GILDAN ACTIVEWEAR INC, 424B1, 1999-05-12

GILDAN ACTIVEWEAR INC
424B1, 1999-05-12
KNIT OUTERWEAR MILLS

Previous: ENTERPRISE PRODUCTS PARTNERS L P, 10-Q, 1999-05-12

Next: SOFTWORKS INC, 10-Q, 1999-05-12

<PAGE> 1
Filed Pursuant to Rule 424(b)(1)
Registration No. 333-74609

PROSPECTUS

3,000,000 CLASS A SUBORDINATE VOTING SHARES
LOGO
GILDAN ACTIVEWEAR INC.

This is a public offering of 3,000,000 Class A Subordinate Voting Shares of
Gildan Activewear Inc. Gildan Activewear Inc. is selling all of the 3,000,000
Class A Subordinate Voting Shares offered under this prospectus.

We have two classes of authorized share capital, the Class A Subordinate
Voting Shares and the Class B Multiple Voting Shares. The economic rights of
each class of share capital are identical, but the voting rights and conversion
rights differ. Holders of Class A Subordinate Voting Shares are entitled to one
vote per share on all matters while holders of Class B Multiple Voting Shares
are entitled to eight votes per share on most matters. The Class A Subordinate
Voting Shares are not convertible into Class B Multiple Voting Shares. The Class
B Multiple Voting Shares are convertible into Class A Subordinate Voting Shares
on a share-for-share basis at the option of the holder. Conversion of Class B
Multiple Voting Shares into Class A Subordinate Voting Shares occurs
automatically under some circumstances and is required under other
circumstances.

Our Class A Subordinate Voting Shares are listed on the American Stock
Exchange under the symbol "GIL" and on both The Montreal Exchange and The
Toronto Stock Exchange under the symbol "GIL.A". On May 11, 1999, the last
reported sale price per Class A Subordinate Voting Share was US$12.375 on the
American Stock Exchange, Cdn$19.00 (last closing price on May 10, 1999) on The
Montreal Exchange and Cdn$18.00 on The Toronto Stock Exchange.

SEE "RISK FACTORS" BEGINNING ON PAGE 9 TO READ ABOUT CERTAIN RISKS THAT YOU
SHOULD CONSIDER BEFORE BUYING OUR CLASS A SUBORDINATE VOTING SHARES.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

------------------------------

<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -----
<S> <C> <C>
Public offering price............................... US$12.3750 US$37,125,000
Underwriting discounts and commissions.............. US$ 0.7425 US$ 2,227,500
Proceeds, before expenses, to us.................... US$11.6325 US$34,897,500
</TABLE>

------------------------------

The underwriters may, under some circumstances, purchase up to an
additional 450,000 Class A Subordinate Voting Shares from us at the public
offering price less the underwriting discount to cover over-allotments.

The underwriters are severally underwriting the Class A Subordinate Voting
Shares being offered. The underwriters expect to deliver the shares against
payment in New York, New York on May 17, 1999.

------------------------------

BEAR, STEARNS & CO. INC.
NESBITT BURNS SECURITIES INC.
THE ROBINSON-HUMPHREY COMPANY
WASSERSTEIN PERELLA SECURITIES, INC.
CIBC WORLD MARKETS INC.

THE DATE OF THIS PROSPECTUS IS MAY 11, 1999.
<PAGE> 2

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Management............................. 44
Certain Relationships and Related
Transactions......................... 53
Principal Shareholders................. 56
Description of Share Capital........... 57
Description of Certain Indebtedness.... 64
Shares Eligible for Future Sale and
Escrow Arrangements.................. 66
Taxation............................... 68
Exchange Controls...................... 73
Underwriting........................... 74
Legal Matters.......................... 75
Experts................................ 76
Where You Can Find More Information.... 76
Index to Consolidated Financial
Statements........................... F-1
</TABLE>

PRESENTATION OF FINANCIAL INFORMATION

Gildan Activewear Inc. prepares its financial statements in Canadian
dollars and in accordance with accounting principles generally accepted in
Canada ("Canadian GAAP"). These principles conform in all material respects with
accounting principles generally accepted in the United States ("U.S. GAAP"),
except as described in note 19 to the consolidated financial statements of
Gildan Activewear Inc. included elsewhere in this prospectus. "Consolidated
Financial Statements" refers to consolidated statements of income, retained
earnings and changes in financial position of Gildan Activewear Inc. for
ten-month fiscal 1996, fiscal 1997, first fiscal quarter 1998, fiscal 1998 and
first fiscal quarter 1999, and the consolidated balance sheets at September 29,
1996, October 5, 1997, October 4, 1998 and January 3, 1999, and the related
notes thereto.

Unless otherwise specified, all references in this prospectus to "dollars",
"$" or "Cdn$" are to Canadian dollars.

Solely for your convenience, we provide some financial information relating
to our business in U.S. dollars based on exchange rates indicated. We caution
you that the amounts and rates used may not always be consistent with those used
in preparation of our Consolidated Financial Statements.

The following table sets forth the terms we use in this prospectus to refer
to our fiscal periods:

<TABLE>
<CAPTION>
FISCAL PERIOD ENDED REFERENCE
------------------- ---------
<S> <C>
November 30, 1993 fiscal 1993
December 2, 1994 fiscal 1994
December 1, 1995 fiscal 1995
September 29, 1996 ten-month fiscal 1996
October 5, 1997 fiscal 1997
January 4, 1998 first fiscal quarter 1998
April 5, 1998 second fiscal quarter 1998
October 4, 1998 fiscal 1998
January 3, 1999 first fiscal quarter 1999
April 4, 1999 second fiscal quarter 1999
October 3, 1999 fourth fiscal quarter 1999
October 3, 1999 fiscal 1999
October 1, 2000 fiscal 2000
</TABLE>

i
<PAGE> 3

CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS

Some of the statements in this prospectus are forward-looking. These
forward-looking statements appear in the "Prospectus Summary--Gildan Activewear
Inc.--Growth Strategy", "Use of Proceeds", "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Business" sections of
this prospectus. We typically use words such as "anticipate", "believe", "plan",
"expect", "intend", "future", "will", "may" and similar expression to identify
forward-looking statements. In addition, we may make forward-looking statements
in future filings with the U.S. Securities and Exchange Commission and with the
securities commissions in Canada and in written material, press releases and
oral statements issued by us or on our behalf.

Our actual results could differ materially from those anticipated from the
forward-looking statements depending on risks, uncertainties and assumptions
about us and the industry in which we operate, including, among other things:

- our ability to implement our growth strategy;

- the supply and price of cotton yarn;

- competition in the activewear industry;

- our relationship with major wholesale distributor customers;

- anticipated trends in the activewear industry;

- changes in international trade protection policies; and

- social, political and economic conditions in countries other than the
United States and Canada where we have operations.

All forward-looking statements in this prospectus are based on information
available to us on the date of this prospectus. We do not undertake to update
any forward-looking statements that we may make in this prospectus or otherwise.

ii
<PAGE> 4

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and does not contain all of the information you
should consider before you invest in the Class A Subordinate Voting Shares
(together with the Class B Multiple Voting Shares, the "Equity Shares"). You
should read the entire prospectus carefully. Unless the context indicates
otherwise, "Gildan", "we", "us" and "our" refer to Gildan Activewear Inc. and
its subsidiaries. Unless otherwise indicated, all information in this prospectus
assumes no exercise of the underwriters' over-allotment option.

GILDAN ACTIVEWEAR INC.

We are a rapidly growing, vertically-integrated manufacturer and marketer
of premium quality branded basic activewear for sale principally into the
wholesale imprinted activewear segment of the North American apparel market. We
manufacture and sell premium quality 100% cotton T-shirts and placket collar
golf shirts as well as premium quality sweatshirts, in a variety of weights,
sizes, colors and styles. In April 1999, we launched a new line of 50%
cotton/50% polyester T-shirts, which we expect to begin shipping to our
customers in fourth fiscal quarter 1999. We sell our products as "blanks",
meaning without design, which are ultimately decorated with designs and logos
for sale to consumers.

We believe that we are one of the low-cost producers of premium quality
branded activewear. Our costs are low as a result of our modern,
vertically-integrated textile operations and offshore sewing facilities in the
Caribbean Basin and Central America. We market and sell our products through the
wholesale channel of distribution, which is largely comprised of distributors,
but also includes the largest screenprinters and embroiderers. We believe that
our Gildan Activewear(TM) brand name is widely associated with premium quality
merchandise and competitive pricing. We plan to capitalize on and strengthen
this brand awareness by introducing new products and extending our existing
product lines over the next few years.

Over the past several years, we have significantly increased our customer
base and increased our sales and earnings. From fiscal 1993 through fiscal 1998,
our sales grew from $30.9 million to $215.4 million and our earnings before
interest, taxes, depreciation and amortization (EBITDA) grew from $2.8 million
to $29.8 million, representing compounded annual growth rates of 49.5% and
63.3%, respectively. Sales for first fiscal quarter 1999 were $45.1 million,
which represented an increase of 41.8% over sales for first fiscal quarter 1998.

OPERATING STRATEGY

We believe that we have been able to rapidly increase our market presence
by focusing on selected product lines with premium quality features and selling
our products at competitive prices. We attribute our strong operating
performance to our:

- EMPHASIS ON PREMIUM QUALITY PRODUCTS. We offer our products in a wide
variety of weights, sizes, colors and styles. All of our T-shirts are
made with pre-shrunk cotton fabric, feature top-stitched seamless
collars and double stitched hems, and are quarter-turned to eliminate
the center crease which would otherwise result from the production
process. We ensure the premium quality of our products by applying
stringent quality control procedures at all stages of the production
process.
1
<PAGE> 5

- COMPETITIVE PRICING AND LOW-COST OPERATIONS. We are able to price our
products competitively because of our success in achieving low
production and operating costs. We accomplish this by:

- locating the majority of our sewing operations in the Caribbean Basin
and Central America, where we benefit from lower labor costs;

- using only modern, automated facilities;

- locating our knitting and dyeing facilities in the Province of Quebec,
where we benefit from an abundant supply of low-cost energy and water,
resources necessary for the manufacturing, dyeing and finishing of
fabric; and

- selling to the wholesale channel which enables us to use a small sales
force and avoid the costs and complexities of selling to the retail
channel.

- CONTROLLED DISTRIBUTION TO THE WHOLESALE CHANNEL. While our major
competitors focus primarily on sales directly to the retail apparel
industry, we market our products through the wholesale distribution
channel, which is principally comprised of distributors and major
garment imprinters. As part of this controlled distribution strategy, we
limit the number and monitor the quality of our distributors and sell
only to the largest garment decorators. We believe that this focused
strategy enables us to:

- foster strong customer and brand loyalty among our distributors and
decorators;

- establish control over the marketing and orderly distribution of our
products;

- effectively plan and predict production; and

- manage expected increases in demand.

- MODERN, VERTICALLY-INTEGRATED OPERATIONS. We intend to continue to
acquire modern, automated equipment for all aspects of our manufacturing
process to maximize production capacity and achieve high efficiency
rates. Over the past three fiscal years, we have spent approximately
$36.4 million on such improvements. Our operations are
vertically-integrated, which means that we knit, dye, finish, cut and
sew our products at our facilities. This enables us to maximize profit
margins and monitor quality at all stages of the production process.

- EXPERIENCED MANAGEMENT TEAM. Our senior executives have significant
industry experience.

GROWTH STRATEGY

We have a comprehensive long-term strategy to sustain our strong unit and
dollar sales growth. The key elements of our strategy are:

- INCREASING SALES TO NEW AND EXISTING CUSTOMERS. To increase sales, we
plan to:

- continue to develop new business with our existing customers as a
result of our enhanced production and distribution capacity and the
introduction of new products;

- pursue additional wholesale distributors which we believe will
generate substantial sales growth without adversely affecting sales to
our existing customers; and

- further develop our "mill direct" program which targets some of the
largest screenprinters and embroiderers in North America which, due to
their size, require larger quantities than distributors can typically
provide. Our mill direct customers include, among others, Nike Canada
Ltd. and Fortune Fashion, Inc., a major supplier of decorated T-shirts
to The Walt Disney Company.
2
<PAGE> 6

- BROADENING PRODUCT OFFERING. We also intend to increase our sales
through the introduction of complementary product lines and new
products. In fiscal 1999, in response to customer demand, we introduced:

- a new lightweight T-shirt, the Famous T(TM), to compete in the
lower-priced market segments;

- placket collar golf shirts, which we believe to be one of the fastest
growing product categories in the imprinted activewear industry; and

- a new 50% cotton/50% polyester T-shirt, the Ultra-Blend(TM), which is
our initial entry into the blended T-shirt market.

- EXPANDING PRODUCTION AND DISTRIBUTION CAPACITY. To satisfy the
increasing demand for our existing products and to introduce new
products, we are expanding our production and distribution facilities
through equipment acquisitions and new facility construction. Under our
investment plans, in fiscal 1999, we:

- added knitting, dyeing and finishing machines and plan to add
additional machinery;

- expanded the capacity of our Company-operated sewing facilities in
Honduras by acquiring one of our sewing contractors, moving one of our
operations into a larger facility and continuing to invest in new
sewing equipment;

- began building a facility in Barbados, which we expect to be
operational by summer 1999, to provide additional sewing capacity for
placket collar golf shirts;

- opened a 210,000-square foot distribution center in Miami, Florida,
which replaced our 67,000-square foot distribution center in
Champlain, New York, to service our U.S. market and targeted Western
European markets; and

- opened a 60,000-square foot distribution center in Ville
Saint-Laurent, Quebec to service our Canadian markets.

- ENTERING NEW MARKETS. We plan to use the same strategy which has led to
our success in North America to expand our selling territory to include
Western Europe, with an initial emphasis on the United Kingdom. We
anticipate shipping our products to distributors in Western Europe by
fiscal 2000.

RECENT DEVELOPMENTS

In February 1999, we established an international subsidiary, Gildan
Activewear SRL, headquartered in Bridgetown, Barbados, which we expect to be
responsible for all of our non-Canadian sales and to manage all related
activities, such as manufacturing, warehousing, distribution, marketing and
customer service. We also expect to manufacture placket collar golf shirts in
Barbados. We anticipate that our operations in Barbados will benefit from a
favorable tax treaty between Barbados and Canada.

In second fiscal quarter 1999, we obtained $35.0 million in new financings.
We issued a $15.0 million subordinated note due 2004, to Le Fonds de solidarite
des travailleurs du Quebec (the "Fund"), one of the largest venture capital
firms in Canada. We also issued a $15.0 million subordinated note due 2004 to
Capital d'Amerique CDPQ Inc., a subsidiary of Caisse de depot et placement du
Quebec. Caisse is the largest pension fund in Canada and one of the largest
institutional investors in North America. Concurrently with the debt financing,
Capital d'Amerique CDPQ Inc. purchased 444,444 of our Class A Subordinate Voting
Shares at the market price prevailing on the date of the commitment letter, for
an aggregate purchase price of $5.0 million.

On March 31, 1999, we entered into a new revolving loan agreement with a
banking syndicate led by National Bank of Canada providing for maximum
borrowings equal to the lesser of (a) $90.0 million and (b) a borrowing base
calculated in accordance with a specified inventory and receivables formula. The
new facility expires on March 31, 2002 and replaces our previously existing
revolving loan arrangements with another Canadian chartered bank.

In April 1999, we appointed Laurence G. Sellyn to the newly created senior
management position of Chief Financial Officer. Prior to joining Gildan, Mr.
Sellyn served as Senior Vice President, Finance and Corporate Development and
Chief Financial Officer of Wajax Limited.
3
<PAGE> 7

On May 4, 1999, we released unaudited results for second fiscal quarter
1999 and the six months ended April 4, 1999. We continued to grow sales and
earnings during second fiscal quarter 1999. Sales for second fiscal quarter 1999
increased to $77.9 million from $42.6 million for second fiscal quarter 1998,
which represented an 83% increase. Similarly, sales for the first six months of
fiscal 1999 grew to $123.0 million from $74.4 million for the first six months
of fiscal 1998, which represented a 65% increase. In addition, EBITDA for second
fiscal quarter 1999 increased to $10.7 million, representing 13.7% of sales,
from $4.7 million, representing 11.1% of sales, for second fiscal quarter 1998.
Likewise, EBITDA for the first six months of fiscal 1999 increased to $15.5
million, representing 12.6% of sales, from $7.0 million, representing 9.3% of
sales, for the first six months of fiscal 1998.
------------------------

Our principal executive offices are located at 725 Montee de Liesse, Ville
Saint-Laurent, Quebec, Canada H4T 1P5, and our telephone number at that address
is (514) 735-2023.
4
<PAGE> 8

THE OFFERING

Class A Subordinate Voting
Shares Offered................ 3,000,000

Equity Shares Outstanding
After the Offering:
Class A Subordinate Voting
Shares(1)................ 10,347,444
Class B Multiple Voting
Shares........................ 3,047,000
Total.................... 13,394,444

Relative Rights of Equity
Shares........................ The economic rights of the Class A Subordinate
Voting Shares and the Class B Multiple Voting
Shares are identical, but the voting rights and
conversion rights differ.

The holders of the Class A Subordinate Voting
Shares are entitled to one vote per share on
all matters while the holders of the Class B
Multiple Voting Shares are entitled to eight
votes per share on most matters. In addition,
the holders of Class A Subordinate Voting
Shares, voting as a separate class, are
entitled to elect two of our directors. The
remaining directors are elected by holders of
Class A Subordinate Voting Shares and Class B
Multiple Voting Shares, voting as a single
class, with each Class A Subordinate Voting
Share entitled to one vote and each Class B
Multiple Voting Share entitled to eight votes.
As a result, holders of Class B Multiple Voting
Shares have, and will continue to have,
substantial control over most matters submitted
to a vote of the shareholders, including the
election of directors. See "Description of
Share Capital--Equity Shares--Voting Rights".
After giving effect to this offering, Harco
Holdings Ltd., the sole holder of Class B
Multiple Voting Shares, will own approximately
22.7% of the total outstanding Equity Shares
and will have approximately 70.2% of the voting
power of Gildan. See "Principal Shareholders".

The Class A Subordinate Voting Shares are not
convertible into any other class of shares,
including Class B Multiple Voting Shares. The
Class B Multiple Voting Shares are convertible
into Class A Subordinate Voting Shares on a
share-for-share basis at the option of the
holder. The Class B Multiple Voting Shares are
automatically converted into Class A
Subordinate Voting Shares under some
circumstances and are required to be so
converted under other circumstances. See
"Description of Share Capital--Equity
Shares--Conversion".

- -------------------------

(1) Based on Class A Subordinate Voting Shares outstanding at May 7, 1999.
Excludes 995,000 Class A Subordinate Voting Shares subject to options which
may be granted under our stock option plan. At May 7, 1999, options to buy
856,500 Class A Subordinate Voting Shares were outstanding, of which 180,666
will become exercisable on June 16, 2000. See "Management-- Stock Option
Plan". If the underwriters exercise their over-allotment option in full, we
would offer an aggregate of 450,000 additional Class A Subordinate Voting
Shares, and 10,797,444 Class A Subordinate Voting Shares would be
outstanding after the offering.
5
<PAGE> 9

Use of Proceeds............... The net proceeds from this offering will be
approximately Cdn$49.3 million. We plan to use
all of the net proceeds initially to repay
borrowings under our revolving loan agreement.
Subsequently, we intend to use the newly
available borrowing capacity under our
revolving loan agreement for the planned
expansion of our production and distribution
capacity. See "Use of Proceeds".

Dividend Policy............... We currently intend to retain available funds
for the development and expansion of our
business. Accordingly, we do not intend to pay
dividends on our shares in the foreseeable
future. See "Dividends".

American Stock Exchange
Symbol........................ GIL

The Montreal Exchange/The
Toronto Stock Exchange
Symbol........................ GIL.A

RISK FACTORS

For a description of certain risks that you should consider before you buy
Class A Subordinate Voting Shares, see "Risk Factors" on page 9.
6
<PAGE> 10

SUMMARY CONSOLIDATED FINANCIAL INFORMATION

The summary consolidated financial information presented below is derived
from Gildan's consolidated financial statements for, and as of the end of,
fiscal 1994 and fiscal 1995, which have been audited by Richter, Usher &
Vineberg, Chartered Accountants, and Gildan's consolidated financial statements
for, and as of the end of, ten-month fiscal 1996, fiscal 1997 and fiscal 1998,
which have been audited by KPMG LLP, Chartered Accountants. The summary
consolidated financial information for the twelve months ended and as of
September 29, 1996, for the first fiscal quarter ended January 4, 1998, and for
the first fiscal quarter ended and as of January 3, 1999 is derived from the
unaudited consolidated financial statements of Gildan, which in the opinion of
management have been prepared on the same basis as the audited financial
statements, reflecting all adjustments necessary, which consist only of normal
recurring adjustments, for a fair presentation of such information.

The Consolidated Financial Statements have been prepared in accordance with
Canadian GAAP. These principles conform in all material respects with U.S. GAAP,
except as described in note 19 to the Consolidated Financial Statements. The
information presented below should be read in conjunction with the Consolidated
Financial Statements included elsewhere in this prospectus and "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
<TABLE>
<CAPTION>
TEN-MONTH TWELVE
FISCAL YEAR ENDED PERIOD MONTHS FISCAL YEAR ENDED
----------------- ENDED ENDED ---------------------------------
DEC. 2, DEC. 1, SEPT. 29, SEPT. 29, OCT. 5, OCT. 4,
1994 1995 1996 1996(1) 1997 1998
------- ------- --------- ----------- -------- ----------------------
CDN$ CDN$ CDN$ CDN$ CDN$ CDN$ US$(2)
------- ------- --------- ----------- -------- -------- -----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA (CANADIAN GAAP):
Sales.................. $45,896 $64,868 $70,448 $80,045 $119,844 $215,428 $147,876
Cost of sales.......... 36,621 51,854 56,367 64,294 93,059 164,850 113,289
------- ------- ------- ------- -------- -------- --------
Gross profit........... 9,275 13,014 14,081 15,751 26,785 50,578 34,587
Selling, general and
administrative
expenses.............. 5,852 9,053 8,360 9,629 12,471 20,796 14,248
Depreciation and
amortization
expenses.............. 940 1,764 1,633 2,026 2,337 4,063 2,782
Writeoff of advances... -- 924 -- 281 -- -- --
------- ------- ------- ------- -------- -------- --------
Operating income....... 2,483 1,273 4,088 3,815 11,977 25,719 17,557
Interest expense....... 1,382 2,709 2,507 2,997 2,974 5,032 3,460
Loss on settlement of
debt.................. -- -- -- -- -- 819 565
------- ------- ------- ------- -------- -------- --------
Income (loss) before
income taxes.......... 1,101 (1,436) 1,581 818 9,003 19,868 13,532
Income taxes
(recovery)............ 327 (249) 608 314 3,338 6,700 4,583
------- ------- ------- ------- -------- -------- --------
Net income (loss)...... $ 774 $(1,187) $ 973 $ 504 $ 5,665 $ 13,168 $ 8,949
======= ======= ======= ======= ======== ======== ========
Net income per share
(basic)............... $ 1.65(3) $ 1.12
Number of shares
(weighted avg.)....... 7,999 7,999
OTHER DATA (CANADIAN
GAAP):
Gross profit margin.... 20.2% 20.1% 20.0% 19.7% 22.3% 23.5% 23.5%
Operating income
margin................ 5.4% 2.0% 5.8% 4.8% 10.0% 11.9% 11.9%
Capital expenditures... $ 6,997 $ 2,514 $ 6,390 $ 7,204 $ 5,439 $ 24,588 $ 17,031
EBITDA(4).............. $ 3,423 $ 3,037 $ 5,721 $ 5,841 $ 14,314 $ 29,782 $ 20,339
SELECTED OPERATING DATA
(UNAUDITED):
Dozens of T-shirts
sold.................. 1,365 1,697 1,899 2,950 5,721
Dozens of sweatshirts
sold.................. 103 63 85 158 195
------- ------- ------- -------- --------
Total dozens sold...... 1,468 1,760 1,984 3,108 5,916
======= ======= ======= ======== ========

FIRST FISCAL QUARTER ENDED
---------------------------------------
JAN. 4, JAN. 3,
1998 1999
----------- -------------------------
CDN$ CDN$ US$(2)
----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
STATEMENT OF INCOME
DATA (CANADIAN GAAP):
Sales.................. $31,812 $45,109 $29,253
Cost of sales.......... 25,969 33,079 21,451
------- ------- -------
Gross profit........... 5,843 12,030 7,802
Selling, general and
administrative
expenses.............. 3,617 7,195 4,666
Depreciation and
amortization
expenses.............. 746 1,763 1,143
Writeoff of advances... -- -- --
------- ------- -------
Operating income....... 1,480 3,072 1,993
Interest expense....... 848 1,543 1,001
Loss on settlement of
debt.................. -- -- --
------- ------- -------
Income (loss) before
income taxes.......... 632 1,529 992
Income taxes
(recovery)............ 332 550 357
------- ------- -------
Net income (loss)...... $ 300 $ 979 $ 635
======= ======= =======
Net income per share
(basic)............... $ 0.10 $ 0.06
Number of shares
(weighted avg.)....... 9,950 9,950
OTHER DATA (CANADIAN
GAAP):
Gross profit margin.... 18.4% 26.7% 26.7%
Operating income
margin................ 4.7% 6.8% 6.8%
Capital expenditures... $ 6,362 $11,564 $ 7,498
EBITDA(4).............. $ 2,226 $ 4,835 $ 3,136
SELECTED OPERATING DATA
(UNAUDITED):
Dozens of T-shirts
sold.................. 820 1,192
Dozens of sweatshirts
sold.................. 59 41
------- -------
Total dozens sold...... 879 1,233
======= =======
</TABLE>

7
<PAGE> 11
<TABLE>
<CAPTION>
DEC. 2, DEC. 1, SEPT. 29, OCT. 5, OCT. 4, JAN. 3,
1994 1995 1996 1997 1998 1999
------- ------- --------- ----------- -------- -----------
CDN$ CDN$ CDN$ CDN$ CDN$ CDN$
------- ------- --------- ----------- -------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
(CANADIAN GAAP):
Working capital............ $ 2,119 $ 1,149 $ 5,010 $15,406 $ 33,134 $ 34,222
Total assets............... 33,784 34,589 52,770 77,365 165,678 211,438
Total debt(5).............. 26,593 28,585 42,793 61,712 112,348 157,129
Shareholders' equity....... 7,191 6,004 9,977 15,653 53,330 54,309

<S> <C> <C>
BALANCE SHEET DATA
(CANADIAN GAAP):
Working capital............
Total assets...............
Total debt(5)..............
Shareholders' equity.......
</TABLE>

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
TEN-MONTH ------------------------------------- FIRST FISCAL QUARTER
PERIOD ENDED OCT. 5, ENDED
SEPT. 29, 1996 1997 OCT. 4, 1998 JAN. 3, 1999
-------------- ----------- ---------------------- --------------------
CDN$ CDN$ CDN$ US$(2) CDN$ US$(2)
-------------- ----------- ------- ----------- -------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL STATEMENT DATA (U.S. GAAP):
Net income.................................... $ 973 $5,036 $12,438 $ 8,453 $ 975 $ 632
Net income (loss) per share................... (0.58) (2.36) 2.63(3) 1.79 0.10 0.06
Total assets.................................. 52,770 76,764 164,788 107,620 210,555 137,321
Total debt(5)................................. 48,343 82,590 112,317 73,352 157,108 102,464
Shareholders' equity.......................... 4,427 (5,826) 52,471 34,268 53,447 34,857
Cash flows from operations.................... (5,738) (4,797) (17,476) (11,413) (29,126) (18,996)
Cash flows from investing activities.......... (7,735) (6,539) (26,537) (17,331) (12,987) (8,470)
Cash flows from financing activities.......... 13,473 11,336 44,013 28,744 42,113 27,466
</TABLE>

- -------------------------

(1) The data for the unaudited twelve-month period ended September 29, 1996
combine our unaudited data for the 62-day period ended December 1, 1995 and
our audited data for ten-month fiscal 1996.

(2) U.S. dollar amounts are provided for convenience only. For the statement of
income data, the U.S. dollar amounts are calculated using a weighted average
of the Bank of Canada monthly average exchange rates. For the balance sheet
data and the cash flow items, the U.S. dollar amounts are calculated using
Bank of Canada closing rates, which were $1.5312 Canadian dollars per U.S.
dollar at October 4, 1998 and $1.5333 Canadian dollars per U.S. dollar at
January 3, 1999.

(3) The principal reason for the difference between net income per share of
$1.65 under Canadian GAAP and net income per share of $2.63 under U.S. GAAP
is the difference in the calculation of the weighted average number of
shares outstanding. Under Canadian GAAP, 7,998,657 were outstanding, whereas
under U.S. GAAP, 4,384,399 were outstanding. The primary difference between
the weighted average number of shares outstanding calculations relates to
the treatment of Class "A" Preferred Shares which were reclassified
concurrently with our initial public offering in June 1998.

(4) EBITDA represents earnings before interest, taxes, depreciation and
amortization. EBITDA is included because we believe that some investors use
this information as one measure of a company's historical ability to service
debt. However, you should not consider EBITDA as an alternative to net
earnings as an indicator of our operating performance or as an alternative
to cash flow as a measure of our overall liquidity as presented in the
Consolidated Financial Statements. EBITDA as presented may not be comparable
to similar computations presented by other companies.

(5) Total debt consists of total bank debt, current liabilities, other loans
payable, secured and unsecured long-term debt, including capitalized leases
and future taxes.
8
<PAGE> 12

RISK FACTORS

You should carefully consider the following risk factors in conjunction
with the other information contained in this prospectus before you invest in the
Class A Subordinate Voting Shares.

OUR INDUSTRY IS EXTREMELY COMPETITIVE

The wholesale imprinted activewear segment of the North American apparel
market includes a number of significant competitors, and the activewear segment
overall is extremely competitive. Some of our competitors are larger, more
diversified, have substantially greater resources and, because they spin their
own yarn, are more vertically integrated than we are. These factors may give
them a competitive advantage over us.

Our primary competitors are the major U.S.-based manufacturers of basic
branded activewear for the wholesale and retail channels. These manufacturers
include Anvil Knitwear, Inc., the Bassett-Walker division of VF Corporation, the
Delta Apparel division of Delta Woodside Industries, Inc., Fruit of the Loom,
Inc., the Hanes Corporation division of Sara Lee Corporation, the Jerzees
division of Russell Corporation, Oneita Industries, Inc. and Tultex Corporation.
Some of these manufacturers have moved the majority of their sewing operations
"offshore" to lower-cost operating environments.

We also compete with manufacturers of activewear outside the United States,
which may have substantially lower labor costs.

OUR INDUSTRY IS SUBJECT TO PRICING PRESSURES

Prices in our industry have been declining over the past several years
primarily as a result of the trend to move sewing operations offshore and the
introduction of new manufacturing technologies. Products sewn offshore cost less
to make primarily because labor costs are lower. Some manufacturers have used
these cost savings to reduce prices. Prices have also declined in recent years
because of inventory dumping. Some manufacturers have engaged in this practice
because they overproduced inventory as a result of excess plant and equipment
capacity.

To remain competitive, we adjust our prices from time to time in response
to these industry-wide pricing pressures. For example, in response to inventory
dumping, we incurred expenses of approximately $4.2 million in customer rebates
in each of fiscal 1997 and fiscal 1998.

In the future, our financial performance may be negatively affected by
these pricing pressures if:

- we are forced to reduce our prices and we cannot reduce our production
costs; or

- our production costs increase and we cannot increase our prices.

THE EFFECT OF CHANGING INTERNATIONAL TRADE REGULATION ON OUR RESULTS OF
OPERATIONS IS UNCERTAIN

9
<PAGE> 13

QUOTAS

In 1995, the Agreement on Textiles and Clothing came into effect, requiring
importing countries, including the United States, Canada and Western Europe, to
eliminate quotas on imports of textiles and apparel from exporting countries by
2005. This could result in increased competition from developing countries which
historically have lower labor costs. This agreement only applies to countries
that are members of the World Trade Organization. China and Taiwan, each a major
apparel manufacturing country, currently remain outside the World Trade
Organization. However, both are seeking membership and if either or both were to
be admitted into the World Trade Organization on terms that did not allow for
the imposition of quotas against their products, this could have a material
adverse effect on our business because it would result in increased competition
from countries with significantly lower labor costs.

None of our products is currently subject to quotas into the United States,
which accounted for 86% of our total sales in fiscal 1998. However, it is
possible that, during the ten-year quota phase-out period, the United States
will impose quotas on some or all of our products assembled in Honduras, El
Salvador, Haiti and Nicaragua. The imposition of quotas could have a material
adverse effect on our business.

FUTURE TRADE AGREEMENTS

Efforts have been made in the United States to extend some of the trade
benefits in the North American Free Trade Agreement ("NAFTA") to the Caribbean
Basin Initiative ("CBI") countries, such as Honduras, El Salvador, Haiti and
Nicaragua. It is not known whether this legislation will come into effect nor
what its terms would be. Under all pending legislative proposals, there would be
no duty on goods sewn in CBI countries upon entry into the United States if the
fabric were knit in the United States from yarn spun in the United States. The
adoption of this legislation in the United States could adversely affect our
operations because we knit all of our fabric in Canada. If any of these
proposals were adopted into law, all of our goods sewn in the Caribbean and
subsequently exported to the United States would remain subject to duty whereas
some of our competitors that knit their fabric in the United States from yarn
spun in the United States would no longer be subject to duty. This outcome would
give some of our competitors an advantage over us. See "Business--Competition"
and "Business--Trade Regulatory Environment".

OUR RESULTS OF OPERATIONS COULD BE ADVERSELY AFFECTED BY THE TREND TO GRANT
EXTENDED PAYMENT TERMS

Increased inventory costs, delays in collecting receivables and returns of
inventory could negatively impact our business if:

- wholesale distributors for the activewear industry demand and receive
longer payment terms than are currently granted; or

- consignment of inventory becomes common within the activewear industry.

Wholesale distributors in the activewear industry generally warehouse inventory
for a longer period than participants in other distribution channels and
therefore receive longer payment terms. Historically, we have extended credit
terms of 90 and 120 days to new customers to assist them in building inventory.
In response to the seasonality of the activewear business, we have at times
offered, and are currently offering, extended terms of 150 to 180 days to select
existing customers, generally during our first two fiscal quarters. In addition,
one activewear manufacturer recently introduced the practice of consigning
products to wholesale distributors, which could become a trend in the activewear
industry.

10
<PAGE> 14

OUR RAPID GROWTH COULD SIGNIFICANTLY STRAIN MANAGERIAL AND FINANCIAL RESOURCES
AND OPERATING SYSTEMS

Our sales have grown from $30.9 million for fiscal 1993 to $215.4 million
for fiscal 1998. This rapid growth has placed increasing demands on our
managerial and financial resources and operating systems, and will continue to
do so as we pursue our expansion strategy.

We cannot guarantee that we will continue to manage growth effectively. In
the future, we could experience manufacturing problems or product delivery
delays due to factors such as:

- the diversion of management's resources;

- construction delays in connection with the expansion or renovation of
existing or future facilities;

- the training and integration of local labor at our offshore facilities;

- ramping up production at new facilities; and

- the introduction of new product lines.

If we cannot meet our manufacturing and delivery commitments on a timely basis,
we could lose sales and our reputation in the marketplace could be damaged.

Examples of our recent growth include:

- expanding our knitting facility in Ville Saint-Laurent in fiscal 1998;

- purchasing an additional dyeing and finishing plant in Montreal in
fiscal 1998;

- leasing a plant in Honduras in fiscal 1998 to establish a second
offshore Gildan-operated sewing facility;

- creating a new international subsidiary in fiscal 1999 headquartered in
Barbados, which we expect to be responsible for all of our non-Canadian
sales and to manage all related activities;

- establishing a new distribution center in Miami in fiscal 1999;

- establishing a new distribution center in Ville Saint-Laurent in fiscal
1999;

- building a sewing facility in Barbados, which is scheduled to begin
operations in summer 1999, to increase our production of placket collar
golf shirts; and

- purchasing one of our Honduran sewing contractors.

WE RELY ON A SMALL NUMBER OF SIGNIFICANT CUSTOMERS, SOME OF WHICH HAVE BEEN OR
COULD BE ACQUIRED BY OUR COMPETITORS

We sell our products to approximately 100 customers. In fiscal 1998, our
top three customers, Broder Bros., Co., Pluma Corporation (the Frank L. Robinson
Company subsidiary and the Stardust Corporation subsidiary) and Alpha Shirt,
accounted for 26.6%, 9.6% and 7.4% of sales, respectively, and our top ten
customers accounted for 68.5% of total sales. If any of our significant
customers substantially reduces its purchases or ceases to buy from us and we
cannot replace that business with sales to other customers on similar terms, our
business would be materially adversely affected.

In addition, in fiscal 1998, one of our competitors, Pluma Corporation,
expanded into the wholesale distribution channel by purchasing Frank L. Robinson
Company and Stardust Corporation, two of our wholesale distributor customers.
Although this purchase has not had an impact on our sales to these customers to
date, we cannot predict whether we will be able to maintain or expand our
historical levels of sales to them in the future. In addition, we cannot predict
whether any of our other wholesale

11
<PAGE> 15

distributor customers will be acquired by our competitors, and if so, what
impact this would have on our business.

We do not have any purchase contracts with our wholesale distributor
customers, except for a contract we entered into with Pluma Corporation in
connection with its acquisitions of Frank L. Robinson Company and Stardust
Corporation. Although we have maintained long-term relationships with many of
our wholesale distributor customers, we cannot assure you that historic levels
of business from any of our customers will continue or increase in the future.

OUR PERFORMANCE COULD BE ADVERSELY AFFECTED BY DIFFICULTIES IN THE RETAIL
INDUSTRY

Historically, the apparel industry has been subject to substantial cyclical
variations due, in part, to significant changes and difficulties in the retail
industry. Significant and sustained difficulties at the retail level may
adversely affect the wholesale activewear sector in general and our business. In
addition, a recession in the U.S. or Canadian economy or uncertainties regarding
future economic prospects that affect consumer spending habits would have a
material adverse effect on our business.

WE ARE SUBJECT TO RISKS OF FLUCTUATIONS IN THE SUPPLY AND PRICE OF COTTON YARN

Cotton yarn is the principal raw material we use in the manufacture of our
products. In recent years, there have been significant shortages in the supply
of cotton. Unlike some of our competitors, we do not spin our own yarn. Instead,
we obtain substantially all of our yarn from three U.S.-based spinners. In
fiscal 1998, Parkdale Mills Inc., Mayo Yarns, Inc. and Frontier Spinning Mills,
LLC accounted for 56.0%, 23.0% and 16.5%, respectively, of our total yarn
purchases. Any interruption in the availability of sufficient quantities of
quality yarn would have a material adverse effect on our business. See
"Business--Raw Materials".

The price of yarn has fluctuated substantially over the past several years
due to price volatility in the cotton industry. We enter into one-year supply
agreements with spinners which allow us to lock in the price of yarn for the
fiscal year, but do not otherwise hedge. Our supply agreements do not protect us
in the event of price increases in following fiscal years. Our supply agreements
also do not enable us to benefit from price decreases which might occur during
the given fiscal year. In either scenario, our business may be materially
adversely affected. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business--Raw Materials".

OUR CARIBBEAN BASIN OPERATIONS ARE SUBJECT TO POLITICAL, SOCIAL AND ECONOMIC
RISK

In fiscal 1998, approximately 83% of our products were sewn outside of the
United States and Canada. Our thirteen offshore sewing facilities are located in
Honduras, El Salvador, Haiti, Mexico and Nicaragua. The following table
provides, for the periods indicated, (a) the number of sewing facilities we
operate, or that are operated for us, in each offshore country, (b) the
percentage of total offshore sewing production generated by the largest facility
in each country and (c) the percentage of total offshore sewing production
generated in each country.

<TABLE>
<CAPTION>
COUNTRY PERCENTAGE OF TOTAL OFFSHORE
(NUMBER OF FACILITIES IN PRODUCTION IN FISCAL 1998 BY PERCENTAGE OF TOTAL OFFSHORE
EACH COUNTRY AT JANUARY 3, 1999) LARGEST FACILITY IN EACH COUNTRY PRODUCTION IN FISCAL 1998
- --------------------------------------- -------------------------------- ----------------------------
<S> <C> <C>
Honduras (seven)....................... 26% 62%
El Salvador (two)...................... 12 14
Haiti (two)............................ 12 12
Mexico (one)........................... 6 6
Nicaragua (one)........................ 6 6
</TABLE>

12
<PAGE> 16

Some of these countries have experienced political, social and economic
instability in the past several years. We cannot predict the future political,
social or economic stability of these countries or the impact on our business of
changes, if any, in the political, social or economic conditions in these
countries.

The three facilities we operate directly, which are located in Honduras,
can import and export goods on a duty-free basis and the profits we generate
through these facilities are generally exempt from income tax. We anticipate
that our future operations in Barbados will benefit from advantageous tax
treatment as well. If these tax benefits are reduced, eliminated or, in the case
of Barbados, fail to materialize, our business could be materially adversely
affected.

OUR INDUSTRY IS SUBJECT TO SEASONALITY RISKS

Typically, demand for our products is higher during the third and fourth
quarters of each fiscal year than in the first and second quarters of each
fiscal year. Based on discussions with our customers at the beginning of each
fiscal year, we produce and store finished goods inventory to meet the expected
demand for delivery in the second half of the fiscal year. If, after producing
and storing inventory in anticipation of third and fourth quarter deliveries,
demand is significantly less than expected, we may have to hold inventory for
extended periods of time, or sell excess inventory at reduced prices. In either
case, our profits would be reduced. Excess inventory could also result in slower
production, lower plant and equipment utilization and lower fixed operating cost
absorption, all of which would have a negative impact on our business. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business--Seasonality".

WE DEPEND ON KEY PERSONNEL TO MAINTAIN OUR COMPETITIVE POSITION

Our ability to maintain our competitive position is largely dependent on
the personal efforts and abilities of our senior management, particularly H.
Gregory Chamandy, Chairman of the Board and Chief Executive Officer, Glenn J.
Chamandy, President and Chief Operating Officer, and Edwin B. Tisch, Executive
Vice President, Manufacturing. Each of H. Gregory Chamandy, Glenn J. Chamandy
and Edwin B. Tisch has entered into an employment agreement with us. See
"Management--
Employment Agreements and Change of Control Agreements". We currently do not
maintain key person life insurance for key executives. The loss of the services
of any of these executives could have a material adverse effect on our business.

In addition, we believe that our success is dependent on our ability to
attract and retain additional qualified employees, and the failure to recruit or
retain additional skilled personnel could have a material adverse effect on our
business.

OUR OPERATIONS ARE SUBJECT TO ENVIRONMENTAL REGULATION

We are subject to various environmental and occupational health and safety
laws and regulations in our operations in the United States, Canada and
offshore. Compliance with those laws and regulations has not had a material
adverse effect on our business. However, future events, such as:

- a change in existing laws and regulations;

- the enactment of new laws and regulations;

- a release of hazardous substances on or from our properties or any
associated offsite disposal location; or

- the discovery of contamination from prior activities at any of our
properties,

13
<PAGE> 17

may give rise to compliance costs that could have a material adverse effect on
our business. See "Business--Environmental Regulation".

OUR OPERATIONS MAY SUFFER FROM YEAR 2000 COMPUTER PROBLEMS

Most of our computer systems, including those used to manage procurement,
production, inventory control, distribution and accounting functions, as well as
some of our manufacturing equipment, are susceptible to the Year 2000 problem.
We use both internal and external resources to ensure that our systems and
equipment will be Year 2000 compliant. We also plan to install a new Year 2000
compliant accounting system, which will replace our current accounting system.
We cannot assure you that these measures will successfully identify and
eliminate all possible Year 2000 problems in our systems and equipment. If we
fail to identify or eliminate any Year 2000 problems, our business could be
harmed.

The failure of our customers and suppliers to be prepared for Year 2000
problems presents risks to us which we cannot quantify at this time. If any of
the computer systems of these customers fail due to the "Year 2000" problem, our
business could be harmed. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Year 2000 Compliance".

CURRENCY AND EXCHANGE RATE FLUCTUATIONS MAY ADVERSELY AFFECT OUR OPERATIONS

Most of our business is transacted in U.S. dollars. The exchange rate
between Canadian dollars and U.S. dollars has fluctuated significantly over the
last several years. Any strengthening in the value of the Canadian dollar
against the U.S. dollar could result in lower sales and earnings for us when
translated into Canadian dollars.

In addition, because we pay the employees at our three Honduran facilities
in Honduran Lempiras, any weakening in the value of the Canadian or U.S. dollar
against the Lempira could have a material adverse effect on our business. Any
Gildan-owned facility established outside of Canada and the United States may
face a similar currency risk.

WE ARE CONTROLLED BY HARCO

Harco Holdings Ltd. ("Harco") is a Canadian corporation controlled jointly
by H. Gregory Chamandy, our Chairman and Chief Executive Officer, and Glenn J.
Chamandy, our President and Chief Operating Officer. Harco owns all of our
outstanding Class B Multiple Voting Shares. Because the Class B Multiple Voting
Shares have eight votes per share, H. Gregory Chamandy and Glenn J. Chamandy,
through their ownership of Harco, will have, after giving effect to the sale of
the Class A Subordinate Voting Shares offered hereby, approximately 70.2% of the
voting power of Gildan. See "Principal Shareholders". Accordingly, H. Gregory
Chamandy and Glenn J. Chamandy will be able to elect all of the directors, other
than the two directors elected solely by the Class A Subordinate Voting Shares
voting as a separate class, for so long as they retain more than 50.0% of the
voting power of Gildan. See "Management--Board of Directors".

OUR ABILITY TO ISSUE PREFERRED SHARES COULD DELAY OR PREVENT A CHANGE IN CONTROL
TRANSACTION

Our Articles authorize the issuance of an unlimited number of First
Preferred Shares and Second Preferred Shares (collectively, the "Preferred
Shares"), which our board of directors may issue in one or more series and
determine the conversion and other rights and preferences of any such series
without any further action on the part of the shareholders. The issuance of
Preferred Shares could be used to delay or prevent a change in control
transaction by:

- discouraging an unsolicited acquisition proposal;

14
<PAGE> 18

- discouraging a proxy contest;

- making more difficult the acquisition of a substantial block of Class A
Subordinate Voting Shares; or

- limiting the price that investors might be willing to pay for Class A
Subordinate Voting Shares.

POTENTIAL SALES OF CLASS A SUBORDINATE VOTING SHARES COULD RESULT IN A DECLINE
IN THE MARKET PRICE OF THE CLASS A SUBORDINATE VOTING SHARES

The market price of the Class A Subordinate Voting Shares could decline as
a result of sales of a large number of Class A Subordinate Voting Shares in the
market after this offering, or the perception that such sales could occur. These
factors also could make it more difficult for us to raise funds through future
offerings of share capital.

Immediately after the offering, we will have outstanding 13,394,444 Equity
Shares. In addition, 995,000 Class A Subordinate Voting Shares are subject to
options which may be granted under our stock option plan. At May 7, 1999,
options to buy 856,500 Class A Subordinate Voting Shares were outstanding, of
which 180,666 will become exercisable on June 16, 2000.

All of our outstanding share capital, except for the Equity Shares held by
"affiliates" (as defined in Rule 144 of the U.S. Securities Act of 1933, as
amended (the "U.S. Securities Act")), will be freely tradeable without
restriction under the U.S. Securities Act. The Equity Shares held by the H.
Gregory Chamandy Family Trust, the Glenn Chamandy Family Trust, the Shirley
Chamandy Family Trust and the Tisch Family Trust (collectively, the "Trusts"),
the Fund and Harco are deemed to be "restricted securities" (as defined in Rule
144). Therefore, the Equity Shares owned by them are not freely tradeable and
may be sold only subject to the timing, manner and volume restrictions of Rule
144 or under a registration statement or pursuant to an exemption therefrom. See
"Shares Eligible for Future Sale and Escrow Arrangements".

Pursuant to a registration rights agreement, Harco, the Fund and the Trusts
generally have the right to require us to register the Class A Subordinate
Voting Shares held by them under the U.S. Securities Act. See "Certain
Relationships and Related Transactions--Registration Rights Agreement". However,
the resale by Harco, the Fund and the Trusts of their Equity Shares is subject
to lock-up provisions and escrow arrangements described under "Shares Eligible
for Future Sale and Escrow Arrangements" and "Underwriting".

THE PRICE OF OUR SHARES MAY FLUCTUATE SIGNIFICANTLY

The following factors, among others, could cause the market price of the
Class A Subordinate Voting Shares to fluctuate significantly:

- adverse changes in our results of operations, including as described in
this "Risk Factors" section;

- the limited number of outstanding Class A Subordinate Voting Shares that
trade;

- changes in the U.S. or Canadian apparel industry in general or the
activewear industry in particular;

- failure to meet the projections of securities analysts; or

- other developments affecting us or our competitors.

15
<PAGE> 19

In addition, in recent years stock markets have experienced extreme price
and volume fluctuations. This volatility has had a significant effect on the
market prices of securities issued by many companies for reasons unrelated to
their operating performance.

WE DO NOT INTEND TO PAY DIVIDENDS

We do not intend to pay dividends because we plan to retain all of our
earnings in the foreseeable future to develop and expand our business. Our
future dividend policy will depend on our earnings, capital requirements,
financial condition, bank facilities and other factors the board of directors
considers relevant. See "Dividends". In addition, some of our credit facilities
and debt instruments require the consent of the lenders before paying dividends.
See "Description of Certain Indebtedness".

BECAUSE WE ARE A CANADIAN COMPANY, YOU MAY NOT BE ABLE TO ENFORCE CIVIL
LIABILITIES UNDER THE U.S. FEDERAL SECURITIES LAWS AGAINST US

We are incorporated in Canada under the Canada Business Corporations Act.
Our registered office as well as a substantial portion of our assets are located
outside the United States. Also, most of our directors and officers and some of
the experts named in this prospectus reside outside the United States.
Therefore, it may be difficult to serve process upon us or them in the United
States or to collect upon a judgment obtained in the United States against us or
them. Ogilvy Renault, our Canadian counsel, has advised us that there is doubt
as to the enforceability of:

- liabilities predicated on U.S. federal securities laws determined in
original actions in the Province of Quebec; and

- judgments of U.S. courts obtained in actions based upon the civil
liability provisions of U.S. federal securities laws in the courts of
the Province of Quebec.

Moreover, no treaty exists between the United States and Canada for the
reciprocal enforcement of foreign court judgments. Consequently, you may be
effectively prevented from pursuing remedies under U.S. federal securities laws
against us or them.

WE HAVE DISCRETION OVER THE USE OF NET PROCEEDS

We intend to use all of the net proceeds of the offering initially to repay
our borrowings under our revolving loan agreement. Subsequently, we intend to
use the newly available borrowing capacity under our revolving loan agreement
for the planned expansion of our production and distribution capacity. We have
not allocated such newly available borrowing capacity to specific uses.
Consequently, we will retain a significant amount of discretion over the
application of the newly available borrowing capacity under our revolving loan
agreement resulting from our initial use of the proceeds of the offering.
Because of the number and variability of factors that determine our ultimate use
of net proceeds of the offering, we cannot assure you that such use will not
vary substantially from our current intentions.

16
<PAGE> 20

USE OF PROCEEDS

The net proceeds from the sale of the 3,000,000 Class A Subordinate Voting
Shares offered hereby will be approximately US$33.9 million (US$39.1 million if
the underwriters' over-allotment option is exercised in full) based on a public
offering price of US$12.375 per share and after deducting underwriting discounts
and commissions and estimated offering expenses payable by us. Based on the
inverse of the Noon Buying Rate (as defined under "Exchange Rates") on May 11,
1999 of Cdn$1.00 per US$0.6875, the net proceeds from the sale of the 3,000,000
Class A Subordinate Voting Shares offered hereby will be approximately $49.3
million ($56.9 million if the underwriters' over-allotment option is exercised
in full).

We plan to use all of the net proceeds initially to repay borrowings under
our revolving loan agreement. Subsequently, we intend to use the newly available
borrowing capacity under our revolving loan agreement for the planned expansion
of our production and distribution capacity.

DIVIDENDS

Except for an aggregate dividend of $500,000 (US$354,887, based on an
exchange rate of 1.41 Canadian dollars per U.S. dollar at November 12, 1997)
which was declared on Gildan's then existing Class "A" common shares and Class
"A" preferred shares on November 12, 1997 and subsequently distributed in 1998,
Gildan has not declared or paid any dividends on its shares. We anticipate that
all of our earnings in the foreseeable future will be retained for the
development and the expansion of our business and, therefore, we have no current
plans to pay dividends. Future dividend policy will depend on our earnings,
capital requirements, financial condition, bank facilities and other factors
considered relevant by the board of directors. In addition, certain of our
credit facilities and debt instruments require the consent of the lenders prior
to the payment of dividends. See "Description of Certain Indebtedness".

17
<PAGE> 21

EXCHANGE RATES

Fluctuations in the exchange rates between the Canadian dollar and the U.S.
dollar will affect the U.S. dollar price of the Class A Subordinate Voting
Shares.

The following table sets forth the average, high, low and period-end Noon
Buying Rate announced by the Federal Reserve Bank of New York (each, a "Noon
Buying Rate").

<TABLE>
<CAPTION>
CANADIAN DOLLARS/U.S. DOLLAR NOON BUYING RATE
------------------------------------------------------------------------------------
TEN-MONTH
PERIOD ENDED
FISCAL YEAR SEPTEMBER 29, FISCAL YEAR
---------------- ------------- ---------------- FIRST FISCAL SECOND FISCAL
1994 1995 1996 1997 1998 QUARTER 1999 QUARTER 1999
------ ------ ------------- ------ ------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Average(1)........... 1.3614 1.3741 1.3683 1.3707 1.4522 1.5430 1.5116
High................. 1.3954 1.4238 1.3822 1.3995 1.5770 1.5570 1.5302
Low.................. 1.3103 1.3285 1.3530 1.3310 1.3718 1.5175 1.4873
Period End........... 1.3720 1.3660 1.3632 1.3713 1.5505 1.5375 1.4968
</TABLE>

- -------------------------
(1) The average rate is the average of the exchange rates on the last day of
each month during the applicable period.

On May 11, 1999, the Noon Buying Rate was 1.4545 Canadian dollars per U.S.
dollar.

We did not use these exchange rates to calculate the U.S. dollar
equivalents provided for fiscal 1998 and first fiscal quarter 1999 under
"Prospectus Summary--Summary Consolidated Financial Information", and "Selected
Consolidated Financial Information". Rather, for the statement of income data,
we used a weighted average of the Bank of Canada monthly average exchange rates,
and for the balance sheet data and cash flow items, we used Bank of Canada
closing rates, which were $1.5312 Canadian dollars per U.S. dollar at October 4,
1998 and $1.5333 Canadian dollars per U.S. dollar at January 3, 1999.

18
<PAGE> 22

CAPITALIZATION

The following table sets forth our capitalization at March 7, 1999 (a) on
an actual basis and (b) as adjusted to give effect to the sale of the Class A
Subordinate Voting Shares offered hereby at a public offering price of US$12.375
($18.00, based on the inverse of the Noon Buying Rate on May 11, 1999 of
Cdn$1.00 per US$0.6875) per Class A Subordinate Voting Share, after deducting
the underwriting discounts and commissions and estimated offering expenses
payable by us.

The table should be read in conjunction with the Consolidated Financial
Statements and related notes thereto included elsewhere in this prospectus,
which include a summary of differences between Canadian GAAP and U.S. GAAP. See
"Use of Proceeds", "Selected Consolidated Financial Information" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".

<TABLE>
<CAPTION>
AT MARCH 7, 1999
----------------------------
ACTUAL AS ADJUSTED(1)
----------- --------------
(CDN$ IN THOUSANDS, EXCEPT
SHARE AMOUNTS)
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Short-term debt:
Bank indebtedness......................................... $ 72,489 $ 23,189(2)
Current portion of long-term debt......................... 6,089 6,089
-------- --------
Total short-term debt................................ $ 78,578 $ 29,278
======== ========
Long-term debt(3)........................................... $ 69,024 $ 69,024
Shareholders' equity:
First Preferred Shares, without par value, unlimited
number authorized; 0 issued and outstanding at March 7,
1999; as adjusted, 0 issued and outstanding............ -- --
Second Preferred Shares, without par value, unlimited
number authorized; 0 issued and outstanding at March 7,
1999; as adjusted, 0 issued and outstanding............ -- --
Class A Subordinate Voting Shares, without par value,
unlimited number authorized; 7,347,444 shares issued
and outstanding at March 7, 1999; as adjusted,
10,347,444 shares issued and outstanding(4)............ 34,375 83,675
Class B Multiple Voting Shares, without par value,
unlimited number authorized; 3,047,000 shares issued
and outstanding at March 7, 1999; as adjusted,
3,047,000 shares issued and outstanding................ 5,083 5,083
Contributed surplus....................................... 323 323
Retained earnings(5)...................................... 19,528 19,528
-------- --------
Total shareholders' equity........................... 59,309 108,609
-------- --------
Total capitalization.............................. $128,333 $177,633
======== ========
</TABLE>

- ---------------

(1) Assumes that the net proceeds are US$33.9 million ($49.3 million, based on
the inverse of the Noon Buying Rate on May 11, 1999 of Cdn$1.00 per
US$0.6875), after deducting the underwriting discounts and commissions and
estimated offering expenses payable by us.

(2) This debt may be reborrowed.

(3) Includes capitalized leases. See note 7 to the Consolidated Financial
Statements.

(4) The number of Class A Subordinate Voting Shares outstanding does not reflect
995,000 Class A Subordinate Voting Shares subject to options which may be
granted under our stock option plan, of which options to buy 856,500 Class A
Subordinate Voting Shares were outstanding at March 7, 1999. See
"Management--Stock Option Plan" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations".

(5) At January 3, 1999.

19
<PAGE> 23

PRICE RANGE OF OUR SHARES

Since our initial public offering in June 1998, our Class A Subordinate
Voting Shares have traded on the American Stock Exchange under the symbol "GIL"
and The Montreal Exchange and The Toronto Stock Exchange under the symbol
"GIL.A". The following table sets forth, for each of the fiscal quarterly
periods indicated, the high and low closing prices of the Class A Subordinate
Voting Shares as reported on each of the respective exchanges:

<TABLE>
<CAPTION>
THE TORONTO
AMERICAN STOCK THE MONTREAL STOCK
EXCHANGE EXCHANGE EXCHANGE
------------------- --------------- ---------------
HIGH LOW HIGH LOW HIGH LOW
-------- -------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Fiscal Year Ended October 4, 1998
Third Quarter(1)................... US$7.00 US$6.31 $10.30 $ 9.25 $10.35 $ 9.25
Fourth Quarter..................... 9.25 6.00 14.25 9.25 14.00 9.20
Fiscal Year Ended October 3, 1999
First Quarter...................... 8.38 6.38 12.50 10.00 12.50 10.05
Second Quarter..................... 13.25 7.38 20.25 11.50 20.25 11.75
Third Quarter(2)................... 14.38 12.38 20.50 18.70 20.50 18.00
</TABLE>

- -------------------------

(1) Trading began June 17, 1998.

(2) Through May 11, 1999 (the last closing price on The Montreal Exchange was on
May 10, 1999).

On May 11, 1999, the last reported sale price of the Class A Subordinate
Voting Shares was US$12.375 per share on the American Stock Exchange and $18.00
per share on The Toronto Stock Exchange. The last closing price of the Class A
Subordinate Voting Shares on The Montreal Exchange was $19.00 per share on May
10, 1999. As at March 15, 1999, there were approximately six holders of record
in the United States, holding approximately 2,825,800 Class A Subordinate Voting
Shares, which represents 38.46% of the outstanding Class A Subordinate Voting
Shares.

20
<PAGE> 24

SELECTED CONSOLIDATED FINANCIAL INFORMATION

The selected consolidated financial information presented below is derived
from Gildan's consolidated financial statements for, and as of the end of,
fiscal 1994 and fiscal 1995, which have been audited by Richter, Usher &
Vineberg, Chartered Accountants, and Gildan's consolidated financial statements
for, and as of the end of, ten-month fiscal 1996, fiscal 1997 and fiscal 1998,
which have been audited by KPMG LLP, Chartered Accountants. The selected
consolidated financial information for the twelve months ended and as of
September 29, 1996, for the first fiscal quarter ended January 4, 1998, and for
the first fiscal quarter ended and as of January 3, 1999 is derived from the
unaudited consolidated financial statements of Gildan, which in the opinion of
management have been prepared on the same basis as the audited financial
statements, reflecting all adjustments necessary, which consist only of normal
recurring adjustments, for a fair presentation of such information.

The Consolidated Financial Statements have been prepared in accordance with
Canadian GAAP. These principles conform in all material respects with U.S. GAAP,
except as described in note 19 to the Consolidated Financial Statements. The
information presented below should be read in conjunction with the Consolidated
Financial Statements included elsewhere in this prospectus and "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
<TABLE>
<CAPTION>
TEN-MONTH TWELVE-
FISCAL YEAR ENDED PERIOD MONTH FISCAL YEAR ENDED
----------------- ENDED ENDED ----------------------------------
DEC. 2, DEC. 1, SEPT. 29, SEPT. 29, OCT. 5, OCT. 4, OCT. 4,
1994 1995 1996 1996(1) 1997 1998 1998
------- ------- --------- ----------- -------- -------- -----------
CDN$ CDN$ CDN$ CDN$ CDN$ CDN$ US$(2)
------- ------- ------- ------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA
(CANADIAN GAAP):
Sales..................... $45,896 $64,868 $70,448 $80,045 $119,844 $215,428 $147,876
Cost of sales............. 36,621 51,854 56,367 64,294 93,059 164,850 113,289
------- ------- ------- ------- -------- -------- --------
Gross profit.............. 9,275 13,014 14,081 15,751 26,785 50,578 34,587
Selling, general and
administrative
expenses................. 5,852 9,053 8,360 9,629 12,471 20,796 14,248
Depreciation and
amortization expenses.... 940 1,764 1,633 2,026 2,337 4,063 2,782
Writeoff of advances...... -- 924 -- 281 -- -- --
------- ------- ------- ------- -------- -------- --------
Operating income.......... 2,483 1,273 4,088 3,815 11,977 25,719 17,557
Interest expense.......... 1,382 2,709 2,507 2,997 2,974 5,032 3,460
Loss on settlement of
debt..................... -- -- -- -- -- 819 565
------- ------- ------- ------- -------- -------- --------
Income (loss) before
income taxes............. 1,101 (1,436) 1,581 818 9,003 19,868 13,532
Income taxes (recovery)... 327 (249) 608 314 3,338 6,700 4,583
------- ------- ------- ------- -------- -------- --------
Net income (loss)......... $ 774 $(1,187) $ 973 $ 504 $ 5,665 $ 13,168 $ 8,949
======= ======= ======= ======= ======== ======== ========
Net income per share
(basic).................. $ 1.65(3) $ 1.12
Number of shares (weighted
avg.).................... 7,999 7,999
OTHER DATA (CANADIAN
GAAP):
Gross profit margin....... 20.2% 20.1% 20.0% 19.7% 22.3% 23.5% 23.5%
Operating income margin... 5.4% 2.0% 5.8% 4.8% 10.0% 11.9% 11.9%
Capital expenditures...... $ 6,997 $ 2,514 $ 6,390 $ 7,204 $ 5,439 $ 24,588 $ 17,031
EBITDA(4)................. $ 3,423 $ 3,037 $ 5,721 $ 5,841 $ 14,314 $ 29,782 $ 20,339
SELECTED OPERATING DATA
(UNAUDITED):
Dozens of T-shirts sold... 1,365 1,697 1,899 2,950 5,721
Dozens of sweatshirts
sold..................... 103 63 85 158 195
------- ------- ------- -------- --------
Total dozens sold......... 1,468 1,760 1,984 3,108 5,916
======= ======= ======= ======== ========

FIRST FISCAL QUARTER ENDED
---------------------------------------
JAN. 4,
1998 JAN. 3, 1999
----------- -------------------------
CDN$ CDN$ US$(2)
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
STATEMENT OF INCOME DATA
(CANADIAN GAAP):
Sales..................... $31,812 $45,109 $29,253
Cost of sales............. 25,969 33,079 21,451
------- ------- -------
Gross profit.............. 5,843 12,030 7,802
Selling, general and
administrative
expenses................. 3,617 7,195 4,666
Depreciation and
amortization expenses.... 746 1,763 1,143
Writeoff of advances...... -- -- --
------- ------- -------
Operating income.......... 1,480 3,072 1,993
Interest expense.......... 848 1,543 1,001
Loss on settlement of
debt..................... -- -- --
------- ------- -------
Income (loss) before
income taxes............. 632 1,529 992
Income taxes (recovery)... 332 550 357
------- ------- -------
Net income (loss)......... $ 300 $ 979 $ 635
======= ======= =======
Net income per share
(basic).................. $ 0.10 $ 0.06
Number of shares (weighted
avg.).................... 9,950 9,950
OTHER DATA (CANADIAN
GAAP):
Gross profit margin....... 18.4% 26.7% 26.7%
Operating income margin... 4.7% 6.8% 6.8%
Capital expenditures...... $ 6,362 $11,564 $ 7,498
EBITDA(4)................. $ 2,226 $ 4,835 $ 3,136
SELECTED OPERATING DATA
(UNAUDITED):
Dozens of T-shirts sold... 820 1,192
Dozens of sweatshirts
sold..................... 59 41
------- -------
Total dozens sold......... 879 1,233
======= =======
</TABLE>

21
<PAGE> 25
<TABLE>
<CAPTION>
DEC. 2, DEC. 1, SEPT. 29, OCT. 5, OCT. 4, JAN. 3,
1994 1995 1996 1997 1998 1999
------- ------- --------- ----------- -------- -----------
CDN$ CDN$ CDN$ CDN$ CDN$ CDN$
------- ------- ------- ------- -------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
(CANADIAN GAAP):
Working capital............ $ 2,119 $ 1,149 $ 5,010 $15,406 $ 33,134 $ 34,222
Total assets............... 33,784 34,589 52,770 77,365 165,678 211,438
Total debt(5).............. 26,593 28,585 42,793 61,712 112,348 157,129
Shareholders' equity....... 7,191 6,004 9,977 15,653 53,330 54,309

<S> <C> <C>
BALANCE SHEET DATA
(CANADIAN GAAP):
Working capital............
Total assets...............
Total debt(5)..............
Shareholders' equity.......
</TABLE>

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
TEN-MONTH PERIOD ---------------------------- FIRST FISCAL QUARTER
ENDED SEPT. 29, OCT. 5, OCT. 4, OCT. 4, ENDED JAN. 3,
1996 1997 1998 1998 1999
---------------- ------- ------- -------- ----------------------
CDN$ CDN$ CDN$ US$(2) CDN$ US$(2)
------- ------- ------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL STATEMENT DATA (U.S. GAAP):
Net income............................................. $ 973 $ 5,036 $12,438 $ 8,453 $ 975 $ 632
Net income (loss) per share............................ (0.58) (2.36) 2.63(3) 1.79 0.10 0.06
Total assets........................................... 52,770 76,764 164,788 107,620 210,555 137,321
Total debt(5).......................................... 48,343 82,590 112,317 73,352 157,108 102,464
Shareholders' equity................................... 4,427 (5,826) 52,471 34,268 53,447 34,857
Cash flows from operations............................. (5,738) (4,797) (17,476) (11,413) (29,126) (18,996)
Cash flows from investing.............................. (7,735) (6,539) (26,537) (17,331) (12,987) (8,470)
Cash flows from financing activities................... 13,473 11,336 44,013 28,744 42,113 27,466
</TABLE>

- ---------------
(1) The data for the unaudited twelve-month period ended September 29, 1996
combine our unaudited data for the 62-day period ended December 1, 1995 and
our audited data for ten-month fiscal 1996.

(3) The principal reason for the difference between net income per share of
$1.65 under Canadian GAAP and net income per share of $2.63 under U.S. GAAP
is the difference in the calculation of the weighted average number of
shares outstanding. Under Canadian GAAP, 7,998,657 were outstanding, whereas
under U.S. GAAP, 4,384,399 were outstanding. The primary difference between
the calculations relates to the treatment of Class "A" Preferred Shares
which were reclassified concurrently with our initial public offering in
June 1998.

(4) EBITDA represents earnings before interest, taxes, depreciation and
amortization. EBITDA is included because we believe that some investors use
this information as one measure of a company's historical ability to service
debt. However, you should not consider EBITDA as an alternative to net
earnings as an indicator of operating performance or as an alternative to
cash flow as a measure of our overall liquidity as presented in the
Consolidated Financial Statements. EBITDA as presented may not be comparable
to similar computations presented by other companies.

(5) Total debt consists of total bank debt, current liabilities, other loans
payable, secured and unsecured long-term debt, including capitalized leases
and future taxes.

22
<PAGE> 26

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the
Consolidated Financial Statements included elsewhere in this prospectus.

CHANGE OF YEAR-END

Effective September 29, 1996, we changed our fiscal year-end from the first
Friday following November 29 to the first Sunday following September 28. The
effective result of this change was to create a ten-month fiscal 1996
("ten-month fiscal 1996"), compared to a twelve-month period ended December 1,
1995 ("fiscal 1995") and a twelve-month period ended October 5, 1997 ("fiscal
1997"). The primary purpose of the change was to recognize that our primary
selling season is completed by the end of September of each year.

As a result of this change, the Consolidated Financial Statements and
Management's Discussion and Analysis compare fiscal 1997 to ten-month fiscal
1996. Information is also provided for an unaudited twelve-month period ended
September 29, 1996 ("unaudited twelve-month 1996") to facilitate a more
meaningful understanding of trends through comparison of like periods. The
Consolidated Financial Statements have been prepared in accordance with Canadian
GAAP. These principles conform in all material respects with U.S. GAAP, except
as described in note 19 to the Consolidated Financial Statements. The
information below should be read in conjunction with the Consolidated Financial
Statements included elsewhere in this prospectus.

RESULTS OF OPERATIONS

Our results of operations are affected by several factors, including: (a)
competition; (b) general economic conditions; (c) raw material costs; (d) mix of
products sold; and (e) plant utilization. Some activewear products of the type
which we manufacture are generally available from multiple sources and our
customers purchase products from more than one source. Sweatshirts and colored
T-shirts are generally more profitable than white T-shirts. Accordingly, our
overall gross profit margin is affected by our product mix. In addition, plant
utilization levels are significant drivers of our profitability due to the
capital intensive nature of our operations.

Prices in the industry have been declining over the past several years
primarily as a result of the trend to move sewing productions offshore by some
manufacturers of basic activewear and the introduction of new manufacturing
technologies. In addition, in recent years, some T-shirt and sweatshirt
manufacturers have overproduced inventory as a result of excess plant and
equipment capacity. This oversupply of inventory has on occasion led to
inventory dumping, resulting in price reductions for T-shirts and sweatshirts.
To remain competitive, we adjust our pricing structure from time to time in
response to such industry-wide price changes.

We generally have been able to mitigate pricing pressures by (a) continuing
to improve and modernize our manufacturing processes to reduce production costs
and (b) moving the majority of our sewing operations offshore to benefit from
the lower wage rate environment. However, in response to price reductions
initiated by our competitors, we incurred expenses of approximately $4.2 million
in customer rebates in each of fiscal 1997 and fiscal 1998. See "Risk
Factors--Our Industry Is Subject to Pricing Pressures".

The largest component of our cost of goods sold is the cost of cotton yarn.
Unlike some of our competitors, we do not spin our own yarn. Instead, we obtain
substantially all of our yarn from three yarn suppliers and place our orders at
the beginning of each fiscal year. In so doing, we can protect against

23
<PAGE> 27

yarn price increases during the fiscal year. However, we may be competitively
disadvantaged if yarn prices decrease during the fiscal year. See "Risk
Factors--We Are Subject to Risks of Fluctuations in the Supply and Price of
Cotton Yarn" and "Business--Raw Materials".

The following table presents the major components of our Statements of
Income as a percentage of sales:

<TABLE>
<CAPTION>
AUDITED UNAUDITED AUDITED AUDITED UNAUDITED UNAUDITED
SEPTEMBER 29, SEPTEMBER 29, OCTOBER 5, OCTOBER 4, JANUARY 4, JANUARY 3,
1996 1996 1997 1998 1998 1999
10 MONTHS 12 MONTHS 12 MONTHS 12 MONTHS 3 MONTHS 3 MONTHS
------------- ------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Sales........................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales................ 80.1 80.3 77.7 76.5 81.6 73.3
----- ----- ----- ----- ----- -----
Gross profit................. 19.9 19.7 22.3 23.5 18.4 26.7
Selling, general and
administrative expenses.... 11.8 12.0 10.4 9.7 11.4 16.0
Depreciation and amortization
expenses................... 2.3 2.5 1.9 1.9 2.4 3.9
Writeoff of advances......... -- 0.4 -- -- -- --
----- ----- ----- ----- ----- -----
Operating income............. 5.8 4.8 10.0 11.9 4.6 6.8
Interest expense............. 3.6 3.8 2.5 2.3 2.7 3.4
Loss on settlement of debt... -- -- -- 0.4 -- --
----- ----- ----- ----- ----- -----
Income before income taxes... 2.2 1.0 7.5 9.2 1.9 3.4
Income taxes................. 0.8 0.4 2.8 3.1 1.0 1.2
----- ----- ----- ----- ----- -----
Net income................... 1.4% 0.6% 4.7% 6.1% 0.9% 2.2%
===== ===== ===== ===== ===== =====
</TABLE>

FIRST FISCAL QUARTER 1999 COMPARED TO FIRST FISCAL QUARTER 1998

Sales: Sales increased by $13.3 million to $45.1 million for first fiscal
quarter 1999 from $31.8 million for first fiscal quarter 1998. This 41.8%
increase was due to higher sales, primarily to existing customers. These sales
resulted from greater product availability due to increased production capacity.

Gross Profit: Gross profit increased to 26.7% of sales in first fiscal
quarter 1999 from 18.4% of sales in first fiscal quarter 1998. The improvement
was due to factors such as lower raw material costs (primarily yarn) and higher
efficiencies in both textile and sewing operations.

Selling, General and Administrative Expenses: Selling, general and
administrative expenses increased to 16.0% of sales in first fiscal quarter 1999
from 11.4% of sales in first fiscal quarter 1998. The increase in selling,
general and administrative expenses resulted from the following:

- the transition from the Champlain distribution center to the Miami and
Montreal distribution centers resulted in higher training costs and
lower efficiencies. See "Business--Manufacturing Operations and
Facilities--Distribution Operations";

- the transfer of products from the Champlain distribution center to the
Miami distribution center also resulted in additional costs;

- the creation of our international sales office in Barbados resulted in
additional overhead as the new operation was established; and

24
<PAGE> 28

- an increase in our staffing and executive ranks during first fiscal
quarter 1999 in anticipation of the higher volumes we expect to ship in
fiscal 1999 resulted in increased administrative costs.

Depreciation and Amortization Expenses: Depreciation and amortization
expenses increased to 3.9% of sales in first fiscal quarter 1999 from 2.4% of
sales in first fiscal quarter 1998. This increase was principally due to capital
expenditures incurred in fiscal 1998 to expand production capacity.

Interest Expense: Interest expense rose to 3.4% of sales in first fiscal
quarter 1999 from 2.7% of sales in first fiscal quarter 1998. This is the result
of total interest-bearing debt levels that were 88.7% higher than those during
first fiscal quarter 1998. The additional debt was used to fund capital
expenditures and working capital requirements.

Income Taxes: The effective income tax rate was 36.0% in first fiscal
quarter 1999 compared to 52.5% in first fiscal quarter 1998 mainly due to the
difference in the amount of unrecognized tax losses incurred by some of our
subsidiaries of $11,000 in first fiscal quarter 1999 compared to $63,000 in
first fiscal quarter 1998.

YEAR ENDED OCTOBER 4, 1998 COMPARED TO YEAR ENDED OCTOBER 5, 1997

Sales: Sales increased by $95.6 million to $215.4 million for fiscal 1998
from $119.8 million for fiscal 1997. This 79.8% increase was due to higher sales
to existing customers and the addition of new customers. Existing customers
accounted for 40% of the increase and new customers accounted for 60%. The
impact of higher unit sales was partially offset by lower average selling prices
during fiscal 1998 due to industry-wide customer rebate programs in the United
States.

Gross Profit: Gross profit increased to 23.5% of sales in fiscal 1998 from
22.3% of sales in fiscal 1997. This improvement was due to:

- increased absorption of factory overhead as a result of the higher
production volume;

- lower costs due to the increase in offshore sewing production; and

- the elimination of custom duties in Canada on cotton yarn of U.S.
origin.

The increase in gross profit margin was partly offset by (a) the ice storm that
hit the Province of Quebec and Northern New York State in January 1998,
disrupting shipping and manufacturing activities and (b) lower average selling
prices during fiscal 1998.

Selling, General and Administrative Expenses: Selling, general and
administrative expenses declined to 9.7% of sales in fiscal 1998 from 10.4% of
sales in fiscal 1997. This is the result of our ongoing commitment to grow sales
at a faster rate than expenses.

Depreciation and Amortization Expenses: Depreciation and amortization
expenses remained stable at 1.9% of sales for both fiscal 1998 and fiscal 1997.

Interest Expense: Interest expense declined to 2.3% of sales during fiscal
1998 from 2.5% of sales in fiscal 1997. Our initial public offering in the third
quarter of fiscal 1998 and the subsequent use of proceeds to repay long-term
debt contributed to the reduction of interest expense as a percentage of sales.

Settlement of Debt: Loss on settlement of debt in the amount of $0.8
million relates to a penalty incurred on the prepayment of $6.7 million of
long-term debt in connection with the initial public offering.

25
<PAGE> 29

Income Taxes: The effective income tax rate was 33.7% in fiscal 1998
compared to 37.1% in fiscal 1997. The reduction of income taxes is due to the
favorable tax treatment arising from the purchase of fixed assets used in the
manufacturing process.

YEAR ENDED OCTOBER 5, 1997 COMPARED TO TEN MONTHS ENDED SEPTEMBER 29, 1996

Sales: Sales increased by $49.3 million, or 69.9%, to $119.8 million in
fiscal 1997 from $70.5 million in ten-month fiscal 1996 (and increased by $39.8
million, or 50.0%, from $80.0 million in unaudited twelve-month 1996). This
increase was primarily due to the addition of several major wholesale
distributor customers during fiscal 1997. Broder Bros., the largest of these
distributors, represented $23.5 million of sales. To a lesser extent, sales
growth was due to an increase in sales to existing customers. The impact of the
increase in unit sales was partially offset by lower prices during fiscal 1997
due to industry-wide customer rebate programs in the United States.

Gross Profit: Gross profit increased to 22.3% of sales in fiscal 1997 from
19.9% of sales in ten-month fiscal 1996 (and 19.7% of sales in unaudited
twelve-month 1996). The increase in gross profit was due to the following
factors:

- a shift of the majority of our sewing production from the United States
and Mexico to the Caribbean Basin and Central America in fiscal 1997;

- increased operating efficiencies;

- increased sales of higher margin sweatshirts, which were 14.5% of sales
in fiscal 1997 compared to 11% of sales in ten-month fiscal 1996 (and
12.6% of sales in unaudited twelve-month 1996); and

- a reduction in our reliance on higher-priced outside knitting and dyeing
contractors in fiscal 1997.

Selling, General and Administrative Expenses: Selling, general and
administrative expenses decreased to 10.4% of sales in fiscal 1997 from 11.8% of
sales in ten-month fiscal 1996 (and 12.0% of sales in unaudited twelve-month
1996). This improvement resulted from cost containment efforts combined with
growth in sales.

Depreciation and Amortization Expenses: Depreciation and amortization
expenses decreased to 1.9% of sales in fiscal 1997 from 2.3% of sales in
ten-month fiscal 1996 (and 2.5% of sales in unaudited twelve-month 1996) as a
result of our sales growth.

Interest Expense: Interest expense decreased to 2.5% of sales in fiscal
1997 from 3.6% of sales in ten-month fiscal 1996 (and 3.8% of sales in unaudited
twelve-month 1996) as (a) we leveraged off of higher sales and (b) interest
rates on our outstanding indebtedness declined.

Income Taxes: The effective tax rate was 37.1% in fiscal 1997 compared to
38.5% in ten-month fiscal 1996 (and 38.4% in unaudited twelve-month 1996).

LIQUIDITY AND CAPITAL RESOURCES

The principal sources of our liquidity have been bank loans, equipment and
mortgage loans, unsecured and subordinated debt, cash generated from our
operations and the proceeds from the initial public offering completed during
the third quarter of fiscal 1998. Following the offering, we believe that, based
upon current levels of operations and anticipated growth, we will be able to
satisfy our ongoing cash requirements through the end of fiscal 2000 primarily
with cash flow from operations, supplemented

26
<PAGE> 30

by borrowings under our revolving loan agreement as well as other financing and
loan facilities which may be entered into following the offering.

Bank Loans: Pursuant to our revolving loan agreement with a banking
syndicate led by a Canadian chartered bank executed on March 31, 1999, we have a
revolving credit facility in the aggregate amount of $90.0 million, subject to a
"borrowing base" limitation as defined in the loan agreement. At March 31, 1999,
we had approximately $85.0 million in outstanding loans and $5.0 million of
additional availability, based on our borrowing base at that time. The revolving
loan agreement expires on March 31, 2002. The interest rate under the credit
facility is variable. At March 31, 1999, the annual interest rate was 7.375% for
Canadian dollar borrowings and 9.125% for U.S. dollar borrowings. The revolving
loan agreement:

- is secured by substantially all of our personal (moveable) property and
guaranteed by certain of our subsidiaries;

- imposes certain operating restrictions on us; and

- requires us to maintain specific financial ratios and levels.

See "Description of Certain Indebtedness--Revolving Loan Agreement".

Equipment and Mortgage Loans: We have relationships with several lenders
which have provided financing by way of secured loans, mortgages, conditional
sales contracts and capitalized leases. At March 7, 1999, these financings
totalled $29.3 million, with the largest amount due to a single lender totaling
$16.5 million, and bore interest at annual rates ranging from 5.9% to 13.0%. See
"Description of Certain Indebtedness--Secured Equipment and Mortgage Loans".

Unsecured and Subordinated Debt: We have unsecured and subordinated debt.
At March 31, 1999, this indebtedness totalled $45.9 million, principally
represented by:

- a $15.0 million unsecured and subordinated debenture due 2003 issued to
the Fund, bearing interest at an annual rate of 11.0%;

- a $15.0 million unsecured and subordinated debenture due 2004 issued to
the Fund, bearing interest at an annual rate of 12.0% for the first two
years and 13.0% for the next three years; and

- a $15.0 million unsecured and subordinated debenture due 2004, bearing
interest at an annual rate of 12.5%, issued to Capital d'Amerique CDPQ
Inc.

See "Description of Certain Indebtedness--The Fund" and "Description of Certain
Indebtedness--Capital d'Amerique CDPQ Inc.".

Cash Flow from Operations: For fiscal 1998, our operations generated cash,
before changes in non-cash working capital, of $18.8 million. Our investment in
working capital amounted to $36.0 million, resulting in a net use of $17.2
million, compared to a net use of $4.2 million in fiscal 1997. Cash used in
operating working capital for fiscal 1998 was largely attributed to an increase
in receivables and inventories of $24.5 million and $40.2 million, respectively,
and offset by an increase in accounts payable and accrued liabilities of $27.5
million.

- The increase in receivables was attributed to the increase in sales over
the prior year. The majority of receivables were credit insured.

- The increase in inventories was required to support the planned growth
in sales for fiscal 1999 which we expect to result from (a) the increase
in sales to existing customers, (b) the introduction of new products and
(c) the expansion of our distribution channels.

27
<PAGE> 31

- The increase in accounts payable and accrued liabilities was
attributable to the build-up of inventories during fiscal 1998.

While we have been generally unable to fund our growth from operations
only, especially in light of the high levels of capital expenditures incurred
during the past three years, we have been able to fund our growth through bank
loans and other debt and equity financings.

Proceeds from Offerings: The sale of 3,000,000 Class A Subordinate Voting
Shares offered in connection with our initial public offering in June 1998
contributed $25.9 million in new funds. Of this amount, approximately $6.7
million was used to repay some of our secured and unsecured debt, $2.5 million
was used to buy back a stock option owned by the Fund, $0.8 million was used to
pay prepayment penalties and the balance was used to reduce bank indebtedness.
The sale of 444,444 Class A Subordinate Voting Shares offered in a private
placement to Capital d'Amerique CDPQ Inc. in February 1999 contributed $5.0
million in new funds, which were used for general corporate purposes, including
working capital.

CAPITAL EXPENDITURES

Capital expenditures were $2.5 million in fiscal 1995, $6.4 million in
ten-month fiscal 1996, $5.4 million in fiscal 1997, $24.6 million in fiscal 1998
and $11.6 million in first fiscal quarter 1999. The substantial portion of
fiscal 1998 capital expenditures was used to acquire a second dyeing and
finishing plant and purchase new equipment for the knitting, dyeing and
finishing and sewing facilities. We expect that additional capital expenditures
will be required in future years to meet continued growth expectations. We
anticipate spending a total of approximately $25.0 million in fiscal 1999 to
further update production and distribution facilities and enhance the
information systems used to support our growth.

INFLATION AND EXCHANGE RATES

Inflation generally affects us by increasing the interest expense of
floating rate indebtedness and by increasing the cost of labor, equipment and
raw materials. We do not believe that inflation has had any material effect on
our business during the periods discussed herein.

FINANCIAL INSTRUMENTS

We use interest rate swap arrangements to manage risks from fluctuations in
interest rates and foreign exchange contracts to manage risks from fluctuations
in the exchange rate between Canadian dollars and U.S. dollars. We do not use
derivative financial instruments for trading purposes.

YEAR 2000 COMPLIANCE

The Year 2000 issue is the result of computer programs which use two digits
rather than four to define the applicable year. As a result, date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This programming flaw could cause system failures or miscalculations which
disrupt normal business activities. We have commenced a comprehensive plan to
upgrade all of our management information and other computer systems which are
not yet Year 2000 compliant. These systems include those used to manage
procurement, production, inventory control,

28
<PAGE> 32

distribution, finance and accounting functions. Having completed our evaluation
of these systems, we currently estimate that the total costs associated with
making our systems Year 2000 compliant will be approximately $1.0 million, the
majority of which will be incurred in calendar year 1999. These costs will be
expensed as incurred.

As part of our Year 2000 preparations, we are in the process of upgrading
our distribution, inventory control, production and procurement systems so that
they are Year 2000 compliant. We anticipate completing the upgrade by June 1999.
We recently began analyzing the extent of our exposure to risks of Year 2000
non-compliance by third parties with whom we have an ongoing business
relationship, such as suppliers and customers. As part of this process, we are
sending letters to third parties to inquire about their Year 2000 readiness.
However, at this time, we are unable to estimate the extent of material
non-compliance by these parties and the risks we might face as a result. We
intend to complete our analysis and follow-up to these inquiries by May 1999.

In order to ensure that these timetables are met, we have assigned two
full-time employees to work exclusively on the Year 2000 project, and we use the
services of additional staff on an "as needed" basis.

We also employ outside resources, including a consulting firm, to assist us
in evaluating our systems and equipment, and to assist us in implementing
necessary remedial measures. We have completed a full inventory of all items
needing evaluation and have begun our analysis of changes to be made. We expect
to complete all modifications and testing by August 1999.

In addition, as a result of our rapid growth, we plan to install a new
accounting system by September 1999 that is Year 2000 compliant. In case of
unexpected delays in installing this software, we are developing a contingency
plan to make our current accounting software Year 2000 compliant by September
1999. We estimate the costs of implementing the new accounting system to be
approximately $0.5 million. These costs are in addition to the estimated costs
directly related to our Year 2000 compliance efforts.

We are designing contingency plans for worst case scenarios regarding
potential Year 2000 problems. We expect these contingency plans to be in place
by the end of September 1999. See "Risk Factors -- Our Operations May Suffer
from Year 2000 Computer Problems".

RECENT ACCOUNTING PRONOUNCEMENTS

In 1997, the Canadian Institute of Chartered Accountants and the Financial
Accounting Standards Board, in a joint project, established identical standards
for the way that public business enterprises report information about operating
segments in interim and annual financial statements. The recommendations of the
Canadian Institute of Chartered Accountants Handbook Section 1701 "Segment
Disclosures" are effective for fiscal years beginning on or after January 1,
1998. Statement of Financial Accounting Standards No. 131, "Disclosures About
Segments of an Enterprise and Related Information" is effective for fiscal years
beginning on or after December 15, 1997.

In June 1998, the Canadian Institute of Chartered Accountants issued
Handbook Section 1540 "Cash Flow Statements". The recommendations are effective
for fiscal years beginning on or after August 1, 1998. Section 1540 establishes
standards for the way that companies report information about the historical
changes in cash and cash equivalents in interim and annual financial statements.

We were not required to, and did not, adopt these sections for our fiscal
1998 consolidated financial statements. These sections had no material effect on
our 1998 consolidated financial statements. We are currently evaluating what, if
any, additional disclosures may be required when we do adopt the recommendations
of these sections.

29
<PAGE> 33

BUSINESS

We are a rapidly growing, vertically-integrated manufacturer and marketer
of premium quality branded basic activewear for sale principally into the
wholesale imprinted activewear segment of the North American apparel market. We
manufacture and sell premium quality 100% cotton T-shirts and placket collar
golf shirts as well as premium quality sweatshirts, in a variety of weights,
sizes, colors and styles. In April 1999, we launched a new line of 50%
cotton/50% polyester T-shirts. We expect to begin shipping this new product to
our customers in fourth fiscal quarter 1999. We sell our products as "blanks",
which are ultimately decorated with designs and logos for sale to consumers.

Over the past several years, we have significantly increased our customer
base and increased sales and earnings. From fiscal 1993 through fiscal 1998, our
sales grew from $30.9 million to $215.4 million and our EBITDA grew from $2.8
million to $29.8 million, representing compounded annual growth rates of 49.5%
and 63.3%, respectively. Sales for first fiscal quarter 1999 were $45.1 million,
which represented an increase of 41.8% over sales for first fiscal quarter 1998.

COMPANY OVERVIEW

We were incorporated on May 8, 1984 pursuant to the Canada Business
Corporations Act under the name of Textiles Gildan Inc. At our inception, we
focused our activities on the manufacture of textiles and produced and sold
finished fabric as a principal product line. However, in 1992, we redefined our
operating strategy and, by 1994, our operations focused exclusively on the
manufacture and sale of activewear for the wholesale distribution market. In
March 1995, we changed our name to Gildan Activewear Inc./Les Vetements de
Sports Gildan Inc. On June 16, 1998, in conjunction with our initial public
offering, we filed Articles of Amendment to, among other things, remove the
private company restrictions contained in our charter documents and change the
structure of our authorized share capital.

OPERATING STRATEGY

We believe that our focus on manufacturing selected product lines with
premium quality features and selling our products at competitive prices, coupled
with an innovative marketing strategy emphasized by our controlled distribution,
is the reason we have been able to rapidly increase our market presence. We
attribute our strong operating performance to our strategy which is composed of
the following principal components:

- EMPHASIS ON PREMIUM QUALITY PRODUCTS. We offer our products in a wide
variety of weights, sizes, colors and styles. All of our T-shirts are
made with pre-shrunk cotton fabric, feature top-stitched seamless
collars and double stitched hems, and are quarter-turned to eliminate
the center crease which would otherwise result from the production
process. To ensure the premium quality of our products, we apply
stringent quality control procedures at all stages of the production
process, both at our facilities and those of our contractors. We believe
that our commitment to consistently produce premium quality, value-added
products at competitive prices enhances our long-term relationships with
our customers.

- COMPETITIVE PRICING AND LOW-COST OPERATIONS. We believe that our
combination of competitive prices and premium quality products provides
superior value to our customers. We are able to price our products
competitively because of our success in maintaining low production and
operating costs. We accomplish this by:

- locating the majority of our sewing operations in the Caribbean Basin
and Central America, where we benefit from lower labor costs;

- using only modern, automated facilities;

30
<PAGE> 34

- selling to the wholesale channel which enables us to use a small sales
force and avoid the costs and complexities of selling to the retail
channel.

- CONTROLLED DISTRIBUTION TO THE WHOLESALE CHANNEL. While our major
competitors focus primarily on sales directly to the retail apparel
industry, we market our products through wholesale channels of
distribution, which is principally comprised of distributors and major
garment imprinters. As part of this controlled distribution strategy, we
limit the number and monitor the quality of our distributors, which
comprise the largest component of our customer base. We sell only to the
largest garment decorators, and direct orders from smaller ones to our
customers. We believe that this focused strategy enables us to:

- foster strong customer and brand loyalty among our distributors and
decorators;

- establish control over the marketing and orderly distribution of our
products;

- effectively plan and predict production; and

- manage expected increases in demand.

- MODERN, VERTICALLY-INTEGRATED OPERATIONS. We believe that our modern,
vertically-integrated operations, which have been designed and developed
to support our operating strategy, provide us with the flexibility and
efficiency to meet our customers' needs. We intend to continue to
acquire modern, automated equipment for all aspects of our manufacturing
process to maximize production and achieve high efficiency rates. Over
the past three fiscal years, we have spent $36.4 million on such
improvements. Our operations are vertically-integrated, which means that
we knit, dye, finish, cut and sew our products at our facilities. This
enables us to maximize profit margins and monitor quality at all stages
of the production process.

- EXPERIENCED MANAGEMENT TEAM. Our senior executives have significant
industry experience. Our strategy of locating all of our capital and
technology-intensive textile manufacturing operations within one hour of
our executive offices facilitates a proactive management philosophy.

GROWTH STRATEGY

We have a comprehensive long-term strategy to sustain our strong unit and
dollar sales growth. The key elements of this strategy are:

- INCREASING SALES TO NEW AND EXISTING CUSTOMERS. To increase sales, we
plan to:

- continue to develop new business with our existing customers as a
result of our enhanced production and distribution capacity and the
introduction of new products;

- pursue additional wholesale distributors which we believe will
generate substantial sales growth without adversely affecting sales to
our existing customers; and

31
<PAGE> 35

- BROADENING PRODUCT OFFERING. We also intend to increase our sales to
existing customers through the introduction of complementary product
lines and new products. In fiscal 1999, in response to customer demand,
we introduced:

- a new lightweight T-shirt, the Famous T(TM), to enable Gildan to
effectively compete in the lower priced market segments;

- placket collar golf shirts, which we believe to be one of the fastest
growing product segments in the imprinted activewear industry; and

- a new 50% cotton/50% polyester T-shirt, the Ultra-Blend(TM), which is
our initial entry into the blended T-shirt market.

- added knitting, dyeing and finishing machines and plan to add
additional machinery;

- began building a facility in Barbados, which we expect to be
operational by summer 1999, to provide additional sewing capacity for
placket collar golf shirts;

- opened a 210,000-square foot distribution center in Miami, which
replaced our 67,000-square foot distribution center in Champlain, to
service our U.S. market and targeted Western European markets; and

- opened a 60,000-square foot distribution center in Ville Saint-Laurent
to service our Canadian markets.

INDUSTRY OVERVIEW

We focus principally on sales of T-shirts, placket collar golf shirts and
sweatshirts, in "blank" form, to the wholesale imprinted activewear market.
"Imprinted" activewear is typically imprinted or embroidered with a logo, design
or character before it reaches the consumer. Imprinted activewear is either
branded or private label. Branded products reach consumers carrying the
manufacturer's label, whereas products sold on a private label basis reach
consumers carrying the brand name of the customer. Based on publicly available
information, we believe that sales of imprinted T-shirts at the wholesale level
in the United States were US$6.1 billion for 1997 and are growing at an annual
rate of 4-5%. We estimate that blended fabric T-shirts, such as 50% cotton/50%
polyester T-shirts, comprise approximately 33% of this market.

We believe that growth in the imprinted activewear market has been driven
primarily by:

- significant development of the entertainment/sports licensing and
merchandising businesses;

- substantial growth in the ad specialty business, for example, corporate
advertising;

- a greater use and acceptance of casual dress in the workplace;

- a growing consumer preference for apparel with a relaxed feel and look;

32
<PAGE> 36

- a substantial increase in tourism; and

- an increasing emphasis on physical fitness.

Over the past several years, casual wear has become increasingly acceptable
in a wider array of settings. In the workplace, for example, many employers have
adopted more flexible dress codes, resulting in greater consumer demand for
casual wear, including T-shirts, knit shirts and sweatshirts. Based on publicly
available information, we believe that 90% of United States companies now allow
their employees to wear casual clothing to work, either regularly or on special
occasions, as compared to 63% in 1992. In addition, a growing emphasis on
physical fitness has spurred a substantial increase in sports participation and,
as a result, has created a heightened demand for activewear. For example, based
on published reports, from 1987 to 1996, the number of people in the United
States participating more than once in the ten most popular sports increased by
approximately 36.8 million. Furthermore, significant improvements in activewear
apparel, ranging from enhanced product characteristics--pre-shrunk 100% cotton
fabrics, improved fabric weight, blends and construction--to increased product
variety--including new sizes, colors and styles--have enhanced consumer appeal.
We believe these trends will continue to generate demand for activewear products
for the foreseeable future.

The activewear market is characterized by low fashion risk compared to many
other apparel markets. While opportunity exists for product innovations and
differentiation, basic garment styles generally are not driven by trends or
fads. The activewear industry is also characterized by significant barriers to
entry, including:

- substantial capital expenditures required for vertically-integrated
production;

- large investments in inventories and working capital;

- strong supplier relationships; and

- established customer relationships.

PRODUCTS

Historically, we have manufactured two principal product lines: premium
quality 100% cotton T-shirts and premium quality 90% cotton/10% polyester
sweatshirts in a variety of weights, sizes, colors and styles. We market and
sell these products under the Gildan Activewear(TM) brand name and have
historically classified them into three categories: midweight, heavyweight and
superweight. In 1999, we introduced a new lower weight T-shirt, the Famous
T(TM). As part of our growth strategy, in fiscal 1999 we increased our product
offerings to include 100% cotton placket collar golf shirts. In April 1999, we
launched a new 50% cotton/50% polyester T-shirt, the Ultra-Blend(TM), which we
expect to begin shipping to our customers in fourth fiscal quarter 1999. All of
our products carry a sub-brand name, for example, Ultraweight Cotton(TM), which
has been developed to reinforce our emphasis on premium quality. The following
table sets forth, for the periods indicated, certain information regarding sales
of our activewear products.
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED FISCAL YEAR ENDED FISCAL YEAR ENDED
SEPTEMBER 29, 1996 OCTOBER 5, 1997 OCTOBER 4, 1998
----------------------------- ------------------------------ ------------------------------
GROSS AVG. SALES GROSS AVG. SALES GROSS AVG. SALES
DOZENS PRICE PER DOZENS PRICE PER DOZENS PRICE PER
SALES SOLD DOZEN SALES SOLD DOZEN SALES SOLD DOZEN
------- ------ ---------- -------- ------ ---------- -------- ------ ----------
(IN THOUSANDS, EXCEPT PRICE PER DOZEN)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
T-shirts............. $69,979 1,899 $ 36.85 $102,367 2,950 $ 34.70 $195,623 5,721 $ 34.19
Sweatshirts.......... 10,066 85 118.42 17,477 158 110.61 19,805 195 101.56
------- ----- -------- ----- -------- -----
Total/Avg............ $80,045 1,984 $119,844 3,108 $215,428 5,916
======= ===== ======== ===== ======== =====

<CAPTION>
FIRST FISCAL QUARTER ENDED
JANUARY 3, 1999
-----------------------------
GROSS AVG. SALES
DOZENS PRICE PER
SALES SOLD DOZEN
------- ------ ----------
<S> <C> <C> <C>
T-shirts............. $40,728 1,192 $ 34.17
Sweatshirts.......... 4,381 41 106.85
------- -----
Total/Avg............ $45,109 1,233
======= =====
</TABLE>

33
<PAGE> 37

T-SHIRTS

In fiscal 1998, T-shirts represented approximately 90% of our sales. We
produce T-shirts in a variety of weights, sizes, colors and styles, including
short and long-sleeved shirts, henleys and pocketed and mockneck products. Our
primary T-shirt offerings are the Famous T(TM) T-shirt (4.8 oz. per sq. yd.),
the Gildan Activewear Heavyweight Cotton(TM) T-shirt (5.3 oz. per sq. yd.), the
recently introduced Gildan Activewear Ultra-Blend(TM) T-shirt (5.5 oz. per sq.
yd.), the Gildan Activewear UltraCotton Heavyweight(TM) T-shirt (6.1 oz. per sq.
yd.) and the Gildan Activewear SupraCotton Superheavyweight(TM) T-shirt (7.0 oz.
per sq. yd.). Each of these T-shirt lines incorporates styles with enhanced
features such as quarter-turned creaseless fronts, shoulder to shoulder tape
reinforcement, double stitching, tubular seamless neck and body, and 38 stitches
per inch.

SWEATSHIRTS

In fiscal 1998, sweatshirts represented approximately 10% of our sales. We
produce sweatshirts in a variety of weights, sizes, colors and styles. Our
primary sweatshirt offerings are the Gildan Activewear Heavyweight Cotton(TM)
Sweatshirt (7.0 oz. per sq. yd.), the Gildan Activewear UltraCotton
Heavyweight(TM) Sweatshirt (9.0 oz. per sq. yd.) and the Gildan Activewear
SupraCotton Superheavyweight(TM) Sweatshirt (12.0 oz. per sq. yd.).

PLACKET COLLAR GOLF SHIRTS

In fiscal 1999, we introduced placket collar golf shirts in a variety of
weights, sizes, colors and styles. Our placket collar golf shirts include the
Gildan Activewear UltraCotton Heavyweight(TM) Placket Collar Golf Shirt (6.1 oz.
per sq. yd.) in jersey fabric, with or without a pocket, and the Gildan
Activewear UltraCotton Heavyweight(TM) Placket Collar Golf Shirt (7.0 oz. per
sq. yd.) in pique fabric.

MARKETING AND SALES

We market our products directly to our customers through our sales force.
Unlike our major competitors, we do not maintain regional sales offices.
Instead, our sales personnel work from home offices. This allows us to incur
lower selling expenses than many of our major competitors. Sales management is
divided into two divisions: Canada and international, which is comprised
principally of the United States and Western Europe.

Our marketing strategy concentrates exclusively on the wholesale
distribution channel catering to screenprinters, embroiderers and decorators. We
promote ourselves through appearances at tradeshows and magazine advertising. We
also engage in various forms of co-operative advertising with our major
customers, including print advertising, catalogs and mailings. We believe that
we have been innovative in maximizing the impact of our marketing to create a
strong awareness of our products in the screenprinter and embroiderer market.

CUSTOMERS

In fiscal 1998, we sold our products in the United States and Canada, which
accounted for approximately 86% and 14% of total sales, respectively. We are
also developing a network of distributors in Western Europe and we expect to
ship our products to distributors in the United Kingdom in fiscal 2000. We
currently sell our products to approximately 100 customers. In fiscal 1998, our
top three customers, Broder Bros., Co., Pluma Corporation (the Frank L. Robinson
Company subsidiary and the Stardust Corporation subsidiary) and Alpha Shirt,
accounted for 26.6%, 9.6% and 7.4% of total sales, respectively, and our top ten
customers accounted for 68.5% of total sales.

34
<PAGE> 38

Approximately 95% of total sales in fiscal 1998 were made through our
wholesale distributors. The balance of sales consisted of sales to our mill
direct customers, which include some of the largest screenprinters and
embroiderers in North America and, on a private label basis, Nike Canada Ltd.
and Boca/Au Coton. Our screenprinter and embroider customers are capable of
purchasing our minimum container order sizes (for example, 5,000-6,000 dozen) in
accordance with our terms. These sales are made in cooperation with our
wholesale distributors, which provide smaller fill-in orders. Under the mill
direct program, we will supply our products to Fortune Fashion, Inc., a major
supplier of decorated T-shirts to The Walt Disney Company.

We do not have any purchase agreements with our wholesale distributor
customers, except for a contract we entered into with Pluma Corporation in
connection with its acquisitions of Frank L. Robinson Company and Stardust
Corporation. Instead, we meet with these customers at the beginning of each
fiscal year to ascertain their projected requirements and then plan our
production and marketing strategy accordingly. Our wholesale distributor
customers then send purchase orders to us during the course of the fiscal year.
Our experience with this practice has been favorable, since customer projections
have historically been reliable indicators of actual orders.

RAW MATERIALS

Cotton yarn is the principal raw material we use in the manufacture of our
products. In fiscal 1998, we purchased all of our yarn from U.S.-based spinners.
Although Parkdale Mills Inc., Mayo Yarns, Inc. and Frontier Spinning Mills, LLC
accounted for approximately 56.0%, 23.0% and 16.5%, respectively, of our yarn in
fiscal 1998, we believe that the yarn we use may be purchased from a number of
sources. Our practice has been to enter into one-year yarn supply agreements at
the beginning of each fiscal year based on a projected budget. This allows us to
fix our price of yarn for the year, and, consequently, to insulate the largest
part of our raw material cost from adverse price fluctuations. Each of our
supply agreements require the spinner to supply, and Gildan to purchase, a fixed
quantity of yarn for the year at a fixed price. To date, we have not experienced
any significant shortages of raw materials, even during periods of cotton
shortage.

We also purchase chemicals and dyestuff, mainly from Clariant International
AG, Bayer AG and BASF Aktiengesellschaft, and purchase thread from a variety of
suppliers. These raw materials have historically been available in adequate
supply.

MANUFACTURING OPERATIONS AND FACILITIES

We currently operate ten major facilities:

- a knitting plant in Ville Saint-Laurent, Quebec, which knits all of the
fabric from which our products are manufactured and also houses our
executive offices;

- a dyeing and finishing plant in Montreal, Quebec;

- a dyeing and finishing plant in Valleyfield, Quebec;

- a cutting plant in Malone, New York, which cuts all of the fabric from
which our products are manufactured;

- a sewing plant in Montreal, Quebec, which sews all products for sale in
Canada;

- three sewing plants in Honduras;

- a distribution center in Miami, Florida; and

- a distribution center in Montreal, Quebec.

In addition to the ten major facilities we operate, we use the sewing
services of ten contractors in the Caribbean Basin and Mexico on an exclusive
basis.

35
<PAGE> 39

The following diagram illustrates the present flow of our products through
our vertically-integrated operations.
DIAGRAM

TEXTILE OPERATIONS

Knitting. We conduct all of our knitting operations at our central
knitting facility in Ville Saint-Laurent, Quebec. We operate circular knitting
machines at this facility, producing jersey, fleece and ribbing in body-sized
fabrics in tubular form using cotton and cotton/polyester yarns. Substantially
all of our knitting equipment is less than five years old, and we believe that
such equipment is among the latest technology available to the knitting
industry. As part of our expansion strategy, we will continue to acquire
additional knitting equipment.

Dyeing and Finishing. Knitted fabric is batched for bleaching and dyeing
and is taken to our dyeing and finishing facilities in Valleyfield and Montreal.
We have invested approximately $30 million to acquire, modernize and expand
operations at these facilities. These capital expenditures have resulted in a
substantial improvement in the quality of fabrics and a significant reduction in
the percentage of redyes, yield losses and claims with respect to off-shade,
unevenness and roping flaws in the fabric. These capital improvements have also
been directed to modernize production planning and control. These facilities
have been very effective in meeting our needs.

CUT AND SEW OPERATIONS

Cutting. All of the fabric produced at the Montreal and Valleyfield plants
is shipped to our automated cutting facility in Malone, New York, which began
operations in July 1994 and serves as the cutting department for all of our
sewing requirements.

Sewing. We conduct our sewing operations for products sold in Canada at
our 54,000-square foot facility in Montreal. The facility is automated and
operates on a group incentive basis designed to

36
<PAGE> 40

maximize productivity and output while maintaining our rigorous quality control
system. This plant provides us with the ability to effectively service the
Canadian marketplace.

We conduct offshore sewing operations at thirteen facilities, three of
which we operate out of leased premises located in Honduras. Of the remaining
ten facilities, four are located in Honduras, two in El Salvador, two in Haiti,
one in Mexico and one in Nicaragua. These thirteen facilities provide us with
substantially all of our non-Canadian market sewing assembly requirements. Most
of the ten facilities owned by third parties are used by us under exclusive
contract arrangements. Our contractual arrangements with these independent
operators have initial terms ranging between one and three years (with
provisions for renewal), and provide us with a predetermined price and
production output as well as the right of reasonable access to enforce our
quality control procedures. Our offshore sewing management team, headquartered
in San Pedro Sula, Honduras, maintains regular production and quality reviews at
all thirteen of the offshore facilities. We expect to begin operations at a
sewing facility in Barbados, which will provide additional sewing capacity for
placket collar golf shirts, in summer 1999.

We have invested significant managerial resources in ensuring that the
working conditions at our offshore sewing facilities meet or exceed the
standards imposed by Canadian occupational health and safety laws. We
contractually obligate our contractors to follow prescribed employment policies
requiring, for example, minimum employee age of sixteen years and a clean and
safe work environment. To ensure that these employment standards are
appropriate, we have worked with the Canadian International Development Agency,
a Canadian federal governmental agency, to secure the services of professionals
who specialize in social/gender analysis and environmental audits with respect
to developing nations.

DISTRIBUTION OPERATIONS

During fiscal 1998, we distributed all of our products to our customers
directly from our 67,000-square foot distribution center in Champlain, New York.
In June 1998, we began leasing a 210,000-square foot facility located in Miami,
Florida. This facility brings our distribution operations closer to the main
port of entry of most of our products into the United States from the Caribbean
Basin where they are sewn. This facility became operational in October 1998 and
has replaced the Champlain facility which closed in April 1999. As a result of
our rapid growth, we plan to replace the Miami distribution center with a larger
facility in the same geographic region in calendar year 2000.

To better service our Canadian customers, in November 1998 we acquired a
60,000-square foot distribution center in Ville Saint-Laurent, Quebec. This
distribution center became fully operational in April 1999.

37
<PAGE> 41

PROPERTIES

The following table sets forth the location, use and approximate size of
each of our principal properties, and indicates whether it is owned or leased,
and if leased, when the lease expires.

<TABLE>
<CAPTION>
APPROXIMATE AREA OWNED OR
LOCATION USE IN SQUARE FEET LEASED LEASE EXPIRATION(1)
- -------------------------------- ----------------------------- ---------------- -------- -------------------
<S> <C> <C> <C> <C>
Ville Saint-Laurent, Quebec Executive offices 17,000 Leased 2016
Knitting facility 93,000 Leased 2016
Bridgetown, Barbados Executive office 11,000 Owned n/a
Sewing facility(2) 11,000 Owned n/a
Valleyfield, Quebec Dyeing and finishing facility 63,000 Owned n/a
Montreal, Quebec Dyeing and finishing facility 88,000 Owned n/a
Malone, New York Cutting facility 87,000 Leased 2003
Montreal, Quebec Sewing facility 54,000 Leased (3)
San Pedro Sula, Honduras Sewing facility 43,000 Leased 2012
El Progreso, Honduras Sewing facility 73,000 Leased 2013
Choloma, Honduras Sewing facility 34,000 Leased 2001
Ville Saint-Laurent, Quebec Distribution facility 60,000 Owned n/a
Miami, Florida Distribution facility 210,000 Leased 2000
</TABLE>

- -------------------------

(1) Includes renewals.

(2) This facility is under construction. We expect to begin production of
placket collar golf shirts at this facility in summer 1999.

(3) This facility is comprised of three buildings with separate leases which
expire in 2002, 2003 and 2004.

We believe that all of these facilities, whether owned or leased, are well
maintained and in good operating condition. We expect to accommodate our
anticipated sales growth through ongoing maintenance and improvement of our
manufacturing facilities, together with the openings of our Miami and Montreal
distribution centers and the planned opening of our new sewing plant in
Barbados.

SUBSIDIARIES

We have eight wholly-owned subsidiaries:

- Gildan Activewear (Barbados) Inc., a Barbados corporation, which is the
holding company for Gildan Activewear San Jose, S.A., Gildan Activewear
El Progreso, S.A. and Winners Manufacturing, S.A.;

- Gildan Activewear Properties (BVI) Inc., a British Virgin Islands
corporation, which owns the facility in Barbados that will house both
the executive offices of Gildan Activewear SRL and the sewing facility
for placket collar golf shirts;

- Gildan Activewear El Progreso, S.A., a Honduras corporation, which
operates a sewing facility in Honduras;

- Gildan Activewear Malone, Inc., a New York corporation, which cuts
fabric;

- Gildan Activewear Miami, Inc., a Florida corporation, which operates the
Miami distribution center;

- Gildan Activewear San Jose, S.A., a Honduras corporation, which operates
a second sewing facility in Honduras;

38
<PAGE> 42

- Gildan Activewear SRL, a Barbados corporation, which is responsible for
all of our non-Canadian sales and related activities; and

- Winners Manufacturing, S.A., a recently acquired Honduras corporation,
which operates a third sewing facility in Honduras whose name will be
changed to Gildan Activewear San Miguel, S.A.

QUALITY CONTROL

Our quality control team has adopted strict standards and procedures to
ensure the quality of our products. Our quality control team enforces
plant-specific quality control standards at the facilities we own and monitors
quality control at the facilities run by offshore contractors. As a result of
our quality control team's efforts, we have not experienced any significant
quality claims from our customers or end-users.

MANAGEMENT INFORMATION SYSTEMS

We have invested in information technology as a tool to:

- reduce overall costs;

- enhance the efficiency of our garment design and manufacturing; and

- support the sale and distribution of our products to our customers.

Our production software processes customer orders, schedules production for such
orders and monitors the products ordered during all stages of production, from
knitting to sewing and during packaging and distribution. We believe that our
information technology has been effective in meeting our needs. We have
evaluated various Enterprise Resource Planning (ERP) systems, and, on March 25,
1999 we signed a contract for the implementation, during fiscal 1999 and fiscal
2000, of a new ERP package comprising financial, manufacturing, sales management
and distribution modules. These new systems will enhance our information
technology capabilities which, in turn, will support our planned growth. See
"Management Discussion and Analyses of Financial Condition and Results of
Operations--Year 2000 Compliance".

SEASONALITY

The activewear business is seasonal. Demand for our products is higher
during the third and fourth quarters than in the first two quarters of each
fiscal year. We meet with our customers at the beginning of each fiscal year to
ascertain their projected requirements and then plan our production and
marketing strategy accordingly. Based on these discussions, we produce and store
finished goods inventory in order to meet the expected demand for delivery in
the second half of the fiscal year. This practice enables us to plan for the
expected demand for delivery during the year. Our experience with this practice
has been favorable, as customers' projections have been sufficiently reliable in
the past. However, if after producing and storing inventory in anticipation of
third and fourth quarter deliveries, demand is significantly less than expected,
we may be required to hold inventory for an extended period of time at our
expense, or sell the excess inventory at reduced prices, thereby reducing
profits. See "Risk Factors--Our Industry Is Subject to Seasonality Risks".

COMPETITION

The wholesale imprinted activewear segment of the North American apparel
market includes a number of significant competitors, and the activewear segment
overall is extremely competitive. Our

39
<PAGE> 43

primary competitors are the major U.S.-based manufacturers of basic branded
activewear for the wholesale and retail channels. These manufacturers include
Anvil Knitwear, Inc., the Bassett-Walker division of VF Corporation, the Delta
Apparel division of Delta Woodside Industries, Inc., Fruit of the Loom, Inc.,
the Hanes Corporation division of Sara Lee Corporation, the Jerzees division of
Russell Corporation, Oneita Industries Inc., and Tultex Corporation. Some of
these manufacturers have moved the majority of their sewing operations offshore
to reduce operating costs by lowering labor costs. We also compete with
manufacturers of activewear outside the United States, which may have
substantially lower labor costs.

We compete primarily on the basis of quality and price. We produce only
premium quality products. We are able to price our products competitively
because of our success in maintaining low production and operating costs. We
accomplish this by:

- locating the majority of our sewing operations in the Caribbean Basin
and Central America, where we benefit from lower labor costs;

- using only modern, automated facilities;

- locating our knitting and dyeing and finishing facilities in the
Province of Quebec, where we benefit from an abundant supply of low-cost
energy and water, resources necessary for the manufacturing, dyeing and
finishing of fabric; and

- selling to the wholesale channel which enables us to us to use a small
sales force and avoid the costs and complexities of selling to the
retail channel.

Our vertically-integrated operations allow us to produce activewear from
our own fabrics, further maximizing profit margins, reducing transportation
costs and enabling us to monitor quality. Furthermore, we have been innovative
in product development, incorporating premium quality features without
compromising our comparative price advantage.

Our ability to remain competitive in the areas of quality, price,
marketing, product development, manufacturing, distribution and order processing
will, in large part, determine our future success. Anticipated changes in the
regulatory environment affecting the textile and apparel industries may also
affect the competitive pressures facing us. See "--Trade Regulatory
Environment".

TRADE REGULATORY ENVIRONMENT

The textile and apparel industries in both the United States and Canada
have historically received a relatively higher degree of international trade
protection than some other industries. However, this protection is diminishing
as a result of the implementation of trade agreements reached in the last ten
years. So far, we have been able to adapt to this changing international
regulatory climate. In order to maintain our competitiveness in the future, we
must continue to adapt to future changes in trade protection, including changes
reflected in existing trade agreements and changes that may be decided
unilaterally by the governments of the countries and regions in which we and our
competitors operate. We have structured our operations in order to minimize the
impact that the current regulatory trade regime would have on the movement of
inputs and the sale of final products internationally. For example, by cutting
fabric in the United States, we can use favorable tariff provisions that would
be unavailable if the cutting were done in Canada. However, we believe that,
taken as a whole, the current regulatory trade regime is no more burdensome to
us than to our competitors.

40
<PAGE> 44

WORLD TRADE ORGANIZATION

In 1995, the Agreement on Textiles and Clothing came into effect, requiring
importing countries, including the United States and Canada, to eliminate quotas
on imports of textiles and apparel from exporting countries by 2005.

The Agreement on Textiles and Clothing establishes a new set of criteria to
be applied by World Trade Organization member nations against other World Trade
Organization members during the ten-year phase-in period. This regime permits
the temporary imposition of additional quotas on textile and apparel exports in
the event such exports are causing, or threatening to cause, serious damage to
the industry in the importing nation. Although China and Taiwan currently remain
outside the World Trade Organization, both are seeking membership. If either
China or Taiwan were to be admitted into the World Trade Organization on terms
that did not allow for the imposition of quotas against their products, this
could have a material adverse effect on us because it would increase competition
with products from countries with low labor costs.

The United States maintains bilateral textile quota agreements under the
Agreement on Textiles and Clothing with the countries in which Gildan assembles
its garments, except Mexico. See "--NAFTA". None of our product categories is
currently subject to quotas into the United States under these bilateral
agreements. It is possible that during the World Trade Organization quota
phase-out period, the United States could impose quotas on some or all of our
products from these countries in conformity with its World Trade Organization
obligations. Our Caribbean-made products are not subject to quotas in Canada, as
Canada does not have bilateral textile quota agreements with the Caribbean
countries in which we produce garments.

The World Trade Organization also obtains commitments from all members to
reduce tariffs over a ten-year period. The United States is committed to tariff
reductions in the textile and apparel sector, but, compared to other industries,
these reductions are very small, and textiles and apparel remain one of the most
highly tariff-protected U.S. industries. Because our cutting operations are
performed in the United States, we are able to take advantage of the duty
deduction on finished garments imported into the United States under sub-heading
9802.00.80, Harmonized Tariff Schedules of the United States (formerly item
807.00, Tariff Schedules of the United States) for the value of the fabric cut
in the United States and sewn outside the United States. The dutiable portion of
the garment is assessed with duty at the Most Favored Nation rates bound in
accordance with the World Trade Organization obligations, except for goods sewn
in Mexico or Canada, which are subject to NAFTA rates, as discussed below. When
such garments are then sent to Canada from the United States, they must pay the
full Most Favored Nation rate of duty, which is currently 21%, but are eligible
for duty drawback on the duty paid into the United States on Caribbean imports.

NAFTA

NAFTA was implemented on January 1, 1994. This agreement establishes a free
trade area among the United States, Mexico and Canada. The United States and
Canada had previously implemented a bilateral free trade agreement which was
incorporated into NAFTA. None of the benefits of NAFTA applies to our goods sewn
outside of the three NAFTA countries and exported to the United States for
distribution.

All NAFTA-originating merchandise was removed from quota upon
implementation on January 1, 1994. NAFTA-originating merchandise generally
requires goods to be made in a NAFTA country from the yarn stage forward. In
other words, the yarn must be spun or extruded in a NAFTA country, the fabric
must be woven or knitted in a NAFTA country, and the apparel must be cut and
assembled in a NAFTA country to be considered NAFTA-qualifying. Certain
exceptions and additional criteria for

41
<PAGE> 45

qualification to these requirements are set forth in NAFTA. Because we knit our
fabric in Canada from United States yarn, our garments sewn in either Canada or
Mexico are NAFTA-qualifying and quota free. Our garments sewn in facilities
located offshore, other than Mexico, do not qualify for any of the benefits of
NAFTA, including preferential tariff treatment.

NAFTA provides for the eventual unrestrained trade in all non-NAFTA
originating textiles and clothing among the three nations by 2004. Only goods
from Mexico were previously under quota into the United States, and there were
no quotas on textile and apparel goods traded between Canada and the United
States. Some non-NAFTA originating textile and apparel goods from Mexico
exported to the United States were immediately removed from quota, other items
will be integrated in three stages, January 1, 1994, January 1, 2001 and January
1, 2004.

NAFTA sets forth a schedule to provide duty-free trade for textile and
apparel goods originating in Canada, the United States or Mexico. The tariffs
for NAFTA-originating textiles and apparel traded between the United States and
Canada were eliminated effective January 1, 1998, pursuant to the tariff
phase-out schedule carried over into NAFTA from the previous United
States-Canada Free Trade Agreement. Thus, our Canadian-sewn goods imported into
the United States were duty free as of January 1, 1998.

The tariffs on some Mexican NAFTA-originating products, including our
products, were eliminated on January 1, 1994 for imports into the United States
and Canada. Other NAFTA-originating products were subject to staged duty
reductions effective on January 1, 1994 and gradually phased-out over a six-or
ten-year period.

Non-NAFTA originating apparel goods cut or sewn in the NAFTA territory from
non-NAFTA originating yarn or fabric are entitled to receive NAFTA duty rates up
to "tariff preference levels". A tariff preference level is a quota which allows
non-NAFTA originating goods to receive the same duty treatment as qualifying
goods until that quota is reached. There is no provision in NAFTA for the
removal of these limits, although certain U.S. interests are seeking to
renegotiate certain of the tariff preference levels.

FUTURE TRADE AGREEMENTS

NAFTA may be expanded in the future to include other countries. Both Mexico
and Canada have implemented free trade agreements with Chile. The United States
has announced its intention to expand the scope of NAFTA, with Chile being the
first country to join. Recent efforts have also been made by the United States
to extend the benefits of NAFTA to the CBI countries. It is not known whether
this legislation will come into effect nor what its terms will be. Under all
pending legislative proposals, there would be no duty on goods sewn in CBI
countries upon entry into the United States if the fabric were knit in the
United States from yarn spun in the United States. The adoption of this
legislation in the United States could adversely affect our operations because
we knit all of our fabric in Canada. Thus, all of our goods sewn in the
Caribbean and subsequently exported to the United States would remain subject to
duties whereas some of our competitors that knit their fabric in the United
States from yarn spun in the United States would no longer be subject to these
duties. This outcome would give an advantage to some of our competitors.

In addition, the Free Trade Agreement of the Americas is moving forward.
This agreement would open a free trade area among the 34 nations of the western
hemisphere. Negotiations have begun and are slated to end in 2005.

42
<PAGE> 46

EMPLOYEES

At March 31, 1999, we employed approximately 3,400 full-time employees. Our
sewing contractors in Honduras, Mexico, Haiti, El Salvador and Nicaragua employ
approximately 3,100 additional persons. Of our 3,400 full-time employees,
approximately 270 are covered by collective bargaining agreements. Approximately
150 employees at the Valleyfield dyeing and finishing facility are covered by a
collective bargaining agreement that expires on October 31, 2001 and
approximately 120 employees at the Montreal dyeing and finishing facility are
covered by a collective bargaining agreement that expires on December 31, 2001.
We consider our relations with our employees to be very good and, as of the date
of the prospectus, we have not experienced any work stoppages that have had a
material impact on our operations.

INTELLECTUAL PROPERTY

We own several registered trademarks, including, among others, "Gildan" in
Canada and the United States, the Gildan "logo" in Canada, and "Gildan
Activewear" in several countries in Europe, Central America, South America and
Asia and in Australia. Applications for the registration of a number of other
trademarks, including "Gildan Activewear", are pending in Canada, the United
States and several other countries.

We believe that the rights to our trademarks are significant assets in
Canada and the United States. We have and intend to continue to maintain our
trademarks and the relevant registrations, and will actively pursue the
registration of trademarks in Canada, the United States and abroad.

ENVIRONMENTAL REGULATION

All of our operations are subject to various environmental and occupational
health and safety laws and regulations. Because we monitor environmental issues,
we believe that we are in compliance with the regulatory requirements of those
jurisdictions in which our facilities are located. We will continue to make
expenditures to comply with these requirements, and we do not believe that
compliance will have a material adverse effect on our business. As is the case
with manufacturers in general, if a release of hazardous substances occurs on or
from our properties or any associated offsite disposal locations, or if
contamination from prior activities is discovered at any of our properties, we
may be held liable. While the amount of such liability could be material, we
endeavor to conduct our operations in a manner that reduces such risks.

LEGAL PROCEEDINGS

There are no material legal proceedings pending against us.

43
<PAGE> 47

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information concerning our directors
and executive officers at May 1, 1999.

<TABLE>
<CAPTION>
NAME AND MUNICIPALITY OF RESIDENCE AGE POSITION
- ----------------------------------------- --- -----------------------------------------
<S> <C> <C>
H. Gregory Chamandy...................... 40 Chairman of the Board and Chief Executive
Montreal, Quebec, Canada Officer
Glenn J. Chamandy........................ 37 Director, President and Chief Operating
Town of Mount Royal, Quebec, Canada Officer
Edwin B. Tisch........................... 60 Director, Executive Vice President,
Hampstead, Quebec, Canada Manufacturing
William H. Houston III(3)................ 64 Director
Memphis, Tennessee, United States
Daniel Laporte(1)(2)(3).................. 52 Director
Westmount, Quebec, Canada
Norman M. Steinberg(1)(2)(3)............. 49 Director
Cote St-Luc, Quebec, Canada
Robert M. Baylis(1)...................... 60 Director
Rowayton, Connecticut, United States
Richard P. Strubel(2).................... 59 Director
Chicago, Illinois, United States
Laurence G. Sellyn....................... 50 Chief Financial Officer
Surrey, British Columbia, Canada
Gino Martel.............................. 40 Secretary
Montreal West, Quebec, Canada
Shirley Chamandy......................... 60 Treasurer
Montreal, Quebec, Canada
George Sam Yu Sum........................ 41 Vice President, Operations
Hampstead, Quebec, Canada
David Cherry............................. 42 President of Gildan Activewear SRL,
Bridgetown, Barbados Gildan Activewear (Barbados) Inc. and
Gildan Activewear Properties (BVI) Inc.
Barry E. Mademann........................ 59 Vice President, Textile Manufacturing
Statesville, North Carolina, United
States
Francois Vinette......................... 43 Vice President, Information Technology
Dollard-des-Ormeaux, Quebec, Canada
Ira Kaminsky............................. 57 President of Gildan Activewear San Jose,
S.A.,
San Pedro Sula, Honduras Gildan Activewear El Progreso, S.A. and
Winners Manufacturing, S.A.
</TABLE>

- -------------------------

(1) Member of the audit committee.

(2) Member of the compensation committee.

(3) Member of the corporate governance committee.

H. Gregory Chamandy is the co-founder of Gildan and has served as Chairman
of the Board and Chief Executive Officer since December 1994, prior to which he
served in various executive capacities

44
<PAGE> 48

with Gildan. Mr. Chamandy has been involved in various Chamandy family textile
and apparel businesses for over twenty years. Mr. Chamandy has been a director
of Gildan since 1984.

Glenn J. Chamandy is the co-founder of Gildan and has served as President
and Chief Operating Officer since December 1994, prior to which he served in
various executive capacities with Gildan. Mr. Chamandy has been involved in
various Chamandy family textile and apparel businesses for over eighteen years.
Mr. Chamandy has been a director of Gildan since 1984.

Edwin B. Tisch has served as Executive Vice President, Manufacturing since
April 1998 and was Vice President, Manufacturing from 1987 to 1998. Mr. Tisch
has been involved in the textile and apparel businesses in Canada and Europe for
over thirty years. Mr. Tisch has been a director of Gildan since January 1996.

William H. Houston III has served as an associate with Flanagan Trading
Corporation since 1996 and as a senior consultant with Sandler and Travis Trade
Advisory Services, a firm he joined in 1990. Prior to accepting that position,
he served as U.S. Ambassador/Chief Textile Negotiator for the United States
Trade Representative during 1987 and 1988. He also worked with Sparks Companies,
Inc., an international consulting firm specializing in the agricultural sector,
during 1994 and 1995, and continues to operate World Trade Link, an
international business consulting firm he founded in 1988. He is a past
president of the Cotton Foundation and the Delta Council. Mr. Houston has been a
director of Gildan since November 1997.

Daniel Laporte has served as Vice President, Investment for the Fund, one
of the largest venture capital funds in Canada, since June 1996. From February
1994 to June 1996, Mr. Laporte served as Investment Advisor and Portfolio
Manager for the Fund. Prior to joining the Fund, Mr. Laporte was a Vice
President with the venture capital arm of The Royal Bank of Canada, RBC Capital.
Mr. Laporte has been a director of Gildan since January 1996.

Norman M. Steinberg is a partner of Ogilvy Renault, our Canadian counsel,
and a member of its management committee. He has been associated with Ogilvy
Renault since 1976 and he is a director of various companies and non-profit
organizations, such as the Montreal Symphony Orchestra and Centaur Theatre. He
is also the President of the Canadian Club of Montreal. Mr. Steinberg has been a
director of Gildan since March 1998.

Robert M. Baylis is currently director of The International Forum, an
executive education program of the Wharton School and is a director of various
companies, including New York Life Insurance Company, Host Marriott Corporation
and Covance, Inc. Mr. Baylis retired from the position of Vice Chairman of CS
First Boston in 1996, after thirty-three years with this investment banking firm
or associated corporations. He was Chairman and Chief Executive Officer of CS
First Boston Pacific Inc./ Hong Kong from 1993 to 1994. Mr. Baylis has been a
director of Gildan since February 1999.

Richard P. Strubel acts as a trustee of the institutional and retail mutual
funds managed by Goldman, Sachs & Co. and is a managing director of Tandem
Partners, Inc., a privately held management services firm which he formed in
1990. He is also trustee of the Northern Institutional Funds, a family of
institutional mutual funds managed by the Northern Trust Company, and a director
of Kaynar Technologies Inc., a leading manufacturer of aircraft fasteners based
in Orange, California listed on the NASDAQ. Mr. Strubel was President of
Northwest Industries, which included Fruit of the Loom and BVD among its
operating entities, from 1982 to 1983. Mr. Strubel has been a director of Gildan
since February 1999.

Laurence G. Sellyn has served as Chief Financial Officer since April 1999.
He is a Chartered Accountant. 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, from

45
<PAGE> 49

October 1992 to March 1999. Prior to joining Wajax, he was employed by Domtar
Inc., where he held various positions, including Corporate Controller and Vice
President, Business Planning and Development.

Gino Martel has served as Secretary since March 1998. Mr. Martel is also a
partner of Hart, Saint-Pierre, our Canadian counsel. He has been employed by
Hart, Saint-Pierre since 1985.

Shirley Chamandy has served as Treasurer since Gildan's inception. Ms.
Chamandy has been involved in various Chamandy family textile and apparel
businesses for over thirty-three years.

George Sam Yu Sum has served as Vice President, Operations since 1998.
Previously, he served as Director of Operations. Prior to joining Gildan in
1995, Mr. Sam Yu Sum spent sixteen years with Dominion Textiles where he served
in various managerial capacities, from manufacturing to sales.

David Cherry has served as President of Gildan Activewear SRL, Gildan
Activewear (Barbados) Inc. and Gildan Activewear Properties (BVI) Inc. since
August 1998, March 1999 and March 1999, respectively. He served as Vice
President, Logistics from July 1998 to February 1999. Prior to joining Gildan,
he was employed by Fruit of the Loom for over twenty years, where his last
position was Vice President of Distribution and Logistics.

Barry E. Mademann has served as Vice President, Textile Manufacturing since
June 1998. Prior to joining Gildan, he served as Vice President for Jockey
International for thirteen years. He was also a principal at Kurt Salmon
Associates for twelve years.

Francois Vinette has served as Vice President, Information Technology since
August 1998. Prior to joining Gildan, he served for two years as Senior Project
Director at IBM Canada Ltd. Prior to IBM, he served for sixteen years as MIS
project director for several other companies.

Ira Kaminsky has served as the President of Gildan Activewear San Jose,
S.A. Gildan Activewear El Progreso, S.A. and Winners Manufacturing, S.A. since
June 1997, June 1998 and March 1999, respectively. From January 1997 to June
1997, he served as Production Manager, Offshore. Prior to joining Gildan, Mr.
Kaminsky worked for Val-Dor, Inc., a sewing contractor.

H. Gregory Chamandy and Glenn J. Chamandy are brothers and Shirley Chamandy
is their mother.

BOARD OF DIRECTORS

Our board of directors currently consists of eight members. Each director
is elected at the annual meeting of shareholders to serve until the next annual
meeting or until a successor is elected or appointed. At each annual meeting of
shareholders, two directors, called the Class A Directors, are elected by the
holders of Class A Subordinate Voting Shares only, voting as a separate class.
Messrs. Baylis and Houston are the current Class A Directors. The remaining
directors are elected by the Class A Subordinate Voting Shares and the Class B
Multiple Voting Shares, voting together as a single class, with holders of the
Class A Subordinate Voting Shares having one vote per share and holders of the
Class B Multiple Voting Shares having eight votes per share. If there are no
longer any Class B Multiple Voting Shares outstanding on the date of any meeting
of shareholders at which directors are to be elected, then all of our directors
will be elected by the holders of Class A Subordinate Voting Shares. Because of
the voting rights attached to the Class B Multiple Voting Shares, holders of the
Class B Multiple Voting Shares may be able to elect all of the directors other
than the Class A Directors even when the number of outstanding Class B Multiple
Voting Shares represents a very small proportion of the Equity Shares
outstanding. See "Risk Factors--We Are Controlled by Harco" and "Description of
Share Capital". Executive officers are appointed annually and serve at the
discretion of the board of directors.

46
<PAGE> 50

COMMITTEES OF THE BOARD OF DIRECTORS

Our board of directors has an audit committee, a compensation committee and
a corporate governance committee. The audit committee is responsible for
recommending to the board of directors the engagement of our independent
auditors and reviewing with the independent auditors the scope and results of
the audits, our internal accounting controls, audit practices and the
professional services furnished by the independent auditors. The compensation
committee reviews the performance of most of our executive officers and our
operating subsidiaries, makes recommendations to the board on, among other
things, the compensation of senior executives and administers our stock option
plan. The corporate governance committee is responsible for matters relating to
corporate governance.

COMPENSATION OF DIRECTORS

Each director who is not a salaried officer of Gildan or any of its
subsidiaries (a "Non-Executive Director") receives the following compensation
for services during his term of office:

- a basic annual retainer of $8,000 payable in quarterly installments for
services as a director;

- an additional annual retainer of $1,000 ($3,500 in the case of the
chairman of the committee) for services on a committee of the board of
directors;

- $1,000 for each board or committee meeting attended, or $500 in the case
of meetings held on the same day as another meeting for which the
Non-Executive Director is already being paid a fee; and

- reimbursement for travel and other out-of-pocket expenses incurred in
attending board or committee meetings.

Non-Executive Directors residing in the United States receive the foregoing
amounts in U.S. dollars. For example, the basic annual retainer paid is
US$8,000, as opposed to the U.S. dollar equivalent of Cdn$8,000.

In addition to the base compensation described above, Non-Executive
Directors may also be granted options under our stock option plan, as described
under "--Stock Option Plan". During fiscal 1998, options covering 5,000 Class A
Subordinate Voting Shares were granted to each of the Non-Executive Directors
then in office at an exercise price of $10.29 (US$7.00) per Class A Subordinate
Voting Share.

COMPENSATION STRATEGY

We recently developed and implemented a formal strategic policy regarding
the compensation of our executives (and other non-production employees). This
policy is intended to ensure that our executives receive total compensation that
(a) is competitive with the compensation received by executives employed by a
group of comparable companies selected by us (the "reference market"), (b) links
the executives' interests with those of the shareholders and (c) rewards
superior performance. The policy is comprised of three components:

- the base compensation strategy which is intended to align base salaries,
benefits and perquisites with the median of the reference market;

- the short-term incentive plan, which is our annual incentive plan and
aims at providing bonuses which bring the total cash compensation
received by our executives to the 75th percentile of total cash
compensation received by executives in the reference market, if all of
our financial objectives are met or exceeded; and

47
<PAGE> 51

- the long-term incentive plan, which is our stock option plan and is
intended to bring the total compensation received by our executives to
the 75th percentile of total compensation received by executives in the
reference market.

EXECUTIVE COMPENSATION

The aggregate amount of compensation we paid to our directors and executive
officers as a group (15 persons) for fiscal 1998 was approximately $2.5 million.

The following table sets forth certain compensation information for the
Chief Executive Officer and the four other most highly compensated executive
officers (collectively, the "Named Executive Officers") for services rendered in
all capacities during fiscal 1997 and fiscal 1998.

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SHARES
------------------------------------- UNDERLYING
OTHER ANNUAL OPTIONS
FISCAL SALARY BONUS COMPENSATION(1) GRANTED
NAME AND PRINCIPAL POSITIONS YEAR ($) ($) ($) (#)
- ---------------------------- ------ ------- ------- --------------- ------------
<S> <C> <C> <C> <C> <C>
H. Gregory Chamandy.................. 1998 298,000 249,558(2)(3) 26,086(4)(5) 88,000
Chairman of the Board and 1997 131,151 100,000 40,319(5)(6) --
Chief Executive Officer
Glenn J. Chamandy.................... 1998 298,000 249,558(2)(3) 35,449(5)(7) 88,000
President and 1997 146,498 100,000 28,282(5)(8) --
Chief Operating Officer
Edwin B. Tisch....................... 1998 298,000 249,558(2)(3) 4,758(9) 88,000
Executive Vice President, 1997 125,922 100,000 19,646(10) --
Manufacturing
Ken Cieply(11)....................... 1998 194,000 43,090(3) -- 57,000
Vice President, 1997 173,826 115,034 373 --
Finance and Administration
George Sam Yu Sum(12)................ 1998 143,749 33,317(3) -- 30,000
Vice President, 1997 -- -- -- --
Operations
</TABLE>

- -------------------------

(1) Perquisites and other personal benefits which in the aggregate do not
exceed 10% of the total annual salary and bonus of a Named Executive
Officer for the year have been excluded.

(2) These bonus amounts include a special bonus of $155,000 granted to each of
H. Gregory Chamandy, Glenn J. Chamandy and Edwin B. Tisch.

(3) Given that our annual incentive plan came into effect on May 1, 1998,
incentive bonuses included in these amounts correspond to 5/12ths of the
annual bonuses calculated pursuant to the annual incentive plan.

(4) This amount includes $23,993 of interest benefit, imputed at an annual rate
of 7.0%, on loans made available to the Named Executive Officer and his
associates. See "--Indebtedness of Directors and Officers".

(5) No amount has been included in this column on account of imputed interest
on a loan in the amount of $1,712,769 ($990,000 in 1997) extended by us to
Harco which, up to July 1998, was non-interest bearing, because such loan
was extended otherwise than in connection with the Named Executive
Officers' compensation.

(6) This amount includes $15,051 relating to a housing benefit and $17,292 of
interest benefit, imputed at an annual rate of 6.0%, on loans made
available to the Named Executive Officer and his associates. See
"--Indebtedness of Directors and Officers".

(7) This amount includes $33,826 of interest benefit, imputed at an annual rate
of 7.0%, on loans made available to the Named Executive Officer and his
associates. See "--Indebtedness of Directors and Officers".

(8) This amount includes $20,306 of interest benefit, imputed at an annual rate
of 6.0%, on loans made available to the Named Executive Officer and his
associates. See "--Indebtedness of Directors and Officers".

48
<PAGE> 52

(9) This amount includes $2,091 of interest benefit, imputed at an annual rate
of 7.0%, on loans made available to the Named Executive Officer and his
associates. See "--Indebtedness of Directors and Officers".

(10) This amount includes $11,077 relating to a housing benefit extended to Mr.
Tisch.

(11) As of April 1999, Mr. Cieply is no longer employed by Gildan.

(12) Mr. Sam Yu Sum was appointed to his current position effective April 1998
and was not an executive officer of Gildan prior to that time. Accordingly,
only his compensation for 1998 is reported in this table.

ANNUAL INCENTIVE PLAN

Our annual incentive plan, known as the Gildan Supplemental Cash
Opportunity for Results Exceeded ("SCORE"), is intended to promote our financial
performance. All full-time, permanent salaried employees are eligible for
bonuses under our annual incentive plan. For a given fiscal year, if both our
actual net earnings exceed the forecasted net earnings and our actual return on
net assets exceeds the forecasted return on net assets by 5% each, we will pay a
bonus based on a pre-determined target percentage of each eligible employee's
base compensation.

STOCK OPTION PLAN

Our stock option plan came into effect in June 1998 and is designed to
assist in attracting and retaining executives and other key employees and to
better align their interests with those of the shareholders. The stock option
plan provides for the granting of options to non-employee directors, officers
and other key employees of Gildan and its subsidiaries. The compensation
committee administers the stock option plan on behalf of the board of directors.
Grant levels depend on the position of the employee and are based on the highest
of the closing prices of the Class A Subordinate Voting Shares on The Montreal
Exchange, The Toronto Stock Exchange and the American Stock Exchange on the
trading day immediately preceding the effective date of the grant of the options
("Gildan Market Value").

Options must be exercised during a period established by the compensation
committee which may not be longer than ten years from the effective date of the
grant. The exercise price payable for each Class A Subordinate Voting Share
covered by an option is equal to the Gildan Market Value.

995,000 Class A Subordinate Voting Shares have been reserved for issuance
under the stock option plan. Our stock option plan provides that, unless
shareholder approval is obtained, the number of Class A Subordinate Voting
Shares reserved for issuance pursuant to the exercise of options thereunder as
well as under other share compensation arrangements will be limited to 10% of
the Equity Shares issued and outstanding. Our stock option plan further provides
for certain limits on the number of Class A Subordinate Voting Shares which we
may issue to insiders and their associates in any one-year period under all of
our share compensation arrangements.

At May 7, 1999, employees and non-employee directors of Gildan had been
granted options to subscribe for a total of 856,500 Class A Subordinate Voting
Shares at prices ranging from $10.29 to $16.50 per share, as shown in the
following table.

<TABLE>
<CAPTION>
DIRECTORS AND OTHER
EXECUTIVE OFFICERS EMPLOYEES
OF GILDAN OF GILDAN
------------------ ---------
<S> <C> <C>
Number of options granted.................................. 601,000 255,500
</TABLE>

49
<PAGE> 53

OPTIONS GRANTED DURING FISCAL 1998

The table below shows information regarding grants of stock options made to
the Named Executive Officers under our stock option plan during fiscal 1998.

<TABLE>
<CAPTION>
PERCENTAGE OF MARKET VALUE
SHARES TOTAL OF SHARES
UNDERLYING OPTIONS UNDERLYING
OPTIONS GRANTED TO OPTIONS ON THE
GRANTED EMPLOYEES IN EXERCISE PRICE DATE OF GRANT EXPIRATION
NAME (#) FISCAL YEAR (CDN$/SHARE) (CDN$/SHARE) DATE
- ---- ---------- ------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
H. Gregory Chamandy............. 88,000 13.9% $10.29 $10.29 June 15, 2008
Glenn J. Chamandy............... 88,000 13.9 10.29 10.29 June 15, 2008
Edwin B. Tisch.................. 88,000 13.9 10.29 10.29 June 15, 2008
Ken Cieply...................... 57,000 9.0 10.29 10.29 June 15, 2008
George Sam Yu Sum............... 30,000 4.7 10.29 10.29 June 15, 2008
</TABLE>

AGGREGATED OPTION EXERCISES DURING FISCAL 1998 AND FISCAL YEAR-END OPTION
VALUES

The following table summarizes, for each of the Named Executive Officers,
(a) the number of stock options, if any, exercised during fiscal 1998, (b) the
aggregate value realized upon exercise, which is the difference between the
market value of the underlying shares on the exercise date and the exercise or
base price of the option, (c) the total number of unexercised options, if any,
held at October 4, 1998 and (d) the aggregate value of unexercised in-the-money
options at fiscal year-end, which is the difference between the exercise or base
price of the options and the market value of the Class A Subordinate Voting
Shares on October 1, 1998, which was $11.25 (US$7.32, based on the inverse of
the Noon Buying Rate on October 1, 1998 of Cdn$1.00 per US$0.6507) per share.
The aggregate values indicated with respect to unexercised in-the-money options
at fiscal year-end have not been, and may never be, realized. These options have
not been, and may not be exercised, and actual gains, if any, on exercise will
depend on the value of our Class A Subordinate Voting Shares on the date of
exercise.

<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
SHARES AGGREGATE FISCAL YEAR-END AT FISCAL YEAR-END
ACQUIRED ON VALUE (#) ($)
EXERCISE REALIZED ---------------------------- ----------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
H. Gregory Chamandy.. -- -- -- 88,000 -- $84,480
Glenn J. Chamandy.... -- -- -- 88,000 -- 84,480
Edwin B. Tisch....... -- -- -- 88,000 -- 84,480
Ken Cieply........... -- -- -- 57,000 -- 54,720
George Sam Yu Sum.... -- -- -- 30,000 -- 28,800
</TABLE>

INDEBTEDNESS OF DIRECTORS AND OFFICERS

At March 31, 1999, the aggregate amount owed to us or our subsidiaries by
all of our current directors, officers and employees, and former directors,
officers and employees as of such date, was approximately $1,552,000, exclusive
of travel advances as permitted by Canadian securities laws. No portion of such
indebtedness was advanced in connection with a purchase of our securities or
those of our subsidiaries. The following table provides information regarding
indebtedness owed to us by each individual who currently is or at any time
during fiscal 1998 has been a director or officer of Gildan, or an associate of
any of the foregoing.

50
<PAGE> 54

TABLE OF INDEBTEDNESS OF
DIRECTORS AND OFFICERS
OTHER THAN UNDER SECURITIES PURCHASE PROGRAMS

<TABLE>
<CAPTION>
INVOLVEMENT OF THE LARGEST AMOUNT AMOUNT
CORPORATION OR OUTSTANDING FOR OUTSTANDING AT
NAME SUBSIDIARY FISCAL 1998 MARCH 31, 1999
- ---- ------------------ --------------- --------------
<S> <C> <C> <C>
H. Gregory Chamandy.................. Lender $ 426,587(1)(2) $ 750,000(2)(3)
Glenn J. Chamandy.................... Lender 529,655(2)(4) 750,000(2)(4)
Edwin B. Tisch....................... Lender 30,075(5) 27,850(5)
</TABLE>

- -------------------------

(1) Includes an amount of $260,000 we advanced to Gregco Holdings Inc., which is
wholly owned by H. Gregory Chamandy. This amount was repaid in full in
February 1999.

(2) Does not include an amount of $1,712,769 ($3,703,793 as at March 31, 1999),
we advanced to Harco, which is controlled by H. Gregory Chamandy and Glenn
J. Chamandy, and an amount of $3,360,000 which Harco borrowed from a third
party and with respect to which we have issued a guaranty which was
cancelled on November 19, 1998. With respect to the advance we made to
Harco, at March 31, 1999, approximately $1,686,000 bears interest at an
annual rate of 8.5% while the balance is interest free.

(3) This amount is payable in ten equal and consecutive annual installments,
without interest, beginning December 1, 1999.

(4) Includes an amount of $320,000 advanced by us to Glennco Holdings Inc., a
company wholly owned by Glenn J. Chamandy. This amount was repaid in full in
March 1999.

(5) Of this amount, $15,350 is owed to us by Mr. Tisch with respect to a
"dwelling loan", for which principal is payable at a rate of $2,500 per
year.

Approval of any such loans must be obtained in accordance with our formal
policy with respect to potential conflicts of interest. See "Certain
Relationships and Related Transactions--Conflicts of Interest Policy".

EMPLOYMENT AGREEMENTS AND CHANGE OF CONTROL AGREEMENTS

We have entered into employment agreements (the "Employment Agreements")
with certain of our key employees, including H. Gregory Chamandy, Glenn J.
Chamandy, Edwin B. Tisch, George Sam Yu Sum and Francois Vinette. The Employment
Agreements provide that we will pay the executive a base salary, the level of
which will be reviewed annually in accordance with our policies. The Employment
Agreements have an indefinite term. Nonetheless, we may terminate the executive
at any time without making any severance payments upon his death, disability,
breach of his Employment Agreement or for cause. In addition, the executive may
terminate his employment at any time upon prior written notice ranging from one
to six months. Each Employment Agreement provides that if we terminate the
employment of the executive for any reason other than those stated above or take
any action which could be construed as constructive dismissal, then the
executive is entitled to:

- an amount equal to 24 months' base salary (12 months in the case of
Messrs. Sam Yu Sum and Vinette), paid out, at the executive's option,
either as a one-time payment or as monthly or bi-weekly installments, as
the case may be, covering the 24 months or the 12 months following
termination, as the case may be (the "Termination Period");

- a one-time payment equal to 24 months of the target annual bonus
established under the annual incentive plan (in favor of H. Gregory
Chamandy, Glenn J. Chamandy and Edwin B. Tisch only);

- continuation of group insurance benefits, except short and long-term
disability, for the Termination Period, ceasing upon new employment, if
earlier;

- any earned bonus, for example, a bonus with respect to a previous fiscal
year, that would otherwise be payable to the executive during Termination
Period pursuant to the annual incentive plan;

51
<PAGE> 55

- the right to exercise vested options pursuant to the stock option plan
within 90 days following termination of employment; and

- the payment of any earned but unused vacation days and any amounts due
under the executive's business expense and personal spending accounts, as
authorized.

The Employment Agreements also provide that, following termination, the
executive will not:

- disclose to any person or use for his own purpose any confidential
information or knowledge relating to Gildan;

- solicit during the Termination Period any of our customers with the
intent of selling them any products which are similar to or, competing
with our products; or

- induce, entice or hire any of our employees.

We have also entered into change of control agreements (the "Change of
Control Agreements") with each of H. Gregory Chamandy, Glenn J. Chamandy, Edwin
B. Tisch, George Sam Yu Sum and Francois Vinette. Under these agreements, in the
event of potential change of control (as defined in the Change of Control
Agreements), the executive agrees to remain employed by us until the earliest of
(a) 365 days from the date of the potential change of control, (b) his
termination of employment by death or disability or (c) his termination of
employment by us without cause or by the executive with good reason. The Change
of Control Agreements also provide that if a change of control occurs and we
terminate the executive without cause, or if the executive terminates his
employment for good reason, then the executive will be entitled to:

- his full base salary, subject to withholding, through the date of
termination;

- a one-time payment, subject to withholding, equal to 36 month's base
salary (24 months in the case of Messrs. Sam Yu Sum and Vinette);

- any amounts, subject to withholding, required to be paid to him under
the stock option plan;

- a one-time payment, subject to withholding, equal to 36 months (24
months in the case of Messrs. Sam Yu Sum and Vinette) of the target
annual bonus established under the annual incentive plan;

- continuation of employee benefits for 36 months (24 months in the case
of Messrs. Sam Yu Sum and Vinette), ceasing upon new employment, if
earlier; and

- any earned but unused vacation days.

52
<PAGE> 56

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

CONFLICTS OF INTEREST POLICY

We have put into effect a formal policy to address any potential conflicts
of interest that may arise in connection with any material transaction involving
Gildan and one of our officers or directors. Under this policy, each director or
officer who:

- is a party to any material contract or proposed material contract with
us; or

- has a material interest in, or is a director or officer of, any entity
which is a party to any material contract or proposed contract with us,

is required to disclose in writing to us the nature and extent of any such
interest and, in the case of directors, is required to abstain from voting upon
any resolution to approve the contract in question, unless such contract:

- provides for our benefit or the benefit of one of our affiliates
security for money lent to or obligations undertaken by the director;

- relates primarily to the remuneration of a director, officer, employee
or agent of Gildan or an affiliate of Gildan;

- is for indemnity of insurance; or

- is an agreement with one of our affiliates.

The manner and timing of the disclosures contemplated by this policy, as well as
the extent to which directors may be required to abstain from voting in
connection with such contracts under this policy, have been established in
accordance with, and by reference to, the applicable provisions of the Canada
Business Corporations Act.

TRANSACTIONS WITH AFFILIATES

The following are the only material transactions we entered into since
January 1, 1996, or propose to enter into, in which any existing or proposed
director, officer or principal shareholder of Gildan, or any associates or
affiliates thereof, has had or expects to have a material interest.

OUR PRINCIPAL SHAREHOLDERS

Harco: We lease the facility containing our executive offices and knitting
operations in Ville Saint-Laurent from Harco. We paid rent of approximately
$364,000, $420,000 and $545,485 in ten-month fiscal 1996, fiscal 1997 and fiscal
1998, respectively. We believe that the terms of this transaction are no less
favorable to us than could have been obtained if the transaction was entered
into with an unaffiliated third party.

We guaranteed Harco's mortgage on the Ville Saint-Laurent facility. The
total amount of such indebtedness guaranteed at September 29, 1996, October 5,
1997 and October 4, 1998 was $1,990,000, $2,360,000 and $3,360,000,
respectively. This guaranty was cancelled on November 19, 1998.

In 1996, in connection with the mortgage renewal on the Ville Saint-Laurent
facility, we made a loan to Harco, which was non-interest bearing. Since June
1998 this loan bears interest, currently at an annual rate of 8.5%. At January
3, 1999, the aggregate amount of such indebtedness was approximately $1,700,000.

In February 1999, we advanced $2.0 million to Harco. This advance does not
bear interest and is payable on demand.
53
<PAGE> 57

In 1987, we became indebted to Harco in the amount of $383,000, which
amount was repaid in August 1998. Interest expenses incurred during ten-month
fiscal 1996, fiscal 1997 and fiscal 1998 were approximately $28,000, $24,000 and
$19,750, respectively.

We had loans since January 1, 1996 which had been guaranteed by Harco, H.
Gregory Chamandy, Glenn J. Chamandy and Shirlco Holding Ltd., a corporation then
controlled by Shirley Chamandy which has since been amalgamated with Harco. At
January 3, 1999, only Harco continued to guarantee loans which at that date
totalled approximately $2,903,000 in aggregate principal amount.

The Fund: We granted to the Fund two options, on January 31, 1996 and May
9, 1997, respectively, each of which was exercisable for $500,000 and allowed
the Fund to purchase 3% of our outstanding voting shares, on a fully-diluted
basis. In June 1998, the Fund exercised the first of the two options and
received 291,294 Class "A" preferred shares and 29.13 Class "A" common shares at
a price per share of $1.72. At the same time, we repurchased the second of these
two options for $2.5 million.

Also, in June 1998, we exercised an option, granted in August 1997, to
redeem 581,500 Class "A" preferred shares and 58.15 Class "A" common shares held
by the Fund, for an aggregate consideration of $100,000, at a price per share of
$0.17. We believe that the terms of our transactions with the Fund, as a whole,
are on terms no less favorable to us than could have been obtained if the
transactions were entered into with an unaffiliated third party.

We have also obtained from the Fund $30.0 million in financing, comprised
of:

- a $15.0 million unsecured and subordinated debenture due June 25, 2003,
bearing interest at an annual rate of 11.0%, which replaced three then
outstanding unsecured and subordinated debentures totalling $15.0
million; and

- a $15.0 million unsecured and subordinated debenture due June 15, 2004,
bearing interest at an annual rate of 12.0% for the first two years and
13.0% of the next three years.

OUR OFFICERS AND DIRECTORS

Gino Martel: We have retained Hart, Saint-Pierre as our corporate counsel
since 1984. Mr. Martel, the Secretary of Gildan, is a partner of Hart,
Saint-Pierre. We paid legal fees to Hart, Saint-Pierre of $91,333, $271,542 and
$419,597 in ten-month fiscal 1996, fiscal 1997 and fiscal 1998, respectively. We
believe that the terms of our relationship with Hart, Saint-Pierre are no less
favorable to us than could be obtained from an independent third party.

Norman M. Steinberg: We have retained Ogilvy Renault as our counsel in
connection with various securities matters since November 1997. Mr. Steinberg, a
director of Gildan, is a partner of Ogilvy Renault. We paid legal fees to Ogilvy
Renault of $706,853 in fiscal 1998. We believe that the terms of our
relationship with Ogilvy Renault are no less favorable to us than could be
obtained from an independent third party.

William H. Houston III: We have paid advisory and legal fees to various
affiliates of Sandler & Travis Trade Advisory Services, for which Mr. Houston,
one of our directors, serves as Senior Consultant. In ten-month fiscal 1996,
fiscal 1997 and fiscal 1998, we paid US$10,320, US$50,118 and US$19,703 in fees
to such affiliates, respectively. Sandler & Travis Trade Advisory Services acts
as our advisor in reclaiming duty drawback payments from the U.S. government,
and its affiliate, Sandler, Travis & Rosenberg, provides us with legal advice
regarding trade regulatory issues. We believe that the terms of our
relationships with these affiliated entities are no less favorable to us than
could be obtained from an independent third party.

54
<PAGE> 58

INDEBTEDNESS OF DIRECTORS AND OFFICERS

For a detailed description of indebtedness owed to us by our directors and
officers during fiscal 1998, see "Management--Indebtedness of Directors and
Officers".

REGISTRATION RIGHTS AGREEMENT

Harco, the Fund and the Trusts have the right to require us to register the
Class A Subordinate Voting Shares or the Class B Multiple Voting Shares (upon
their conversion to Class A Subordinate Voting Shares), as the case may be, held
by them under the U.S. Securities Act. Pursuant to the registration rights
agreement, Harco, the Fund and the Trusts are granted an unlimited number of
demand and piggy-back registration rights, except that no demand registration
may be effected within one year after any other demand registration. We have
agreed to pay all expenses incurred in connection with all piggy-back
registrations and with the first five demand registrations, and will share
expenses ratably with Harco, the Fund and the Trusts in connection with any
additional demand registrations. The registration rights agreement provides for
indemnities between us and Harco, the Fund and the Trusts for certain
liabilities arising under the U.S. Securities Act.

AGREEMENTS BETWEEN HARCO AND THE FUND

Harco and the Fund have entered into an agreement (the "Agreement") with
respect to the election of directors. Pursuant to the Agreement, for so long as
the Fund holds at least 5% of the outstanding Equity Shares,

- the Fund will abstain from voting its Class A Subordinate Voting Shares
in the election of the Class A Directors;

- the Fund will vote its Class A Subordinate Voting Shares in accordance
with Harco's written instructions in the election of the non-Class A
Directors; and

- Harco will vote its Class B Multiple Voting Shares for one director
designated by the Fund.

The Agreement further provides that, for so long as the Fund holds at least
15% of the outstanding Equity Shares, Harco will vote its Class B Multiple
Voting Shares for an additional director designated by the Fund, which designee
must be reasonably acceptable to Harco. Currently, Mr. Laporte is the director
who was designated by the Fund and Mr. Strubel is the additional designated
director.

Both parties' obligations under the Agreement terminate upon the Fund's
ceasing to hold at least 5% of the outstanding Equity Shares and with respect to
any of the Fund's Class A Subordinate Voting Shares transferred to a third
party.

Harco and the Fund also entered into an agreement which provides that Harco
may not transfer any Class B Multiple Voting Shares to a third party, unless:

- the transfer is pursuant to a takeover bid or a Permitted Transfer, as
described under "Description of Share Capital--Equity
Shares--Conversion"; or

- the Fund is entitled to transfer to the third party the same number of
Class A Subordinate Voting Shares, and on the same terms and conditions,
as Harco is transferring.

55
<PAGE> 59

PRINCIPAL SHAREHOLDERS

The following table sets forth information regarding the beneficial
ownership of our Class A Subordinate Voting Shares and our Class B Multiple
Voting Shares as of February 28, 1999 by (a) each person known by us to own
beneficially 10% or more of any class of Equity Shares and (b) all of our
directors and executive officers as a group. Unless otherwise indicated, the
address for each person listed is c/o Gildan Activewear Inc., 725 Montee de
Liesse, Ville Saint-Laurent, Quebec, Canada H4T 1P5. See "Risk Factors--We Are
Controlled by Harco".

<TABLE>
<CAPTION>
CLASS A
SUBORDINATE VOTING PERCENTAGE OF CLASS B
SHARES OWNED CLASS A MULTIPLE VOTING
BEFORE OFFERING SUBORDINATE SHARES OWNED PERCENTAGE OF
---------------------- VOTING SHARES ---------------------- TOTAL VOTING
PERCENTAGE OWNED AFTER PERCENTAGE POWER AFTER
NAME OF BENEFICIAL OWNER NUMBER OF CLASS OFFERING(1) NUMBER OF CLASS OFFERING(1)
- ------------------------ --------- ---------- ------------- --------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Harco(2)................ -- -- -- 3,047,000 100% 70.20%
H. Gregory Chamandy
Family Trust(3)....... 856,300 11.65% 8.28% -- -- 2.47
Glenn Chamandy Family
Trust(3).............. 856,300 11.65 8.28 -- -- 2.47
The Fund(4)............. 1,939,000 26.39 18.74 -- -- 5.58
Directors and Executive
Officers as a group
(16 persons)(2)(5).... 61,180 0.83 0.59 3,047,000 100 70.38
</TABLE>

- -------------------------

(1) Assumes no exercise of the underwriters' over-allotment option.

(2) H. Gregory Chamandy, Chairman and Chief Executive Officer of Gildan, and
Glenn J. Chamandy, President and Chief Operating Officer of Gildan, who
indirectly control Harco, may be deemed to beneficially own shares of Gildan
owned by Harco.

(3) The trustee for each of the Trusts is Royal Bank of Canada Financial
Corporation which has sole voting power and sole investment power over the
Class A Subordinate Voting Shares held by each of the Trusts. The Trusts are
located at Royal Bank of Canada Financial Corporation, Royal Bank House, The
Garrison, St. Michael, P.O. Box 48B, Bridgetown, Barbados, West Indies.

(4) The Fund is located at 8717 rue Berri, Montreal, Quebec, Canada H2M 2T9.

(5) Does not include shares held by the Trusts because, although some officers
and directors are beneficiaries of the Trusts, they do not have voting power
or investment power over the Class A Subordinate Voting Shares held by the
Trusts. These officers and directors expressly disclaim beneficial ownership
of these shares.

56
<PAGE> 60

DESCRIPTION OF SHARE CAPITAL

Our authorized share capital currently consists of an unlimited number of
First Preferred Shares, issuable in series, an unlimited number of Second
Preferred Shares, issuable in series (collectively, the "Preferred Shares"), an
unlimited number of Class A Subordinate Voting Shares and an unlimited number of
Class B Multiple Voting Shares, all of which are without par value. As of the
date of this prospectus, only Class A Subordinate Voting Shares and Class B
Multiple Voting Shares are outstanding. The following is a summary of the
material terms of our authorized share capital as set forth in the Articles.
This summary is qualified in its entirety by reference to, and is subject to,
the detailed provisions of the Articles, as amended, and the Trust Agreement, as
defined below. Because this is a summary, it does not contain all the
information that may be important to you. You should read the Articles and the
Trust Agreement before you buy Class A Subordinate Voting Shares.

FIRST PREFERRED SHARES

ISSUANCE IN SERIES

The First Preferred Shares are issuable 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 each series, subject to the
limitations, if any, set out in the Articles.

RANK

The First Preferred Shares rank senior to the Second Preferred Shares and
the Equity Shares with respect to the payment of dividends, return of capital
and the distribution of assets in the event of the liquidation, dissolution or
winding-up of Gildan. The First Preferred Shares in each series rank equally
with the First Preferred Shares of any other series.

VOTING RIGHTS

Unless the Articles otherwise provide with respect to any series of the
First Preferred Shares, the holders of the First Preferred Shares are not
entitled to receive any notice of or attend any meeting of the shareholders of
Gildan and are not entitled to vote at any such meeting.

SECOND PREFERRED SHARES

ISSUANCE IN SERIES

The Second Preferred Shares are issuable 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 each series, subject to the
limitations, if any, set out in the Articles.

RANK

The Second Preferred Shares are subject and subordinate to the rights,
privileges, restrictions and conditions attaching to the First Preferred Shares.
The Second Preferred Shares rank senior to the Equity Shares with respect to
payment of dividends, return of capital and distribution of assets in the event
of the liquidation, dissolution or winding-up of Gildan. The Second Preferred
Shares in each series rank equally with the Second Preferred Shares of any other
series.

57
<PAGE> 61

VOTING RIGHTS

Unless the Articles otherwise provide with respect to any series of the
Second Preferred Shares, the holders of the Second Preferred Shares are not
entitled to receive any notice of or attend any meeting of the shareholders of
Gildan and are not entitled to vote at any such meeting.

EQUITY SHARES

Except as described herein, the Class A Subordinate Voting Shares and the
Class B Multiple Voting Shares are equal in all respects and will be treated as
if they were shares of one class only.

RANK

The Equity Shares rank junior to the First Preferred Shares and the Second
Preferred Shares with respect to the payment of dividends, return of capital and
distribution of assets in the event of the liquidation, dissolution or
winding-up of Gildan.

DIVIDENDS

The holders of outstanding Equity Shares are entitled to receive dividends
on a share-for-share basis out of assets legally available therefor at such
times and in such amounts as the board of directors may from time to time
determine without preference or distinction among or between the Class A
Subordinate Voting Shares and the Class B Multiple Voting Shares.

VOTING RIGHTS

Except as set forth in the third succeeding paragraph, the Class A
Subordinate Voting Shares carry one vote per share and the Class B Multiple
Voting Shares carry eight votes per share. There is no cumulative voting. The
holders of Class A Subordinate Voting Shares and the holders of Class B Multiple
Voting Shares are entitled to receive notice of any meeting of our shareholders
and to attend and vote at such meeting as a single class on all matters to be
voted on by our shareholders, except for the election and the removal of
directors as described below and as otherwise required by applicable law.

With respect to the election of directors, the Articles provide that the
board of directors will consist of between five and eleven members. The board of
directors currently has eight members. For as long as any Class B Multiple
Voting Shares are outstanding, at all shareholder meetings held after October 4,
1998 at which directors are elected, (a) two of the directors will be elected by
the holders of the Class A Subordinate Voting Shares only, voting as a separate
class and (b) the remaining directors will be elected by the holders of Class A
Subordinate Voting Shares and Class B Multiple Voting Shares, voting together as
a single class, with holders of Class A Subordinate Voting Shares having one
vote per share and holders of Class B Multiple Voting Shares having eight votes
per share. Because of the voting rights attached to the Class B Multiple Voting
Shares, holders of Class B Multiple Voting Shares may be able to elect all of
the directors other than the two Class A Directors even when the number of
outstanding Class B Multiple Voting Shares is a very small proportion of the
number of Equity Shares outstanding. See "Risk Factors--We Are Controlled by
Harco".

Directors may be removed, with or without cause, only by the holders of the
class or classes of Equity Shares that, as of the date such removal is effected,
would be entitled to elect such director at the next annual meeting of
shareholders. Vacancies in a directorship may be filled only by (a) the
remaining directors elected by holders of each class of Equity Shares that (1)
elected such director and (2) as of the date such vacancy is filled, would be
entitled to elect such director at the next annual meeting of

58
<PAGE> 62

shareholders or (b) if there are no such remaining directors, then by the vote
of the holders of the class or classes of Equity Shares that, as of the date
such vacancy is filled, would be entitled to elect such director at the next
annual meeting of shareholders, voting as a special class at a meeting, special
or otherwise, of the holders of Equity Shares of such class or classes.

The Articles provide that each Class A Subordinate Voting Share and each
Class B Multiple Voting Share entitles its holder to one vote per share with
respect to (a) shareholder approvals required (1) by section 189(3) of the
Canada Business Corporations Act in respect of a sale, lease or exchange of all
or substantially all of Gildan's property other than in the ordinary course of
business as therein described, except to one of Gildan's wholly-owned
subsidiaries, (2) by section 183 of the Canada Business Corporations Act in
respect of an amalgamation of Gildan with one or more amalgamating companies,
which are not one of Gildan's wholly-owned subsidiaries, (3) in connection with
the liquidation, dissolution or winding-up of Gildan or (4) in connection with
the issuance of Equity Shares as consideration for the acquisition of stock or
assets of another company where such issuance requires shareholder approval in
accordance with the rules of a stock exchange on which the Equity Shares are
listed, and (b) amendments to Gildan's Articles or by-laws which alter, amend or
repeal the provisions described in clause (a) above.

CONVERSION

The Class A Subordinate Voting Shares cannot be converted into any other
class of shares. Each outstanding Class B Multiple Voting Share may at any time,
at the option of the holder, be converted into one Class A Subordinate Voting
Share and must be so converted upon a transfer other than a Permitted Transfer
(as defined below). Each Class B Multiple Voting Share will automatically
convert into one Class A Subordinate Voting Share in any of the following cases
(each a "Triggering Event"):

- upon the death of the later to die of H. Gregory Chamandy or Glenn J.
Chamandy;

- at any time that neither H. Gregory Chamandy nor Glenn J. Chamandy is
Chief Executive Officer or Chief Operating Officer of Gildan;

- in the event that more than 40% of the Class B Multiple Voting Shares in
the aggregate owned by Harco upon the closing of the initial public
offering are converted into Class A Subordinate Voting Shares;

- in the event that more than 40% of the Class B Multiple Voting Shares in
the aggregate owned by Harco upon the closing of the initial public
offering are sold, transferred, charged, pledged, hypothecated,
encumbered or otherwise disposed of (each, a "transfer"), whether
directly or indirectly, otherwise than in a Permitted Transfer;

- in the event (a) of the death of either H. Gregory Chamandy or Glenn J.
Chamandy or (b) that either H. Gregory Chamandy or Glenn J. Chamandy
ceases to be Chief Executive Officer or Chief Operating Officer of
Gildan and that upon and from such event (1) the later to die of H.
Gregory Chamandy or Glenn J. Chamandy or (2) the later to cease to be
Chief Executive Officer or Chief Operating Officer of Gildan of H.
Gregory Chamandy or Glenn J. Chamandy does not exercise, directly or
indirectly, voting control over all of the shares of Holding Entities
(as defined below), if any, and the Class B Multiple Voting Shares
which, on the date of such occurrence, were beneficially owned by the
deceased or retiring brother; or

- in the event that the board of directors in a directors' circular or
otherwise makes a recommendation to accept, or makes a statement to the
effect that the directors are unable to make or are not making a
recommendation, to shareholders of Gildan with respect to a takeover bid
on the Class A Subordinate Voting Shares.

59
<PAGE> 63

For purposes hereof, any transfer of shares of Harco or of a Permitted
Transferee (as defined below), to the extent such entity then holds any Class B
Multiple Voting Shares (a "Holding Entity"), shall be considered a transfer of
Class B Multiple Voting Shares, with the necessary modifications.

Notwithstanding the foregoing, Class B Multiple Voting Shares and shares of
Holding Entities, if any, may be transferred in the following circumstances
(each, a "Permitted Transfer"):

(a) in favor of a Permitted Transferee;

(b) upon the death of the first to die of H. Gregory Chamandy or Glenn J.
Chamandy, such shares as are then beneficially owned by the deceased
may be (1) sold to the survivor or (2) be transferred to the spouse or
the living children of the deceased (either outright or by means of a
spousal trust), by will or the law of succession, provided always that
the survivor maintains full and complete voting control, whether
directly or indirectly, over such shares;

(c) upon the first to retire of H. Gregory Chamandy or Glenn J. Chamandy,
such shares as are then beneficially owned by the retiring brother may
be sold to the other brother;

(d) upon the death or retirement of Edwin B. Tisch, such shares as are
then beneficially owned by Edwin B. Tisch may be sold to H. Gregory
Chamandy, Glenn J. Chamandy or, to the extent one or the other or H.
Gregory Chamandy or Glenn J. Chamandy has passed away and transferred
all of the shares of Holding Entities, if any, or of Class B Multiple
Voting Shares to his spouse or living children as contemplated at
(b)(2) of this paragraph, the spouse or living children of such
deceased person, provided always that the purchasers maintain, or, to
the extent one or the other of H. Gregory Chamandy or Glenn J.
Chamandy has passed away, the survivor maintains full and complete
voting control over such shares; and

(e) in the case of a sale contemplated by (b), (c) and (d) above, or in
the case of a transfer to Harco under paragraph (a) of the definition
of Permitted Transferee below, the purchaser may charge, pledge,
hypothecate or otherwise encumber any Class B Multiple Voting Shares
or shares of Holdings Entities, if any, beneficially owned by him
(including the shares acquired by him in such sale) in favor of a
third party to secure any indebtedness incurred for the purpose of
financing, in whole or in part, such sale.

As used in this prospectus, the term "Permitted Transferee" refers only to
the following:

(a) Harco, if at the time of the transfer Harco is still the registered
holder of some Class B Multiple Voting Shares;

(b) in the case of Class B Multiple Voting Shares beneficially owned by H.
Gregory Chamandy, (1) H. Gregory Chamandy, (2) corporations
wholly-owned, directly or indirectly, by H. Gregory Chamandy, (3) any
limited liability or similar company if all the value of the company
is owned by H. Gregory Chamandy and (4) any trust, the sole
beneficiary of which is H. Gregory Chamandy;

(c) in the case of Class B Multiple Voting Shares beneficially owned by
Glenn J. Chamandy, (1) Glenn J. Chamandy, (2) corporations
wholly-owned, directly or indirectly, by Glenn J. Chamandy, (3) any
limited liability or similar company if all the value of the company
is owned by Glenn J. Chamandy and (4) any trust, the sole beneficiary
of which is Glenn J. Chamandy; and

60
<PAGE> 64

(d) in the case of Class B Multiple Voting Shares beneficially owned by
Edwin B. Tisch, (1) Edwin B. Tisch, (2) corporations wholly-owned,
directly or indirectly, by Edwin B. Tisch, (3) any limited liability
or similar company if all the value of the company is owned by Edwin
B. Tisch and (4) any trust, the sole beneficiary of which is Edwin B.
Tisch, provided that the current voting arrangements in connection
with the Class B Multiple Voting Shares are maintained.

SUBDIVISION OR CONSOLIDATION

No subdivision or consolidation of the Class A Subordinate Voting Shares or
the Class B Multiple Voting Shares may be carried out unless, at the same time,
the Class A Subordinate Voting Shares or Class B Multiple Voting Shares, as the
case may be, are subdivided or consolidated in the same manner and on the same
basis.

ADDITIONAL ISSUANCE OF CLASS B MULTIPLE VOTING SHARES

Gildan may not issue Class B Multiple Voting Shares without the approval of
the holders of the Class A Subordinate Voting Shares. Approval must be given by
a special resolution of the holders of the Class A Subordinate Voting Shares at
a meeting of shareholders. However, approval is not required in connection with
a subdivision on a pro rata basis as between the Class A Subordinate Voting
Shares and the Class B Multiple Voting Shares, as permitted under the Articles.

LIQUIDATION RIGHTS AND OTHER MATTERS

The Equity Shares are not redeemable. Upon the liquidation, dissolution or
winding-up of Gildan, the holders of Class B Multiple Voting Shares and Class A
Subordinate Voting Shares are entitled to participate equally, share-for-share,
in the remaining property and assets of Gildan available for distribution to the
holders of Equity Shares.

TAKEOVER BID PROTECTION

Under applicable Canadian law, an offer to purchase Class B Multiple Voting
Shares would not necessarily require that an offer be made to purchase Class A
Subordinate Voting Shares. In compliance with the rules of The Montreal Exchange
and The Toronto Stock Exchange, Harco and each of H. Gregory Chamandy, Glenn J.
Chamandy and Edwin B. Tisch (collectively, the "Founders") entered into an
agreement (the "Trust Agreement") with Gildan and the Montreal Trust Company
(the "Trustee"). Pursuant to the Trust Agreement, Harco placed its Class B
Multiple Voting Shares on deposit with the Trustee and each of Harco and the
Founders have undertaken not to sell or dispose of, directly or indirectly, any
Class B Multiple Voting Shares pursuant to any transaction under circumstances
where securities legislation or any other law would require, if the sale or
disposition had been of Class A Subordinate Voting Shares rather than Class B
Multiple Voting Shares, that the same offer be made to all holders of Class A
Subordinate Voting Shares. Under current rules, this would include a sale of
Class B Multiple Voting Shares by Harco or the Founders at a price per share in
excess of 115% of the market price of the Class A Subordinate Voting Shares as
determined under such legislation (generally the 20-day average trading price of
such shares prior to the sale). This undertaking does not apply if the sale is
made pursuant to an offer made to all holders of Class B Multiple Voting Shares
to purchase only part of the Class B Multiple Voting Shares where:

- an offer is made concurrently to all holders of Class A Subordinate
Voting Shares to purchase the same proportionate number of such Class A
Subordinate Voting Shares at a price per share

61
<PAGE> 65

at least as high as the highest price per share paid in connection with
the sale or disposition of the Class B Multiple Voting Shares;

- all of the terms of the offer for Class A Subordinate Voting Shares are
at least as favorable as those of the offer for Class B Multiple Voting
Shares; and

- the offer for Class A Subordinate Voting Shares has no condition
attached other than the right not to take up and pay for the Class A
Subordinate Voting Shares tendered if no shares are purchased pursuant
to the offer for Class B Multiple Voting Shares.

This undertaking also does not apply if there is a concurrent unconditional
offer, the terms of which are at least as favorable as the terms of the offer to
purchase Class B Multiple Voting Shares, to purchase all of the Class A
Subordinate Voting Shares at a price per share at least as high as the highest
price per share paid in connection with the sale or disposition of the Class B
Multiple Voting Shares.

The Trust Agreement permits, subject to compliance with applicable law and
the prior consent of the Trustee, certain indirect sales resulting from the
acquisition of shares of a corporation which, directly or indirectly, controls
Gildan, or controls or is controlled by Harco where:

- the transferee is a Permitted Transferee;

- the transfer either (a) results in no change to the beneficial ownership
of the transferred shares other than between spouses or between the
transferor and his or her descendants, or (b) in the case of a transfer
to a Permitted Transferee, such transfer is made in accordance with
applicable law;

- no such transferee is a party to any agreement under which any other
person would participate in the ownership of, control or direction over
more than 10% of the votes or 50% of the equity of such corporation,
Harco or Gildan; and

- in the event that the transferee is a Permitted Transferee, but not a
Founder, such transferee shall become a party to the Trust Agreement.

Under the Trust Agreement, any direct or indirect sale or disposition of
Class B Multiple Voting Shares, including a transfer to a pledgee as security,
by a party to the agreement or any person or company which it controls is
conditional upon the transferee becoming a party to an agreement on
substantially similar terms and conditions as are contained in the Trust
Agreement.

The Trust Agreement provides that if a person or company carries out an
indirect sale or disposition in respect of any Class B Multiple Voting Shares in
breach of the Trust Agreement, no person shall from the time the sale becomes
effective and thereafter, (a) directly or indirectly sell or dispose of any of
such Class B Multiple Voting Shares or convert them into Class A Subordinate
Voting Shares, in either case without the prior written consent of the Trustee
or (b) exercise any voting rights attaching to such Class B Multiple Voting
Shares except in accordance with the written instructions of the Trustee. The
Trustee may attach conditions to any consent the Trustee gives in exercising its
rights and must exercise these rights in the best interest of the holders of the
Class A Subordinate Voting Shares, other than (a) Harco, (b) the Founders and
(c) holders who, in the opinion of the Trustee, participated directly or
indirectly in the transaction that triggered the operation of this provision.
Notwithstanding a sale of shares which constitutes an indirect sale of Class B
Multiple Voting Shares in breach of the Trust Agreement, Harco shall remain
bound by the foregoing restrictions and prohibitions, but shall not have any
liability for damages under the Trust Agreement in respect of such sale,
provided that Harco otherwise complies with all other provisions of the Trust
Agreement, including, without limitation, the foregoing provision.

62
<PAGE> 66

The Trust Agreement provides that the prior consent of the Trustee shall be
required in connection with any sale or disposition of Class B Multiple Voting
Shares, whether direct or indirect, by Harco or the Founders. Such consent shall
be given if the Trustee receives evidence satisfactory to it, acting reasonably,
that the sale or disposition is not in breach of the Trust Agreement. The
Trustee also has the right to require from time to time evidence satisfactory to
it, acting reasonably, as to the number of Class B Multiple Voting Shares and
Class A Subordinate Voting Shares held directly or indirectly by Harco, the
Founders and any Permitted Transferee.

The Trust Agreement contains provisions for authorizing action by the
Trustee to enforce the rights under the Trust Agreement on behalf of the holders
of the Class A Subordinate Voting Shares. The obligation of the Trustee to take
such action will be conditional on Gildan or holders of the Class A Subordinate
Voting Shares providing such funds and indemnity as the Trustee may require. No
holder of Class A Subordinate Voting Shares will have the right, other than
through the Trustee, to institute any action or proceeding or to exercise any
other remedy to enforce any rights arising under the Trust Agreement unless the
Trustee fails to act on a request authorized by holders of not less than 10% of
the outstanding Class A Subordinate Voting Shares and reasonable funds and
indemnity have been provided to the Trustee. Gildan has agreed to pay the
reasonable costs of any action that may be taken in good faith by holders of
Class A Subordinate Voting Shares pursuant to the Trust Agreement.

The Trust Agreement provides that it may not be amended, and no provision
thereof may be waived, unless, prior to giving effect to such amendment or
waiver, the following have been obtained, (a) the consent of The Montreal
Exchange, The Toronto Stock Exchange and any other applicable securities
regulatory authority in Canada and (b) the approval of at least two-thirds of
the votes cast by holders of Class A Subordinate Voting Shares excluding Harco,
the Founders, their Permitted Transferees, their respective affiliates and any
persons who have an agreement to purchase Class B Multiple Voting Shares on
terms which would constitute a sale or disposition for purposes of the Trust
Agreement other than as permitted thereby.

No provision of the Trust Agreement limits the rights of any holders of
Class A Subordinate Voting Shares under applicable law.

63
<PAGE> 67

DESCRIPTION OF CERTAIN INDEBTEDNESS

The following is a summary of the material terms of our currently
outstanding indebtedness.

REVOLVING LOAN AGREEMENT

On March 31, 1999, we entered into a syndicated loan agreement led by
National Bank of Canada. This loan agreement provides for a secured revolving
operating credit facility, under which the maximum allowable borrowings equal
the lesser of (a) $90.0 million and (b) a borrowing base calculated in
accordance with a specified inventory and receivables formula. This facility
expires on March 31, 2002. At March 31, 1999, we had approximately $85.0 million
outstanding under the revolving loan agreement and $5.0 million available, based
on our borrowing base at that time.

On March 31, 1999, the annual interest rate was 7.375% for Canadian dollar
borrowings and 9.125% for U.S. dollar borrowings. The revolving loan agreement
contains covenants that limit, among other things, our ability to:

- merge or consolidate;

- effect or permit a change of control;

- sell or lease assets;

- incur or grant additional indebtedness or capital leases;

- create or allow to exist liens and other encumbrances on our assets;

- pay dividends or other distributions to our shareholders;

- make certain capital expenditures and investments; and

- enter into certain related-party transactions.

Further, we are required to maintain specific financial ratios and levels
including (a) a ratio of senior debt to EBITDA, (b) a fixed charge coverage
ratio comparing EBITDA to specific disbursements and (c) a ratio comparing
senior debt to total capitalization. For fiscal 1999, the required senior debt
to EBITDA ratio is no more than 3.75 to 1.00, the fixed charge coverage ratio
must be no less than 2.00 to 1.00 and the senior debt to total capitalization
ratio must be no more than 0.65 to 1.00.

The revolving loan agreement provides for customary events of default,
including, among others, the occurrence of a change of control as well as the
failure to complete, by June 1, 1999, the proposed restructuring of operations
whereby Gildan Activewear SRL will become responsible for all of our
non-Canadian sales.

THE FUND

In June 1998, we replaced three unsecured and subordinated debentures
totalling $15.0 million with a new $15.0 million unsecured and subordinated
debenture due 2003, which bears interest at an annual rate of 11.0%. In January
1999, we issued another $15.0 million unsecured and subordinated debenture due
2004, which bears interest at an annual rate of 12.0% for the first two years
and 13.0% for the next three years. The debenture due 2004 contains certain
financial ratio requirements. Both debentures provide for customary events of
default, including, among others, the occurrence of a change of control, as
defined in the Canada Business Corporations Act, without the Fund's prior
consent. In the event of a default by Gildan, the Fund may require us to redeem
the debentures.

64
<PAGE> 68

CAPITAL D'AMERIQUE CDPQ INC.

In February 1999, we issued a $15.0 million unsecured and subordinated
debenture due 2004, which bears interest at an annual rate of 12.5%, to Capital
d'Amerique CDPQ Inc., a subsidiary of Caisse de depot et placement du Quebec.
The debenture contains certain financial ratio requirements and provides for
customary events of default, including the occurrence of a change of control
without prior consent.

SECURED EQUIPMENT AND MORTGAGE LOANS

We have relationships with several lenders which have provided financing by
way of secured loans, mortgages, conditional sales contracts and capitalized
leases. At March 7, 1999, these financings totalled $29.3 million and bore
interest at annual rates ranging from 5.9% to 13.0%. Each of the loans is
secured by certain of our personal (movable) or real (immovable) property. While
some of these lenders do not impose any covenants on us, others require that we
meet specific financial ratios and comply with certain covenants. These
covenants require us to:

- maintain specific (a) shareholders' equity levels, (b) current ratios,
(c) long-term debt to shareholders' equity ratios, (d) total debt to net
worth ratios, (e) minimum tangible net worth, and (f) debt coverage
ratios;

- not declare any dividends without their prior consent unless specific
debt coverage ratios are met;

- maintain control within the Chamandy family; and

- maintain collateral, property and insurance.

Failure to satisfy or comply with any of the foregoing could result in the
acceleration of amounts due or loss of collateral.

65
<PAGE> 69

SHARES ELIGIBLE FOR FUTURE SALE AND ESCROW ARRANGEMENTS

Upon completion of this offering, we will have outstanding 13,394,444
Equity Shares, comprised of 10,347,444 Class A Subordinate Voting Shares, of
which 3,000,000 Class A Subordinate Voting Shares are offered hereby, and
3,047,000 Class B Multiple Voting Shares. The 3,000,000 Class A Subordinate
Voting Shares being offered hereby are not restricted securities and,
consequently, will be freely tradeable under the U.S. Securities Act, unless
purchased by an "affiliate" of Gildan as such term is defined in the U.S.
Securities Act. Any Class A Subordinate Voting Shares purchased by our
affiliates generally may only be sold subject to the requirements of Rule 144
which are described below or pursuant to a registration rights statement or an
exemption therefrom.

The Class B Multiple Voting Shares held by Harco and the Class A
Subordinate Voting Shares held by the Fund and the Trusts, collectively
representing 51.9% of the Equity Shares outstanding immediately after the
closing of this offering, are deemed to be restricted securities under Rule 144
of the U.S. Securities Act. Consequently, Harco, the Fund and each of the Trusts
are entitled to sell within any three-month period only the number of shares
that does not exceed the greater of (a) 1% of the then-outstanding Class A
Subordinate Voting Shares (103,474 Class A Subordinate Voting Shares immediately
after the closing of this offering) or (b) the average weekly trading volume of
the Class A Subordinate Voting Shares during the four calendar weeks preceding
the date on which notice of the sale is filed with the U.S. Commission.
Furthermore, because a holder of restricted securities is not entitled to sell
its shares pursuant to Rule 144 unless it has held such shares for one year, the
Fund may not sell until June 6, 1999 its Class A Subordinate Voting Shares
purchased on June 6, 1998 when it exercised an option to purchase 3% of our
outstanding voting shares on a fully-diluted basis for $500,000.

However, Harco, the Fund and the Trusts may sell their Equity Shares
without regard to the restrictions of Rule 144 upon their registration under the
U.S. Securities Act. Pursuant to a registration rights agreement with us, Harco,
the Fund and the Trusts have the right to require us to register the Class A
Subordinate Voting Shares or the Class B Multiple Voting Shares, upon their
conversion to Class A Subordinate Voting Shares, held by them under the U.S.
Securities Act. See "Certain Relationships and Related
Transactions--Registration Rights Agreement".

However, even if Harco, the Fund and the Trusts were to register shares,
they are restricted in their ability to sell their Equity Shares by lock-up
provisions. Specifically, Harco has agreed not to sell, offer to sell, contract
to sell, announce its intention to sell, pledge, hypothecate, grant any option
for the sale of or otherwise dispose of, directly or indirectly, or file with
the U.S. Commission a registration statement under the U.S. Securities Act, or
file with the applicable Canadian securities commissions a prospectus, relating
to any Class A Subordinate Voting Shares or Class B Multiple Voting Shares or
any securities convertible or exercisable into or exchangeable for any Class A
Subordinate Voting Shares or Class B Multiple Voting Shares until December 17,
1999 without the prior written consent of Bear, Stearns & Co. Inc., as
representative of the underwriters. The Trusts, except with respect to pledging
and hypothecation, Gildan and the Fund have agreed to identical selling
restrictions for a 180-day period following the date of the prospectus.

In accordance with the policies of the relevant Canadian securities
regulatory authorities and The Toronto Stock Exchange concerning the disposition
of shares held by certain persons related to a company engaging in an initial
public offering, Harco, the Fund, the H. Gregory Chamandy Family Trust and the
Glenn Chamandy Family Trust entered into an escrow agreement with Montreal Trust
Company, as escrow agent. Pursuant to the escrow agreement, 2,372,014 Class B
Multiple Voting Shares and 2,842,499 Class A Subordinate Voting Shares were
deposited with the escrow agent by these shareholders. The escrowed shares
deposited with the escrow agent will be released to these shareholders in
tranches of 33 1/3% immediately after each of June 18, 1999, June 18, 2000 and
June 18, 2001, or at any prior time with the consent of the Commission des
valeurs mobilieres du Quebec, the Ontario

66
<PAGE> 70

Securities Commission and The Toronto Stock Exchange. During the period of the
escrow, the escrowed shares may be pledged for security to financial
institutions, subject to the prior approval of the Commission des valeurs
mobilieres du Quebec, the Ontario Securities Commission and The Toronto Stock
Exchange.

We cannot predict the effect, if any, that future sales of Class A
Subordinate Voting Shares or the availability of Class A Subordinate Voting
Shares for future sale will have on the market price of the Class A Subordinate
Voting Shares prevailing from time to time. Sales of substantial numbers of
Class A Subordinate Voting Shares in the public market or the perception that
such sales will occur could adversely affect the market price of the Class A
Subordinate Voting Shares and could impair our ability to raise capital through
the offering of our equity securities. See "Risk Factors--Potential Sales of
Class A Subordinate Voting Shares Could Result In a Decline In the Market Price
of the Class A Subordinate Voting Shares".

67
<PAGE> 71

TAXATION

Unless otherwise stated, statements of legal conclusion set forth under
"Taxation--U.S. Federal Income Taxation" reflect the opinion of Simpson Thacher
& Bartlett as to the material U.S. federal income tax consequences of the
acquisition, ownership and disposition of Class A Subordinate Voting Shares to
U.S. Holders (as defined below) and do not purport to be a complete analysis or
listing of all possible tax considerations. Unless otherwise stated, statements
of legal conclusion set forth under "Taxation--Canadian Taxation" reflect the
opinion of Ogilvy Renault as to the material Canadian federal income tax
consequences of the acquisition, ownership and disposition of Class A
Subordinate Voting Shares by United States Holders, as defined below, and do not
purport to be a complete analysis or listing of all possible tax consequences
relating to an investment in the Class A Subordinate Voting Shares. As indicated
below, certain conclusions are based on (i) certain factual assumptions or (ii)
the belief of Gildan, and such conclusions (as well as such assumptions and
beliefs) do not represent the opinions of Simpson Thacher & Bartlett or Ogilvy
Renault. The discussion does not deal with all possible tax consequences
relating to an investment in the Class A Subordinate Voting Shares and does not
purport to deal with the tax consequences applicable to all categories of
investors, some of which (such as dealers in securities, insurance companies and
tax-exempt entities) may be subject to special rules. In particular, the
discussion does not address the tax consequences under state, provincial, local
and other national (e.g., non-U.S., non-Canadian) tax laws. Accordingly, each
prospective investor should consult its own tax advisor regarding the particular
tax consequences to it of an investment in the Class A Subordinate Voting
Shares. The following discussion is based upon laws, regulations and relevant
interpretations thereof in effect as of the date of this prospectus, all of
which are subject to change, possibly retroactively.

U.S. FEDERAL INCOME TAXATION

The following is a discussion of the U.S. federal income tax consequences
of the acquisition, ownership and disposition of Class A Subordinate Voting
Shares by U.S. Holders. It does not purport to be a complete analysis or listing
of all possible tax considerations. The discussion deals only with Class A
Subordinate Voting Shares held as capital assets and does not address any
special U.S. tax consequences that may be applicable to U.S. Holders that are
subject to special treatment under the U.S. Internal Revenue Code of 1986, as
amended (the "Code"), such as dealers in securities or currencies, financial
institutions, tax-exempt entities, life insurance companies, persons holding
Class A Subordinate Voting Shares as part of a hedging or conversion
transaction, constructive sale or a straddle, persons owning directly or
indirectly 10% or more of the total combined voting power of all classes of
voting stock of Gildan, or whose functional currency is not the U.S. dollar.
Prospective purchasers who are U.S. Holders are urged to satisfy themselves as
to the overall U.S. federal, state and local tax consequences of their ownership
of the Class A Subordinate Voting Shares by consulting their own tax advisors.

As used herein, a "U.S. Holder" of a Class A Subordinate Voting Share means
a holder that is, for U.S. federal and income tax purposes, a citizen or
resident of the United States, a corporation or partnership created or organized
in or under the laws of the United States or any political subdivision thereof,
an estate the income of which is subject to U.S. federal income taxation
regardless of its source, or a trust (a) which is subject to the supervision of
a court within the United States and the control of a United States person as
described in Section 7701(a)(3) of the Code or (b) that has a valid election in
effect under applicable U.S. Treasury regulations to be treated as a United
States person.

68
<PAGE> 72

TAXATION OF DIVIDENDS

The gross amount of dividends paid to U.S. Holders of Class A Subordinate
Voting Shares (including amounts withheld to reflect Canadian withholding taxes,
if any) will be treated as dividend income to such U.S. Holders, to the extent
paid out of current or accumulated earnings and profits, as determined under
U.S. federal income tax principles. Such income will be includable in the gross
income of a U.S. Holder as ordinary income. Such dividends will not be eligible
for the dividends received deduction allowed to corporations under the Code.

The maximum rate of withholding tax on dividends paid to a U.S. Holder
pursuant to the Treaty is 15%. U.S. Holders may be required to properly
demonstrate to Gildan and the Canadian tax authorities their entitlement to the
reduced rate of withholding under the Treaty. Subject to certain significant
conditions and limitations, Canadian withholding taxes will be treated as
foreign taxes eligible for credit against a U.S. Holder's U.S. federal income
tax liability. For purposes of calculating the foreign tax credit, dividends
paid on the Class A Subordinate Voting Shares will be treated as income from
sources outside the United States and will generally constitute "passive income"
or, in the case of certain U.S. Holders, "financial services income". Special
rules apply to certain individuals whose foreign source income during the
taxable year consists entirely of "qualified passive income" and whose
creditable foreign taxes paid or accrued during the taxable year do not exceed
$300 ($600 in the case of a joint return). Further, in certain circumstances, a
U.S. Holder that:

- has held Class A Subordinate Voting Shares for less than a specified
minimum period with respect to each dividend payment during which it is
not protected from risk of loss;

- is obligated to make payments related to the dividends; or

- holds the Class A Subordinate Voting Shares in an arrangement in which
the U.S. Holder's expected economic profit after non-U.S. taxes is
insubstantial

will not be allowed a foreign tax credit for foreign taxes imposed on dividends
paid on Class A Subordinate Voting Shares. Investors are urged to consult their
tax advisors regarding the availability of the foreign tax credit under their
particular circumstances.

To the extent that the amount of any distribution exceeds Gildan's current
and accumulated earnings and profits for a taxable year, the distribution will
first be treated as a tax-free return of capital, causing a reduction in the
adjusted basis of the Class A Subordinate Voting Shares (thereby increasing the
amount of gain, or decreasing the amount of loss, to be recognized by the
investor on a subsequent disposition of the Class A Subordinate Voting Shares),
and the balance in excess of adjusted basis will be taxed as capital gain
recognized on a sale or exchange. Consequently, such distributions in excess of
Gildan's current and accumulated earnings and profits would not give rise to
foreign source income and a U.S. Holder would not be able to use the foreign tax
credit arising from any Canadian withholding tax imposed on such distributions,
unless such credit can be applied (subject to applicable limitations) against
U.S. tax due on other foreign source income in the appropriate category for
foreign tax credit purposes.

FOREIGN PERSONAL HOLDING COMPANY STATUS

A foreign corporation will be classified as a foreign personal holding
company (an "FPHC") if:

- at any time during the corporation's taxable year, five or fewer
individuals, who are U.S. citizens or residents, directly or indirectly
own more than 50% of the corporation's stock (by either voting power or
value) (the "FPHC shareholder test"); and

69
<PAGE> 73

- the corporation receives at least 60% of its gross income (regardless of
source), as adjusted, from certain passive sources (the "FPHC income
test"). After its initial year of qualification as an FPHC, a
corporation may remain an FPHC even if only 50% of its gross income is
FPHC income (i.e., passive income such as interest, dividends, etc.).

Gildan believes that it does not satisfy, and expects that it will continue
to fail to satisfy, the FPHC income test. Gildan believes that the FPHC
shareholder test also was not met prior to the offering and will not be met
immediately after the offering. However, due to a number of factors (including
the FPHC stock attribution rules, possible change in residence by current
indirect shareholders, and possible acquisition of Class A Subordinate Voting
Shares by purchase, gift, or bequest by individuals related to or partners of
current indirect shareholders), Gildan cannot assure you that Gildan will not
become an FPHC in the future.

If Gildan were classified as an FPHC, U.S. Holders (including certain
indirect holders) would be required to include in income their pro rata share of
Gildan's undistributed FPHC income if they were holders on the last day of
Gildan's taxable year (or if earlier, the last day on which Gildan satisfies the
shareholder test). Such income would be taxable to such persons as a dividend,
even if no cash dividend were actually paid. In general, a U.S. Holder would be
entitled to increase its tax basis in the Class A Subordinate Voting Shares by
the amount of such deemed FPHC dividend. U.S. Holders who dispose of their Class
A Subordinate Voting Shares prior to the date discussed above would not be
subject to these rules. Moreover, if Gildan became an FPHC, U.S. persons who
acquire Class A Subordinate Voting Shares from decedents would not receive a
"stepped-up" basis in such Class A Subordinate Voting Shares. Instead, such a
holder would have a tax basis equal to the lower of fair market value or the
decedent's basis.

Gildan will notify U.S. Holders in the event that it concludes that it is
classified as FPHC for any taxable year.

PERSONAL HOLDING COMPANY TAX

A corporation will be classified as a personal holding company (a "PHC")
if:

- at any time during the last half of the corporation's taxable year, five
or fewer individuals own more than 50% of the corporation's stock (by
value) directly or indirectly (the "PHC Shareholder test"); and

- the corporation receives at least 60% of its gross income, as adjusted,
from certain passive sources (the "PHC Income test").

However, if a corporation is an FPHC (see above), it cannot be a PHC.

Gildan believes that it satisfies, and will continue to satisfy, the PHC
shareholder test. Gildan believes that the PHC income test will not be met for
the current taxable year and that it consequently will not be classified as a
PHC. However, there can be no assurance that Gildan will not become a PHC in the
future.

A corporation classified as a PHC is subject to a 39.6% tax on its
undistributed personal holding company income. Foreign corporations (such as
Gildan) determine their liability for PHC tax by considering only (i) gross
income derived from U.S. sources and (ii) gross income which is effectively
connected with a U.S. trade or business (collectively, "U.S. Taxable Income").

70
<PAGE> 74

PASSIVE FOREIGN INVESTMENT COMPANY STATUS

Gildan does not believe that it is, for U.S. federal tax purposes, a
passive foreign investment company (a "PFIC"), and expects to continue its
operations in such a manner that it will not be a PFIC. If, however, Gildan is
or does become a PFIC, U.S. Holders could be subject to additional U.S. federal
income taxes on certain distributions or gains with respect to Class A
Subordinate Voting Shares, plus an interest charge on certain taxes treated as
having been deferred by the U.S. Holder, under the PFIC rules.

TAXATION OF CAPITAL GAINS

For U.S. federal income tax purposes, a U.S. Holder will recognize taxable
gain or loss on any sale or exchange of a Class A Subordinate Voting Share in an
amount equal to the difference between the amount realized for the Class A
Subordinate Voting Share and the U.S. Holder's basis in the Class A Subordinate
Voting Share. Such gain or loss will be capital gain or loss. Capital gains of
individuals derived with respect to capital assets held for more than one year
are eligible for reduced rates of taxation. The deductibility of capital losses
is subject to limitation. Any gain or loss recognized by a U.S. Holder will
generally be treated as U.S. source gain or loss. Prospective investors should
consult their own tax advisors with respect to the treatment of capital gains
and losses.

INFORMATION REPORTING AND BACKUP WITHHOLDING

In general, information reporting requirements will apply to dividends paid
in respect of the Class A Subordinate Voting Shares or the proceeds received on
the sale, exchange, or redemption of the Class A Subordinate Voting Shares
within the United States (and in certain cases, outside the United States) by
non-corporate U.S. Holders, and a 31% backup withholding may apply to such
amounts if the U.S. Holder fails to provide an accurate taxpayer identification
number or to report interest and dividends required to be shown on its federal
income tax returns. Backup withholding will not apply with respect to payments
made to certain exempt recipients, such as corporations and tax-exempt
organizations. The amount of any backup withholding from a payment to a U.S.
Holder will be allowed as a credit against the U.S. Holder's U.S. federal income
tax liability and may entitle such U.S. Holder to a refund, provided that the
required information is furnished to the U.S. Internal Revenue Service.

CANADIAN TAXATION

The following takes into account the current provisions of the Income Tax
Act (Canada) (the "Tax Act"), the regulations thereunder, all specific proposals
to amend the Tax Act publicly announced prior to the date of this Offering, the
Convention between Canada and the United States of America with respect to Taxes
on Income and on Capital (the "Convention") and the current published
administrative practices and policies of Revenue Canada, as understood by Ogilvy
Renault. It assumes that all proposals to amend the Tax Act will be enacted in
their present form and otherwise does not take into account or anticipate
changes in the law, whether by way of judicial decision or legislative action
nor does it take into account provincial, territorial or foreign tax legislation
or considerations. This summary is generally applicable to a person who acquires
the Class A Subordinate Voting Shares pursuant to this offering and who:

- throughout the period during which the purchaser owns the Class A
Subordinate Voting Shares, is not resident in Canada for the purposes of
the Tax Act and is a resident of the United States for the purposes of
the Convention;

- holds the Class A Subordinate Voting Shares as capital property for the
purposes of the Tax Act; and

71
<PAGE> 75

- does not use or hold, and is not deemed for the purposes of the Tax Act
to use or hold, such Class A Subordinate Voting Shares in, or in the
course of, carrying on a business in Canada (a "United States Holder").

The Class A Subordinate Voting Shares will generally be considered to be capital
property to a United States Holder unless either the United States Holder holds
those shares in the course of carrying on a business or the United States Holder
has acquired those shares in one or more transactions considered to be an
adventure in the nature of trade.

The following does not purport to be a complete analysis or listing of all
possible tax considerations that may be relevant to purchasers of Class A
Subordinate Voting Shares. Prospective purchasers who are United States Holders
are urged to satisfy themselves as to the overall Canadian federal, provincial
or territorial as well as foreign tax consequences of their ownership of Class A
Subordinate Voting Shares by consulting their own tax advisers with respect to
their particular circumstances.

TAXATION OF DIVIDENDS

Dividends paid or credited (or deemed to be paid or credited) by Gildan to
a United States Holder that beneficially owns such dividends generally are
subject to Canadian withholding tax at the rate of (a) 15% of the gross amount
of such dividends, or (b) where the United States Holder is a company that owns
at least 10% of the voting stock of Gildan, 5% of the gross amount of such
dividends.

A United States Holder, which is a trust company, organization or other
arrangement generally exempt from income taxation in the United States in a
given taxable year and operated exclusively either (a) to administer or provide
pension, retirement or employee benefits or (b) to earn income for the benefit
of an organization referred to in (a) shall not be subject to Canadian
withholding tax on dividends paid or credited (or deemed to be paid or credited)
by Gildan in such year unless such United States Holder is related to Gildan or
receives such dividends in the course of carrying on a trade or business.

TAXATION OF SALE OR OTHER DISPOSITION

A United States Holder will not be subject to tax under the Tax Act on any
gain in respect of the disposition or deemed disposition of Class A Subordinate
Voting Shares unless those Class A Subordinate Voting Shares constitute "taxable
Canadian property", as defined in the Tax Act, to such United States Holder. The
Class A Subordinate Voting Shares generally will not constitute taxable Canadian
property to a United States Holder unless the United States Holder, persons with
whom the United States Holder does not deal at arm's length, or the United
States Holder and such persons collectively own or have at any time within the
five year period immediately prior to the disposition collectively owned, 25% or
more of the issued shares of any class or series of the Company, including
rights to acquire shares. Even if the Class A Subordinate Voting Shares are
taxable Canadian property to a United States Holder, under the Convention, gains
derived by a United States Holder from the disposition of Class A Subordinate
Voting Shares would generally not be taxable in Canada unless the value of the
Class A Subordinate Voting Shares is derived principally from real property
situated in Canada. Gildan believes that the value of its Class A Subordinate
Voting Shares is not currently derived principally from real property situated
in Canada and it does not expect this to change in the foreseeable future.

OTHER CANADIAN TAXES

No other taxes on income or capital are payable by United States Holders in
respect of the Class A Subordinate Voting Shares or the dividends thereon.

72
<PAGE> 76

EXCHANGE CONTROLS

There are currently no laws, decrees or regulations in Canada imposing
restrictions on the import or export of capital affecting remittances of
dividends on our Class A Subordinate Voting Shares or on the conduct of our
operations.

73
<PAGE> 77

UNDERWRITING

Gildan and the underwriters for this offering named below, for whom Bear,
Stearns & Co. Inc., Nesbitt Burns Inc., The Robinson-Humphrey Company, LLC,
Wasserstein Perella Securities, Inc. and CIBC World Markets Inc. are acting as
representatives (collectively, the "Representatives"), have entered into an
underwriting agreement with respect to the Class A Subordinate Voting Shares
being offered. Subject to the terms and conditions of the underwriting
agreement, each underwriter has severally agreed to purchase the number of Class
A Subordinate Voting Shares set forth opposite their respective names below:

<TABLE>
<CAPTION>
NUMBER OF
CLASS A SUBORDINATE
NAME OF UNDERWRITER VOTING SHARES
- ------------------- -------------------
<S> <C>
Bear, Stearns & Co. Inc. ............................. 1,140,000
Nesbitt Burns Inc. ................................... 570,000
The Robinson-Humphrey Company, LLC.................... 570,000
Wasserstein Perella Securities, Inc. ................. 570,000
CIBC World Markets Inc................................ 150,000
---------
Total............................................... 3,000,000
=========
</TABLE>

If the underwriters sell more than the total number set forth in the table
above, the underwriters have an option to buy up to an aggregate of 450,000
additional Class A Subordinate Voting Shares from us to cover such sales. They
may exercise that option within 30 days after the date of this prospectus. If
any Class A Subordinate Voting Shares are purchased pursuant to this option, the
underwriters will severally purchase Class A Subordinate Voting Shares in
approximately the same proportion as set forth in the above table.

The following table shows the per Class A Subordinate Voting Share and
total underwriting discounts and commissions to be paid to the underwriters by
us. Such amounts are shown assuming both no exercise and full exercise of the
underwriters' option to purchase additional Class A Subordinate Voting Shares.

<TABLE>
<CAPTION>
PAID BY GILDAN
-----------------------------
NO EXERCISE FULL EXERCISE
------------ -------------
<S> <C> <C>
Per Class A Subordinate Voting Share........................ US$ 0.7425 US$ 0.7425
Total....................................................... US$2,227,500 US$2,561,625
</TABLE>

Class A Subordinate Voting Shares sold by the underwriters to the public
will initially be offered at the public offering price set forth on the cover
page of this prospectus. Any Class A Subordinate Voting Shares sold by the
underwriters to securities dealers may be sold at a discount of up to US$0.45
per Class A Subordinate Voting Share from the public offering price. Any such
securities dealers may resell any Class A Subordinate Voting Shares purchased
from the underwriters to certain other brokers or dealers at a discount of up to
US$0.10 per Class A Subordinate Voting Share from the public offering price.

This offering is being made concurrently in the United States and in all
the provinces of Canada. Subject to applicable law, the underwriters may offer
the Class A Subordinate Voting Shares outside of the United States and Canada.

Harco has agreed that until December 17, 1999, it will not, without the
prior written consent of Bear, Stearns & Co. Inc., on behalf of the
underwriters, sell, offer to sell, contract to sell, announce its intention to
sell, pledge, hypothecate, grant any option for the sale of or otherwise dispose
of, directly or indirectly, or file with the U.S. Commission a registration
statement under the U.S. Securities Act, or file with the applicable Canadian
securities commissions a prospectus, relating to any Class A

74
<PAGE> 78

Subordinate Voting Shares or Class B Multiple Voting Shares or any securities
convertible or exercisable into or exchangeable for any Class A Subordinate
Voting Shares or Class B Multiple Voting Shares. Gildan, each of the Trusts,
except with respect to pledging and hypothecation, and the Fund have agreed to
identical selling limitations for a period of 180 days from the date of the
prospectus. All of these undertakings are subject to limited exceptions.

In connection with the offering, the underwriters may purchase and sell
Class A Subordinate Voting Shares in the open market. These transactions may
include short sales, stabilizing transactions and purchases to cover positions
created by short sales. Short sales involve the sale by the underwriters of a
greater number of Class A Subordinate Voting Shares than they are required to
purchase in the offering. Stabilizing transactions consist of certain bids or
purchases made for the purpose of preventing or slowing a decline in the market
price of the Class A Subordinate Voting Shares while the offering is in
progress.

The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the Representatives have repurchased Class A
Subordinate Voting Shares sold by or for the account of such underwriter in
stabilizing or short covering transactions. These activities by the underwriters
may stabilize, maintain or otherwise affect the market price of the Class A
Subordinate Voting Shares. As a result, the price of a Class A Subordinate
Voting Share may be higher than the price that otherwise might exist in the open
market. We make no representation as to the magnitude or effect of any such
stabilization or other transactions. Such transactions may be effected on the
American Stock Exchange, The Montreal Exchange, The Toronto Stock Exchange or
otherwise and, if commenced, may be discontinued at any time.

We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the U.S. Securities Act and applicable Canadian
securities laws, and, where such indemnification is unavailable, to contribute
to payments that the underwriters may be required to make in respect of such
liabilities.

Some of the underwriters and their affiliates have from time to time
provided, and may continue to provide, investment banking services to us for
which such underwriters or affiliates have received and will receive fees and
commissions.

LEGAL MATTERS

The validity of the Class A Subordinate Voting Shares offered hereby and
certain other matters of Canadian law relating to the offering are being passed
upon for us by Ogilvy Renault, Montreal, Quebec, a general partnership, and
Hart, Saint-Pierre, Montreal, Quebec, a general partnership. Certain legal
matters relating to the offering are being passed upon for us by Simpson Thacher
& Bartlett, New York, New York, with respect to U.S. law, and certain legal
matters relating to the offering are being passed upon for the underwriters by
Weil, Gotshal & Manges LLP, New York, New York, with respect to U.S. law and
Stikeman, Elliott, Montreal, Quebec, with respect to Canadian law. Simpson
Thacher & Bartlett and Weil, Gotshal & Manges LLP will rely upon Ogilvy Renault
with respect to matters of Canadian law.

Mr. Norman M. Steinberg, a director of Gildan, is a partner of Ogilvy
Renault. Mr. Gino Martel, Secretary of Gildan, is a partner of Hart,
Saint-Pierre. Ogilvy Renault has acted as counsel to Gildan since 1997. Hart,
Saint-Pierre has acted as counsel to Gildan since its inception in 1984.

75
<PAGE> 79

EXPERTS

Our consolidated financial statements as of and for ten-month fiscal 1996,
fiscal 1997 and fiscal 1998 have been audited by KPMG LLP, Chartered
Accountants, as stated in their report appearing herein. The consolidated
financial statements referred to above have been so included in reliance upon
such reports given upon the authority of said firms as experts in auditing and
accounting.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form F-1 under the Securities Act, with respect to the Class A
Subordinate Voting Shares offered hereby. This prospectus does not contain all
of the information set forth in the registration statement and the exhibits
thereto. For further information with respect to Gildan and the Class A
Subordinate Voting Shares offered hereby, reference is made to the registration
statement and to the financial statements and exhibits filed as a part thereof.
Statements contained in this prospectus as to the contents of any contract,
agreement or any other document are not necessarily complete and, in each
instance, reference is made to the copy of such document filed as an exhibit to
the registration statement or otherwise with the Commission, each such statement
being qualified in all respects by such reference and exhibits. The registration
statement, including all exhibits thereto, may be found on the Commission's
website at www.sec.gov or inspected without charge at the Commission's principal
office at 450 Fifth Street, N.W., Washington, D.C. 20549, as well as the
Commission's regional offices at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and Seven World Trade Center, Suite 1300, New York, New York
10048, and copies of all or any part thereof may be obtained from such offices
after payment of the fees prescribed by the Commission. You may obtain
information regarding the operation of the public reference rooms at
1-800-SEC-0330.

We furnish our shareholders with annual reports containing financial
statements and a reconciliation with U.S. GAAP audited by an independent
chartered accounting firm. We also furnish quarterly reports for the first three
quarters of each fiscal year containing unaudited financial information. Our
annual reports and quarterly reports are prepared in accordance with Canadian
GAAP and in Canadian dollars. We are subject to the reporting requirements of
the U.S. Securities Exchange Act of 1934, as amended, applicable to foreign
private issuers and in accordance therewith we file reports and other
information with the Commission. As a foreign private issuer, we are exempt from
certain provisions of the U.S. Securities Exchange Act prescribing the
furnishing and content of proxy statements and certain periodic reports and from
provisions of the U.S. Securities Exchange Act relating to short swing profits
reporting and liability.

In addition, all of our continuous disclosure documents are available
on-line on SEDAR, the System for Electronic Document Analysis and Retrieval,
used by companies to electronically file information with the Canadian
Securities Administrators. SEDAR is located on the internet at www.sedar.com and
is operated by The Canadian Depository for Securities.

76
<PAGE> 80

GILDAN ACTIVEWEAR INC.
CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FINANCIAL STATEMENTS
Auditors' Report to the Board of Directors................ F-2
Consolidated Balance Sheets............................... F-3
Consolidated Statements of Income......................... F-4
Consolidated Statements of Retained Earnings.............. F-5
Consolidated Statements of Changes in Financial
Position............................................... F-6
Notes to Consolidated Financial Statements................ F-7
</TABLE>

F-1
<PAGE> 81

AUDITORS' REPORT TO THE BOARD OF DIRECTORS

We have audited the consolidated balance sheets of Gildan Activewear Inc.
as at October 4, 1998 and October 5, 1997 and the consolidated statements of
income, retained earnings and changes in financial position for the years ended
October 4, 1998 and October 5, 1997 and the ten-month period ended September 29,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the Company as at October 4,
1998 and October 5, 1997 and the results of its operations and the changes in
its financial position for the years ended October 4, 1998 and October 5, 1997
and for the ten-month period ended September 29, 1996 in accordance with
generally accepted accounting principles in Canada.

Accounting principles generally accepted in Canada vary in certain
significant respects from accounting principles generally accepted in the United
States. Application of accounting principles generally accepted in the United
States would have affected results of operations for the years ended October 4,
1998, October 5, 1997 and the ten-month period ended September 29, 1996 and
shareholders' equity as of October 4, 1998 and October 5, 1997, to the extent
summarized in note 19 to the consolidated financial statements.

/s/ KPMG LLP
Chartered Accountants

Montreal, Canada
November 13, 1998
(Except as to note 18 which is as of May 7, 1999)

F-2
<PAGE> 82

GILDAN ACTIVEWEAR INC.

CONSOLIDATED BALANCE SHEETS
(In Canadian dollars)

<TABLE>
<CAPTION>
JANUARY 3, OCTOBER 4, OCTOBER 5,
1999 1998 1997
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Accounts receivable (note 2)............... $ 57,206,600 $ 55,687,657 $ 31,166,610
Inventories (note 3)....................... 93,360,675 59,981,432 19,758,851
Prepaid expenses and deposits.............. 1,673,654 2,030,080 1,175,777
------------ ------------ ------------
152,240,929 117,699,169 52,101,238
Fixed assets (note 4)........................ 51,948,406 41,873,758 21,378,121
Other assets (note 5)........................ 7,248,229 6,105,008 3,885,276
------------ ------------ ------------
$211,437,564 $165,677,935 $ 77,364,635
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank indebtedness (note 6)................. $ 61,528,877 $ 32,496,777 $ 15,029,867
Accounts payable and accrued liabilities... 47,937,576 45,309,533 17,833,894
Income taxes payable....................... 3,255,543 3,465,643 1,468,799
Current portion of long-term debt (note
7)...................................... 5,296,023 3,293,280 2,363,087
------------ ------------ ------------
118,018,019 84,565,233 36,695,647
Long-term debt (note 7)...................... 35,832,576 24,754,500 21,958,303
Advances from parent company................. -- -- 382,790
Future income taxes.......................... 3,278,000 3,028,000 2,675,000
Shareholders' equity:
Share capital (note 8)..................... 34,458,145 34,458,145 7,271,994
Contributed surplus (note 8)............... 322,866 322,866 --
Retained earnings.......................... 19,527,958 18,549,191 8,380,901
------------ ------------ ------------
54,308,969 53,330,202 15,652,895
------------ ------------ ------------
Commitments and contingent liabilities (note
9)
$211,437,564 $165,677,935 $ 77,364,635
============ ============ ============
</TABLE>

On behalf of the Board:

<TABLE>
<S> <C>
/s/ H. GREGORY CHAMANDY, Director /s/ NORMAN M. STEINBERG, Director
</TABLE>

See accompanying notes to consolidated financial statements.

F-3
<PAGE> 83

GILDAN ACTIVEWEAR INC.

CONSOLIDATED STATEMENTS OF INCOME
(In Canadian dollars)

<TABLE>
<CAPTION>
THREE-MONTH THREE-MONTH TEN-MONTH
PERIOD ENDED PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
JANUARY 3, JANUARY 4, OCTOBER 4, OCTOBER 5, SEPTEMBER 29,
1999 1998 1998 1997 1996
------------ ------------ ------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Sales.............................. $45,109,313 $31,812,474 $215,427,668 $119,844,406 $70,448,421
Cost of sales...................... 33,078,967 25,969,379 164,849,498 93,059,472 56,367,062
----------- ----------- ------------ ------------ -----------
Gross profit....................... 12,030,346 5,843,095 50,578,170 26,784,934 14,081,359
Expenses:
Selling, general and
administrative................. 7,194,791 3,617,318 20,795,860 12,470,101 8,359,505
Depreciation and amortization.... 1,763,011 746,150 4,062,850 2,337,073 1,633,292
Interest on long-term debt....... 675,255 506,381 2,767,468 1,683,548 1,080,277
Interest, other.................. 868,522 341,591 2,264,571 1,290,787 1,427,115
Loss on settlement of long-term
debt (note 7).................. - - 819,131 - -
----------- ----------- ------------ ------------ -----------
10,501,579 5,211,440 30,709,880 17,781,509 12,500,189
----------- ----------- ------------ ------------ -----------
Income before income taxes......... 1,528,767 631,655 19,868,290 9,003,425 1,581,170
Income taxes (note 11):
Current.......................... 300,000 - 4,771,000 1,787,000 170,000
Future........................... 250,000 331,269 1,929,000 1,551,000 438,000
----------- ----------- ------------ ------------ -----------
550,000 331,269 6,700,000 3,338,000 608,000
----------- ----------- ------------ ------------ -----------
Net income......................... $ 978,767 $ 300,386 $ 13,168,290 $ 5,665,425 $ 973,170
=========== =========== ============ ============ ===========
Net income per share (note 1 (g)):
Basic............................ $ 0.10 $ 1.65
Fully diluted.................... 0.10 1.62
Weighted average number of common
shares outstanding:
Basic............................ 9,950,000 7,998,657
Fully diluted.................... 10,627,076 8,177,303
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE> 84
GILDAN ACTIVEWEAR INC.

CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(In Canadian dollars)

THREE-MONTH THREE-MONTH TEN-MONTH
PERIOD ENDED PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
JANUARY 3, JANUARY 4, OCTOBER 4, OCTOBER 5, SEPTEMBER 29,
1999 1998 1998 1997 1996
------------ ------------ ------------ ------------ -------------
(UNAUDITED)

<S> <C> <C> <C> <C> <C>
Retained earnings, beginning of
period........................... $18,549,191 $ 8,380,901 $ 8,380,901 $ 2,715,476 $ 1,742,306
Net income......................... 978,767 300,386 13,168,290 5,665,425 973,170
Dividends.......................... - (500,000) (500,000) -- --
Cost of stock option re-acquired
(note 8 (b))..................... -- -- (2,500,000) -- --
----------- ----------- ------------ ------------ -----------
Retained earnings, end of period... $19,527,958 $ 8,181,287 $ 18,549,191 $ 8,380,901 $ 2,715,476
=========== =========== ============ ============ ===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE> 85

GILDAN ACTIVEWEAR INC.
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
(In Canadian dollars)

<TABLE>
<CAPTION>
THREE-MONTH THREE-MONTH TEN-MONTH
PERIOD ENDED PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
JANUARY 3, JANUARY 4, OCTOBER 4, OCTOBER 5, SEPTEMBER 29,
1999 1998 1998 1997 1996
------------ ------------- ------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash provided by (used in):
Operations:
Net income..................... $ 978,767 $ 300,386 $ 13,168,290 $ 5,665,425 $ 973,170
Add (deduct) items not
affecting cash:
Depreciation and
amortization............... 1,763,011 746,150 4,109,341 2,337,073 1,633,292
Future income taxes.......... 250,000 331,269 1,929,000 1,551,000 438,000
(Gain) loss on disposal of
fixed assets............... -- 201,316 (380,783) 31,464 1,229
Net changes in non-cash working
capital balances (note 12)... (32,123,819) (10,162,320) (36,012,448) (13,781,840) (8,784,038)
------------ ------------ ------------ ------------ ------------
(29,132,041) (8,583,199) (17,186,600) (4,196,878) (5,738,347)
Financing:
Increase in long-term debt..... 13,939,055 1,154,283 14,034,944 10,392,680 9,651,842
Repayment of long-term debt.... (858,236) (629,982) (10,308,554) (2,854,755) (3,562,397)
Issue of common shares, net.... -- -- 25,920,017 10,000 3,000,000
Payment of dividends........... -- (500,000) (500,000) -- --
Redemption of share capital.... -- -- (422,866) -- --
Increase in contributed
surplus...................... -- -- 322,866 -- --
Acquisition of stock option.... -- -- (2,500,000) -- --
------------ ------------ ------------ ------------ ------------
13,080,819 24,301 26,546,407 7,547,925 9,089,445
Investments:
Decrease in advances to
affiliated companies......... -- -- -- -- 20,000
Decrease (increase) in advances
to/from parent company....... 50,967 (119,984) (1,110,412) 5,810 (987,957)
Increase in deferred charges... (430,734) (60,917) (994,300) (996,293) (491,402)
Increase in prepaid equipment
rental....................... (106,520) -- (703,684) -- --
Purchase of fixed assets....... (11,563,406) (6,362,164) (24,587,694) (5,438,648) (6,390,257)
Proceeds on disposal of fixed
assets....................... -- 213,000 1,289,191 90,133 16,350
Decrease (increase) in
deposits..................... (931,185) 355,194 (719,818) (799,712) 98,381
------------ ------------ ------------ ------------ ------------
(12,980,878) (5,974,871) (26,826,717) (7,138,710) (7,734,885)
------------ ------------ ------------ ------------ ------------
Increase in bank indebtedness.... (29,032,100) (14,533,769) (17,466,910) (3,787,663) (4,383,787)
Bank indebtedness, beginning of
period......................... (32,496,777) (15,029,867) (15,029,867) (11,242,204) (6,858,417)
------------ ------------ ------------ ------------ ------------
Bank indebtedness, end of
period......................... $(61,528,877) $(29,563,636) $(32,496,777) $(15,029,867) $(11,242,204)
============ ============ ============ ============ ============
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE> 86

GILDAN ACTIVEWEAR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended October 4, 1998, October 5, 1997 and period ended September 29, 1996

(In Canadian dollars)

Gildan Activewear Inc. (the "Company") is incorporated under the Canada
Business Corporations Act. Its principal business activities include the design,
manufacture and distribution of activewear apparel. Effective September 29,
1996, the Company changed its fiscal year-end from the first Friday following
November 29 to the first Sunday following September 28.

The consolidated statements of income, retained earnings and changes in
financial position for the three-month periods ended January 3, 1999 and January
4, 1998, and the balance sheet as at January 3, 1999 are unaudited but include
all adjustments (consisting of normal recurring adjustments) that the Company
considers necessary for a fair presentation. Operating results for the
three-month period ended January 3, 1999 are not necessarily indicative of the
results that may be expected for the year ending October 3, 1999. Financial
disclosures herein relating to matters subsequent to November 13, 1998 are
unaudited, except for matters disclosed in note 18.

1. SIGNIFICANT ACCOUNTING POLICIES:

The consolidated financial statements are expressed in Canadian dollars and
have been prepared in accordance with accounting principles generally
accepted in Canada.

(a) Principles of consolidation:

The accompanying consolidated financial statements include the accounts
of the Company and its subsidiaries. All significant intercompany
balances and transactions have been eliminated on consolidation.

(b) Inventories:

Inventories are stated at the lower of cost (first in, first out method)
and market value. Market value is defined as replacement cost for raw
materials and net realizable value for work in process and finished
goods.

Fixed assets are recorded at cost. Depreciation and amortization are
calculated on a straight-line basis at the following annual rates:

<TABLE>
<CAPTION>
ASSET RATE
----- ----------
<S> <C>
Building and improvements................................... 2 1/2% to
20%
Equipment................................................... 5% to 25%
Equipment under capital leases.............................. 5% to 25%
</TABLE>

(d) Deferred charges:

The costs of obtaining long-term financing are deferred and amortized on
a straight-line basis over the term of the related debt, ranging over a
period of 3 to 5 years. Plant start-up costs and significant plant
renovation costs incurred to improve future production efficiencies are
deferred and amortized over 2 years. The amortization of these charges
is included in depreciation and amortization.

F-7
<PAGE> 87

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(e) Use of estimates:

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

(f) Foreign exchange:

Monetary assets and liabilities denominated in foreign currencies are
translated at the rates of exchange at the balance sheet date. Other
balance sheet items are translated at the rates prevailing at the
respective transaction dates. Income and expenses are translated at
average rates prevailing during the year. Gains or losses on foreign
exchange are recorded in the statements of income.

The foreign subsidiaries are considered to be integrated foreign
operations and their accounts have been translated using the temporal
method with translation gains and losses included in the statements of
income.

(g) Earnings per share:

Earnings per share is calculated using the weighted average number of
equity shares outstanding during the year after giving effect
retroactively at the beginning of fiscal 1998 to the conversion of the
Class A preferred shares and Class A common shares into Class A
subordinate voting shares and Class B multiple voting shares as
discussed in note 8 (d) to the Consolidated Financial Statements. Fully
diluted earnings per share reflects the dilutive effects of the assumed
exercise of stock options outstanding at the end of the period.

Prior to the completion of the initial public offering, the Company, as
a private entity, is not required to present earnings per share.

(h) Revenue recognition:

Sales are recognized at the time of shipment of products. At the time of
sale, estimates are made, based upon existing programs, for customer
price discounts and rebates. Accruals required for new programs which
related to prior sales are recorded at the time the new program is
introduced.

(i) Advertising and promotion:

All costs associated with advertising and promoting products are
expensed in the period incurred.

(j) Financial instruments:

The Company uses derivative financial instruments, principally forward
foreign exchange contracts to manage risks from fluctuations in exchange
rates and interest rate swap arrangements to manage risks from
fluctuations in interest rates. Derivative financial instruments are not
used for trading purposes. Gains and losses on forward foreign exchange
contracts are recognized through income and generally offset transaction
losses or gains on the foreign currency cash flows, which they are
intended to hedge. Forward foreign exchange contracts are entered into
with maturities of no longer than six months.

F-8
<PAGE> 88

2. RECEIVABLES:

<TABLE>
<CAPTION>
JANUARY 3, OCTOBER 4, OCTOBER 5,
1999 1998 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Trade receivables........................ $54,249,616 $55,335,629 $30,161,104
Duty drawback............................ 726,675 783,769 425,000
Commodity taxes receivable............... 2,408,495 2,202,153 1,078,946
Other.................................... 1,325,177 1,186,916 431,560
Less allowance for doubtful accounts,
price discounts and rebates............ (1,503,363) (3,820,810) (930,000)
----------- ----------- -----------
$57,206,600 $55,687,657 $31,166,610
=========== =========== ===========
Allowance for doubtful accounts, price
discounts and rebates:
Beginning of period.................... $ 3,820,810 $ 930,000 $ 503,143
Amount provided for during the
period.............................. 1,303,000 3,620,810 465,596
Amount applied against the provision
during the period................... (3,620,447) (730,000) (38,739)
----------- ----------- -----------
Balance, end of period................... $ 1,503,363 $ 3,820,810 $ 930,000
=========== =========== ===========
</TABLE>

3. INVENTORIES:

<TABLE>
<CAPTION>
JANUARY 3, OCTOBER 4, OCTOBER 5,
1999 1998 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials............................ $ 3,568,257 $ 6,012,464 $ 2,255,196
Work in process.......................... 25,750,791 20,471,740 9,071,432
Finished goods........................... 64,041,627 33,497,228 8,432,223
----------- ----------- -----------
$93,360,675 $59,981,432 $19,758,851
=========== =========== ===========
</TABLE>

4. FIXED ASSETS:

<TABLE>
<CAPTION>
JANUARY 3,
ACCUMULATED 1999
DEPRECIATION -----------
AND NET BOOK
COST AMORTIZATION VALUE
----------- ------------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Land..................................... $ 1,757,647 $ -- $ 1,757,647
Building and improvements................ 8,997,006 1,455,761 7,541,245
Equipment................................ 34,542,324 8,941,201 25,601,123
Equipment under capital leases........... 19,705,183 2,656,792 17,048,391
----------- ----------- -----------
$65,002,160 $13,053,754 $51,948,406
=========== =========== ===========
</TABLE>

During the three-month period ended January 3, 1999, approximately
$9,000,000 of equipment acquired during fiscal 1998 was refinanced under
capital leases. A reclassification from equipment to equipment under
capital leases has been reflected in the above table.

F-9
<PAGE> 89

4. FIXED ASSETS (CONTINUED):

<TABLE>
<CAPTION>
OCTOBER 4,
ACCUMULATED 1998
DEPRECIATION -----------
AND NET BOOK
COST AMORTIZATION VALUE
----------- -------------- -----------
<S> <C> <C> <C>
Land..................................... $ 755,975 $ -- $ 755,975
Building and improvements................ 6,930,171 1,311,375 5,618,796
Equipment................................ 36,010,956 8,198,399 27,812,557
Equipment under capital leases........... 9,741,650 2,055,220 7,686,430
----------- ----------- -----------
$53,438,752 $11,564,994 $41,873,758
=========== =========== ===========
</TABLE>

<TABLE>
<CAPTION>
OCTOBER 5,
ACCUMULATED 1997
DEPRECIATION -----------
AND NET BOOK
COST AMORTIZATION VALUE
----------- -------------- -----------
<S> <C> <C> <C>
Land..................................... $ 29,100 $ -- $ 29,100
Building and improvements................ 4,102,246 863,471 3,238,775
Equipment................................ 20,310,583 6,542,007 13,768,576
Equipment under capital leases........... 5,559,638 1,217,968 4,341,670
----------- ----------- -----------
$30,001,567 $ 8,623,446 $21,378,121
=========== =========== ===========
</TABLE>

Depreciation expense in 1998 was $3,183,649 (1997--$2,082,927;
1996--$1,537,140). The depreciation expense for the three-month periods
ended January 3, 1999 and January 4, 1998 was $1,488,760 and $615,278
respectively (unaudited).

5. OTHER ASSETS:

<TABLE>
<CAPTION>
JANUARY 3, OCTOBER 4, OCTOBER 5,
1999 1998 1997
----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Advances to parent company.................. $1,661,802 $1,712,769 $ 985,147
Advances to affiliated companies............ 580,000 580,000 580,000
Deferred charges, net of accumulated
amortization of $1,079,478 (unaudited)
(1998--$1,264,183; 1997--$345,187)........ 1,471,425 1,313,268 1,237,964
Prepaid equipment rental.................... 810,204 703,684 --
Deposits.................................... 2,622,349 1,691,164 971,346
Goodwill, net of accumulated amortization of
$64,661 (unaudited) (1998--$62,987;
1997--$56,291)............................ 102,449 104,123 110,819
---------- ---------- ----------
$7,248,229 $6,105,008 $3,885,276
========== ========== ==========
</TABLE>

The amortization expense in fiscal 1998 for deferred charges and goodwill
was $872,505 (1997--$247,450; 1996--$90,572) and $6,696 (1997--$6,696;
1996--$5,580) respectively. The amortization expense for the three-month
periods ended January 3, 1999 and January 4, 1998 for deferred charges was
$272,577 and $129,200 and for goodwill was $1,674 and $1,674 (unaudited).

F-10
<PAGE> 90

6. BANK INDEBTEDNESS:

The Company has an operating line of credit with its bankers to a maximum
of $50,000,000 (January 3, 1999--$70,000,000 (unaudited)) or the equivalent
amount thereof in US dollars, which bears interest at a floating base rate
and is secured by a first ranking moveable hypothec (a form of security on
personal property) covering all of the Company's and its subsidiaries'
assets, other than a first ranking security on specific machinery and
equipment pledged as security for long-term debt, and the assignment of
property insurance.

The effective interest rate at October 4, 1998 was 9.75% on US dollar
denominated loans and 8.25% on Canadian dollar denominated loans under the
operating credit facility. Effective interest rates at October 5, 1997 were
10% on US dollar denominated loans and 6.50% on Canadian dollar denominated
loans.

The effective interest rate at January 3, 1999 was 9.25% on US dollar
denominated loans and 7.75% on Canadian dollar denominated loans
(unaudited).

Under various financing arrangements with its bankers and long-term
lenders, the Company is required to meet certain covenants. The Company was
in compliance with these covenants as at January 3, 1999, October 4, 1998
and October 5, 1997.

7. LONG-TERM DEBT:

<TABLE>
<CAPTION>
JANUARY 3, OCTOBER 4, OCTOBER 5,
1999 1998 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
UNSECURED:
Debenture payable, bearing interest at 11% per
annum, maturing in June 2003............... $15,000,000 $15,000,000 $ --
Loan payable, non-interest bearing except on
overdue principal repayments, maturing in
November 2001.............................. 394,650 460,425 591,975
Term loan, bearing interest at 6% per annum,
maturing in January 2008................... 500,000 500,000 --
Loans payable, bearing interest at prime plus
1.5%....................................... -- -- 4,569,878
Debentures payable, bearing interest at 10%
per annum.................................. -- -- 9,000,000
----------- ----------- -----------
15,894,650 15,960,425 14,161,853
Current portion of unsecured debt............. 181,550 181,550 131,550
----------- ----------- -----------
$15,713,100 $15,778,875 $14,030,303
=========== =========== ===========
</TABLE>

F-11
<PAGE> 91

7. LONG-TERM DEBT (CONTINUED):

<TABLE>
<CAPTION>
JANUARY 3, OCTOBER 4, OCTOBER 5,
1999 1998 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
SECURED:
Mortgage loans, bearing interest at fixed
rate, maturing in 2007, 2008 and 2013.
(Effective interest rates at January 3,
1999--8.5% to 9.7%; October 4, 1998--8.5%;
October 5, 1997--10.5%.)................... $ 4,488,717 $ 2,338,368 $ 946,896
Term loans, bearing interest at rates from
8.15% to 10.97%, maturing at various dates
through 2003............................... 5,463,127 4,169,721 3,638,205
Note payable, bearing interest at 6%, maturing
in March 2002, (January 3,
1999--US$154,937; October 4,
1998--US$165,653; October 5,
1997--US$206,950).......................... 237,565 253,647 283,980
Term loan, bearing interest at prime plus
1.5%....................................... -- -- 2,079,250
Obligations under capital leases, bearing
interest at rates varying from 5.9% to
12.96% maturing at various dates through
2004....................................... 15,044,540 5,325,619 3,211,206
----------- ----------- -----------
25,233,949 12,087,355 10,159,537
Current portion of secured debt............... 5,114,473 3,111,730 2,231,537
----------- ----------- -----------
$20,119,476 $ 8,975,625 $ 7,928,000
=========== =========== ===========
Total unsecured and secured long-term debt.... $35,832,576 $24,754,500 $21,958,303
=========== =========== ===========
</TABLE>

During 1998, the Company repaid certain secured and unsecured loans. A
prepayment penalty and the write-off of the unamortized deferred financing
costs related to these loans totaling $819,131 have been expensed as a loss
on settlement of long-term debt in the consolidated statements of income.

As at January 3, 1999, certain long-term debt amounting to $2,903,000
(unaudited) (1998--$3,058,000; 1997--$9,200,000) is guaranteed by Harco
Holdings Ltd., the parent company.

Principal payments due on long-term debt, other than obligations under
capital leases, are approximately as follows:

<TABLE>
<CAPTION>
JANUARY 3, OCTOBER 4,
FISCAL YEAR 1999 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C>
1999........................................................ $ 1,624,000 $ 1,809,000
2000........................................................ 2,025,000 1,558,000
2001........................................................ 2,093,000 1,602,000
2002........................................................ 1,329,000 810,000
2003........................................................ 16,098,000 15,550,000
Thereafter.................................................. 2,915,000 1,393,000
----------- -----------
$26,084,000 $22,722,000
=========== ===========
</TABLE>

F-12
<PAGE> 92

7. LONG-TERM DEBT (CONTINUED):
Future minimum lease payments under capital leases in each of the next five
years are approximately as follows:

<TABLE>
<CAPTION>
JANUARY 3, OCTOBER 4,
FISCAL YEAR 1999 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C>
1999........................................................ $ 3,237,000 $ 1,900,000
2000........................................................ 4,145,000 1,718,000
2001........................................................ 4,144,000 1,721,000
2002........................................................ 3,215,000 804,000
2003........................................................ 2,536,000 145,000
Thereafter.................................................. 648,000 --
----------- -----------
Total minimum lease payments................................ 17,925,000 6,288,000
Less imputed interest....................................... 2,879,000 962,000
----------- -----------
$15,046,000 $ 5,326,000
=========== ===========
</TABLE>

8. SHARE CAPITAL:

<TABLE>
<CAPTION>
JANUARY 3, OCTOBER 4, OCTOBER 5,
1999 1998 1997
----------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Authorized without limit as to number and
without par value:
First preferred shares, issuable in series,
non-voting
Second preferred shares, issuable in series,
non-voting
Class A subordinate voting shares,
participating, one vote per share
Class B multiple voting shares,
participating, eight votes per share
Issued and outstanding:
Nil Class A preferred shares
(1997--10,000,000 shares)................. $ -- $ -- $ 7,261,994
Nil Class A common shares (1997--1,000
shares)................................... -- -- 10,000
6,903,000 Class A subordinate voting shares
(1997--nil)............................... 29,374,749 29,374,749 --
3,047,000 Class B multiple voting shares
(1997--nil)............................... 5,083,396 5,083,396 --
----------- ----------- -----------
$34,458,145 $34,458,145 $ 7,271,994
=========== =========== ===========
</TABLE>

F-13
<PAGE> 93

8. SHARE CAPITAL (CONTINUED):
Summary of issued and outstanding share capital:

<TABLE>
<CAPTION>
NUMBER AMOUNT
----------- -----------
<S> <C> <C>
Class A preferred shares:
Balance, September 29, 1996............................... -- $ --
Fiscal 1997:
Conversion of common shares to Class A preferred
shares............................................... 10,000,000 7,261,994
Fiscal 1998:
Redemption of shares................................... (581,500) (422,285)
Issuance of shares for cash............................ 291,294 499,860
Conversion of Class A preferred shares to Class A
subordinate voting shares and Class B multiple voting
shares............................................... (9,709,794) (7,339,569)
----------- -----------
Total Class A preferred shares, October 4, 1998............. -- $ --
=========== ===========
Common shares:
Balance, September 29, 1996................................ 10,000,000 $ 7,261,994
Fiscal 1997:
Conversion of common shares to 10,000,000 Class A
preferred shares and 300 Class A common shares......... (10,000,000) (7,261,994)
----------- -----------
Total common shares, October 5, 1997 and October 4, 1998.... -- $ --
=========== ===========
Class A common shares:
Balance, September 29, 1996................................ -- $ --
Fiscal 1997:
Issuance of shares for cash............................... 700 10,000
Conversion of common shares to Class A common shares...... 300 --
----------- -----------
Balance, October 5, 1997................................... 1,000 10,000
Fiscal 1998:
Redemption of shares...................................... (58.15) (581)
Issuance of shares for cash............................... 29.13 140
Conversion of Class A common shares to Class A subordinate
voting shares.......................................... (970.98) (9,559)
----------- -----------
Total Class A common shares, October 4, 1998................ -- $ --
=========== ===========
</TABLE>

F-14
<PAGE> 94

8. SHARE CAPITAL (CONTINUED):

<TABLE>
<CAPTION>
NUMBER AMOUNT
----------- -----------
<S> <C> <C>
Class A subordinate voting shares:
Balance, October 5, 1997................................... -- $ --
Fiscal 1998:
Conversion of 970.98 Class A common shares to Class A
subordinate voting shares.............................. 2,724,000 9,559
Conversion of 2,709,794 Class A preferred shares to Class
A subordinate voting shares............................ 1,179,000 2,256,173
Issuance of shares for cash............................... 3,000,000 30,870,000
Share issue costs, net of future taxes of $1,689,000...... -- (3,760,983)
----------- -----------
Total Class A subordinate voting shares, October 4, 1998 and
January 3, 1999........................................... 6,903,000 $29,374,749
=========== ===========
Class B multiple voting shares:
Balance, October 5, 1997................................... -- $ --
Fiscal 1998:
Conversion of 7,000,000 Class A preferred shares to Class
B multiple voting shares............................... 3,047,000 5,083,396
----------- -----------
Total Class B multiple voting shares, October 4, 1998 and
January 3, 1999........................................... 3,047,000 $ 5,083,396
=========== ===========
</TABLE>

(a) During fiscal 1997, the Company obtained a Certificate of Amendment
which provided for:

(i) the creation of an unlimited number of Class A common shares and
Class A preferred shares;

(ii) the conversion of 10,000,000 common shares into 10,000,000 Class A
preferred shares and 300 Class A common shares; and

(iii) the cancellation of the authorized and unissued common shares.

The Class A preferred shares were retractable at $43,500,000 and upon
retraction, the Company had the option to settle the shares in cash or
through the issuance of Class A common shares.

During fiscal 1997, the Company issued 700 Class A common shares for a
total cash consideration of $10,000.

(b) During fiscal 1998, a shareholder exercised an option and acquired
291,294 Class A preferred shares and 29.13 Class A common shares for an
aggregate consideration of $500,000. The Company reacquired a second
stock option from this shareholder for $2,500,000 using proceeds from
the initial public offering. The cost of buying back the option was
charged against retained earnings.

(c) Under the terms of a renegotiated redemption agreement and immediately
prior to the initial public offering, the Company redeemed 581,500 Class
A preferred shares and 58.15 Class A common shares for an aggregate
consideration of $100,000 which resulted in an amount of $322,866 being
credited to contributed surplus.

F-15
<PAGE> 95

8. SHARE CAPITAL (CONTINUED):
(d) By Certificate of Amendment dated June 16, 1998, the Articles of the
Company were amended to provide for:

(i) the creation of an unlimited number of:

-- First preferred shares issuable in series;

-- Second preferred shares issuable in series;

-- Class A subordinate voting shares;

-- Class B multiple voting shares.

(ii) the exchange of the 970.98 outstanding Class A common shares for
2,724,000 Class A subordinate voting shares;

(iii) the exchange of 9,709,794 outstanding Class A preferred shares for
1,179,000 Class A subordinate voting shares and 3,047,000 Class B
multiple voting shares;

(iv) the cancellation of the authorized Class A common shares and Class
A preferred shares;

(v) the elimination of all restrictions on the issue and transfer of
the Company's shares to the public.

(e) On June 24, 1998, the Company issued 3,000,000 Class A subordinate
voting shares for a total cash consideration of $30,870,000. Issue
expenses of $5,449,983 less future income taxes of $1,689,000 have been
applied against proceeds from the initial public offering.

(f) Pursuant to the initial public offering, 2,372,014 Class B multiple
voting shares and 2,842,499 Class A subordinate voting shares are held
in escrow and cannot be transferred, mortgaged, pledged or otherwise
disposed of without the consent of the Quebec and Ontario securities
commissions and The Toronto Stock Exchange. The release of these shares
is based solely on the passage of time.

9. STOCK OPTION PLAN:

Effective June 24, 1998, the Company established a stock option plan (the
"Plan"). Under the Plan, the Company may grant options to purchase Class A
subordinate voting shares at the then current market price to officers,
other key employees and directors of the Company. Options vest ratably over
a two to four-year period from the date of grant and expire no more than
ten years after the date of grant. The Plan provides that the number of
Class A subordinate voting shares reserved for issuance will be limited to
995,000, which were reserved for issuance under the Plan.

Changes in outstanding options were as follows:

<TABLE>
<S> <C>
Options outstanding, October 5, 1997........................ --
Granted..................................................... 633,000
-------
Options outstanding, October 4, 1998........................ 633,000
Expired or cancelled........................................ (7,000)
Granted..................................................... 116,000
-------
Options outstanding, January 3, 1999 (unaudited)............ 742,000
=======
</TABLE>

Details of the options outstanding were as follows:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING EXERCISE PRICE PER SHARE EXPIRY DATE
------------------- ------------------------ -----------
<S> <C> <C>
742,000.......................................... $10.29 to $11.50 2008
================ =====
</TABLE>

F-16
<PAGE> 96

10. COMMITMENTS AND CONTINGENT LIABILITIES:

(a) The Company has guaranteed a mortgage owed by the parent company on a
building which serves as the Company's knitting facilities and executive
offices. As at October 4, 1998, the total indebtedness outstanding
amounted to approximately $3,360,000 (1997 -- $2,360,000). As at January
3, 1999, the Company was no longer a guarantor for this indebtedness.

(b) The minimum annual lease payments under operating leases are
approximately as follows:

<TABLE>
<CAPTION>
JANUARY 3, OCTOBER 4,
FISCAL YEAR 1999 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C>
1999................................................ $ 3,915,000 $ 5,042,000
2000................................................ 3,743,000 3,654,000
2001................................................ 2,729,000 2,515,000
2002................................................ 2,397,000 2,254,000
2003................................................ 1,849,000 1,626,000
Thereafter.......................................... 5,002,000 4,887,000
----------- -----------
$19,635,000 $19,978,000
=========== ===========
</TABLE>

(c) As at January 3, 1999 and October 4, 1998, there were contractual
obligations outstanding of approximately $8,600,000 (unaudited) and
$8,500,000 respectively for the acquisition of fixed assets
(1997--$4,879,000).

(d) The Company has employment agreements with certain of its executives
that provide for lump sum severance and other payments, certain group
insurance benefits and the right to exercise vested options pursuant to
the Company's stock option plan upon termination of employment under
certain circumstances or a change of control, as defined. The minimum
value of such contingent obligations for senior management personnel was
estimated to be $3,800,000 as at October 4, 1998.

11. INCOME TAXES:

A reconciliation of the statutory income tax rate and the effective tax
rate is as follows:

<TABLE>
<CAPTION>
JANUARY 3, JANUARY 4, OCTOBER 4, OCTOBER 5, SEPTEMBER 29,
1999 1998 1998 1997 1996
---------- ---------- ----------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Combined basic Canadian federal and
provincial income taxes.............. $ 581,000 $240,000 $ 7,550,000 $3,399,000 $597,000
Increase (decrease) in income taxes
resulting from:
Manufacturing and processing
credit............................. (126,000) (35,000) (1,350,000) (629,000) (99,000)
Large corporations tax............... 29,000 10,000 40,000 25,000 58,000
Effect of different tax rates on
earnings of foreign subsidiaries... 52,000 68,000 (73,000) 62,000 (60,000)
Utilization of losses carried forward
by a subsidiary.................... (41,000) (5,000) (129,000) - -
Permanent differences and other...... 55,000 54,000 662,000 481,000 112,000
--------- -------- ----------- ---------- --------
$ 550,000 $332,000 $ 6,700,000 $3,338,000 $608,000
========= ======== =========== ========== ========
</TABLE>

F-17
<PAGE> 97

11. INCOME TAXES (CONTINUED):
In fiscal 1998, the Company adopted the new Canadian Institute of Chartered
Accountants' recommendations for the accounting for income taxes. The new
standard requires the use of the asset and liability method for accounting
for income taxes. Under the asset and liability method, future income taxes
are recognized for the future income tax consequences attributable to
differences between the financial statement carrying values and their
respective income tax basis (temporary differences). Future income tax
assets and liabilities are measured using enacted income tax rates expected
to apply to taxable income in the years in which temporary differences are
expected to be recovered or settled. The effect on future income tax assets
and liabilities of a change in tax rates is included in income in the
period that includes the enactment date. Future income tax assets are
evaluated and if realization is not considered "more likely than not", a
valuation allowance is provided.

Previously, the Company followed the deferral method of accounting for
income taxes which related the provision for income taxes to the accounting
income for the period. Under the deferral method, the amount by which the
income tax provision differed from the amount of income taxes currently
payable was considered to represent the deferring to future periods of
benefits obtained on expenditures incurred in the current period and
accordingly was computed at current income tax rates. The accumulated
income tax allocation debit or credit balance was not adjusted to reflect
subsequent changes in income tax rates. Also, under the deferral method,
tax benefits related to accounting losses could only be recognized in the
period in which the loss was incurred if there was virtual certainty of
realizing the benefits.

The adoption of the new standard does not materially affect the reported
earnings of the Company. The financial impact of adopting the new policy
has been reflected in the current period and has not been applied
retroactively.

Future income taxes reflect the net effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's future tax position as at January
3, 1999 and October 4, 1998 are as follows:

<TABLE>
<CAPTION>
JANUARY 3, OCTOBER 4,
1999 1998
----------- -----------
(UNAUDITED)
<S> <C> <C>
Future tax assets:
Share issue costs......................................... $ 1,491,000 $ 1,576,000
Deferred financing costs and other........................ 124,000 146,000
----------- -----------
1,615,000 1,722,000
Future tax liabilities:
Tax depreciation in excess of book depreciation........... 4,860,000 4,717,000
Other..................................................... 33,000 33,000
----------- -----------
4,893,000 4,750,000
----------- -----------
Net future tax liability.................................... $ 3,278,000 $ 3,028,000
=========== ===========
</TABLE>

F-18
<PAGE> 98

12. NET CHANGES IN NON-CASH WORKING CAPITAL BALANCES:

<TABLE>
<CAPTION>
JANUARY 3, JANUARY 4, OCTOBER 4, OCTOBER 5, SEPTEMBER 29,
1999 1998 1998 1997 1996
------------- ------------ ------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Accounts receivable.......... $ (1,518,943) $ (7,819,141) $(24,521,047) $(16,542,668) $(6,582,757)
Inventories.................. (33,379,243) (6,332,570) (40,222,581) (2,979,855) (5,638,409)
Prepaid expenses and
deposits................... 356,426 484,375 (854,303) (600,082) (199,812)
Accounts payable and accrued
liabilities................ 2,628,041 5,407,827 27,475,639 4,570,935 3,299,937
Income taxes................. (210,100) (1,902,811) 2,109,844 1,769,830 337,003
------------- ------------ ------------ ------------ -----------
$ (32,123,819) $(10,162,320) $(36,012,448) $(13,781,840) $(8,784,038)
============= ============ ============ ============ ===========
</TABLE>

13. RELATED PARTY TRANSACTIONS:

Advances from parent company, which were repaid during fiscal 1998, bore
interest at an effective rate of 7.8% (1997--6.3%) and were subordinated in
favour of the Company's lenders.

The advances to affiliated companies are non-interest bearing while the
advances to parent company bear interest at an effective rate of 7.2%
commencing June 1998. The advances have no specified terms of repayment.

The Company had the following transactions with the parent or affiliated
companies:

<TABLE>
<CAPTION>
JANUARY 3, JANUARY 4, OCTOBER 4, OCTOBER 5, SEPTEMBER 29,
1999 1998 1998 1997 1996
------------- ------------ ------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Rent expense................. $ 185,484 $ 120,000 $ 545,484 $ 420,000 $ 363,936
Interest expense............. -- 4,950 19,750 24,000 28,000
Interest income.............. 32,616 -- 30,000 -- --
</TABLE>

In management's opinion, the rent expense approximated market rates on
normal terms at the time the lease was entered into.

14. FINANCIAL INSTRUMENTS:

(a) Foreign currency risk management:

A substantial portion of the Company's sales are denominated in US
dollars. The Company uses the revenue stream in US dollars as a natural
hedge to cover expenses denominated in US dollars. During the year, the
Company also used forward foreign exchange contracts to hedge its
foreign exchange exposure on cash flows related to payables and accounts
receivable in US dollars.

The forward exchange contracts represent an obligation to exchange
principal amounts between the Company and counterparties. Credit risk
exists in the event of failure by counterparties to meet their
obligations. The Company reduces this risk by dealing only with highly
rated counterparties, normally major North American financial
institutions.

F-19
<PAGE> 99

14. FINANCIAL INSTRUMENTS (CONTINUED):

(a) Foreign currency risk management (continued):
At January 3, 1999, October 4, 1998 and October 5, 1997, there were no
forward foreign exchange contracts outstanding.

(b) Credit risk:

Approximately 50% of the Company's sales were made to four unrelated
companies for fiscal 1998, 1997 and 1996 and 52% and 72% for the
three-month periods ended January 3, 1999 and January 4, 1998
respectively (unaudited).

Percentages related to individual customers accounting for greater than
10% of total sales are as follows:

The Company regularly monitors its credit risk exposure to these and
other customers and takes steps to mitigate the risk of loss, including
obtaining credit insurance.

The Company's extension of credit is based on an evaluation of each
customer's financial condition and the Company's ability to obtain
credit insurance coverage for that customer. Credit losses are provided
for in the financial statements.

Fair value estimates are made as of a specific point in time, using
available information about the financial instrument. These estimates
are subjective in nature and often cannot be determined with precision.

The Company has determined that the carrying value of its short-term
financial assets and liabilities approximates fair values as at the
balance sheet dates because of the short-term maturity of those
instruments. The fair value of advances to parent and affiliated
companies could not be determined because the advances have no specified
repayment dates.

The fair value and carrying value of other financial instruments are
presented below:

<TABLE>
<CAPTION>
JANUARY 3, 1999 OCTOBER 4, 1998 OCTOBER 5, 1997
------------------------- ------------------------- -------------------------
CARRYING FAIR CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE VALUE VALUE
----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Long-term debt....... $41,128,599 $41,345,000 $28,047,780 $28,132,200 $24,321,390 $24,495,500
</TABLE>

The fair value of the Company's long-term debt bearing interest at fixed
rates has been calculated using the present value of future payments of
principal and interest discounted at the current market rates of
interest available to the Company for the same or similar debt
instruments with the same remaining maturities. For long-term debt
bearing interest at

F-20
<PAGE> 100

14. FINANCIAL INSTRUMENTS (CONTINUED):

(c) Fair value disclosure (continued):
variable rates, the fair value is considered to approximate the carrying
value. The fair value of the interest rate swap described in note 14 (d)
is considered to approximate its carrying value of $6,000.

(d) Interest rate risk:

The Company's principal exposure to interest rate fluctuations is with
respect to its short-term and long-term financing which bear interest at
floating rates. To mitigate the effects of interest rate fluctuations,
the Company entered into a swap arrangement on October 1, 1997 with its
bankers to cap the floating interest rate on the first $25,000,000 of
borrowings under its credit facilities to a maximum of 13%. This
arrangement expires on October 1, 1999.

15. SEGMENTED INFORMATION:

The Company operates internationally in one industry segment, the
manufacture and sale of activewear. Export sales amounted to approximately
$185,000,000 in fiscal 1998 (1997--$86,200,000; 1996--$52,000,000) and
$41,600,000 for the three-month period ended January 3, 1999 (January 4,
1998--$28,000,000) unaudited.

16. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE:

The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize
the year 2000 as 1900 or some other date, resulting in errors when
information using year 2000 dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000 Issue
may be experienced before, on, or after January 1, 2000, and, if not
addressed, the impact on operations and financial reporting may range from
minor errors to significant systems failure which could affect an entity's
ability to conduct normal business operations. It is not possible to be
certain that all aspects of the Year 2000 Issue affecting the Company,
including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.

17. RECLASSIFICATION:

Certain amounts from the preceding years have been reclassified to be in
conformity with the current year's presentation.

18. SUBSEQUENT EVENTS:

(a) In January 1999, the Company obtained $30,000,000 of subordinated
debenture financing, $15,000,000 of which bears interest at 12% per
annum for the first two years and 13% per annum for the next three years
and $15,000,000 bears interest at 12.5% per annum, both maturing in
2004. In addition, $5,000,000 of equity financing was obtained through
the issuance of 444,444 Class A subordinate voting shares. The funds are
used to finance working capital requirements and the acquisition of new
assets.

(b) In March 1999, the Company entered into a new three-year revolving
credit agreement with a banking syndicate providing for a maximum
borrowing capacity of $90,000,000.

F-21
<PAGE> 101

18. SUBSEQUENT EVENTS (CONTINUED):
(d) Subsequent to January 3, 1999, under the Plan the Company cancelled
5,000 options and granted 19,500 options to employees at a price of
$16.50 per share and 100,000 options to an executive at a price of
$13.25 per share.

(e) The Company entered into capital lease agreements for machinery and
equipment totaling approximately $10,000,000 bearing interest at rates
varying from 8.1% to 8.6% per annum.

19. RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES:

The consolidated financial statements of the Company are expressed in
Canadian dollars and are prepared in accordance with Canadian generally
accepted accounting principles ("GAAP"), which conform, in all material
respects, with those generally accepted in the United States except as
described below:

(a) Consolidated statements of income:

The Company has adopted the new Statement of Financial Accounting
Standards ("SFAS") No. 128 for computing and presenting earnings per
share under United States GAAP.

F-22
<PAGE> 102

19. RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (CONTINUED):
(a) Consolidated statements of income (continued):

<TABLE>
<CAPTION>
THREE-MONTH TEN-MONTH
PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
JANUARY 3, OCTOBER 4, OCTOBER 5, SEPTEMBER 29,
1999 1998 1997 1996
------------ ---------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Basic net income (loss)
per share:
Net income (loss)
before
extraordinary
item............... $ 0.10 $ 2.75 $ (2.36) $ (0.58)
Extraordinary item:
Loss on settlement of
long-term debt..... -- (0.12) -- --
---------- ---------- ---------- ----------
Basic net income (loss)
per share under United
States GAAP............. $ 0.10 $ 2.63 $ (2.36) $ (0.58)
========== ========== ========== ==========
Weighted average number of
common shares
outstanding under United
States GAAP............. 9,950,000 4,384,399 4,213,255 4,120,185
========== ========== ========== ==========
</TABLE>

Fully diluted earnings per share:

United States GAAP requires the use of the treasury stock method for
common stock equivalents to compute the weighted average number of
common shares outstanding for the period. The use of the treasury stock
method for stock options issued has been considered in the earnings per
share figure.

<TABLE>
<CAPTION>
THREE-MONTH TEN-MONTH
PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
JANUARY 3, OCTOBER 4, OCTOBER 5, SEPTEMBER 29,
1999 1998 1997 1996
------------ ---------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Fully diluted net income (loss) per
share:
Net income (loss) before
extraordinary item............ $ 0.10 $ 2.74 $ (2.36) $ (0.58)
Extraordinary item:
Loss on settlement of
long-term debt.............. -- (0.12) -- --
---------- --------- --------- ---------
Fully diluted net income (loss) per
share under United States GAAP... $ 0.10 $ 2.62 $ (2.36) $ (0.58)
========== ========= ========= =========
Weighted average number of common
shares outstanding under United
States GAAP...................... 10,011,621 4,397,464 4,213,255 4,120,185
========== ========= ========= =========
</TABLE>

For fiscal 1997 and 1996 the effect of outstanding options was
anti-dilutive.

F-23
<PAGE> 103

19. RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (CONTINUED):

(a) Consolidated statements of income (continued):

(i) Start-up costs:

Costs incurred during the start-up period for new manufacturing
and distribution facilities are deferred and amortized on a
straight-line basis over two years (see note 1 (d) to the
Consolidated Financial Statements). United States GAAP requires
these costs to be expensed in the year incurred.

(ii) Plant renovation costs:

Plant renovation costs incurred to improve the efficiency of the
plant layout have been included in deferred charges and are being
amortized over 2 years (see note 1 (d) to the Consolidated
Financial Statements). Under United States GAAP, this amount, net
of its related amortization, has been reversed and accounted for
as a period expense.

(iii) Debt discount:

In connection with the issuance of debentures payable, the Company
granted stock options to subscribe for additional shares. Under
United States GAAP, the difference between the estimated fair
market value of the options and the subscription price at the date
the option is granted is accounted for as an adjustment to the
carrying value of the debenture ("debt discount") and is amortized
over the term of the related debt as an increase to interest
expense with the corresponding amount credited to temporary
equity.

The estimated fair value of the options amounted to $800,000 at
the dates the options were granted. During fiscal 1998, the
debentures were refinanced and the related unamortized debt
discount of $640,000 was recorded as additional interest expense
under United States GAAP (1997 -- $160,000; 1996 -- nil).

(iv) Stock-based compensation:

United States GAAP requires the measurement and recognition of
compensation expense related to certain stock-based compensation.
As permitted by the provisions of SFAS No. 123 statement, the
Company has measured compensation cost as the excess of the quoted
market price of the Company's stock at the grant date over the
amount the employee must pay for the stock. Accordingly, no
compensation expense is recognized for stock option awards. There
are no similar requirements under Canadian GAAP.

SFAS No. 123 requires disclosure of pro forma net income and
earnings per share as if the fair value based method had been
applied in measuring compensation cost for options granted in
fiscal 1998 and in the three-month period ended January 3, 1999.

Management believes that the effects of applying SFAS No. 123 on a
pro forma basis are not likely to be representative of the effects
on reported pro forma net income for future years as the estimated
compensation costs reflect only options granted to January 3, 1999
and do not consider awards which may occur in future years, the
terms and conditions of which may vary.

F-24
<PAGE> 104

19. RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (CONTINUED):
(a) Consolidated statements of income (continued):

(iv) Stock-based compensation (continued):
Reported and pro forma net income and earnings per share amounts
under United States GAAP are set forth below:

<TABLE>
<CAPTION>
THREE-MONTH
PERIOD ENDED YEAR ENDED
JANUARY 3, OCTOBER 4,
1999 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Net income:

As reported..................................... $974,643 $11,538,390
Pro forma....................................... 714,043 11,272,987
Earnings per share:
Basic:
As reported.................................. 0.10 2.63
Pro forma.................................... 0.07 2.57
Fully diluted:
As reported.................................. 0.10 2.62
Pro forma.................................... 0.07 2.56
</TABLE>

The weighted average fair value of options granted in fiscal 1998
and in the three-month period ended January 3, 1999 is $4.43 and
$4.45 (unaudited) respectively. The fair value of the options
granted was estimated on the date of their grant using the
Black-Scholes option-pricing model based on the following weighted
average assumptions:

<TABLE>
<CAPTION>
JANUARY 3, OCTOBER 4,
1999 1998
----------- -----------
(UNAUDITED)
<S> <C> <C>
Risk-free interest rate........................... 5% 5%
Expected life in years............................ 6.1 6.1
Expected volatility............................... 31.4% 29.4%
Expected dividend yield........................... -- --
</TABLE>

Dividend yield was excluded from the calculation since it is the
present policy of the Company to retain all earnings to finance
operations. In addition, option valuation models require the input
of highly subjective assumptions including the expected stock
price volatility. Because the Company's stock options have
characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions
can materially affect their fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its stock options.

(v) Loss on settlement of long-term debt:

Under United States GAAP, the debt prepayment penalty incurred on
settlement of long-term debt, which is identified as a separate
expense item in the consolidated statements of income for Canadian
GAAP purposes (see note 7 to the Consolidated Financial
Statements), would have been treated as an extraordinary item and
presented net of taxes as $543,000.

F-25
<PAGE> 105

19. RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (CONTINUED):
(b) Consolidated statements of changes in financial position:

(i) The Company's consolidated statements of changes in financial
position reconcile the changes in bank indebtedness. Under United
States GAAP, changes in bank indebtedness amounting to
$(17,466,910) in fiscal 1998, ($3,787,663) in fiscal 1997 and
($4,383,787) in fiscal 1996 would have been disclosed as financing
activities. Changes in bank indebtedness amounting to
$(29,032,100) as of January 3, 1999 and $(14,533,769) as of
January 4, 1998 would have been disclosed as financing activities
(unaudited).

(ii) Investing activities include additions to fixed assets of
$1,553,715 in fiscal 1998 (1997--$534,925; 1996--$2,850,866) and
$960,139 for the three-month period ended January 3, 1999 (January
4, 1998--$1,117,915) (unaudited) which were acquired through
capital leases.

F-26
<PAGE> 106

19. RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (CONTINUED):
(iii) United States GAAP requires that the amount of interest and income
taxes paid during each fiscal period be disclosed. There is no
requirement to disclose this information under Canadian GAAP. Cash
paid during the years was as follows:

<TABLE>
<CAPTION>
JANUARY 3, JANUARY 4, OCTOBER 4, OCTOBER 5, SEPTEMBER 29,
1999 1998 1998 1997 1996
---------- ---------- ---------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Interest..................... $1,295,775 $ 700,836 $5,004,894 $2,971,316 $2,481,018
Income taxes................. 320,000 2,037,832 3,369,212 73,972 98,000
</TABLE>

Differences between Canadian and United States GAAP are not material in
the presentation of the assets, liabilities and shareholders' equity,
except for:

<TABLE>
<CAPTION>
JANUARY 3, OCTOBER 4, OCTOBER 5,
1999 1998 1997
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Other assets under Canadian GAAP........ $ 7,248,229 $ 6,105,008 $ 3,885,276
Start-up costs.......................... (826,000) (805,900) (408,000)
Plant renovation costs.................. (57,000) (84,000) (192,000)
------------ ------------ ------------
Other assets under United States GAAP... $ 6,365,229 $ 5,215,108 $ 3,285,276
============ ============ ============
Long-term debt under Canadian GAAP...... $ 37,065,041 $ 24,754,500 $ 21,958,303
Debt discount........................... -- -- (640,000)
------------ ------------ ------------
Long-term debt under United States
GAAP.................................. $ 37,065,041 $ 24,754,500 $ 21,318,303
============ ============ ============
Future income tax liabilities under
Canadian GAAP......................... $ 3,278,000 $ 3,028,000 $ 2,675,000
Future taxes related to debt discount... -- -- 240,000
Future taxes related to GAAP
adjustments........................... (21,000) (31,000) (71,000)
------------ ------------ ------------
Future income tax liabilities under
United States GAAP (c)(i)............. $ 3,257,000 $ 2,997,000 $ 2,844,000
============ ============ ============
Temporary equity under Canadian GAAP.... $ -- $ -- $ --
Stock options treated as temporary
equity (c)(ii)........................ -- 800,000 800,000
Reclass of Class A preferred shares and
Class A common shares (c)(ii)......... -- 43,050,000 20,550,000
Reduction in fair value of temporary
equity (c)(ii)........................ -- (21,600,000) --
Redemption of shares.................... -- (1,950,000) --
Exercise of one option held and purchase
of the second option.................. -- (300,000) --
Reclass of temporary equity to share
capital (c) (ii)...................... -- (20,000,000) --
------------ ------------ ------------
Temporary equity under United States
GAAP.................................. $ -- $ -- $ 21,350,000
============ ============ ============
</TABLE>

F-27
<PAGE> 107

19. RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (CONTINUED):
(c) Consolidated balance sheets (continued):

<TABLE>
<CAPTION>
JANUARY 3, OCTOBER 4, OCTOBER 5,
1999 1998 1997
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Share capital under Canadian GAAP....... $ 34,458,145 $ 34,458,145 $ 7,271,994
Reclass of Class A preferred shares and
Class A common shares (c) (ii)........ (2,181,598) (2,181,598) (2,181,598)
Redemption of shares.................... 422,866 422,866 --
Reclass of Class A preferred and Class A
common shares issued during fiscal
1998.................................. (500,000) (500,000) --
Reclass of temporary equity to share
capital (c) (ii)...................... 20,000,000 20,000,000 --
------------ ------------ ------------
Share capital under United States
GAAP.................................. $ 52,199,413 $ 52,199,413 $ 5,090,396
============ ============ ============
Contributed surplus under Canadian
GAAP.................................. $ 322,866 $ 322,866 $ --
Reversal of contributed surplus recorded
under Canadian GAAP................... (322,866) (322,866) --
Excess of fair value of temporary equity
shares redeemed over redemption
price................................. 1,850,000 1,850,000 --
Excess of fair value of temporary equity
(c) (ii).............................. 21,600,000 21,600,000 --
------------ ------------ ------------
Contributed surplus under United States
GAAP.................................. $ 23,450,000 $ 23,450,000 $ --
============ ============ ============
Retained earnings under Canadian GAAP... $ 19,527,958 $ 18,549,191 $ 8,380,901
United States GAAP net income
adjustments........................... (1,362,000) (1,358,900) (629,000)
Future income tax on debt discount...... (300,000) (300,000) (300,000)
Excess of fair value over book value of
Class A preferred shares (c) (ii)..... (40,868,402) (40,868,402) (18,368,402)
Re-acquired option included in temporary
equity (c) (ii)....................... 800,000 800,000 --
------------ ------------ ------------
Retained earnings (deficit) under United
States GAAP........................... $(22,202,444) $(23,178,111) $(10,916,501)
============ ============ ============
</TABLE>

(i) Future income taxes:

Effective fiscal 1998, the Company adopted the new Canadian
Institute of Chartered Accountants Handbook income tax
recommendations which more closely align the Canadian and United
States accounting policies. Differences in the calculation of
deferred/future income taxes for fiscal 1997 were not material.

F-28
<PAGE> 108

19. RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (CONTINUED):
(c) Consolidated balance sheets (continued):
(i) Future income taxes (continued):
As at the following dates, future tax assets and liabilities are
the result of:

<TABLE>
<CAPTION>
JANUARY 3, OCTOBER 4, OCTOBER 5,
1999 1998 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Fixed assets.......................... $(4,860,000) $(4,717,000) $(2,621,000)
Debt discount......................... -- -- (240,000)
Share issue costs..................... 1,491,000 1,576,000 --
Deferred financing costs.............. 145,000 177,000 17,000
Other................................. (33,000) (33,000) --
----------- ----------- -----------
$(3,257,000) $(2,997,000) $(2,844,000)
=========== =========== ===========
</TABLE>

(ii) Temporary equity:

Under United States GAAP, Class A preferred shares and Class A
common shares held by Le fonds de solidarite des travailleurs du
Quebec would be classified outside of shareholders' equity and
recorded as temporary equity at an amount equal to their fair
market value. As at October 5, 1997, $18,368,402 representing the
difference between the fair market value and the carrying value
was charged against retained earnings.

As at April 5, 1998, the end of the second quarter of fiscal 1998,
the difference between the fair value and the carrying value of
these shares had increased by $22,500,000, which amount had been
reported as an accretion in the value of these shares and shown as
a reduction to net income available to common shareholders for the
six months then ended. Due to a subsequent decline in the stock
market, $21,600,000 of this accretion had reversed by the time the
Company priced its shares in the market. This reduction in the
fair value was removed from temporary equity and credited to
contributed surplus.

Under Canadian GAAP, these shares are recorded as part of share
capital at their book values.

Under United States GAAP, the difference of $800,000 between the
estimated fair market value of the options described in (a) (iii)
and the subscription price at the date the options were granted is
accounted for as an adjustment to temporary equity.

During fiscal 1998, the Company re-acquired a stock option for
$2,500,000 which was charged against retained earnings under
Canadian GAAP (see note 8 (b) to the Consolidated Financial
Statements). Under United States GAAP, since the option had been
valued at $800,000 and accounted for as temporary equity, only
$1,700,000 would be charged to retained earnings on the
re-acquisition. The resulting net difference between Canadian and
United States GAAP of $800,000 has been credited to retained
earnings.

As a result of the initial public offering, the amounts classified
as temporary equity are reclassified as part of share capital.

F-29
<PAGE> 109

19. RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (CONTINUED):

(d) Supplementary information:

Under United States GAAP, separate disclosure is required of the
following income statement and balance sheet items. There is no similar
requirement under Canadian GAAP.

<TABLE>
<CAPTION>
JANUARY 3, JANUARY 4, OCTOBER 4, OCTOBER 5, SEPTEMBER 29,
1999 1998 1998 1997 1996
----------- ---------- ----------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF INCOME:
Rental expenses............. $ 1,382,550 $488,051 $ 2,798,000 $ 1,876,000 $1,208,000
Foreign exchange gains
(losses).................. (262,759) 456,889 902,000 158,000 61,000
Advertising expense......... 502,266 373,779 3,693,000 1,463,000 1,321,000
BALANCE SHEETS:
Accounts payable............ 37,577,774 38,640,000 14,968,000
Accrued liabilities......... 10,359,802 6,670,000 2,366,000
</TABLE>

F-30
<PAGE> 110

- ------------------------------------------------------
- ------------------------------------------------------

PROSPECTIVE INVESTORS MAY RELY ONLY ON THE INFORMATION CONTAINED IN THIS
PROSPECTUS. NEITHER GILDAN ACTIVEWEAR INC. NOR ANY UNDERWRITER HAS AUTHORIZED
ANYONE TO PROVIDE PROSPECTIVE INVESTORS WITH DIFFERENT OR ADDITIONAL
INFORMATION. THIS PROSPECTUS IS NOT AN OFFER TO SELL NOR IS IT SEEKING AN OFFER
TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF THE DELIVERY OF THIS
PROSPECTUS OR ANY SALE OF THESE SECURITIES.

NO ACTION IS BEING TAKEN IN ANY JURISDICTION OUTSIDE THE UNITED STATES AND
CANADA TO PERMIT A PUBLIC OFFERING OF THE CLASS A SUBORDINATE VOTING SHARES OR
POSSESSION OR DISTRIBUTION OF THIS PROSPECTUS IN ANY SUCH JURISDICTION. PERSONS
WHO COME INTO POSSESSION OF THIS PROSPECTUS IN JURISDICTIONS OUTSIDE THE UNITED
STATES AND CANADA ARE REQUIRED TO INFORM THEMSELVES ABOUT AND TO OBSERVE THE
RESTRICTIONS OF THAT JURISDICTION RELATED TO THIS OFFERING AND THE DISTRIBUTION
OF THIS PROSPECTUS.

---------------------

TABLE OF CONTENTS

---------------------

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Presentation of Financial
Information.......................... i
Cautionary Statement Regarding
Forward-Looking Statements........... ii
Prospectus Summary..................... 1
Risk Factors........................... 9
Use of Proceeds........................ 17
Dividends.............................. 17
Exchange Rates......................... 18
Capitalization......................... 19
Price Range of Our Shares.............. 20
Selected Consolidated Financial
Information.......................... 21
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 23
Business............................... 30
Management............................. 44
Certain Relationships and Related
Transactions......................... 53
Principal Shareholders................. 56
Description of Share Capital........... 57
Description of Certain Indebtedness.... 64
Shares Eligible for Future Sale and
Escrow Arrangements.................. 66
Taxation............................... 68
Exchange Controls...................... 73
Underwriting........................... 74
Legal Matters.......................... 75
Experts................................ 76
Where You Can Find More Information.... 76
Index to Consolidated Financial
Statements........................... F-1
</TABLE>

- ------------------------------------------------------
- ------------------------------------------------------
------------------------------------------------------
------------------------------------------------------

LOGO

3,000,000 CLASS A SUBORDINATE VOTING SHARES

---------------------
PROSPECTUS
---------------------

BEAR, STEARNS & CO. INC.

NESBITT BURNS SECURITIES INC.

THE ROBINSON-HUMPHREY COMPANY

WASSERSTEIN PERELLA SECURITIES, INC.

CIBC WORLD MARKETS INC.

MAY 11, 1999
------------------------------------------------------
------------------------------------------------------