presented as a separate component of shareholders' equity.
Under Section 1602, non-controlling interest in income is not deducted in arriving at consolidated net income or other comprehensive income. Rather, net income and each component of other comprehensive income are allocated to the controlling and
non-controlling interests based on relative ownership interests. These Sections apply to interim and annual consolidated financial statements relating to fiscal years beginning on or after January 1, 2011, and should be adopted concurrently with
Section 1582. Earlier adoption is permitted which would be effective as of the beginning of the fiscal year of adoption. The Company is currently considering early adoption of Section 1582, which would result in the reclassification of the
non-controlling interest in consolidated joint venture from a separate item on the consolidated balance sheet to a separate component of shareholders equity for all periods presented.                                                                                                        

GILDAN 2009 REPORT TO SHAREHOLDERS P.52

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



1. SIGNIFICANT ACCOUNTING POLICIES (continued):

|(c) | Future accounting standards (continued):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | International Financial Reporting
      Standards                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | In February 2008, the AcSB confirmed that IFRS, as issued
      by the International Accounting Standards Board, 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 financial statements with comparative
      information for fiscal 2011.                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | In preparation for the changeover to IFRS, the Company
      has developed an IFRS transition plan. The Company has completed its
      initial phase, comprised of a diagnostic process, which involved a
      comparison of the Companys current accounting policies under Canadian
      generally accepted accounting principles with currently issued IFRS. The
      identified differences are being analyzed and will be addressed according
      to the level of impact they will have on the key elements of the
      transition plan. These key elements include: accounting policies,
      including choices among policies permitted under IFRS; information
      technology and data systems; internal control over financial reporting;
      disclosure controls and procedures, including investor relations and
      external communications plans; and business activities.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | As the IFRS transition plan progresses, the Company will
      continue to report on the status of the transition plan and provide more
      detailed information of the impact on the key elements indicated
    above.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(d) | Cash and cash equivalents:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | The Company considers all liquid investments with
      maturities of three months or less when acquired to be cash
      equivalents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(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 materials.
      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
      overhead 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 recorded at cost.
      Depreciation and amortization are recorded on a straight-line basis over
      the estimated useful lives of the assets at the following annual
    rates:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 



Asset
    RateBuildings and improvements
    2 1/2% to 20%Equipment
    10% to 25%


Assets not in service include expenditures incurred to date for
plant expansions which are still in process and equipment not yet in service as
at the balance sheet date. Depreciation on these assets commences when the
assets are put into service.

The cost of information technology projects including
internally developed software is capitalized and included in equipment
commencing at the point at which conceptual formulation, design and testing of
possible software project alternatives are complete and management authorizes
and commits to funding the project. The Company does not capitalize pilot
projects where it believes that future economic benefits are less than probable.
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.

GILDAN 2009 REPORT TO SHAREHOLDERS P.53

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



1. SIGNIFICANT ACCOUNTING POLICIES (continued):

|(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, which consist of acquired customer contracts and customer relationships, are being amortized on a straight-line basis over a period of twenty years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(i) | Goodwill:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | Goodwill represents the excess of the purchase price over the fair value of net assets acquired. Goodwill is not amortized and is tested for impairment annually, or more frequently if events or changes in circumstances indicate
that the asset might be impaired. When the carrying amount of a reporting unit exceeds the estimated fair value of the reporting unit, an impairment loss is recognized in an amount equal to the excess of the carrying value over the fair value of the
goodwill, if any.                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(j) | Impairment of long-lived assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | Long-lived assets, consisting of property, plant and equipment and intangible assets with finite lives, are reviewed for potential impairment whenever 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 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, with fair value being determined based upon discounted cash flows or appraised values, depending on the nature of the
asset.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(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 the consolidated statements of earnings.                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | The 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 the consolidated statements of 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 when 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.                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(m) | 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.                                                                                                                                                                                                                                                                                                                                                                             

GILDAN 2009 REPORT TO SHAREHOLDERS P.54

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



1. SIGNIFICANT ACCOUNTING POLICIES (continued):

|(n) | Cost of sales and gross profit:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | Cost of sales includes all raw material costs, manufacturing conversion costs, including manufacturing depreciation expense, sourcing costs, transportation costs incurred until the receipt of finished goods at the Companys
distribution facilities, and outbound freight to customers. Cost of sales also includes costs relating to purchasing, receiving and inspection activities, manufacturing administration, third-party manufacturing services, insurance, internal
transfer of inventories and customs and duties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | 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 and outbound freight to
customers from cost of sales.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(o) | 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 expense, and other general and administrative expenses. SG&A expenses also include amortization of customer-related intangible assets and bad debt expense.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(p) | 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 recoverability and enforceability. 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.                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(q) | 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. 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.                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(r) | 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 market 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.

GILDAN 2009 REPORT TO SHAREHOLDERS P.55

---

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



1. SIGNIFICANT ACCOUNTING POLICIES (continued):

|(r) | Financial instruments and hedging relationships (continued):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | 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 marked-to-market at each reporting date and the gains
or losses are included in net earnings.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | The Company has classified cash equivalents as held-for-trading. The Company has also classified accounts receivable as loans and receivables, and accounts payable and long-term debt as other financial liabilities, all of which
are measured at amortized cost.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | The Company may periodically use derivative financial instruments to manage risks related to fluctuations in exchange rates, commodity prices and interest rates. Derivative financial instruments are not used for trading purposes.
Forward foreign exchange contracts are entered into with maturities not exceeding twenty-four months.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | As at October 4, 2009, there were no derivative financial instruments outstanding. As at October 5, 2008, all forward foreign exchange contracts were reported on a mark-to-market basis, and the gains or losses were included in net
earnings. The Company elected not to apply hedge accounting for these derivatives.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(s) | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(t) | 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. Future income tax assets are evaluated and 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

GILDAN 2009 REPORT TO SHAREHOLDERS P.56

---

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



1. SIGNIFICANT ACCOUNTING POLICIES (continued):

|(t) | Income taxes (continued):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | 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.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(u) | Stock-based compensation and other stock-based payments:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | 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. 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 recognized by amortizing the cost over the 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(v) | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | The Company 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 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(w) | 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 2009 REPORT TO SHAREHOLDERS P.57

---

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

1. SIGNIFICANT ACCOUNTING POLICIES (continued):

|(x) | 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 costs should it decide to discontinue some of its activities. There were no liabilities recorded for such costs in the consolidated balance sheets because the Company plans to continue
its activities for an indefinite period, and the information available is insufficient to reasonably estimate a schedule for future asset retirement. Where there is a legal obligation associated with the retirement of property, plant and equipment,
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 asset
retirement obligations as at October 4, 2009 and October 5, 2008.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(y) | Business acquisitions:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | The Company accounts for business acquisitions using the purchase method. Accordingly, the purchase price of a business acquisition is allocated to its identifiable net assets including identifiable intangible assets, 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.                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(z) | 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 assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Financial results as determined by actual events could differ materially from those
estimates.                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | Significant areas requiring the use of management estimates and assumptions include the allowance for doubtful accounts, inventory valuation, income tax assets and liabilities, accruals for sales promotional programs, the fair
value of identifiable tangible and intangible assets acquired in a business combination, impairment of assets and the recoverability of long-lived assets.                                                                                                                                                                                                                                                                                                                                                                                                                        

2. BUSINESS ACQUISITION:

On October 15, 2007, the Company acquired 100% of the capital stock of V.I. Prewett & Son, Inc. (Prewett), a U.S. supplier of basic family socks primarily to U.S. mass-market retailers. The acquisition is intended to enhance further
the Companys position as a full-product supplier of socks, activewear and underwear for the retail channel.

The aggregate purchase price of $128.0 million was comprised of cash consideration of $125.3 million, a deferred payment of $1.2 million, which was disbursed in the fourth quarter of fiscal 2009, and transaction costs of $1.5
million. The purchase agreement provides for an additional purchase consideration of up to $10.0 million contingent on specified future events. This amount was paid into escrow by the Company, but events occurring subsequent to the acquisition
have resulted in a reduction of the contingent purchase price and escrow balance to $6.0 million as at October 4, 2009. The escrow deposit of $6.0 million (October 5, 2008 - $10.0 million) is included in other assets on the consolidated
balance sheet. The remaining contingent purchase price may be subject to further reductions during fiscal 2010 and 2011. Any further purchase price consideration paid by the Company will be accounted for as additional goodwill.

The Company accounted for this acquisition using the purchase method and the results of Prewett 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 values and taking into account all relevant information available at that time.

GILDAN 2009 REPORT TO SHAREHOLDERS P.58

---

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

2. BUSINESS ACQUISITION (continued):

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

|Assets acquired:                               |   |         |  
|---------------------------------------------- | - | ------- | -
|Accounts receivable                            | $ | 28,228  |  
|Inventories                                    |   | 44,074  |  
|Prepaid expenses                               |   | 1,573   |  
|Property, plant and equipment                  |   | 26,202  |  
|Customer contracts and customer relationships  |   | 61,000  |  
|Other assets                                   |   | 196     |  
|                                               |   | 161,273 |  
|Liabilities assumed:                           |   |         |  
|Bank indebtedness                              |   | (2,739  | )
|Accounts payable and accrued
      liabilities |   | (12,800 | )
|Future
      income taxes                      |   | (24,428 | )
|                                               |   | (39,967 | )
|Net identifiable assets acquired               |   | 121,306 |  
|Goodwill                                       |   | 6,709   |  
|Purchase price                                 | $ | 128,015 |  
|                                               |   |         |  
|Consideration:                                 |   |         |  
|Cash                                           | $ | 125,294 |  
|Transaction costs                              |   | 1,525   |  
|Deferred payment disbursed in fiscal 2009      |   | 1,196   |  
|                                               | $ | 128,015 |  

Immediately following the acquisition, the Company repaid the
entire amount of bank indebtedness assumed at the date of acquisition. Goodwill
recorded in connection with this acquisition is not deductible for tax purposes.

|3. INVENTORIES:                              |   |         |  |   |         | 
|-------------------------------------------- | - | ------- |  | - | ------- | 
|                                             |   |         |  |   |         | 
|Inventories were comprised of the following: |   |         |  |   |         | 
|                                             |   |         |  |   |         | 
|                                             |   | 2009    |  |   | 2008    | 
|                                             |   |         |  |   |         | 
|Raw materials and spare parts inventories    | $ | 43,078  |  | $ | 59,742  | 
|Work in process                              |   | 24,576  |  |   | 29,086  | 
|Finished goods                               |   | 234,213 |  |   | 227,344 | 
|                                             | $ | 301,867 |  | $ | 316,172 | 

The amount of inventory recognized as an expense and included
in cost of sales was $795.0 million (2008 - $890.6 million), which included an
expense of $8.1 million (2008 - $9.4 million), related to the write-down of
slow-moving or obsolete inventory.

GILDAN 2009 REPORT TO SHAREHOLDERS P.59

---

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



|4. PROPERTY, PLANT AND
      EQUIPMENT:                                                                                                                                                      |   |         |  |   |              |   |   |                |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ------- |  | - | ------------ | - | - | -------------- | -
|                                                                                                                                                                                             |   |         |  |   |              |   |   |                |  
|                                                                                                                                                                                             |   |         |  |   | Accumulated  |   |   | Net book       |  
|2009                                                                                                                                                                                         |   | Cost    |  |   | depreciation |   |   | value          |  
|                                                                                                                                                                                             |   |         |  |   |              |   |   |                |  
|Land                                                                                                                                                                                         | $ | 17,152  |  | $ | -            |   | $ | 17,152         |  
|Buildings and improvements                                                                                                                                                                   |   | 146,823 |  |   | 34,798       |   |   | 112,025        |  
|Equipment                                                                                                                                                                                    |   | 460,616 |  |   | 200,438      |   |   | 260,178        |  
|Assets not in service                                                                                                                                                                        |   | 25,183  |  |   | -            |   |   | 25,183         |  
|                                                                                                                                                                                             | $ | 649,774 |  | $ | 235,236      |   | $ | 414,538        |  
|                                                                                                                                                                                             |   |         |  |   |              |   |   |                |  
|                                                                                                                                                                                             |   |         |  |   | Accumulated  |   |   | Net
      book |  
|2008                                                                                                                                                                                         |   | Cost    |  |   | depreciation |   |   | value          |  
|                                                                                                                                                                                             |   |         |  |   |              |   |   |                |  
|Land                                                                                                                                                                                         | $ | 19,110  |  | $ | -            |   | $ | 19,110         |  
|Buildings and improvements                                                                                                                                                                   |   | 151,989 |  |   | 35,066       |   |   | 116,923        |  
|Equipment                                                                                                                                                                                    |   | 420,893 |  |   | 141,960      |   |   | 278,933        |  
|Assets not in service                                                                                                                                                                        |   | 21,550  |  |   | -            |   |   | 21,550         |  
|                                                                                                                                                                                             | $ | 613,542 |  | $ | 177,026      |   | $ | 436,516        |  
|                                                                                                                                                                                             |   |         |  |   |              |   |   |                |  
|Assets
      not in service include expenditures incurred to date for plant expansions
      which are still in process and equipment not yet in
      service as at the balance sheet date. |  
|                                                                                                                                                                                             |  
|5. INTANGIBLE
      ASSETS:                                                                                                                                                                  |   |         |  |   |              |   |   |                |  
|                                                                                                                                                                                             |   |         |  |   |              |   |   |                |  
|                                                                                                                                                                                             |   |         |  |   | 2009         |   |   | 2008           |  
|                                                                                                                                                                                             |   |         |  |   |              |   |   |                |  
|Customer
      contracts and customer relationships                                                                                                                                          |   |         |  | $ | 63,526       |   | $ | 63,526         |  
|Accumulated amortization                                                                                                                                                                     |   |         |  |   | (6,769       | ) |   | (3,572         | )
|                                                                                                                                                                                             |   |         |  | $ | 56,757       |   | $ | 59,954         |  
|                                                                                                                                                                                             |   |         |  |   |              |   |   |                |  
|6. OTHER
      ASSETS:                                                                                                                                                                       |   |         |  |   |              |   |   |                |  
|                                                                                                                                                                                             |   |         |  |   |              |   |   |                |  
|                                                                                                                                                                                             |   |         |  |   | 2009         |   |   | 2008           |  
|                                                                                                                                                                                             |   |         |  |   |              |   |   |                |  
|Long-term
      prepaid expenses and other                                                                                                                                                   |   |         |  | $ | 2,689        |   | $ | 5,529          |  
|Long-term non-trade receivable                                                                                                                                                               |   |         |  |   | 1,254        |   |   | 1,748          |  
|Restricted cash related to the acquisition of
      Prewett (note 2)                                                                                                                         |   |         |  |   | 6,042        |   |   | 10,000         |  
|                                                                                                                                                                                             |   |         |  | $ | 9,985        |   | $ | 17,277         |  

7. REVOLVING LINE OF CREDIT:

The Company's joint venture, CanAm, has a revolving line of
credit in the amount of $4.0 million. The borrowings are due on demand and bear
interest at 30-day LIBOR plus 2.0% (2.26% at October 4, 2009; 4.49% at October
5, 2008). 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 4, 2009 (2008  nil).

GILDAN 2009 REPORT TO SHAREHOLDERS P.60

---

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



|8. LONG-TERM DEBT:                                                                                                                                                                                                    |   |       |  |   |        | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ----- |  | - | ------ | 
|                                                                                                                                                                                                                      |   |       |  |   |        | 
|                                                                                                                                                                                                                      |   | 2009  |  |   | 2008   | 
|                                                                                                                                                                                                                      |   |       |  |   |        | 
|Secured:                                                                                                                                                                                                              |   |       |  |   |        | 
|                                                                                                                                                                                                                      |   |       |  |   |        | 
|Term loan, repayable in monthly instalments, bearing interest at 30-day LIBOR plus
      2.50% (2.76% at October 4, 2009; 4.99% at October 5, 2008) maturing in September 2012; secured by assets (b)                 | $ | 3,162 |  | $ | 4,889  | 
|                                                                                                                                                                                                                      |   |       |  |   |        | 
|Municipal bonds, repayable in
      annual instalments, bearing interest at variable rates
      (3.05% at October 4, 2009; 2.60% at October 5, 2008) maturing in January 2010; secured by building and equipment (c) |   | 714   |  |   | 1,429  | 
|                                                                                                                                                                                                                      |   |       |  |   |        | 
|Other term loans and
      notes payable to bank which matured during the year                                                                                                                                        |   | -     |  |   | 478    | 
|                                                                                                                                                                                                                      |   | 3,876 |  |   | 6,796  | 
|                                                                                                                                                                                                                      |   |       |  |   |        | 
|Current portion of secured debt                                                                                                                                                                                       |   | 2,348 |  |   | 2,827  | 
|                                                                                                                                                                                                                      | $ | 1,528 |  | $ | 3,969  | 
|                                                                                                                                                                                                                      |   |       |  |   |        | 
|Unsecured:                                                                                                                                                                                                            |   |       |  |   |        | 
|Revolving term credit facility (a)                                                                                                                                                                                    | $ | -     |  | $ | 45,000 | 
|Term
      loans, bearing interest at rates up to 4% per annum, maturing at various dates through 2011                                                                                                                |   | 511   |  |   | 1,208  | 
|                                                                                                                                                                                                                      |   | 511   |  |   | 46,208 | 
|                                                                                                                                                                                                                      |   |       |  |   |        | 
|Current portion of unsecured debt                                                                                                                                                                                     |   | 455   |  |   | 729    | 
|                                                                                                                                                                                                                      |   | 56    |  |   | 45,479 | 
|                                                                                                                                                                                                                      |   |       |  |   |        | 
|Total secured and unsecured long-term debt                                                                                                                                                                            | $ | 1,584 |  | $ | 49,448 | 

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | The Company has a committed revolving term credit
      facility for a maximum of $400.0 million, which matures in June 2013. The
      facility is unsecured. There were no amounts drawn under this facility at
      October 4, 2009 (2008 - $45.0 million). In addition, an amount of $0.2
      million (2008 - $3.6 million) has been committed against this facility to
      cover various letters of credit as described in note 13.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(b) | The term loan has been entered into by CanAm. The
      property, plant and equipment of CanAm serve as collateral for the
      long-term borrowings of CanAm. Other creditors of CanAm do not have any
      recourse to the general credit of the Company.                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(c) | As a result of the acquisition of Kentucky Derby Hosiery
      Co., Inc. (Kentucky Derby) in fiscal 2006, the Company assumed the
      obligations entered into by Kentucky Derby. The property, plant and
      equipment of Kentucky Derby serve as collateral for the long-term
      borrowings of Kentucky Derby.                                                                                                                    

Under various financing arrangements with its bankers and other
long-term lenders, the Company is required to meet certain financial covenants.
The Company was in compliance with all of these financial covenants as at
October 4, 2009 and October 5, 2008.

GILDAN 2009 REPORT TO SHAREHOLDERS P.61

---

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



|8. LONG-TERM DEBT (continued):                                                       |   |       | 
|------------------------------------------------------------------------------------ | - | ----- | 
|                                                                                     |   |       | 
|Principal payments due on long-term debt as at
      October 4, 2009 are as follows: |   |       | 
|                                                                                     |   |       | 
|Fiscal year                                                                          |   |       | 
|                                                                                     |   |       | 
|2010                                                                                 | $ | 2,803 | 
|2011                                                                                 |   | 1,584 | 
|                                                                                     | $ | 4,387 | 

9. 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) | On May 2, 2007, the Board of Directors of the Company
      declared a two-for-one stock split, effected in the form of a stock
      dividend, applicable to all of its issued and outstanding common shares,
      to shareholders of record on May 18, 2007. All share and per share data in
      these consolidated financial statements reflect the effect of the stock
      split on a retroactive basis.                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(c) | 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.                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(d) | 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 4, 2009 and October 5, 2008 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 4, 2009 there were 120,963,028 (2008 -
      120,536,501) common shares issued and outstanding.                                                                                                                                                                                                                                                                                                                            

10. 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 4, 2009, a total of 219,353 (2008 - 161,746)
      shares were issued under these plans. Included as compensation costs in
      selling, general and administrative expenses is $0.1 million (2008 - $0.1
      million; 2007 - $0.1 million) relating to the employee share purchase
      plans.

GILDAN 2009 REPORT TO SHAREHOLDERS P.62

---

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

10. 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 4, 2009, 3,404,045 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 vest equally beginning on and after
the second, third, fourth and fifth anniversary of the grant date and expire no
more than seven or ten years after the date of the grant.

Changes in outstanding stock options
were as follows:

| |                                                                                                                                                                                                             |  |            |  |  |                             |  
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------- |  |  | --------------------------- | -
| |                                                                                                                                                                                                             |  |            |  |  | Weighted
      average      |  
| |                                                                                                                                                                                                             |  |            |  |  | Number                      |  
| |                                                                                                                                                                                                             |  |            |  |  | (in
      Canadian dollars) |  
| |                                                                                                                                                                                                             |  |            |  |  |                             |  
| | Options
      outstanding, September 30, 2007                                                                                                                                                               |  |            |  |  | 852                         |  
| | Granted                                                                                                                                                                                                     |  |            |  |  | 128                         |  
| | Exercised                                                                                                                                                                                                   |  |            |  |  | (81                         | )
| | Forfeited                                                                                                                                                                                                   |  |            |  |  | (21                         | )
| | Options
      outstanding, October 5, 2008                                                                                                                                                                  |  |            |  |  | 878                         |  
| | Granted                                                                                                                                                                                                     |  |            |  |  | 233                         |  
| | Exercised                                                                                                                                                                                                   |  |            |  |  | (54                         | )
| | Forfeited                                                                                                                                                                                                   |  |            |  |  | (47                         | )
| | Options outstanding, October 4, 2009                                                                                                                                                                        |  |            |  |  | 1,010                       |  
| |                                                                                                                                                                                                             |  |            |  |  |                             |  
| | The weighted average fair value of each option granted in fiscal
      2009 was estimated on the date of grant using the Black-Scholes pricing model with the following weighted average
      assumptions:
| |                                                                                                                                                                                                             |  |            |  |  |                             |  
| |                                                                                                                                                                                                             |  | 2009       |  |  | 2008                        |  
| |                                                                                                                                                                                                             |  |            |  |  |                             |  
| | Risk-free
      interest rate                                                                                                                                                                               |  | 3.06%      |  |  | 4.17%                       |  
| | Expected volatility                                                                                                                                                                                         |  | 34.98%     |  |  | 30.73%                      |  
| | Expected life                                                                                                                                                                                               |  | 5.25 years |  |  | 4.68 years                  |  
| | Expected dividend yield                                                                                                                                                                                     |  | -          |  |  | -                           |  
| |                                                                                                                                                                                                             |  |            |  |  |                             |  
| | The
      grant date weighted average fair value of options granted in fiscal 2009
      was $9.24 (2008  $13.02; 2007  $7.70).                                                                           | 

GILDAN 2009 REPORT TO SHAREHOLDERS P.63

---

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

10. STOCK-BASED COMPENSATION (continued):

|(b) | Stock options and restricted share units
      (continued):                                                         
|--- | --------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                     
|    | The following table summarizes information about stock
      options outstanding and exercisable at October 4,
2009:

| |                       |  |        |  |   |                             |  |  |                        |  |  |        |  |   |                             | 
| | --------------------- |  | ------ |  | - | --------------------------- |  |  | ---------------------- |  |  | ------ |  | - | --------------------------- | 
| |                       |  |        |  |   |                             |  |  | Options outstanding    |  |  |        |  |   | Options exercisable         | 
| |                       |  |        |  |   |                             |  |  | Weighted               |  |  |        |  |   |                             | 
| | Range of exercise     |  |        |  |   | Weighted average            |  |  | average remaining      |  |  |        |  |   | Weighted average            | 
| | prices                |  | Number |  |   | exercise price              |  |  | contractual life (yrs) |  |  | Number |  |   | exercise price              | 
| | (in Canadian dollars) |  |        |  |   | (in Canadian
      dollars) |  |  |                        |  |  |        |  |   | (in Canadian
      dollars) | 
| |                       |  |        |  |   |                             |  |  |                        |  |  |        |  |   |                             | 
| | $ 5.00 - $ 5.39       |  | 63     |  | $ | 5.25                        |  |  | 2.09                   |  |  | 63     |  | $ | 5.25                        | 
| | $ 6.06 - $ 6.88       |  | 301    |  |   | 6.34                        |  |  | 0.98                   |  |  | 301    |  |   | 6.34                        | 
| | $ 8.64 - $ 8.70       |  | 208    |  |   | 8.64                        |  |  | 1.37                   |  |  | 208    |  |   | 8.64                        | 
| | $11.41 - $23.49       |  | 214    |  |   | 23.48                       |  |  | 6.01                   |  |  | -      |  |   | -                           | 
| | $27.17 - $39.39       |  | 224    |  |   | 32.61                       |  |  | 4.44                   |  |  | 87     |  |   | 30.69                       | 
| |                       |  | 1,010  |  | $ | 16.21                       |  |  |                        |  |  | 659    |  | $ | 10.17                       | 

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 at the end of a five-year vesting
period. The vesting of 50% of the Treasury RSUs are dependent upon the fiscal
performance of the Company relative to a benchmark group of Canadian publicly
listed companies. Compensation expense relating to the Treasury RSUs is
recognized in the financial statements over the vesting period based on the fair
value of the Treasury RSUs on the date of the grant and estimates relating to
forfeitures and the probability of the performance objectives being met. The
fair value of the Treasury RSUs granted is equal to the market price of the
common shares of the Company at the time of grant.

Changes in outstanding Treasury RSUs
were as follows:

| |                                                     |  |        |   |   |                | 
| | --------------------------------------------------- |  | ------ | - | - | -------------- | 
| |                                                     |  |        |   |   | Weighted       | 
| |                                                     |  |        |   |   | average fair   | 
| |                                                     |  | Number |   |   | value per unit | 
| |                                                     |  |        |   |   |                | 
| | Treasury RSUs
      outstanding, September 30, 2007 |  | 941    |   | $ | 16.13          | 
| | Granted                                             |  | 133    |   |   | 29.35          | 
| | Settled through
      the issuance of common shares |  | (15    | ) |   | 12.87          | 
| | Forfeited                                           |  | (81    | ) |   | 22.69          | 
| | Treasury RSUs
      outstanding, October 5, 2008    |  | 978    |   |   | 17.43          | 
| | Granted                                             |  | 181    |   |   | 11.11          | 
| | Settled through
      the issuance of common shares |  | (315   | ) |   | 8.75           | 
| | Forfeited                                           |  | (86    | ) |   | 26.75          | 
| | Treasury RSUs outstanding, October 4, 2009          |  | 758    |   | $ | 18.48          | 

As at October 4, 2009, 20,000 (2008 
nil) of the outstanding Treasury RSUs were vested for which shares will be
issued in December 2009. The compensation expense included in selling, general
and administrative expenses and cost of sales, in respect of the options and
Treasury RSUs, was $3.0 million (2008 - $3.0 million; 2007 - $1.8 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.

GILDAN 2009 REPORT TO SHAREHOLDERS P.64

---

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

10. STOCK-BASED COMPENSATION (continued):

|(b) | Stock options and restricted share units
      (continued):    
|--- | ---------------------------------------------------------------
|    |                                                                
|    | Changes in outstanding non-Treasury RSUs were as
      follows:

| |                                                         |  |        |  
| | ------------------------------------------------------- |  | ------ | -
| |                                                         |  | Number |  
| |                                                         |  |        |  
| | Non-Treasury
      RSUs outstanding, September 30, 2007 |  | 56     |  
| | Granted                                                 |  | 50     |  
| | Settled                                                 |  | (1     | )
| | Forfeited                                               |  | (6     | )
| | Non-Treasury
      RSUs outstanding, October 5, 2008    |  | 99     |  
| | Granted                                                 |  | 106    |  
| | Settled                                                 |  | (3     | )
| | Forfeited                                               |  | (17    | )
| | Non-Treasury RSUs outstanding, October 4,
      2009    |  | 185    |  

Non-Treasury RSUs have the same
features as Treasury RSUs, except that their vesting period is a maximum of
three years and they will 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.
As of October 4, 2009, the weighted average fair value per non-Treasury RSU was
$18.55. No common shares are issued from treasury under such awards and they
are, therefore, non-dilutive. As at October 4, 2009, 47,170 (2008  nil) of the
outstanding non-Treasury RSUs were vested, which were settled in cash subsequent
to year-end.

The compensation expense included in
selling, general and administrative expenses and cost of sales, in respect of
the non-Treasury RSUs, was $0.8 million (2008 - $0.3 million; 2007 - $0.4
million). The total obligation under this plan as at October 4, 2009, is $1.7
million (2008 - $0.8 million) and is recorded in accounts payable and accrued
liabilities.

11. 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 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 4, 2009, there were 36,086 (2008 -
19,499) DSUs outstanding at a value of $0.7 million (2008 - $0.4 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, September 30, 2007 |  | 11     | 
|Granted                                    |  | 8      | 
|DSUs
      outstanding, October 5, 2008    |  | 19     | 
|Granted                                    |  | 17     | 
|DSUs outstanding, October 4, 2009          |  | 36     | 

GILDAN 2009 REPORT TO SHAREHOLDERS P.65

---

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

12. COMMITMENTS AND CONTINGENCIES:

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

| |             |   |        | 
| | ----------- | - | ------ | 
| | Fiscal year |   |        | 
| |             |   |        | 
| | 2010        | $ | 7,976  | 
| | 2011        |   | 6,760  | 
| | 2012        |   | 5,058  | 
| | 2013        |   | 4,696  | 
| | 2014        |   | 3,954  | 
| | Thereafter  |   | 11,398 | 
| |             | $ | 39,842 | 



|(b) | As at October 4, 2009, there were contractual obligations
      outstanding of approximately $60.0 million for the acquisition of
      property, plant and equipment (2008 - $14.1 million).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(c) | During fiscal 2009, the United States Department of
      Agriculture advanced $4.3 million to CanAm in connection with a new
      subsidy program aimed at subsidizing qualifying capital expenditures.
      Amounts received under this program are initially based on U.S. cotton
      consumption. The assistance provided is not repayable, provided that the
      amounts received under the program are used to finance eligible capital
      expenditures over a certain period of time. As at October 4, 2009, the
      balance of financial assistance received in the amount of $4.1 million,
      which is to be disbursed no later than February 2011 to finance eligible
      capital expenditures, is included in accounts payable and accrued
      liabilities. Once the eligible capital expenditures are made, the balance
      included in accounts payable and accrued liabilities will be recognized as
      a reduction of the cost of the eligible capital expenditures.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(d) | Securities Class Actions:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | The Company and certain of its senior officers have been
      named as defendants in a number of proposed class action lawsuits filed in
      the United States District Court for the Southern District of New York. A
      proposed class action has also been filed in the Ontario Superior Court of
      Justice and a petition for authorization to commence a class action has
      been filed in the Quebec Superior Court. Each of these U.S. and Canadian
      lawsuits, which have yet to be certified as a class action by the
      respective courts at this stage, seek to represent a class comprised of
      persons who acquired the Companys common shares between August 2, 2007
      and April 29, 2008 and allege, among other things, that the defendants
      misrepresented the Companys financial condition and its financial
      prospects in its financial guidance concerning the 2008 fiscal year, which
      was subsequently revised on April 29, 2008.      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | The U.S. lawsuits have been consolidated, and a
      consolidated amended complaint was filed alleging claims under the U.S.
      securities laws. On July 1, 2009, the District Court granted the motion by
      Gildan and other defendants to dismiss the U.S. action in its entirety,
      holding that the consolidated amended complaint failed to adequately
      allege the essential elements of a claim under the applicable provisions
      of the U.S. securities laws, including the existence of a material
      misstatement and fraudulent intent. On July 17, 2009, plaintiffs filed a
      motion seeking reconsideration of this decision only insofar as it
      declined to grant plaintiffs an opportunity to file a second amended
      complaint. On July 31, 2009, the Company and the other defendants filed a
      response to plaintiffs motion seeking reconsideration. On December 4,
      2009, the plaintiffs motion seeking reconsideration was denied.    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | In addition to pursuing common law claims, the Ontario
      action proposes to seek leave from the Ontario court to also bring
      statutory misrepresentation civil liability claims under Ontarios
      Securities Act. A motion, along with affidavit evidence, for leave to
      pursue such statutory liability claims and class certification have been
      filed by the plaintiff. No date has been set yet for the hearing of that
      motion.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | The Company strongly contests the basis upon which these
      actions are predicated and intends to vigorously defend its position.
      However, due to the inherent uncertainties of litigation, it is not
      possible to predict the final outcome of these lawsuits or determine the
      amount of any potential losses, if any. No provision for contingent loss
      has been recorded in the consolidated financial
  statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

GILDAN 2009 REPORT TO SHAREHOLDERS P.66

---

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

12. COMMITMENTS AND CONTINGENCIES (continued):

|(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 materially adverse effect on the
      financial position or results of operations of the
  Company.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

13. 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 4,
2009, the maximum potential liability under these guarantees was $10.0 million
(2008 - $14.1 million), of which $4.7 million (2008 - $4.5 million) was for
surety bonds and $5.3 million (2008 - $9.6 million) was for corporate guarantees
and standby letters of credit. The standby letters of credit mature at various
dates up to fiscal 2010, the surety bonds are automatically renewed on an annual
basis and the corporate guarantees mature at various dates up to fiscal 2010.

As at October 4, 2009, 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.

14. 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:

|                                                                  |   |         |   |   |         |   |   |         |  
|----------------------------------------------------------------- | - | ------- | - | - | ------- | - | - | ------- | -
|                                                                  |   | 2009    |   |   | 2008    |   |   | 2007    |  
|                                                                  |   |         |   |   |         |   |   |         |  
|Combined basic
      Canadian federal and provincial income taxes | $ | 27,884  |   | $ | 56,114  |   | $ | 40,291  |  
|                                                                  |   |         |   |   |         |   |   |         |  
|(Decrease)
    increase in income taxes resulting from:           |   |         |   |   |         |   |   |         |  
|Effect of different tax rates on earnings of foreign subsidiaries |   | (26,181 | ) |   | (51,292 | ) |   | (38,288 | )
|Income tax
      (recovery) charge  for prior taxation years      |   | (6,085  | ) |   | 26,906  |   |   | (7,601  | )
|Effect of non-deductible
      expenses and other                 |   | (1,404  | ) |   | 2,672   |   |   | 783     |  
|                                                                  | $ | (5,786  | ) | $ | 34,400  |   | $ | (4,815  | )

For fiscal 2009 and 2007, the income tax recoveries of $6.1
million and $7.6 million, respectively, relate to previously unrecognized tax
positions of prior taxation years.

In the third quarter of fiscal 2009, the Canada Revenue Agency
(CRA) completed its audit of the 2004, 2005 and 2006 taxation years and there
were no significant adjustments to the Companys income tax returns. In fiscal
2008, the CRA completed an audit of the Companys income tax returns for the
2000, 2001, 2002 and 2003 fiscal years, the scope of which included a review of
the Companys transfer pricing and the allocation of income between the
Companys Canadian legal entity and its foreign subsidiaries. On December
10, 2008, the Company reached an agreement with CRA, which resulted in a tax reassessment related to the restructuring of
its international wholesale business and the related transfer of the Companys
assets to its Barbados subsidiary, which occurred in fiscal 1999. The terms of
the agreement were accounted for in fiscal 2008 through a charge to income tax
expense of $26.9 million, including a provision for provincial taxes, and a
reclassification of $17.3 million of future income tax liabilities to income
taxes payable. There were no penalties assessed as part of the agreement, and
there were no other significant income tax adjustments to reported taxable
income for the years under audit. During fiscal 2009, the Company made payments
of $24.8 million to the CRA and a provincial tax authority, as part of this
agreement.

GILDAN 2009 REPORT TO SHAREHOLDERS P.67

---

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

14. INCOME TAXES (continued):

The components of income tax (recovery) expense are as follows:

|                           |   |        |   |   |         |   |   |        |  
|-------------------------- | - | ------ | - | - | ------- | - | - | ------ | -
|                           |   | 2009   |   |   | 2008    |   |   | 2007   |  
|                           |   |        |   |   |         |   |   |        |  
|Current income
      taxes | $ | (3,352 | ) | $ | 50,285  |   | $ | 4,104  |  
|Future income taxes        |   | (2,434 | ) |   | (15,885 | ) |   | (8,919 | )
|                           | $ | (5,786 | ) | $ | 34,400  |   | $ | (4,815 | )

As at October 4, 2009, the Company has non-capital loss
carryforwards available to reduce future taxable income for Canadian, and US tax
purposes of approximately CAD$9.8 million and $20.3 million, respectively,
expiring between 2022 and 2029.

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

Significant components of the Companys future income tax
assets and liabilities are as follows:

|                                                                  |   |         |   |   |         |  
|----------------------------------------------------------------- | - | ------- | - | - | ------- | -
|                                                                  |   | 2009    |   |   | 2008    |  
|                                                                  |   |         |   |   |         |  
|Future income tax assets
      (liabilities)                      |   |         |   |   |         |  
|Non-capital losses                                                | $ | 9,261   |   | $ | 9,442   |  
|Reserves
      and accruals                                       |   | 5,094   |   |   | 5,690   |  
|Other                                                             |   | 2,653   |   |   | 1,910   |  
|                                                                  |   | 17,008  |   |   | 17,042  |  
|Valuation allowance                                               |   | (2,579  | ) |   | (907    | )
|                                                                  |   | 14,429  |   |   | 16,135  |  
|Property, plant and equipment, intangible
      assets, and other |   | (30,283 | ) |   | (34,183 | )
|Net future income tax liability                                   | $ | (15,854 | ) | $ | (18,048 | )
|                                                                  |   |         |   |   |         |  
|Presented as:                                                     |   |         |   |   |         |  
|Long-term assets                                                  | $ | 7,910   |   | $ | 9,283   |  
|Long-term liabilities                                             |   | (23,764 | ) |   | (27,331 | )
|                                                                  | $ | (15,854 | ) | $ | (18,048 | )

GILDAN 2009 REPORT TO SHAREHOLDERS P.68

---

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

15. EARNINGS PER SHARE:

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

|                                                                   |   |         |  |   |         |  |   |         | 
|------------------------------------------------------------------ | - | ------- |  | - | ------- |  | - | ------- | 
|                                                                   |   | 2009    |  |   | 2008    |  |   | 2007    | 
|                                                                   |   |         |  |   |         |  |   |         | 
|Basic earnings
      per share:                                    |   |         |  |   |         |  |   |         | 
|Basic weighted average
      number of common shares outstanding   |   | 120,811 |  |   | 120,479 |  |   | 120,340 | 
|Basic earnings per share                                           | $ | 0.79    |  | $ | 1.21    |  | $ | 1.07    | 
|                                                                   |   |         |  |   |         |  |   |         | 
|Diluted earnings
      per share:                                  |   |         |  |   |         |  |   |         | 
|Basic weighted average number of common
      shares outstanding   |   | 120,811 |  |   | 120,479 |  |   | 120,340 | 
|Plus dilutive impact of stock
      options and Treasury RSUs      |   | 624     |  |   | 1,143   |  |   | 1,198   | 
|Diluted weighted
      average number of common shares outstanding |   | 121,435 |  |   | 121,622 |  |   | 121,538 | 
|Diluted earnings per share                                         | $ | 0.79    |  | $ | 1.20    |  | $ | 1.06    | 

Excluded from the above calculation for the year ended October
4, 2009 are 452,093 (2008  125,208) stock options and 236,934 (2008  25,575)
Treasury RSUs which were deemed to be anti-dilutive. All the stock options and
Treasury RSUs outstanding for fiscal 2007 were dilutive.

16. RESTRUCTURING AND OTHER CHARGES, AND ASSETS HELD FOR
SALE:

|                                                                          |   |       |   |   |       |   |   |        |  
|------------------------------------------------------------------------- | - | ----- | - | - | ----- | - | - | ------ | -
|                                                                          |   | 2009  |   |   | 2008  |   |   | 2007   |  
|                                                                          |   |       |   |   |       |   |   |        |  
|Gain on disposal
      of assets held for sale                            | $ | (619  | ) | $ | (526  | ) | $ | (1,530 | )
|Accelerated depreciation                                                  |   | -     |   |   | -     |   |   | 3,493  |  
|Asset impairment
      loss and write-down of assets held for sale        |   | 1,595 |   |   | 2,700 |   |   | 3,560  |  
|Employee termination costs and
      other benefits                       |   | 2,180 |   |   | 400   |   |   | 13,619 |  
|Carrying and
      dismantling costs associated with assets held for sale |   | 3,120 |   |   | 3,470 |   |   | 8,870  |  
|Adjustment for employment contract                                        |   | (77   | ) |   | (555  | ) |   | -      |  
|                                                                          | $ | 6,199 |   | $ | 5,489 |   | $ | 28,012 |  

In fiscal 2006 and 2007, the Company announced the closure,
relocation and consolidation of manufacturing and distribution facilities in
Canada, the United States and Mexico, as well as the relocation of its corporate
office. In fiscal 2008, the Company announced the consolidation of its Haiti
sewing operation, which was finalized in the first half of fiscal 2009, and the
planned phase out of sock finishing operations in the U.S., which was finalized
in the third quarter of fiscal 2009. The costs incurred in connection with these
initiatives have been recorded as restructuring and other charges.

For fiscal 2009, restructuring and other charges totalled $6.2
million which included $3.7 million for the closure of the Company's U.S. sock
finishing operations in the third quarter, and $3.2 million primarily related to
facility closures that occurred in previous fiscal years, including carrying
costs and asset write-downs relating to assets held for sale, net of a gain of
$0.6 million on the disposal of equipment.

Restructuring charges of $5.5 million in fiscal 2008 included
$2.1 million relating to the consolidation of the Company's Haiti sewing
operation, and $4.5 million relating to facility closures which occurred in
previous fiscal years, primarily for carrying and dismantling costs associated
with assets held for sale, net of a gain on disposal of assets held for sale of
$0.5 million. The Company also had a recovery of $0.6 million from the
obligations accrued for the employment contract with the former Chairman and
Co-Chief Executive Officer of the Company.

GILDAN 2009 REPORT TO SHAREHOLDERS P.69

---

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

16. RESTRUCTURING, OTHER CHARGES AND ASSETS HELD FOR SALE
(continued):

The $28.0 million of restructuring charges incurred in fiscal
2007 relate primarily to the closures of the Companys textile facilities in
Canada and the United States and its sewing facilities in Mexico as well as the
relocation of its corporate office, resulting in employee termination costs of
$13.6 million, an asset impairment of $3.6 million, an accelerated depreciation
charge of $3.5 million, a gain on disposal of assets held for sale of $1.5
million, and other exit costs of $8.8 million.

Assets held for sale of $6.5 million as at October 4, 2009
(October 5, 2008 - $10.5 million) include property, plant and equipment relating
to the 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 and until all property, plant and equipment related to the
closures are disposed of. Any gains or losses on the disposal of the assets held
for sale 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, as follows:

|                                              |   |        |  
|--------------------------------------------- | - | ------ | -
|                                              |   |        |  
|Balance,
      September 30, 2007             | $ | 4,248  |  
|Employee termination and other
      benefits |   | 400    |  
|Adjustment for
      employment contract      |   | (555   | )
|Foreign exchange adjustment                   |   | (95    | )
|Payments                                      |   | (2,005 | )
|Balance, October 5, 2008                      |   | 1,993  |  
|Employee
      termination and other benefits |   | 2,180  |  
|Adjustment for employment
      contract      |   | (77    | )
|Foreign exchange
      adjustment             |   | (25    | )
|Payments                                      |   | (2,385 | )
|Balance, October 4, 2009                      | $ | 1,686  |  

17. OTHER INFORMATION:

|(a) | Supplemental cash flow
disclosure:
|--- | ----------------------------------

| |                                                                                                             |   |        |  |   |       |  |   |       | 
| | ----------------------------------------------------------------------------------------------------------- | - | ------ |  | - | ----- |  | - | ----- | 
| |                                                                                                             |   | 2009   |  |   | 2008  |  |   | 2007  | 
| |                                                                                                             |   |        |  |   |       |  |   |       | 
| | Cash paid during the year for:                                                                              |   |        |  |   |       |  |   |       | 
| | Interest                                                                                                    | $ | 2,028  |  | $ | 7,866 |  | $ | 5,447 | 
| | Income taxes                                                                                                |   | 30,419 |  |   | 5,867 |  |   | 4,780 | 
| |                                                                                                             |   |        |  |   |       |  |   |       | 
| | Balance of non-cash transactions:                                                                           |   |        |  |   |       |  |   |       | 
| | Additions to
      property, plant and equipment included in accounts
      payable and accrued liabilities |   | 627    |  |   | 1,720 |  |   | 2,566 | 
| | Proceeds on
    disposal of long-lived assets in other assets                                               |   | 808    |  |   | 1,382 |  |   | 1,855 | 
| | Proceeds on
      disposal of long-lived assets in accounts receivable                                      |   | 456    |  |   | -     |  |   | 1,050 | 
| | Business acquisition in accounts
      payable and accrued liabilities                                      |   | -      |  |   | 1,196 |  |   | -     | 
| | Reversal of valuation allowance
      on acquired future tax assets                                         |   | -      |  |   | -     |  |   | 7,340 | 

GILDAN 2009 REPORT TO SHAREHOLDERS P.70

---

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

17. OTHER INFORMATION (continued):

|(a) | Supplemental cash flow disclosure
  (continued):
|--- | ------------------------------------------------

| |                                                                                                                                 |   |        |  |   |        |  |   |       | 
| | ------------------------------------------------------------------------------------------------------------------------------- | - | ------ |  | - | ------ |  | - | ----- | 
| |                                                                                                                                 |   | 2009   |  |   | 2008   |  |   | 2007  | 
| |                                                                                                                                 |   |        |  |   |        |  |   |       | 
| | Non-cash ascribed value credited to share
      capital from issuance of Treasury RSUs                                          |   | 2,759  |  |   | 190    |  |   | 226   | 
| |                                                                                                                                 |   |        |  |   |        |  |   |       | 
| | Cash and cash
      equivalents consist of:                                                                                     |   |        |  |   |        |  |   |       | 
| | Cash balances with banks                                                                                                        | $ | 92,608 |  | $ | 8,068  |  | $ | 9,250 | 
| | Short-term investments, bearing
      interest at rates up to 0.12% at October 4, 2009 and
      up to 2.22% at October 5, 2008 |   | 7,124  |  |   | 4,289  |  |   | -     | 
| |                                                                                                                                 | $ | 99,732 |  | $ | 12,357 |  | $ | 9,250 | 

|    |                               
|--- | ------------------------------
|(b) | Depreciation and
amortization:

| |                                                                                                                                                          |   |        |   |   |                   |   |   |                   |  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ------ | - | - | ----------------- | - | - | ----------------- | -
| |                                                                                                                                                          |   | 2009   |   |   | 2008              |   |   | 2007              |  
| |                                                                                                                                                          |   |        |   |   | (recast note 1(b) | ) |   | (recast note 1(b) | )
| |                                                                                                                                                          |   |        |   |   |                   |   |   |                   |  
| | Depreciation and
      amortization of property, plant and equipment and
      intangible assets                                                         | $ | 65,407 |   | $ | 57,135            |   | $ | 37,268            |  
| | Adjustment for the variation of depreciation of
      property, plant and equipment included in inventories
      at the beginning and end of the period |   | (2,437 | ) |   | (957              | ) |   | (1,837            | )
| | Depreciation and amortization included in the
      consolidated statements of earnings and comprehensive
      income                                   | $ | 62,970 |   | $ | 56,178            |   | $ | 35,431            |  
| |                                                                                                                                                          |   |        |   |   |                   |   |   |                   |  
| | Consists of:                                                                                                                                             |   |        |   |   |                   |   |   |                   |  
| | Depreciation of property, plant and equipment                                                                                                            | $ | 59,571 |   | $ | 52,887            |   | $ | 35,053            |  
| | Amortization of intangible assets                                                                                                                        |   | 3,197  |   |   | 3,070             |   |   | 150               |  
| | Amortization of deferred financing
    costs and other                                                                                                   |   | 202    |   |   | 221               |   |   | 228               |  
| | Depreciation and amortization included in the
      consolidated statements of earnings and comprehensive
      income                                   | $ | 62,970 |   | $ | 56,178            |   | $ | 35,431            |  

|    |                                                                                            
|--- | -------------------------------------------------------------------------------------------
|(c) | The following items were included in the determination of
      the Companys net earnings:

| |                                            |   |       |  |   |       |  |   |        |  
| | ------------------------------------------ | - | ----- |  | - | ----- |  | - | ------ | -
| |                                            |   | 2009  |  |   | 2008  |  |   | 2007   |  
| |                                            |   |       |  |   |       |  |   |        |  
| | Defined
      contribution expense         | $ | 1,447 |  | $ | 1,827 |  | $ | 1,360  |  
| | Research and development tax
      credits |   | -     |  |   | -     |  |   | (646   | )
| | Bad debt expense
      (recovery)          |   | 5,995 |  |   | 4,543 |  |   | (1,300 | )
| |                                            |   |       |  |   |       |  |   |        |  

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(d) | During fiscal 2009, the Company expensed $7.1 million
      (2008 - $6.1 million; 2007 - $4.7 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 4, 2009, an amount of
      $9.5 million (2008 - $6.9 million) has been included in accounts payable
      and accrued liabilities.

GILDAN 2009 REPORT TO SHAREHOLDERS P.71

---

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

18. 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:

|                                               |   |         |  |   |         |  |   |         | 
|---------------------------------------------- | - | ------- |  | - | ------- |  | - | ------- | 
|                                               |   | 2009    |  |   | 2008    |  |   | 2007    | 
|                                               |   |         |  |   |         |  |   |         | 
|Transactions:                                  |   |         |  |   |         |  |   |         | 
|Yarn
      purchases                           | $ | 149,754 |  | $ | 138,642 |  | $ | 103,902 | 
|Management fee expense                         |   | 750     |  |   | 750     |  |   | 750     | 
|                                               |   |         |  |   |         |  |   |         | 
|Balances
      outstanding:                    |   |         |  |   |         |  |   |         | 
|Accounts payable and
      accrued liabilities |   | 22,129  |  |   | 32,445  |  |   | 20,130  | 

19. 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 4, 2009, 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:

| |                                                                                     |   |          |  |   |            |  |   |          |  |   |            | 
| | ----------------------------------------------------------------------------------- | - | -------- |  | - | ---------- |  | - | -------- |  | - | ---------- | 
| |                                                                                     |   |          |  |   | 2009       |  |   |          |  |   | 2008       | 
| |                                                                                     |   | Carrying |  |   |            |  |   | Carrying |  |   |            | 
| |                                                                                     |   | amount   |  |   | Fair value |  |   | amount   |  |   | Fair value | 
| |                                                                                     |   |          |  |   |            |  |   |          |  |   |            | 
| | Financial
      assets                                                              |   |          |  |   |            |  |   |          |  |   |            | 
| | Held-for-trading financial
      assets:                                            |   |          |  |   |            |  |   |          |  |   |            | 
| | Cash and cash equivalents                                                           | $ | 99,732   |  | $ | 99,732     |  | $ | 12,357   |  | $ | 12,357     | 
| | Loans and receivables:                                                              |   |          |  |   |            |  |   |          |  |   |            | 
| | Accounts
    receivable - trade                                                     |   | 159,645  |  |   | 159,645    |  |   | 206,276  |  |   | 206,276    | 
| | Accounts
    receivable - other                                                     |   | 7,117    |  |   | 7,117      |  |   | 9,557    |  |   | 9,557      | 
| | Long-term non-trade receivable included in other
      assets                       |   | 1,254    |  |   | 1,254      |  |   | 1,748    |  |   | 1,748      | 
| | Restricted cash
      related to Prewett acquisition included in other
      assets |   | 6,042    |  |   | 6,042      |  |   | 10,000   |  |   | 10,000     | 
| | Forward foreign exchange contracts included in other assets                         |   | -        |  |   | -          |  |   | 929      |  |   | 929        | 

GILDAN 2009 REPORT TO SHAREHOLDERS P.72

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


19. FINANCIAL INSTRUMENTS (continued):

|(a) | Financial instruments  carrying values and fair values
      (continued):
|--- | --------------------------------------------------------------------------

| |                                                            |   |          |  |   |            |  |   |          |  |   |            | 
| | ---------------------------------------------------------- | - | -------- |  | - | ---------- |  | - | -------- |  | - | ---------- | 
| |                                                            |   |          |  |   | 2009       |  |   |          |  |   | 2008       | 
| |                                                            |   | Carrying |  |   |            |  |   | Carrying |  |   |            | 
| |                                                            |   | amount   |  |   | Fair value |  |   | amount   |  |   | Fair value | 
| |                                                            |   |          |  |   |            |  |   |          |  |   |            | 
| | Financial
      liabilities                                |   |          |  |   |            |  |   |          |  |   |            | 
| | Other financial liabilities:                               |   |          |  |   |            |  |   |          |  |   |            | 
| | Accounts payable and accrued liabilities                   | $ | 124,378  |  | $ | 124,378    |  | $ | 149,344  |  | $ | 149,344    | 
| | Long-term debt -
      bearing interest at variable rates: |   |          |  |   |            |  |   |          |  |   |            | 
| | Revolving long-term credit facility                        |   | -        |  |   | -          |  |   | 45,000   |  |   | 45,000     | 
| | Other long-term debt                                       |   | 3,876    |  |   | 3,876      |  |   | 6,318    |  |   | 6,318      | 
| | Long-term debt - bearing
      interest at fixed rates     |   | 511      |  |   | 511        |  |   | 1,686    |  |   | 1,686      | 

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | 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, the restricted cash related to the acquisition of Prewett, and
      the Companys interest-bearing financial liabilities also approximate
      their respective carrying amounts. The fair values of cash and cash
      equivalents and forward foreign contracts were measured using Level 2 and
      Level 1 inputs, respectively, in the fair value hierarchy.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(b) | Financial (income) expense,
net:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

| |                                   |   |        |   |   |       |  |   |       |  
| | --------------------------------- | - | ------ | - | - | ----- |  | - | ----- | -
| |                                   |   | 2009   |   |   | 2008  |  |   | 2007  |  
| |                                   |   |        |   |   |       |  |   |       |  
| | Interest expense
      (i)        | $ | 1,824  |   | $ | 7,223 |  | $ | 4,898 |  
| | Bank and other financial charges  |   | 1,039  |   |   | 946   |  |   | 1,239 |  
| | Foreign exchange (gain) loss (ii) |   | (3,167 | ) |   | 1,071 |  |   | (717  | )
| |                                   | $ | (304   | ) | $ | 9,240 |  | $ | 5,420 |  

| |     |                  
| | --- | -----------------
| | (i) | Interest expense:

| |                                                            |   |       |   |   |       |   |   |       |  
| | ---------------------------------------------------------- | - | ----- | - | - | ----- | - | - | ----- | -
| |                                                            |   | 2009  |   |   | 2008  |   |   | 2007  |  
| |                                                            |   |       |   |   |       |   |   |       |  
| | Interest expense
      on long-term debt                   | $ | 1,800 |   | $ | 7,422 |   | $ | 4,997 |  
| | Interest expense on short-term
      indebtedness          |   | 142   |   |   | 191   |   |   | 233   |  
| | Interest income
      on held-for-trading financial assets |   | (103  | ) |   | (413  | ) |   | (460  | )
| | Interest income on loans and
      receivables             |   | (80   | ) |   | (80   | ) |   | -     |  
| | Other interest
      expense                               |   | 65    |   |   | 103   |   |   | 128   |  
| |                                                            | $ | 1,824 |   | $ | 7,223 |   | $ | 4,898 |  

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.

GILDAN 2009 REPORT TO SHAREHOLDERS P.73

---

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

19. FINANCIAL INSTRUMENTS (continued):

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

| |      |                              
| | ---- | -----------------------------
| | (ii) | Foreign exchange (gain) loss:

| |                                                                                                                                                                     |   |        |   |   |        |   |   |        |  
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ------ | - | - | ------ | - | - | ------ | -
| |                                                                                                                                                                     |   | 2009   |   |   | 2008   |   |   | 2007   |  
| |                                                                                                                                                                     |   |        |   |   |        |   |   |        |  
| | (Gain) loss
      relating to financial assets and liabilities, excluding forward foreign exchange contracts                                                        | $ | (220   | ) | $ | 674    |   | $ | (1,486 | )
| | (Gain) loss relating to forward foreign exchange
      contracts, including amounts realized on contract
      maturity and changes in fair value of open positions |   | (82    | ) |   | 2,084  |   |   | (1,945 | )
| | Foreign exchange
      (gain) loss relating to financial instruments                                                                                                |   | (302   | ) |   | 2,758  |   |   | (3,431 | )
| | Other foreign exchange (gain) loss                                                                                                                                  |   | (2,865 | ) |   | (1,687 | ) |   | 2,714  |  
| |                                                                                                                                                                     | $ | (3,167 | ) | $ | 1,071  |   | $ | (717   | )

|    |                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(c) | Forward foreign exchange contracts:                                                                                                                                                                     
|    |                                                                                                                                                                                                         
|    | As at October 4, 2009 the Company had no outstanding
      derivative financial instruments relating to commitments to buy and sell
      foreign currencies through forward foreign exchange contracts.
|    |                                                                                                                                                                                                         
|    | The following table summarizes the Companys derivative
      financial instruments at October 5, 2008:                                                                                                 

| |                  |  |                  |  |  |                  |  |  |          |  |   |               |  |   |                         |  |   |           | 
| | ---------------- |  | ---------------- |  |  | ---------------- |  |  | -------- |  | - | ------------- |  | - | ----------------------- |  | - | --------- | 
| |                  |  |                  |  |  | Notional foreign |  |  | Average  |  |   |               |  |   |                         |  |   |           | 
| |                  |  |                  |  |  | currency         |  |  | exchange |  |   | Notional U.S. |  |   | Carrying and fair value | 
| | October 5, 2008  |  | Maturity         |  |  | amount           |  |  | rate     |  |   | equivalent    |  |   | Asset                   |  |   | Liability | 
| |                  |  |                  |  |  |                  |  |  |          |  |   |               |  |   |                         |  |   |           | 
| | Buy CAD/Sell USD |  | 0-6
      months |  |  | 5,483            |  |  | 0.9302   |  | $ | 5,100         |  | $ | -                       |  | $ | -         | 
| | Buy EUR/Sell GBP |  | 0-6 months       |  |  | 962              |  |  | 1.3740   |  |   | 1,322         |  |   | -                       |  |   | -         | 
| | Sell EUR/Buy USD |  | 0-6
      months |  |  | 5,650            |  |  | 1.4591   |  |   | 8,244         |  |   | 472                     |  |   | -         | 
| | Sell GBP/Buy USD |  | 0-6 months       |  |  | 2,951            |  |  | 1.9177   |  |   | 5,659         |  |   | 457                     |  |   | -         | 
| |                  |  |                  |  |  |                  |  |  |          |  | $ | 20,325        |  | $ | 929                     |  | $ | -         | 

20. 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 increases in
non-cash working capital and capital expenditures for capacity expansion as well
as 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.

GILDAN 2009 REPORT TO SHAREHOLDERS P.74

---

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

20. CAPITAL DISCLOSURES (continued):

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
other charges (EBITDA), which it aims to maintain at less than 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 computation of net debt (cash in excess of total
indebtedness) and EBITDA as at October 4, 2009, October 5, 2008 and September
30, 2007 were as follows:

|                                                             |   |                                           |   |   |            |   |   |           |  
|------------------------------------------------------------ | - | ----------------------------------------- | - | - | ---------- | - | - | --------- | -
|                                                             |   | 2009                                      |   |   | 2008       |   |   | 2007      |  
|                                                             |   |                                           |   |   |            |   |   |           |  
|Current portion
      of long-term debt                      | $ | 2,803                                     |   | $ | 3,556      |   | $ | 3,689     |  
|Long-term debt                                               |   | 1,584                                     |   |   | 49,448     |   |   | 55,971    |  
|Less: cash and cash equivalents                              |   | (99,732                                   | ) |   | (12,357    | ) |   | (9,250    | )
|(Cash in excess of total indebtedness) net debt              | $ | (95,345                                   | ) | $ | 40,647     |   | $ | 50,410    |  
|                                                             |   |                                           |   |   |            |   |   |           |  
|                                                             |   |                                           |   |   |            |   |   |           |  
|                                                             |   | For the last four
      quarters ended on |  
|                                                             |   | October 4,                                |   |   | October 5, |   |   | September |  
|                                                             |   | 2009                                      |   |   | 2008       |   |   | 30, 2007  |  
|                                                             |   |                                           |   |   |            |   |   |           |  
|Net earnings                                                 | $ | 95,329                                    |   | $ | 146,350    |   | $ | 129,062   |  
|Restructuring and other charges                              |   | 6,199                                     |   |   | 5,489      |   |   | 28,012    |  
|Depreciation and
      amortization                          |   | 65,407                                    |   |   | 57,135     |   |   | 37,268    |  
|Variation of depreciation
      included in inventories      |   | (2,437                                    | ) |   | (957       | ) |   | (1,837    | )
|Interest, net                                                |   | 1,824                                     |   |   | 7,223      |   |   | 4,898     |  
|Income tax (recovery) expense                                |   | (5,786                                    | ) |   | 34,400     |   |   | (4,815    | )
|Non-controlling interest in consolidated
      joint venture |   | 110                                       |   |   | 230        |   |   | 1,278     |  
|EBITDA                                                       | $ | 160,646                                   |   | $ | 249,870    |   | $ | 193,866   |  
|                                                             |   |                                           |   |   |            |   |   |           |  
|Net debt to EBITDA ratio                                     |   | n/a                                       |   |   | 0.2:1      |   |   | 0.3:1     |  

The terms of the revolving credit facility require the Company
to maintain a net debt to EBITDA ratio below 3.0:1, although this limit may be
exceeded under certain circumstances. 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. In the first quarter of
fiscal 2008, the Company used its revolving credit facility to finance the
acquisition of Prewett.

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. The Company
does not currently pay a dividend. However, the Companys Board of Directors
periodically evaluates the merits of introducing a dividend.

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

GILDAN 2009 REPORT TO SHAREHOLDERS P.75

---

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

21. 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:
|--- | ---------------------------------

| |                                |   |           |  |   |           |  |   |         | 
| | ------------------------------ | - | --------- |  | - | --------- |  | - | ------- | 
| |                                |   | 2009      |  |   | 2008      |  |   | 2007    | 
| |                                |   |           |  |   |           |  |   |         | 
| | Activewear and
      underwear | $ | 795,535   |  | $ | 957,061   |  | $ | 826,252 | 
| | Socks                          |   | 242,784   |  |   | 292,650   |  |   | 138,177 | 
| |                                | $ | 1,038,319 |  | $ | 1,249,711 |  | $ | 964,429 | 

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



| | (i) | The Company has two customers accounting for at
      least 10% of total net sales:
| | --- | -----------------------------------------------------------------------------------



| |           |  | 2009  |  |  | 2008  |  |  | 2007  | 
| | --------- |  | ----- |  |  | ----- |  |  | ----- | 
| |           |  |       |  |  |       |  |  |       | 
| | Company A |  | 18.6% |  |  | 23.1% |  |  | 23.1% | 
| | Company B |  | 15.5% |  |  | 13.6% |  |  | 5.3%  | 

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

| |                  |   |           |  |   |           |  |   |         | 
| | ---------------- | - | --------- |  | - | --------- |  | - | ------- | 
| |                  |   | 2009      |  |   | 2008      |  |   | 2007    | 
| |                  |   |           |  |   |           |  |   |         | 
| | United States    | $ | 939,717   |  | $ | 1,125,961 |  | $ | 852,522 | 
| | Canada           |   | 35,134    |  |   | 56,353    |  |   | 53,336  | 
| | Europe and other |   | 63,468    |  |   | 67,397    |  |   | 58,571  | 
| |                  | $ | 1,038,319 |  | $ | 1,249,711 |  | $ | 964,429 | 

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

| |                                                                                           |   |                 |  |   |                 | 
| | ----------------------------------------------------------------------------------------- | - | --------------- |  | - | --------------- | 
| |                                                                                           |   | October 4, 2009 |  |   | October 5, 2008 | 
| |                                                                                           |   |                 |  |   |                 | 
| | Caribbean Basin
      and Central America                                                 | $ | 324,430         |  | $ | 325,670         | 
| | United States                                                                             |   | 67,491          |  |   | 83,264          | 
| | Canada and other                                                                          |   | 22,617          |  |   | 27,582          | 
| |                                                                                           | $ | 414,538         |  | $ | 436,516         | 
| |                                                                                           |   |                 |  |   |                 | 
| | Goodwill and intangible assets relate to acquisitions located in
      the United States. |   |                 |  |  

22. COMPARATIVE FIGURES:

Certain comparative figures in the statement of earnings and
comprehensive income have been reclassified as described in note 1(a). In
addition, certain other comparative figures have been adjusted to conform to the
current years presentation including the reclassification of a non-trade
accounts receivable balance of $6.3 million as at October 5, 2008 against
accounts payable and accrued liabilities for which the Company has the legal
right of offset and intends to settle on a net basis.

GILDAN 2009 REPORT TO SHAREHOLDERS P.76

---