Corby Distilleries Limited reports earnings for the three months and year ended June 30, 2007 & announces dividend



    TORONTO, Aug. 30 /CNW/ - Corby Distilleries Limited ("Corby or the
"company") reported today net earnings of $5.5 million, or $0.20 per share,
for the three months ended June 30, 2007. Corby's Board of Directors also
declared a dividend of $0.14 per share, payable on September 14, 2007 on
Voting Class A Common Shares and Non-voting Class B Common Shares of the
company to shareholders of record as at the close of business on August 31,
2007.
    The financial results for the three months ended June 30, 2007 reflect a
39% increase in EBITDA when compared to the three months ended June 30, 2006.
While the majority of the increase was driven by the additions of the recently
acquired international rights to Lamb's rum ("Lamb's International") and
Seagram's Cooler businesses; organic growth of 6% in sales revenue for Corby's
owned brands and a 15% increase in commission income also contributed to the
growth in EBITDA. Basic earnings per share for the three months ended June 30,
2007 amounted to $0.20 compared to $0.22 in the three months ended June 30,
2006. The decrease in earnings per share is due to the inclusion of
$0.8 million in equity earnings related to the company's former interest in
Tia Maria Group ("TMG") in the prior period.
    Following the previously disclosed change in Corby's fiscal year-end from
August 31 to June 30, the company reported audited consolidated financial
statements for the year ended June 30, 2007 with those for the ten month
period ended June 30, 2006. For further details, please refer to Corby's MD&A
and consolidated audited financial statements and accompanying notes for the
year ended June 30, 2007 prepared in accordance with Canadian generally
accepted accounting principles.
    The financial results for the year ended June 30, 2007 reflect a solid
performance by Corby as the company managed to integrate the Lamb's
International and Seagram's businesses while also growing from an organic
perspective. EBITDA for the year ended increased by 42% when compared to the
transition year. While the increase in EBITDA reflects the inclusion of
results from the recently acquired Lamb's International and Seagram's Coolers
businesses in addition to the fact that the comparative period includes two
less months of operations; it also reflects a strong underlying performance
for the company as a whole.
    Operating revenue, consisting of sales revenue and commission income,
rose to $153.6 million for the year ended June 30, 2007, with support from the
company's owned brands, such as Wiser's rye whiskies, Polar Ice vodka and
Lamb's rum. Corby's recent acquisitions, Lamb's International and Seagram's
Coolers, contributed $11.6 million in net operating revenue in the first nine
months of their inclusion in Corby's results.
    Basic earnings per share amounted to $3.53 for the year ended June 30,
2007 compared to $0.99 for the transition year. Net earnings for the year
ended June 30, 2007 include a gain of $72.6 million from the sale of the
company's investment in TMG. Excluding the gain from the sale of TMG (and
$1.2 million in related income taxes), the Company's earnings were
$29.0 million compared with $28.0 in the transition year.
    "While fiscal 2007 was a year of significant operational and cultural
change, Corby adapted quickly and delivered a solid performance, particularly
in the fourth quarter, during which we focused on executing new strategic
imperatives. I am very proud of the team's achievements and the momentum we've
carried into the new fiscal year," said Con Constandis, Corby's Chief
Executive Officer.
    Corby's portfolio of owned-brands includes some of the most renowned
brands in Canada, including Wiser's rye whiskies, Lamb's rum and Polar Ice
vodka. Through its affiliation with Pernod Ricard, Corby also represents
leading international brands such as Chivas Regal, The Glenlivet and
Ballantine's scotches, Jameson Irish whiskey, Beefeater gin, Malibu rum,
Kahlua liqueur, Mumm champagne, and Jacob's Creek and Wyndham Estate wines.
    The existing Voting Class A Common Shares and Non-voting Class B Common
Shares of the company are traded on the Toronto Stock Exchange under the
symbols CDL.A and CDL.B.
    Corby defines "EBITDA" as net earnings before equity earnings, net
interest income, income taxes, depreciation, and amortization. This non-GAAP
financial measure has been included in Management's Discussion and Analysis as
it is a measure which management believes is useful in evaluating and
measuring the Company's operating performance, particularly following the
transaction with Pernod Ricard. EBITDA is also a common measure used by
investors, financial analysts and rating agencies. These groups may use EBITDA
and other non-GAAP financial measures to value the Company and assess its
performance. However, EBITDA is not a measure recognized by GAAP and it does
not have a standardized meaning prescribed by GAAP. Therefore EBITDA may not
be comparable to similar measures presented by other issuers. Investors are
cautioned that EBITDA should not be construed as alternatives to net earnings
as determined in accordance with GAAP as indicators of performance.


    
                         CORBY DISTILLERIES LIMITED
                     Management's Discussion and Analysis
                                June 30, 2007
    
    -------------------------------------------------------------------------

    The following Management's Discussion and Analysis ("MD&A") dated
August 30, 2007 should be read in conjunction with the audited consolidated
financial statements and accompanying notes for the year ended June 30, 2007
prepared in accordance with Canadian generally accepted accounting principles.
    This MD&A contains forward-looking statements, including statements
concerning possible or assumed future results of operations of Corby
Distilleries Limited ("Corby" or "the Company"). Forward-looking statements
typically are preceded by, followed by or include the words "believes",
"expects", "anticipates", "estimates", "intends", "plans" or similar
expressions. Forward-looking statements are not guarantees of future
performance. They involve risks, uncertainties and assumptions, including, but
not limited to: the impact of competition; consumer confidence and spending
preferences; regulatory changes; general economic conditions; and the
Company's ability to attract and retain qualified employees and, as such, the
Company's results could differ materially from those anticipated in these
forward-looking statements.
    This document has been reviewed by the Audit Committee of Corby's Board
of Directors and contains certain information that is current as of August 30,
2007. Events occurring after that date could render the information contained
herein inaccurate or misleading in a material respect. Corby may, but is not
obligated to, provide updates to forward-looking statements, including in
subsequent news releases and its interim management's discussion and analyses
filed with regulatory authorities. Additional information regarding Corby,
including the Company's Annual Information Form, is available on SEDAR at
www.sedar.com.
    All dollar amounts are in Canadian dollars unless otherwise stated.

    Significant Events
    ------------------

    Stock Split

    On February 9, 2006, the Company's Board of Directors declared a
four-for-one stock split by way of a stock dividend paid on March 15, 2006 on
Voting Class A Common Shares and Non-voting Class B Common Shares of the
Company to shareholders of record as at the close of business on February 28,
2006. As a result, all references to common shares, earnings per common share,
diluted earnings per common share, and stock options have been retroactively
restated to reflect the impact of the stock split.

    Transaction with Pernod Ricard S.A.

    On September 29, 2006, Corby closed its previously disclosed transaction
with Pernod Ricard S.A. ("PR") concerning the Canadian representation of PR's
brands, production of Corby's owned brands, an exchange of certain assets and
a combined strategic approach to the Canadian market. PR wholly-owns Corby's
parent company, Hiram Walker & Sons Limited ("HWSL"), and is therefore
considered to be the Company's ultimate parent. Both companies' Canadian
operations were reorganized as a result of the transaction.
    Pursuant to the transaction, Corby acquired the exclusive right to
represent PR's brands in Canada for the next 15 years. Furthermore, Corby also
acquired the international rights to Lamb's rum (excluding the Canadian
rights, which Corby already owned) and the Canadian rights to Seagram's
Coolers. Corby satisfied the purchase price by selling its 45% interest in TMG
and by making a cash payment to PR.
    The companies also agreed upon the terms for the continuation of
production of Corby's owned brands by PR at its production facility in
Windsor, Ontario for the next 10 years. Corby and PR further agreed that Corby
will manage PR's business interests in Canada, including the Windsor
production facility. Corby anticipates that the transaction shall provide the
Company with greater assurance with respect to both earnings and production,
in addition to the leverage of a global player in PR and its brands. The
transaction generated approximately $10.4 million in earnings before equity
earnings, net income interest income, income taxes, depreciation, and
amortization ("EBITDA") during the first nine months since the close of the
transaction. This is in line with the Company's original expectations of the
transaction generating approximately $14 million in EBITDA on an annual basis.
    The addition of PR's brands solidified Corby's leadership position in the
Canadian market, while further enhancing the Company's premium portfolio.
Corby and PR have operated as one organization in Canada as of April 1, 2006.
The reorganization of both companies has occurred and significant efforts have
been spent over the past year integrating the two companies in Canada. Corby
began earning commission income on the new additions to the brand portfolio
effective April 3, 2006, although the transaction did not close until
September 29, 2006.

    Impact of transaction on Corby's financial statements

    Long term Representation Rights: Corby's acquisition of the exclusive
right to represent PR's brands in Canada was valued at $70.4 million,
including transaction related costs. The cost of these rights are being
reflected as a long term asset which will be subject to amortization on a
straight line basis over the 15 year term of the agreement, resulting in
$4.7 million in annual amortization expense. Since Corby's acquisition of the
representation rights was not considered to be an acquisition of a business,
the annual amortization expense related to the rights will be presented as a
reduction of the commission income earned from the PR brands being
represented. Amortization of the representation rights began as of October 1,
2006.

    Seagram's Coolers: The acquisition of the Canadian rights to Seagram's
Coolers was valued at $20.1 million, including transaction related costs. The
$20.1 million also includes $2.2 million for a potential earn-out clause which
only becomes payable in the event that the income (defined as sales, less cost
of sales and advertising and promotional spend) derived from the brand over a
four year period exceeds $11.6 million. The maximum amount which may become
payable is $2.2 million, subject to 5% interest compounded annually.
    The Company has not recognized the cost of the $2.2 million earn-out
clause since management cannot determine beyond a reasonable doubt the amount
that will become payable. As a result, the Company recognized $17.9 million of
the purchase price and allocated $1.3 million to inventory, $3.6 million to
future income tax liabilities, $16.2 million to trademarks and licenses, and
$4.0 million to goodwill.
    Since the Canadian rights to Seagram's Coolers were deemed to have an
indefinite life, the value of these rights will not be subject to
amortization. Rather, they will be subject to annual impairment testing in
accordance with CICA Handbook Section 3062.

    Lamb's International: The acquisition of the international rights to
Lamb's rum ("Lamb's International") was valued at $13.6 million, including
transaction related costs. The allocation of the purchase price resulted in
$0.4 million in inventory, $11.8 million in trademarks and licenses, and
$1.4 million for goodwill. Since the international rights to Lamb's rum were
deemed to have an indefinite life, the value of these rights will not be
subject to amortization. Rather, they will be subject to annual impairment
testing in accordance with CICA Handbook Section 3062.

    TMG Investment: Corby satisfied the acquisition of the representation
rights, Seagram's Coolers, and Lamb's International by selling its 45%
interest in TMG and by making a cash payment to PR. Corby also received a
dividend of $28.6 million from TMG immediately prior to its disposition. The
disposition of TMG resulted in the Company reflecting a gain of $72.6 million
during the year-ended June 30, 2007.

    Declaration and payment of special dividend

    On November 14, 2006, the Board of Directors of Corby declared a special
dividend in the amount of $1.50 per share. This dividend was paid on
January 15, 2007 on Voting Class A Common Shares and Non-voting Class B Common
Shares of the Company to shareholders of record as at the close of business on
November 30, 2006. The dividend was in addition to Corby's regular quarterly
dividend of $0.14 per share which was also declared by Corby's Board of
Directors on the same day and paid on December 15, 2006 to shareholders of
record as at the close of business on November 30, 2006.
    The special dividend resulted in a cash distribution of $42.7 million to
shareholders and was sourced from the Company's surplus cash position, which
was augmented in part by the $28.6 million dividend received immediately prior
to the disposition of Corby's 45% interest in the Tia Maria Group ("TMG").
Both the special and regular dividend distributions were consistent with the
Company's history of returning surplus cash to its shareholders.

    Management reorganization

    On January 11, 2007, the Board of Directors of Corby announced that
Krystyna Hoeg, President and Chief Executive Officer, decided to leave the
Company, effective February 1, 2007, to pursue personal interests. Her
successor is Con Constandis, a spirits industry veteran with extensive
management and international experience at the former Allied Domecq and
Seagram companies. Concurrently, Corby's Vice-President of Human Resources
also left the Company and a successor was appointed shortly thereafter.
Included in net earnings for the year-ended June 30, 2007 is a charge of
$2.0 million to reflect all the costs associated with this management
reorganization.

    Business Overview
    -----------------
    Corby is a leading Canadian manufacturer and marketer of spirits and
importer of wines. Corby's national leadership is sustained by a diverse brand
portfolio which allows the Company to drive profitable organic growth with
strong, consistent cash flows.
    The Company's activities are comprised of the production of spirits,
along with the distribution of owned and represented spirits, liqueurs,
coolers, and wines. Revenues predominantly consist of sales made to each of
the provincial liquor boards in Canada.
    Corby's portfolio of owned brands include some of the most renowned and
respected brands in Canada, including Wiser's rye whiskies, Lamb's rum and
Polar Ice vodka. Through its affiliation with PR, Corby also represents
leading international brands such as Chivas Regal, The Glenlivet and
Ballantine's scotches, Jameson Irish whiskey, Beefeater gin, Malibu rum,
Kahlua liqueur, Mumm champagne, and Jacob's Creek and Wyndham Estate wines.
    Approximately 72% of the Company's production requirements are sourced
from HWSL, an indirectly wholly-owned subsidiary of PR located in Windsor,
Ontario. HWSL owns in excess of 50% of the issued and outstanding Voting Class
A common shares of Corby and is thereby considered to be the Company's parent.
PR is considered to be Corby's ultimate parent and affiliated companies are
those that are also subsidiaries of PR. Approximately 24% of Corby's
production requirements are sourced from the Company's owned plant in
Montreal, Quebec. The remaining 4% is sourced through an affiliated company
located in Scotland which manufactures Lamb's rum for the international
market.

    Brand Performance Review
    ------------------------
    Corby's portfolio of owned brands continued to demonstrate strong volume
growth as evidenced by increases of 3% and 5% for the 12 months and 3 months
ended June 30, 2007, respectively, in sales at the retail store level in
Canada; as indicated by market data provided by the Association of Canadian
Distillers ("ACD"). The following chart provides further details of retail
sales in Canada for Corby's owned brands:

    
                        -----------------------------------------------------
    (in 000's 9L cases)     RETAIL SALES VOLUMES FOR CANADIAN MARKET ONLY
                        -----------------------------------------------------
                             12       12                 3        3
                         months   months        %   months   months        %
                          ended    ended   Change    ended    ended   Change
                        June 30, June 30, 2007 vs. June 30, June 30, 2007 vs.
    Brand                  2007     2006   2006(*)    2007     2006   2006(*)
                        -----------------------------------------------------

    Wiser's                 650      623       4%      147      139       6%

    Lamb's                  511      503       2%      114      112       2%

    Polar Ice               300      279       8%       71       65       9%

    Seagram's Coolers       394      390       1%      125      112      12%

    All other               857      836       3%      187      187       0%

                        -----------------------------------------------------
    Total                 2,712    2,631       3%      644      615       5%
                        -----------------------------------------------------

    (*) Refers to the growth in sales at the retail store level, as measured
        by case volumes provided by the ACD
    


    Wiser's whiskies have continued to be a success story for Corby as the
brand remained the largest selling brand of rye whisky in Canada, as measured
by case volumes. While the rye whisky category is experiencing a lack of
growth in retail sales volumes, Wiser's whiskies have consistently
outperformed the rye whisky category in recent years and captured market share
as a result of effective advertising and promotional expenditures in key
markets and a loyal consumer base. Furthermore, the Wiser's Deluxe brand is
benefiting from the trend among consumers to trade up to premium quality
spirit products.
    The success of Polar Ice vodka can be partially attributed to the strong
growth of the vodka category in Canada. Vodka has been one of the fastest
growing spirit categories in recent years, due to the trend towards martinis
and other forms of cocktail drinks. As a result of its award-winning quality
and design, and effective retail programming; Polar Ice has become one of the
leading premium vodka brands in the Canadian market.
    During the first nine months in which Corby has owned the Seagram's
Coolers brand, the Company has managed to streamline the portfolio by
discontinuing poor performing variants while also focusing on innovation and
several new product launches, namely Seagram's Vodka Spritzers and Seagram's
Strawberry-Kiwi Swirl which were launched this past spring. The benefits of
these efforts are beginning to show as retail sales of Seagram's Coolers have
grown by 12% during the three months ended June 30, 2007 as compared to the
same period in the prior year.

    Non-GAAP Financial Measures
    ---------------------------
    Corby defines "EBITDA" as net earnings before equity earnings, net
interest income, income taxes, depreciation, and amortization. This non-GAAP
financial measure has been included in Management's Discussion and Analysis as
it is a measure which management believes is useful in evaluating and
measuring the Company's operating performance, particularly following the
transaction with PR. EBITDA is also a common measure used by investors,
financial analysts and rating agencies. These groups may use EBITDA and other
non-GAAP financial measures to value the Company and assess its performance.
    However, EBITDA is not a measure recognized by GAAP and it does not have
a standardized meaning prescribed by GAAP. Therefore EBITDA may not be
comparable to similar measures presented by other issuers. Investors are
cautioned that EBITDA should not be construed as an alternative to net
earnings as determined in accordance with GAAP as an indicator of performance.

    
    Financial and Operating Results - Three months ended June 30, 2007
    ------------------------------------------------------------------

    SUMMARY OF QUARTERLY FINANCIAL RESULTS



                          3      3      3      3      3      3      4      3
    (in millions     Months Months Months Months Months Months Months Months
     of Canadian      Ended  Ended  Ended  Ended  Ended  Ended  Ended  Ended
     dollars,           Jun.   Mar.   Dec.   Sep.   Jun.   Mar.   Dec.   Aug.
     except per          30,    31,    31,    30,    30,    31,    31,    31
     share amounts)    2007   2007   2006   2006   2006   2006   2005   2005
    -------------------------------------------------------------------------
    Operating revenue $40.1  $33.3  $28.5  $37.0  $33.4  $28.5  $48.3  $35.7
    EBITDA(*)         $ 9.9  $ 7.2  $14.7  $12.2  $ 7.1  $ 6.5  $15.6  $10.9
    Equity earnings
     from TMG         $   -  $   -  $   -  $ 2.1  $ 0.8  $ 2.5  $ 3.3  $ 2.6
    Gain from sale
     of TMG           $   -  $   -  $   -  $72.6  $   -  $   -  $   -  $   -
    Net earnings      $ 5.5  $ 4.3  $ 8.7  $81.9  $ 6.3  $ 6.9  $14.9  $10.6
    EBITDA per
     share(*)         $0.35  $0.25  $0.52  $0.43  $0.25  $0.23  $0.55  $0.38
    Basic EPS         $0.20  $0.15  $0.31  $2.88  $0.22  $0.24  $0.52  $0.37
    Diluted EPS       $0.20  $0.15  $0.31  $2.88  $0.22  $0.24  $0.52  $0.37
    -------------------------------------------------------------------------

    (*) EBITDA for 3 months ended September 30, 2006 excludes the gain on
        sale of the Company's investment in TMG
    


    The financial results for the three months ended June 30, 2007 reflect a
39% increase in EBITDA when compared to the three months ended June 30, 2006.
While the majority of the increase was driven by the additions of the recently
acquired Lamb's International and Seagram's Cooler businesses; organic growth
of 6% in sales revenue for Corby's owned brands and a 15% increase in
commission income also contributed to the growth in EBITDA.
    Partially offsetting the above items was an increase of $1.1 million in
advertising and promotional expenditures during the three months ended
June 30, 2007 as compared to the prior year. The majority of the increased
expenditures are related to additional media and other promotional activities
for the Wiser's brand, which is celebrating its 150th anniversary this year.
The strong performance of the Company's owned brands reflect the benefits of
these investments, as demonstrated by the fact that brands such as Wiser's
have consistently grown at a faster pace than their respective categories in
recent years. Please refer to the "Brand Performance Review" section for
further details.
    Basic earnings per share for the three months ended June 30, 2007
amounted to $0.20 compared to $0.22 in the three months ended June 30, 2006.
The decrease in earnings per share is due to the inclusion of $0.8 million in
equity earnings related to the Company's former interest in TMG in the prior
period.
    Corby's operating revenue, consisting of sales revenue and commission
income, was $40.1 million for the three months ended June 30, 2007 compared to
$33.8 million for the three months ended June 30, 2006, an increase of 18.6%.
The increase mainly reflects the $5.5 million contribution in sales revenue
from the recently acquired Lamb's International and Seagram's Coolers
businesses. In addition, a combination of volume growth and increased pricing
resulted in the aforementioned 6% organic sales revenue growth.
    Commission income was $3.8 million for the three months ended June 30,
2007 compared with $4.3 million for the three months ended June 30, 2006. It
should be noted that commission income for the three months ended June 30,
2007 is presented net of $1.2 million in amortization expense related to the
aforementioned representation rights acquired on September 29, 2006 from PR.
Growth of 15% in commission income before amortization was driven by the
strong performance of PR brands in the final quarter as Malibu rum, Jacob's
Creek wine, and Wyndham Estate wine all demonstrated significant volume growth
as compared to the same period in the transition year.
    For further details on the commission earned by Corby, please refer to
the table below:

    
                                                            Three      Three
                                                           Months     Months
                                                            Ended      Ended
                                                          June 30,   June 30,
    (in millions of Canadian dollars)                        2007       2006
    -------------------------------------------------------------------------
    Commission from PR brands                           $     3.4  $     2.7
    Less: representation rights amortization                 (1.2)         -
    Commission from un-related 3rd parties                    1.6        0.9
    Commission from brands that are no longer
     represented by Corby                                       -        0.7
    -------------------------------------------------------------------------

    Net commission income                               $     3.8  $     4.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Financial and Operating Results - Year ended June 30, 2007
    ----------------------------------------------------------

    THREE YEAR FINANCIAL REVIEW
                                                              Ten
                                                  Year     Months       Year
                                                 Ended      Ended      Ended
    (in millions of Canadian dollars,          June 30,   June 30, August 31,
     except per share amounts)                    2007       2006       2005
    -------------------------------------------------------------------------
    Operating revenue                        $   153.6  $   110.8  $   128.3
    EBITDA(*)                                $    44.0  $    29.2  $    40.8
    Net earnings                             $   100.4  $    28.0  $    39.9
    Basic EPS                                $    3.53  $    0.99  $    1.41
    Diluted EPS                              $    3.53  $    0.99  $    1.41
    EBITDA per share(*)                      $    1.55  $    1.03  $    1.44
    Total assets                             $   238.0  $   180.3  $   313.2
    Total liabilities                        $    34.5  $    22.0  $   170.5
    Dividends paid per share                 $    2.06  $    0.41  $    0.55
    -------------------------------------------------------------------------
    (*) EBITDA for year ended June 30, 2007 excludes the gain on sale of the
        Company's investment in TMG
    


    Overview

    As previously disclosed, the Company announced a change in its fiscal
year end from August 31 to June 30, effective as of June 30, 2006. As a
result, the comparative figures reported in the annual consolidated financial
statements reflect the ten month period ended June 30, 2006 (the "transition
year").
    The financial results for the year ended June 30, 2007 reflect a solid
performance by Corby as the Company managed to integrate the Lamb's
International and Seagram's businesses while also growing from an organic
perspective. EBITDA for the year ended increased by 51% when compared to the
transition year.
    While the increase in EBITDA reflects the inclusion of results from the
recently acquired Lamb's International and Seagram's businesses in addition to
the fact that the comparative period includes two less months of operations;
it also reflects a strong underlying performance for the Company as a whole.
This is demonstrated by the fact that after excluding the impact of the Lamb's
International and Seagram's Coolers businesses, shipment volumes and average
gross selling prices of Corby's owned brands grew by 2% and 3%, respectively
during the twelve months ended June 30, 2007 as compared to the previous
twelve months.
    Basic earnings per share amounted to $3.53 for the year ended June 30,
2007 compared to $0.99 for the transition year. Net earnings for the year
ended June 30, 2007 include a gain of $72.6 million from the sale of the
Company's investment in TMG.
    Excluding the gain from the sale of TMG (and $1.2 million in related
income taxes), the Company's earnings were $29.0 million compared with
$28.0 million in the transition year. Increased earnings as a result of the
Seagram's Coolers and Lamb's International acquisitions, the aforementioned
organic growth from the Company's owned brands, and the two less months of
operations in the transition year were partially offset by reduced equity
earnings from TMG (as a result of the aforementioned sale on September 29,
2006).

    Operating revenue

    Corby's operating revenue, consisting of sales revenue and commission
income, was $153.6 million for the year ended June 30, 2007 compared to
$110.8 million for the transition year resulting in an increase of
$42.8 million or 38.7%.
    Lamb's International and Seagram's Coolers contributed $11.6 million in
operating revenue in the first nine months since their acquisition. The
inclusion of these brands, combined with the aforementioned organic growth of
Corby's owned brands and the two less months of operations in the transition
year led to an increase of $41.9 million in sales revenue.
    The organic growth in sales revenue from Corby's owned brands was mainly
the result of floor price increases by the Company's main customers, the
provincial liquor boards, in addition to strategic price increases on brands
such as Wiser's Deluxe.
    Net commission income was $14.2 million for the year ended June 30, 2007
compared to $13.2 million in the transition year. Commission income for the
year ended June 30, 2007 is presented net of $3.5 million in amortization
expense related to the aforementioned representation rights acquired on
September 29, 2006 from PR. For further details on the commission income
earned by Corby, please refer to the table below:

    
                                                                         Ten
                                                             Year     Months
                                                            Ended      Ended
                                                          June 30,   June 30,
    (in millions of Canadian dollars)                        2007       2006
    -------------------------------------------------------------------------
    Commission from PR brands                           $    12.8  $     6.3
    Less: representation rights amortization                 (3.5)         -
    Commission from un-related 3rd parties                    4.9        2.7
    Commission from brands that are no longer
     represented by Corby(*)                                    -        4.2
    -------------------------------------------------------------------------

    Net commission income                               $    14.2  $    13.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (*) Note: the transition year includes income on brands which are no
        longer represented by Corby. These brands mainly consist of Canadian
        Club rye whisky, Sauza tequila and Folonari wines.
    


    Cost of sales

    Cost of sales for the year ended June 30, 2007 was $71.6 million compared
to $48.1 million for the transition year. The majority of the increase in cost
of sales was commensurate with the increase in sales revenue, which includes
the costs associated with the newly acquired Seagram's Coolers and Lamb's
International businesses. Gross margin from the sale of Corby's owned brands
was 51.1% during the year ended June 30, 2007 compared with 53.7% during the
transition year. The decrease in gross margin reflects the inclusion of
Seagram's Coolers, which traditionally earn a lower gross margin than Corby's
other spirit brands. Offsetting this shift in product mix was improved pricing
on Corby's owned brands, as previously mentioned.

    Marketing, sales and administration

    Marketing, sales and administration expenses were $41.5 million for the
year ended June 30, 2007 compared to $31.6 million for the transition year.
The increase in the year ended June 30, 2007 reflects the additional two
months of operations included this year combined with an increase in general
overhead expenses, which is due to the growth in the Company's business
following the integration with PR's Canadian operations. The current year
includes a $2.0 million charge associated with the Company's previously
disclosed management reorganization.
    As previously mentioned, the Company also continued to make significant
investments in its owned brands, as demonstrated by the additional media and
other promotional spend on Wiser's whiskies.

    Income Taxes

    Corby's income tax provision for the year ended June 30, 2007 amounted to
$16.4 million compared with $9.1 million for the transition year. The income
tax expense for the year ended June 30, 2007 includes $1.2 million in
withholding and other taxes related to the disposition of TMG. The transaction
was not subject to further tax expense as a result of the use of Section 85
rollover provisions in the Income Tax Act (Canada). Corby has been indemnified
for any further tax liabilities resulting from the disposition of TMG, should
they occur, up to a maximum of $16 million. Excluding the gain on the sale of
TMG, the Company's effective tax rate was 33.4% for the year ended June 30,
2007 compared to 24.4% for the transition year. The rise in the effective tax
rate is mainly due to higher equity earnings in the transition year, which are
not subject to income tax. This was coupled with the previously disclosed
maturation of the Company's debt financing instruments in December 2005.

    Seasonality
    -----------
    Corby's operations are typically subject to seasonal fluctuations in that
the retail holiday season generally results in an increase in consumer
purchases over the course of October, November and December. Further, the
summer months traditionally result in higher consumer purchases of spirits as
compared to the winter and spring months. As a result, the Company's first and
second quarter of each fiscal year tend to typically reflect the impact of
seasonal fluctuations in that more shipments are typically made during those
quarters.

    Balance Sheet Review
    --------------------
    Working capital was $91.2 million as at June 30, 2007 compared to
$144.0 million as at June 30, 2006. The decrease in working capital was mainly
the result of the aforementioned $42.7 million special dividend paid by Corby
and the classification of Corby's former investment in TMG of $31.1 million,
which was classified as a current asset as at June 30, 2006. This was
partially offset by the Company's current year positive cash flows from
operating activities and the impact of two less months of operations being
included in the transition year.
    The increase of $6.4 million in accounts payable and accrued liabilities
is mainly the result of higher balances owing to PR affiliates as at June 30,
2007 as compared to the previous year. The majority of this increase is offset
by a $5.4 million increase in inventory as at June 30, 2007 as compared to the
prior year. The higher balance of inventory mainly reflects increased
lay-downs of maturing bulk whisky in addition to the inventory associated with
the Seagram's Coolers business.
    The June 30, 2007 net book value of Corby's long term representation
rights of $66.9 million and increase of $33.4 million for goodwill and
intangible assets related to the Seagram's Cooler and Lamb's International
business acquisitions are the result of the transaction with PR which closed
on September 29, 2006. For further details regarding this transaction, please
see the "Significant Events" section of this MD&A
    Corby's cash balance as at June 30, 2007 was $47.0 million.

    Cash Flow Review
    ----------------
    Corby's operating activities contributed $33.7 million to cash during the
year ended June 30, 2007 compared with $21.5 million during the transition
year. The increase in cash flows from operating activities was mainly driven
by the aforementioned increased in EBITDA resulting from the PR transaction in
addition to the transition year including two less months of operations versus
the current year. This was partially offset by higher income tax payments as a
result of the increase in the Company's effective tax rate.
    Investment activities provided an additional $3.1 million in cash flow
when compared to the transition year. A cash inflow of $4.6 million was the
result of the aforementioned transaction with PR, partially offset by
$1.5 million of increased capital expenditures. The increase in capital asset
additions was mainly the result of $0.7 million in purchases of barrels for
maturing whisky coupled with an increase in capital expenditures related to
the Company's manufacturing plant in Montreal.
    The $58.3 million in cash flows used in financing activities mainly
reflects the payment of Corby's special dividend of $42.7 million, in addition
to $15.8 million of regular quarterly dividends. Corby's regular quarterly
dividends were $4.1 million lower in the transition year as a result of there
being one less quarterly dividend payment.

    Outstanding Share Data
    ----------------------
    As at June 30, 2007, Corby had 24,274,320 Voting Class A common shares
and 4,194,536 Non-Voting Class B common shares outstanding. There were no
options outstanding as at June 30, 2007.

    Liquidity and Funding Requirements
    ----------------------------------
    Corby continues to generate strong cash flows from operations and does
not have any long term debt. As a result, it is expected that the Company will
be able to meet all funding and working capital requirements that may arise
within the ordinary course of business. While demographic and financial market
dynamics in recent years have increased the cost of providing pensions and
other post-retirement benefits, the Company is committed to making any
required contributions to ensure that it meets its obligations. Specifically,
Corby intends to continue to fund its employee pension benefit plans as
required.
    The transaction with PR and the payment of the aforementioned special
dividend has not had a negative impact with respect to Corby's liquidity and
funding requirements. Nonetheless, readers are urged to review the
"Significant Events" section of this MD&A for details of the expected impact
of the aforementioned transaction with PR and the special dividend.

    Related Party Transactions
    --------------------------
    HWSL, an indirectly wholly-owned subsidiary of PR, owns in excess of 50%
of the issued and outstanding Voting Class A common shares of Corby and is
thereby considered to be the Company's parent. PR is considered to be Corby's
ultimate parent and affiliated companies are those that are also subsidiaries
of PR.
    Corby engages in a significant number of transactions with its parent
company, its ultimate parent and various affiliates. Specifically, Corby
renders services to its parent company, its ultimate parent, and affiliates
for the marketing and sale of beverage alcohol products in Canada.
Furthermore, Corby sub-contracts the large majority of its distilling,
maturing, storing, blending, bottling and related production activities to its
parent company. A significant portion of Corby's bookkeeping, record keeping
services, data processing and other administrative services are also
outsourced to its parent company.
    The companies had previously been operating under the terms of agreements
which expired on August 31, 2005. However the companies are now operating
under the terms of the agreements which became effective on September 29, 2006
as a result of the aforementioned transaction with PR. These agreements
provide for the continuing production of certain Corby brands by PR at its
production facility in Windsor, Ontario for the next 10 years. Corby also
manages PR's business interests in Canada, including the Windsor production
facility. Certain officers of Corby have been appointed as directors and
officers of PR's Canadian entities, as approved by Corby's Board of Directors.
All of these transactions are in the normal course of operations and are
measured at the exchange amount, which is the amount of consideration
established and agreed to by the related parties.
    For further details regarding the transaction with PR which closed on
September 29, 2006, please refer to the "Significant Events" section of this
MD&A.

    Accounting Standards - Implemented in 2007
    ------------------------------------------

    Consideration to customers

    EIC-156 "Accounting by a Vendor for Consideration given to a Customer
(including a Reseller of the Vendor's Products)" became effective for all
interim and annual financial statements for fiscal years beginning on or after
January 1, 2006. This abstract provides guidance for the classification,
recognition and measurement of sales incentives or other consideration given
by a vendor to a direct or indirect customer.
    Corby has adopted this pronouncement as of July 1, 2006 on a retroactive
basis. As a result of the retroactive implementation of this new standard, the
impact on the Consolidated Statement of Earnings was as follows:

    
                                                                         Ten
                                                             Year     Months
                                                            Ended      Ended
                                                          June 30,   June 30,
    (in millions of Canadian dollars)                        2007       2006
    -------------------------------------------------------------------------
    Increase (decrease)
    Operating revenue                                   $    (2.4) $    (1.7)
    Cost of sales                                       $     3.5  $     2.4
    Marketing, sales and administration                 $    (5.9) $    (4.1)
    Net earnings or earnings per share                          -          -
    -------------------------------------------------------------------------
    

    Stock-Based Compensation

    In July, 2006, the Emerging Issues Committee ("EIC") issued EIC-162,
"Stock-based Compensation for Employees Eligible to Retire Before the Vesting
Date" ("EIC-162"). EIC-162 addresses the accounting treatment of stock-based
awards for employees who are eligible to retire at the grant date or who will
be eligible for retirement during the vesting period. The compensation cost
attributable to awards for employees eligible to retire at the grant date
should be recognized at the grant date; for employees eligible to retire
during the vesting period, the cost should be recognized over the period from
the grant date to the date the employee becomes eligible for retirement.
EIC-162 is to be applied retroactively and is effective for interim and annual
periods ending on or after December 31, 2006. The implementation of EIC-162
did not have a material impact on the Company's results of operations or
financial position.

    Variability to be considered in applying Accounting Guideline 15

    In September 2006, the EIC issued EIC-163, "Determining the Variability
to Be Considered in Applying AcG-15" ("EIC-163"), to address the diversity in
practice in determining the variability that should be considered in applying
AcG-15. EIC-163 should be applied in the first interim or annual period
beginning on or after January 1, 2007. The implementation of EIC-163 did not
have an impact on the Company's results of operations or financial position.

    Future Accounting Standards
    ---------------------------

    Financial instruments

    The CICA issued new accounting standards for the recognition and
measurement of financial instruments, hedge accounting and comprehensive
income. The standards have been based on existing U.S. and international
accounting standards. The standards are based on several key principles:
financial instruments and non-financial instruments derivatives represent
rights or obligations that meet the definition of assets or liabilities and
should be reported in the financial statements; fair value is the most
relevant measure for financial instruments and the only relevant measure for
derivative financial instruments; only items that are assets or liabilities
should be reported as such in the financial statements; and, special
accounting for items designated as being part of hedging relationship should
be provided only for qualifying items. The standards are effective for interim
and annual financial statements for fiscal years beginning on or after
October 1, 2006. The Company does not expect implementation of these new
standards to have a significant impact on the Company's results of operations
or financial position.

    Accounting changes

    The CICA issued new accounting standards to establish criteria for
changing accounting policies, together with the accounting treatment and
disclosure of changes in accounting policies and estimates, and correction of
errors. The new standards specify that voluntary changes in accounting policy
are to be made only if they result in the financial statements providing
reliable and more relevant information. Changes in accounting policy are
applied retrospectively unless doing so is impractical. The standards are
effective for interim and annual financial statements for fiscal years
beginning on or after January 1, 2007. The Company does not expect their
implementation to have a significant impact on the Company's results of
operations or financial position.

    Disclosure Controls and Procedures
    ----------------------------------
    The Company maintains a system of disclosure controls and procedures that
has been designed to provide reasonable assurance that information required to
be disclosed by the Company in its public filings is recorded, processed,
summarized and reported within required time periods and includes controls and
procedures designed to ensure that all relevant information is accumulated and
communicated to senior management, including the Company's Chief Executive
Officer ("CEO") and Chief Financial Officer ("CFO"), to allow timely decisions
regarding required disclosure.
    Management, with the participation of the CEO and CFO, has evaluated the
effectiveness of the Company's disclosure controls and procedures (as defined
in the rules of the Canadian Securities Administrators) as at June 30, 2007
and has concluded that such disclosure controls and procedures are effective
based upon such evaluation.

    Internal Controls Over Financial Reporting
    ------------------------------------------
    There were no changes in internal control over financial reporting during
the Company's most recent interim period that have materially affected, or are
reasonably likely to materially affect, the Company's internal control over
financial reporting.
    In addition, the CEO and CFO have designed, or caused to be designed
under their supervision, internal controls over financial reporting to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
GAAP.

    Risks & Outlook
    ---------------
    The beverage alcohol industry in Canada is subject to government policy,
extensive regulatory requirements and significant rates of taxation at both
the federal and provincial levels. As a result, changes in the government
policy, regulatory and/or taxation environments within the beverage alcohol
industry may affect Corby's business operations, including changes in market
dynamics or changes in consumer consumption patterns. The Company continuously
monitors the potential risk associated with any proposed changes in its
government policy, regulatory and taxation environments and, as an industry
leader, actively participates in trade association discussions relating to new
developments.
    As a consumer products industry, beverage alcohol companies are
susceptible to risks relating to changes in consumer consumption patterns,
product quality and availability, including manufacturing or inventory
disruption. Corby offers a solid portfolio of products, which complements
consumer desires and offers exciting innovation. The Company adheres to a
comprehensive suite of quality programs and proactively manages production and
supply chains to mitigate any potential risk to consumer safety or Corby's
reputation and profitability.
    The Canadian beverage alcohol industry is also extremely competitive.
Competitors may take actions to establish and sustain competitive advantage.
They may also affect Corby's ability to attract and retain high quality
employees. The Company's long heritage attests to Corby's strong foundation
and successful strategic implementation. Being a leading Canadian beverage
alcohol company helps facilitate recruitment efforts. Corby appreciates and
invests in its employees to partner with them in achieving corporate
objectives and creating value.
    Corby is a leading Canadian manufacturer and marketer of spirits and
importer of wines. Corby's national leadership is sustained by a diverse brand
portfolio which allows the Company to drive profitable organic growth with
strong, consistent cash flows. The addition of PR's brands to Corby's
portfolio of excellence has solidified Corby's leadership position in the
Canadian market and the business is well positioned for future growth.


    
    CORBY DISTILLERIES LIMITED
    CONSOLIDATED BALANCE SHEETS

    As at June 30, 2007 and June 30, 2006
    (in thousands of Canadian dollars)                       2007       2006
    -------------------------------------------------------------------------

    ASSETS
    Current
      Cash                                              $  46,989  $  67,687
      Accounts receivable                                  24,964     23,388
      Inventories (Note 5)                                 43,048     37,677
      Prepaid expenses                                      1,013        795
      Investments in companies subject to
       significant influence (Note 3)                           -     31,111
      Future income taxes (Note 10)                           363      1,171
    -------------------------------------------------------------------------
                                                          116,377    161,829
    Deferred costs                                              -        680
    Capital assets (Note 6)                                 9,669      8,008
    Employee future benefits (Note 7)                       7,142      5,343
    Future income taxes (Note 10)                               -          8
    Long term representation rights (Note 8)               66,940          -
    Goodwill and intangible assets (Note 9)                37,906      4,476
    -------------------------------------------------------------------------
                                                        $ 238,034  $ 180,344
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES
    Current
      Accounts payable and accrued liabilities          $  22,605  $  16,178
      Income and other taxes payable                        2,601      1,621
    -------------------------------------------------------------------------
                                                           25,206     17,799
    Employee future benefits (Note 7)                       3,909      2,942
    Future income taxes (Note 10)                           5,400      1,277
    -------------------------------------------------------------------------
                                                           34,515     22,018
    -------------------------------------------------------------------------

    SHAREHOLDERS' EQUITY
    Share capital (Note 11)                                14,304     14,008
    Retained earnings                                     189,215    147,337
    Cumulative translation adjustments (Note 13)                -     (3,019)
    -------------------------------------------------------------------------
                                                          203,519    158,326
    -------------------------------------------------------------------------
                                                        $ 238,034  $ 180,344
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements



    CORBY DISTILLERIES LIMITED
    CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS

    For the year ended June 30, 2007 and
     ten months ended June 30, 2006 (Note 2)
    (in thousands of Canadian dollars,
     except per share amounts)                               2007       2006
    -------------------------------------------------------------------------

    OPERATING REVENUE
      Sales                                             $ 139,426  $  97,536
      Commissions (net of amortization of
       $3,500; 2006 - $nil)                                14,161     13,245
    -------------------------------------------------------------------------
                                                          153,587    110,781
    -------------------------------------------------------------------------

    OPERATING COSTS
      Cost of sales                                        71,627     48,130
      Marketing, sales and administration                  41,454     31,646
      Restructuring                                             -      1,764
      Amortization                                          1,359        719
    -------------------------------------------------------------------------
                                                          114,440     82,259
    -------------------------------------------------------------------------

    OTHER INCOME
      Equity in net earnings of companies subject
       to significant influence (Note 3)                    2,091      6,607
      Gain from disposition of investment in companies
       subject to significant influence (Note 3)           72,595          -
      Interest income, net                                  2,968      1,979
    -------------------------------------------------------------------------
                                                           77,654      8,586
    -------------------------------------------------------------------------

    EARNINGS BEFORE INCOME TAXES                          116,801     37,108
    -------------------------------------------------------------------------

    INCOME TAXES (Note 10)
      Current                                              15,027     10,198
      Future                                                1,350     (1,127)
    -------------------------------------------------------------------------
                                                           16,377      9,071
    -------------------------------------------------------------------------

    NET EARNINGS                                        $ 100,424  $  28,037
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    BASIC EARNINGS PER SHARE (Note 14)                  $    3.53  $    0.99
    DILUTED EARNINGS PER SHARE (Note 14)                $    3.53  $    0.99
    -------------------------------------------------------------------------

    RETAINED EARNINGS, BEGINNING OF YEAR                $ 147,337  $ 131,026
    NET EARNINGS                                          100,424     28,037
    DIVIDENDS                                              58,546     11,726
    -------------------------------------------------------------------------

    RETAINED EARNINGS, END OF YEAR                      $ 189,215  $ 147,337
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements



    CORBY DISTILLERIES LIMITED
    CONSOLIDATED STATEMENTS OF CASH FLOW

    For the year ended June 30, 2007 and
     ten months ended June 30, 2006 (Note 2)
    (in thousands of Canadian dollars)                       2007       2006
    -------------------------------------------------------------------------

    OPERATING ACTIVITIES
    Net earnings                                        $ 100,424  $  28,037
    Items not affecting cash
      Amortization                                          4,859        719
      Future income taxes (Note 10)                         1,350     (1,127)
      Equity earnings from companies subject
       to significant influence (Note 3)                   (2,091)    (6,607)
      Gain on disposition of investment in companies
       subject to significant influence (Note 3)          (72,595)         -
    Employee future benefits                                 (832)    (1,379)
    -------------------------------------------------------------------------
                                                           31,115     19,643
    Net change in non-cash working capital
     balances (Note 15)                                     2,552      1,817
    -------------------------------------------------------------------------
    Cash flows from operating activities                   33,667     21,460
    -------------------------------------------------------------------------

    INVESTMENT ACTIVITIES
    Dividends received from companies subject
     to significant influence (Note 3)                     28,573      2,346
    Acquisitions of businesses and long term
     representation rights, net of disposal of
     long term investments (Note 3)                       (21,668)         -
    Additions to capital assets                            (3,020)    (1,530)
    -------------------------------------------------------------------------
    Cash flows from investment activities                   3,885        816
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
    Proceeds of loan from affiliated company                    -    149,160
    Repayment of loan to affiliated company                     -   (149,160)
    Dividends paid                                        (58,546)   (11,726)
    Proceeds on issuance of capital stock                     296        489
    -------------------------------------------------------------------------
    Cash flows used in financing activities               (58,250)   (11,237)
    -------------------------------------------------------------------------

    NET CHANGE IN CASH                                    (20,698)    11,039
    CASH, BEGINNING OF YEAR                                67,687     56,648
    -------------------------------------------------------------------------
    CASH, END OF YEAR                                   $  46,989  $  67,687
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    SUPPLEMENTAL CASH FLOW INFORMATION
    Interest paid                                       $      31  $   4,374
    Interest received                                   $   3,064  $   7,745
    Income taxes paid                                   $  14,044  $  10,644
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements



    CORBY DISTILLERIES LIMITED
    CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS

    For the three months ended June 30,
     2007 and June 30, 2006
    (in thousands of Canadian dollars,
     except per share amounts)                               2007       2006
    -------------------------------------------------------------------------

    OPERATING REVENUE
      Sales                                             $  36,317  $  29,066
      Commissions (net of amortization of
       $1,167; 2006 - $nil)                                 3,753      4,283
    -------------------------------------------------------------------------
                                                           40,070     33,349
    -------------------------------------------------------------------------

    OPERATING COSTS
      Cost of sales                                        19,816     13,795
      Marketing, sales and administration                  11,513     12,023
      Restructuring                                             -        414
      Amortization                                            730        174
    -------------------------------------------------------------------------
                                                           32,059     26,406
    -------------------------------------------------------------------------

    OTHER INCOME
      Equity in net earnings of companies
       subject to significant influence                         -        817
      Gain from disposition of investment in companies
       subject to significant influence                         -          -
      Interest income, net                                    499        718
    -------------------------------------------------------------------------
                                                              499      1,535
    -------------------------------------------------------------------------

    EARNINGS BEFORE INCOME TAXES                            8,510      8,478
    INCOME TAXES                                            2,983      2,165
    -------------------------------------------------------------------------

    NET EARNINGS                                        $   5,527  $   6,313
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    BASIC EARNINGS PER SHARE                            $    0.20  $    0.22
    DILUTED EARNINGS PER SHARE                          $    0.20  $    0.22
    -------------------------------------------------------------------------

    RETAINED EARNINGS, BEGINNING OF PERIOD              $ 187,674  $ 144,936
    NET EARNINGS                                            5,527      6,313
    DIVIDENDS                                               3,986      3,912
    -------------------------------------------------------------------------

    RETAINED EARNINGS, END OF PERIOD                    $ 189,215  $ 147,337
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    CORBY DISTILLERIES LIMITED
    CONSOLIDATED STATEMENTS OF CASH FLOW

    For the three months ended June 30,
     2007 and June 30, 2006
    (in thousands of Canadian dollars)                       2007       2006
    -------------------------------------------------------------------------

    OPERATING ACTIVITIES
    Net earnings                                        $   5,527  $   6,313
    Items not affecting cash
      Amortization                                          1,897        174
      Future income taxes                                     353        (40)
      Equity earnings from companies subject
       to significant influence                                 -       (817)
    Employee future benefits                               (1,552)    (1,538)
    -------------------------------------------------------------------------
                                                            6,225      4,092
    Net change in non-cash working capital balances        (6,542)    (1,929)
    -------------------------------------------------------------------------
    Cash flows (used in) provided from
     operating activities                                    (317)     2,163
    -------------------------------------------------------------------------

    INVESTMENT ACTIVITY
    Additions to capital assets                            (1,162)    (1,065)
    -------------------------------------------------------------------------
    Cash flows (used in) provided from
     investment activity                                   (1,162)    (1,065)
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
    Dividends paid                                         (3,986)    (3,912)
    Proceeds on issuance of capital stock                       -        303
    -------------------------------------------------------------------------
    Cash flows used in financing activities                (3,986)    (3,609)
    -------------------------------------------------------------------------

    NET CHANGE IN CASH                                     (5,465)    (2,511)
    CASH, BEGINNING OF PERIOD                              52,454     70,198
    -------------------------------------------------------------------------
    CASH, END OF PERIOD                                 $  46,989  $  67,687
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    FOR THE YEAR ENDED JUNE 30, 2007 AND THE TEN MONTHS ENDED JUNE 30, 2006
    (In thousands of Canadian dollars, except share amounts)

    1.  SIGNIFICANT ACCOUNTING POLICIES

    Description of Business

    Corby Distilleries Limited is a leading Canadian manufacturer and
    marketer of spirits and importer of wines. The Company's activities are
    comprised of the production of spirits, along with the distribution of
    owned and represented spirits, liqueurs, coolers, and wines. Revenues
    predominately consist of sales made to each of the provincial liquor
    boards in Canada.

    Basis of Consolidation

    The consolidated financial statements include the accounts of Corby
    Distilleries Limited and its subsidiaries, collectively referred to as
    "Corby" or the "Company". Up until September 29, 2006, Corby owned a 45%
    investment in Tia Maria Limited and Tia Maria International Limited
    (collectively referred to as the "Tia Maria Group") and accounted for
    this investment via the equity method. Corby disposed of its investment
    in the Tia Maria Group as part of a transaction with Pernod Ricard S.A.
    ("PR"), the Company's ultimate parent. Refer to Note 3 for further
    details on the PR transaction.

    Revenue Recognition

    Sales and commissions are recognized when title for goods passes to the
    customer. Sales are presented net of customer and consumer discounts and
    taxes. The large majority of the Company's sales are to government
    controlled liquor boards. As a result, collection of accounts receivable
    is reasonably assured.

    Inventories

    Inventories are stated at average cost not exceeding net realizable
    value. Inventories include barreled whiskies which will remain in storage
    over a period of years, but are classified as current assets as there is
    a market for barreled whiskies.

    Deferred Costs

    Deferred costs represent legal and advisory fees related to the Company's
    transaction with PR. Such costs were recognized as transaction costs upon
    legal closure of the agreement, which occurred on September 29, 2006.

    Capital Assets

    Buildings and machinery and equipment are recorded at cost, net of
    accumulated amortization. Amortization is recorded on a straight-line
    basis over the estimated useful lives of the assets as indicated below.
    Half-year rates are applied in the year of acquisition.


    Buildings                                                 40 to 50 years
    Machinery and equipment                                    3 to 12 years
    -------------------------------------------------------------------------

    Employee Future Benefits

    The Company accrues its obligations under employee benefit plans and its
    related costs, net of plan assets and recognizes the cost of retirement
    benefits and certain post-employment benefits over the periods in which
    employees render services to the Company in return for the benefits.
    Other post-employment benefits are recognized when the event that
    obligates the Company occurs. The Company has the following policies:

        -   The cost of pensions and other retirement benefits earned by
            employees is actuarially determined using the projected benefit
            method prorated on service and management's best estimate of
            expected plan investment performance, salary escalation,
            retirement ages of employees and expected health care costs.

        -   For the purpose of calculating the expected return on plan
            assets, those assets are valued at fair values.

        -   Past service costs from plan amendments and the transitional
            asset are amortized on a straight-line basis over the average
            remaining service life of active members expected to receive
            benefits under the plan.

        -   Net actuarial gains or losses are amortized based on the corridor
            method. Under the corridor method, cumulative gains and losses in
            excess of 10% of the greater of the accrued benefit obligation
            and the market value of plan assets are amortized over the
            average remaining service period of active members expected to
            receive benefits under the plan.

        -   The measurement date of the plans' assets and obligations is
            June 30, 2007.

    Long Term Representation Rights

    Long term representation rights reflect the cost of the Company's
    exclusive right to represent PR's brands in Canada and are carried at
    cost, less accumulated amortization. Amortization is provided for on a
    straight line basis over the 15 year term of the agreement beginning
    October 1, 2006.

    Long-lived Assets

    Long-lived assets are tested for impairment when events or changes in
    circumstances indicate their carrying value exceeds the sum of the
    undiscounted cash flows expected from their use and eventual disposal. If
    estimated future undiscounted cash flows are not sufficient to recover
    the carrying value of the assets, an impairment charge is recorded for
    the amount by which the long-lived assets' carrying value exceeds fair
    value. Fair value is determined using appraisals, management estimates or
    discounted cash flow calculations.

    Goodwill and Intangible Assets

    Goodwill represents the excess of the purchase price of an acquired
    business over the fair value of the underlying net assets, including
    intangible assets, at the date of acquisition. Intangible assets
    represent the value of trademarks and licenses of businesses acquired.
    These intangible assets are deemed to have an indefinite life. Goodwill
    and intangible assets are not amortized but are tested for impairment on
    an annual basis or more frequently if events or changes in circumstances
    indicate that the asset might be impaired. In the event of impairment,
    the excess of the carrying amount over the fair value of these assets
    would be charged to earnings.

    Income Taxes

    Income taxes are accounted for using the asset and liability method.
    Under this method, future income tax assets and liabilities are
    recognized for temporary differences between financial statement carrying
    amounts of assets and liabilities and their respective income tax bases.
    A future income tax asset or liability is estimated for each temporary
    difference using substantively enacted income tax rates and laws expected
    to be in effect when the asset is realized or the liability is settled. A
    valuation allowance is established, if necessary, to reduce any future
    income tax asset to an amount that is more likely than not to be
    realized.

    Foreign Currency Translation

    The Tia Maria Group, in which the Company had an investment of a self-
    sustaining nature, had the UK Pound Sterling as its functional currency
    and translated its financial results to Canadian Dollars as follows:
    assets and liabilities at the exchange rates in effect at the balance
    sheet dates and the translation of revenues and expenses at the exchange
    rates prevailing on the transaction dates. Unrealized gains or losses on
    translation are shown as a separate component in shareholders' equity.
    Corby disposed of its investment in the Tia Maria Group on September 29,
    2006 as part of a transaction with PR (Note 3).

    The monetary assets and liabilities of the Company, which are denominated
    in its functional currency, are translated at exchange rates in effect at
    the balance sheet dates. Revenues and expenses are translated at rates of
    exchange prevailing on the transaction dates. All exchange gains or
    losses are included in earnings.

    Stock Based Compensation Plans

    The Company accounts for awards of stock based compensation using the
    fair value method for all awards subsequent to September 1, 2002 that
    will be settled by the issuance of shares. Awards of stock based
    compensation prior to that date continue to be accounted for using the
    settlement basis. There have been no such awards of stock based
    compensation subsequent to September 1, 2002.

    On September 8, 2006, the Company implemented a Restricted Share Units
    Plan replacing the previous long term incentive plan. Through this Plan,
    restricted share units ("RSUs") will be granted to certain officers and
    employees at a grant price equal to the market closing price of the
    Company's Voting Class A Common Shares on the last day prior to grant.
    RSUs vest at the end of the three year term subject to the achievement of
    pre-determined corporate performance targets. The related compensation
    expense is recognized over this period. Unvested RSUs will attract
    dividend equivalent units whenever dividends are paid on the Voting Class
    A Common Shares of the Company and will be immediately reinvested into
    additional RSUs which will vest and become payable at the end of the
    three year vesting period, subject to the same performance conditions as
    the original RSU award. On the date of vesting, the holder will be
    entitled to the cash value of the number of RSUs granted, plus any RSUs
    received from reinvested dividend-equivalents. RSUs do not entitle
    participants to acquire any rights or entitlements as a shareholder of
    the Company.

    Use of Estimates

    The preparation of the consolidated financial statements in conformity
    with Canadian 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 year. Estimates are
    used when accounting for items such as allowance for uncollectible
    accounts receivable, inventory obsolescence, allocating the fair value
    between goodwill and intangibles, amortization, employee future benefits,
    income taxes, accruals and contingencies and testing goodwill, intangible
    assets and long-lived assets for impairment. Changes in those estimates
    could materially affect the consolidated financial statements.

    Recent Accounting Pronouncements

    EIC-156 "Accounting by a Vendor for Consideration given to a Customer
    (including a Reseller of the Vendor's Products)" became effective for all
    interim and annual financial statements for fiscal years beginning on or
    after January 1, 2006. This abstract provides guidance for the
    classification, recognition and measurement of sales incentives or other
    consideration given by a vendor to a direct or indirect customer.

    Corby has adopted this pronouncement effective July 1, 2006 on a
    retroactive basis. As a result of the retroactive implementation of this
    new standard, the impact on the Consolidated Statements of Earnings was
    as follows:

                                                             2007       2006
    -------------------------------------------------------------------------
    Increase (decrease)
    Sales                                               $  (2,383) $  (1,640)
    Cost of sales                                           3,509      2,420
    Marketing, sales and administration                    (5,892)    (4,060)
    Net earnings or earnings per share                          -          -
    -------------------------------------------------------------------------

    2.  CHANGES TO FISCAL YEAR

    In the prior year, Corby aligned its financial reporting calendar with
    that of its ultimate parent, PR, and changed its fiscal year end from
    August 31 to June 30. Therefore, comparative figures have been reported
    based on the ten month period ended June 30, 2006.

    3.  AGREEMENT WITH PERNOD RICARD S.A.

    On September 29, 2006, Corby closed its previously disclosed transaction
    with PR concerning the Canadian representation of PR's brands, production
    of Corby's owned brands, an exchange of certain assets and a combined
    strategic approach to the Canadian market. PR owns 51% of the Voting
    Class A common shares (and 46% of the total equity) of Corby and is
    considered to be the Company's ultimate parent.

    Under the agreement, Corby acquired the exclusive right to represent PR's
    brands in Canada for the next 15 years. Furthermore, Corby also acquired
    the international rights to Lamb's rum (excluding the Canadian rights,
    which Corby already owned) and the Canadian rights to Seagram's Coolers.
    Both Lamb's rum ("Lamb's International") and Seagram's Coolers meet the
    definition of a business.

    The companies also agreed upon the terms for the continuation of
    production of Corby's owned brands by PR at its production facility in
    Windsor, Ontario for the next 10 years. The companies further agreed that
    Corby will manage PR's business interests in Canada, including the
    Windsor production facility.

    The purchase consideration of $101,911 (long term representation rights
    $70,440, Lamb's International, $13,559, and Seagram's Coolers $17,912)
    was satisfied by the sale of the Company's 45% interest in Tia Maria
    Group ("TMG") to PR, along with cash consideration of $21,668 including
    transaction related costs.

    The Company has not recognized the cost of an earn-out clause on
    Seagram's Coolers since management cannot determine beyond a reasonable
    doubt that the amount will become payable to PR. The earn-out will become
    payable only in the event that the income (defined as sales, less cost of
    sales and advertising and promotional spend) derived from the brand over
    a four year period exceeds $11,600. The maximum amount which may become
    payable is $2,200, subject to 5% interest compounded annually.

    Corby received a dividend of $28,573 from TMG just prior to its
    disposition. The Company has reflected a gain of $72,595, net of
    cumulative translation adjustments of $2,439, associated with the
    disposition of TMG in its financial results for the year ended June 30,
    2007. Also included in the financial results for the three months ended
    September 30, 2006 is $1,045 for withholding and other taxes related to
    the disposition of TMG. The transaction was not subject to further tax
    expense as a result of the use of Section 85 rollover provisions in the
    Canadian Income Tax Act. Corby has been indemnified for any further tax
    liabilities resulting from the disposition of TMG, should they occur, up
    to a maximum of $16,000.

    As part of the above transaction, Corby has entered into agreements that
    contain features that may meet the definition of a guarantee. A guarantee
    is defined to be a contract (including an indemnity) that contingently
    requires the Company to make payments to the guaranteed party in certain
    situations. Conversely, the Company has also received indemnities or
    guarantees that contingently require another party to make payments to
    Corby in certain situations.

    4.  ACQUISITION OF BUSINESSES

    The acquisition of Lamb's International gives Corby worldwide rights to
    the Lamb's business and assets in addition to the Canadian rights which
    Corby already owned. The Company is entitled to intellectual property
    such as product specifications and the recipe for the Lamb's Navy Rum
    brand, and the "Alfred Lamb International Limited" trademark.

    The large majority of the Lamb's International business occurs in the UK
    market, with several other countries contributing a small portion. The
    rum will be matured, blended and bottled in Scotland for the next five
    years by the Chivas Brothers Co., an affiliate of Corby and a wholly-
    owned subsidiary of PR.

    Corby also acquired the Canadian assets and business of Seagram's
    Coolers. The Company is entitled to an irrevocable, perpetual, royalty
    free and transferable license for Canada for the intellectual property
    (such as product specifications and recipes) related to the use of the
    Seagram name in connection with the Seagram's Coolers assets and
    business. Corby also acquired all of the inventory and other assets used
    in connection with the Seagram's Coolers business in Canada in addition
    to acquiring all of PR's rights under applicable co-pack and other
    agreements.

    Virtually all of the Seagram's Coolers are produced by Diageo Canada in
    Dorval, Quebec under a co-packing agreement that expires in December
    2007. This agreement requires a minimum annual production volume of
    300,000 cases and a maximum annual production volume of 1,000,000 cases.
    Management anticipates annual volumes to be within this contracted range.

    The following values associated with its acquisition of the Seagram's
    Coolers and Lamb's International businesses have been recognized:

    Seagram's Coolers
    -------------------------------------------------------------------------
    Inventory                                                      $   1,281
    Trademarks and licenses                                           16,250
    Goodwill                                                           3,970
    Less: Future income tax liability                                 (3,589)
    -------------------------------------------------------------------------
                                                                   $  17,912
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Lamb's International
    -------------------------------------------------------------------------
    Inventory                                                      $     349
    Trademarks and licenses                                           11,800
    Goodwill                                                           1,410
    -------------------------------------------------------------------------
                                                                   $  13,559
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    For details on the accounting treatment of the long term representation
    rights and goodwill and intangible assets, please refer to Note 1.

    5.  INVENTORIES

                                                             2007       2006
    -------------------------------------------------------------------------
    Raw materials                                       $   5,674  $   5,841
    Work-in-progress                                       26,806     22,943
    Finished goods                                         10,568      8,893
    -------------------------------------------------------------------------
                                                        $  43,048  $  37,677
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    6.  CAPITAL ASSETS

                                          2007                          2006
    -------------------------------------------------------------------------
                              Accum.  Net Book              Accum.  Net Book
                      Cost    Amort.     Value      Cost    Amort.     Value
    -------------------------------------------------------------------------
    Land          $    638  $      -  $    638  $    638  $      -  $    638
    Buildings        7,284     4,318     2,966     6,656     4,217     2,439
    Machinery and
     equipment      14,195     8,130     6,065    14,850     9,919     4,931
    -------------------------------------------------------------------------
                  $ 22,117  $ 12,448  $  9,669  $ 22,144  $ 14,136  $  8,008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    7.  EMPLOYEE FUTURE BENEFITS

    The Company has two defined benefit plans for executives and salaried
    employees, two supplementary executive retirement plans for retired and
    current senior executives of the Company, and a post retirement benefit
    plan covering retiree life insurance, health and dental care. Benefits
    under these plans are based on years of service and compensation levels.
    The latest valuations completed for these plans are dated January 1,
    2005. The next required valuations must be completed with an effective
    date no later than January 1, 2008.

                                                  2007                  2006
    -------------------------------------------------------------------------
                                                 Other                 Other
                                    Pension    Benefit    Pension    Benefit
                                      Plans      Plans      Plans      Plans
    -------------------------------------------------------------------------
    Fair value of plan assets
    Fair value of plan assets,
     beginning of year            $  37,941  $       -  $  36,382  $       -
      Actual return on plan assets    4,278          -        492          -
      Employer contributions          3,714        610      3,652        616
      Employee contributions            162          -         92          -
      Benefits paid                  (3,523)      (610)    (2,677)      (616)
      Net transfer in from Parent
       Company's pension plan           271          -          -          -
    -------------------------------------------------------------------------
    Fair value of plan assets,
     end of year                  $  42,843  $       -  $  37,941  $       -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Accrued benefit obligation
    Benefit obligation,
     beginning of year            $  43,144  $  10,622  $  46,681  $  11,138
      Actuarial loss,
       beginning of year                  -          -          -        968
      Service cost                    1,260        496      1,107        243
      Interest cost                   2,392        592      1,892        493
      Employee contributions            162          -         92          -
      Actuarial loss (gain)           1,065        474     (3,951)    (1,604)
      Benefits paid                  (3,523)      (610)    (2,677)      (616)
      Net transfer in from Parent
       Company's pension plan           271          -          -          -
    -------------------------------------------------------------------------
    Accrued benefit obligation,
     end of year                  $  44,771  $  11,574  $  43,144  $  10,622
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                  2007                  2006
    -------------------------------------------------------------------------
                                                 Other                 Other
                                    Pension    Benefit    Pension    Benefit
                                      Plans      Plans      Plans      Plans
    -------------------------------------------------------------------------
    Funded status
    Funded status: plan deficit   $  (1,928) $ (11,574) $  (5,203) $ (10,622)
      Unamortized net
       transition obligation         (2,801)     4,488     (3,134)     4,891
      Unamortized past
       service costs                    937          -      1,017          -
      Unamortized net
       actuarial loss                10,934      3,177     12,663      2,789
    -------------------------------------------------------------------------
    Accrued benefit asset
     (liability)                  $   7,142  $  (3,909) $   5,343  $  (2,942)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    All pension plans other than the salaried employees' plan are in a funded
    deficit position. The aggregate fair value of plan assets and accrued
    benefit obligation for these deficit position plans as at June 30, 2007
    is $35,479 and $39,003 respectively (2006 - $32,674 and $37,976).

    Significant actuarial assumptions adopted are as follows:

                                                  2007                  2006
    -------------------------------------------------------------------------
                                                 Other                 Other
                                    Pension    Benefit    Pension    Benefit
                                      Plans      Plans      Plans      Plans
    -------------------------------------------------------------------------
    Accrued benefit obligation,
     end of year
    Discount rate                     5.50%      5.50%      5.75%      5.75%
    Compensation increase             4.00%      4.00%      4.00%      4.00%
    Benefit expense, for the year
    Discount rate                     5.75%      5.75%      5.00%      5.00%
    Expected long term return
     on assets                        6.75%        N/A      7.00%        N/A
    Compensation increase             4.00%      4.00%      4.00%      4.00%


    The health care cost trend rates used were 8.0% and 8.5% for 2007 and
    2006 respectively, with 5.0% being the ultimate trend rate for years 2013
    and thereafter.

    Assumed health care cost trend rates have a significant effect on the
    amounts reported for the health care plans. A one-percentage-point change
    in assumed health care cost trend rates would have the following effects
    for 2007:

                                                         Increase   Decrease
    -------------------------------------------------------------------------
    Service and interest cost                           $     171  $    (134)
    Accrued benefit obligation                              1,285       (947)


    Components of the Company's pension and other post-retirement benefit
    plans expense are as follows:

                                                  2007                  2006
    -------------------------------------------------------------------------
                                                 Other                 Other
                                    Pension    Benefit    Pension    Benefit
                                      Plans      Plans      Plans      Plans
    -------------------------------------------------------------------------
    Service cost (including
     provision for plan expenses) $   1,578  $     496  $   1,334  $     243
    Interest cost                     2,392        592      1,892        493
    Actual return on plan assets     (4,871)         -       (899)         -
    Actuarial loss (gain)             1,065        484     (3,951)      (646)
    -------------------------------------------------------------------------
    Costs arising in the period         164      1,572     (1,624)        90

    Differences between:
      Actual and expected return
       on plan assets                 2,526          -     (1,109)         -
      Actuarial gain or loss
       recognized for the year and
       actuarial gain or loss on
       accrued benefit obligation      (501)      (388)     4,577        792
      Amortization of plan
       amendments and actual plan
       amendments                        79          -         67          -
      Amortization of transitional
       obligations                     (333)       403       (277)       336
    -------------------------------------------------------------------------
    Net expense                   $   1,935  $   1,587  $   1,634  $   1,218
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Plan assets by category are as follows:

                                                             2007       2006
    -------------------------------------------------------------------------
    Equity                                                  54.2%      54.0%
    Fixed income                                            37.1%      40.7%
    Refundable taxes at Canada Revenue Agency/other          8.7%       5.3%
    -------------------------------------------------------------------------
                                                           100.0%     100.0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    8.  LONG TERM REPRESENTATION RIGHTS

                                                             2007       2006
    -------------------------------------------------------------------------
    Cost                                                $  70,440  $       -
    Accumulated amortization                               (3,500)         -
    -------------------------------------------------------------------------
                                                        $  66,940  $       -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    9.  GOODWILL AND INTANGIBLE ASSETS

                                          2007                          2006
    -------------------------------------------------------------------------

                  Goodwill Intangibles   Total  Goodwill Intangibles   Total
    -------------------------------------------------------------------------
    Meaghers/
     De Kuyper    $  4,476  $      -  $  4,476  $  4,476  $      -  $  4,476
    Seagram's
     Coolers         3,970    16,250    20,220         -         -         -
    Lamb's
     International   1,410    11,800    13,210         -         -         -
    -------------------------------------------------------------------------
                  $  9,856  $ 28,050  $ 37,906  $  4,476  $      -  $  4,476
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    10. INCOME TAXES

    The tax effects of temporary differences and loss carry forwards that
    give rise to significant portions of the future income tax assets and
    future income tax liabilities are presented below:

                                                             2007       2006
    -------------------------------------------------------------------------
    Future income tax assets
    Current
      Bad debt and inventory reserves                   $     171  $     329
      Restructuring reserves                                  192        197
      Investment in affiliated companies                        -        460
      Capital losses carried forward                            -        185
    -------------------------------------------------------------------------
                                                              363      1,171
    -------------------------------------------------------------------------
    Long term
      Other                                                     -          8
    -------------------------------------------------------------------------
                                                                -          8
    -------------------------------------------------------------------------
                                                        $     363  $   1,179
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Future income tax liabilities
    Long term
      Employee future benefits                          $   1,039  $     785
      Capital assets                                          482        492
      Representation rights                                 3,879          -
    -------------------------------------------------------------------------
                                                        $   5,400  $   1,277
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    As at June 30, 2007, the Company has no capital loss carry forward for
    tax purposes (2006 - $1,050).

    The effective tax rate of 14% for the year ended June 30, 2007 and 24%
    for the 10 months ended June 30, 2006 differ from the basic Federal and
    Provincial rates due to the following:

                                                             2007       2006
    -------------------------------------------------------------------------
    Combined basic Federal and Provincial tax rates           35%        35%
    Equity in net earnings of companies subject
     to significant influence                                 (1%)       (7%)
    Income not subject to tax                                (22%)       (3%)
    Other                                                      2%        (1%)
    -------------------------------------------------------------------------
                                                              14%        24%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    11. SHARE CAPITAL

    On February 9, 2006, the Board of Directors of Corby declared a four-for-
    one stock split by way of a stock dividend after payment of the quarterly
    dividend, both paid on March 15, 2006 on Voting Class A Common Shares and
    Non-voting Class B Common Shares of the Company to shareholders of record
    as at the close of business on February 28, 2006.

    As a result, all of the references to common shares, earnings per common
    share, diluted earnings per common share, and stock options have been
    retroactively restated to reflect the impact of the stock split.

                                                            2007        2006
    -------------------------------------------------------------------------
    Number of shares authorized:
      Voting Class A Common Shares
       - no par value                                  Unlimited   Unlimited
      Non-voting Class B Common Shares
       - no par value                                  Unlimited   Unlimited

    Number of shares issued and fully paid:
      Voting Class A Common Shares                    24,274,320  24,274,320
    -------------------------------------------------------------------------
      Non-voting Class B Common Shares,
       beginning of year                               4,176,336   4,139,936
      Non-voting Class B Common Shares,
       issued during the year                             18,200      36,400
    -------------------------------------------------------------------------
      Non-voting Class B Common Shares,
       end of year                                     4,194,536   4,176,336
    -------------------------------------------------------------------------
                                                      28,468,856  28,450,656
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Stated value                                      $   14,304  $   14,008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    In prior years, the Company established a Non Voting Class B Common Share
    Option Plan ("Share Option Plan") and set aside 800,000 Non-Voting
    Class B Common Shares. Through the Share Option Plan, options were
    granted to certain officers and employees for the purchase of Non-Voting
    Class B Common Shares. Options were granted at prices equal to the
    closing market value on the last trading day prior to the grant and are
    exercisable from six to nine years from the date of vesting. Options vest
    from one to four years after the grant date. During the year, 18,200
    options were exercised for total proceeds of $296. The last options
    granted through the Share Option Plan were granted on October 23, 2000.

    A summary of the status of the Share Option Plan and changes during the
    year is presented below:

                                                  2007                  2006
    -------------------------------------------------------------------------
                                              Weighted              Weighted
                                               Average               Average
                                              Exercise              Exercise
                                    Options      Price    Options      Price
    -------------------------------------------------------------------------
    Outstanding, beginning
     of year                         18,200  $   16.23     54,600  $   14.37
    Exercised through the
     purchase option                (18,200)     16.23    (36,400)     13.43
    -------------------------------------------------------------------------
    Outstanding, end of year              -  $       -     18,200  $   16.23
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    12. RESTRICTED SHARE UNITS

                                                                    Weighted
                                                                     Average
                                                                       Grant
                                                       Restricted       Date
                                                            Share       Fair
                                                            Units      Value
    -------------------------------------------------------------------------
    Non-vested, September 8, 2006
     (date of plan creation)                               26,328  $   24.90
      Granted                                                   -          -
      Reinvested dividend equivalent units                    959      25.57
      Vested                                                    -          -
      Forfeited                                           (13,737)    (24.93)
    -------------------------------------------------------------------------
    Non-vested at June 30, 2007                            13,550  $   24.92
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Compensation expense related to this plan for the year ended June 30,
    2007 was $111 (ten month period ended June 30, 2006 - $nil).

    13. CUMULATIVE TRANSLATION ADJUSTMENTS

    For investments in self-sustaining operations, cumulative translation
    adjustments represent the unrealized gain or loss on the Company's net
    investment in foreign companies. These valuation adjustments are
    recognized in earnings only when there is a reduction in the Company's
    investment in the respective foreign companies. The self-sustaining
    investments were disposed of on September 29, 2006 as part of the PR
    transaction (Note 3).

                                                            2007        2006
    -------------------------------------------------------------------------
    Balance, beginning of year                        $   (3,019) $   (1,813)
    Translation adjustment of long term investments            -      (1,206)
    Disposition of self-sustaining operations              3,019           -
    -------------------------------------------------------------------------
    Balance, end of year                              $        -  $   (3,019)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    14. EARNINGS PER SHARE

                                                            2007        2006
    -------------------------------------------------------------------------
    Numerator:
      Net earnings                                    $  100,424  $   28,037
    Denominator:
      Denominator for basic earnings per share:
       weighted average shares outstanding            28,457,694  28,421,723
      Effect of stock options                              3,276      16,845
    -------------------------------------------------------------------------
                                                      28,460,970  28,438,568
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    15. CHANGES IN NON-CASH WORKING CAPITAL

                                                            2007        2006
    -------------------------------------------------------------------------
    Increase (decrease)
    Accounts receivable                               $   (1,576) $     (937)
    Interest receivable from affiliated company                -       2,631
    Inventories                                           (3,741)        216
    Prepaid expenses                                        (218)        124
    Deferred costs                                           680        (680)
    Accounts payable and accrued liabilities               6,427       3,817
    Interest payable to affiliated company                     -      (1,184)
    Income and other taxes payable                           980      (2,170)
    -------------------------------------------------------------------------
                                                      $    2,552  $    1,817
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    16. RELATED PARTY TRANSACTIONS

    Hiram Walker & Sons Limited, a wholly owned subsidiary of PR, owns in
    excess of 50% of the issued voting common shares of Corby and is thereby
    considered to be the Company's parent. PR is considered to be Corby's
    ultimate parent and affiliated companies are those that are also
    subsidiaries of PR. In addition to the information provided in Notes 3
    and 4, transactions and balances with parent and affiliated companies
    include the following:

                                                Financial
                                Nature of       Statement
    Nature of Transaction       Relationship  Classification    2007    2006
    -------------------------------------------------------------------------
    I   The Corporation renders Parent company  Sales,       $   868 $   988
        blending and bottling                   accounts
        services                                receivable
    -------------------------------------------------------------------------
    II  The Corporation sells   Affiliated      Sales,       $ 3,478 $   351
        certain of its          companies       accounts
        products for resale                     receivable
        at an export level
    -------------------------------------------------------------------------
    III The Corporation renders Parent company, Commissions, $12,345 $ 6,286
        services, as the sole   companies       accounts
        and exclusive           subject to      receivable
        representative, for     significant
        purposes of marketing   influence,
        and sales of beverage   ultimate Parent
        alcohol products        company and
        in Canada               Affiliated
                                companies
    -------------------------------------------------------------------------
    IV  The Corporation         Parent company  Cost of      $24,206 $14,772
        sub-contracts           and an          sales,
        virtually all of its    Affiliated      inventories
        distilling, blending,   company         and accounts
        bottling, storing and                   payable
        production activities
    -------------------------------------------------------------------------
    V   The Corporation         Parent company  Marketing,   $ 2,100 $ 1,920
        sub-contracts                           sales and
        an important portion                    administration
        of its bookkeeping,
        record keeping
        services, certain
        administrative
        services, related
        data processing and
        maintenance of data
        processing activities
    -------------------------------------------------------------------------
    VI  The Corporation         Parent company  Cost of      $ 2,262 $ 1,915
        purchases some                          sales,
        of the inventory                        inventories
        used in production                      and accounts
        activities                              payable
    -------------------------------------------------------------------------

    These transactions, which are settled the following month, are in the
    normal course of operations and are measured at the exchange amount,
    which is the amount of consideration established and agreed to by the
    related parties. Transactions in sections III, IV, and V above are
    covered under the terms of agreements with related parties that may be
    terminated upon six months notice. These agreements include a non-
    competition clause whereby the Company ceded its rights to sell beverage
    alcohol in bulk to third parties in favour of its parent company. In
    addition to the transactions noted above, the Company sold three year old
    bulk whisky to its parent company at market prices totaling $915 during
    the year ended June 30, 2007. There were no sales of bulk whisky during
    the ten month period ended June 30, 2006. This transaction was measured
    at the exchange amount.

    During the ten-month period ended June 30, 2006, the Company entered into
    short-term loan arrangements whereby the cash balance of the Company was
    lent to its ultimate parent company at risk free market interest rates.
    The loans were for periods of five days and two days respectively, and
    the Company earned a total of $33 in interest income from these
    transactions during the ten months ended June 30, 2006. No such loans
    were made during the year ended June 30, 2007.

    Amounts included in accounts receivable and accounts payable with respect
    to Corby's affiliates, parent company, and ultimate parent company are as
    follows:

                                                             2007       2006
    -------------------------------------------------------------------------
    Accounts receivable - related parties               $     982  $       -
    Accounts payable - related parties                     (7,103)    (1,775)
    -------------------------------------------------------------------------
    Net amount payable to related parties               $  (6,121) $  (1,775)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    17. SEGMENT INFORMATION

    Corby has two reportable segments: "Case Goods" and "Commissions".
    Corby's Case Goods segment derives its revenue from the production and
    distribution of its owned beverage alcohol brands. Corby's portfolio of
    owned brands include some of the most renowned and respected brands in
    Canada, including Wiser's rye whiskies, Lamb's rum and Polar Ice vodka.
    Corby's Commissions segment earns commission income from the
    representation of non-owned beverage alcohol brands in Canada. Corby
    represents leading international brands such as Chivas Regal, The
    Glenlivet and Ballantine's scotches, Jameson Irish whiskey, Beefeater
    gin, Malibu rum, Kahlua liqueur, Mumm champagne, and Jacob's Creek and
    Wyndham Estate wines.

    The Commissions segment has no assets or liabilities. Its financial
    results are fully reported as "commissions" on the consolidated statement
    of earnings and retained earnings. Therefore, a chart detailing
    operational results by segment has not been provided as no additional
    meaningful information would result.

    Geographic information regarding the Company is as follows:

                                                                        2007
    -------------------------------------------------------------------------
                                     United
                                  States of     United    Rest of
                          Canada    America    Kingdom      World      Total
    -------------------------------------------------------------------------
    Operating revenue  $ 143,509  $   4,609  $   4,478  $     991  $ 153,587
    Capital assets         9,669          -          -          -      9,669
    Goodwill               8,446          -      1,410          -      9,856
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                                        2006
    -------------------------------------------------------------------------
                                     United
                                  States of     United    Rest of
                          Canada    America    Kingdom      World      Total
    -------------------------------------------------------------------------
    Operating revenue  $ 106,324  $   4,087  $       -  $     370  $ 110,781
    Capital assets         8,008          -          -          -      8,008
    Goodwill               4,476          -          -          -      4,476
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    In 2007, net operating revenue to three major customers accounted for
    31%, 16%, and 13% respectively (2006 - 33%, 15%, and 12%).

    18. FINANCIAL INSTRUMENTS

    Credit Risk

    The Company's accounts receivable are substantially with provincial
    liquor boards, which significantly reduces credit risk.

    Fair Values

    The financial instruments used by the Company are limited to short-term
    financial assets and liabilities and loans to and from affiliates. Short-
    term financial assets are comprised of cash and accounts receivable.
    Short-term financial liabilities are comprised of accounts payable and
    accrued liabilities. The carrying amounts of these short-term assets,
    liabilities, and loans to and from affiliates are a reasonable estimate
    of the fair values, given the short-term maturity of those instruments.

    19. COMMITMENTS

    Future minimum payments under operating leases for premises and equipment
    for the next five years and thereafter are as follows:

    -------------------------------------------------------------------------
    2008                                                           $   1,036
    2009                                                                 668
    2010                                                                 487
    2011                                                                 287
    2012                                                                 112
    Thereafter                                                            95
    -------------------------------------------------------------------------
                                                                   $   2,685
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    In August 2007, the Company tendered an offer to lease new office space
    as part of its plan to relocate Corby's corporate headquarters in
    Toronto, Ontario. The new operating lease is scheduled to commence its
    ten year term on September 1, 2008, which coincides with the expiry date
    of the Company's existing head office lease. Minimum payments under the
    operating lease are not expected to be materially different from those
    under the Company's current lease agreement. As the agreement was not
    signed prior to June 30, 2007, the above schedule does not include the
    anticipated operating lease payments for the new office space.

    20. GUARANTEES

    The Company may enter into agreements that may contain features that meet
    the definition of a guarantee. A guarantee is defined to be a contract
    (including an indemnity) that contingently requires the Company to make
    payments to the guaranteed party in certain situations.

    In the ordinary course of business, the Company provides indemnification
    commitments to counterparties in transactions such as leasing and service
    arrangements. These indemnification agreements require the Company to
    compensate the counterparties for certain amounts and costs incurred as a
    result of litigation claims. The terms of the indemnification agreements
    will vary based on the contract and do not provide any limit on the
    maximum potential liability.

    21. CONTINGENCIES

    The Company is contingently liable with respect to pending litigation and
    claims arising in the normal course of business. Although the ultimate
    outcome of these matters is not presently determinable, at this point in
    time management believes that the resolution of all such pending matters
    will not have a material adverse effect on the Company's financial
    position or results of operations.

    22. COMPARATIVE FIGURES

    Certain of the comparative figures have been reclassified to conform to
    the financial statement presentation adopted in 2007.
    

    %SEDAR: 00001138E




For further information:

For further information: CORBY DISTILLERIES LIMITED, Tel.: (416)
479-2400, www.Corby.ca; Investor inquiries: John Nicodemo, Vice President,
Finance and Chief Financial Officer, Email: investors@corby.ca; Media
inquiries: Howard Kirke, Vice President, External Affairs, Email:
howard.kirke@corby.ca


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