President's Report to Shareholders of Magnotta Winery Corporation Six Months Ended July 31, 2000

Financial Highlights                            

Three Month Six Month
Period Ended Period Ended
July 31, 2000 July 31, 2000
------------- -------------
Gross Sales Increased 19.7% Increased 15.3%
Net Sales Increased 26.4% Increased 18.1%
Earnings Before Interest,
Income Taxes and Amortization Increased 6.9% Increased 6.2%
Net Earnings Increased 5.7% Increased 10.1%

Magnotta Winery Corporation is pleased to announce continued growth and earnings for the second quarter ended July 31, 2000. Gross sales increased by 19.7% to $5,200,377 from $4,344,761 in the second quarter last year. For the six month period, gross sales increased 15.3% to $9,948,089 from $8,629,361 last year. Net sales increased by 26.4% to $3,960,495 from $3,134,438 last year, and for the six month period, increased 18.1% to $7,421,288 from $6,283,768. The sales increase has been facilitated through increased sales in Chile, increased sales volumes of wine and beer at both the retail and wholesale levels and increased inter-provincial and export sales. The gross margin percentage has decreased due to the product mix of sales.

Earnings before interest, income taxes, depreciation and amortization increased 6.9% for the second quarter and 6.2% for the six month period. Net earnings increased by 5.7% to $463,731 from $438,726 in the second quarter last year. For the six month period, net earnings increased 10.1% to $802,305 from $728,473 last year. Basic and fully diluted earnings per share have remained constant for the second quarter but have increased 16.7% respectively for the six month period.

Beer sales through the Beer Store in Ontario continue to show increased volumes despite the cooler weather. The introduction of the Classic European India Pale Ale and Altbier through the Beer Store, and expanded beer distribution through more Beer Stores, have increased volumes and sales.

We continue to be Canada's most award-winning winery by far! Our medal count is well over 1,300 medals and awards including many awards from VinExpo in France, VinItaly and Intervin in the United States!

Once again, I would like to thank our customers, shareholders, suppliers, directors and staff for your continued dedication, commitment and support.

MAGNOTTA WINERY CORPORATION Consolidated Balance Sheets

As at July 31, 2000, with comparative figures for   
January 31, 2000 and July 31, 1999
---------------------------------------------------------------
July 31 January 31 July 31
2000 2000 1999
(Unaudited) (Audited) (Unaudited)
---------------------------------------------------------------

Assets

Current assets:
Accounts receivable $1,510,892 $941,921 $1,138,102
Inventories 13,525,632 13,843,591 11,239,255
Prepaid expenses and deposits 585,810 657,877 671,380
-----------------------------------
15,622,334 15,443,389 13,048,737

Capital assets 18,637,346 18,713,482 18,383,220
-----------------------------------
$34,259,680 $34,156,871 $31,431,957
===================================

Liabilities and Shareholders' Equity

Current liabilities:
Bank indebtedness $4,593,090 $5,309,679 $3,936,143
Accounts payable and accrued
liabilities 1,101,373 1,912,400 1,100,530
Income taxes payable 518,810 432,603 587,099
Current portion of
long-term debt 1,258,992 1,266,633 1,158,402
Current portion of
preference shares 2,250,000 1,550,000 1,550,000
-----------------------------------
9,722,265 10,471,315 8,332,174

Long-term debt 10,595,683 10,022,129 10,523,738
Future income taxes 900,896 724,896 490,094

Preference shares - 700,000 700,000

Shareholders' equity:
Share capital 4,915,293 4,915,293 4,915,293
Other paid in capital 210,000 210,000 210,000
Retained earnings 7,915,543 7,113,238 6,260,658
-----------------------------------
13,040,836 12,238,531 11,385,951
-----------------------------------
$34,259,680 $34,156,871 $31,431,957
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Segmented information on identifiable
assets by geographic region
Assets:
Canada $30,022,048 $30,141,555 $27,162,490
Chile 4,237,632 4,015,316 4,269,467
-----------------------------------
$34,259,680 $34,156,871 $31,431,957
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MAGNOTTA WINERY CORPORATION
Consolidated Interim Statements of Earnings and Retained
Earnings
---------------------------------------------------------------
For The Three Months For The Six Months
Ended July 31 Ended July 31
2000 1999 2000 1999
(Unaudited)(Unaudited)(Unaudited)(Unaudited)
---------------------------------------------------------------

Sales $5,200,377 $4,344,761 $9,948,089 $8,629,361
Less product
taxes levied 1,239,882 1,210,323 2,526,801 2,345,593
-------------------------------------------
Net sales 3,960,495 3,134,438 7,421,288 6,283,768

Cost of sales 1,862,791 1,233,119 3,481,265 2,747,061
-------------------------------------------
Gross profit 2,097,704 1,901,319 3,940,023 3,536,707

Expenses:
Selling, general and
administrative 674,994 569,977 1,320,768 1,071,154
Amortization 274,205 278,535 548,411 557,071
Dividends on redeemable
preference shares 30,658 24,164 57,591 49,762
Interest 100,783 77,882 199,482 151,444
Interest
- long-term debt 228,333 209,035 451,466 466,803
-------------------------------------------
1,308,973 1,159,593 2,577,718 2,296,234
-------------------------------------------
Earnings before
income taxes 788,731 741,726 1,362,305 1,240,473

Income tax:
Current 223,000 248,000 384,000 390,000
Future 102,000 55,000 176,000 122,000
-------------------------------------------
325,000 303,000 560,000 512,000
-------------------------------------------
Net earnings for the
period 463,731 438,726 802,305 728,473
Retained earnings,
beginning of period 7,451,812 5,821,932 7,113,238 5,501,896
Adjustment to future
income taxes - - - 30,289
Retained earnings,
end of period $7,915,543 $6,260,658 $7,915,543 $6,260,658
---------------------------------------------------------------

Earnings per share :
Basic $0.04 $0.04 $0.07 $0.06
Fully diluted $0.04 $0.04 $0.07 $0.06
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Weighted average number of
common shares
outstanding 12,189,576 12,127,987 12,189,576 12,127,987
Common shares
outstanding 12,189,576 12,189,576 12,189,576 12,189,576
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Segmented information on net sales by geographic region
Net sales:
Canada $3,615,414 $3,134,438 $6,476,207 $5,883,768
Chile 345,081 - 945,081 400,000
-------------------------------------------
$3,960,495 $3,134,438 $7,421,288 $6,283,768
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MAGNOTTA WINERY CORPORATION
Consolidated Interim Statements of Cash Flow

---------------------------------------------------------------
For The Three Months For The Six Months
Ended July 31 Ended July 31
2000 1999 2000 1999
(Unaudited)(Unaudited)(Unaudited)(Unaudited)
---------------------------------------------------------------

Cash flows from (used in):

Operating activities:
Net earnings $463,731 $438,726 $802,305 $728,473
Adjustments:
Amortization 274,205 278,535 548,411 557,071
Future income taxes 102,000 55,000 176,000 122,000
------------------------------------------
839,936 772,261 1,526,716 1,407,544

Changes in non-cash operating working capital:

Accounts receivable 20,238 (7,373) (568,971) (251,946)
Inventories (444,262) (230,181) 317,959 (40,383)
Prepaid expenses and
deposits (49,371) (6,991) 72,067 (22,009)
Accounts payable and
accrued
liabilities (423,554) (131,965) (811,027) (591,534)
Income taxes payable 55,762 76,537 86,207 (33,148)
------------------------------------------
(841,187) (299,973) (903,765) (939,020)
------------------------------------------
(1,251) 472,288 622,951 468,524

Financing activities:
Increase in
long-term debt 1,200,000 - 1,200,000 -
Repayments of
long-term debt (259,509) (263,887) (634,087) (388,726)
Increase (decrease)
in bank
indebtedness (595,905) 180,440 (716,589) 488,854
------------------------------------------
344,586 (83,447) (150,676) 100,128
Investing activities:
Purchases of
capital assets (343,335) (388,841) (472,275) (568,652)
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Cash, end of period - - - -
------------------------------------------