"-&"%*/($"/"%*"/."/6'"$563&3."3,&5&3 0'41*3*54"/%*.1035&30'8*/&44*/$& $03#:%*45*--&3*&4-*.*5&%"//6"-3&1035'035)&5&/.0/5)4&/%&%+6/& 2 Financial Highlights 4 Management’s Discussion 8 Notes to the Consolidated 15 Directors, Officers and 3 President’s Message and Analysis Financial Statements General Information 8 Consolidated Financial Statements 14 Ten Year Review 16 Portfolio of Excellence CORBY-PERNOD RICARD INTEGRATION CREATES INDUSTRY POWERHOUSE Corby Distilleries Limited President and Chief Executive Officer Krystyna Hoeg discusses the integration of Corby with the Canadian operations of Pernod Ricard S.A., the most significant event at the company in fiscal 2006. • • • • “The successful integration of Corby, the number two spirits Under the agreement entered into on March 7, 2006, Corby In that time, management integrated the Corby and and wine company in Canada, with Pernod Ricard, the second will acquire the exclusive right to represent Pernod Ricard Pernod Ricard sales organizations while maintaining an largest spirits and wine group in the world, has created an brands in Canada for the next 15 years, the international industry-leading sales performance. In both April and exceptional organization with great marketing, sales and rights to Lamb’s Rum and the Canadian rights to Seagram’s May, when the bulk of the integration took place, Corby functional coverage,” said Krystyna Hoeg, President and Coolers. Corby also secures a long term agreement covering outperformed the industry in sales at the retail level.” Chief Executive Officer, Corby Distilleries Limited. the production of Corby-owned brands by Pernod Ricard Andy Alexander, Corby Vice President of Sales, believes at the latter’s production facility in Windsor, Ontario. The that the addition of the Pernod Ricard brands to Corby’s companies further agreed that Corby would manage Pernod portfolio is an exciting development for the company. “The Ricard’s business interests in Canada, including the Pernod Ricard brands are a great fit because they play to our management of the Windsor production facility. To strength in premium products, will enhance our category satisfy the $105 million purchase price, Corby will sell its management opportunities and add value across the board 45 per cent interest in Tia Maria to Pernod Ricard. in spirits and wines.” “The integration and the adoption of a combined Mr. Alexander describes Pernod Ricard brands like strategic approach to the Canadian market means real Jameson Irish Whiskey, the world’s leading Irish whisky benefits for Corby and its shareholders,” Krystyna Hoeg, brand with global sales of 2.1 million cases, Chivas Regal, Corby President and Chief Executive Officer, said. “Corby a renowned premium blended Scotch whisky with global now has the responsibility for the management of every sales of 3.9 million cases, and The Glenlivet, the third biggest aspect of its business, including production and supply selling single malt in the world, as being “iconic” brands. chain management. This will allow the company to “These are premium products that define entire maximize efficiencies and capitalize on synergies across its categories for consumers, retailers and licensees,” entire operation. We have secured long term certainty for Mr. Alexander said. “Most licensed establishments in this the production of our own brands. The acquisition of the market would have these products on the back bar.” Pernod Ricard brands has strengthened our Portfolio of Adding these brands to the Corby portfolio that already Excellence and created a more favourable mix of premium includes Wiser’s, the number one brand family of Canadian domestic and international products.” whisky, means that Corby will have a very strong position Corby Chief Operating Officer, André Hémard, who across the entire “brown goods” category in the Canadian joined the company from Pernod Ricard, believes that spirits market. the integration will generate more value for shareholders. Colin Kavanagh, Corby Vice President of Marketing, “The integration combined the best elements of two strong who joined Corby from Pernod Ricard, says the transaction enterprises. The new organization has a very well balanced also created category management opportunities for the portfolio with powerful brands in every category and at company in the vodka category, where Corby picks up the every price point, from economy to premium to super premium Wyborowa brand, in the rum category, through the premium. The company is also strong in every regional addition of the Havana Club family and the international market in Canada. This combination of a balanced portfolio rights to Lamb’s, as well as in the cognac category, where with national reach and first class management makes for a the Martell brand joins the top-selling Courvoisier in the very competitive enterprise.” Corby portfolio. Mr. Hémard said that he had been very impressed by the Mr. Kavanagh believes that the transaction has given speed and efficiency of the integration. “There was only a Corby access to a number of brands with exciting growth three week period between the announcement of the potential and points to Jameson Irish Whiskey as an example. agreement and the operational launch of the new entity. See CORBY LEADS on 2 KEY BRANDS DRIVE STRONG SALES PERFORMANCE IN 2006 IN 2006, CORBY’S SHOWCASE PREMIUM BRANDS – THE WISER’S FAMILY OF CANADIAN WHISKY AND POLAR ICE VODKA – LED A SALES PERFORMANCE THAT PRODUCED WHAT CORBY VICE PRESIDENT OF SALES, ANDY ALEXANDER DESCRIBED AS “JUST AN OUTSTANDING YEAR FOR THE COMPANY”. THE POTENTIAL POSITIVE IMPACT OF THE INTEGRATION WITH PERNOD RICARD ON CORBY’S FUTURE SALES WAS ALSO EVIDENT FROM THE IMPRESSIVE RETAIL SALES GROWTH ACHIEVED BY A NUMBER OF PERNOD RICARD’S PREMIUM BRANDS. Last year, for the fourth consecutive year, Corby’s retail sales growth outpaced that achieved by the industry as a whole. In the twelve month period ending June 2006, Corby’s total spirit retail sales increased by over 205,000 cases to almost 4,000,000 cases. This represented an increase of 5.5 per cent over 2005 retail sales and bumped Corby’s retail market share from 24.5 per cent to 24.8 per cent. By comparison, retail sales by the rest of the industry over that same 12 month period increased by 4.5 per cent. In other terms, while Corby accounted for 24.8 per cent of the retail market for the 12 month period ending June 2006, the company accounted for nearly 30 per cent of the total increase in industry retail sales. This strong performance was driven by a number of Corby’s showcase premium brands. Fiscal 2006 was the seventh year in a row in which the Wiser’s family of Canadian whisky was the fastest growing family of whisky brands in the country. In the twelve month period ending June 2006, the Wiser’s family retail sales increased by 10.4 per cent, while retail sales of Wiser’s De Luxe and Wiser’s Special Blend grew by 8.8 per cent and 11.5 per cent, respectively. Over that same period, total Canadian whisky sales at retail increased by 0.68 per cent and retail sales of Wiser’s See KEY BRANDS on 2 THIS ANNUAL REPORT IS PUBLISHED BY THE EXECUTIVE OFFICE OF CORBY DISTILLERIES LIMITED, 193 YONGE STREET, TORONTO, ON M5B 1M8 66977977 PP530530 CCorbyorby AAR06R06 EEng-8.inddng-8.indd 1 99/14/06/14/06 111:45:061:45:06 AAMM 2 Corby Distilleries Limited POLAR ICE FASTEST GROWING VODKA IN CANADA Polar Ice continues to blaze a trail in the vodka category, with 19.5% growth, making it the fastest-growing vodka brand for a fourth consecutive year. Polar Ice is the ideal mixable spirit thanks to its quadruple distillation and triple filtration, which gives it an exceptionally clean and smooth taste. » CORBY LEADS CONTINUED FROM P1 real shift in what has traditionally been a market dominated in revenue the company maintains by continuing to “Sales of Jameson have exploded in the U.S., having reached by European wines. With the addition of Jacob’s Creek and represent the former Allied Domecq brands acquired by FINANCIAL HIGHLIGHTS the 400,000 case level. With the support of the Corby sales Wyndham Estate, Corby will be able to benefit from this Pernod Ricard in 2005. FOR THE TEN MONTHS ENDED JUNE 30, 2006 and marketing machine, we can aim for equally strong shift,” Alexander said. “The Pernod Ricard transaction was the right deal at AGAINST TWELVE MONTHS ENDED AUGUST 31, 2005 growth for Jameson in Canada.” Mr. Kavanagh expects that, similar to Pernod Ricard’s the right time for Corby,” Mrs. Hoeg said. “It solidified our Both Mr. Alexander and Mr. Kavanagh are excited about spirits and wine brands, Seagram’s Coolers will also benefit position as the number two company in our market and 2005 the addition of Pernod Ricard’s Australian wine brands from being part of Corby’s portfolio. “Corby is recognized provides a very solid foundation for future growth. We 2005 – Jacob’s Creek and Wyndham Estate – to Corby’s portfolio. as having the best sales team in the industry with excellent have been operating as one company since the beginning 2006 2006 “These are big brands in a big category and create a big relationships and reputation with the retail and on-premise of April and I am delighted that the integration has gone so opportunity for Corby”, Mr. Alexander said. channels. There is every reason to be confident that this smoothly and efficiently. It is a tribute to the professionalism “These are two premium brands from one of the most network will be able to maximize the sales potential of of Corby’s management and staff that we have been popular, and fastest-growing, wine producing regions in Seagram’s Coolers in Canada.” able to manage this transition while delivering another the world.