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SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 
FORM 40-F 

o
Registration statement    pursuant to Section 12 of the Securities Exchange Act of 1934     
or          
þ
Annual report pursuant    to Section 13(a) or 15(d) of the Securities Exchange Act of 1934  **For Fiscal year    ended: October 1, 2006****Commission File number: 01-14830**GILDAN ACTIVEWEAR INC. *(Exact name of registrant asspecified in its charter)***Québec, Canada *(Province or other jurisdiction of incorporation or organization)***2200, 2250, 2300 *(Primary standard industrial classification code number, if applicable)***Not Applicable *(I.R.S. employer identification number, if applicable)***725 Montée de Liesse, Montréal, Québec, Canada H4T 1P5, (514)735-2023 *(Address and telephone number of registrant's principal executive office)*
**Puglisi & Associates, 850 Library Avenue, Suite 204, P.O. Box885, Newark, Delaware 19715, (302) 738-6680 (*Name, address and telephone number of agent for service in the UnitedStates*) 

Securities registered pursuant to Section 12(b) of the Act:
Title of each className of each exchange on which registered**Common Shares****The New York Stock Exchange** **The Toronto Stock Exchange**
Securities registered or to be registered pursuant to Section12(g) of the Act: **None** Securities for which there is a reportingobligation pursuant to Section 15(d) of the Act:**None**
For annual reports, indicate by check mark the informationfiled with this form:
þ                Annual Information Formþ                Audited Annual Financial Statements 
 Indicate the number of outstanding shares of each of theissuer's classes of capital or common stock as of the close of the periodcovered by the annual report: 
**Common Shares: 60,113,834**
Indicate by check mark whether the registrant by filing theinformation contained in this form is also thereby furnishing the information tothe Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of1934 (the "Exchange Act"). If "Yes" is marked, indicate the file number assignedto the registrant in connection with such rule. 

Yes                      
 No                 þ
Indicate by check mark whether the registrant: (1) has filedall reports required to be filed by Section 13 or 15(d) of the Exchange Actduring the preceding 12 months (or for such shorter period that the registrantwas required to file such reports); and (2) has been subject to such filingrequirements for the past 90 days. 

Yes                þ
No                        
**GILDAN ACTIVEWEAR INC. 

ANNUAL INFORMATION FORM 

for the year ended October 1, 2006
 

 
**December 20, 2006 

**GILDAN ACTIVEWEAR INC. 

TABLE OF CONTENTS   **Page****1.****CORPORATE STRUCTURE****1** **1.1**         **NAME, ADDRESS AND INCORPORATION****1** **1.2****        INTERCORPORATE RELATIONSHIPS****1****2.****GENERAL DEVELOPMENT OF THE BUSINESS****3** **2.1**         **THREE YEAR HISTORY****3****3.****DESCRIPTION OF THE BUSINESS****5** **3.1**         **BUSINESS OVERVIEW****5** **3.2**         **MANUFACTURING OPERATIONS****12** **3.3****        RISK FACTORS****14** **3.4****        EMPLOYEES****14****4.****DIVIDEND POLICY****15****5.****CAPITAL STRUCTURE****15****6.****MARKET FOR SECURITIES****16****7.****DIRECTORS AND OFFICERS****17****8.****AUDIT COMMITTEE DISCLOSURE****20****9.****LEGAL PROCEEDINGS****21****10.****TRANSFER AGENT AND REGISTRAR****21****11.****MATERIAL CONTRACTS****21****12.****INTERESTS OF EXPERTS****22****13.****FORWARD – LOOKING INFORMATION****22****14.****ADDITIONAL INFORMATION****23****APPENDIX A - MANDATE OF THE    AUDIT AND FINANCE COMMITTEE****24**  
*Except as otherwise indicated, the information containedherein is given as of December 20,****2006, and all dollar amounts set forthherein are expressed in U.S. dollars. 

In this annual information form, "**Gildan**",the "**Corporation**", or the words "**we**", "**our**" and "**us**"refer, depending on the context, either to Gildan Activewear Inc. or to GildanActivewear Inc. together with its subsidiaries and joint ventures. 

The information appearing in theextracts of the documents listed below and specifically referred to in thisAnnual Information Form is incorporated herein by reference: 

-*    2006 Annual Report; and*
- *    2006 Notice of AnnualMeeting of Shareholders and Management Proxy Circular (the "Circular"). 
The foregoing documents are availableon the SEDAR website at www.sedar.com, on the Edgar website at www.sec.gov andon the Corporation's website at www.gildan.com. 

This Annual Information Form containscertain forward-looking statements, which are based on Gildan's currentexpectations, estimates, projections and assumptions and were made by Gildan inlight of its experience and its perception of historical trends. Please refer tothe cautionary statement at page 22 of this Annual Information Form.***1.**   CORPORATE STRUCTURE 
1.1   Name, Address and Incorporation**
We were incorporated on May 8, 1984pursuant to the *Canada Business Corporations Act* under the name ofTextiles Gildan Inc. At our inception, we focused our activities on themanufacture of textiles and produced and sold finished fabric as a principalproduct-line. In 1992, we redefined our operating strategy and, by 1994, ouroperations focused exclusively on the manufacture and sale of activewear for thewholesale imprinted sportswear market. 

In March 1995, we changed our name toGildan Activewear Inc./Les Vêtements de Sports Gildan Inc. In June 1998, inconjunction with our initial public offering, we filed Articles of Amendment to,among other things, remove the private company restrictions contained in ourcharter documents and change the structure of our authorized share capital. 

In February 2004, we amended ourArticles in order to provide for the possibility of holding annual meetings ofshareholders at places outside Canada and to change the province or territory inCanada where our registered office is to be situated from "Montreal UrbanCommunity (Province of Québec)" to "Province of Québec". 

On February 2, 2005, we filedArticles of Amendment in order to (i) create a new class of Common Shares (the"Common Shares"), (ii) change each of the issued and outstanding Class ASubordinate Voting Shares into one of the newly-created Common Shares, (iii)remove the Class B Multiple Voting Shares and the Class A Subordinate VotingShares as well as the rights, privileges, restrictions and conditions attachingthereto, (iv) change the French form of our name to "Les Vêtements de SportGildan Inc." and (v) decrease the maximum number of directors from fifteen (15)to ten (10). 

Our principal executive offices andregistered office are located at 725 Montée de Liesse, Montreal, Québec, CanadaH4T 1P5, and our telephone number at that address is (514) 735-2023. 
**1.2   Intercorporate Relationships**
We have 40 directly or indirectlywholly-owned subsidiaries, which include the following principal entities: 
-  ***Gildan  Activewear SRL***, a Barbados corporation, which has overall  responsibility for all of our international sales and related activities, such  as contract manufacturing, warehousing, distribution, marketing and customer  service; 
- ***Gildan Activewear  San José, S.A.*** , a  Honduran corporation, which operates a sewing facility in San Pedro Sula,  Honduras;
- ***Gildan Activewear San  Miguel, S.A.*** , ****** a Honduran  corporation, which operates a sewing facility in Choloma, Honduras;
- ***Gildan Activewear San  Antonio, S.A.*** , a  Honduran corporation, which operates a sewing facility in Choloma, Honduras;
- ***Gildan Activewear  Villanueva, S.A.*** , a  Honduran corporation, which operates a sewing facility in Villanueva,  Honduras;
- ***Gildan Activewear (Clercine),  S.A.*** , a Haitian  corporation, which operates a sewing facility in Port-au-Prince, Haiti and  which will operate an integrated cutting, sewing and distribution centre in  Port-au-Prince, Haiti;
- ***Gildan Activewear (Louverture),  S.A.*** , a Haitian  corporation, which operates a sewing facility in Port-au-Prince, Haiti;
- ***Gildan Activewear (San  Marcos), S.A.*** , a  Nicaraguan corporation, which operates a sewing facility in San Marcos,  Nicaragua;
- ***Gildan Activewear (Rivas),  S.A.*** , a Nicaraguan  corporation, which operates a sewing facility in Rivas, Nicaragua;
- ***Gildan Activewear Castaños,  S. de R.L. de C.V.*** ,  a Mexican corporation, which operates sewing facilities in Castaños and San  Buenaventura, Mexico;
- ***Gildan Activewear Mexico,  S.A. de C.V.*** , a  Mexican corporation, which is responsible for sales and distribution in  Mexico;
- ***Gildan Activewear Malone,  Inc.*** , a New York  corporation, which operates a cutting facility in Bombay, New York;
- ***Gildan Activewear Honduras  Textiles Company, S.A.*** ,  a Honduran corporation, which operates our integrated textile manufacturing  facility in Rio Nance, Honduras;
- ***Gildan Activewear (UK)  Limited*** , a U.K.  corporation, which is responsible for sales and distribution for our European  and Asia/Pacific markets;
- ***Gildan Choloma Textiles,  S.A.*** , a Honduran  corporation, which will operate our second integrated textile manufacturing  facility in Rio Nance, Honduras;
- ***Gildan Honduras Hosiery  Factory, S.A.*** , a  Honduran corporation, which will operate our integrated sock manufacturing  facility in Rio Nance, Honduras;
- ***Gildan Activewear (Eden)  Inc.*** , a North  Carolina corporation, which operates our Eden, North Carolina distribution  facility and which will operate our Martinsville, Virginia distribution  facility;
- ***Gildan Activewear Dominican  Republic Textile Company Inc.*** ,  a Barbados corporation, which operates our integrated textile manufacturing  facility in Bella Vista, Dominican Republic;
- ***Gildan Activewear  Properties (Dominican Republic) Inc.*** ,  a Barbados corporation, which owns the real estate where our integrated  textile manufacturing facility is located in Bella Vista, Dominican Republic;  and
- ***Kentucky Derby Hosiery Co.,  Inc**.* , a Kentucky  corporation, which manufactures and sells socks ("Kentucky Derby").  2   
In addition, in the first quarter of fiscal 2004, we formed ajoint venture company with Frontier Spinning Mills, Inc. ("Frontier"), a majorU.S. yarn manufacturer. This company, called CanAm Yarns, LLC (formerlyCedartown Manufacturing, LLC) ("CanAm"), a Delaware limited liability company,currently operates yarn-spinning facilities in Cedartown, Georgia and Clarkton,North Carolina. Gildan and Frontier each own a 50% voting and equity interest inCanAm. 
**2.**   GENERAL DEVELOPMENT OF THE BUSINESS 
2.1   Three Year History**
Over the past three fiscal years, wehave continued to gain market share in our core market, the wholesaledistributor channel serving screenprinters in the United States, Canada andEurope. We are also continuing with the next major stage of our growth strategy,which is to develop Gildan as a leading consumer brand for high-volume, basic,frequently replenished, non-fashion apparel, and have accelerated this strategywith the acquisition of a U.S. sock manufacturer, Kentucky Derby. In addition,we are continuing to invest in major capacity expansion projects to support oursales growth objectives and have further developed our vertically-integratedmanufacturing hubs in Central America and the Caribbean Basin. For changes inour business that are expected to occur during fiscal 2007, see "Description ofthe Business Business Overview Strategy". 
**Retail Market Initiative**
In fiscal 2005, as an initial stepinto the retail market, we began selling our existing activewear products toU.S. and Canadian regional retailers for sale without logos or decoration. Infiscal 2006, we expanded our product-line to include underwear and basicathletic socks. In addition, in the fourth quarter, we completed the acquisitionof Kentucky Derby, which is intended to enhance and accelerate our strategy toenter the North American mass-market retail channel. 

In order to support our retail marketstrategy, during fiscal 2006 we completed the construction of a newstate-of-the-art manufacturing facility at our Rio Nance manufacturing complexin Honduras for the large-scale production of athletic socks and began theconstruction of a third state-of-the-art integrated textile manufacturingfacility for the production of fleece. We expect to ramp up our sock facility tofull capacity by the second half of fiscal 2008 and begin production at ourfleece facility in the second half of fiscal 2007. 
**Acquisition of U.S. Sock Manufacturer**
On July 6, 2006, we acquired 100% ofthe common shares of Kentucky Derby, a U.S. sock manufacturer based inHopkinsville, Kentucky. The total purchase price of $20.4 million was paid incash at closing, with the exception of approximately $0.5 million, which wassettled through the issuance of Gildan Common Shares. 

Kentucky Derby has annual sales inexcess of $130 million, consisting primarily of private label programs for U.S.mass-market retailers. We intend to utilize Kentucky Derby's experience anddistribution with mass-market retailers to enhance our platform to develop Gildan as a consumer brand in basic athletic socks, underwear and activewear,while continuing to focus on serving the needs of our customers in the wholesaledistribution channel and continuing to support Kentucky Derby's private labelprograms and brand licenses. 

We are currently in the process ofintegrating Kentucky Derby and expect to achieve the full benefits of theintegration by the end of fiscal 2008. 
**Restructuring of Canadian and U.S. Textile ManufacturingOperations**
During fiscal 2006, consistent withour ongoing strategy to enhance our overall cost structure by maximizinglarge-scale production of basic t-shirts at our textile manufacturing operationsin Honduras and the Dominican Republic, we announced the restructuring of ourCanadian manufacturing operations, to take effect in December 2006. Thisincluded the closure of our textile manufacturing facility in Valleyfield,Québec and the reduction in the operations of our knitting facility in Montreal,Québec, as well as our cutting facility in Bombay, New York. Also in fiscal2006, we announced the closure and downsizing of sock manufacturing capacitylocated in North Carolina and Virginia, which will be undertaken during thefirst half of fiscal 2007. 

We continue to significantly increaseour overall capacity through major new expansions in both our Central Americanand Caribbean Basin manufacturing hubs and will continue on an ongoing basis toevaluate the role and global competitiveness of our Canadian textile and U.S. sock manufacturing facilitieswithin our overall capacity planning to support our growth strategy. 

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**Yarn-Spinning**
In the second quarter of fiscal 2005,we closed our Canadian yarn-spinning plants in Long Sault, Ontario and Montreal,Québec and transferred our Canadian yarn-spinning activities to the UnitedStates. In order to be globally cost-competitive, we decided to focus onexpanding our textile operations in Central America and the Caribbean Basin andutilizing our textile operations in Canada to produce shorter-run, higher-valueproduct-lines. This resulted in lower requirements for commodity yarns from ourCanadian yarn-spinning facilities, with the consequence that they were no longerable to operate at an efficient level of capacity utilization. ****
In the first quarter of fiscal 2004,we formed CanAm, a 50%/50%-owned joint venture company with Frontier, whichacquired all of the assets of an existing yarn-spinning facility located inCedartown, Georgia. The total cost of the equipment and real estate for theacquisition of the Cedartown facility, including Frontier's 50% share of theinvestment, amounted to $12.5 million. In fiscal 2005, concurrent with theCanadian yarn-spinning plant closures, CanAm's yarn-spinning operations wereexpanded to include a new yarn-spinning facility in Clarkton, North Carolina. Inconjunction with the development of the new Clarkton facility, CanAm acquiredcertain assets of our yarn-spinning facility in Long Sault, Ontario, thetransfer of which occurred in the second quarter of fiscal 2005, and the newClarkton facility became fully operational by the end of the third quarter offiscal 2005. **Textile Manufacturing**
In fiscal 2004, we began constructionof an integrated knitting, bleaching, dyeing, finishing and cutting facility inBella Vista, Dominican Republic to support our projected continuing salesgrowth. The Bella Vista facility began production in the third quarter of fiscal2005 and is currently running at a comparable scale of production to our maturefirst textile facility in Honduras. We will continue to maximize productionlevels and cost efficiencies at this facility during fiscal 2007. 

In fiscal 2004, we purchased propertyin Nandaïme, Nicaragua for development of an integrated textile facility. Weview the Nicaragua site as a strategic long-term asset for future capacityexpansion. 

During fiscal 2005, we purchasedadditional land adjacent to our Rio Nance facility in Honduras for the purposeof constructing two new integrated world-scale facilities, one for theproduction of fleece, and one for the production of athletic socks. Duringfiscal 2006, we completed the construction of the sock manufacturing facilityand began the construction of the fleece textile facility. We expect to ramp upour sock facility to full capacity by the second half of fiscal 2008****andbegin production at our fleece facility in the second half of fiscal 2007. 

With the acquisition of KentuckyDerby in the fourth quarter of fiscal 2006, we also operate sock manufacturingfacilities in North Carolina and Virginia. 
**Sewing**
In fiscal 2005, we began productionin three new sewing facilities located in Choloma, Honduras, Rivas, Nicaraguaand Port-au-Prince, Haiti. 

In fiscal 2006, we commencedoperations in a new sewing facility located in Villanueva, Honduras. During thelast quarter of fiscal 2006, we signed lease agreements for an integratedcutting, sewing and distribution facility in Port-au-Prince, Haiti, as well asfor a new building under construction in Rivas, Nicaragua. We expect to beginproduction at these facilities in the first quarter and the second quarter offiscal 2007, respectively. In addition to our own facilities, we supplement ourproduction by using third party contractors in Haiti and the Dominican Republic.**Distribution**
In fiscal 2004, we supplemented ourexisting third party distribution centre located in Bletchley-Milton Keynes,United Kingdom, with three additional third party distribution centres locatedin Brisbane, Australia, Meer, Belgium and Ontario, California. In fiscal 2004,we also began a major expansion of our distribution centre in Eden, NorthCarolina, which was completed in the second quarter of fiscal 2005.****
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In fiscal 2006, we added a newdistribution centre in Choloma, Honduras to better serve our European customersas well as two new third party distribution centres located in Monterrey, Mexicoand Mississauga, Ontario to better serve our Mexican and Canadian customers,respectively. In September 2006, we announced the closure of our distributioncentre located in Montreal, Québec effective October 2006. 

Finally, in August 2006, as part ofour overall plan to integrate the operations of Kentucky Derby and to supportfuture capacity requirements for our retail initiative, we announced plans toinvest approximately $7 million in a new 400,000 square foot retail distributioncentre in Martinsville, Virginia and to relocate and consolidate KentuckyDerby's existing distribution centres at multiple sites in Danville, Virginiaand Mt. Airy, North Carolina to this single location. This new distributioncentre will be fully dedicated to supporting our retail distribution plans. Therelocation and consolidation of Kentucky Derby's distribution centres isexpected to result in improved operating efficiencies and lower transportationcosts, as well as faster customer response times. The installation of equipmentin this facility, together with the associated warehouse management informationsystem, is expected to be completed during the second quarter of fiscal 2007.Our existing distribution centre in Eden, North Carolina will remain fullydedicated to providing the capacity required for Gildan's anticipated futuregrowth in the wholesale distribution channel. 
**Capital Expenditures**
In the last three fiscal years, wehave invested an aggregate of approximately $220 million in our manufacturingand distribution operations in North America and offshore. 
**Share Structure**
In February 2004, our Board ofDirectors approved the conversion of all of the Corporation's Class B MultipleVoting Shares into Class A Subordinate Voting Shares on a one-for-one basis andwithout any conversion premium. The Class B Multiple Voting Shares were held byH. Greg Chamandy, Glenn J. Chamandy and Edwin B. Tisch through their respectiveholding companies. The conversion became effective on March 1, 2004. 

At the annual and special meeting ofthe shareholders on February 2, 2005, our shareholders approved a specialresolution to amend our Articles in order to change each of the issued andoutstanding Class A Subordinate Voting Shares into one newly-created CommonShare and to remove the Class B Multiple Voting Shares and the Class A MultipleVoting Shares, effectively eliminating our dual class voting structure. 
**Shareholder Rights Plan**
On December 1, 2004, our Board ofDirectors adopted a shareholder rights plan, which became effective that sameday. At the annual and special meeting of the shareholders held on February 2,2005, our shareholders approved a resolution confirming the ratification of theshareholder rights plan. The objectives of the shareholder rights plan are toprovide the Board of Directors and the shareholders with adequate time to assessany unsolicited take-over bid for the Corporation and where appropriate, givethe Board of Directors sufficient time to pursue other alternatives formaximizing shareholder value. 
**Stock Split**
On May 4, 2005, our Board ofDirectors approved a two-for-one stock split effected in the form of a stockdividend. The split was applicable to all shareholders of record on May 20,2005. The Common Shares commenced trading on a post-split basis on May 18, 2005on the Toronto Stock Exchange and on June 1, 2005 on the New York StockExchange, in accordance with the respective requirements of these exchanges. Thestock split was intended to increase the liquidity of, and facilitate tradingin, our Common Shares. 
**3.**   DESCRIPTION OF THE BUSINESS 
3.1   Business Overview**
We are a vertically-integratedmarketer and manufacturer of activewear, underwear and socks. We operate in onebusiness segment, being high-volume, basic, frequently replenished, non-fashionapparel. We are the leading supplier of activewear for the wholesale imprintedsportswear market in the United States and Canada, and also a leading supplierfor this market in Europe."Imprinted" sportswear is decorated with a screenprint or embroidered with alogo, design or character before it reaches the end user. 
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In fiscal 2005, as part of our growthstrategy, we began to implement a major new initiative to sell our products intothe mass-market retail channel in North America. In conjunction with theseplans, in fiscal 2006, we expanded our product-line to include underwear andbasic athletic socks. In the fourth quarter of fiscal 2006, we enhanced andaccelerated our retail market initiative by acquiring Kentucky Derby, a U.S.sock manufacturer, and intend to use this strategic acquisition as a platform tobuild the Gildan brand in athletic socks, underwear and activewear. 

Over the past several years, we havesignificantly increased our sales and earnings. From fiscal 1993 through fiscal2006, our sales have grown from $24.0 million to $773.2 million, representing acompounded annual growth rate of 30.6%. Sales in the fourth quarter of fiscal2006 included the sales of our new subsidiary, Kentucky Derby. 
**Strategy**
We believe that our success indeveloping our vertically-integrated manufacturing hubs has allowed us toprovide our customers with low prices, consistent product quality and a reliablesupply chain, and has been the main reason that we have been able to rapidlyincrease our market presence and establish our market leadership in theimprinted sportswear market. These are the same factors that management believeswill allow Gildan to be successful in building a consumer brand in the retailchannel. 

We believe that ourvertically-integrated manufacturing operations allow us to provide a combinationof competitive prices and premium quality products and to deliver superior valueto our customers. We are able to price our products competitively because of oursuccess in reducing operating costs. We accomplish this by:
-  investing in modern, automated equipment and facilities;increasing our capacity through the development of  integrated regional hubs in Central America and the Caribbean Basin, where we  benefit from strategic locations and favourable international trade  agreements; andfocusing on producing a narrow range of basic, high-volume  product-lines, which allows us to maximize production efficiencies.
We intend to continue to expandcapacity through the acquisition of modern, automated equipment for all aspectsof our manufacturing process to maximize productivity and achieve highefficiency rates. 

We are implementing a five-year planto approximately triple our unit sales volumes and continue to achievesignificant manufacturing efficiencies. Our growth strategy comprises thefollowing four initiatives:

***Continue to increase market sharein the U.S. wholesale imprinted sportswear market in all product categories.***During fiscal 2006, wefurther increased our leading market share position in the U.S. wholesaledistributor network in the t-shirt and sport shirts categories as reported inthe S.T.A.R.S Report produced by ACNielsen Market Decisions (the "S.T.A.R.S.Report"). In addition, we gained significant share in the fleece category,reaching the number two market share position. We believe we will continue toincrease market share in this channel due to our competitive strengths and theaddition of low cost production capacity.

***Leverage our successful business modelto enter the mass-market retail channel and develop Gildan as a consumer brand.***We plan to continue tosell the same basic undecorated activewear apparel products into the retailchannel, as well as our new complementary products, underwear and athleticsocks, which also leverage our existing core competencies, successful businessmodel and competitive strengths. Our goal is to continue to provide a valueproposition, which combines quality, service and competitive pricing. We intendto follow the same pricing strategy as in the wholesale market, by using ourcost efficiencies to lower selling prices. Our main competitors in the retailchannel for basic family apparel products are essentially the same as in thewholesale channel.

During fiscal 2006, we expanded ourpresence in the retail channel, particularly with U.S. regional retailers.Following our recent acquisition of Kentucky Derby, we intend to use KentuckyDerby's experience and distribution with mass-market retailers to build Gildanas a consumer brand in athletic socks, underwear and activewear in themass-market retail channel. 

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***Increase penetration in Europe andother international markets. We expect to pursue further marketpenetration within our existing served wholesale markets in Europe, Mexico andAustralia, in addition to pursuing further international market expansionopportunities. During fiscal 2006, we began to sell Gildan products in Mexico.***Support unit sales growth and maintainpricing competitiveness through continued significant investments in low-costproduction capacity. To support our projected continuing sales growth, in fiscal 2006 we ramped upour new Dominican Republic facility to close to full capacity. In addition, wecompleted the construction of our sock facility in Honduras, which we expect toramp up to full capacity by the second half of fiscal 2008. We also beganconstruction of a world-scale integrated facility for the production of fleece,which is expected to begin production in the second half of fiscal 2007. Ourland and infrastructure in Central America and the Caribbean Basin canaccommodate further major capacity expansion on the same sites. During the nextfive years, we expect to invest approximately $400 million in capitalexpenditures to support our projected sales growth. All of the organic capacityexpansions that we plan to undertake over the next five years are expected to befinanced by internally generated funds. 
We are subject to a variety ofbusiness risks that may affect our ability to maintain our current market shareand profitability, as well as our ability to achieve our long-term strategicobjectives. These risks are described in the "Risks and Uncertainties" sectionof the management's discussion and analysis on pages 37 to 40 of the 2006 AnnualReport. As well, the nature of our growth strategy involves risks related tocertain assumptions underlying unit sales growth, production capacity growth andcost reductions, among others. Notably, our planned growth in market sharedepends to a significant extent on the successful start-up and ramp-up of newoffshore facilities. There can be no assurances that we will achieve our plannedmarket share growth, retail market penetration or capacity increases. ****Market Overview**
Our target market for activewear,underwear and socks is characterized by low fashion risk compared to many otherapparel markets, since products are basic and produced in a limited range ofsizes, colours and styles, and since logos and designs for the screenprintmarket are not imprinted or embroidered by manufacturers. 

While the majority of our sales arecurrently derived from the sale of activewear through the wholesale distributionchannel, in fiscal 2006 we continued to expand our entry into the retailchannel, concentrating on regional retailers that we can service well with theproduction capacity that we have available. As we ramp up our major capacityexpansion projects in the Caribbean Basin and Central America, we willincreasingly be in a position to service major mass-market retailers. We believethat providing a superior value proposition predicated on reliable productquality and comfort, combined with efficient customer service and competitivepricing, the same factors that contribute to our success in the wholesalechannel, will allow us to be successful in penetrating the retail channel.

We believe that growth for ouractivewear products has been driven by several market trends, such as thefollowing:
-  continued use of activewear for event merchandising (such  as concerts, festivals, etc.);continued evolution of the entertainment/sports licensing  and merchandising businesses;the growing use of activewear for uniform applications;the growing use of activewear for corporate promotions;continued increase in use of activewear products for travel  and tourism;an increased emphasis on physical fitness; anda greater use and acceptance of casual dress in the  workplace.
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In addition, reductions inmanufacturing costs, combined with quality enhancements in activewear apparel,such as pre-shrunk fabrics, improved fabric weight, blends and construction,have provided consumers with superior products at lower prices. 
**Products**
We specialize in the large-scalemarketing and manufacturing of basic, non-fashion apparel products for customersrequiring an efficient supply chain and consistent product quality forhigh-volume, automatic replenishment programs. Our product offering focuses oncore basic activewear styles sold in various fabrics, weights and colours forthe adult, ladies and youth markets. Silhouettes include basic t-shirts, longsleeve t-shirts, sleeveless t-shirts, ringer tees, tank tops, pocket t-shirts,basic sport shirts, pocketed sport shirts, crewneck sweatshirts, hoodedsweatshirts and sweatpants. Each product category is serviced by various labels(each indicative of a specific quality level or fabric type), such as UltraCotton®, Heavy Cotton, Ultra Blend® andHeavy Blend. We offer 100% cotton as well asblended cotton and polyester products. In fiscal 2006, we also introduced avariety of styles of men's and boys' underwear and athletic socks into ourproduct-line. Typically, our product offering is characterized by low fashionrisk, since products are basic and produced in a limited range of sizes, coloursand styles. Our products for the wholesale channel for screenprinters areproduced and sold without logos and designs. ***T-shirts***
T-shirts represented 77% of our salesin fiscal 2006 and 80% in fiscal 2005. Our primary t-shirt offerings are theGildan Activewear Ultra Cotton® t-shirt (6.1 oz. per sq. yd.), theGildan Activewear Heavyweight Cottont-shirt (5.5 oz. per sq. yd.)and the Gildan Activewear Ultra Blend® t-shirt (5.6 oz. per sq. yd.).Each of these t-shirt lines incorporates styles with enhanced features, such asdouble stitched necklines, seamless collars, taped neck and shoulders,quarter-turned bodies and superior knit surfaces to enhance printability of thefabrics. A variety of silhouettes complement the basic adult t-shirt styleswithin each label offering. 
For the nine-month period endedSeptember 30,****2006, we maintained our number oneposition in the U.S. wholesale distributor network in the t-shirt category asreported in the S.T.A.R.S. Report. The data in the S.T.A.R.S. Report for theperiod includes information provided by the largest wholesale distributor, whichhas renewed its participation in the S.T.A.R.S. Report. ***Fleece Products***
In fiscal 2006 and fiscal 2005,fleece products represented 14% and 12% of our sales, respectively. Our primaryofferings in the fleece category are crewneck sweatshirts, sweatpants and hoodedsweatshirts in adult and youth sizes in three distinct fabric contents andweights. We maintained the number two position in the U.S. wholesale distributornetwork in the overall fleece category for the nine-month period ended September30,****2006 as reported in the S.T.A.R.S.Report. Significant growth in this fleece category was driven by ourvolume-priced Heavy Blendcollection, featuring 50%cotton/50% polyester fabric in a 7.75 oz. per sq. yd. weight. Our Ultra Blend®collection features 50% cotton /50% polyester fabric in a 9.3 oz. per sq. yd.weight and is the volume leader in this segment. We remain the leader in theU.S. wholesale distributor network in the high-cotton category, as reported inthe S.T.A.R.S. Report for the nine-month period ended September 30, 2006. Thissegment is well serviced with our Ultra Cotton® products featuring80% cotton/20% polyester blend and a 9.5 oz. per sq. yd. weight. ***Sport Shirts***
In fiscal 2006 and fiscal 2005, sportshirts represented approximately 6% and 8% of our sales, respectively. Weproduce sport shirts in a variety of weights, sizes, colours and styles, with orwithout a pocket. Our sport shirts include the 100% cotton Ultra Cotton®sport shirt in jersey fabric (6.1 oz. per sq. yd.) and piqué fabric (7.0 oz. persq. yd.) and the 50% cotton/50% polyester Gildan Activewear Ultra Blend®sport shirt in blended jersey fabric (5.6 oz. per sq. yd.) and piqué fabric (6.5oz. per sq. yd.). We also offer the Gildan Activewear Ultra Cotton®fashion sport shirt (7.0 oz. per sq. yd.), in piqué fabric featuring fashioncollars and cuffs in racing, jacquard, pin stripe and wide stripe styles. Wemaintained our position as the leader in the U.S. wholesale distributor networkin the sport shirt category, as reported in the S.T.A.R.S. Report for thenine-month period ended September 30, 2006. 

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***Other Products***
Since fiscal 2006, we began to sellmen's and boys' packaged underwear and basic athletic socks and, with theacquisition of Kentucky Derby, we are now selling socks in a variety of sizes,styles and colours in the infants', children's, girls', boys', ladies' and men'smarkets. 
**Marketing and Sales**
We market our products directly towholesale distributors and retail customers through our sales force. For ourwholesale customers, we do not maintain regional sales offices; instead, oursales personnel work from home. Our small sales force is trained to managerelationships with a limited number of regional wholesale distributors. With theacquisition of Kentucky Derby, we now have a sales office in Hopkinsville,Kentucky, which has a small sales force that manages the customer relationshipswith our retail accounts. 

Our wholesale activewear marketingstrategy concentrates primarily on the wholesale distribution channel cateringto screenprinters, embroiderers and advertising specialty distributors. We alsopromote our products through appearances at tradeshows and trade magazineadvertising and also engage in various forms of co-operative advertising withour major customers, including print advertising, catalogues and mailings andproduct sampling programs. Our marketing strategy in the retail channel will bebased on delivering consistent, reliable product quality to our customers atlower prices rather than consumer advertising. 
**Customers**
In fiscal 2006, we sold our productsin the United States, Canada and Europe and other markets, which accounted for88.0%, 6.5% and 5.5% of total sales, respectively. For a breakdown of our totalsales by geographic market for each of the last three financial years, referenceis made to Note 20(b) (ii) to the audited annual consolidated financialstatements of the Corporation included in our 2006 Annual Report, which isincorporated herein by reference. 

Due to wholesaler and retailerconsolidation, the customer base to which we sell and are targeting to sell ourproducts is composed of a relatively small number of significant customers. Wecurrently sell our products to approximately 180 customers. In fiscal 2006, ourlargest customer accounted for 28.2% of total sales, and our top ten customersaccounted for 66.0% of total sales. 

The large majority of total sales infiscal 2006 were made through our wholesale distributors. Although we havelong-term ongoing relationships with our distributor network, our contracts withour customers do not require them to purchase a minimum quantity of ourproducts. Instead, we meet with them at the beginning of each fiscal year toascertain their projected requirements and then plan our production andmarketing strategy accordingly. Our wholesale distributor customers then sendpurchase orders to us during the course of the fiscal year. 

We have begun selling a full Gildanbrand product-line of activewear, underwear and athletic socks without logos ordecoration to U.S. and Canadian regional retailers and U.S. mass-marketretailers. 
**Raw Materials**
Cotton and polyester fibres are themain raw materials used in the manufacturing of our products. Cotton is used inthe manufacturing of 100% cotton yarn while polyester is added in themanufacturing of cotton-polyester blend yarn. Polyester pricing is negotiated onan annual basis, while cotton fibre pricing is fixed in the futures markets. 

During fiscal 2006, all of our yarnrequirements for all of our product-lines were met by our long-term supplyagreements with Frontier and Parkdale America, LLC ("Parkdale"), as well as byour jointly-owned CanAm yarn-spinning facilities in Cedartown, Georgia andClarkton, North Carolina. We expect that our yarn requirements will continue tobe met by these sources. 

We also purchase chemicals, dyestuffsand trims through a variety of suppliers. These products have historically beenavailable in sufficient supply. 

9

**Quality Control**
Our quality control team has adoptedstrict standards and procedures to ensure the quality of our products. This teamenforces plant-specific quality control standards at the facilities we own andmonitors quality control at the facilities run by offshore contractors. As aresult of our quality control team's efforts, we have not experienced anysignificant quality claims from our customers or end users. 
**Management Information Systems**
Our Enterprise Resource Planning (ERP)system supports all of our operations in the areas of finance, manufacturing andcustomer service. This system is centralized and is accessed from all of ourlocations through secure networks. Our ERP system is linked to serverssupporting both local processes and specialized applications, including payrolland distribution. We continue to leverage our existing ERP system by developingnew functionality in the areas of supply chain, forecasting and strategicnetwork optimization. Due to our increasing dependence on the availability ofour computer systems to support our operations, we plan to continue in fiscal2007 to implement initiatives to enhance our information technology (IT)processes and infrastructure based on the Information Technology InfrastructureLibrary (ITIL), a framework of best practices approaches intended to facilitatethe delivery of high quality IT services. 
**Seasonality**
The activewear business is seasonal.Typically, demand for t-shirts is highest in the third quarter of each fiscalyear, when distributors purchase inventory for the peak summer selling season,and lowest in the first quarter of each fiscal year. Demand for our sockproducts is typically highest in the first and fourth quarters of each fiscalyear, stimulated largely by the need to support requirements for theback-to-school period and peak retail selling during the Christmas holidayseason. 

As a result of the historicalseasonal trends, we produce and store finished goods inventory in the first halfof the fiscal year in order to meet the expected demand for delivery in thesecond half of the fiscal year. 
**Competition**
The apparel market for our productsis highly competitive. Competition is generally based upon price, with reliablequality and service also being key requirements for success. Our primarycompetitors in North America are the major U.S.-based manufacturers of basicbranded activewear for the wholesale and retail channels, such as Fruit of theLoom, Inc., Hanesbrands Inc., the Jerzees division of Russell Corporation, whichwas recently acquired by Berkshire Hathaway Inc., which owns Fruit of the Loom,Inc., Delta Apparel Inc. and Anvil Knitwear, Inc. 

The competition in the Europeanwholesale imprinted activewear market is similar to that in North America as wecompete primarily with the European divisions of the larger U.S.-basedmanufacturers. In Europe, we also have large competitors that do not haveintegrated manufacturing operations and source products from contractors inAsia. 

For the first nine months of fiscal2006, our market share in the U.S. wholesale distributor network was 43.7% inthe overall t-shirt category, 32.2% in the sport shirt category and 30.8% in thefleece category. All U.S. market share data is based on the S.T.A.R.S. Report.
**Trade Regulatory Environment**
Although textile and apparelindustries worldwide have historically enjoyed significant protections, inrecent years trade liberalization and trade preference programs have diminishedthis protection somewhat. Our increasingly globalized production and sourcingand our increased market coverage have helped us to benefit from changes in theinternational regulatory climate. 
***United States***
Qualifying imports into the UnitedStates enjoy the benefits of free trade agreements with Australia, Bahrain,Chile, Israel, Jordan, Morocco and Singapore, as well as the benefits of theNorth American Free Trade Agreement ("NAFTA") and the U.S.-DominicanRepublic-Central America Free Trade Agreement ("CAFTA"). 

10

NAFTA is an agreement among Canada,the United States and Mexico that grants duty-free treatment to originatingtextile and apparel goods. None of the benefits of NAFTA apply to our goods sewnoutside the NAFTA countries. 

CAFTA presently includes the UnitedStates, El Salvador, Guatemala, Honduras and Nicaragua, and is expected toinclude Costa Rica and the Dominican Republic within the next year. In themeantime, these two countries are included in the Caribbean Basin TradePartnership Act ("CBTPA") discussed below. All CAFTA originating textile andapparel goods traded among the CAFTA countries are duty-free. The garments weknit and sew in CAFTA countries from U.S. yarn are thus CAFTA originating andduty-free when imported into the United States. CAFTA permits the use ofsafeguards in the form of reinstatement of normal duties if increased importscause or threaten to cause substantial injury to a domestic industry. 

Textiles and apparel imported intothe United States have also benefited from U.S. preference grants under programssuch as the CBTPA, the African Growth and Opportunity Act ("AGOA") and theAndean Trade Promotion and Drug Eradication Act ("ATPDEA"). Our Haiti productionis covered under the CBTPA. These programs allow duty-free entry of apparelarticles into the United States, subject to certain origin rules and otherrestrictions. The Corporation and its competitors have participated in theseprograms. ATPDEA and certain features of AGOA expire within the next year, butCongress is considering extensions. CAFTA replaces CBTPA in countriesparticipating in CAFTA. 

A potential obstacle to the U.S.importation of textiles and apparel is the safeguard regime that limits importsof Chinese textiles and apparel, through a system of absolute quotas for theyears 2006, 2007 and 2008. 
***Canada***
Textile and apparel imports intoCanada benefit from both free trade agreements and preference programs. Canadais part of NAFTA with Mexico and the United States, and Canada has a separatebilateral free trade agreement with Chile. Textile and apparel productsoriginating from approximately 48 Least Developed Countries ("LDCs") are alsoallowed into Canada duty-free and quota-free under certain rules of origin. 
***Mexico***
Imports into Mexico may receive thebenefit of NAFTA, the benefits of bilateral free trade agreements with Bolivia,Chile, Costa Rica, the European Union, Israel, Japan, Nicaragua and Uruguay, andthe benefits of two additional regional trade agreements: one among Colombia,Mexico and Venezuela, and one among El Salvador, Guatemala, Honduras and Mexico.
***European Union***
In addition to free tradearrangements among the individual countries in the European Union, the EuropeanUnion has preferential trade agreements with other European countries and withcountries outside of Europe. Of significance to the Corporation is the freetrade agreement between the European Union and Mexico. The European Union alsohas a Generalized System of Preferences program that permits duty-free entryinto the European Union of qualifying articles, including apparel, fromdeveloping countries. 

A safeguard agreement limitingimports of Chinese textile and apparel into the European Union will expire atthe end of 2007. 
***Australia***
Australia has a free trade agreementwith the United States. Additionally, Australia has introduced legislationsimilar to the legislation in force in Canada to allow duty-free and quota-freeentry of textiles and apparel articles from LDCs. 
**Intellectual Property**
We own several registered trademarksincluding, among others, "Gildan" in Canada and the United States, the Gildan"logo" in Canada, and "Gildan Activewear" in Canada, the United States and manycountries in Europe, Central America, South America and Asia, as well as inAustralia. Applications for the registration of a number of other trademarks,including "Gildan Activewear" and "Gildan", are pending in several countries. Wehave and intend to continue to maintain our trademarks and the relevant registrations, and will actively pursue theregistration of trademarks in Canada, the United States and abroad. 

11

**Environmental Regulation**
All of our operations are subject tovarious environmental and occupational health and safety laws and regulations.Because we monitor, control and manage environmental issues, we believe that weare in compliance in all material respects with the regulatory requirements ofthose jurisdictions in which our facilities are located. In line with ourcommitment to the environment as well as to the health and safety of ouremployees, we will continue to make expenditures to comply with theserequirements, and we do not believe that compliance will have a material adverseeffect on our business. As is the case with manufacturers in general, if arelease of hazardous substances occurs on or from our properties or anyassociated offsite disposal locations, or if contamination from prior activitiesis discovered at any of our properties, we may be held liable. While the amountof such liability could be material, we endeavour to conduct our operations in amanner that reduces such risks.**3.2     Manufacturing Operations 

Textile Operations***Yarn-Spinning. We currentlyconduct yarn-spinning operations at facilities located in Cedartown, Georgia andClarkton, North Carolina through CanAm, our 50%/50%-owned joint venture withFrontier. These yarn-spinning facilities supply our textile manufacturingfacilities with 100% cotton U.S. origin yarn. 
*Knitting. We currently conductknitting operations at our knitting facility in Montreal, Québec. We operatecircular and flat knitting machines at this facility, producing jersey, piqué,fleece and ribbing in body-sized fabrics in tubular form using cotton andcotton/polyester yarns. We also conduct knitting operations in our integratedtextile facility in Rio Nance, Honduras, and at our integrated textile facilityin Bella Vista, Dominican Republic. At these facilities, we operate circular andflat knitting machines, producing jersey, piqué and ribbing in body-sizedfabrics in tubular form using cotton and cotton/polyester yarns. Our secondintegrated textile facility in Rio Nance is expected to begin knitting, dyeing,finishing and cutting operations for the production of fleece in the second halfof fiscal 2007. 
*Dyeing and Finishing. Knittedfabric produced at our facility in Montreal, Québec is batched for bleaching anddyeing and is taken to our dyeing and finishing facilities in Montreal, Québecand, until December 2006, to our dyeing and finishing facility in Valleyfield,Québec. Bleaching, dyeing and finishing operations in our integrated textilefacilities in Rio Nance, Honduras and Bella Vista, Dominican Republic processall the fabric knitted in each respective facility. 
*Cutting. All of the fabricproduced at the Montreal dyeing and finishing facility and, until December 2006,the Valleyfield dyeing and finishing facility, is shipped to our automatedcutting facility located in Bombay, New York. Cutting operations in ourintegrated textile facilities in Rio Nance, Honduras and Bella Vista, DominicanRepublic, cut all bleached and dyed fabric produced in each respective facility,thereby leveraging our existing manufacturing infrastructure and also reducingtransportation costs. 
*Sock Production. During fiscal2006, we completed the construction of our new integrated sock manufacturingfacility in Rio Nance, Honduras for the production of athletic socks and webegan production in this facility in early fiscal 2007. With the acquisition ofKentucky Derby in the fourth quarter of fiscal 2006, we also conduct knittingand finishing operations for the production of socks in Mt. Airy, North Carolinaand knitting operations in Hillsville, Virginia. We also utilize third partycontractors to complement our product offering and fulfill our customer needs.******Sewing Operations**
We conduct our sewing operationsprimarily through our four facilities in Honduras, our two facilities in Mexico,our three facilities in Haiti and our two facilities in Nicaragua. In additionto these eleven facilities, we supplement our production by using third partycontractors in Haiti and the Dominican Republic. These facilities provide uswith substantially all of our market sewing assembly requirements. 

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**Distribution Operations**
We distribute our products towholesale customers in the United States from a distribution centre in Eden,North Carolina as well as from a distribution centre operated by a third partyin Ontario, California. The North Carolina facility maintains our distributionoperations close to our customers, providing us with the space needed forcontinuing growth. The third party warehouse in California was added in fiscal2004 for the purpose of providing next day service to customers on the U.S. westcoast. 

In the fourth quarter of fiscal 2006,we announced plans to invest approximately $7 million in a new 400,000 squarefoot retail distribution centre in a leased building in Martinsville, Virginiaand to relocate and consolidate Kentucky Derby's existing distribution centresat multiple sites in Danville, Virginia and Mt. Airy, North Carolina to thissingle location. This new distribution centre will be fully dedicated tosupporting our retail distribution plans. The relocation and consolidation ofKentucky Derby's distribution centres is expected to result in improvedoperating efficiencies and lower transportation costs, as well as fastercustomer response times. The installation of equipment in this facility,together with the associated warehouse management information system, isexpected to be completed during the second quarter of fiscal 2007. Our existingdistribution centre in Eden, North Carolina will remain fully dedicated toproviding the capacity required for Gildan's anticipated future growth in thewholesale distribution channel. 

As of the beginning of the firstquarter of fiscal 2007, our Canadian wholesale and retail customers are servicedfrom a third party distribution centre located in Mississauga, Ontario. Thisdistribution centre in Mississauga replaces our distribution centre in Montreal,Québec, which was closed effective October 2006, and provides us with greaterflexibility in meeting our Canadian customers' needs. 

Customers in Europe are serviced fromdistribution centres operated by third parties in Meer, Belgium andBletchley-Milton Keynes, United Kingdom and, as of the fourth quarter of fiscal2006, from our new distribution centre in Choloma, Honduras. Customers inAustralia are serviced from a distribution centre operated by a third party inBrisbane, Australia. In fiscal 2006, we began utilizing a new distributioncentre operated by a third party in Monterrey, Mexico to service our Mexicancustomers. 
**Properties**
The following table sets forth thelocation and use of each of our principal properties: 

  **Owned****Location**Use****or Leased**
Montreal, QuébecExecutive officesOwned
Montreal, QuébecKnitting facilityOwned
St. Michael, BarbadosExecutive officesOwned
Valleyfield, QuébecDyeing and finishing facility (1)Owned
Montreal, QuébecDyeing and finishing facilityOwned
Bombay, New YorkCutting facilityLeased
Rio Nance, HondurasKnitting, dyeing, finishing and cutting    facilityOwned
Rio Nance, HondurasKnitting, dyeing, finishing and cutting    facility (2)Owned
Rio Nance, HondurasIntegrated sock manufacturing facility     (3)Owned
Bella Vista, Dominican RepublicKnitting, dyeing, finishing and cutting    facilityOwned
San Pedro Sula, HondurasSewing facilityLeased
Choloma, HondurasSewing facilityLeased
Choloma, HondurasSewing facilityLeased
Choloma, HondurasWholesale distribution facilityLeased
Villanueva, HondurasSewing facilityLeased
Castaños, MexicoSewing facilityOwned
San Buenaventura, MexicoSewing facilityLeased
San Marcos, NicaraguaSewing facilityLeased
Rivas, NicaraguaSewing facilityLeased
Rivas, NicaraguaSewing facility (4)Leased
Port-au-Prince, HaitiSewing facilityLeased
Port-au-Prince, HaitiSewing facilityLeased
Port-au-Prince, HaitiCutting, sewing and distribution facility    (5)Leased
Montreal, QuébecDistribution facility (6)Owned
Eden, North CarolinaWholesale distribution facilityOwned
Cedartown, GeorgiaYarn-spinning facilityOwned(7)
Clarkton, North CarolinaYarn-spinning facilityLeased(7)
Hopkinsville, KentuckyOffices (8)Owned
Mt. Airy, North CarolinaManufacturing, warehousing and offices     (9)Owned
Mt. Airy, North CarolinaManufacturing, warehousing and offices     (10)Leased
Hillsville, VirginiaManufacturing, warehousing and offices     (11)Owned
13

  **Owned****Location**Use****or Leased**
Bentonville, ArkansasOfficesLeased
Danville, VirginiaManufacturing and    warehousing (12)Owned
Danville, VirginiaManufacturingLeased
Shanghai, ChinaOfficesLeased
Martinsville, VirginiaRetail distribution    facilityLeased
________________________ (1)    This facility was closed effective December 2006. (2)     This facility is expected to begin production in thesecond half of fiscal 2007. (3)     This facility began production in early fiscal 2007.(4)     Under construction. (5)     This facility is expected to begin operations in thefirst quarter of fiscal 2007. (6)     This facility was closed effective October 2006. (7)     Jointly with Frontier. (8)     Two locations. (9)     Five locations. (10)   Eight locations. (11)   Two locations. (12)   Three locations. 
We believe that all of thesefacilities, whether owned or leased, are well maintained and in good operatingcondition. 

Our revolving term credit facilityand senior notes are secured by a first ranking moveable hypothec and securityinterest on most of our assets located at a majority of our facilities. Thelenders under the term credit facility and the noteholders, among others, areparty to an intercreditor agreement, which provides that the lenders and thenoteholders shall in all respects be *pari passu* first and senior liens inrespect of our assets. 
**Labour Practices**
We have invested significant time andresources in ensuring that the working conditions in all our facilities meet orexceed the standards imposed by Canadian occupational health and safety laws. Inaddition to having our own Code of Conduct, which is available on our website atwww.gildan.com, we have obtained WRAP (Worldwide Responsible Apparel Production)certification for most of our sewing plants in Honduras, for our main Mexicansewing facility, and for our two sewing plants in Nicaragua. To ensure thatthese employment standards are appropriate, we have worked with the CanadianInternational Development Agency, a Canadian federal governmental agency, tosecure the services of professionals who specialize in social/gender analysisand environmental audits with respect to developing nations. We alsocontractually obligate our third party contractors to follow prescribedemployment policies as well as our Code of Conduct. ****
In November 2003, we joined the FairLabor Association ("FLA") as a Participating Company. The FLA is recognizedinternationally as one of the most highly respected verification agencies andpromotes adherence to international labour standards and improving workingconditions. We have developed a comprehensive action plan to obtain FLAaccreditation in 2007. 

Since fiscal 2005, we have engagedVérité, an internationally respected training and auditing organization to carryout a comprehensive and ongoing program of training and auditing at all of ourGildan-owned and contractor manufacturing facilities. In addition, this year werecruited an internationally respected Director of Corporate SocialResponsibility to develop our training, auditing and compliance programs. 
**3.3   Risk Factors**
Please see the "Risks and Uncertainties" section ofour management's discussion and analysis on pages 37 to 40 of the 2006 AnnualReport. 
**3.4   Employees**
As at October 1, 2006, we employed14,509 full-time employees. Of these employees, 308 Canadian employees at ourValleyfield, Québec and Montreal, Québec dyeing and finishing facilities arecovered by collective bargaining agreements that have each been renewed forthree years. We closed the Valleyfield facility effective December 2006. Weconsider our relations with our employees to be very good and, as of the datehereof, we have not experienced any work stoppages that have had a materialimpact on our operations. 

14

**4.**   DIVIDEND POLICY**
We do not currently pay dividendsbecause we retain all of our earnings to maximize our financing capacity todevelop and expand our business. The Board of Directors periodically reviews theCorporation's policy towards paying dividends. Although our revolving termcredit facility and senior notes require compliance with lending covenants inorder to pay dividends, these covenants are not currently, and are not expectedto be, a constraint to the future payment of dividends. 
**5.**   CAPITAL STRUCTURE 
First Preferred Shares 
*Issuance in Series***
The First Preferred Shares areissuable in series and the Board of Directors has the right, from time to time,to fix the number of, and to determine the designation, rights, privileges,restrictions and conditions attaching to, the First Preferred Shares of eachseries subject to the limitations, if any, set out in the Articles of theCorporation. 
***Rank***
The First Preferred Shares ranksenior to the Second Preferred Shares and the Common Shares with respect to thepayment of dividends, return of capital and the distribution of assets in theevent of the liquidation, dissolution or winding-up of Gildan. The FirstPreferred Shares in each series rank equally with the First Preferred Shares ofany other series. 
***Voting Rights***
Unless the Articles otherwise providewith respect to any series of the First Preferred Shares, the holders of theFirst Preferred Shares are not entitled to receive any notice of or attend anymeeting of the shareholders of Gildan and are not entitled to vote at any suchmeeting. 
**Second Preferred Shares 
*Issuance in Series***
The Second Preferred Shares areissuable in series and the Board of Directors has the right, from time to time,to fix the number of, and to determine the designation, rights, privileges,restrictions and conditions attaching to, the Second Preferred Shares of eachseries subject to the limitations, if any, set out in the Articles of theCorporation. 
***Rank***
The Second Preferred Shares aresubject and subordinate to the rights, privileges, restrictions and conditionsattaching to the First Preferred Shares. The Second Preferred Shares rank seniorto the Common Shares with respect to payment of dividends, return of capital anddistribution of assets in the event of the liquidation, dissolution orwinding-up of Gildan. The Second Preferred Shares in each series rank equallywith the Second Preferred Shares of any other series. 
***Voting Rights***
Unless the Articles otherwise providewith respect to any series of the Second Preferred Shares, the holders of theSecond Preferred Shares are not entitled to receive any notice of or attend anymeeting of the shareholders of Gildan and are not entitled to vote at any suchmeeting. 
**Common Shares**
Following the conversion of all ofthe Corporation's Class B Multiple Voting Shares into Class A Subordinate VotingShares, the Corporation's shareholders approved a special resolution on February2, 2005 to amend the Corporation's Articles in order to change each of theissued and outstanding Class A Subordinate Voting Shares into one newly-createdCommon Share and to remove the Class B Multiple Voting Shares and the Class ASubordinate Voting Shares.****
15

The Common Shares are subject to andsubordinate to the rights, privileges, restrictions and conditions attaching tothe First Preferred Shares and the Second Preferred Shares. Each holder ofCommon Shares shall have the right to receive any dividend declared by theCorporation and the right to receive the remaining property and assets of theCorporation on dissolution. 

Each holder of Common Shares isentitled to receive notice of and to attend all meetings of shareholders of theCorporation, except meetings of which only holders of another particular classor series shall have the right to vote. Each Common Share shall entitle theholder thereof to one (1) vote. 
**6.     **MARKET FOR SECURITIES**
The Common Shares of the Corporationare listed on the New York Stock Exchange (the "NYSE") and the Toronto StockExchange (the "TSX") under the symbol "GIL". The Class A Subordinate VotingShares (now the Common Shares), which were issued at an offering price of $1.75(Cdn$2.57), began trading on the TSX, the Montreal Exchange (the "ME") and theAmerican Stock Exchange ("AMEX") on June 17, 1998. Prior to that date, there wasno public market for the Class A Subordinate Voting Shares. On September 1,1999, the Class A Subordinate Voting Shares (now the Common Shares) commencedtrading on the NYSE. We delisted such shares from AMEX on August 31, 1999. As aresult of a restructuring of Canada's stock exchanges, which took effect onDecember 7, 1999, we are no longer listed on the ME. 

The table below shows the monthlyprice range per share and the trading volume of the Common Shares for the fiscalyear ended October 1, 2006 on the TSX (in Cdn$) and on the NYSE (in US$). 

**COMMON SHARES**
**Toronto Stock    Exchange (TSX)****New York Stock Exchange (NYSE)
**Month**
**High**
**Low**
**Trading Volume**
**Month**
**High**
**Low**
**Trading Volume**
October 3 to 31, 2005
46.70
37.29
4,561,600
October 3 to 31, 2005
39.78
32.03
3,021,100
November 2005
45.50
40.50
4,643,000
November 2005
38.55
34.45
2,852,400
December 2005
51.09
45.00
3,871,600
December 2005
43.58
38.55
2,320,400
January 2006
56.44
50.02
3,876,800
January 2006
49.21
43.00
3,265,600
February 2006
59.17
54.56
3,504,700
February 2006
51.52
47.76
2,708,500
March 2006
61.23
53.80
4,920,300
March 2006
53.03
46.00
5,059,700
April 2006
58.08
51.21
6,104,300
April 2006
50.17
44.06
4,235,200
May 2006
55.00
45.55
6,290,900
May 2006
49.00
40.03
4,819,900
June 2006
53.00
42.26
5,860,300
June 2006
47.54
38.24
5,337,300
July 2006
52.99
44.00
5,066,200
July 2006
47.42
39.03
4,461,800
August 2006
55.95
47.15
3,998,400
August 2006
50.51
41.72
4,074,100
September 2006
58.12
53.19
3,891,800
September 2006
51.93
47.26
2,965,700
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**7.**   DIRECTORS AND OFFICERS**
Listed below is certain informationabout the current directors of Gildan. The directors have served in theirrespective capacities since their election and/or appointment and will continueto serve until the next annual meeting of shareholders or until a successor isduly elected. 
**Name and Municipality of    Residence****Age****Principal Occupation**Director Since  
 
 Robert M. Baylis    (2)(3)(4) 
Corporate Director
 Darien,    Connecticut, United States68
February 1999  
 
 Glenn J. Chamandy 
President and Chief Executive    Officer of the Corporation
 Montreal, Québec,    Canada45
May 1984  
 
 William D. Anderson(1)(3) 
Corporate Director
 Montreal, Québec,    Canada57
June 2006  
 
 Sheila O'Brien    (2)(3) 
President, Belvedere    Investments (private investment company)
 Calgary, Alberta,    Canada59
June 2005  
 
 Pierre Robitaille(1)(2) 
Business Advisor and Corporate    Director
 St-Lambert, Québec,    Canada63
February 2003  
 
 Richard P. Strubel    (1)(3) 
Corporate Director
 Chicago, Illinois,    United States67
February 1999  
 
 Gonzalo F.    Valdes-Fauli(1)(2) 
Chairman of BroadSpan Capital    LLC (an investment banking firm)
 Key Biscayne,    Florida, United States60
October 2004_________________________   (1)      Member of the Audit and Finance Committee.(2)      Member of the Corporate Governance Committee.(3)      Member of the Human Resources and Compensation Committee.(4)      Chairman of the Board.
Listed below is certain information about the currentexecutive officers of Gildan. 
**Name and Municipality of    Residence**Age**Position Held Within the    Corporation
 
 
 
Glenn J. Chamandy (1) (2)
 
President, Chief Executive    Officer and Director
Montreal, Québec, Canada
45   
Laurence G. Sellyn (1) (2)
 
Executive Vice-President, Chief    Financial and Administrative Officer
Beaconsfield, Québec, Canada
57   
Michael R. Hoffman (1)
 
President, Gildan Activewear SRL
St. James, Barbados
44   
Georges Sam Yu Sum (1) (2)
 
Executive Vice-President,    Operations
Montreal, Québec, Canada
49   
Gregg Thomassin (1) (2)
 
Executive Vice-President,    Corporate Controller
Baie D'Urfé, Québec, Canada
47   
Benito Masi (1) (2)
 
Executive Vice-President,    Manufacturing
Laval, Québec, Canada
51   
Cam Gentile (1) (2)
 
Executive Vice-President,    Organizational Development and Change Management
Hudson, Québec, Canada
64   
Claude Guay (1) (2)
 
Executive Vice-President, Chief    Information Officer
Montreal, Québec, Canada
45   
Eric R. Lehman(1) (2)
 
Executive Vice-President, Supply    Chain
Kennesaw, Georgia, USA
45   
William H. Nichol, Jr. (1)
 
President, Retail Sales Division
Hopkinsville, Kentucky, USA
55
_________________________
 
 
(1) Executive Management    Committee.
 
 
(2) Officer of the Corporation.
 
 
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*Glenn J. Chamandy is one of the founders of theCorporation and has been involved in various Chamandy family textile and apparelbusinesses for over twenty years. Prior to February 2004, Mr. Chamandy held theposition of President and Chief Operating Officer. He was then named Presidentand Co-Chief Executive Officer and, in August 2004, he was appointed to theposition of President and Chief Executive Officer.*Robert M. Baylis,Chairman of the Board of the Corporation, serves as a director of several largecorporations, including the New York Life Insurance Company (life insuranceprovider), Host Hotels & Resorts Inc*.*(luxury hotels andresorts), Covance Inc. (drug development products and services provider) andPartner Re Ltd. (multi-line reinsurance provider). He is also a trustee of theRubin Museum of Art in New York City, a corporation member of the Woods HoleOceanographic Institution, an overseer of the University of Pennsylvania Museum,and a member of the Advisory Council of the Economics Department of PrincetonUniversity. He was formerly a director of Gryphon Holdings, Inc. (insurance) andof the Wharton International Forum, an executive education program. Mr. Baylisretired from Credit Suisse First Boston as Vice-Chairman in 1996, afterthirty-three years with this investment banking firm and its associatedcorporations, including a term as the Chairman and Chief Executive Officer ofCredit Suisse First Boston (Pacific). Mr. Baylis was educated at HarvardBusiness School and is a chartered financial analyst.*William D. Andersonhas had a career as a business leader in Canada spanning over thirty years. Mr.Anderson joined the Bell Canada organization in 1992, where from 1998 to 2001 heserved as Chief Financial Officer of BCE Inc., Canada's largesttelecommunications company. From 2001 to 2005, Mr. Anderson served as Presidentof BCE Ventures (the strategic investment unit of BCE Inc.) and he was theChairman and Chief Executive Officer of Bell Canada International Inc. (asubsidiary of BCE that was formed to invest in telecommunications operationsoutside Canada), where he continues to serve as a member of the board. Prior tojoining the Bell Canada organization, Mr. Anderson was in public practice fornearly twenty years with the accounting firm KPMG, where he was a partner foreleven years. Mr. Anderson also serves on the boards of directors of TransAltaCorporation (power generation and energy marketing) and Four Seasons Hotels Inc.(luxury hotels and resorts). Mr. Anderson was educated at the University ofWestern Ontario and is a member of the Institute of Chartered Accountants ofOntario.*Sheila O'Brien, CMis President of Belvedere Investments, a private investment company, and is alsoa business consultant and corporate director. She has had a thirty-year careeras a senior executive in the oil and gas and petrochemical sectors in the areasof human resources, investor relations and public and government relations.Prior to 2004, Ms. O'Brien was Senior Vice-President, Human Resources, PublicAffairs, Investor and Government Relations at NOVA Chemicals Corporation, aproducer of commodity plastics and chemicals, where she was the architect of acorporate restructuring practice that was designated a world wide best practiceby Watson Wyatt Consulting Firm. She has also been active on the boards ofdirectors of over thirty public sector and not-for-profit organizations and wasawarded the Order of Canada for her community leadership in 1998. Ms. O'Brien isa member of the Board of Trustees of Transforce Income Trust (a Canadiantransportation company) and MaRS (a Toronto-based biotechnology accelerator). Inaddition to her corporate career, she has worked in a senior executive capacityat the University of Calgary. She is a graduate of the MTC program at theUniversity of Western Ontario and completed a one-year sabbatical on creativityand innovation at various U.S. schools in 1990. 

*Pierre Robitaille*is a business advisor and a corporate director. Mr. Robitaille previouslypursued his career at SNC-Lavalin Group Inc., a global engineering-constructionfirm, where he was Executive Vice-President and Chief Financial Officer from1990 to 1998. Prior to this, Mr. Robitaille was in public practice for more thantwenty years with the public accounting and management consulting firm of Ernst& Whinney, where he held the positions of Managing Partner of the Montrealoffice, President of the firm in Québec, and member of its national board ofdirectors. Mr. Robitaille also serves on the boards of directors of Nav Canada(civil air navigation services provider), Swiss Re Company of Canada and SwissRe Life & Health Co. Canada (reinsurance companies) and National PublicRelations Capital Partnership Inc. (national public relations consulting firm).Mr. Robitaille is a Fellow member of the Québec Order of Chartered Accountants.He was educated at HEC-University of Montreal and McGill Business School. 

*Richard P. Strubel*is a corporate director and is Vice-Chairman of the Board of Cardean LearningGroup (formerly known as Unext), a provider of advanced education over theInternet, where from 1999 to 2004 he served as President and Chief OperatingOfficer. From 1990 to 1999, Mr. Strubel was Managing Director of TandemPartners, Inc., a privately-held management services firm, and from 1984 to1994, he served as President and Chief Executive Officer of Microdot, Inc. Priorto that, Mr. Strubel served as President of Northwest Industries, then aNYSE-listed company, which included Fruit of the Loom and BVD among itsoperating entities. Mr. Strubel also serves on the boards of directors of themutual funds of Goldman Sachs & Co., Goldman Sachs Hedge Fund Partners andMutual Funds of Northern Trust. Mr. Strubel is also Trustee of the University ofChicago and Chairman of its Audit Committee. Mr. Strubel was educated at HarvardBusiness School.*Gonzalo F. Valdes-Fauliis Chairman of the Board of BroadSpan Capital LLC, an investment banking firmspecializing in financial advisory services. Mr. Valdes-Fauli retired fromBarclays Bank PLC (a major UK-based global bank) in 2001, where he held the positionof Vice-Chairman, Barclays Capital, and Group CEO, Latin America. Mr. Valdes-Faulialso serves on the boards of directors of Blue Cross Shield of Florida (healthinsurance provider), where he is Lead Chairman, and Republic Bank of DominicanRepublic (financial services provider), where he is Chairman of the Board. He isalso Trustee Emeritus of the University of Miami. Mr. Valdes-Fauli holds aMaster's Degree in international finance from Thunderbird Graduate School forInternational Management.

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*Laurence G. Sellyn was appointedto the position of Executive Vice-President, Chief Financial and AdministrativeOfficer of the Corporation in November 2005. He joined Gildan as ExecutiveVice-President, Finance and Chief Financial Officer of the Corporation in April1999. He is a Fellow of the Institute of Chartered Accountants of England andWales. Prior to joining Gildan, Mr. Sellyn served as Senior Vice-President,Finance and Corporate Development and Chief Financial Officer of Wajax Limited,an industrial distribution company, where he was employed from October 1992 toMarch 1999. Prior to joining Wajax, he was employed by Domtar Inc., where heheld various positions, including Corporate Controller and Vice-President,Business Planning and Development. 
*Michael R. Hoffman joined Gildanin November 1997. He served as Vice-President, Sales and Marketing for theinternational division until his appointment as President of Gildan ActivewearSRL in February 2001. Prior to joining Gildan, Mr. Hoffman was employed by Fruitof the Loom, Inc., where he last served as Divisional Vice-President of theActivewear Division. 
*Georges Sam Yu Sum has beenExecutive Vice-President, Operations of the Corporation since 2000. From 1998 to2000, he served as Vice-President, Operations of the Corporation and from 1995to 1998, he served as Director of Operations of the Corporation. Prior tojoining Gildan in 1995, Mr. Sam Yu Sum spent sixteen years with DominionTextiles, where he served in various managerial capacities, from manufacturingto sales. 
*Gregg Thomassin joined Gildan inFebruary 1999 as Corporate Controller and was appointed to the position ofExecutive Vice-President in November 2003. He previously held the position ofVice-President, Finance and Administration with various manufacturing companies.Mr. Thomassin is a Canadian Chartered Accountant. 
*Benito Masi has been involved inapparel manufacturing in North America for over twenty-five years. He joinedGildan in 1986, where he held various positions. He was appointedVice-President, Apparel Manufacturing in February 2001 and his title was changedto Vice-President, Corporate Apparel Operations in September 2003. In August2004, he was appointed Executive Vice-President, Apparel Manufacturing and wasappointed Executive Vice-President, Manufacturing in January 2005. 
*Cam Gentile joined theCorporation in 2006 as Executive Vice-President, Organizational Development andChange Management. He has over thirty years of experience in the pulp and paperindustry in senior management positions at Domtar Inc., TranscontinentalPrinting Inc., Paperboard Industries International Inc. and Uniboard Canada Inc.He is currently a member of the Order of Engineers of Québec, President andChairman of the Board of Directors of the Québec Institute of GraphicCommunications, a member of the External Advisory Board to the Faculty of Artsand Science of Concordia University, as well as Vice-President and member of theboard directors of Village Theatre in Hudson, Québec. 
*Claude Guay joined theCorporation as Executive Vice-President, Chief Information Officer in October2006. His career spans more than twenty years in international executivemanagement at IBM Corporation and Accovia Inc., as well as at MTI Services, acompany he founded in 2005. Mr. Guay is a graduate of Industrial Engineeringfrom l'École Polytechnique de Montréal and has been a professional engineersince 1984. He also acts as the Networking Officer for the Québec Chapter Boardof Directors of the Young Presidents' Organization. 
*Eric R. Lehman joined theCorporation in December 2006 as Executive Vice-President, Supply Chain. He hasover twenty years of experience in the supply chain function with major nationalapparel brands. Prior to joining Gildan, Mr. Lehman was employed by RussellCorporation, where he last served as Vice President of Supply Chain. Prior tothat, he held senior supply chain planning positions at both Fruit of the Loom,Inc. and the Hanes Division of Sara Lee Corporation. 
*William H. Nichol, Jr. assumedthe position of President, Retail Sales Division, upon the Corporation'sacquisition of Kentucky Derby. Previously, Mr. Nichol served as Chairman andChief Executive Officer of Kentucky Derby since 1985. Mr. Nichol isPresident-elect of The Hosiery Association, a national trade association thatrepresents the manufacturers of more than 85% of the hosiery produced in theUnited States. 

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As at December 20, 2006, theexecutive officers and directors of the Corporation as a group own 5,656,272Common Shares, which represents 9.40% of the voting rights attached to allCommon Shares. 
**8.**   AUDIT COMMITTEE DISCLOSURE 
Mandate of the Audit and Finance Committee**
The mandate of the Audit and FinanceCommittee is included herewith as Appendix A. 
**Composition of the Audit and Finance Committee**
The Audit and Finance Committee iscomposed of four independent and financially literate directors, as those termsare defined in the rules of the Canadian Securities Administrators and the U.S.Securities and Exchange Commission as well as the standards of the NYSE. Theireducation and experience that is relevant to the performance of theirresponsibilities as members of the Audit and Finance Committee is as follows:
***Pierre Robitaille – Mr.Robitaille is a business advisor and corporate director. He is retired fromSNC-Lavalin Group Inc., a global engineering-construction firm, where he wasExecutive Vice-President and Chief Financial Officer from 1990 to 1998. Prior tothis, Mr. Robitaille was in public practice for more than twenty years with thepublic accounting and management consulting firm of Ernst & Whinney, where heheld the positions of Managing Partner of the Montreal office, President of thefirm in Québec and member of the firm's national board of directors. Mr. Robitaille is a member of the boards of directors of Swiss Re Company of Canadaand Swiss Re Life & Health Co. Canada (national reinsurance companies), NavCanada (civil air navigation services provider) and National Public RelationsCapital Partnership Inc. (national public relations consulting firm). Over thecourse of his career, he has acquired competence in the audit of major publicand private companies and a familiarity with internal controls and financialreporting procedures. Mr. Robitaille is a Fellow member of the Québec Order ofChartered Accountants. He was educated at HEC-University of Montreal and McGillBusiness School. 
***William D. Anderson – Mr.Anderson is a chartered accountant and has had a business career spanning overthirty years. From 1998 to 2001, he served as Chief Financial Officer of BCEInc., Canada's largest telecommunications company. Most recently, Mr. Andersonserved as President of BCE Ventures (the strategic investment unit of BCE Inc.)and previously he was the Chairman and Chief Executive Officer of Bell CanadaInternational Inc. (a subsidiary of BCE that was formed to invest intelecommunications operations outside Canada). Prior to joining the Bell Canadaorganization in 1992, Mr. Anderson was in public practice for nearly twentyyears with the accounting firm KPMG, where he was a partner for eleven years.Mr. Anderson also serves on the boards of directors of TransAlta Corporation(power generation and energy marketing) and Four Seasons Hotels Inc. (luxuryhotels and resorts). Mr. Anderson was educated at the University of WesternOntario and is a member of the Institute of Chartered Accountants of Ontario.
***Richard P. Strubel – Mr.Strubel is a corporate director and is Vice-Chairman of the Board of CardeanLearning Group, where he previously served as President and Chief OperatingOfficer. Prior to that, Mr. Strubel served as Managing Director of TandemPartners, Inc., a privately-held management services firm, President and ChiefExecutive Officer of Microdot, Inc. and President of Northwest Industries, thena NYSE-listed company with sales in excess of $3 billion. Mr. Strubel is also atrustee of all the institutional and retail mutual funds managed by GoldmanSachs & Co., as well as the institutional funds of the Northern Trust Companyand serves as a member of the audit committees of these mutual fund families.Mr. Strubel has more than twenty-five years of experience in executive positionsoverseeing large operating corporations. Mr. Strubel is also Trustee of theUniversity of Chicago and Chairman of its Audit Committee. He was educated atHarvard Business School. 
***Gonzalo F. Valdes-Fauli – Mr.Valdes-Fauli is a retired Vice-Chairman of Barclays Capital, the investmentbanking division of Barclays Bank, London, England. Mr. Valdes-Fauli served as amember of the management committee of Barclays Capital from 1988 to 2001. He wasGroup CEO of Barclays Bank Latin America from 1988 to 2001. He is Chairman ofBroadSpan Capital LLC and Chairman of Republic Bank, Dominican Republic. Mr.Valdes-Fauli also serves on the board of directors of Blue Cross Blue Shield ofFlorida, where he is Lead Chairman. Mr. Valdes-Fauli is a Trustee Emeritus ofthe University of Miami. He has more than thirty years of experience in financeand holds a Master's Degree in international finance from Thunderbird GraduateSchool for International Management. 

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**Pre-Approval of Non-Audit Services**
In accordance with the CanadianInstitute of Chartered Accountants' independence standards for auditors, the *Sarbanes-Oxley Act of 2002* and rules of the U.S. Securities and ExchangeCommission, the Corporation is restricted from engaging the auditors to providecertain non-audit services to the Corporation and its subsidiaries, includingbookkeeping or other services related to the accounting records or financialstatements, information technology services, valuation services, actuarialservices, internal audit services, corporate finance services, managementfunctions, human resources functions, legal services and expert servicesunrelated to the audit. The Corporation does engage the auditors from time totime to provide certain non-audit services other than the restricted services.All non-audit services must be specifically pre-approved by the Audit andFinance Committee. 
**External Auditor Service Fees**
The aggregate fees billed by KPMG LLP,Chartered Accountants ("KPMG"), the Corporation's external auditor, for variousaudit-related and non-audit services rendered for the fiscal years 2006 and 2005were as follows: 
*Audit Fees — The aggregate auditfees billed by KPMG for professional services rendered for the annual audit ofthe Corporation's consolidated financial statements, quarterly reviews of theCorporation's financial statements and services provided in connection withstatutory and regulatory filings or engagements were Cdn$1,196,100 for fiscal2006 and Cdn$687,287 for fiscal 2005. The audit fees for fiscal 2006 includefees relating to KPMG's audit of management's assessment of internal controlover financial reporting. 
*Audit-Related Fees — Theaggregate audit-related fees billed by KPMG were Cdn$94,025 for fiscal 2006 andCdn$74,700 for fiscal 2005. These services consisted of miscellaneous assuranceservices. 
*Tax Fees — The aggregate tax feesbilled by KPMG were Cdn$322,785 for fiscal 2006 and Cdn$262,659 for fiscal 2005.These services consisted of tax compliance, including the review of tax returns,assistance regarding income, capital and sales tax audits, the preparation ofannual transfer pricing studies, tax advisory services relating to domestic andinternational taxation and customs and duties. 
*All Other Fees — The aggregatefees billed by KPMG for all other professional services rendered wereCdn$169,860 for fiscal 2006 for services associated with financial due diligenceand Cdn$3,178 for fiscal 2005 for services associated with the assistance ofstatutory filing requirements. 
**9.**   LEGAL PROCEEDINGS**
The Corporation is a party to claimsand litigation arising in the normal course of its operations. Management doesnot expect the resolution of these matters to have a materially adverse effecton the financial position or results of operations of the Corporation. 
**10.   TRANSFER AGENT AND REGISTRAR**
The transfer agent and registrar ofthe Corporation is Computershare Investor Services Inc., having offices inMontreal and Toronto at which the register of transfer of the Common Shares isheld. The co-transfer agent and co-registrar of the Corporation is ComputershareTrust Company, Inc., having an office in New York.**11.   MATERIAL CONTRACTS**
The Corporation has not entered intoany material contract outside the ordinary course of business. 

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**12.   INTERESTS OF EXPERTS**
KPMG, the external auditors of theCorporation, reported on the fiscal 2006 audited consolidated financialstatements of the Corporation, which were filed with the securities regulatoryauthorities. We are advised that, as at the date hereof, the members of KPMG areindependent in accordance with the Code of Ethics of Chartered Accountants(Québec). 
**13.   FORWARD – LOOKING INFORMATION**
Certain statements included in thisAnnual Information Form may constitute "forward-looking statements" within themeaning of the U.S. *Private Securities Litigation Reform Act of 1995* andCanadian securities legislation and regulations, and are subject to importantrisks, uncertainties and assumptions. This forward-looking information includes,amongst others, information with respect to our objectives and the strategies toachieve these objectives, as well as information with respect to our beliefs,plans, expectations, anticipations, estimates and intentions. Forward-lookingstatements generally can be identified by the use of forward-looking terminologysuch as "may", "will", "expect", "intend", "estimate", "anticipate", "plan","foresee", "believe" or "continue" or the negatives of these terms or variationsof them or similar terminology. We refer you to the Corporation's filings withthe Canadian securities regulatory authorities and the U.S. Securities andExchange Commission, as well as the "Risks and Uncertainties" section of themanagement's discussion and analysis on pages 37 to 40 of the 2006 AnnualReport, for a discussion of the various factors that may affect theCorporation's future results. Material factors and assumptions that were appliedin drawing a conclusion or making a forecast or projection are also set outthroughout this document. 

The results or events predicted insuch forward-looking information may differ materially from actual results orevents. Material factors, which could cause actual results or events to differmaterially from a conclusion, forecast or projection in such forward-lookinginformation, include, but are not limited to: 
-  general  economic conditions such as currency exchange rates, commodity prices and  other factors over which we have no control;the impact of  economic and business conditions, industry trends and other external and  political factors in the countries in which we operate;the intensity of  competitive activity;changes in  environmental, tax, trade and other laws and regulations;our ability to  implement our strategies and plans;our ability to  complete and successfully integrate acquisitions;changes in  customer demand for our products and our ability to maintain customer  relationships and grow our business;the seasonality of  our business;our ability to  attract and retain key personnel;changes in  accounting policies; anddisruption to  manufacturing and distribution activities due to the impact of weather,  natural disasters and other unforeseen adverse events.
This may cause the Corporation'sactual performance and financial results in future periods to differ materiallyfrom any estimates or projections of future performance or results expressed orimplied by such forward-looking statements. Forward-looking statements do nottake into account the effect that transactions or non-recurring or other specialitems announced or occurring after the statements are made have on theCorporation's business. For example, they do not include the effect ofdispositions, acquisitions, other business transactions, asset writedowns orother charges announced or occurring after forward-looking statements are made.The financial impact of such transactions and non-recurring and other specialitems can be complex and necessarily depends on the facts particular to each ofthem. 

We believe that the expectationsrepresented by our forward-looking statements are reasonable, yet there can beno assurance that such expectations will prove to be correct. Furthermore, theforward-looking statements contained in this Annual Information Form are made asof the date hereof, and we do not undertake any obligation to update publicly orto revise any of the included forward-looking statements, whether as a result ofnew information, future events or otherwise unless required by applicablelegislation or regulation. The forward-looking statements contained in thisAnnual Information Form are expressly qualified by this cautionary statement.

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**14.   ADDITIONAL INFORMATION**
Additional information, includingdirectors' and officers' remuneration and indebtedness, principal holders of theCorporation's securities and securities authorized for insurance under theCorporation's equity compensation plans is contained in the Circular, andadditional financial information is provided in the Corporation's comparativeconsolidated financial statements and management's discussion and analysis forits most recently completed financial year, both of which are contained in the2006 Annual Report. 

Copies of these documents andadditional information relating to Gildan may be found on the SEDAR website atwww.sedar.com and the Edgar website at www.sec.gov and may also be obtained uponrequest to the Secretary of Gildan at the following address: 

725 Montée de Liesse Montreal, Québec H4T 1P5 Telephone: (514) 735-2023 

The documents mentioned above, aswell as Gildan's news releases, are also available on the Corporation's websiteat www.gildan.com. 

 

 

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**APPENDIX A - MANDATE OF THE AUDIT AND FINANCE COMMITTEE**
The following description of the mandate of the Audit andFinance Committee of the Corporation complies with applicable Canadian laws andregulations, such as the rules of the Canadian Securities Administrators, andwith the disclosure and listing requirements of the Toronto Stock Exchange(collectively, the "**CanadianCorporate Governance Standards**"),as they exist on the date hereof. In addition, this mandate complies withapplicable U.S. laws, such as the *Sarbanes-Oxley Act of 2002*,**and rules and regulationsadopted thereunder, and with the New York Stock Exchange's corporate governancestandards (collectively, the "**USCorporate Governance Standards**"),as they exist on the date hereof. The mandate of the Audit and Finance Committeeof the Corporation (the "**AuditCommittee**") shall bereviewed annually by the Board in order to ensure on-going compliance with suchstandards. **1.**   MEMBERSHIP AND QUORUM**
-  a minimum of  three directors;only  "independent" (as contemplated by Canadian Corporate Governance Standards and  US Corporate Governance Standards) directors shall be appointed, the whole as  determined by the Board; no affiliate of the Corporation or any of its  subsidiaries (including any person who, directly or indirectly, controls or is  controlled by, or is under common control with the Corporation, or any  director, executive officer, partner, member, principal or designee of such  affiliate) may serve on the Audit Committee; a member of the Audit Committee  shall receive no compensation from the Corporation or any of its affiliates  other than compensation as a director and committee member of the Corporation;  prohibited compensation includes fees paid, directly or indirectly, for  services as a consultant or as legal or financial advisor, regardless of the  amount;each member must  be "financially literate" (as contemplated by Canadian Corporate Governance  Standards and US Corporate Governance Standards), as determined by the Board;at least one  member must be an "audit committee financial expert" (as contemplated by US  Corporate Governance Standards), as determined by the Board;members of the  Audit Committee shall be appointed annually by the Board upon recommendation  of the Corporation's Corporate Governance Committee; such members may be  removed or replaced, and any vacancies on the Audit Committee shall be filled  by the Board upon recommendation of the Corporation's Corporate Governance  Committee; membership on the Audit Committee shall automatically end at such  time the Board determines that a member ceases to be "independent" as  determined in the manner set forth above;quorum of  majority of members.**2.**   Frequency and Timing of Meetings**
- normally contemporaneously with  the Corporation's Board meetings;
- at least four times a year and  as necessary. **3.**   MANDATE**
The responsibilities of the Audit Committee includethe following: 

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*(a)     Overseeing financialreporting-      monitoring the integrity and quality of the Corporation's accounting and    financial reporting process, disclosure controls and procedures, and systems    of internal control, through independent discussions with management, the    external auditors and the internal auditors;reviewing,    with management and the external auditors, the annual audited consolidated    financial statements as well as the report of the auditors thereon to be    included in the Annual Report of the Corporation, including the    Corporation's MD&A disclosure, prior to their release, filing and    distribution;reviewing,    with management and the external auditors, quarterly consolidated financial    statements of the Corporation and accompanying information including the    Corporation's MD&A disclosure, prior to their release, filing and    distribution;reviewing with    management and external auditors the financial information contained in    prospectuses, offering memoranda, Annual Information Form, Annual Report,    Management Proxy Circular, Forms 6-K (including Supplemental Disclosure) and    40-F and any other document required to be disclosed or filed by the    Corporation before their public disclosure or filing with regulatory    authorities in Canada or the United States of America;reviewing,    with management, the level and type of financial information provided from    time to time, to financial markets, including any earnings press releases,    as well as financial information and earnings guidance provided to analysts    and rating agencies;reviewing with    management that adequate procedures are in place for the review of the    Corporation's disclosure of financial information extracted or derived from    the Corporation's financial statements and periodically assessing the    adequacy of those procedures;reviewing,    with the external auditors and management, the quality, appropriateness and    disclosure of the Corporation's accounting principles and policies,    underlying assumptions and reporting practices, and any proposed changes    thereto;reviewing any    analysis or other written communications prepared by management, the    internal auditors or external auditors setting forth significant financial    reporting issues and judgments made in connection with the preparation of    the financial statements, including analyses of the effect of alternative    generally accepted accounting principles methods;reviewing the    external auditors' quarterly review engagement report;reviewing the    compliance of management certification of financial reports with applicable    legislation;reviewing the    potential impact of any litigation, claim or other contingency and any    regulatory or accounting initiatives that could have a material effect upon    the financial position or operating results of the Corporation and the    appropriateness of the disclosure thereof in the documents reviewed by the    Audit Committee;reviewing the    results of the external audit, any significant problems encountered in    performing the audit, and management's response and/or action plan related    to any Management Letter issued by the external auditors and any significant    recommendations contained therein;reviewing at    least annually the Corporation's communications policy and monitoring the    Corporation's communications with analysts, investors, the media and the    public.
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(b) *    Monitoring risk managementand internal controls*
-  receiving periodically management's report assessing the    adequacy and effectiveness of the Corporation's disclosure controls and    procedures and systems of internal control;reviewing insurance coverage (annually and as may    otherwise be appropriate);taking reasonable measures to ensure that appropriate    systems are in place to identify business risks and opportunities and    overseeing the implementation of processes to manage these risks and    opportunities;reviewing policy parameters for normal derivative    transactions to hedge interest rate and foreign exchange risks and any    transaction not within the parameters;assisting the Board with the oversight of the    Corporation's compliance with, and reviewing the Corporation's processes to    ensure compliance with, applicable legal and regulatory requirements;while ensuring confidentiality and anonymity,    establishing procedures for the receipt, retention and treatment of    complaints or concerns received by the Corporation regarding accounting,    internal accounting controls or auditing matters or employee concerns    regarding accounting or auditing matters;requesting the performance of any specific audit, as    required.*(c)     Monitoring internalauditors
-  ensuring that the internal auditors have a functional    reporting relationship with the Audit Committee;ensuring that the internal auditors have access to all    levels of management in order to carry out their duties;regularly monitoring the internal audit function's    performance, its responsibilities, staffing and budget;approving the appointment and termination of the    Corporation's chief internal auditor;ensuring that the internal auditors are accountable to    the Audit Committee and to the Board.*(d)     Monitoring externalauditors
- recommending the retention and, if appropriate, the removal of    external auditors (both subject to shareholder approval), their    compensation, as well as evaluating and monitoring their qualifications,    performance and independence;
- overseeing all relationships between the external auditors and the    Corporation including, determining which non-audit services the external    auditors are prohibited from providing, approving, or pre-approving policies    defining audit and permitted non-audit services provided by the external    auditors, overseeing the disclosure of all audit and permitted non-audit    services provided by the external auditors, and reviewing the total amount    of fees paid by the Corporation to the external auditors for all audit and    non-audit services;
- ensuring that the external auditors report directly to the Audit    Committee and that they are accountable to the Audit Committee and to the    Board;

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-  directly    overseeing the external auditors and discussing with them the quality and    not just the acceptability of the Corporation's accounting principles,    including (i) all critical accounting policies and practices used, (ii) any    alternative treatments of financial information that have been discussed    with management, the ramification of their use and the treatment preferred    by the external auditors, as well as (iii) any other material written    communications between the Corporation and the external auditors (including    any disagreement with management and the resolution thereof);reviewing at least    annually, a report by the external auditors describing their internal    quality-control procedures; any material issues raised by their most recent    internal quality-control review of their firm, or peer review, or by any    inquiry or investigation by governmental or professional authorities, within    the preceding five years, respecting one or more audits carried out by them,    to the extent available, and any steps taken to deal with any such issues;reviewing at least    annually, the formal written statement from the external auditors stating    all relationships the external auditors have with the Corporation and    confirming their independence, and holding discussions with the external    auditors as to any relationship or services that may impact their    objectivity or independence;reviewing hiring    policies for employees or former employees of the Corporation's firm of    external auditors;taking all    reasonable steps to ensure the rotation of lead, concurring and other audit    partners, to the extent required by Canadian Corporate Governance Standards    and US Corporate Governance Standards.*(e)     Reviewingfinancings
-  reviewing    the adequacy of the Corporation's financing, including terms and conditions.*(f)    Evaluating the performance of the Audit Committee
-  ensuring    that processes are in place to annually evaluate the performance of the    Audit Committee.
Because of the Audit Committee's demanding role andresponsibilities, the Board chair, together with the Corporate GovernanceCommittee chair, reviews any invitation to Audit Committee members to join theaudit committee of another publicly-listed entity. Where a member of the AuditCommittee simultaneously serves on the audit committee of more than three publiccompanies, including the Corporation, the Board determines whether suchsimultaneous service impairs the ability of such member to effectively serve onthe Audit Committee and either requires a correction to the situation ordiscloses in the Corporation's Management Proxy Circular that there is no suchimpairment. 

As appropriate, the Audit Committee may obtain advice andassistance from outside legal, accounting or other advisors and set and paytheir compensation, and so advise the Board chair and, if appropriate, theexternal auditors; the Audit Committee makes arrangements for the appropriatefunding for payment of the external auditors and any advisors retained by it. Inaddition, the Corporation will provide appropriate funding for the AuditCommittee, including the payment of all outside legal, accounting and otheradvisors retained by the Audit Committee. 

The internal auditors and the external auditors will have atall times a direct line of communication with the Audit Committee. In addition,each must meet separately with the Audit Committee, without management, twice ayear and more frequently as required, during which the Corporation's financialstatements and control environment must be discussed; the Audit Committee mustalso meet separately with management twice a year, and more frequently asrequired. 

The Audit Committee shall report annually to the Board on theadequacy of its mandate. In addition, the chair of the Audit Committee shallreport regularly to the Board on the business of the Audit Committee. 

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Nothing contained inthe above mandate is intended to transfer to the Audit Committee the Board'sresponsibility to ensure the Corporation's compliance with applicable laws orregulations or to expand applicable standards of liability under statutory or regulatory requirements for the directors or the members of theAudit Committee. Even though the Audit Committee has a specific mandate and itsmembers may have financial experience, they do not have the obligation to act asauditors or to perform auditing, or to determine that the Corporation'sfinancial statements are complete and accurate and are in accordance withgenerally accepted accounting principles. Such matters are the responsibility ofmanagement, the internal auditors and the external auditors. Members of theAudit Committee are entitled to rely, absent knowledge to the contrary, on (i)the integrity of the persons and organizations from whom they receiveinformation, (ii) the accuracy and completeness of the information provided, and(iii) representations made by management as to the non-audit services providedto the Corporation by the external auditors. The Audit Committee's oversightresponsibilities are not established to provide an independent basis todetermine that (i) management has maintained appropriate accounting andfinancial reporting principles or appropriate internal controls and procedures,or (ii) the Corporation's financial statements have been prepared and, ifapplicable, audited in accordance with generally accepted accounting principles.

* * * * * * * 

 

 

28

**        A.   Undertaking**
Gildan Activewear Inc. (the"Registrant") undertakes to make available, in person or by telephone,representatives to respond to inquiries made by the staff of the Securities andExchange Commission ("SEC"), and to furnish promptly, when requested to do so bythe SEC staff, information relating to the securities in relation to which theobligation to file an annual report on Form 40-F arises or transactions in saidsecurities. 
**        B.   Consent to Service of Process**
The Registrant has previously filedwith the SEC a written irrevocable consent and power of attorney on Form F-X inconnection with the Class A Subordinate Voting Shares (now Common Shares). 
**        C.   Evaluation of disclosure controls and procedures**
Our disclosure controls andprocedures are designed to ensure that information required to be disclosed inour reports filed with the SEC is recorded, processed, summarized and reportedwithin the time periods specified in the SEC's rules and forms and isaccumulated and communicated to our management, including our principalexecutive officer and our principal financial officer, as appropriate, to allowtimely decisions regarding required disclosure. 

An evaluation was carried out underthe supervision of, and with the participation of, our management, including ourprincipal executive officer and our principal financial officer, of theeffectiveness of our disclosure controls and procedures (as such term is definedin the Securities Exchange Act of 1934 (the "Exchange Act"), as amended, Rules13a-15(e) and 15d-15(e)) as of the end of the period covered by this AnnualReport on Form 40-F. Based on that evaluation, our principal executive officerand our principal financial officer concluded that our disclosure controls andprocedures were effective as of the end of such period. 
**        D.   Management's annual report on internal control over financial reporting**
Our management is responsible forestablishing and maintaining adequate internal control over financial reporting,as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.

Our internal control over financialreporting includes those policies and procedures that: (1) pertain to themaintenance of records that, in reasonable detail, accurately and fairly reflectthe transactions and dispositions of our assets; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accountingprinciples, and that our receipts and expenditures are being made only inaccordance with authorizations of our management and directors; and (3) providereasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use or disposition of our assets that could have a material effecton the financial statements. 

Under the supervision and with theparticipation of our principal executive officer and our principal financialofficer, management conducted an evaluation of the effectiveness of our internalcontrol over financial reporting, as of October 1, 2006, based on the frameworkset forth in*****Internal Control-Integrated Framework* issued by theCommittee of Sponsoring Organizations of the Treadway Commission (COSO). Basedon its evaluation under this framework, management concluded that our internalcontrol over financial reporting was effective as of that date. 

Management's assessment of theeffectiveness of our internal control over financial reporting as of October 1,2006 excluded Kentucky Derby Hosiery Co., Inc. ("KDH"), which we acquired onJuly 6, 2006. KDH is a wholly-owned subsidiary of ours whose total assets andtotal sales represented less than 11% of our consolidated total assets and lessthan 4% of our consolidated sales, respectively, as of and for the year endedOctober 1, 2006. Companies are allowed to exclude acquisitions from theirassessment of internal control over financial reporting during the first year ofan acquisition while integrating the acquired company under guidelinesestablished by the SEC. 
**        E.    Attestation report of the registered public accounting firm.**
KPMG LLP ("KPMG"), an independentregistered public accounting firm, who audited and reported on our financialstatements attached as Exhibit 99.2 to this Annual Report on Form 40-F, hasissued an attestation report on management's assessment of ourinternal control over financial reporting as of October 1, 2006. The attestationreport is included on page 47 of the financial statements attached as Exhibit99.2to this Annual Report on Form 40-F.
**        F.    Changes in internal controls over financial reporting.**
We made improvements to our internalcontrols over financial reporting during the period covered by this AnnualReport on Form 40-F in preparation for our first annual management report oninternal control over financial reporting. 

The design of any system of controlsand procedures is based in part upon certain assumptions about the likelihood ofcertain events. There can be no assurance that any design will succeed inachieving its stated goals under all potential future conditions, regardless ofhow remote.**        G.    Audit Committee Financial Experts**
The Registrant's board of directorshas determined that it has at least three (3) audit committee financial expertsserving on its audit committee. Mr. Pierre Robitaille, Mr. Gonzalo F. Valdes-Fauliand Mr. William D. Anderson have been determined to be such audit committeefinancial experts and are independent, as that term is defined by the New YorkStock Exchange's listing standards applicable to the Registrant. The SEC hasindicated that the designation of Mr. Robitaille, Mr. Valdes-Fauli and Mr.Anderson as audit committee financial experts does not make Mr. Robitaille, Mr.Valdes-Fauli and Mr. Anderson "experts" for any purpose, impose any duties,obligations or liability on Mr. Robitaille, Mr. Valdes-Fauli and Mr. Andersonthat are greater than those imposed on members of the audit committee and boardof directors who do not carry this designation or affect the duties, obligationsor liability of any other member of the audit committee. 
**        H.    Code of Ethics**
The Registrant has adopted a Code ofEthics and Business Conduct (the "Code of Conduct") that applies to allemployees and officers, including its principal executive officer, principalfinancial officer and principal accounting officer. The Code of Conduct isavailable at the Registrant's Internet website, www.gildan.com, and is available in print to any shareholder whorequests it. 
**        I.    Principal Accountant Fees and Services
In addition to retaining KPMG toreport upon the annual consolidated financial statements of the Registrant, theRegistrant retained KPMG to provide various audit-related and non-audit servicesin fiscal 2006. The aggregate fees billed for professional services by KPMG foreach of the last two (2) fiscal years, were as follows: 
*Audit Fees — The aggregate audit fees billed byKPMG for professional services rendered for the annual audit of the Registrant'sconsolidated financial statements, quarterly reviews of the Registrant'sfinancial statements and services provided in connection with statutory andregulatory filings or engagements were CDN$1,196,100 for fiscal 2006 andCDN$687,287 for fiscal 2005. The audit fees for fiscal 2006 include feesrelating to KPMG's audit of management's assessment of internal control overfinancial reporting. *Audit-Related Fees — The aggregate audit-related feesbilled by KPMG were CDN$94,025 for fiscal 2006 and CDN$74,700 for fiscal 2005.These services consisted of miscellaneous assurance services. *Tax Fees— The aggregate tax fees billed by KPMG were CDN$322,785 for fiscal 2006 andCDN$262,659 for fiscal 2005. These services consisted of tax compliance,including the review of tax returns, assistance regarding income, capital andsales tax audits, the preparation of annual transfer pricing studies, taxadvisory services relating to domestic and international taxation and customsand duties. *All Other Fees — The aggregate fees billed by KPMGfor all other professional services rendered were CDN$169,860 for fiscal 2006for services associated with financial due diligence and CDN$3,178 for fiscal2005 for services associated with the assistance of statutory filingrequirements. 
All fees billed to the Registrant byKPMG in fiscal 2006 were pre-approved by the Registrant's Audit and FinanceCommittee pursuant to the procedures and policies set forth in the Audit andFinance Committee mandate and pursuant to applicable legislation. The mandate of the Audit and FinanceCommittee is available on the Registrant's Internet website atwww.gildan.com. 

**        J.    Off-Balance Sheet Arrangements***Operating leases and commitments*
The Registrant has no commitmentsthat are not reflected in its balance sheets except for operating leases andother purchase obligations, which are included in the table of contractualobligations on page 32 of its MD&A (see Exhibit 99.1). As disclosed in Note 13to the Registrant's Consolidated Financial Statements (see Exhibit 99.2), theRegistrant has issued standby letters of credit and corporate guaranteesprimarily from various servicing agreements amounting to $37.4 million atOctober 1, 2006. 
*Derivative Financial Instruments*
From time to time, the Registrantuses forward foreign exchange contracts, primarily in Canadian dollars, Britishpounds and Euros, to hedge cash flows related to sales and operating expenses inforeign currencies (non-U.S. dollar). A forward foreign exchange contractrepresents an obligation to exchange a foreign currency with a counterparty at apredetermined rate. Credit risk exists in the event of failure by a counterpartyto meet its obligations. The Registrant reduces this risk by dealing only withhighly rated counterparties, normally major North American and Europeanfinancial institutions. The Registrant's exposure to foreign currencyfluctuations is described in more detail in the "Risks and Uncertainties"section of its MD&A beginning on page 37 (see Exhibit 99.1). 

The Registrant does not usederivative financial instruments for speculative purposes. Forward foreignexchange contracts are entered into with maturities not exceeding twenty-fourmonths. 

For the years ended October 1, 2006and October 2, 2005, net earnings included recognized gains relating toderivative financial instruments of $4.6 million and $5.8 million, respectively.

The following table summarizes the Registrant's commitmentsto buy and sell foreign currencies as at October 1, 2006 and October 2, 2005:

 
Notional
Exchange
 
Notional US dollar
 
Amount
Rate
Maturity
Equivalent
 
 
 
 
 
 
(in thousands)
 
 
(in thousands)**2006:
 
 
 
 
Buy contracts:
 
 
 
 
Foreign exchange contracts:**€9,756**1.2056 to 1.2696**Oct. 2006 - June 2007**$11,934
 **CDN$6,250**0.8961**Oct. 2006**5,600
 
 
 
 
 **2005:
 
 
 
 
Sell contracts:
 
 
 
 
Foreign exchange contracts:**€9,276**1.3450 to 1.3721**Oct. 2005 - Sept. 2006**$12,620
 **£4,490**1.8707 to 1.8909**Oct. 2005 - Sept.2006**8,439
 **CDN$2,800**0.8610**Oct. 2005**2,410
 
 
 
 
      
Buy contracts:
 
 
 
 
Foreign exchange contracts:**CDN$21,400**0.7997 to 0.8216**Oct. 2005 - Aug. 2006**$17,348
 **€2,150**1.2039**Oct. 2005**2,588     
The fair value of the forward foreign exchangecontracts, based on quoted market values, was $0.5 million as at October 1, 2006and $3.0 million as at October 2, 2005. 

**        K.     TabularDisclosure of Contractual Obligations**
See page 32 of Exhibit 99.1. 
**        L.    Corporate Governance Guidelines**
The Registrant has adopted CorporateGovernance Guidelines as well as mandates for its board of directors and each ofits three committees which are available at the Registrant's Internet website,www.gildan.com, and are available in printto any shareholder who requests them. 
**        M.    Identification of the Audit Committee 

The Registrant has a standing AuditCommittee established in accordance with Section 3 (a) (58) (A) of the ExchangeAct. The members of the Registrant's Audit Committee are Pierre Robitaille,William D. Anderson, Richard P. Strubel and Gonzalo F. Valdez-Fauli. See theAudit Committee Disclosure section of our Annual Information Form includedherein for additional information. 
 

 

 

**SIGNATURES**
Pursuant to the requirements of theExchange Act, the Registrant certifies that it meets all of the requirements forfiling on Form 40-F and has duly caused this annual report to be signed on itsbehalf by the undersigned, thereto duly authorized. 

DATED: December 20, 2006 
**GILDAN      ACTIVEWEAR INC.**    By:/s/ Lindsay MatthewsName:Lindsay MatthewsTitle:Director, Legal      Services and Corporate Secretary
 

**EXHIBIT INDEX**  **Exhibit No.****Description  99.1Management's Discussion and Analysis of the Registrant for the year ended    October 1, 2006  99.2Audited comparative consolidated financial statements of the Registrant as    at and for the year ended October 1, 2006  99.3Consent of KPMG LLP  99.4    Schedule "D" – Statement of Corporate Governance Practices to the    Registrant's Notice of Annual Meeting of Shareholders and Management Proxy    Circular dated as of December 8, 2006 (incorporated by reference to Exhibit    99.1 of the Registrant's Form 6-K (file no. 001-14830) furnished to the    Securities and Exchange Commission on December 22, 2006)  99.5Reconciliation to United States GAAP.  99.6Officers' Certifications Required by Rule 13a-14(a) or Rule 15d-14(a)  99.7Officers' Certifications Required by Rule 13a-14(b) or Rule 15d-14(b) and    Section 1350 of Chapter 63 of Title 18 of the United States Code
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