Corby Distilleries Announces Quarterly Dividend and Reports Fourth Quarter & Year End Results

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Aug 28, 2012, 14:53 ET

TORONTO, Aug. 28, 2012 /CNW/ - Corby Distilleries Limited ("Corby" or the "Company") (TSX: CDL.A) (TSX: CDL.B) today reported its financial results for the fourth quarter ended June 30, 2012. The Corby Board of Directors today also declared a dividend of $0.15 per share payable on September 30, 2012 on the 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 September 15, 2012.

Net earnings for the fourth quarter and year ended June 30, 2012 totaled $4.9 million (or $0.17 per share) and $46.0 million ($1.62 per share). Year over year, net earnings increased $17.1 million. Two disposal transactions, the sale of certain non-core brands and the subsidiary that owned the Montreal plant on October 31, 2011 and the sale of the Seagram Coolers brand on March 16, 2011, had a substantial impact on the financial results in both the current and prior years (hereafter the "Disposal Transactions"). The following provides a comparison on a like-for-like basis as it excludes the impact of the aforementioned Disposal Transactions:

Case good shipments grew 3% on an annual basis; quarterly, shipments grew 1%
Revenue increased 7% on an annual basis; 3% during the quarter
Net earnings increased 11% on an annual basis; net earnings decreased 5% during the quarter

Fourth quarter case goods shipments showed modest growth, despite being impacted by the exceptional results experienced in the third quarter where shipment phasing was significantly ahead of consumer trends. Corby's commission business and its continued sale of bulk whisky combined to improve revenue this quarter. Given these shipment phasing impacts, our full year results are a better reflection of actual performance. The growth in net earnings for the year was driven by encouraging volumes and reflected the delivery of strong advertising and promotional ("A&P") programs which drove market share growth in our key focus areas. The Company continues to increase its A&P investment and new product innovation. Net earnings for the year (and fourth quarter) also benefited from increased commissions from the representation of Pernod Ricard brands in Canada, higher interest on cash deposits, and having lower statutory rates of corporate income tax. In addition, bulk inventory sales continue to have a positive impact while we continue to invest in our route to market capabilities.

Without adjustment for the Disposal Transactions, Corby's fourth quarter revenue decreased $7.7 million when compared with the same three month period last year, while on a year over year comparison basis, revenue decreased 8% (or $12.9 million).

"I am pleased to report excellent progress in a year where we have clearly made great strides in implementing our core strategy of focusing our investments on, and leveraging the long-term growth potential of, our key brands. We continue to achieve growth ahead of category in our areas of focus, deliver new products to market on schedule, increase investment behind key brands and re-shape our route to market capabilities. What is particularly pleasing, is achieving all this while delivering strong growth to our bottom-line", noted Patrick O'Driscoll, President and Chief Executive Officer of Corby.

For further details, please refer to Corby's management's discussion and analysis and consolidated financial statements and accompanying notes for the year ended June 30, 2012, prepared in accordance with International Financial Reporting Standards.

About Corby

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, respectively.

This press release contains forward-looking statements, including statements concerning possible or assumed future results of Corby's operations. 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 and, as such, the Company's results could differ materially from those anticipated in these forward-looking statements. Accordingly, readers should not place undue reliance on forward-looking statements. All financial results are reported in Canadian dollars.

CORBY DISTILLERIES LIMITED
Management's Discussion and Analysis
June 30, 2012

The following Management's Discussion and Analysis ("MD&A") dated August 28, 2012, should be read in conjunction with the audited consolidated financial statements and accompanying notes for the year ended June 30, 2012, prepared in accordance with International Financial Reporting Standards ("IFRS"). (See "Transition to International Financial Reporting Standards" under "New Accounting Pronouncements" in this MD&A).

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; business interruption; trademark infringement; consumer confidence and spending preferences; regulatory changes; general economic conditions; and the Company's ability to attract and retain qualified employees. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. These factors are not intended to represent a complete list of the factors that could affect the Company. Additional factors are noted elsewhere in this MD&A.

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 28, 2012. Events occurring after that date could render the information contained herein inaccurate or misleading in a material respect. Corby will provide updates to material forward-looking statements, including in subsequent news releases and its interim management's discussion and analyses filed with regulatory authorities as required under applicable law. Additional information regarding Corby, including the Company's Annual Information Form, is available on SEDAR at www.sedar.com.

Unless otherwise indicated, all comparisons of results for the fourth quarter of fiscal 2012 (three months ended June 30, 2012) are against results for the fourth quarter of fiscal 2011 (three months ended June 30, 2011). All dollar amounts are in Canadian dollars unless otherwise stated. The results for the three months and year ended June 30, 2011 have been restated to conform to IFRS.

Business Overview

Corby is a leading Canadian marketer of spirits and importer of wines. Corby's national leadership is sustained by a diverse brand portfolio that allows the Company to drive profitable organic growth with strong, consistent cash flows. Corby is a publicly traded company, with its shares listed on the Toronto Stock Exchange under the symbols "CDL.A" (Voting Class A Common Shares) and "CDL.B" (Non-Voting Class B Common Shares). Corby's Voting Class A Common Shares are majority-owned by Hiram Walker & Sons Limited ("HWSL") (a private company) located in Windsor, Ontario. HWSL is a wholly-owned subsidiary of international spirits and wine company Pernod Ricard S.A. ("PR") (a French public limited company), which is headquartered in Paris, France. Therefore, throughout the remainder of this MD&A, Corby refers to HWSL as its parent, and to PR as its ultimate parent. Affiliated companies are those that are also subsidiaries of PR.

The Company derives its revenues from the sale of its owned-brands ("Case Goods"), as well as earning commission income from the representation of selected non-owned brands in Canada ("Commissions"). The Company also supplements these primary sources of revenue with other ancillary activities incidental to its core business, such as logistics fees and miscellaneous bulk spirit sales. Revenue from Corby's owned-brands predominately consists of sales made to each of the provincial liquor boards in Canada, and also includes sales to international markets. As noted in the "Significant Events" section of this MD&A, Corby sold its bottling facility on October 31, 2011. As a result of this transaction Corby no longer derives revenue from contract bottling services. All other activities remain in place.

Corby's portfolio of owned-brands includes some of the most renowned brands in Canada, including Wiser's Canadian whisky, Lamb's rum, Polar Ice vodka and McGuinness liqueurs. Through its affiliation with PR, Corby also represents leading international brands such as ABSOLUT vodka, Chivas Regal, The Glenlivet and Ballantine's Scotch whiskies, Jameson Irish whiskey, Beefeater gin, Malibu rum, Kahlúa liqueur, Mumm champagne, and Jacob's Creek, Wyndham Estate, Stoneleigh and Graffigna wines. In addition to representing PR's brands in Canada, Corby also provides representation for certain selected, unrelated third-party brands ("Agency brands") when they fit within the Company's strategic direction and, thus, complement Corby's existing brand portfolio.

Pursuant to a production agreement that expires in September 2016, PR produces Corby's owned-brands at HWSL's production facility in Windsor, Ontario. Under the production agreement, Corby manages PR's business interests in Canada, including HWSL's production facility, also until September 2016.

The Company sources more than 80% of its spirits production requirements from HWSL at its production facility in Windsor, Ontario. The Company's remaining production requirements have been outsourced to third party vendors. The formerly owned plant in Montreal continues to manufacture most of the Corby products that were produced there prior to the sale. The Company also utilizes a third-party manufacturer in the UK to produce its Lamb's rum products destined for sale in countries located outside North America. Corby's Lamb's rum products sold in North America continue to be manufactured at HWSL's production facility.

In most provinces, Corby's route to market in Canada entails shipping its products to government-controlled liquor boards ("LBs"). The LBs then sell directly, or control the sale of, beverage alcohol products to end consumers. The exception to this model is Alberta, where the retail sector is privatized. In this province, Corby ships products to a bonded warehouse that is managed by a government-appointed service provider who is responsible for warehousing and distribution into the retail channel.

Corby's shipment patterns to the LBs will not always exactly match short-term consumer purchase patterns. However, given the importance of monitoring consumer consumption trends over the long term, the Company stays abreast of consumer purchase patterns in Canada through its member affiliation with the Association of Canadian Distillers ("ACD"), which tabulates and disseminates consumer purchase information it receives from the LBs to its industry members. Corby refers to this data throughout this MD&A as "retail sales", which are measured both in volume (measured in nine-litre-case equivalents) and in retail value (measured in Canadian dollars).

Corby's route to market for its international business primarily entails direct shipment of its products to international distributors, located mainly in the US. In the UK, Corby utilizes a third party contract bottler and distribution company for the production and distribution of Lamb's rum for the UK and select markets. International sales typically account for less than 10% of Corby's total annual sales. Distributors sell to various local wholesalers and retailers who in turn sell directly to the consumer. Reliable consumer purchase data is not readily available for these international markets and is, therefore, not discussed in this MD&A.

Corby's operations are subject to seasonal fluctuations: sales are typically strong in the first and second quarters, while third-quarter sales usually decline after the end of the retail holiday season. Fourth-quarter sales typically increase again with the onset of warmer weather as consumers tend to increase their purchasing levels during the summer season.

Strategies and Outlook

Corby's business strategies are designed to maximize sustainable long-term value growth, and thus deliver solid profit while continuing to produce strong and consistent cash flows from operating activities. The Company's portfolio of owned and represented brands provides an excellent platform from which to achieve its current and long-term objectives moving forward.

Management believes that having a focused brand prioritization strategy will permit Corby to capture market share in the segments and markets that are expected to deliver the most growth in value over the long term. Therefore, the Company's strategy is to focus its investments on, and leverage the long-term growth potential of, its key brands. As a result, Corby will continue to invest behind its brands to promote its premium offerings where it makes the most sense and drives the most value for shareholders.

Brand prioritization requires an evaluation of each brand's potential to deliver upon this strategy, and facilitates Corby's marketing and sales teams' focus and resources allocation. Over the long term, management believes that effective execution of its strategy will result in value creation for shareholders. Recent disposal transactions (the sale of the Seagram Coolers brand in March 2011, in the prior fiscal year, and the October 2011 sale of certain non-core brands and the subsidiary that owned the Montreal bottling facility, discussed below) reflect this strategy by streamlining Corby's portfolio and thus refocusing resources on key brands.

Key to brand strategies being implemented is an effective route to market strategy. Corby is committed to investing in its trade marketing expertise and ensuring that its commercial resources are focused around the differing needs of their customers and the selling channels they inhabit.

In addition, management is convinced that innovation is key to seizing new profit and growth opportunities. Successful innovation can be delivered through a structured and efficient process as well as consistent investment on consumer insight and research and development ("R&D"). As far as R&D is concerned, the Company benefits from access to leading-edge practices at PR's North American hub, which is located in Windsor, Ontario.

Finally, the Company is a strong advocate of social responsibility, especially with respect to its sales and promotional activities. Corby will continue to promote the responsible consumption of its products in its activities. The Company stresses its core values throughout its organization, including those of conviviality, straightforwardness, commitment, integrity and entrepreneurship.

Significant Events

Corby sells its Montreal bottling facility and certain non-core brands

On October 31, 2011, the Company sold certain owned-brands as well as the shares of its subsidiary, Corby Manufacturing Inc., the owner of the manufacturing and bottling facility in Montréal, Québec, to Sazerac Company, Inc. ("Sazerac") for an aggregate purchase price of $39.7 million, including the cost of inventory and other working capital items associated with the brands and manufacturing facility sold and other related adjustments.

The transaction involved the sale of 17 brands, including De Kuyper Geneva gin, De Kuyper Peachtree schnapps, Red Tassel vodka and Silk Tassel Canadian whisky, as well as the Montréal-based manufacturing facility where a significant portion of the brands are produced. As a result of this transaction, Corby recognized a gain on closing of $17.7 million, net of taxes and transaction costs. The book value of the assets disposed, including working capital items, was $17.8 million.

The agreement contains customary representations, warranties and covenants. In addition, as part of the agreement, Corby agreed to indemnify Sazerac in respect of a misrepresentation, breach of covenant, pre-closing liabilities and certain environmental matters. Based on current facts and circumstances, no material liability is anticipated in respect of this indemnification, and no provision has been made in the financial results for this contingency.

This transaction allows the Company to streamline its portfolio with a more focused and targeted collection of brands, and to focus resources on the long term growth of its core portfolio of premium spirits and wines as part of its brand prioritization strategy. The bottling facility in Montreal had been increasingly underutilized with Corby-owned brand production in recent years, and thus increased the Company's reliance on ancillary and low margin contract bottling activities to fill this capacity. Corby will continue its relationship with the facility and source the production of certain brands with the new ownership.

In fiscal 2011 the brands and manufacturing facility disposed of contributed a combined $5.7 million to net earnings on sales of $32.2 million. Therefore, the transaction is expected to have a material impact on Corby's future operating results. Direct comparisons to prior periods will be less meaningful, and as such, the impacts of the transaction will be explained throughout this MD&A, where applicable.

Corby declares special dividend and increases regular dividend amount

On November 9, 2011, the Corby Board of Directors declared a special dividend of $1.85 per share which was paid on January 3, 2012 on the Voting Class A Common Shares and Non-voting Class B Common Shares of Corby to shareholders of record as at the close of business on December 15, 2011. The special dividend resulted in an aggregate cash distribution of approximately $52.7 million to shareholders and was sourced from Corby's surplus cash position.

Further, on November 9, 2011, the Corby Board of Directors announced an amendment to its dividend policy. Subject to business conditions and opportunities, the regular dividend shall be adjusted from $0.14 per share to $0.15 per share, representing a 7% increase in the Company's quarterly dividend. On an annualized basis, the regular dividend will increase from $0.56 per share to $0.60 per share. Further, subject to business conditions and opportunities, effective as of fiscal 2013, regular dividends for the fiscal year will be paid quarterly, on the basis of an annual amount equal to the greater of 75% of net earnings per share in the preceding fiscal year ended June 30, and $0.60 per share.

Corby secures new term for ABSOLUT representation rights

On November 9, 2011, Corby entered into an agreement with PR for a new term for Corby's exclusive right to represent ABSOLUT vodka in Canada from September 30, 2013 to September 29, 2021, which is consistent with the term of Corby's Canadian representation for the other PR brands in Corby's portfolio. Under the agreement, Corby will pay the present value of $10 million for the additional eight years of the new term to PR at its commencement. Since the agreement with PR is a related party transaction, the agreement was approved by the Independent Committee of the Corby Board of Directors, in accordance with Corby's related party transaction policy, following an extensive review and with external financial and legal advice. Pursuant to this agreement, Corby also agreed to continue with the mirror netting arrangement with PR and its affiliates, under which Corby's excess cash will continue to be deposited to cash management pools, as further described in the "Related Party Transactions" section of this MD&A.

ABSOLUT is the number one premium vodka brand worldwide with around 11 million nine litre cases sold in 2011 and is an iconic brand with an image built around values of creativity, innovation and cultural leadership. It is one of only four international spirits brands in the world which sells more than 10 million cases a year and has an especially attractive growth profile. ABSOLUT vodka complements Corby's strategy, while further enhancing the Company's premium brands portfolio. With ABSOLUT vodka in the Corby portfolio, Corby is the number two player in the vodka category in Canada with a 22% volume share - combining ABSOLUT with other key Corby vodka brands, such as Polar Ice vodka.

Three-Year Review of Selected Financial Information

The following table provides a summary of certain selected consolidated financial information for the Company. This information has been prepared in accordance with IFRS.


(in millions of Canadian dollars, except per share amounts)			2012		2011		2010 ⁽²⁾

Revenue		$	146.7	$	159.6	$	162.2

Earnings from operations			58.8		40.5		43.0
	- Earnings from operations per common share		2.07		1.42		1.51

Net earnings			46.0		28.9		20.7
	- Basic earnings per share		1.62		1.01		0.73
	- Diluted earnings per share		1.62		1.01		0.73

Net earnings adjusted for unusual items and disposed brands⁽¹⁾			26.3		23.8		23.4
	- Basic earnings per share,adjusted as noted above ⁽¹⁾		0.92		0.84		0.82
	- Diluted earnings per share, adjusted as noted above ⁽¹⁾		0.92		0.84		0.82

Total assets			253.4		271.5		271.2
Total liabilities			37.6		32.3		30.3

Regular dividends paid per share			0.59		0.56		0.56
Special dividends paid per Share			1.85		-		-
⁽¹⁾ Net earnings are adjusted in 2012 for the net after-tax gain from the sale of the Montreal plant and non-core brands of $17.7 million and in 2011 for the net after-tax loss from the sale of Seagram Coolers which amounted to $1.7 million. In 2010 net earnings are adjusted for the net after-tax impairment charge of $9.4 million. All three years have been further adjusted for net after-tax earnings related to brands disposed of in 2012 and 2011. ⁽²⁾ The finanical information presented for 2010 does not reflect the impact of the adoption of IFRS.

In general, the global economic environment has been challenging over this three year period, and, while the spirits industry is more resilient than others, the impact was still quite evident. More recently, however, the Canadian spirits industry is experiencing growth with retail volumes up by 3% in 2012 when compared with retail volumes in 2011.

Despite the economic challenges, Corby has stayed true to its core strategy to leverage the long-term growth potential of its key brands by increasing its advertising and promotional expenditures in each of the last three years. In addition, the Company has actively carried out strategies to streamline and focus its portfolio. Two significant events, namely the sale of the Seagram Cooler's brand in 2011 and the sale of certain non-core brands and the subsidiary that owned the Montreal manufacturing facility in October of this fiscal year, have been instrumental in carrying out these strategies. As a result of these actions, the Company exited low-growth and low-margin sectors, simplified and focused its brand portfolio (and thus focused its Sales and Marketing Teams) to its key brands, and sold an under-utilized bottling plant.

Given the significant structural changes in the business over this three year period, the chart above removed the net earnings impact of these events to allow for a proper like-for-like comparison of Corby's remaining core business (denoted in the chart above as "Net earnings adjusted for unusual items and disposed brands").

Net earnings (as adjusted for unusual items and disposed brands) has held strong over the three year period with a compounded annual growth rate of 4%. When reviewing the three year period individually, a noticeable increase occurred in 2012 over 2011, and was primarily the result of a strong contribution from the Company's Case Goods business, with additional positive contributions from Corby's representation of PR brands and higher sales of bulk whisky this year versus last.

The three year review chart also highlights the increased dividends paid to shareholders in 2012 when compared with 2011 and 2010. This year, the Board of Directors amended Corby's dividend policy to increase the regular quarterly dividend amount and also declared a significant special dividend, thus returning significant value to shareholders during the year. The new dividend policy also provided for a new mechanism whereby the greater of 75% of the prior year annual net earnings (or a minimum $0.60 per share) will be paid to shareholders beginning in fiscal 2013. For more information regarding Corby's dividend policy, please refer to the "Significant Event" section of this MD&A.

Brand Performance Review

Corby's portfolio of owned-brands accounts for more than 80% of the Company's total annual revenue. Included in this portfolio are its key brands: Wiser's Canadian whisky, Lamb's rum, Polar Ice vodka, and Corby's mixable liqueur brands. The sales performance of these key brands significantly impacts Corby's net earnings. Therefore, understanding each key brand is essential to understanding the Company's overall performance.

Shipment Volume and Shipment Value Performance

The following chart summarizes the performance of Corby's owned-brands in terms of both shipment volume (as measured by shipments to customers in equivalent nine-litre cases) and shipment value (as measured by the change in sales revenue). The chart includes results for sales in both Canada and international markets. Specifically, the Wiser's, Lamb's and Polar Ice brands are also sold to international markets, particularly in the US and UK. International sales typically account for less than 10% of Corby's total annual revenues.



BRAND PERFORMANCE CHART - INCLUDES BOTH CANADIAN AND INTERNATIONAL SHIPMENTS

		Three Months Ended				Year Ended
Volumes (in 000's of 9L cases)		Jun. 30, 2012	Jun. 30, 2011	Shipment % Volume Change	Shipment % Value Change	Jun. 30, 2012	Jun. 30, 2011	Shipment % Volume Change	Shipment % Value Change

Brand
Wiser's Canadian whisky		189	203	(7%)	(5%)	786	775	1%	3%
Lamb's rum		126	114	11%	9%	564	549	3%	2%
Polar Ice vodka		102	96	6%	10%	394	363	9%	12%
Mixable liqueurs		45	41	10%	10%	182	175	4%	5%

Total Key Brands		462	454	2%	2%	1,926	1,862	3%	4%
All other Corby-owned brands		51	54	(6%)	(3%)	225	230	(2%)	0%

Total Corby brands		513	508	1%	2%	2,151	2,092	3%	4%

	Disposed Brands	-	78	(100%)	(100%)	108	421	(74%)	(71%)

Total Corby brands including
	Disposed Brands	513	586	(12%)	(8%)	2,259	2,513	(10%)	(8%)

Note that the above chart segregates "Disposed Brands" from the other Corby-owned brands. Disposed Brands include brands that are no longer owned by Corby as a result of two sale transactions. Specifically, the Company sold certain non-core brands and the subsidiary that owned the Montreal plant on October 31, 2011 (further described in the "Significant Event" section of this MD&A) and in the prior year the Company sold the Seagram Coolers brand effective March 16, 2011. Shipment information associated with these Disposed Brands has been segregated in an effort to display the non-recurring impact on Corby's shipments, as comparisons with prior periods are otherwise no longer meaningful given that Corby no longer owns these brands. Up until the date of their sale, the Disposed Brands sold in the October 31, 2011 sale transaction were showing a trend of decline of 4% over prior year performance.

From a year-over-year perspective, Corby's brand portfolio (excluding Disposed Brands), saw its shipment performance effectively match that of the overall Canadian spirits market with a 3% increase in volume. In fact, all of Corby's Key Brands achieved positive shipment volume and shipment value growth when compared against last year's results. Corby's Polar Ice vodka brand led the way with a 9% increase in shipment volumes (+12% in shipment value) on account of successful new market strategies, and changes to the brand's promotional calendar. Wiser's Canadian whisky, Corby's flagship brand, also posted a modest 1% increase in shipment volumes (+3% in shipment value), which exceeded the performance of the Canadian whisky category as a whole. In addition, shipments of Wiser's to the US market were strong, increasing 8% this year versus last. The Brand Performance Chart also confirms a 3% shipment volume increase in Lamb's rum. Lamb's benefited this year from strong international shipments; mostly the result of a changing shipment profile since its international production was moved to a third party bottler in the UK.

From a quarter-over-quarter perspective, Corby's brand volumes remained relatively consistent with an overall shipment volume increase of 1% and shipment value increase of 2%. As anticipated, fourth quarter shipments for Wiser's Canadian whisky pulled back on account of changes to the brand's promotional calendar in the current year.. However, as previously noted the brand's annual shipment performance exceeded that of the prior year in addition to exceeding the Canadian whisky category as a whole. Lamb's rum continued to benefit from strong international shipments on account of a changing shipment profile since moving production to a third party bottler in the UK. Polar Ice vodka and the Mixable Liqueurs brands experienced strong fourth quarter shipment volume and value primarily due to new promotional activities as well as the launch of new product innovations.

Retail Volume and Retail Value Performance

It is of critical importance to understand the performance of Corby's brands at the retail level in Canada. Analysis of performance at the retail level provides insight with regards to consumers' current purchase patterns and trends. Retail sales data, as provided by the ACD, is set out in the following chart and is discussed throughout this MD&A. It should be noted that the retail sales information presented does not include international retail sales of Corby-owned brands, as this information is not readily available. International sales typically account for less than 10% of Corby's total annual revenues.


RETAIL SALES FOR THE CANADIAN MARKET ONLY⁽¹⁾

	Three Months Ended				Year Ended
Volumes (in 000's of 9L cases)	Jun. 30 2012	Jun. 30 2011	% Retail Volume Change	% Retail Value Change	Jun. 30 2012	Jun. 30 2011	% Retail Volume Change	% Retail Value Change

Brand
Wiser's Canadian whisky	160	157	2%	5%	717	695	3%	4%
Lamb's rum	100	102	(2%)	0%	454	455	0%	1%
Polar Ice vodka	75	74	2%	5%	350	321	9%	10%
Mixable liqueurs	39	36	9%	8%	182	176	3%	3%

Total Key Brands	374	369	1%	4%	1,703	1,647	3%	4%

All other Corby-owned brands	53	51	4%	3%	218	212	3%	3%

Total	427	420	2%	4%	1,921	1,859	3%	4%
⁽¹⁾ Refers to sales at the retail store level in Canada, as provided by the Association of Canadian Distillers.

In an effort to maintain focus on Corby's continuing business activities and the Company's brand prioritization strategy, brands impacted by the aforementioned sale transactions have been excluded from the above chart.

Overall, the year-over-year performance of Corby-owned brands was relatively consistent with trends seen in the Canadian spirits industry as a whole, with total retail volume increases of 3% and retail value increases of 4%. The Canadian spirits industry saw retail volume and retail value growth of 3% and 5%, respectively, during the same twelve month period. The year-over-year growth trend currently experienced in the Canadian spirits industry continued to be led by the vodka and rum categories (especially spiced and dark rums); as both categories boasted growth of 4% in retail volume and 5% in retail value. The Canadian whisky category experienced only a modest increase in retail volume growth of just under 1%, while retail value grew 2% this year versus last.

The quarter over quarter overall retail trend for Corby-owned brands were relatively consistent with annual results. Polar Ice vodka's retail volume was somewhat less than that of the year-to-date results, and is attributed to changes in timing to the brand's promotional calendar. The Company's Mixable Liqueur brands benefited from strategic pricing and additional promotional support, in addition to new product innovations.

Summary of Corby's Key Brands

Wiser's Canadian Whisky

On an annual basis, Corby's flagship brand, Wiser's Canadian whisky, continued to gain market share from both a retail volume and retail value perspective, at the expense of its direct competitors in Canada. Specifically, the brand had retail volume growth of 3% and retail value growth of 4% compared to its category which showed 1% volume and 2% value growth during the same annual period. During the quarter, the brand continued to show strong performance against the market category with retail volume and retail value growth of 2% and 5%, respectively, whereas the Canadian whisky category was flat for volume and showed retail value growth of 2% compared to the same three month period in the prior year. This year, the Company continued to build upon the brand's popular and award winning "Welcome to the Wiserhood" television campaign, as it launched new versions of its popular television commercials.

Lamb's Rum

Lamb's rum, one of the top-selling rum families in Canada, saw its retail volumes hold steady this year versus last, while retail volumes for the rum category in Canada increased 4%. The growth in the rum category has been entirely driven by the growth in spiced and dark rum categories, while consumer consumption of white rum has been experiencing declines (-2% on a year-over-year comparison basis). The Lamb's rum family has a significant amount of its volume weighted in white rum, and its performance is reflective of the decline in the category. However, compared to the white rum category, Lamb's rum is performing slightly ahead of the market. Corby continued to invest behind the brand this year as it launched a new campaign entitled "Lamb's Nation", which is focused in its key markets of Newfoundland and Labrador.

Polar Ice Vodka

Polar Ice vodka is among the top three largest vodka brands in Canada. As a result of achieving considerable growth in the first and second quarters, the brand's year-over-year growth trend (+9% retail volume, +10% retail value) continued to significantly outpace the vodka category in Canada which was +4% for volume and +6% for value when compared to the prior year. Aggressive investment in key markets, specifically BC and Alberta, supported with an outdoor "Canada's Vodka" media campaign and strategic pricing were key reasons that consumers have re-engaged with the brand. As well, the Company recently introduced "Polar Ice Cube", a new ready-to-drink innovation for the brand.

Mixable Liqueurs

Corby's portfolio of mixable liqueur brands consists of McGuinness liqueurs (which is Canada's largest mixable liqueur brand family) and Meaghers liqueurs. Retail value and volumes for Corby's mixable liqueurs portfolio grew 3% during the year when compared to last year, while the category as a whole grew at only 1% over prior year retail volumes. During the quarter, Corby brands experienced heavy retail sales as a result of strategic pricing and promotional activity. Specifically, Corby's mixable liqueur brands grew 9% for volume and 8% for value while the category shows growth of 5% in volume and value over the same three month period. Corby recently launched McGuinness Ice Storm, a unique liqueur innovation which has been well received by consumers across Canada.

Other Corby-Owned Brands

Royal Reserve, a Canadian whisky, is the most significant brand in this grouping and achieved growth of 3% in both retail volume and retail value compared to last year. On a quarterly basis the brand's retail sales grew 4% when compared to the same quarter last year. The brand's performance exceeded its Canadian whisky category in Canada on both a year-to-date and quarter-over-quarter basis.

Financial and Operating Results

The following table presents a summary of certain selected consolidated financial information of the Company for the years ended June 30, 2012 and 2011.


(in millions of Canadian dollars, except per share amounts)		2012		2011		$ Change	% Change

Revenue	$	146.7	$	159.6	$	(12.9)	(8%)

Cost of sales		(60.9)		(70.5)		9.6	(14%)
Marketing, sales and administration		(48.7)		(46.6)		(2.1)	4%
Disposal transactions		21.5		(2.2)		23.7	N/A
Other income (expense)		0.2		0.3		(0.1)	(33%)

Earnings from operations		58.8		40.5		18.4	45%

Financial income		2.0		1.3		0.7	50%
Financial expenses		(0.6)		(0.9)		0.3	(35%)
Net financial income		1.4		0.4		1.0	256%

Earnings before income taxes		60.2		40.8		19.4	47%
Income taxes		(14.2)		(12.0)		(2.2)	19%

Net earnings	$	46.0	$	28.9	$	17.1	59%

Per common share
-Basic net earnings	$	1.62	$	1.01	$	0.61	60%
-Diluted net earnings	$	1.62	$	1.01	$	0.61	60%
⁽¹⁾ In preparing the comparative information, the Company has adjusted amounts previously reported in financial statements prepared in accordance with Canadian GAAP. See Note 32 to the consolidated financial statements for an explanation of the transition to IFRS.

Overall Financial Results

Financial results were substantially impacted by three factors:

The gain on sale of certain non-core brands and the subsidiary that owned the manufacturing plant on October 31, 2011. An after-tax gain on sale of $17.7 million was recognized in the fiscal 2012 financial results. Please refer to the "Significant Events" section of this MD&A for further details regarding the sale transaction.
The reduction of earnings resulting from the aforementioned October 31, 2011 sale transaction, as from November 1, 2011 onward, Corby's results no longer include earnings associated with the brands and manufacturing facility sold. However, the comparative periods will include the financial results of those brands for the full period, given the Company's ownership of the brands at that time.
The sale of the Company's formerly owned Seagram Coolers brand which occurred on March 16, 2011. There are no earnings associated with this brand in fiscal 2012; however, the comparative period includes the financial results of this brand given the Company's ownership at that time.

In order to effectively assess Corby's current year's results against those of the prior year the impact of the aforementioned three factors have been removed from the discussion, where noted.

As noted in the Financial and Operating Results chart, the Company's net earnings increased $17.1 million for the year ended June 31, 2012 compared to 2011. After removing the impacts of the aforementioned three factors, net earnings increased 11%, when compared to last year. Earnings per share increases mirror these results on the same comparative basis.

These increases were primarily the result of having higher case good sales (driven by Polar Ice vodka and Wiser's in Canada,), increased bulk whisky sales activity, increased interest income earned on cash deposits, and lastly, the impact of having lower statutory corporate tax rates this year versus last year. The aforementioned growth in earnings was partially offset by increased selling and administrative costs and higher advertising and promotional investment in the Company's key brands.

Revenue

The following highlights the key components of the Company's revenue streams:


(in millions of Canadian dollars)			2012		2011		$ Change	% Change

Revenue streams:
	Case goods (excluding Disposed Brands)	$	107.9	$	105.1	$	2.8	3%
	Commissions		16.3		15.2		1.1	7%
	Other services		9.4		4.7		4.7	100%
Revenue, excluding Disposed Brands			133.6		125.0		8.6	7%

Disposed Brands			13.1		34.6		(21.5)	(62%)

Revenue		$	146.7	$	159.6	$	(12.9)	(8%)

Removing the impact of the aforementioned sale transactions (which are denoted in the above chart as "Disposed Brands"), revenue from the remaining Corby brand portfolio and other business activities increased 7% compared to the prior year.

The increase in Case Goods revenue is driven by new pricing strategies and refocused promotional activities for certain key brands, notably Polar Ice vodka and Wiser's Canadian whisky. Case Goods revenue also benefited from the impact of general price increases across most of Corby's brand portfolio in Canada. Commission income also increased on a year-over-year comparative basis and reflects the strong performance from Corby's international brand portfolio, including ABSOLUT vodka and Jameson Irish whiskey. Corby's portfolio of represented wine brands also experienced strong growth during 2012. Other services primarily include revenue ancillary to the sale of Case Goods, such as logistics fees and miscellaneous bulk spirit sales. The increase in other services is almost entirely the result of having a higher volume of bulk whisky sales to a former contract bottling customer; these sales are currently not expected to continue past December 31, 2012.

Cost of sales

Cost of sales was $60.9 million, representing a decrease of 14%, or $9.6 million on an annual basis. The decrease in cost of sales is mostly the result of the aforementioned disposal transactions, as the Company no longer incurred production costs associated with the disposed brands and bottling facility. Gross margin for the year was 53.3% versus 51.1% last year (note: commissions are not included in this calculation). The improvement in gross margin is also a result of the two disposal transactions (i.e., sale of the Montreal plant and certain non-core brands as of October 31, 2011, and the sale of the Seagram Coolers brand in March 2011). The revenues derived from the formerly owned brands and bottling facility generated significantly less margin than Corby's remaining Case Goods business.

Marketing, sales and administration

Marketing, sales and administration expenses were $48.7 million for the year ended June 30, 2012, an increase of 4% or $2.1 million compared to the prior year. A significant portion of the increase relates to a project the Company has undertaken to improve its route-to-market and transform its sales and trade-marketing organization in Canada. Additionally, the increase reflects year-over-year increases associated with headcount and other related costs.

Other Income and Expenses

Other income and expenses include such items as realized foreign exchange gains and losses, gains on sale of property and equipment and amortization of actuarial gains and losses related to the Company's pension and post retirement benefit plans. The balances comprising this account were relatively consistent year-over-year.

Net Financial Income

Net financial income is comprised of interest earned on deposits in cash management pools, offset by interest costs associated with the Company's pension and post-retirement benefit plans. The increased net financial income is primarily the result of increased market interest rates applicable to the Company's cash deposits in addition to having higher average amounts of cash on deposit.

Income taxes

Income tax expense for the year was $14.2 million as compared to $12.0 million last year. The effective tax rate for the year is substantially impacted by the sale of the Montreal plant and the non-core brands which resulted in a tax impact of $3.9 million. Partially offsetting this increase are tax savings as a result of previously announced reductions in statutory income tax rates. Both the Canadian federal and Ontario provincial governments enacted reductions to corporate taxation rates.


	2012	2011

Combined basic Federal and Provincial tax rates	27%	29%
Net capital gain on disposal of plant and non-core brands	(4%)	0%
Other	1%	0%
Effective tax rate	24%	29%

Liquidity and Capital Resources

Corby's sources of liquidity are its deposits in cash management pools of $110.1 million as at June 30, 2012, and its cash generated from operating activities. Corby's total contractual maturities are represented by its accounts payable and accrued liabilities and income and other taxes payable balances, which totalled $26.1 million as at June 30, 2012, and are all due to be paid within one year. The Company does not have any liabilities under short or long-term debt facilities.

The Company also has funding obligations related to its employee future benefit plans, which include defined benefit pension plans. As at June 30, 2012, certain of the Company's defined benefit pension plans were in a deficit position. Of those plans in a funded deficit position, the unfunded accrued benefit obligation totalled $4.3 million.

The Company has identified the area of employee future benefits as a critical accounting estimate in that accounting policies related to employee future benefits include various assumptions that incorporate a high degree of judgment and complexity. These assumptions may change in the future and may have a material impact on the accrued benefit obligations of the Company and the cost of these plans, which is reflected in the Company's consolidated statements of earnings. In addition, the actual rate of return on plan assets and changes in interest rates could result in changes in the Company's funding requirements for its defined benefit pension plans.

The Company monitors its pension plan assets closely and follows strict guidelines to ensure that pension fund investment portfolios are diversified in-line with industry best practices. Nonetheless, pension fund assets are not immune to market fluctuations and, as a result, the Company may be required to make additional cash contributions in the future. For more information regarding Corby's employee future benefit plans, please refer to Note 15 to the consolidated financial statements.

The Company believes that its deposits in cash management pools, combined with its historically strong operational cash flows, provide for sufficient liquidity to fund its operations, investing activities and commitments for the foreseeable future. The Company's cash flows from operations are subject to fluctuation due to commodity, foreign exchange and interest rate risks. Please refer to the "Risks and Risk Management" section of this MD&A for further information.

Cash flows


(in millions of Canadian dollars)			2012		2011		Change

Operating activities
	Net earnings, adjusted for non-cash items	$	40.2	$	46.6	$	(6.4)
	Net change in non-cash working capital		13.6		(1.0)		14.6
	Net payments for interest and income taxes		(7.5)		(10.3)		2.8
			46.3		35.3		11.0

Investing activities
	Additions to property and equipment		(1.6)		(2.3)		0.7
	Proceeds from disposition of property and equipment		0.3		0.1		0.2
	Proceeds from sale of plant and brands		37.4		4.8		32.6
	Deposits in cash management pools		(13.5)		(22.0)		8.5
			22.6		(19.4)		42.0

Financing activities
	Proceeds from note receivable		0.6		-		0.6
	Dividends paid		(69.5)		(15.9)		(53.6)
			(68.9)		(15.9)		(53.0)

Net change in cash		$	-	$	-	$	-

Operating activities

On an annual basis, net cash from operating activities was $46.3 million compared to $35.3 million of the prior year, representing an increase of $11.0 million. Cash flows from operating activities have been significantly impacted by the previously mentioned sale of the Montreal plant and non-core brands. Reduced net earnings, adjusted for non-cash items, have been offset by lower inventory and accounts receivable levels driven by the Disposed Brands. Further, cash flows from operating activities has benefited from lower levels of maturing inventories compared to the prior year due to bulk whisky sales and lower tax payments.

Investing activities

Cash from investing activities increased $42.0 million this year compared to last year. The year-over-year change in cash from investing activities was primarily impacted by the Disposal Transactions and changes to the amount deposited in cash management pools. The change in cash associated with the Disposal Transactions reflects the difference in proceeds received from the sale of the Montreal plant and non-core brands completed in 2012 versus the proceeds received from the sale of the Seagram Coolers brand completed in 2011.

Changes in the amount deposited in cash management pools is dependent on how much cash is available after operating, other investing, and financing activities are completed. In the current year, less cash was deposited primarily due to the higher amount of dividends paid, partially offset by cash generated from operating activities and proceeds received from the sale of the Montreal plant and non-core brands.

Deposits made to cash management pools represent cash on deposit with The Bank of Nova Scotia via Corby's Mirror Netting Service Agreement with PR. Corby has daily access to these funds and earns a market rate of interest from PR on its deposits. For more information related to these deposits, please refer to the "Related Party Transactions" section of this MD&A.

Financing activities

Cash used for financing activities totals $68.9 million for the year and primarily represented the payment of dividends to shareholders. Also included in this balance are proceeds received from the long-term note receivable paid to the Company during the year. Dividend payments increased over the prior year due to a special dividend of $1.85 per share and changes to the dividend policy which increased regular quarterly dividends to $0.15 per share from $0.14 per share effective November 9, 2011. The payment of these dividends is in accordance with the Company's stated dividend policy.

The following table summarizes dividends paid, and payable, by the Company over the last two fiscal years:


for	Declaration date	Record Date	Payment date	$ / Share
2012 - Q4	August 29, 2012	September 15, 2012	September 30, 2012	$ 0.15
2012 - Q3	May 10, 2012	May 31, 2012	June 15, 2012	0.15
2012 - Q2	February 8, 2012	February 29, 2012	March 15, 2012	0.15
2012 - special	November 9, 2011 (special dividend)	December 15, 2011	January 3, 2012	1.85
2012 - Q1	November 9, 2011	November 30, 2011	December 15, 2011	0.15
2011 - Q4	August 24, 2011	September 15, 2011	September 30, 2011	0.14
2011 - Q3	May 11, 2011	May 31, 2011	June 15, 2011	0.14
2011 - Q2	February 9, 2011	February 28, 2011	March 15, 2011	0.14
2011 - Q1	November 10, 2010	November 30, 2010	December 15, 2010	0.14

Outstanding Share Data

As at August 28, 2012, Corby had 24,274,320 Voting Class A Common Shares and 4,194,536 Non-Voting Class B Common Shares outstanding. The Company does not have a stock option plan, and therefore, there are no options outstanding.

Contractual Obligations

The following table presents a summary of the maturity periods of the Company's contractual obligations as at June 30, 2012:



	Payments During 2013		Payments due in 2014 and 2015		Payments due in 2016 and 2017		Payments due after 2017		Obligations with no fixed maturity		Total

Operating lease obligations	$	1.8	$	2.9	$	1.6	$	0.8	$	-	$	7.1
Employee benefits		-		-		-		-		20.9		20.9

	$	1.8	$	2.9	$	1.6	$	0.8	$	20.9	$	28.0

Operating lease obligations represent future minimum payments under long-term operating leases for premises and office equipment as at June 30, 2012. Employee benefits represent the Company's unfunded pension and other post-retirement benefit plan obligations as at June 30, 2012. For further information regarding Corby's employee future benefit plans, please refer to Note 15 to the audited consolidated financial statements.

Related Party Transactions

Transactions with parent, ultimate parent, and affiliates

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 outsources 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, recordkeeping services, data processing and other administrative services are also outsourced to its parent company. Transactions with the parent company, ultimate parent and affiliates are subject to Corby's related party transaction policy.

The companies operate under the terms of agreements that became effective on September 29, 2006. These agreements provide the Company with the exclusive right to represent PR's brands in the Canadian market for 15 years, as well as providing for the continuing production of certain Corby brands by PR at its production facility in Windsor, Ontario, for 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.

In addition to the aforementioned agreements, Corby signed an agreement on September 26, 2008, with its ultimate parent to be the exclusive Canadian representative for the ABSOLUT vodka and Plymouth gin brands, for a five-year term expiring October 1, 2013. These brands were acquired by PR subsequent to the original representation rights agreement dated September 29, 2006. As noted in the "Significant Events" section of this MD&A, the Company entered into an agreement with PR on November 9, 2011, for a new term for Corby's exclusive right to represent ABSOLUT vodka and Plymouth gin brands in Canada from September 30, 2013 to September 29, 2021, which is consistent with the term of Canadian representation for the other PR brands in Corby's portfolio.

Deposits in cash management pools

Corby participates in a cash pooling arrangement under a Mirror Netting Service Agreement, together with PR's other Canadian affiliates, the terms of which are administered by The Bank of Nova Scotia. The Mirror Netting Service Agreement acts to aggregate each participant's net cash balance for purposes of having a centralized cash management function for all of PR's Canadian affiliates, including Corby. As a result of Corby's participation in this agreement, Corby's credit risk associated with its deposits in cash management pools is contingent upon PR's credit rating. PR's credit rating as at August 28, 2012, as published by Standard & Poor's and Moody's, was BBB- and Baa3, respectively. PR compensates Corby for the benefit it receives from having the Company participate in the Mirror Netting Service Agreement by paying interest to Corby based upon the 30-day LIBOR rate plus 0.40%.

Corby accesses these funds on a daily basis and has the contractual right to withdraw these funds or terminate these cash management arrangements upon providing five days' written notice.

Results of Operations - Fourth Quarter of Fiscal 2012

The following table presents a summary of certain selected consolidated financial information for the Company for the three month periods ended June 30, 2012 and 2011:



		Three Months Ended

		June 30,		June 30,
(in millions of Canadian dollars, except per share amounts)		2012		2011		$ Change	% Change

Revenue	$	32.4	$	40.1	$	(7.7)	(19%)

Cost of sales		(13.0)		(17.7)		4.7	(27%)
Marketing, sales and administration		(12.8)		(12.6)		(0.2)	2%
Other income (expense)		-		(0.4)		0.4	(100%)

Earnings from operations		6.6		9.4		(2.8)	(30%)

Financial income		0.4		0.4		-	0%
Financial expenses		(0.1)		(0.2)		0.1	(50%)
Net financial income		0.3		0.2		0.1	50%

Earnings before income taxes		6.9		9.6		(2.7)	(28%)
Income taxes		(2.0)		(2.8)		0.8	(29%)

Net earnings	$	4.9	$	6.8	$	(1.9)	(28%)

Per common share
-Basic net earnings	$	0.17	$	0.24	$	(0.07)	(28%)
-Diluted net earnings	$	0.17	$	0.24	$	(0.07)	(28%)

⁽¹⁾ In preparing the comparative information, the Company has adjusted amounts previously reported in financial statements prepared in accordance with Canadian GAAP. See Note 32 to the consolidated financial statements for an explanation of the transition to IFRS.

The financial results for the quarter have been substantially impacted by the sale of certain non-core brands and the subsidiary that owned the Montreal plant in October 2011. The following discussion identifies the impact of this transaction in order to facilitate comparison with the prior year quarter, where noted.

Revenue

The following table highlights the various components of the Company's revenue streams for the quarter:



			Three Months Ended
			June 30,		June 30,
(in millions of Canadian dollars)			2012		2011		$ Change	% Change
Revenue streams:
	Case goods (excluding Disposed Brands)	$	25.9	$	26.3	$	(0.4)	(2%)
	Commissions		4.0		3.8		0.2	5%
	Other services		2.5		1.3		1.2	92%
Revenue, excluding Disposed Brands			32.4		31.4		1.0	3%

Disposed Brands			-		8.7		(8.7)	(100%)

Revenue		$	32.4	$	40.1	$	(7.7)	(19%)

Excluding the impact of Disposed Brands, like-for-like revenues increased 3% quarter over quarter, or $1.0 million. While Case Goods experienced a 2% increase in shipment value (as previously discussed in the "Brand Performance Review" section), these sales were offset by increased promotional investment behind key brands as accounting rules require certain types of promotional expenses to be reported net of revenues. As a result, the increase in revenue this quarter versus the same quarter last year was mostly derived from the Company's other activities, which are predominately comprised of bulk whisky sales to a former contract bottling customer. Note that these bulk whisky sales are not expected to continue past December 2012.

Cost of Sales

Cost of goods sold is significantly lower this quarter due to the reduced Case Goods volume as a result of the aforementioned sale transaction (i.e., Disposed Brands). Gross margin was 54.1% this quarter compared to 51.4% for the same quarter last year (note: commissions are not included in this calculation). The substantial increase in gross margin this quarter is a direct result of the aforementioned disposal transaction. The revenue derived from Disposed Brands and the Montreal bottling facility generated significantly less margin than Corby's remaining business.

Net earnings and earnings per share

Net earnings for the fourth quarter were $4.9 million, or $0.17 per share, which is a decrease from the same quarter last year of $1.9 million. Removing the impact of Disposed Brands, net earnings on a like-for-like comparison basis decreased $0.2 million when compared to the same quarter last year.

Selected Quarterly Information

Summary of Quarterly Financial Results


(in millions of Canadian dollars, except per share amounts)		Q4 2012		Q3 2012		Q2 2012		Q1 2012		Q4 2011		Q3 2011		Q2 2011		Q1 2011

Revenue	$	32.4	$	29.2	$	40.9	$	44.2	$	40.1	$	32.4	$	45.5	$	41.6
Earnings from operations		6.6		6.1		33.6		12.6		9.4		4.3		13.7		13.1
Net earnings, excluding undernoted items ⁽¹⁾		4.9		4.6		9.0		9.9		6.8		3.1		9.8		9.2
Net earnings		4.9		4.6		27.1		9.5		6.8		4.8		9.8		9.2
Basic EPS		0.17		0.16		0.95		0.33		0.24		0.11		0.34		0.32
Diluted EPS		0.17		0.16		0.95		0.33		0.24		0.11		0.34		0.32
⁽¹⁾ Net earnings have been adjusted for the net after-tax gain on the sale of plant and brands of $17.7 million in the current year and for the net after-tax loss on the sale of Seagram Coolers of $1.7 million in 2011

The above chart demonstrates the seasonality of Corby's business, as sales are typically strong in the first and second quarters, while third-quarter sales (January, February and March) usually decline after the end of the retail holiday season. Fourth-quarter sales typically increase again with the onset of warmer weather, as consumers tend to increase their purchasing levels during the summer season.

Also highlighted in the chart is the effect the aforementioned sale transactions (i.e., the sale of certain non-core brands and the subsidiary that owned the Montreal plant in Q2-2012, and the sale of the Seagram Coolers brand in Q3-2011) had on the quarterly results. Specifically, on a quarter-over-quarter comparative basis, revenues for Q4-2012 are lower by $7.7 million compared to Q4-2011 due to these aforementioned changes to the Company's brand portfolio. Removing the impact of the aforementioned sale transactions, revenue from the remaining Corby brand portfolio and other business activities increased 3% for the quarter when compared with the same period in the prior year. In addition, the Company's net earnings were impacted by the gain on the sale of the Montreal plant and non-core brands in the amount of $18.1 million in the second quarter for 2012. The third quarter of 2011 was impacted by a loss on the sale of the Seagram Coolers brand in the amount of $1.7 million.

For further information regarding these sale transactions please refer to Note 19 to the audited consolidated financial statements.

Critical Accounting Estimates

The Company's consolidated financial statements are prepared in accordance with IFRS, which require management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and related disclosures as at the date of the consolidated financial statements. The Company bases its estimates, judgments and assumptions on historical experience, current trends and other factors that management believes to be important at the time the consolidated financial statements are prepared. The Company reviews its accounting policies and how they are applied on a regular basis. While the Company believes that the historical experience, current trends and other factors considered support the preparation of its consolidated financial statements in accordance with IFRS, actual results could differ from its estimates and such differences could be material.

The Company's significant accounting policies are discussed in Note 3 to the consolidated financial statements. The following accounting policies incorporate a higher degree of judgment and/or complexity and, accordingly, are considered to be critical accounting policies.

Goodwill and Indefinite-Lived Intangible Assets

The Company records as goodwill the excess amount 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. Indefinite-lived intangible assets represent the value of trademarks and licences acquired. Goodwill and indefinite-lived intangible assets account for $15.1 million of the Company's total assets. These balances are evaluated annually for impairment. The process of evaluating these items for impairment involves the determination of fair value. Inherent in such fair value determinations are certain judgments and estimates including, but not limited to, projected future sales, earnings and capital investment; discount rates; and terminal growth rates. These judgments and estimates may change in the future due to uncertain competitive, market and general economic conditions, or as a result of changes in the business strategies and outlook of the Company.

An impairment loss would be recognized to the extent that the carrying value of the goodwill or trademarks and licences exceeds the implied fair value. Any impairment would result in a reduction in the carrying value of these items on the consolidated balance sheets of the Company and the recognition of a non-cash impairment charge in net earnings. Based on analysis performed, the Company has not identified any impairment.

Employee Future Benefits

The cost and accrued benefit plan obligations of the Company's defined benefit pension plans and its other post-retirement benefit plan are accrued based on actuarial valuations that are dependent upon assumptions determined by management. These assumptions include the discount rate, the expected long-term rate of return on plan assets, the rate of compensation increases, retirement ages, mortality rates and the expected inflation rate of health care costs. These assumptions are reviewed annually by the Company's management and its actuary. These assumptions may change in the future and may have a material impact on the accrued benefit obligations of the Company and the cost of these plans, which is reflected in the Company's consolidated statement of earnings. In addition, the actual rate of return on plan assets and changes in interest rates could result in changes in the Company's funding requirements for its defined benefit pension plans. See Note 15 to the consolidated financial statements for detailed information regarding the major assumptions utilized.

Income and Other Taxes

The Company accounts for income taxes using the liability method of accounting. Under the liability method, deferred income tax assets and liabilities are determined based on differences between the carrying amounts of balance sheet items and their corresponding tax values. The determination of the income tax provision requires management to interpret regulatory requirements and to make certain judgments. While income, capital and commodity tax filings are subject to audits and reassessments, management believes that adequate provisions have been made for all income and other tax obligations. However, changes in the interpretations or judgments may result in an increase or decrease in the Company's income, capital or commodity tax provisions in the future. The amount of any such increase or decrease cannot be reasonably estimated.

New Accounting Pronouncements

Transition to International Financial Reporting Standards

The Company has adopted International Financial Reporting Standards ("IFRS") for its fiscal year ended June 30, 2012 as required by the Accounting Standards Board of the Canadian Institute of Chartered Accountants.

The Company has provided a detailed explanation of the impacts of this transition in Note 32 to the Company's consolidated financial statements ("Note 32"). Note 32 includes reconciliations of the Company's balance sheet and shareholders' equity from previous Canadian GAAP to IFRS as at June 30, 2011 and July 1, 2010, and its net earnings and comprehensive income for the year ended June 30, 2011. Explanations of the individual impacts of adopting IFRS identified in the reconciliations are also provided, as are the Company's elections under IFRS 1 "First-time Adoption of International Financial Reporting Standards."

Future Accounting Standards

(i) Deferred Taxes - Recovery of Underlying Assets

The IASB has issued an amendment to IAS 12, "Income Taxes" ("IAS 12 amendment"), which introduces an exception to the general measurement requirements of IAS 12 in respect of investment properties measured at fair value. The IAS 12 amendment is effective for annual periods beginning on or after January 1, 2012. Corby does not anticipate the implementation of this amendment to have a significant impact on its results of operations, financial position and disclosures.

(ii) Presentation of Financial Statements

On June 16, 2011 the IASB issued amendments to IAS 1, "Presentation of Financial Statements." The amendments enhance the presentation of Other Comprehensive Income ("OCI") in the financial statements. A requirement has been added to present items in other comprehensive income grouped on the basis of whether they may be subsequently reclassified to earnings in order to more clearly show the effect the items of other comprehensive income may have on future earnings. The amendments are effective for annual periods beginning on or after July 1, 2012. As the amendments only relate to presentation, Corby's results of operations and financial position will not be impacted. Further, Corby does not anticipate the amendment will have a significant impact on disclosure.

(iii) Consolidated Financial Statements

In May 2011 the IASB issued IFRS 10, "Consolidated Financial Statements" ("IFRS 10"), IFRS 11, "Joint Ventures" ("IFRS 11"), and IFRS 12, "Disclosure of Interest in Other Entities" ("IFRS 12"). In addition, the IASB amended IAS 27, "Consolidated and Separate Financial Statements" ("IAS27") and IAS 28, "Investments in Associates and Joint Ventures" ("IAS 28"). The objective of IFRS 10 is to define the principles of control and establish the basis of determining when and how an entity should be included within a set of consolidated financial statements. IFRS 11 establishes principles to determine the type of joint arrangement and guidance for financial reporting activities required by entities that have an interest in an arrangement that is jointly controlled. IFRS 12 enables users of the financial statements to evaluate the nature and risks associated with its interest in other entities and the effects of those interests on its financial performance.

IFRS 10, 11 and 12, and the amendments to IAS 27 and 28 are all effective for annual periods beginning on or after January 1, 2013. For Corby, this set of standards and amendments become effective July 1, 2013. The Company is currently assessing the impact of IFRS 10, 11, and 12 and the amendments to IAS 27 and 28 on its consolidated financial statements.

(iv) Fair Value Measurement

On May 12, 2011 the IASB issued IFRS 13, "Fair Value Measurement" ("IFRS 13") which defines fair value, provides guidance in a single IFRS framework for measuring fair value and identifies the required disclosures pertaining to fair value measurement. This standard is effective for annual periods beginning on or after January 1, 2013. For Corby this standard becomes effective July 1, 2013. The Company is currently assessing the impact of the new standard on its consolidated financial statements.

(v) Employee Benefits

On June 16, 2011 the IASB revised IAS 19, "Employee Benefits" ("IAS 19"). The revisions include the elimination of the option to defer the recognition of actuarial gains and losses, enhancing the guidance around measurement of plan assets and defined benefit obligations, streamlining the presentation of changes in assets and liabilities arising from defined benefit plans and introduces enhanced disclosure for defined benefit plans. The amendments are effective for annual periods beginning on or after January 1, 2013. For Corby, the revisions to this standard become effective July 1, 2013. The Company is currently assessing the impact of this amendment on its consolidated financial statements.

(vi) Financial Instruments

The IASB has issued a new standard, IFRS 9, "Financial Instruments" ("IFRS 9"), which will ultimately replace IAS 39, "Financial Instruments: Recognition and Measurement" ("IAS 39"). The replacement of IAS 39 is a multi-phase project with the objective of improving and simplifying the reporting for financial instruments and the issuance of IFRS 9 is part of the first phase. This standard becomes effective for fiscal years beginning on or after January 1, 2015. For Corby, this standard will become effective July 1, 2015. The Company is currently assessing the impact of the new standard on its results of operations, financial position and disclosures.

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 National Instrument 52-109) as at June 30, 2012, and has concluded that such disclosure controls and procedures are effective based upon such evaluation.

Internal Controls Over Financial Reporting

The Company maintains a system of disclosure controls and procedures to provide reasonable assurance that all material information relating to the Company is gathered and reported to senior management on a timely basis so that appropriate decisions can be made regarding public disclosure.

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 IFRS. Internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be designed effectively can provide only reasonable assurance with respect to financial reporting and financial statement preparation.

Management, with the participation of the CEO and CFO, has evaluated the effectiveness of the Company's internal controls over financial reporting as at June 30, 2012, and has concluded that internal control over financial reporting is designed and operating effectively to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Management's assessment was based on the framework established in Internal Control - Integrated Framework, published by the Committee of Sponsoring Organizations of the Treadway Commission.

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 controls over financial reporting.

Risks & Risk Management

The Company is exposed to a number of risks in the normal course of its business that have the potential to affect its operating and financial performance.

Industry and Regulatory

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, causing changes in market dynamics or changes in consumer consumption patterns. In addition, the Company's provincial LB customers have the ability to mandate changes that can lead to increased costs, as well as other factors that may impact financial results.

The Company continuously monitors the potential risk associated with any proposed changes to its government policy, regulatory and taxation environments, and, as an industry leader, actively participates in trade association discussions relating to new developments.

Consumer Consumption Patterns

Beverage alcohol companies are susceptible to risks relating to changes in consumer consumption patterns. Consumer consumption patterns are affected by many external influences, not the least of which is the economic outlook and overall consumer confidence in the stability of the economy as a whole. Corby offers a diverse portfolio of products across all major spirits categories and at various price points, which complements consumer desires and offers exciting innovation.

Distribution/Supply Chain Interruption

The Company is susceptible to risks relating to distributor and supply chain interruptions. Distribution in Canada is largely accomplished through the government-owned provincial LBs and, therefore, an interruption (e.g., a labour strike) for any length of time may have a significant impact on the Company's ability to sell its products in a particular province and/or market.

Supply chain interruptions, including a manufacturing or inventory disruption, could impact product quality and availability. 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.

Environmental Compliance

Environmental liabilities may potentially arise when companies are in the business of manufacturing products and, thus, required to handle potentially hazardous materials. As Corby outsources its production, including all of its storage and handling of maturing alcohol, the risk of environmental liabilities is considered minimal. Corby currently has no significant recorded or unrecorded environmental liabilities.

Industry Consolidation

In recent years, the global beverage alcohol industry has experienced a significant amount of consolidation. Industry consolidation can have varying degrees of impact and, in some cases, may even create exceptional opportunities. Either way, management believes that the Company is well positioned to deal with this or other changes to the competitive landscape in Canada.

Competition

The Canadian beverage alcohol industry is extremely competitive. Competitors may take actions to establish and sustain a 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 execution of its strategies. 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.

Credit Risk

Credit risk arises from deposits in cash management pools held with PR via Corby's participation in the Mirror Netting Service Agreement (as previously described in the "Related Party Transactions" section of this MD&A), as well as credit exposure to customers, including outstanding accounts and note receivable. The maximum exposure to credit risk is equal to the carrying value of the Company's financial assets. The objective of managing counter-party credit risk is to prevent losses in financial assets. The Company assesses the credit quality of its counter-parties, taking into account their financial position, past experience and other factors. As the large majority of Corby's accounts receivable balances are collectable from government-controlled LBs, management believes the Company's credit risk relating to accounts receivable is at an acceptably low level. The Company's note receivable is secured.

Exposure to Interest Rate Fluctuations

The Company does not have any short- or long-term debt facilities. Interest rate risk exists, as Corby earns market rates of interest on its deposits in cash management pools and also has a note receivable that earns a fixed rate of interest. An active risk management program does not exist, as management believes that changes in interest rates would not have a material impact on Corby's financial position over the long term.

Exposure to Commodity Price Fluctuations

Commodity risk exists, as the manufacture of Corby's products requires the procurement of several known commodities, such as grains, sugar and natural gas. The Company strives to partially mitigate this risk through the use of longer-term procurement contracts where possible. In addition, subject to competitive conditions, the Company may pass on commodity price changes to consumers through pricing over the long term.

Foreign Currency Exchange Risk

The Company has exposure to foreign currency risk, as it conducts business in multiple foreign currencies; however, its exposure is primarily limited to the US dollar ("USD") and UK pound sterling ("GBP"). Corby does not utilize derivative instruments to manage this risk. Subject to competitive conditions, changes in foreign currency rates may be passed on to consumers through pricing over the long term.

USD Exposure
The Company's demand for USD has traditionally outpaced its supply, due to USD sourcing of production inputs exceeding that of the Company's USD sales. Therefore, decreases in the value of the Canadian dollar ("CAD") relative to the USD will have an unfavourable impact on the Company's earnings.

GBP Exposure
As a result of the relocation of its Lamb's international production from Canada to the UK (transition completed in Q1-2012), the Company's exposure to fluctuations in the value of the GBP relative to the CAD have been significantly reduced as both sales and cost of production are now denominated in GBP. While Corby's exposure has been minimized, increases in the value of the CAD relative to the GBP will have an unfavourable impact on the Company's earnings.

Third-Party Service Providers

HWSL, which Corby manages on behalf of PR, provides more than 80% of the Company's production requirements, among other services including administration and information technology. However, the Company is reliant upon certain third-party service providers in respect of certain of its operations. It is possible that negative events affecting these third-party service providers could, in turn, negatively impact the Company. While the Company has no direct control over how such third parties are managed, it has entered into contractual arrangements to formalize these relationships. In order to minimize operating risks, the Company actively monitors and manages its relationships with its third-party service providers.

Brand Reputation and Trademark Protection

The Company promotes nationally branded, non-proprietary products as well as proprietary products. Damage to the reputation of any of these brands, or to the reputation of any supplier or manufacturer of these brands, could negatively impact consumer opinion of the Company or the related products, which could have an adverse impact on the financial performance of the Company. The Company strives to mitigate such risks by selecting only those products from suppliers that strategically complement Corby's existing brand portfolio and by actively monitoring brand advertising and promotion activities. The Company registers trademarks, as applicable, while constantly watching for and responding to competitive threats, as necessary.

Valuation of Goodwill and Intangible Assets

Goodwill and intangible assets account for a significant amount of the Company's total assets. Goodwill and intangible assets are subject to impairment tests that involve the determination of fair value. Inherent in such fair value determinations are certain judgments and estimates including, but not limited to, projected future sales, earnings and capital investment; discount rates; and terminal growth rates. These judgments and estimates may change in the future due to uncertain competitive market and general economic conditions, or as the Company makes changes in its business strategies. Given the current state of the economy, certain of the aforementioned factors affecting the determination of fair value may be impacted and, as a result, the Company's financial results may be adversely affected.

The following chart summarizes Corby's goodwill and intangible assets and details the amounts associated with each brand (or basket of brands) and market:


		Carrying Values as at June 30, 2012

Associated Brand	Associated Market		Goodwill		Intangibles		Total

Various PR brands	Canada	$	-	$	42.0	$	42.0
Lamb's rum	United Kingdom⁽¹⁾		1.4		11.8		13.2
Corby domestic brands	Canada		1.9		-		1.9

		$	3.3	$	53.8	$	57.1

⁽¹⁾ The international business for Lamb's rum is primarily focused in the UK, however, the trademarks and licenses purchased, relate to all international markets outside of Canada, as Corby previously owned the Canadian rights.

Therefore, economic factors (such as consumer consumption patterns) specific to these brands and markets are primary drivers of the risk associated with their respective goodwill and intangible assets valuations.

Employee Future Benefits

The Company has certain obligations under its registered and non-registered defined benefit pension plans and other post-retirement benefit plan. There is no assurance that the Company's benefit plans will be able to earn the assumed rate of return. New regulations and market-driven changes may result in changes in the discount rates and other variables, which would result in the Company being required to make contributions in the future that differ significantly from estimates. An extended period of depressed capital markets and low interest rates could require the Company to make contributions to these plans in excess of those currently contemplated, which, in turn, could have an adverse impact on the financial performance of the Company. Somewhat mitigating the impact of a potential market decline is the fact that the Company monitors its pension plan assets closely and follows strict guidelines to ensure that pension fund investment portfolios are diversified in-line with industry best practices. For further details related to Corby's defined benefit pension plans, please refer to Note 15 of the consolidated financial statements for the year ended June 30, 2012.

CORBY DISTILLERIES LIMITED
CONSOLIDATED BALANCE SHEETS
as at June 30, 2012, June 30, 2011 and July 1, 2010

(Unaudited)
(in thousands of Canadian dollars)

			June 30,		June 30,		July 1,
	Note		2012		2011⁽¹⁾		2010⁽¹⁾


ASSETS
Deposits in cash management pools		$	110,113	$	96,636	$	74,685
Accounts receivable	6		28,611		31,005		28,340
Income and other taxes recoverable			-		-		1,070
Inventories	7		47,760		59,654		60,502
Prepaid expenses			555		1,731		1,551
Current portion of note receivable	8		600		600		-

Total current assets			187,639		189,626		166,148
Note receivable	8		1,200		1,800		-
Deferred income taxes	16		-		256		-
Property and equipment	9		7,524		15,646		15,238
Goodwill	10		3,278		5,886		6,857
Intangible assets	11		53,771		58,302		70,571

Total assets		$	253,412	$	271,516	$	258,814


LIABILITIES
Accounts payable and accrued liabilities	13	$	22,400	$	19,492	$	18,285
Income and other taxes payable			3,656		115		-

Total current liabilities			26,056		19,607		18,285
Provision for pensions	15		10,550		12,670		14,175
Deferred income taxes	16		983		-		41

Total liabiliites			37,589		32,277		32,501

Shareholders' equity
Share capital	17		14,304		14,304		14,304
Retained earnings			201,519		224,935		212,009

Total shareholders' equity			215,823		239,239		226,313

Total liabilities and shareholders' equity		$	253,412	$	271,516	$	258,814

⁽¹⁾ In preparing its comparative information, the Company has adjusted amounts reported previously in financial statements prepared in accordance with Canadian Generally Accepted Accounting Principles ("Canadian GAAP"). See Note 32 to these consolidated financial statements for an explanation of the transition to IFRS.

The accompanying notes are an integral part of these consolidated financial statements.

CORBY DISTILLERIES LIMITED
CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)
(in thousands of Canadian dollars, except per share amounts)

		For the Three Months Ended				For the Year Ended

		June 30,		June 30,		June 30,		June 30,
	Note	2012		2011⁽¹⁾		2012		2011⁽¹⁾


Revenue	18	$	32,433	$	40,081	$	146,746	$	159,566

Cost of sales			(13,068)		(17,641)		(60,885)		(70,541)
Marketing, sales and administration			(12,774)		(12,624)		(48,744)		(46,635)
Disposal transactions	19		-		-		21,532		(2,233)
Other income and expenses	20		28		(377)		202		299

Earnings from operations			6,619		9,439		58,851		40,456

Financial income			453		403		1,963		1,308
Financial expenses			(184)		(191)		(612)		(925)
Net financial income	21		269		212		1,351		383

Earnings before income taxes			6,888		9,651		60,202		40,839

Current income taxes			(1,877)		(2,482)		(12,915)		(12,266)
Deferred income taxes			(130)		(340)		(1,239)		297
Income taxes	16		(2,007)		(2,822)		(14,154)		(11,969)

Net earnings		$	4,881	$	6,829	$	46,048	$	28,870

Basic earnings per share	24	$	0.17	$	0.24	$	1.62	$	1.01
Diluted earnings per share	24	$	0.17	$	0.24	$	1.62	$	1.01

Weighted average common shares outstanding
Basic			28,468,856		28,468,856		28,468,856		28,468,856
Diluted			28,468,856		28,468,856		28,468,856		28,468,856

⁽¹⁾ In preparing its comparative information, the Company has adjusted amounts reported previously in financial statements prepared in accordance with Canadian Generally Accepted Accounting Principles ("Canadian GAAP"). See Note 32 to these consolidated financial statements for an explanation of the transition to IFRS.

The accompanying notes are an integral part of these consolidated financial statements.

CORBY DISTILLERIES LIMITED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)
(in thousands of Canadian dollars)

	For the Three Months Ended				For the Year Ended

		June 30,	June 30,		June 30,		June 30,
		2012	2011⁽¹⁾		2012		2011⁽¹⁾

Net earnings	$	4,881	$	6,829	$	46,048	$	28,870

Other comprehensive income		-		-		-		-

Total comprehensive income	$	4,881	$	6,829	$	46,048	$	28,870

⁽¹⁾ In preparing its comparative information, the Company has adjusted amounts reported previously in financial statements prepared in accordance with Canadian Generally Accepted Accounting Principles ("Canadian GAAP"). See Note 32 to these consolidated financial statements for an explanation of the transition to IFRS.

The accompanying notes are an integral part of these consolidated financial statements.

CORBY DISTILLERIES LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the years ended June 30, 2012 and 2011

(Unaudited)
(in thousands of Canadian dollars)


	Note	Share Capital		Accumulated Other Comprehensive Income		Retained Earnings		Total

Balance as at July 1, 2011		$	14,304	$	-	$	224,935	$	239,239
Net earnings			-		-		46,048		46,048
Other comprehensive income			-		-		-		-
Dividends	26		-		-		(69,464)		(69,464)

Balance as at June 30, 2012		$	14,304	$	-	$	201,519	$	215,823


Balance as at July 1, 2010 ⁽¹⁾		$	14,304	$	-	$	212,009	$	226,313
Net earnings			-		-		28,870		28,870
Other comprehensive income			-		-		-		-
Dividends			-		-		(15,944)		(15,944)

Balance as at June 30, 2011 ⁽¹⁾		$	14,304	$	-	$	224,935	$	239,239

⁽¹⁾ In preparing its comparative information, the Company has adjusted amounts reported previously in financial statements prepared in accordance with Canadian Generally Accepted Accounting Principles ("Canadian GAAP"). See Note 32 to these consolidated financial statements for an explanation of the transition to IFRS.

The accompanying notes are an integral part of these consolidated financial statements.

CORBY DISTILLERIES LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)
(in thousands of Canadian dollars)

		For the Three Months Ended				For the Year Ended

			June 30,		June 30,		June 30,		June 30,
	Notes		2012		2011⁽¹⁾		2012		2011⁽¹⁾

Operating activities
Net earnings		$	4,881	$	6,829	$	46,048	$	28,870
Adjustments for:
Amortization and depreciation	22		1,357		1,549		5,688		6,224
Net financial income	21		(269)		(212)		(1,351)		(383)
Disposal transactions	19		-		-		(21,532)		2,233
(Gain) loss on disposal of property and equipment			(47)		48		(175)		52
Income tax expense	16		2,007		2,822		14,154		11,969
Provision for pensions			(456)		(896)		(2,674)		(2,410)
			7,473		10,140		40,158		46,555
Net change in non-cash working capital balances	25		2,763		1,926		13,613		(957)
Interest received			396		398		1,797		1,288
Income taxes paid			(1,704)		(3,287)		(9,290)		(11,536)

Net cash from operating activities			8,928		9,177		46,278		35,350

Investing activities
Additions to property and equipment	9		(1,029)		(1,660)		(1,648)		(2,288)
Net proceeds on disposal transactions	19		-		-		37,376		4,756
Proceeds from disposition of property and equipment			54		60		335		77
Deposits in cash management pools			(3,683)		(3,591)		(13,477)		(21,951)

Net cash (used) from in investing activities			(4,658)		(5,191)		22,586		(19,406)

Financing activities
Proceeds from note receivable	8		-		-		600		-
Dividends paid	26		(4,270)		(3,986)		(69,464)		(15,944)

Net cash used in financing activities			(4,270)		(3,986)		(68,864)		(15,944)

Net change in cash			-		-		-		-
Cash, beginning of period			-		-		-		-

Cash, end of period		$	-	$	-	$	-	$	-

⁽¹⁾ In preparing its comparative information, the Company has adjusted amounts reported previously in financial statements prepared in accordance with Canadian Generally Accepted Accounting Principles ("Canadian GAAP"). See Note 32 to these consolidated financial statements for an explanation of the transition to IFRS.

The accompanying notes are an integral part of these consolidated financial statements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2012 AND 2011
(in thousands of Canadian dollars, except per share amounts)

1. GENERAL INFORMATION

Corby Distilleries Limited ("Corby" or the "Company") is a leading Canadian marketer of spirits and importer of wines. The Company derives its revenues from the sale of its owned-brands in Canada and other international markets, as well as earning commissions from the representation of selected non-owned brands in the Canadian marketplace. Revenues predominantly consist of sales made to each of the provincial liquor boards in Canada.

Corby is controlled by Hiram Walker & Sons Limited ("HWSL"), which is a wholly owned subsidiary of Pernod Ricard, S.A. ("PR"), a French public limited company that owned 51.6% of the outstanding Voting Class A Common Shares of Corby as at June 30, 2012.

Corby is a public company incorporated and domiciled in Canada, whose shares are traded on the Toronto Stock Exchange. The Company's registered address is 225 King Street West, Suite 1100, Toronto, ON M5V 3M2.

2. BASIS OF PREPARATION

Statement of compliance
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") and using the accounting policies described herein.

These are the Company's first annual consolidated financial statements reported under IFRS for the year ended June 30, 2012 with comparatives for the year ended June 30, 2011. IFRS 1 - First-time Adoption of IFRS ("IFRS 1") has been applied in the preparation of these financial statements. Consolidated financial statements of the Company had been prepared under previous Canadian Generally Accepted Accounting Principles ("Canadian GAAP"), which differs in certain respects from IFRS. When preparing the Company's 2011 consolidated financial statements as presented here, management has amended certain of the Company's previous accounting methods in order to comply with IFRS. The comparative consolidated financial statements presented reflect the adoption of IFRS.

An explanation of how the transition from previous Canadian GAAP to IFRS has affected the reported financial position, financial performance and cash flows of the Company, including the mandatory exceptions and optional exemptions under IFRS, is provided in Note 32 to these consolidated financial statements.

These consolidated financial statements were approved by the Company's Board of Directors on August 28, 2012.

Functional and presentation currency
The Company's consolidated financial statements are presented in Canadian dollars, which is the Company's functional and presentation currency.

Foreign currency translation
Transactions denominated in foreign currencies are translated into the functional currency using the exchange rate applying at the transaction date. Non-monetary assets and liabilities denominated in foreign currencies are recognized at the historical exchange rate applicable at the transaction date. Monetary assets and liabilities dominated in foreign currencies are translated at the exchange rate applying at the balance sheet date. Foreign currency differences related to operating activities are recognized in earnings from operations for the period; foreign currency differences related to financing activities are recognized within net financial income.

Basis of Measurement
These consolidated financial statements are prepared in accordance with the historical cost model, except for certain categories of assets and liabilities, which are measured in accordance with other methods provided for by IFRS as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for assets.

Use of Estimates and Judgements
The preparation of the consolidated financial statements in conformity with IFRS requires management to make certain judgements, estimates and assumptions that affect the application of accounting policies, the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. These estimates are made on the assumption the Company will continue as a going concern and are based on information available at the time of preparation. Estimates may be revised where the circumstance on which they were based change or where new information becomes available. Future outcomes can differ from these estimates.

Judgement is commonly used in determining whether a balance or transaction should be recognized in the consolidated financial statements and estimates and assumptions are more commonly used in determining the measurement of recognized transactions and balances. However, judgement and estimates are often interrelated.

The Company has applied judgement in its determining the tax rates used for measuring deferred taxes and identifying the indicators of impairment for property and equipment, goodwill and intangible assets. In the absence of standards or interpretations applicable to a specific transaction, management uses its judgement to define and apply accounting policies that provide relevant and reliable information in the context of the preparation of the financial statements.

Estimates are used when estimating the useful lives of property and equipment and intangible assets for the purpose of depreciation and amortization, when accounting for or measuring items such as allowances for uncollectible accounts receivable and inventory obsolescence, assumptions underlying the actuarial determination of provision for pensions, income and other taxes, provisions, certain fair value measures including those related to the valuation of share-based payments and financial instruments, and when testing goodwill, intangible assets and other assets for impairment. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

3. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to all years presented in these consolidated financial statements.

Basis of Consolidation
Subsidiaries are entities controlled by the Company. Control exists where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the Company's consolidated financial statement from the date that the control commences until the date that control ceases.

Intra-company balances and transactions and any unrealized income and expenses arising from intra-company transactions are eliminated in preparing the consolidated financial statements.

Deposits in Cash Management Pools
Corby participates in a cash pooling arrangement under a Mirror Netting Services Agreement together with PR's other Canadian affiliates, the terms of which are administered by the Bank of Nova Scotia. The Mirror Netting Services Agreement acts to aggregate each participant's net cash balance for the purposes of having a centralized cash management function for all of PR's Canadian affiliates, including Corby.

Corby accesses these funds on a daily basis and has the contractual right to withdraw these funds or terminate these cash management arrangements upon providing five days' written notice.

Inventories
Inventories are measured at the lower of cost (acquisition cost and cost of production, including indirect production overheads) and net realizable value. Net realizable value is the selling price less the estimated cost of completion and sale of the inventories. Most inventories are valued using the average cost method. The cost of long-cycle inventories is calculated using a single method which includes distilling and ageing maturing costs but excludes finance costs. These inventories are classified in current assets, although a substantial part remains in inventory for more than one year before being sold in order to undergo the ageing maturing process used for certain spirits.

Property and equipment
Property and equipment are recognized at acquisition cost and broken down by component. Cost includes expenditures that are directly attributable to the acquisition of the asset.

Depreciation is calculated on a straight-line basis over the estimated useful life of the assets. Land is not depreciated. Useful life and depreciation methods are reviewed at each reporting date. Items of property and equipment are written down when impaired

The range of depreciable lives for the major categories of property and equipment are as follows:

Buildings

40 to 50 years

Machinery and equipment

3 to 12 years

Casks

12 years

Other

3 to 20 years

Depreciation of property and equipment is recognized within earnings from operations. The Company commences recognition of depreciation in earnings when the item of property and equipment is ready for its intended use.

Gains and losses on disposal of an item of property and equipment are determined by comparing the proceeds from disposal with the carrying amount of property and equipment and are recognized net, within earnings from operations.

Fully-depreciated items of property and equipment that are still in use continue to be recognized in the cost and accumulated depreciation.

The cost of replacing part of an item of property and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company and its cost can be measured reliably. The carrying amount of the replaced part is de-recognized. The costs of repairs and maintenance of property and equipment are recognized in earnings from operations as incurred.

Leases
The Company leases certain premises and equipment. Terms vary in length and typically permit renewal for additional periods. These leases are classified as operating leases under which minimum rent, including scheduled escalations, is expensed on a straight-line basis over the term of the lease.

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. The Company currently has no financing leases.

Goodwill
Goodwill arising in a business combination is recognized as an asset at the date that control is acquired. For acquisitions on or after July 1, 2010, goodwill is measured as the excess of the sum of the fair value of the consideration transferred over the fair value of the identifiable assets acquired less the fair value of the liabilities assumed. Goodwill is tested for impairment at least annually and whenever there is an indication that the asset may be impaired.

As described in Note 32, as part of its transition to IFRS, the Company elected to apply IFRS 3 - Business Combinations ("IFRS 3"), only to those business combinations that occurred on or after July 1, 2010. In respect of acquisitions prior to July 1, 2010, goodwill represents the amount recognized under Canadian GAAP.

Goodwill is measured at cost less any accumulated impairment losses.

Intangible Assets
Intangible assets are comprised of long-term representation rights and trademarks and licenses:

(i) Long-term Representation Rights

Long-term representation rights represent the cost of the Company's exclusive right to represent PR's brands in Canada. These representation rights are carried at cost, less accumulated amortization. Amortization is provided for on a straight-line basis over the 15-year term of the agreement, which began on October 1, 2006, and is scheduled to expire on September 30, 2021 and recognized within earnings from operations.

(ii) Trademarks and licences

Trademarks and licences represent the value of trademarks and licences of businesses acquired and are measured at cost on initial recognition. These intangible assets are deemed to have an indefinite life and are, therefore, not amortized. Trademarks and licences are tested for impairment on an annual basis or more frequently if events or changes in circumstances indicate that the assets might be impaired.

Impairment

(i) Financial Assets

A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have occurred that have had a negative effect on the estimated future cash flows of that asset.

Objective evidence that a financial asset is impaired includes, but is not limited to, default or delinquency by a debtor, restructuring of an amount due to the Company on terms the Company would not consider otherwise, indicators the debtor will enter bankruptcy, or adverse changes in the status of the debtor's economic conditions.

An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows, discounted at the original effective interest rate.

Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.

All impairment losses are recognized in net earnings.

(ii) Non-financial assets

The carrying amount of the Company's non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indications exist, the asset's recoverable amount is estimated.

Intangible assets and property and equipment are subject to impairment tests whenever there is an indication that the value of the asset has been impaired and at least once a year for non-current assets with indefinite useful lives (goodwill and trademarks and licences).

Assets subject to impairment tests are included in Cash-Generating Units ("CGUs"), corresponding to linked groups of assets, which generate identifiable cash flows. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. CGUs to which goodwill has been allocated are aggregated so that the level at which impairment testing is performed reflects the lowest level at which goodwill is monitored for internal reporting purposes. When the recoverable amount of a CGU is less than its carrying amount, an impairment loss is recognized within earnings from operations. The recoverable amount of the CGU is the higher of its fair value less costs to sell and its value in use.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. Projected cash flows are discounted to present based on annual budgets and multi-year strategies, extrapolated into subsequent years based on the medium and long-term trends for each market and brand. The calculation includes a terminal value derived by capitalizing the cash flows generated in the last forecasted year. Assumptions applied to sales and advertising spending are determined by management based on previous results and long-term development trends in the markets concerned. The present values of discounted cash flows are sensitive to these assumptions as well as to consumer trends and economic factors.

Fair value is based either on the sale price, net of selling costs, obtained under normal market conditions or earnings multiples observed in recent transactions concerning similar assets.

Impairment losses are recognized in the statement of earnings. Impairment losses recognized in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. With respect to other assets, impairment losses recognized in prior periods are assessed at each reporting date for any indicators that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the carrying amount of the assets does not exceed the carrying amount that would have been determined, net of depreciation and amortization, if no impairment loss had been recognized.

Provisions
Provisions are recognized when there is a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and that obligation can be measured reliably. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the risk specific to the liability. Provisions are reviewed on a regular basis and adjusted to reflect management's best current estimates. Due to the judgmental nature of these items, future settlements may differ from amounts recognized. Provisions notably include: provisions for pensions and provisions for uncertain tax positions.

Provisions for pensions
The Company maintains registered defined benefit pension plans under which benefits are available to certain employee groups. The Company also makes supplementary retirement benefits available to certain employees under a non-registered defined benefit pension plan. The Company also provides a defined contribution plan.

(i) Defined Benefit Plans

For defined benefit plans, the projected unit credit method is used to measure the present value of defined benefit obligations, current service cost and, if applicable, past service cost. The measurement is made at each balance sheet date and the personnel data concerning employees is revised at least every three years. The calculation requires the use of economic assumptions (inflation rate, discount rate, expected return on plan assets) and assumptions concerning employees (mainly: average salary increase, rate of employee turnover, life expectancy). Plan assets are measured at their market value at each annual balance sheet date. The provision in the balance sheet corresponds to the discounted value of the defined benefit obligation, adjusted for unrecognized past service cost and unrecognized actuarial gains and losses, and net of the fair value of plan assets. Actuarial gains and losses mainly arise where estimates differ from actual outcomes (for example between the expected value of plan assets and their actual value at the balance sheet date) or when changes are made to long-term actuarial assumptions (for example: discount rate, rate of increase of salaries). Actuarial gains and losses are only recognized when, for a given plan, they represent more than 10% of the greater of the present value of the benefit obligation and the fair value of plan assets at the end of the prior year (termed the "corridor" method). Recognition of the provision is on a straight-line basis over the average number of remaining years' service of the employees in the plan in question (amortization of actuarial gains and losses).

The expense recognized in respect of the benefit obligation described above incorporates:

expenses corresponding to the acquisition of an additional year's rights;
interest costs;
income corresponding to the expected return on plan assets;
income or expense corresponding to the amortization of actuarial gains and losses;
past service costs; recognized on a straight-line basis over the average residual period until the corresponding benefits vest with employees;
income or expense related to changes to existing plans or the creation of new plans;
income or expense related to any plan curtailments or settlements.

The expense arising from the change in net obligations for pensions and other long-term employee benefits is recognized within earnings from operations or within net financial income on the basis of the nature of the underlying balances

(ii) Defined contributions plans

Contributions are recognized as expenses when the employees have rendered services. As the Company is not committed beyond the amount of such contributions, no provision is recognized in respect of defined contribution plans.

Income Taxes
Income tax expense comprises current and deferred income tax. Income tax expense is recognized in net earnings except to the extent that it relates to items recognized either in other comprehensive income or directly in equity, in which case it is recognized in other comprehensive income or in equity, respectively.

Current income tax expense comprises the tax payable on the taxable income for the current financial year using tax rates enacted or substantively enacted at the reporting date, and any adjustment to income taxes payable in respect of previous years.

Deferred tax is recognized on temporary differences between the tax and book value of assets and liabilities in the consolidated balance sheet and is measured using the balance sheet approach. Deferred tax is measured at the tax rates that are expected to apply to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset the recognized amounts and the Company intends to settle on a net basis or to realize the asset and settle the liability simultaneously.

A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences to the extent that it is probable that future taxable earnings will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that all or part of the related tax benefit will be realized.

In determining the amount of current and deferred tax the Company takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due. The Company believes that its accruals for tax liabilities are adequate for all open tax years based on its assessment of many factors, including interpretations of tax law and prior experience. This assessment relies on estimates and assumptions and may involve a series of judgements about future events. New information may become available that causes the Company to change its judgement regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense in the period that such a determination is made.

Revenue Recognition
Revenue is comprised of case good sales, commissions and revenues from ancillary activities and is measured at the fair value of the consideration received or to be received, after deducting trade discounts, volume rebates and sales-related taxes and duties. Sales are recognized when the significant risks and rewards of ownership have been transferred, generally at the date of transfer of ownership title.

(i) Costs of services rendered in connection with sales

In accordance with IAS 18 - Revenue ("IAS 18"), certain costs of services rendered in connection with sales, such as advertising programmes in conjunction with distributors, listing costs for new products, and promotional activities at point of sale, are deducted directly from sales if there is no separately identifiable service whose fair value can be reliably measured.

(ii) Commissions

When the Company acts in the capacity of an agent rather than as the principal in a transaction, the revenue recognized is the net amount of commissions made by the Company. Commissions are reported net of long-term representation rights amortization. The long-term representation rights represent the Company's exclusive right to represent PR's brands in Canada and are being amortized over the 15-year term of the agreement.

(iii) Interest

Interest income is recognized on an accrual basis using the effective interest method. Primarily interest income is earned on deposits in cash management pools.

Stock-Based Compensation Plans
The Company utilizes a Restricted Share Units Plan as its 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 a 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.

Earnings per Common Share
The Company presents basic and diluted earnings per share ("EPS") amounts for its common shares. Basic and diluted EPS is calculated by dividing the net earnings attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the period. Dilutive EPS is calculated by adjusting the net income attributable to shareholders and the weighted average number of shares outstanding for the effect of potentially dilutive shares. There are no potentially dilutive shares as at June 30, 2012.

Classification of Financial Instruments
Financial instruments are classified into one of the following five categories: fair value through profit or loss, held-to-maturity investments, loans and receivables, available-for-sale financial assets, or other financial liabilities. The classification determines the accounting treatment of the instrument. The classification is determined by the Company when the financial instrument is initially recorded, based on the underlying purpose of the instrument.

Corby's financial assets and liabilities are classified and measured as follows:



Financial Asset/Liability	Category	Measurement

Deposits in cash management pools	Loans and receivables	Amortized cost
Accounts receivable and note receivable	Loans and receivables	Amortized cost
Accounts payable and accrued liabilities	Other financial liabilities	Amortized cost

Financial instruments measured at amortized cost are initially recognized at fair value plus any directly attributable transaction costs and then, subsequently, at amortized cost using the effective interest method, less any impairment losses, with gains and losses recognized in earnings in the period in which the gain or loss occurs.

All financial assets are recognized and derecognized on the trade date. A financial asset is derecognized when the contractual rights to the cash flows from the asset expired or when the Company transferred the financial asset to another party without retaining control or substantially all the risks and rewards of ownership of the asset. Any interest in transferred financial assets that is created or retained by the Company is recognized as a separate asset or liability.

A financial liability is derecognized when its contractual obligations are discharged, cancelled or expire.

Common shares issued by the Company are recorded in the amount of the proceeds received, net of direct issues costs.

Transaction costs are added to the initial fair value of financial assets and liabilities when those financial assets and liabilities are not measured at fair value subsequent to initial measurement. Transaction costs are amortized to net earnings, in finance expense, using the effective interest method.

Segmented Reporting
An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company's other operations. Segment operating results are reviewed regularly by the Company's CEO to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

Recent accounting pronouncements
A number of new standards, amendments to standards and interpretations have been issued but are not yet effective for the financial year ending June 30, 2012, and accordingly, have not been applied in preparing these consolidated financial statements:

(i) Deferred Taxes - Recovery of Underlying Assets

(ii) Presentation of Financial Statements

(iii) Consolidated Financial Statements

In May 2011 the IASB issued IFRS 10, "Consolidated Financial Statements" ("IFRS 10"), IFRS 11, "Joint Ventures" ("IFRS 11"), and IFRS 12, "Disclosure of Interest in Other Entities" ("IFRS 12"). In addition, the IASB amended IAS 27, "Consolidated and Separate Financial Statements" ("IAS 27") and IAS 28, "Investments in Associates and Joint Ventures" ("IAS 28"). The objective of IFRS 10 is to define the principles of control and establish the basis of determining when and how an entity should be included within a set of consolidated financial statements. IFRS 11 establishes principles to determine the type of joint arrangement and guidance for financial reporting activities required by entities that have an interest in an arrangement that is jointly controlled. IFRS 12 enables users of the financial statements to evaluate the nature and risks associated with its interest in other entities and the effects of those interests on its financial performance.

(iv) Fair Value Measurement

(v) Employee Benefits

(vi) Financial Instruments

4. FINANCIAL INSTRUMENTS

Corby's financial instruments consist of its deposits in cash management pools, accounts and note receivable and accounts payable and accrued liabilities balances. Corby does not use derivative financial instruments.

Financial Risk Management Objectives and Policies
In the normal course of business, the Company is exposed to financial risks that have the potential to negatively impact its financial performance. The Company does not use derivative financial instruments to manage these risks, as management believes that the risks arising from the Company's financial instruments are already at an acceptably low level. These risks are discussed in more detail below.

Credit Risk
Credit risk arises from cash held with PR via Corby's participation in the Mirror Netting Services Agreement (further described in Note 27), as well as credit exposure to customers, including outstanding accounts and note receivable. The maximum exposure to credit risk is equal to the carrying value of the financial assets.

The objective of managing counter-party credit risk is to prevent losses in financial assets. The Company assesses the credit quality of its counter-parties, taking into account their financial position, past experience and other factors.

As the large majority of Corby's accounts receivable balances are collectable from government-controlled liquor boards, management believes that the Company's credit risk relating to accounts receivable is at an acceptably low level. With respect to Corby's deposits in PR's cash management pools, the Company monitors PR's credit rating in the normal course of business and has the right to terminate its participation in the Mirror Netting Services Agreement at any time, subject to five days' written notice. The note receivable is secured as described in Note 8.

Liquidity Risk
Corby's sources of liquidity are its deposits in cash management pools of $110,113 and its cash generated by operating activities. Corby's total contractual maturities are represented by its accounts payable and accrued liabilities balances which totaled $22,400 as at June 30, 2012, and are all due to be paid within one year. The Company believes that its deposits in cash management pools, combined with its historically strong and consistent operational cash flows, is more than sufficient to fund its operations, investing activities and commitments for the foreseeable future.

Corby does not have any investments in asset-backed commercial paper ("ABCP") and, therefore, has no exposure to this type of liquidity risk.

Interest Rate Risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company does not have any short- or long-term debt facilities. Interest rate risk exists as Corby earns market rates of interest on its deposits in cash management pools and also has a note receivable earning a fixed rate of interest.

As the note receivable earns interest at a fixed rate, there is no cash flow exposure associated with this instrument. However, the fair value of the note receivable will fluctuate with changes in market interest rates.

An active risk management program does not exist, as management believes that changes in interest rates would not have a material impact on Corby's financial position over the long term.

Foreign Currency Risk
The Company has exposure to foreign currency risk as it conducts business in multiple foreign currencies; however, its exposure is primarily limited to the US dollar ("USD") and UK pound Sterling ("GBP"). Corby does not utilize derivative instruments to manage this risk. Subject to competitive conditions, changes in foreign currency rates may be passed on to consumers through pricing over the long-term.

GBP Exposure
The Company's supply of GBP outpaces demand, as Corby's sales into the UK market are denominated in GBP, while having only certain production inputs denominated in GBP. Therefore, increases in the value of the CAD relative to the GBP will have an unfavourable impact on the Company's earnings.

Commodity Risk
Commodity risk exists, as the manufacture of Corby's products requires the procurement of several known commodities such as grains, sugar and natural gas. The Company strives to partially mitigate this risk through the use of longer-term procurement contracts where possible. In addition, subject to competitive conditions, the Company may pass on commodity price changes to consumers via pricing.

Fair Value of Financial Instruments
The Company uses a fair value hierarchy in order to classify the fair value disclosures related to the Company's financial assets and financial liabilities recognized in the balance sheets at fair value.

The fair value hierarchy has the following levels:

Level 1 - Quoted market prices in active markets for identical assets or liabilities;
Level 2 - Inputs other than quoted market prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices); and
Level 3 - Unobservable inputs such as inputs for the asset or liability that are not based on observable market data.

The level in the fair value hierarchy within which the fair value measurement is categorized in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety.

The Company has no financial instruments carried at fair value on its balance sheet. For financial assets and liabilities that are valued at other than fair value on its balance sheets (i.e., deposits in cash management pools, accounts receivable, accounts payable and accrued liabilities), fair value approximates their carrying value at each balance sheet date due to their short-term maturities.

The carrying value of the note receivable approximates fair value. Fair value is determined using the present value of future cash flows, based on the estimated market rates for instruments with similar terms and conditions.

5. CAPITAL MANAGEMENT

The Company's objectives when managing capital are:

To ensure sufficient capital exists to allow management the flexibility to execute its strategic plans; and
To ensure shareholders receive a reasonable return on their investment in the form of quarterly dividends.

Management includes the following items in its definition of capital:



		June 30,		June 30,		July 1,
		2012		2011		2010

Share capital	$	14,304	$	14,304	$	14,304
Retained earnings		201,519		224,935		212,009

Net capital under management	$	215,823	$	239,239	$	226,313

The Company is not subject to any externally imposed capital requirements.

Beginning in fiscal 2013, the Company's dividend policy stipulates that, barring any unanticipated developments, regular dividends will be paid quarterly, on the basis of an annual amount equal to the greater of 75% of net earnings per share in the preceding fiscal year ended June 30, and $0.60 per share.

The Company is meeting all of its objectives and stated policies with respect to its management of capital.

6. ACCOUNTS RECEIVABLE



		June 30,		June 30,		July 1,
		2012		2011		2010

Trade receivables	$	19,722	$	21,398	$	22,144
Due from related parties		8,852		8,216		6,196
Other receivables		37		1,391		-

	$	28,611	$	31,005	$	28,340

As at June 30, 2011, other receivables included amounts owing from Brick Brewing Co., Limited for inventory transferred as part of the sale of the Seagram Coolers brand, and also includes interest accrued on the secured promissory note receivable also due from Brick Brewing Co., Limited as described in Note 8 of these financial statements. The amount owing from Brick related to inventory was paid in full during the year ended June 30, 2012.

7. INVENTORIES



		June 30,		June 30,		July 1,
		2012		2011		2010

Raw materials	$	1,597	$	5,429	$	6,390
Work-in-progress		40,703		45,079		43,990
Finished goods		5,460		9,146		10,122

	$	47,760	$	59,654	$	60,502

The cost of inventory recognized as an expense and included in cost of goods sold during the year ended June 30, 2012 was $50,373 (2011 - $60,010). During the current and prior year, there were no significant write-downs of inventory as a result of net realizable value being lower than cost, and no inventory write-downs recognized in previous years were reversed.

8. NOTE RECEIVABLE



		June 30,		June 30,		July 1,
		2012		2011		2010

Note receivable	$	1,800	$	2,400	$	-
Less: current portion		600		600		-

	$	1,200	$	1,800	$	-

As part of the Company's sale of the Seagram Coolers brand on March 15, 2011, the purchase price was satisfied in part by a promissory note secured by specific property and issued by the purchaser in favour of Corby for $2,400, which will be paid in equal annual instalments of $600 plus interest of 5% per annum, with the final payment due January 31, 2015. The disposal transaction is further described in Note 19 to these consolidated financial statements.

9. PROPERTY AND EQUIPMENT



		July 1,								June 30,
		2011		Additions		Depreciation		Disposals		2012

Land	$	638	$	-	$	-	$	(638)	$	-
Buildings		8,125		39		-		(7,268)		896
Machinery and equipment		14,395		792		-		(10,591)		4,596
Casks		6,122		799		-		(222)		6,699
Other		455		18		-		(273)		200
Gross value		29,735		1,648		-		(18,992)		12,391

Land		-		-		-		-		-
Buildings		(5,106)		-		(130)		4,912		(324)
Machinery and equipment		(7,049)		-		(516)		5,332		(2,233)
Casks		(1,752)		-		(478)		69		(2,161)
Other		(182)		-		(33)		66		(149)
Accum. depreciation		(14,089)		-		(1,157)		10,379		(4,867)

Property, plant and equipment	$	15,646	$	1,648	$	(1,157)	$	(8,613)	$	7,524


		July 1,								June 30,
		2010		Additions		Depreciation		Disposals		2011

Land	$	638	$	-	$	-	$	-	$	638
Buildings		7,931		194		-		-		8,125
Machinery and equipment		13,954		1,359		-		(918)		14,395
Casks		5,387		735		-		-		6,122
Other		538		-		-		(83)		455
Gross value		28,448		2,288		-		(1,001)		29,735

Land		-		-		-		-		-
Buildings		(4,864)		-		(242)		-		(5,106)
Machinery and equipment		(6,765)		-		(992)		708		(7,049)
Casks		(1,331)		-		(421)		-		(1,752)
Other		(250)		-		(38)		106		(182)
Accum. depreciation		(13,210)		-		(1,693)		814		(14,089)

Property, plant and equipment	$	15,238	$	2,288	$	(1,693)	$	(187)	$	15,646

10. GOODWILL

Changes in the carrying amount of goodwill are as follows:



		2012		2011

Balance, beginning of year	$	5,886	$	6,857
Decreases in goodwill		(2,608)		(971)

Balance, end of year	$	3,278	$	5,886

The decrease in goodwill recognized in fiscal 2012 was the result of the sale of certain brands included with the disposal of the Montreal manufacturing facility and non-core brands as described in Note 19 of these financial statements. In 2011, the decrease relates to the sale of Seagram Coolers, also described in Note 19. There have been no impairment losses recognized with respect to Goodwill during 2012 (2011 -$nil).

11. INTANGIBLE ASSETS

											2012

			Movements in the Year
		Opening									Ending
		Book Value			Amortization		Impairments		Disposals		Book Value

Long-term representation rights	$	46,501		$	(4,531)	$	-	$	-	$	41,970
Trademarks and licenses		11,801			-		-		-		11,801

	$	58,302		$	(4,531)	$	-	$	-	$	53,771

											2011

			Movements in the Year
		Opening									Ending
		Book Value			Amortization		Impairments		Disposals		Book Value

Long-term representation rights	$	51,032		$	(4,531)	$	-	$	-	$	46,501
Trademarks and licenses		19,539			-		-		(7,738)		11,801

	$	70,571		$	(4,531)	$	-	$	(7,738)	$	58,302

Disposals in fiscal 2011 reflect the Company's decision to sell the trademark and licenses associated with Seagram Coolers, as described in Note 19 of these financial statements. There have been no impairment losses recognized with respect to intangible assets during 2012 (2011- $nil).

12. IMPAIRMENT

In accordance with the Company's accounting policies, the Company tests goodwill and indefinite-lived intangibles (trademarks and licences) for impairment on an annual basis. The carrying value of goodwill and indefinite-lived intangibles at June 30, 2012, along with the data and assumptions applied to the Cash Generating Units ("CGUs") of the Case Goods Segment are as follows:

Carrying

Value

Terminal

Value

Trademarks

Discount

Growth

Goodwill

& Licences

Rate

Case Goods Segment

3,278

11,801

7.8% to 11.5%

2% to 3%

The Company's commissions segment has no goodwill or indefinite lived intangibles.

For purposes of impairment testing, goodwill and intangibles with an indefinite life (trademarks and licences) were allocated to the group of CGUs which represent the lowest level within the group at which the goodwill is monitored for internal management purposes.

During the financial year ended June 30, 2012, the Company performed impairment testing on goodwill and indefinite-lived intangible assets in accordance with its accounting policy and identified no impairment.

The discount rate used for these calculations is a pre-tax rate which corresponds to the weighted average cost of capital. Different discount rates were used to allow for risks specific to certain markets or geographical areas in calculating cash flows. Assumptions made in terms of future changes in sales and of terminal values are reasonable and in accordance with market data available for each of the CGUs. Additional impairment tests are applied where events or specific circumstances suggest that a potential impairment exists.

A 50 basis points ("bp") increase in the discount rates would result in no impairment to goodwill or the indefinite-lived intangibles. A 50bp decrease in the terminal growth rate would result in no impairment to goodwill or indefinite-lived intangibles.

13. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES


		June 30,		June 30,		July 1,
		2012		2011		2010

Trade payables and accruals	$	16,584	$	13,375	$	12,554
Due to related parties		5,816		6,117		5,731

	$	22,400	$	19,492	$	18,285

14. PROVISIONS

Provisions include the provisions for uncertain tax risks and pensions and other long-term employee benefits. See Note 15 for details of changes in provision for pensions for the year ended June 30, 2011. Provision for uncertain tax risk is included in "Income and other taxes payable," in the amount of $1,000 at June 30, 2012 (at June 30, 2011 and July 1, 2010 - $1,000). There was no activity in this balance during the course of the year.

15. PROVISION FOR PENSIONS

The Company has two defined benefit pension 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 care 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 December 31, 2010. The next required valuations must be completed with an effective date no later than December 31, 2013.

Employees hired after July 1, 2010 are no longer offered enrolment into the Company's defined benefit pension plans. Instead, the Company provides these employees a defined contribution pension plan. To become eligible, most employees must first accrue one year of service before joining the new plan. For the year ended June 30, 2012, the Company recognized contributions of $63 as expense (2011 - $nil as the plan had no active participants at June 30, 2011).

Details of the Company's defined benefit pension and other post-retirement benefit plans as at and for the years ended June 30, 2012 and 2011 are as follows:



				2012			2011
			Pension	Other Benefit		Pension			Other Benefit
			Plans	Plans		Plans			Plans

Fair value of plan assets
Fair value of plan assets, beginning of year		$	46,380	$	-	$	43,478	$	-
	Expected return on plan assets		2,336		-		2,140		-
	Actuarial (loss) /gain on plan assets		(1,795)		-		1,484		-
	Company contributions		1,637		-		2,920		-
	Plan participants' contributions		205		-		221		-
	Settlement		(2,495)		-		-		-
	Benefits paid		(2,798)		-		(3,863)		-

Fair value of plan assets, end of year		$	43,470	$	-	$	46,380	$	-

Present value of defined benefit obligation
Defined benefit obligation, beginning of year		$	48,279	$	11,613	$	46,226	$	13,490
	Current service cost		1,534		286		1,380		341
	Interest cost		2,358		532		2,441		604
	Curtailment		(1,231)		(1,525)		-		-
	Settlement		(2,435)		-		-		-
	Plan participants' contributions		205		-		221		-
	Actuarial loss (gain)		7,968		239		1,927		(2,131)
	Benefits paid		(2,848)		(668)		(3,916)		(691)
Present value of the defined benefit obligations, end of year		$	53,830	$	10,477	$	48,279	$	11,613
Present value of funded status			10,360		10,477		1,899		11,613
	Unrecognized actuarial (losses) / gains	(11,399)			58		(2,321)		173
	Unrecognized past service costs	-			1,054	-			1,306

Net defined benefit (asset) / liability		$	(1,039)	$	11,589	$	(422)	$	13,092

Only the Company's pension plans are partially funded. For the fiscal year ending June 30, 2013 total Company contributions to the pension plans is expected to be $1,693.

The table below presents a roll-forward of the net defined benefit liability:


		2012		2011

Defined benefit liability
Net defined benefit liability, beginning of year	$	12,670	$	14,175
Expenses for the period		2,407		2,160
Curtailment and settlement		(2,168)		-
Employer contributions		(1,637)		(2,920)
Benefits paid directly by the employer		(722)		(745)

Net defined benefit liability, end of year	$	10,550	$	12,670

The curtailment and settlement was recognized as part of the sale of the Montreal manufacturing facility as described in Note 19 of these financial statements and included in earnings from operations under "Disposal Transactions."

Significant actuarial assumptions adopted for the year ended June 30, 2012 and 2011 are as follows:

2012

2011

Pension

Other Benefit

Pension

Other Benefit

Plans

Accrued benefit obligation, end of year

Discount rate

4.2%

5.5%

Compensation increase

3.0 - 3.5%

N/A

3.5%

N/A

Benefit expense, for the year

Discount rate

5.2%

5.2%

Expected long term return on assets

3.5 - 6.5%

N/A

6.3%

N/A

Compensation increase

3.5 - 4.0%

N/A

3.5%

N/A

The medical cost trend rate used was 8.0% for 2012 (2011 - 9%), with 5.0% being the ultimate trend rate for 2014 and years thereafter. The dental cost trend rate used was 5.0% for 2012 (2011 - 5.0%).

The experience adjustments are as follows:


					2012				2011
			Pension		Other Benefit		Pension		Other Benefit
			Plans		Plans		Plans		Plans

Asset experience adjustments
	Asset (loss)/gain during the year	$	(1,795)	$	-	$	1,484	$	-
Liability experience adjustments
	Liability (loss)/gain during the year	$	(845)	$	(1,336)	$	127	$	766
Liability assumptions
	Liability (loss)/gain during the year	$	(7,124)	$	1,097	$	(2,054)	$	(2,897)

The expected long-term rate of return on plan assets is determined based on asset mix, active management and a review of historical returns. The expected long-term rate of return is based on the portfolio as a whole and not on the sum of the individual asset categories. The actual return on plan assets for 2012 was 6.46%.

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:


				2012				2011

		Increase		Decrease		Increase		Decrease

Service and interest cost	$	155	$	(121)	$	155	$	(121)
Accrued benefit obligation		1,197		(964)		1,451		(1,189)

The net expense (income) recognized in profit and loss in respect of defined benefit pensions and other long-term employee benefits are broken down as follows:


		2012		2011

Net defined benefit pension expense recognized in profit and loss for the year
Service cost	$	1,820	$	1,721
Interest costs		2,890		3,045
Expected return on plan assets		(2,336)		(2,140)
Amortization of past service cost		(103)		(529)
Amortization of actuarial losses		136		63

Net expense recognized in profit and loss	$	2,407	$	2,160

Plan assets by category were as follows:


	2012	2011

Equity	48.0%	52.0%
Fixed income	42.0%	37.0%
Other	10.0%	11.0%

	100.0%	100.0%

16. INCOME TAXES


		2012		2011
Current income tax expense
Current period	$	13,101	$	12,328
Adjustments with respect to prior period tax estimates		(186)		(62)

	$	12,915	$	12,266

Deferred income tax expense
Origination and reversal of temporary differences	$	723	$	991
Change in tax rate		(73)		3
Impact of disposal transactions		449		(1,158)
Adjustments with respect to prior period tax estimates		140		(133)

	$	1,239	$	(297)

Total income tax expense	$	14,154	$	11,969

There are no capital loss carry-forwards available for tax purposes.

The Company's effective tax rates are comprised of the following items:


	2012			2011

Net earnings for the financial year	$	46,048		$	28,870
Total income tax expense		14,154			11,969
Earnings before income tax expense	$	60,202		$	40,839

Income tax using the combined Federal and Provincial
statutory tax rates		16,465	27.4%		11,843	29.0%

Non-deductible expenses		145	0.2%		330	0.8%
Net capital gains		(2,765)	(4.6%)		-	0.0%
Adjustments with respect to prior period tax estimates		(46)	(0.1%)		(195)	(0.5%)
Other		355	0.6%		(9)	(0.0%)

Effective income tax rate	$	14,154	23.5%	$	11,969	29.3%

Deferred tax assets (liabilities) are broken down by nature as follows:


		July 1,	Recognized in					June 30,
		2011		Earnings		Equity		2012
Provision for pensions	$	3,476	$	(462)	$	-	$	3,014
Property, plant and equipment		(2,051)		987		-		(1,064)
Inventory		(581)		42		-		(539)
Intangibles		(750)		(1,857)		-		(2,607)
Other		162		51		-		213

	$	256	$	(1,239)	$	-	$	(983)


		July 1,	Recognized in					June 30,
		2010		Earnings		Equity		2011
Provision for pensions	$	3,895	$	(419)	$	-	$	3,476
Property, plant and equipment		(1,772)		(279)		-		(2,051)
Inventory		(681)		100		-		(581)
Intangibles		(1,618)		868		-		(750)
Other		135		27		-		162

	$	(41)	$	297	$	-	$	256

17. SHARE CAPITAL

June 30,

June 30,

July 1,

2012

2011

2010

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

4,194,536

4,194,536

28,468,856

28,468,856

Stated value

14,304

14,304

18. REVENUE

The Company's revenue consists of the following streams:


		2012		2011

Case good sales	$	110,857	$	118,381
Commissions (net of amortization of representation rights)		16,314		15,246
Other services		19,575		25,939

	$	146,746	$	159,566

Commissions for the year are shown net of the long-term representation rights amortization of $4,531, (2011 - $4,531). Other services include revenues incidental to the manufacture of case goods, such as contract bottling revenues, logistics fees and miscellaneous bulk spirit sales.

19. DISPOSAL TRANSACTIONS

Sale of Montreal manufacturing facility and non-core brands

On October 31, 2011, the Company completed a transaction to sell the shares of the wholly-owned subsidiary that owned the manufacturing and bottling facility located in Montreal, Quebec. The transaction resulted in the sale of 17 brands, as well as the Montreal-based manufacturing facility where a significant portion of the brands were produced, for a total purchase price of $39,660; including the cost of inventory and other working capital items associated with the brands and manufacturing facility sold. The transaction resulted in a gain on sale recorded as follows:


	For the year ended
	June 30, 2012

Proceeds, including inventory and other working capital items		$	39,660

Book value of assets sold, including inventory and other working capital items			(17,820)
Curtailment gain and settlement with respect to employee benefit plans			2,168
Transaction costs			(2,476)

Gain on sale before income taxes			21,532
Income taxes			(3,855)

Net gain on sale		$	17,677

The sale agreement contains customary representations, warranties and covenants. In addition, as part of the agreement, Corby agreed to indemnify, the purchaser, Sazerac Company, Inc. ("Sazerac") in respect of a misrepresentation, breach of covenant, pre-closing liabilities and certain environmental matters. Based on current facts and circumstances, no material liability is anticipated in respect of this indemnification, and no provision has been made in the financial results for this contingency.

Sale of Seagram Coolers

On March 16, 2011, the Company entered into an agreement with Brick Brewing Co. Ltd ("Brick"), pursuant to which Brick purchased from Corby the Canadian rights to the Seagram Coolers brand, for a purchase price of $7,300.

The transaction resulted in a loss on sale during the year ended June 30, 2011, as follows:


	For the year ended
	June 30, 2011

Proceeds		$	7,300

Book value of assets sold			(9,061)
Transaction costs			(472)

Loss on sale before income taxes			(2,233)
Income taxes			500

Net loss on sale		$	(1,733)

20. OTHER INCOME AND EXPENSE

The Company's other income (expense) consist of the following amounts:


		2012		2011

Foreign exchange gains (losses)	$	61	$	(115)
Gains (losses) on disposal of property and equipment		175		(52)
Amortization of actuarial (losses) gains under defined benefit plans		(34)		466

	$	202	$	299

21. NET FINANCIAL INCOME

The Company's financial income (expense) consists of the following amounts:


		2012		2011

Interest income	$	1,963	$	1,308
Interest expense		(58)		(20)
Net financial impact of pensions		(554)		(905)

	$	1,351	$	383

22. EXPENSES BY NATURE

Earnings from operations include depreciation and amortization, as well as personnel expenses as follows:


		2012		2011

Depreciation of property and equipment	$	1,157	$	1,693
Amortization of intangible assets		4,531		4,531
Salary and payroll costs		21,689		23,083
Expenses related to pensions and benefits		1,852		1,721

	$	29,229	$	31,028

23. RESTRICTED SHARE UNITS PLAN

2012

2011

Weighted

Restricted

Average

Restricted

Average

Grant Date

Units

Fair Value

Units

Fair Value

Non-vested, beginning of year

53,768

17.17

57,414

21.73

Granted

23,012

15.89

24,474

15.10

Reinvested dividend equivalent units

7,412

16.42

2,044

16.07

Vested

(28,434)

19.38

(30,164)

24.09

Non-vested, end of year

55,758

15.42

53,768

17.17

Compensation expense related to this plan for the year ended June 30, 2012, was $332 (2011 - $292).

24. EARNINGS PER SHARE

The following table sets forth the numerator and denominator utilized in the computation of basic and diluted earnings per share:


			2012		2011

Numerator:
	Net earnings	$	46,048	$	28,870
Denominator:
	Weighted average shares outstanding		28,468,856		28,468,856

25. NET CHANGE IN NON-CASH WORKING CAPITAL BALANCES


		2012		2011

Accounts receivable	$	2,394	$	(2,665)
Inventories		5,677		555
Prepaid expenses		1,176		(180)
Income tax and other taxes recoverable / payable		(627)		455
Accounts payable and accrued liabilities		4,993		878

	$	13,613	$	(957)

26. DIVIDENDS

On August 29, 2012 subsequent to the year ended June 30, 2012, the Board of Directors declared its regular quarterly dividend of $0.15 per common share, to be paid on September 15, 2012, to shareholders of record as at the close of business on September 30, 2012. This dividend is in accordance with the Company's dividend policy.

27. RELATED PARTY TRANSACTIONS

Transactions with parent, ultimate parent, and affiliates
The majority of Corby's issued and outstanding voting Class A shares are owned by HWSL. HWSL is a wholly-owned subsidiary of PR. Therefore, HWSL is Corby's parent and PR is Corby's ultimate parent. Affiliated companies are subsidiaries which are controlled by Corby's parent and/or ultimate parent.

On November 9, 2011, the Company announced that it has entered into an agreement with PR for a new term for Corby's exclusive right to represent ABSOLUT vodka and Plymouth gin brands in Canada from September 30, 2013 to September 29, 2021, which is consistent with the term of Canadian representation for the other PR brands in Corby's portfolio. Under the agreement, Corby will pay the present value of $10 million for the additional eight years of the new term to PR at its commencement.

Related party transactions are recorded at the exchange amount. Transactions between Corby and its parent, ultimate parent and affiliates during the period are as follows:


		2012		2011

Sales to related parties
Commissions - parent, ultimate parent and affiliated companies	$	17,680	$	16,650
Blending and bottling services - parent		217		227
Products for resale at an export level - affiliated companies		450		393
Bulk spirits - parent		174		-

	$	18,521	$	17,270

Cost of goods sold, purchased from related parties
Distilling, blending, and production services - parent	$	18,562	$	20,371
Bulk spirits - parent		700		1,807

	$	19,262	$	22,178

Administrative services purchased from related parties
Marketing, selling and administraton services- parent	$	2,044	$	2,118

Balances outstanding with related parties are due within 60 days, are to be settled in cash and are unsecured.

Corby has a number of defined benefit pension plans; for the year ending June 30, 2012, contributions to these plans totaled $1,637, (2011 - $2,920), respectively.

During the year ending June 30, 2012, Corby sold casks to its parent company for net proceeds of $277 (2011 - $nil).

Deposits in cash management pools
Corby participates in a cash pooling arrangement under the Mirror Netting Service Agreement together with PR's other Canadian affiliates, the terms of which are administered by The Bank of Nova Scotia. The Mirror Netting Services Agreement acts to aggregate each participant's net cash balance for the purposes of having a centralized cash management function for all of PR's Canadian affiliates, including Corby.

As a result of Corby's participation in this agreement, Corby's credit risk associated with its deposits in cash management pools is contingent upon PR's credit rating. PR's credit rating as at August 28, 2012, as published by Standard & Poor's and Moody's, was BBB- and Baa3, respectively. PR compensates Corby for the benefit it receives from having the Company participate in the Mirror Netting Services Agreement by paying interest to Corby based upon the 30-day LIBOR rate plus 0.40%. During the year ending June 30, 2012, Corby earned interest income of $1,759 from PR (2011 - $1,250). Corby has the right to terminate its participation in the Mirror Netting Services Agreement at any time, subject to five days' written notice.

Key management personnel
Key management personnel are those individuals having authority and responsibility for planning, directing and controlling the activities of the Company, including members of the Company's Board of Directors. The Company considers key management to be the members of the Board of Directors and the Senior Management Team (which includes the CEO, CFO, and Vice Presidents).

Key management personnel also participate in the company's RSU plan.

Key management personnel compensation is comprised of:


		2012		2011


Wages, salaries and short term employee benefits	$	4,054	$	3,470
Other long term benefits		344		329
Share-based payment transactions		363		403

	$	4,761	$	4,202

Certain members of the board and key management personnel are provided benefits and or salary and wages through the parent company or the ultimate parent company in addition to the amounts reported above.

28. 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 includes some of the most renowned and respected brands in Canada, such as Wiser's Canadian whisky, Lamb's rum, Polar Ice vodka, and McGuinness liqueurs.

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 ABSOLUT vodka, Chivas Regal, The Glenlivet and Ballantine's scotches, Jameson Irish whiskey, Beefeater gin, Malibu rum, Kahlúa liqueur, Mumm champagne, and Jacob's Creek and Wyndham Estate wines.

The Commissions segment's financial results are fully reported as "Commissions" in Note 18 of these consolidated statements. 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:

										2012
				United States		United		Rest of
		Canada		of America		Kingdom		World		Total

Revenue	$	137,438	$	4,555	$	4,291	$	462	$	146,746
Property, equipment and goodwill		9,392		-		1,410		-		10,802

										2011
				United States		United		Rest of
		Canada		of America		Kingdom		World		Total

Revenue	$	149,549	$	5,862	$	3,712	$	443	$	159,566
Property, equipment and goodwill		20,122		-		1,410		-		21,532

In 2012, revenue to three major customers accounted for 32%, 17% and 14%, respectively (2011 - 29%, 15%, and 14%).

29. COMMITMENTS

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


2013	$	1,804
2014		1,588
2015		1,300
2016		899
2017		705
Thereafter		775

	$	7,071

Total lease payments of $2,312 (2011 - $2,056) have been recognized as an expense in cost of sales and marketing, sales and administration.

30. 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 counter-parties in transactions such as leasing and service arrangements. These indemnification agreements require the Company to compensate the counter-parties 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.

31. 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.

32. EXPLANATION OF TRANSITION TO IFRS

As stated in Note 2, these are the Company's first consolidated financial statements prepared in accordance with IFRS. Prior to the adoption of IFRS, the Company prepared its financial statements in accordance with Canadian Generally Accepted Accounting Principles ("Canadian GAAP" or "previous GAAP").

The accounting policies set out in Note 3 to these consolidated financial statements have been applied in preparing the financial statements for the year ended June 30, 2012, the comparative information presented in these financial statements for the financial year ended June 30, 2011 and in the preparation of an opening IFRS balance sheet at July 1, 2010 (the Company's date of transition).

In preparing its opening IFRS balance sheet, the Company has adjusted amounts reported previously in financial statements prepared in accordance with previous GAAP based on IFRS 1 - First-time Adoption of International Financial Reporting Standards ("IFRS 1"), elections and exception and IFRS policy choices. An explanation of how the transition from previous GAAP to IFRS has affected the Company's financial performance and financial position is set out in the following tables and the notes that accompany the tables.

The adoption of IFRS has had no impact on the net cash flows of the Company. The changes made to the balance sheets, statements of earnings, statements of comprehensive income and statements of equity have resulted in reclassifications of various amounts on the statements of cash flows, however, as there has been no change to net cash flows, no reconciliations have been presented.

Reconciliation of Consolidated Statement of Earnings for the year ended June 30, 2011
(in thousands of Canadian dollars, except per share amounts)

					Presentation
					adjustments from
					previous GAAP		Employee
	Note		Previous GAAP		to IFRS		benefits		IFRS

Revenue	c)	$	158,790	$	776	$	-	$	159,566

Cost of sales	c)		(71,336)		795		-		(70,541)
Marketing, sales and administration	b) i); c)		(45,764)		(3,264)		2,393		(46,635)
Amortization and depreciation	c)		(1,693)		1,693		-		-
Disposal transactions	c)		-		(2,233)		-		(2,233)
Other income and expenses	b) i); c)		-		(167)		466		299

Earnings from operations			39,997		(2,400)		2,859		40,456

Financial income	c)		-		1,308		-		1,308
Financial expenses	b) i); c)		-		(20)		(905)		(925)
Loss on sale of Seagram Coolers	c)		(2,233)		2,233		-		-
Interest income	c)		1,288		(1,288)		-		-
Foreign exchange loss	c)		(115)		115		-		-
Loss on disposal of property, plant
and equipment	c)		(52)		52		-		-
Net financial income			(1,112)		2,400		(905)		383

Earnings before income taxes			38,885		-		1,954		40,839

Current income taxes			(12,266)		-		-		(12,266)
Deferred income taxes			804		-		(507)		297
Income taxes			(11,462)		-		(507)		(11,969)

Net earnings		$	27,423	$	-	$	1,447	$	28,870

Basic earnings per share		$	0.96					$	1.01
Diluted earnings per share		$	0.96					$	1.01

Reconciliation of Consolidated Comprehensive Income for the period ended June 30, 2011
(in thousands of Canadian dollars)

				Effect of
				transition to
		Previous GAAP		IFRS		IFRS

NET EARNINGS	$	27,423	$	1,447	$	28,870
OTHER COMPREHENSIVE INCOME		-		-		-

COMPREHENSIVE INCOME	$	27,423	$	1,447	$	28,870

Reconciliation of Consolidated Balance Sheet as at June 30, 2011
(in thousands of Canadian dollars)

					Presentation
					adjustments from
			Previous		previous GAAP		Employee
	Notes		GAAP		to IFRS		benefits		IFRS

ASSETS
Deposits in cash management pools		$	96,636	$	-	$	-	$	96,636
Accounts receivable			31,005		-		-		31,005
Inventories			59,654		-		-		59,654
Prepaid expenses			1,731		-		-		1,731
Current portion of note receivable			600		-		-		600
Deferred income taxes	c)		161		(161)		-		-

Total current assets			189,787		(161)		-		189,626
Note receivable			1,800		-		-		1,800
Deferred income taxes	b) i), c)		-		256		-		256
Property and equipment			15,646		-		-		15,646
Provision for pensions	b) i)		12,516		-		(12,516)		-
Goodwill			5,886		-		-		5,886
Intangible assets			58,302		-		-		58,302

Total assets		$	283,937	$	95	$	(12,516)	$	271,516

LIABILITIES
Accounts payable and accrued liabilities		$	19,492	$	-	$	-	$	19,492
Income and other taxes payable			115		-		-		115

Total current liabilities			19,607		-		-		19,607
Provision for pensions	b) i)		7,421		-		5,249		12,670
Deferred income taxes	b) i); c)		4,468		95		(4,563)		-

Total liabilities			31,496		95		686		32,277

Shareholders' equity
Share capital			14,304		-		-		14,304
Retained earnings	b) i)		238,137		-		(13,202)		224,935

Total shareholders' equity			252,441		-		(13,202)		239,239

Total liabilities and shareholders' equity		$	283,937	$	95	$	(12,516)	$	271,516

Reconciliation of Consolidated Shareholders' Equity as at June 30, 2011
(in thousands of Canadian dollars)

					Effect of
			Previous		transition to
	Note		GAAP		IFRS		IFRS

Share capital		$	14,304	$	-	$	14,304
Accumulated other comprehensive income			-		-		-
Retained earnings	b) i)		238,137		(13,202)		224,935

Total shareholder's equity		$	252,441	$	(13,202)	$	239,239

Reconciliation of Consolidated Balance Sheet as at July 1, 2010
(in thousands of Canadian dollars)

					Presentation
					adjustments from
			Previous		previous GAAP		Employee
	Notes		GAAP		to IFRS		benefits		IFRS

ASSETS
Deposits in cash management pools		$	74,685	$	-	$	-	$	74,685
Accounts receivable			28,340		-		-		28,340
Income and other taxes recoverable			1,070		-		-		1,070
Inventories			60,502		-		-		60,502
Prepaid expenses			1,551		-		-		1,551
Deferred income taxes	c)		135		(135)		-		-

Total current assets			166,283		(135)		-		166,148
Property and equipment			15,238		-		-		15,238
Provision for pensions	b) i)		12,292		-		(12,292)		-
Goodwill			6,857		-		-		6,857
Intangible assets			70,571		-		-		70,571

Total assets		$	271,241	$	(135)	$	(12,292)	$	258,814

LIABILITIES
Accounts payable and accrued liabilities		$	18,285	$	-	$	-	$	18,285

Total current liabilities			18,285		-		-		18,285
Provision for pensions	b) i)		6,748		-		7,427		14,175
Deferred income taxes	b) i); c)		5,246		(135)		(5,070)		41

Total liabilities			30,279		(135)		2,357		32,501

Shareholders' equity
Share capital			14,304		-		-		14,304
Retained earnings	b) i)		226,658		-		(14,649)		212,009

Total shareholders' equity			240,962		-		(14,649)		226,313

Total liabilities and shareholders' equity		$	271,241	$	(135)	$	(12,292)	$	258,814

Reconciliation of Consolidated Shareholders' Equity as at July 1, 2010
(in thousands of Canadian dollars)

					Effect of
			Previous		transition to
	Note		GAAP		IFRS		IFRS

Share capital		$	14,304	$	-	$	14,304
Accumulated other comprehensive income			-		-		-
Retained earnings	b) i)		226,658		(14,649)		212,009

Total shareholder's equity		$	240,962	$	(14,649)	$	226,313

Notes to Reconciliations

(a) Elections under IFRS 1

IFRS 1 provides a protocol for converting a set of financial statements from another basis of preparation. IFRS 1 generally requires that a first-time adopter apply IFRS accounting principles retrospectively to all periods presented in its first IFRS financial statements. However, IFRS 1 also provides certain mandatory and optional exemptions to alleviate the complication of full retrospective application.

In addition to this, IFRS 1 permits a subsidiary that becomes a first-time adopter later than its parent to elect to measure its assets and liabilities in its financial statements at the carrying amounts that would be included in the parent's consolidated financial statements, if no adjustments were made for consolidation procedures and the effect of the business combination in which the parent acquired the subsidiary. As PR, the Company's ultimate parent, adopted IFRS on July 1, 2004 the Company has chosen this option under IFRS 1. This decision impacts the optional exemptions available to the Company on transition. The following accounting policies have been impacted by the transition to IFRS and the adoption of the parent company's measurement basis:

(i) Business Combinations

Certain of the Company's business combinations are outside of the option discussed above, which allows the Company to adopt the parent company's measurement basis, as certain business combinations are subject to adjustments by the parent company for consolidation procedures and for the effects of the business combination in which the parent company acquired Corby. Therefore, the IFRS 1 optional elections related to business combinations are applicable to Corby.

IFRS 1 permits a first-time adopter to elect not to apply IFRS 3 - Business Combinations ("IFRS 3"), to business combinations that occurred prior to the date of transition to IFRS. A first-time adopter can also elect to choose a date prior to the date of transition and apply IFRS 3 to all subsequent business combinations. The Company has elected to apply IFRS 3 prospectively to business combinations that occurred on or after July 1, 2010 (or "the date of transitions to IFRS"). No change has been made to the recognition and measurement of business combinations that occurred prior to this date.

(ii) Employee benefits

IFRS 1 permits a first-time adopter to account for its employee benefits under the "corridor" approach as measured retrospectively under IFRS or to recognize all cumulative actuarial gains and losses in retained earnings at the date of transition to IFRS. Since the Company has elected to adopt the measurement basis of its ultimate parent company, as described above, Corby will revalue the accrued benefit assets and liabilities related to its pension and other employee benefit defined benefit plans to reflect the carrying values recorded by the parent company.

Further, to comply with the parent's policies with respect to the provision for pensions, the Company will continue to use the "corridor" approach option under IAS 19 - Employee Benefits ("IAS 19"). As well, to be consistent with accounting policies of the parent, the Company will present the amount of actuarial gains and losses recognized during the reporting period in "Other income and expenses" as well as past service costs and the impact of plan settlements or curtailments. Pension interest cost and expected return on plan assets is included in "Financial expenses" on the statement of earnings. All other costs related to pensions and other employee benefits under defined benefit plans is reflected in marketing, sales and administration expenses.

The Company has also elected to use the exemption not to disclose the defined benefit plan surplus/deficit and experience adjustments before the date of transition.

(iii) Deemed Cost

IFRS 1 allows a first-time adopter to elect to measure an item of property and equipment or intangible asset at the date of transition to IFRS at fair value and use that fair value as deemed cost at that date. As described above, the Company has elected to adopt the measurement basis of its parent company and therefore is unable to utilize this election. However, the Company has determined that adoption of the parent company's measurement basis for property and equipment will have no impact on the Company's financial position or results of operations, as there are no differences between the parent company's carrying values and accounting policies and those of the Company.

(b) Financial Impacts of Adopting IFRS

(i) Employee benefits

The Company has elected under IFRS 1 to measure its assets and liabilities in its financial statements at the carrying amounts that would be included in the parent's consolidated financial statements, if no adjustments were made for consolidation procedures and the effect of the business combination in which the parent acquired the subsidiary. As a result, the Company will revalue the provision for pensions to the carrying amounts recorded by the parent company.

Deferred income tax assets and liabilities have been re-measured for the IFRS transition adjustments related to employee future benefits, as described above.

The following is the impact of electing under IFRS 1 to measure its provision for pensions and the associated impact to deferred tax liabilities based on the parent company's carrying values on the Company's net earnings and other comprehensive income for the year ended June 30, 2011 and the Company's financial position as at June 30, 2011 and July 1, 2010.


				Year ended
				June 30,
Net earnings impact				2011

Marketing, sales and administration			$	(2,393)
Other income				(466)
Earnings from operations				2,859

Financial expense				(905)
Earnings before income taxes				1,954

Income tax expense				507

Increase in net earnings			$	1,447


		June 30,		July 1,
Balance sheet impact		2011		2010

Provision for pensions	$	(17,765)	$	(19,719)
Deferred tax liabilities		4,563		5,070

Decrease in retained earnings	$	(13,202)	$	(14,649)

(ii) Impairment

The Company performed an impairment test under IFRS on goodwill and intangibles as at July 1, 2010. No impairment was identified.

(c) Presentation Impacts of Adopting IFRS

Certain presentation differences between Canadian GAAP and IFRS have no impact on reported earnings or shareholder's equity. Certain assets and liabilities have been reclassified into another line item under IFRS at the date of transition. Certain line items are described differently (renamed) under IFRS compared to Canadian GAAP, although the asset and liability amounts included in these items are unaffected. The following summarizes these changes:

"Deferred taxes" was previously described as future income taxes under Canadian GAAP. As well, under IFRS, deferred tax assets and liabilities may not be presented as current. The Company has reclassified deferred taxes into non-current assets and liabilities based on the net asset and liability positions of the entities that have generated the balances.

"Air miles" under previous GAAP Air Miles were deemed to be a sales discount and reflected on the statement of profit and loss as a reduction in Net Revenues. IFRIC 13 - Customer Loyalty Programmes ("IFRIC 13"), requires the value of Air Miles to be presented at gross fair value in revenues, with an offsetting cost reflected in Marketing, sales and administration expenses.

"Functional presentation" these IFRS financial statements have been presented by function. As a result certain expenses, such as depreciation expense, interest income and foreign exchange gains and losses, have been reclassified by function. Depreciation of property and equipment is reported in costs of goods sold and in marketing, sales and administrative expenses. Foreign exchange gains and losses are included in earnings from operations as they relate to operating assets and liabilities. Interest earned on deposits in cash management pools is recorded in net financial income.

SOURCE: Corby Distilleries Limited

CORBY DISTILLERIES LIMITED
John Leburn, Vice-President and Chief Financial Officer
Tel.: 416-479-2400
[email protected]
www.Corby.ca

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