Corby Distilleries Limited reports 15% increase in EBITDA for the year ended June 30, 2008 & announces dividend



    TORONTO, Aug. 19 /CNW/ - Corby Distilleries Limited ("Corby" or the
"Company") reported today net earnings of $31.7 million, or $1.11 per share,
for the year ended June 30, 2008.
    Corby's Board of Directors also declared a dividend of $0.14 per share on
the Voting Class A Common Shares and Non-voting Class B Common Shares of the
Company, payable on September 15, 2008, to shareholders of record as at the
close of business on August 29, 2008.
    The financial results for fiscal 2008 reflect a solid performance by the
Company as demonstrated by a 6% increase in operating revenue, a 15% increase
in EBITDA(1), and a 10% increase in net earnings (after excluding the gain on
disposition of the Company's investment in the Tia Maria Group in fiscal
2007).
    Operating revenue, consisting of sales revenue and commission income, was
$163.3 million compared to $153.6 million last year, representing an increase
of 6% or $9.7 million. This increase is the combination of an $8.5 million, or
6%, increase in sales of Corby's owned brands, coupled with a $2.6 million, or
15%, increase in commissions before amortization expense. Growth in sales of
key brands such as Wiser's Canadian whiskies, Polar Ice vodka, and Lamb's rum
were the main drivers behind the increase in sales revenue.
    Corby also reported a 6% increase in net earnings for the three months
ended June 30, 2008, as compared to the three months ended June 30, 2007.
Operating revenue for the three months ended June 30, 2008, was $40.8 million
compared to $41.3 million for the corresponding period the previous year.
Sales remained steady quarter over quarter at $36.4 million, while commissions
decreased $0.5 million to $4.4 million for the three month period ended
June 30, 2008.
    "While a late arrival for summer affected industry sales across most
markets, Q4 of Fiscal 2008 marked the 6th consecutive period of underlying
growth since we set forth with a strategy focusing on value growth. We remain
confident with that strategy, and our excellent performance for the full year
further reinforces our continued commitment to delivering growth for all our
shareholders", said Con Constandis, Corby's President and Chief Executive
Officer.
    Effective July 1, 2008, joining Corby's Board of Directors are Alain
Barbet, Chairman and Chief Executive Officer of Pernod Ricard Americas, and
Claude Boulay, outside legal counsel of Pernod Ricard Americas, who replaced
Michel Bord and André Hémard, the latter of whom left Corby to return to
Pernod Ricard in France. John Nicodemo was appointed Chief Operating Officer,
in addition to his current position of Chief Financial Officer, effective
August 19, 2008.
    For further details, please refer to Corby's management's discussion &
analysis ("MD&A") and consolidated financial statements and accompanying notes
for the year ended June 30, 2008, prepared in accordance with Canadian
generally accepted accounting principles ("GAAP"). Such MD&A will be filed end
of September 2008.
    Corby's portfolio of owned-brands includes some of the most renowned
brands in Canada, including Wiser's Canadian whiskies, Lamb's rum, Polar Ice
vodka, and Seagram's Coolers. Through its affiliation with Pernod Ricard,
Corby also represents leading international brands such as Chivas Regal, The
Glenlivet and Ballantine's scotches, Jameson Irish whiskey, Beefeater gin,
Malibu and Kahlza liqueurs, Mumm champagne, and Jacob's Creek and Wyndham
Estate wines.
    The existing Voting Class A Common Shares and Non-voting Class B Common
Shares of the Company are traded on the Toronto Stock Exchange under the
symbols CDL.A and CDL.B.

    (1) Corby defines "EBITDA" as net earnings before equity earnings,
foreign exchange, interest income, income taxes, depreciation, and
amortization. This non-GAAP financial measure has been included in MD&A as it
is a measure which management believes is useful in evaluating and measuring
the Company's operating performance. EBITDA is also a common measure used by
investors, financial analysts and rating agencies. These groups may use EBITDA
and other non-GAAP financial measures to value the Company and assess its
performance. However, EBITDA is not a measure recognized by GAAP and it does
not have a standardized meaning prescribed by GAAP. Therefore EBITDA may not
be comparable to similar measures presented by other issuers. Investors are
cautioned that EBITDA should not be construed as alternatives to net earnings
as determined in accordance with GAAP as indicators of performance.


    CORBY DISTILLERIES LIMITED
    Management's Discussion and Analysis
    June 30, 2008
    -------------------------------------------------------------------------

    The following Management's Discussion and Analysis ("MD&A") dated
August 19, 2008 should be read in conjunction with the audited consolidated
financial statements and accompanying notes for the year ended June 30, 2008
prepared in accordance with Canadian generally accepted accounting principles
("GAAP").
    This MD&A contains forward-looking statements, including statements
concerning possible or assumed future results of operations of Corby
Distilleries Limited ("Corby" or the "Company"). Forward-looking statements
typically are preceded by, followed by or include the words "believes",
"expects", "anticipates", "estimates", "intends", "plans" or similar
expressions. Forward-looking statements are not guarantees of future
performance. They involve risks, uncertainties and assumptions, including, but
not limited to: the impact of competition; consumer confidence and spending
preferences; regulatory changes; general economic conditions; and the
Company's ability to attract and retain qualified employees and, as such, the
Company's results could differ materially from those anticipated in these
forward-looking statements. Accordingly, readers should not place undue
reliance on forward-looking statements.
    This document has been reviewed by the Audit Committee of Corby's Board
of Directors and contains certain information that is current as of August 19,
2008. 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 2008 (three months ended June 30, 2008) are against results
for the fourth quarter of fiscal 2007 (three months ended June 30, 2007). All
dollar amounts are in Canadian dollars unless otherwise stated.

    Business Overview
    -----------------

    Corby is a leading Canadian manufacturer and marketer of spirits and
importer of wines. Corby's national leadership is sustained by a diverse brand
portfolio which allows the Company to drive profitable organic growth with
strong, consistent cash flows.
    The Company derives its revenues from the sale of its owned-brands as
well as earning commission income from the representation of selected
non-owned brands in the Canadian market place. Revenue from Corby's
owned-brands are denoted as "Sales" on the consolidated statement of earnings
and while it predominantly consists of sales made to each of the provincial
liquor boards in Canada, it also includes sales to international markets.
Commission income earned from the representation of non-owned brands is
denoted as "Commissions" on the consolidated statement of earnings.
    Corby's portfolio of owned-brands include some of the most renowned
brands in Canada, including Wiser's rye whiskies, Lamb's rum, Polar Ice vodka
and Seagram's Coolers. Through its affiliation with international wine and
spirits company Pernod Ricard, S.A. ("PR"), Corby also represents leading
international brands such as Chivas Regal, The Glenlivet and Ballantine's
scotches, Jameson Irish whiskey, Beefeater gin, Malibu rum, Kahlua liqueur,
Mumm champagne, and Jacob's Creek and Wyndham Estate wines. 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.
    Corby's voting shares are majority owned by Hiram Walker & Sons Limited
("HWSL") located in Windsor, Ontario. HWSL is a wholly owned subsidiary of PR.
Therefore, in this MD&A, Corby refers to HWSL as its parent, PR as its
ultimate parent and subsidiaries of PR as its affiliates.
    On September 29, 2006, Corby completed a transaction with PR which
provided the Company the exclusive right to represent PR's brands in the
Canadian market for a 15 year period, expiring in 2021. In addition to
acquiring these rights, Corby also purchased the international rights to
Lamb's rum (excluding the Canadian rights, which the Company already owned)
and the Canadian rights to Seagram's Coolers. Corby satisfied the purchase
price by selling its 45% owned equity investment in the Tia Maria Group
("TMG") and by making a cash payment to PR. Revenue earned from the
representation of PR's brands in Canada is presented in the consolidated
statement of earnings as "Commissions", whereas revenue earned on the sale of
Lamb's rum and Seagram's Coolers is presented as "Sales". This transaction
allowed Corby to unlock the value of a non-strategic equity investment in TMG,
while providing the Company with a long-term income stream for which
management has direct control. In addition, the transaction effectively
converted the non-cash TMG equity earnings into a new long-term cash based
income stream for the Company and ultimately its shareholders.
    The Company sources approximately 72% of its spirits production
requirements from HWSL at its production facilities in Windsor, Ontario, while
another 24% of Corby's spirits production is sourced from the Company's owned
plant in Montreal, Quebec. The remaining 4% is sourced through an affiliated
company located in Scotland which manufactures Lamb's rum for the
international market ("Lamb's International"). However, plans are underway to
move all production requirements for Lamb's International to Corby's owned
plant in Montreal, Quebec. Essentially all of Corby's cooler production
requirements are outsourced to an unrelated third-party located in Dorval,
Quebec.
    Corby's operations are typically subject to seasonal fluctuations in that
the retail holiday season generally results in an increase in consumer
purchases over the course of October, November and December. Further, the
summer months traditionally result in higher consumer purchases of spirits as
compared to the winter and spring months. As a result, the Company's first and
second quarter of each fiscal year tend to typically reflect the impact of
seasonal fluctuations in that more shipments are typically made during those
quarters.

    Strategies and Outlook
    ----------------------

    Corby's business strategies are designed to maximize value growth, and
thus deliver exceptional profit to shareholders 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 to
achieve its current and long-term objectives moving forward.
    The Company believes that having a focused brand prioritization strategy
will permit it to capture value in those segments and markets where consumers
continue to demonstrate their willingness to trade up to premium brands.
Therefore, the Company's strategy is to focus its investments and leverage the
long-term growth potential of its key brands, while emphasizing less on
smaller and less profitable 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 honest evaluation of each brand's
potential to deliver upon this strategy. Particular focus has been given to
evaluate the strategic importance of the Company's representation of
third-party brands, and as a result, Corby has permitted certain of its
representation contracts to expire, thus allowing Corby's marketing and sales
teams to focus on maximizing value creation within the brand prioritization
strategy. The Company believes that effective execution of its strategy will
result in value creation for shareholders.
    The Company is a strong advocate of social responsibility, especially
with respect to its sales and promotional activities. Corby will continue to
promote responsible consumption of its products in all its activities. The
Company stresses its core values throughout its organization, including that
of value creation, social responsibility, tradition, substance over style and
character above all.

    Non-GAAP Financial Measures
    ---------------------------

    Corby defines "EBITDA" as net earnings before equity earnings, foreign
exchange, interest income, income taxes, depreciation, and amortization. This
non-GAAP financial measure has been included in this MD&A as it is a measure
which management believes is useful in evaluating and measuring the Company's
operating performance. EBITDA is also a common measure used by investors,
financial analysts and rating agencies. These groups may use EBITDA and other
non-GAAP financial measures to value the Company and assess its performance.
    However, EBITDA is not a measure recognized by GAAP and it does not have
a standardized meaning prescribed by GAAP. Therefore, EBITDA may not be
comparable to similar measures presented by other issuers. Investors are
cautioned that EBITDA should not be construed as an alternative to net
earnings as determined in accordance with GAAP as an indicator of performance.
    A reconciliation of EBITDA to the most directly comparable GAAP measure
can be found under "Results of Operations - Fiscal 2008" in this Management's
Discussion and Analysis.

    Overall Financial Performance
    -----------------------------

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

    
    -------------------------------------------------------------------------
                                              Year         Year   Ten Months
                                             Ended        Ended        Ended
    (in millions of Canadian dollars,      June 30,     June 30,     June 30,
     except per share amounts)                2008         2007       2006(1)
    -------------------------------------------------------------------------
    Operating revenue                      $ 163.3      $ 153.6      $ 110.8

    EBITDA(2)                                 50.5         44.0         29.2
      - EBITDA per common share               1.77         1.55         0.99

    Net earnings                              31.7        100.4         28.0
      - Basic earnings per share              1.11         3.53         0.99
      - Diluted earnings per share            1.11         3.53         0.99

    Total assets                             249.9        238.0        180.3
    Total liabilities                         30.7         34.5         22.0

    Dividends paid per share                  0.56         2.06         0.41
    -------------------------------------------------------------------------

    (1) The Company changed its fiscal year end from August 31 to June 30,
        effective as of June 30, 2006.
    (2) EBITDA for the year ended June 30, 2007, excludes the gain on sale of
        the Company's investment in TMG.

    Key Operating and Financial Metrics for the year ended June 30, 2008

    -   6% increase in operating revenue;
    -   15% increase in EBITDA;
    -   10% increase in net earnings, after excluding the gain on disposition
        of TMG in 2007.
    

    Brand Performance Review
    ------------------------

    Corby's portfolio of owned-brands typically accounts for more than 80% of
the Company's total operating revenue. Included in this portfolio are its key
brands Wiser's Canadian whisky, Lamb's rum, Polar Ice vodka and Seagram's
Coolers. The sales performance of these key brands significantly impacts
Corby's net earnings and therefore understanding sales at the retail store
level in Canada provides insight into the current performance of each key
brand. The following charts summarize market data provided by the Association
of Canadian Distillers. It should be noted that the retail sales information
depicted below does not include international retail sales of Corby
owned-brands as this information is not readily available.

    
    -------------------------------------------------------------------------
    RETAIL SALES FOR THE CANADIAN MARKET ONLY(1)
    -------------------------------------------------------------------------

                                Retail Volumes             Retail Value
                            (in 000's of 9L cases)   (in millions of dollars)
                              Year Ended June 30,      Year Ended June 30,
                           ------------------------ -------------------------
                            2008    2007  % Change    2008    2007  % Change
    -------------------------------------------------------------------------

    Corby owned-brands
    Wiser's Canadian
     whisky                  677     650      4%    $187.4  $175.3      7%
    Lamb's rum               498     511     (3%)    126.8   130.1     (3%)
    Polar Ice vodka          309     300      3%      79.8    75.7      5%
    Seagram's Coolers        395     394      0%      23.9    22.4      7%
    -------------------------------------------------------------------------
    Sub-total              1,879   1,855      1%     417.9   403.5      4%
    All other Corby
     owned-brands            792     838     (5%)    190.3   200.6     (5%)
    -------------------------------------------------------------------------
    Total                  2,671   2,693     (1%)   $608.2  $604.1      1%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) Refers to sales at the retail store level in Canada, as provided by
        the Association of Canadian Distillers.
    

    The sales performances in the chart above are in line with management's
expectations, with the exception of Lamb's rum which is discussed further
below. As discussed in the "Strategy and Outlook" section of this MD&A, the
Company's strategy is to focus its investments and leverage the long-term
growth potential of its key brands, while emphasizing less on smaller and less
profitable brands.
    Furthermore, the figures above also reflect Corby's strategy to have
value growth exceed volume growth through focus on premium brands, in addition
to continually seeking opportunities to increase prices in-line with targeted
competitive sets. The benefits of this strategy can be seen above as the
growth in retail value of Corby's key brands, as measured by retail sales
dollars, collectively increased by 4% compared with a collective volume
increase of 1%.
    Corby's flagship brand, Wiser's Canadian whisky, experienced a retail
volume increase of 4% with retail value growing by 7%. The Wiser's Canadian
whisky brand's continued growth in both retail volume and retail value further
solidifies its status as the largest selling brand family of rye whisky in
Canada.
    Significant investments were made in the Wiser's Canadian whisky brand
over the past year in the form of a focused advertising and media campaign to
commemorate its 150 year anniversary with the tag line "Character above all",
reflective of the values held by the brand's original creator, J.P. Wiser. The
media campaign capitalized on the rich history of the brand while also
remaining contemporary. The Company also released a special limited edition
variant entitled Wiser's Red Letter Canadian whisky which retailed for $150 a
bottle. Wiser's Red Letter received positive reviews and press attention,
further contributing to the brand's leading reputation in the marketplace.
    The Company has also recently released new packaging for Wiser's Deluxe
and Wiser's Special Blend. The new labels convey all of the premium qualities
of the whisky, featuring enhanced gold detailing and embossing, while
maintaining the heritage and authenticity for which the brand has become
famous.
    Wiser's Canadian whisky's performance demonstrates the value of these
investments as the brand has continued to outperform the rye whisky category
during the year ended June 30, 2008. The brand is also benefiting from the
trend among consumers to trade up to premium quality spirits products.
    Polar Ice vodka is now the third-largest vodka brand in Canada, as
measured by retail value. Polar Ice vodka has experienced retail volume growth
of 3% and retail value grew by 5%. The success of the brand can be partially
attributed to the strong growth of the vodka category in recent years as vodka
has become the largest spirits category in Canada. In addition, Polar Ice
vodka has been effective in its retail programming and in building strong
on-premise distribution. The on-going sponsorship of Pride week in Toronto is
a key event in the brand's promotional calendar and one which is used to
effectively communicate the brand's values of community and diversity.
    The Lamb's rum brand experienced a 3% decline in retail volume while
retail value also declined 3%. The decline in Lamb's rum retail sales
performance is mainly the result of competitive pricing pressures,
particularly in the Ontario market. Management has been closely monitoring the
competitive situation and has begun taking action through increased focus and
some additional advertising and promotional spend aimed at retaining the
brand's core consumers. Early signs are showing that the actions plans
implemented by the Company are yielding the intended results as the brand's
performance over the last quarter was significantly improved, with retail
sales increasing by 3%.
    As the Seagram's Coolers brand is primarily targeted toward the warmer
seasons, its success is typically more dependent on warm weather during the
summer season, than that of Corby's other key brands. As a result, the poor
weather experienced at the start of the 2008 summer season in key markets such
as Ontario negatively impacted the brand's performance during the final
quarter of fiscal 2008.
    Nonetheless, the Seagram's Coolers brand outperformed its segment
experiencing a 7% increase in retail sales value, further demonstrating the
value proposition inherent within the Company's brand premiumization strategy.
Prior to the effect of the cooler weather, the brand was experiencing great
success largely attributed to the addition of new and innovative products
launched during the spring of 2007, namely Seagram's Vodka Spritzers and
Seagram's Strawberry-Kiwi Swirl.

    Results of Operations - Fiscal 2008
    -----------------------------------

    The following table presents a summary of certain selected consolidated
financial information for the Company for the years ended June 30, 2008 and
2007:

    
    -------------------------------------------------------------------------
    (in millions of Canadian
     dollars, except per share
     amounts)                          2008       2007   $ Change   % Change
    -------------------------------------------------------------------------
    Sales                          $  147.9   $  139.4   $    8.5         6%
    Commissions(1)                     20.3       17.7        2.6        15%
    -------------------------------------------------------------------------
    Operating revenue(1)              168.2      157.1       11.1         7%
    Cost of sales                      75.1       71.6        3.5         5%
    Marketing, sales and
     administration                    42.6       41.5        1.1         3%
    -------------------------------------------------------------------------

    EBITDA(2)                          50.5       44.0        6.5        15%

    Amortization(3)                     6.1        4.8        1.3        27%
    -------------------------------------------------------------------------
    Earnings from operations           44.4       39.2        5.2        13%
    Interest income                     2.4        2.9       (0.5)      (17%)
    Foreign exchange loss              (0.3)       0.0       (0.3)         -
    Equity earnings from
     investment in TMG                    -        2.1       (2.1)     (100%)
    Gain from disposition of
     equity investment in TMG             -       72.6      (72.6)     (100%)
    -------------------------------------------------------------------------
    Earnings before income
     taxes                             46.5      116.8      (70.3)      (60%)
    Income taxes                       14.8       16.4       (1.6)      (10%)
    -------------------------------------------------------------------------
    Net earnings                   $   31.7   $  100.4   $  (68.7)      (68%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Per common share
      - Basic net earnings         $   1.11   $   3.53   $  (2.42)      (69%)
      - Diluted net earnings       $   1.11   $   3.53   $  (2.42)      (69%)
    -------------------------------------------------------------------------

    (1) Amounts are presented gross of representation rights amortization of
        $4.9 (2007 - $3.5).
    (2) Corby defines EBITDA as net earnings before equity earnings, foreign
        exchange, interest, taxes, depreciation, and amortization.
    (3) Amounts include capital assets amortization of $1.2 (2007 - $1.3) and
        representation rights amortization of $4.9 (2007 - $3.5).
    

    Operating revenue

    Corby's operating revenue, consisting of sales revenue and commission
income, was $168.2 million compared to $157.1 million last year, representing
an increase of 7% or $11.1 million. This increase is the combination of an
$8.5 million, or 6%, increase in sales coupled with a $2.6 million, or 15%,
increase in commissions.

    Sales

    Sales revenue grew by $8.5 million mainly as a result of a 4% increase in
average selling prices in the Canadian spirits market. As previously
mentioned, the growth in average selling prices is mainly the result of a
focused effort to increase prices in-line with targeted competitive sets along
with improved product mix.
    The sales growth experienced in the Canadian market has been partially
offset by the negative impact of the appreciating Canadian dollar on the
Company's international business, which is mainly in the US and the UK. It is
estimated that the change in foreign currencies had a negative impact of
$1.1 million on Corby's revenues. Excluding this, sales revenue growth would
have been 7% versus fiscal 2007.
    Wiser's Canadian whisky in particular, has shown excellent growth as
gross sales revenues of the brand in Canada grew by 8% when compared to last
year. The 8% increase in gross sales was driven by a 4% increase in shipment
volumes along with a 4% increase in average selling prices.
    Another contributor to the increase in sales this year is Corby's prior
year acquisitions of the Seagram's Coolers and Lamb's International
businesses. These two businesses account for $3.5 million of the sales
increase as this year's financial results include a full twelve months
activity, whereas last year only included nine months given these businesses
were acquired at the end of the first quarter of 2007.

    Commissions

    The following table highlights the various components which comprise
commissions:

    
    -------------------------------------------------------------------------
    (in millions of Canadian
     dollars)                          2008       2007   $ Change   % Change
    -------------------------------------------------------------------------
    Commission from PR brands      $   14.3   $   12.8   $    1.5        12%
    Commission from Agency brands       6.0        4.9        1.1        22%
    -------------------------------------------------------------------------
    Commissions                    $   20.3   $   17.7   $    2.6        15%
    -------------------------------------------------------------------------
    

    Commissions for the year ended June 30, 2008 was $20.3 million, as
compared to $17.7 million last year. Commissions from PR brands increased by
12% led by double-digit growth in sales of brands such as Jacob's Creek and
Wyndham Estates wines, Malibu rum, Havana Club rum, The Glenlivet single-malt
scotch, Ballantine's scotch, and Jameson Irish whisky.
    The majority of the increase in commission from Agency brands was the
result of the Company earning a one-time lump sum of $0.9 million in
commission income from an Agency brand that Corby ceased to represent on
June 30, 2006. This commission was in lieu of earnings Corby would have
otherwise received during the required notice period, as provided for under
the relevant representation agreement.

    Cost of sales

    Cost of sales for year ended June 30, 2008 was $75.1 million, compared to
$71.6 million last year. The increase in cost of sales was largely
commensurate with the increase in sales. The impact of increased commodity
prices was offset by the foreign exchange benefit of sourcing some production
components from the US and UK. Despite these challenges, gross margin
increased by 0.6% to 49.2% as at June 30, 2008, as compared with 48.6% at
June 30, 2007.

    Marketing, sales and administration

    Marketing, sales and administration expenses were $42.6 million, as
compared to $41.5 million last year. The increase was mainly the result of
higher advertising and promotional ("A&P") spend on the Company's key brands,
partially offset by the inclusion of a $2.0 million charge associated with a
management reorganization in last year's financial results. The increase in
A&P spend reflects promotional activity associated with the 150th anniversary
of the Wiser's Canadian whisky brand, in addition to promotional spend
associated with a full year of Seagram's Coolers and Lamb's International
activity. The Company also increased promotional spending on Lamb's rum in
Canada in an effort to turn around its performance after a softer than
anticipated first half of the year.

    Amortization

    Amortization expense includes amortization of Corby's rights to represent
PR's brands in Canada in addition to amortization of the Company's capital
assets as displayed in the following schedule:

    
    -------------------------------------------------------------------------
    (in millions of Canadian
     dollars)                          2008       2007   $ Change   % Change
    -------------------------------------------------------------------------
    Representation rights
     amortization                  $    4.9   $    3.5   $    1.4        40%
    Capital assets amortization         1.2        1.4       (0.2)      (14%)
    -------------------------------------------------------------------------
    Amortization                   $    6.1   $    4.9   $    1.2        24%
    -------------------------------------------------------------------------
    

    The increase in amortization reflects the fact that the current year
results include an additional three months of representation rights
amortization as compared to 2007. Since the PR transaction closed on
September 29, 2006, the comparative period reflects only nine months of
amortization expense.

    Interest income

    Interest income is earned on Corby's cash balances held at its financial
institution. The $0.5 million decrease since prior year reflects the fact that
the Company's average cash balance has declined as a result of paying a
$42.7 million special dividend to shareholders on January 15, 2007.

    Equity earnings from TMG/gain from disposition of equity investment in
    TMG

    The Company disposed of its equity investment in TMG on September 29,
2006 as part of the transaction with PR which is described in detail in the
"Business Overview" section of this Management Discussion and Analysis.

    Income taxes

    Corby's effective tax rate was 32% for the year ended June 30, 2008, as
compared with 14% last year. The current year's effective tax rate was lower
than the statutory rate of 33% as the Government of Canada substantively
enacted reductions in corporate income tax rates. The prior year's effective
rate is substantially lower than the 35% statutory rate as the gain on sale of
the Company's investment in TMG was largely free of tax through the use of
Section 85 rollover provisions contained in the Income Tax Act (Canada).
    The following table provides reconciliations between the effective and
statutory rates of income tax for both the year ended June 30, 2008 and 2007:

    
    -------------------------------------------------------------------------
                                                             2008       2007
    -------------------------------------------------------------------------

    Combined basic federal and provincial tax rates           33%        35%
    Impact of substantively enacted rate decreases            (1%)        0%
    Income not subject to income tax                           0%       (22%)
    Equity in net earnings of companies subject to
     significant influence                                     0%        (1%)
    Other                                                      0%         2%
    -------------------------------------------------------------------------
                                                              32%        14%
    -------------------------------------------------------------------------

    Net earnings/earnings per share

    Net earnings in the prior year included a one-time gain as a result of the
Company's disposition of its equity investment in TMG. A schedule removing the
effects of this one-time event is presented below:

    -------------------------------------------------------------------------
    (in millions of Canadian dollars,
     except per share amounts)         2008       2007   $ Change   % Change
    -------------------------------------------------------------------------
    Net earnings                   $   31.7   $  100.4   $  (68.7)      (68%)
    Normalization adjustments:
      Gain from disposition of TMG        -      (72.6)      72.6      (100%)
      Tax effect of gain from
       disposition of TMG                 -        1.1       (1.1)     (100%)
    -------------------------------------------------------------------------

    Normalized net earnings        $   31.7   $   28.9   $    2.8        10%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Normalized earnings per share:
      Basic                        $   1.11   $   1.01   $   0.10        10%
      Diluted                      $   1.11   $   1.01   $   0.10        10%
    -------------------------------------------------------------------------
    

    Balance Sheet Review
    --------------------

    Working capital totaled $109.6 million as compared to $91.2 million at
June 30, 2007. The $18.4 million increase is primarily the result of increased
cash and inventories, decreased accounts payable and accrued liabilities,
partially offset by a decrease in accounts receivable. Fluctuations in each of
these balances are further described below.
    Corby's cash balance of $58.6 million reflects an increase of
$11.6 million since June 30, 2007. This increase is primarily the result of
$31.2 million of cash being generated from operations offset by $15.9 million
in regular dividend payments and $3.5 million in additions to capital assets.
    Inventories were $47.3 million at June 30, 2008 compared to $43.0 million
at June 30, 2007. The higher balance is being driven by two primary factors.
The first is the result of $2.1 million of increased lay-downs of maturing
bulk whisky which is necessary to ensure an adequate future supply is
available to support Corby's growing whisky brands. The second factor, which
accounts for $1.3 million, is the result of the Company's strategic decision
to shift the production of Lamb's International from its current location with
an affiliate in the UK to Corby's own production facility in Montreal. In
order to facilitate a smooth transition and avoid any disruption in
operations, the Company has been building a level of inventory in the UK above
normal levels. The shift in production locations is expected to increase
product margins, mainly as a result of the Company's ability to benefit from
manufacturing and production synergies available at its Montreal production
facility.
    The June 30, 2008 accounts receivable balance of $21.9 million has
decreased $3.1 million since June 30, 2007. This is mainly due to the
inclusion of a $2.1 million receivable (which was subsequently collected in
July) associated with one of the Company's customers in the June 30, 2007
balance.
    Accounts payable and accrued liabilities totaled $19.2 million, a
decrease of $3.4 million since June 30, 2007. The decrease is the result of
having higher than normal amounts owing to PR affiliates in the prior year
offset by having built-up $1.3 million of finished goods inventory at year-end
to facilitate the move of the Lamb's International production from its current
location in the UK to Corby's own production facility in Montreal.
    Capital assets increased $2.3 million since June 30, 2007 and are
explained by $3.5 million of asset additions less amortization expense of
$1.2 million. The capital asset additions and amortization expense are
comparable with prior year amounts.
    Employee future benefits were in a net asset position of $3.1 million, as
compared to $3.2 million at June 30, 2007. The slight decrease is explained by
$3.5 million of expense offset by pension plan funding and payments to
retirees being made during the year equal to $3.4 million. The employee future
benefits expense and contributions are comparable with prior year amounts.
    Goodwill remains unchanged since 2007 at $9.9 million, as goodwill
balances have indefinite lives and thus are not amortized in accordance with
current accounting standards, but are instead tested for impairment on an
annual basis.
    Corby's intangible asset balance of $90.1 million is comprised of
long-term representation rights of $62.1 million and trademarks and licenses
of $28.0 million. The balance decreased $4.9 million since prior year and is
primarily the result of normal amortization of the long-term representation
rights balance over its fifteen-year useful life. The trademarks and licenses
balance did not change as they have indefinite lives and are not amortized in
accordance with current accounting standards, but are instead tested for
impairment on an annual basis.
    Future income tax balances increased a net $0.2 million since June 30,
2007. The change is a combination of the normal reversal of temporary
differences from year to year, offset by a decrease in substantively enacted
corporate income tax rates during the year.
    Shareholders' equity increased by $15.8 million to $249.9 million at
June 30, 2008. The change since last year is the result of net earnings of
$31.7 million less dividends being declared and paid in the amount of
$15.9 million.

    Cash Flow Review
    ----------------

    Cash flows from operating activities

    The Company has generated $31.2 million of cash from operating activities
compared to $33.4 million last year, a decrease of $2.2 million. Year over
year growth in EBITDA was offset by an investment in non-cash working capital
balances, whereas in the prior year, the Company's investment in non-cash
working capital balances declined. For further details on working capital
changes, please refer to the "balance sheet review" section of this MD&A.

    Cash flows from investing activities

    Cash flows used for investing activities was $3.5 million for the year,
compared to a net inflow of cash of $3.9 million last year. The net decrease
of $7.4 million reflects the impact of the aforementioned transaction with PR
combined with $0.5 million of increased capital asset additions in the current
year.

    Cash flows from financing activities

    Cash flows used in financing activities this year were $15.9 million
compared with $58.3 million last year. The $42.4 million change is explained
by the payment of a one-time $42.7 million special dividend in 2007.

    Outstanding Share Data
    ----------------------

    As at June 30, 2008, Corby had 24,274,320 Voting Class A common shares
and 4,194,536 Non-Voting Class B common shares outstanding. There are no
options outstanding.

    Liquidity and Funding Requirements
    ----------------------------------

    Corby's sources of liquidity are its cash balance of $58.6 million along
with cash generated by operating activities. The Company believes that the
available cash balance combined with its historically strong and consistent
operational cash flows are sufficient to fund its operations, investing
activities and commitments for the foreseeable future.
    In recent months, the much publicized global liquidity crisis has been
tumultuous for many companies, particularly for those entities holding
short-term investments in asset-backed commercial paper ("ABCP"). Corby does
not have exposure to this type of liquidity risk as the Company does not hold
any investments in ABCP.
    The Company's cash flows from operations are subject to fluctuation due
to commodity, foreign exchange and interest rate risk. Corby does not actively
manage these risks as they are believed to naturally be at an already
acceptably low level. Please refer to the "Risks and Risk Management" section
of this MD&A for further information.

    Contractual Obligations
    -----------------------

    The following table presents a summary of the maturity periods of the
Company's contractual obligations as at June 30, 2008:

    
    -------------------------------------------------------------------------
                                                             Obli-
                            Payments  Payments  Payments   gations
                  Payments    due in    due in       due   with no
                    During  2010 and  2012 and     after     fixed
                      2009      2011      2013      2013  maturity     Total
    -------------------------------------------------------------------------
    Operating lease
     obligations    $  1.2    $  2.2    $  1.4    $  3.3    $    -    $  8.1
    Employee future
     benefits            -         -         -         -      12.8      12.8
    -------------------------------------------------------------------------

                    $  1.2    $  2.2    $  1.4    $  3.3    $ 12.8    $ 20.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Operating lease obligations represent future minimum payments under
long-term operating leases for premises and office equipment as at June 30,
2008. Employee future benefits represent the Company's unfunded pension and
other post retirement benefit plan obligations as at June 30, 2008. Please
refer to Note 8 of the consolidated financial statements for further
information with respect to the Corby's employee future benefit plans.

    Related Party Transactions
    --------------------------

    HWSL, an indirectly wholly-owned subsidiary of PR, owns in excess of 50%
of the issued and outstanding Voting Class A common shares of Corby and is
thereby considered to be the Company's parent. PR is considered to be Corby's
ultimate parent and affiliated companies are those that are also subsidiaries
of PR.
    Corby engages in a significant number of transactions with its parent
company, its ultimate parent and various affiliates. Specifically, Corby
renders services to its parent company, its ultimate parent, and affiliates
for the marketing and sale of beverage alcohol products in Canada. Corby also
sub-contracts the large majority of its distilling, maturing, storing,
blending, bottling and related production activities to its parent company. A
significant portion of Corby's bookkeeping, record keeping services, data
processing and other administrative services are also outsourced to its parent
company.
    The companies are now operating under the terms of the agreements which
became effective on September 29, 2006, as a result of the aforementioned
transaction with PR. These agreements provide the Company with the exclusive
right to represent PR's brands in the Canadian market until 2021, as well as
providing for the continuing production of certain Corby brands by PR at its
production facility in Windsor, Ontario until 2016. Corby also manages PR's
business interests in Canada, including the Windsor production facility.
Certain officers of Corby have been appointed as directors and officers of
PR's Canadian entities, as approved by Corby's Board of Directors. All of
these transactions are in the normal course of operations and are measured at
the exchange amount, which is the amount of consideration established and
agreed to by the related parties.
    In addition to the transactions noted above, Corby purchased and sold
bulk whisky from/to HWSL at market prices, which was $2.70 per original litre
of alcohol ("OLA"). The quantities of OLA and the related exchange amount for
each type of transaction are listed in the following chart:

    
                                                2008                    2007
    -------------------------------------------------------------------------
    (Quantities stated in
     000's of original                      Exchange                Exchange
     litres of alcohol)       Quantities      Amount  Quantities      Amount
    -------------------------------------------------------------------------
    Sales                            407     $   1.1         339     $   0.9
    Purchases                        506     $   1.4           -           -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Approximately $1.0 million of bulk whisky purchased from HWSL remains in
inventory at June 30, 2008.
    Corby recently changed its financial institution to the Bank of Nova
Scotia ("Scotiabank"). As a result, all of the Company's banking and cash
management needs are addressed by Scotiabank and under this arrangement, Corby
participates in a Mirror Netting Service Agreement ("Mirror Agreement") with
PR's other Canadian affiliates. The Mirror Agreement acts to notionally
aggregate each of the participants' net cash balance on a nightly basis for
purposes of interest calculation. Corby earns interest income, which is
settled on a monthly basis, from PR at market rates on its cash balances held
at its financial institution. Corby's participation in the Mirror Agreement
places no restrictions on its cash balance, and the funds contained in Corby's
bank account are never physically moved as a result of the Company's
participation in this agreement.

    Results of Operations - Fourth Quarter of Fiscal 2008
    -----------------------------------------------------

    The following table presents a summary of certain selected consolidated
financial information for the Company for the three month periods ended
June 30, 2008 and June 30, 2007:

    
    -------------------------------------------------------------------------
                                3 Months    3 Months
    (in millions of Canadian       Ended       Ended
     dollars, except per         June 30,    June 30,
     share amounts)                 2008        2007    $ Change    % Change
    -------------------------------------------------------------------------
    Sales                        $  36.4     $  36.4     $     -           -
    Commissions(1)                   4.4         4.9        (0.5)       (10%)
    -------------------------------------------------------------------------
    Operating revenue(1)            40.8        41.3        (0.5)        (1%)
    Cost of sales                   19.5        19.8        (0.3)        (2%)
    Marketing, sales and
     administration                 11.4        11.5        (0.1)        (1%)
    -------------------------------------------------------------------------
    EBITDA(2)                        9.9        10.0        (0.1)        (1%)
    Amortization(3)                  1.6         1.9        (0.3)       (16%)
    -------------------------------------------------------------------------
    Earnings from operations         8.3         8.1         0.2          2%
    Interest income                  0.4         0.5        (0.1)       (20%)
    Foreign exchange loss           (0.1)       (0.1)          -           -
    -------------------------------------------------------------------------
    Earnings before income taxes     8.6         8.5         0.1          1%
    Income taxes                     2.7         3.0        (0.3)       (10%)
    -------------------------------------------------------------------------
    Net earnings                 $   5.9     $   5.5     $   0.4          7%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Per common share
      -  Basic net earnings      $  0.21     $  0.20     $  0.01          5%
      -  Diluted net earnings    $  0.21     $  0.20     $  0.01          5%
    -------------------------------------------------------------------------

    (1) Amounts are presented gross of representation rights amortization of
        $1.2 (2007 - $1.2).
    (2) Corby defines EBITDA as net earnings before equity earnings, foreign
        exchange, interest, taxes, depreciation, and amortization.
    (3) Amounts include capital assets amortization of $0.4 (2007 - $0.7) and
        representation rights amortization of $1.2 (2007 - $1.2).
    

    Operating revenue

    Operating revenue, consisting of sales and commissions, was $40.8 million
for the fourth quarter compared to $41.3 million in the same quarter last
year, a decrease of $0.5 million or 1%. Sales remained steady quarter over
quarter at $36.4 million, while commissions decreased $0.5 million to $4.4
million for the three month period ended June 30, 2008.

    Sales

    Fourth quarter sales were consistent with the same quarter last year at
$36.4 million as increased average selling prices were offset by a 1% decline
in quarter over quarter shipment volumes of spirits in addition to a 15%
decline in shipment volumes for the Seagram's Coolers brand. The slight
decline in spirit volumes is mainly the result of overall market weakness over
the final quarter in the Ontario market. The decline in shipment volumes for
the Seagram's Coolers brand was mainly the result of poor weather at the start
of the 2008 summer season.

    Commissions

    The following table highlights the various components which comprise
commissions:

    
    -------------------------------------------------------------------------
                                3 Months    3 Months
                                   Ended       Ended
    (in millions of Canadian     June 30,    June 30,
     dollars)                       2008        2007    $ Change    % Change
    -------------------------------------------------------------------------
    Commission from PR brands    $   3.4     $   3.4     $     -           -
    Commission from Agency
     brands                          1.0         1.6        (0.6)       (38%)
    -------------------------------------------------------------------------

    Commissions                  $   4.4     $   5.0     $  (0.6)       (12%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Commissions from PR brands remained consistent quarter over quarter while
commissions from Agency brands decreased $0.6 million. The decrease in Agency
brand commissions is mainly the result of timing of shipments related to
imported brands as more shipments were made earlier in the year in fiscal
2008.

    Cost of sales

    Cost of sales was $19.5 million compared to $19.8 million for the same
quarter last year. The slight decrease of $0.3 million is in-line with the
Company's fourth quarter sales which also remained consistent quarter over
quarter. Gross margin was 46.5%, as compared with 45.6% for the same quarter
last year. The fourth quarter's gross margin is lower than the margin realized
in the full year results due to the higher proportion of Seagram's Coolers
sales, which traditionally earn a lower margin than that of the Company's
spirit brands.

    Marketing, sales and administration

    Marketing, sales and administration expenses were $11.4 million, as
compared to $11.5 million during the same quarter last year and thus remained
stable showing a minimal $0.1 million decrease. The Company continues to
invest behind its key brands to allow for long-term sustainable growth.

    Amortization

    Amortization expense includes amortization of Corby's rights to represent
PR's brands in Canada in addition to amortization of the Company's capital
assets as displayed in the following schedule:

    
    -------------------------------------------------------------------------
                                3 Months    3 Months
                                   Ended       Ended
    (in millions of Canadian     June 30,    June 30,
     dollars)                       2008        2007    $ Change    % Change
    -------------------------------------------------------------------------
    Representation rights
     amortization                $   1.2     $   1.2     $     -           -
    Capital assets amortization      0.4         0.7        (0.3)       (43%)
    -------------------------------------------------------------------------
    Amortization                 $   1.6     $   1.9     $  (0.3)       (16%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Interest income

    Interest income is earned on Corby's cash balances held at its financial
institution. A slight decrease of $0.1 million was experienced this quarter
versus the same quarter last year due to lower market interest rates.

    Income taxes

    Income tax expense decreased $0.3 million when compared with the same
quarter last year. The decrease is the result of the Government of Canada's
decision made in December 2007 to substantively enact reductions in corporate
income tax rates.

    Selected Quarterly Information
    ------------------------------

    Summary of Quarterly Financial Results

    
    -------------------------------------------------------------------------
                                3 Months    3 Months    3 Months    3 Months
    (in millions of Canadian       Ended       Ended       Ended       Ended
     dollars, except per         Jun. 30,    Mar. 31,    Dec. 31,    Sep. 30,
     share amounts)                 2008        2008        2007        2007
    -------------------------------------------------------------------------
    Operating revenue            $  39.6     $  33.0     $  48.8     $  41.9
    EBITDA(1)                        9.9         9.6        15.8        15.2
    Equity earnings from TMG           -           -           -           -
    Gain from sale of TMG              -           -           -           -
    Net earnings                     5.9         5.9        10.5         9.4
    EBITDA per share(1)             0.35        0.34        0.55        0.53
    Basic EPS(2)                    0.21        0.21        0.37        0.33
    Diluted EPS(2)                  0.21        0.21        0.37        0.33
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                3 Months    3 Months    3 Months    3 Months
    (in millions of Canadian       Ended       Ended       Ended       Ended
     dollars, except per         Jun. 30,    Mar. 31,    Dec. 31,    Sep. 30,
     share amounts)                 2007        2007        2006        2006
    -------------------------------------------------------------------------
    Operating revenue            $  40.1     $  33.3     $  43.1     $  37.1
    EBITDA(1)                       10.0         7.3        14.5        12.2
    Equity earnings from TMG           -           -           -         2.1
    Gain from sale of TMG              -           -           -        72.6
    Net earnings                     5.5         4.3         8.7        81.9
    EBITDA per share(1)             0.35        0.26        0.51        0.43
    Basic EPS(2)                    0.20        0.15        0.31        2.88
    Diluted EPS(2)                  0.20        0.15        0.31        2.88
    -------------------------------------------------------------------------

    (1) EBITDA for the three months ended September 30, 2006 excludes the
        gain on sale of the Company's investment in TMG.
    (2) Excluding the gain on sale of the Company's investment in TMG and the
        related taxes of $1.1 million, Basic EPS and Diluted EPS for the
        three months ended September 30, 2006 was $0.37 and $0.37
        respectively.
    

    Critical Accounting Estimates
    -----------------------------

    The Company's consolidated financial statements are prepared in
accordance with Canadian GAAP, which require management to make certain
estimates, judgements 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, judgements
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
Canadian GAAP, actual results could differ from its estimates and such
differences could be material.
    The Company's significant accounting policies are discussed in Note 1 to
the consolidated financial statements. The following accounting policies
incorporate a higher degree of judgement 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 licenses acquired.
Goodwill and indefinite-lived intangible assets accounts for a significant
amount of the Company's total assets. These balances are evaluated for
impairment annually. The process of evaluating these items for impairment
involves the determination of fair value. Inherent in such fair value
determinations are certain judgements and estimates including, but not limited
to, projected future sales, earnings and capital investment, discount rates,
and terminal growth rates. These judgements 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 licenses exceeds the implied fair
value. Any impairment would result in a reduction in the carrying value of
these items on the consolidated balance sheet of the Company and the
recognition of a non-cash impairment charge in net earnings. Based on the
analyses 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 other post-retirement benefit plan are accrued based
on actuarial valuations which 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 actuaries. 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.

    Income and Other Taxes

    The Company accounts for income taxes using the liability method of
accounting. Under the liability method, future 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 judgements. 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 judgements 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.

    Accounting Standards - Implemented in 2008
    ------------------------------------------

    Financial Instruments

    In 2006, the Canadian Institute of Chartered Accountants issued new
accounting standards concerning financial instruments: Financial Instruments -
Recognition and Measurement ("Section 3855"); Financial Instruments -
Disclosure and Presentation ("Section 3861"); Hedges ("Section 3865");
Comprehensive Income ("Section 1530"); and Equity ("Section 3251"). These
standards require prospective application with the exception of the
translation of self-sustaining foreign operations and were effective for the
Company's first quarter of fiscal 2008. The Company applied the new accounting
standards at the beginning of its current fiscal year and their implementation
did not have a significant impact on the Company's results of operations or
financial position.

    Financial Assets and Liabilities

    Section 3855 establishes standards for recognizing and measuring
financial instruments. Under the new standards, all financial instruments are
classified into one of the following five categories: held-for-trading;
held-to-maturity investments; loans and receivables; available-for-sale
financial assets; or other financial liabilities. It is this classification
that will drive the future basis of measurement and the accounting treatment
in the financial statements. (See Note 2 to the accompanying consolidated
financial statements of the Company).

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

    International Financial Reporting Standards

    In 2006 the Accounting Standards Board has announced that Canadian GAAP
for publicly accountable enterprises will be replaced with International
Financial Reporting Standards ("IFRS") over a five year transitional period.
As the changeover is effective for fiscal years beginning on or after
January 1, 2011, Corby will changeover July 1, 2011. The Company has launched
an internal initiative to govern the conversion process and is currently in
the process of evaluating the potential impact of the conversion to IFRS on
its financial statements.

    Inventories

    In June 2007, the CICA issued new accounting standard Section 3031
"Inventories", which replaces CICA section 3030 "Inventories". The new
standard provides the Canadian equivalent to International Financial Reporting
Standard IAS 2 "Inventories". Section 3031 prescribes measurement of
inventories at the lower of cost and net realizable value. It provides
guidance on the determination of cost, including allocation of overheads and
other costs to inventories, prohibits the use of the last-in, first-out (LIFO)
method, and requires the reversal of previous write-downs when there is a
subsequent increase in the value of inventories. It also requires greater
disclosure regarding inventories and cost of sales. As this new standard is
effective for fiscal years beginning on or after January 1, 2008, Corby will
implement it in the first quarter of fiscal 2009. The Company is currently
assessing the impact of this new standard on its consolidated financial
statements.

    Financial Instruments - Disclosure and Presentation

    In December 2006, the Accounting Standards Board issued two new
accounting standards, Section 3862 "Financial Instruments - Disclosure" and
Section 3863 "Financial Instruments - Presentation". These standards will
replace existing Section 3861 "Financial Instruments - Disclosure and
Presentation". These new standards are harmonized with International Financial
Reporting Standards. Section 3862 requires increased disclosures regarding the
risks associated with financial instruments and how these risks are managed.
Section 3863 carries forward the presentation standards for financial
instruments and non-financial derivatives and provides additional guidance for
the classification of financial instruments, from the perspective of the
issuer, between liabilities and equity. As these new standards are effective
for fiscal years beginning on or after October 1, 2007, Corby will implement
them in the first quarter of fiscal 2009.

    Capital Disclosures

    In December 2006, the Accounting Standards Board issued a new accounting
standard, Section 1535 "Capital Disclosures", which establishes standards for
disclosing information about an entity's capital and how it is managed. As
this new standard is effective for fiscal years beginning on or after
October 1, 2007, Corby will implement it in the first quarter of fiscal 2009.

    Goodwill and Intangible Assets

    In February 2008, the Accounting Standards Board issued a new accounting
standard, Section 3064 "Goodwill and Intangible Assets", to replace current
Section 3062 "Goodwill and Other Intangible Assets". The new standard
prescribes new methods for recognizing, measuring, presenting and disclosing
goodwill and intangible assets. As this new standard is effective for fiscal
years beginning on or after October 1, 2008, Corby will implement it in the
first quarter of fiscal 2010.

    Disclosure Controls and Procedures
    ----------------------------------

    The Company maintains a system of disclosure controls and procedures that
has been designed to provide reasonable assurance that information required to
be disclosed by the Company in its public filings is recorded, processed,
summarized and reported within required time periods and includes controls and
procedures designed to ensure that all relevant information is accumulated and
communicated to senior management, including the Company's Chief Executive
Officer ("CEO") and Chief Financial Officer ("CFO"), to allow timely decisions
regarding required disclosure.
    Management, with the participation of the CEO and CFO, has evaluated the
effectiveness of the Company's disclosure controls and procedures (as defined
in the rules of the Canadian Securities Administrators) as at June 30, 2008
and has concluded that such disclosure controls and procedures are effective
based upon such evaluation.

    Internal Controls Over Financial Reporting
    ------------------------------------------

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

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

    Consumer Opinion and Supply Chain Interruption

    Beverage alcohol companies are susceptible to risks relating to changes
in consumer consumption patterns, product quality and availability, including
manufacturing or inventory disruption. Corby offers a solid portfolio of
products, which complements consumer desires and offers exciting innovation.
The Company adheres to a comprehensive suite of quality programs and
proactively manages production and supply chains to mitigate any potential
risk to consumer safety or Corby's reputation and profitability.

    Environmental Compliance

    Environmental liabilities may potentially arise when companies are in the
business of manufacturing products, and thus are required to handle
potentially hazardous materials. As Corby out sources the majority of its
production, including all of its storage and handling of maturing alcohol, the
risk of environmental liabilities has been reduced to an acceptably low level.
In addition, Corby's owned-production facility follows strict industry
guidelines for proper use and or disposal of hazardous materials to further
reduce environmental risks. 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. On July 24, 2008, Corby's majority
shareholder, Pernod Ricard S.A. announced that it had closed its acquisition
of 100% of Vin & Sprit Group, the owner of Absolut vodka, from the Kingdom of
Sweden. The Absolut vodka brand is currently represented in Canada by another
organization, and unless circumstances change, the Company is not in a
position to comment on the possibility of Corby representing the brand.
Nonetheless, 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 also extremely competitive.
Competitors may take actions to establish and sustain competitive advantage.
They may also affect Corby's ability to attract and retain high quality
employees. The Company's long heritage attests to Corby's strong foundation
and successful 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.

    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 cash
balances. An active risk management program does not exist as management
believes that changes in interest rates would not have a significant impact to
Corby's earnings.

    Exposure to Commodity Price Fluctuations

    Commodity risk exists as the manufacturing 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. Nonetheless, Corby's
earnings over the long-term are subject to fluctuations from commodity price
changes.

    Foreign Currency Exchange Risk

    Foreign exchange risk exists as a relatively small proportion of Corby's
total operating revenues are invoiced in a foreign currency, specifically the
UK Pound and the United States dollar. Naturally mitigating this risk is the
fact the Company also purchases certain of its goods and services in the same
foreign currencies.

    Third Party Service Providers

    The Company is reliant upon 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 influence 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 relationship with its third-party service providers.

    Brand Reputations

    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.

    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.



    
    CORBY DISTILLERIES LIMITED
    CONSOLIDATED BALANCE SHEETS

    As at June 30, 2008 and June 30, 2007
    (in thousands of Canadian dollars)
    -------------------------------------------------------------------------
                                                             2008       2007
                                                        ---------------------
    ASSETS
    Current
      Cash                                               $ 58,553   $ 46,989
      Accounts receivable                                  21,873     24,964
      Inventories (Note 6)                                 47,302     43,048
      Prepaid expenses                                      1,936      1,013
      Future income taxes (Note 10)                           164        363
    -------------------------------------------------------------------------
                                                          129,828    116,377
    Capital assets (Note 7)                                12,010      9,669
    Employee future benefits (Note 8)                       8,135      7,142
    Goodwill                                                9,856      9,856
    Intangible assets (Note 9)                             90,103     94,990
    -------------------------------------------------------------------------
                                                         $249,932   $238,034
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES
    Current
      Accounts payable and accrued liabilities           $ 19,248   $ 22,605
      Income and other taxes payable                        1,016      2,601
    -------------------------------------------------------------------------
                                                           20,264     25,206
    Employee future benefits (Note 8)                       5,023      3,909
    Future income taxes (Note 10)                           5,380      5,400
    -------------------------------------------------------------------------
                                                           30,667     34,515
    -------------------------------------------------------------------------

    SHAREHOLDERS' EQUITY
    Share capital (Note 11)                                14,304     14,304
    Accumulated other comprehensive income                      -          -
    Retained earnings                                     204,961    189,215
    -------------------------------------------------------------------------
                                                          219,265    203,519
    -------------------------------------------------------------------------
                                                         $249,932   $238,034
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements


    Approved by the Board of Directors:

    George F. McCarthy             Robert L. Llewellyn
    Director                       Director



    CORBY DISTILLERIES LIMITED
    CONSOLIDATED STATEMENTS OF EARNINGS

    For the Years Ended June 30, 2008 and June 30, 2007
    (in thousands of Canadian dollars, except per share amounts)
    -------------------------------------------------------------------------
                                                             2008       2007
                                                        ---------------------
    OPERATING REVENUE
      Sales                                              $147,916   $139,435
      Commissions (net of amortization
       of $4,887; 2007 - $3,500)                           15,402     14,161
    -------------------------------------------------------------------------
                                                          163,318    153,596
    -------------------------------------------------------------------------

    OPERATING COSTS
      Cost of sales                                        75,096     71,627
      Marketing, sales and administration                  42,633     41,454
      Amortization                                          1,199      1,359
    -------------------------------------------------------------------------
                                                          118,928    114,440
    -------------------------------------------------------------------------

    EARNINGS FROM OPERATIONS                               44,390     39,156
    -------------------------------------------------------------------------

    OTHER INCOME AND EXPENSE
      Equity in net earnings of companies subject to
       significant influence (Note 4)                           -      2,091
      Gain from disposition of investment in companies
       subject to significant influence (Note 4)                -     72,595
      Foreign exchange loss                                  (302)        (9)
      Interest income (Note 14)                             2,427      2,968
    -------------------------------------------------------------------------
                                                            2,125     77,645
    -------------------------------------------------------------------------

    EARNINGS BEFORE INCOME TAXES                           46,515    116,801
    -------------------------------------------------------------------------

    INCOME TAXES (Note 10)
      Current                                              14,646     15,027
      Future                                                  179      1,350
    -------------------------------------------------------------------------
                                                           14,825     16,377
    -------------------------------------------------------------------------

    NET EARNINGS                                         $ 31,690   $100,424
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    BASIC EARNINGS PER SHARE (Note 13)                   $   1.11   $   3.53
    DILUTED EARNINGS PER SHARE (Note 13)                 $   1.11   $   3.53
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements



    CORBY DISTILLERIES LIMITED
    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

    For the Years Ended June 30, 2008 and June 30, 2007
    (in thousands of Canadian dollars)
    -------------------------------------------------------------------------
                                                             2008       2007
                                                        ---------------------

    NET EARNINGS                                         $ 31,690   $100,424

    OTHER COMPREHENSIVE INCOME
      Foreign currency translation adjustment recognized
       in net earnings (Note 2)                                 -      3,019
    -------------------------------------------------------------------------

    COMPREHENSIVE INCOME                                 $ 31,690   $103,443
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements



    CORBY DISTILLERIES LIMITED
    CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

    For the Years Ended June 30, 2008 and June 30, 2007
    (in thousands of Canadian dollars)
    -------------------------------------------------------------------------
                                                             2008       2007
                                                        ---------------------
    SHARE CAPITAL
      Balance, beginning of year                         $ 14,304   $ 14,008
      Transactions, net                                         -        296
    -------------------------------------------------------------------------
      Balance, end of year                               $ 14,304   $ 14,304
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    RETAINED EARNINGS
      Balance, beginning of year                         $189,215   $147,337
      Net earnings                                         31,690    100,424
      Dividends                                           (15,944)   (58,546)
    -------------------------------------------------------------------------
      Balance, end of year                               $204,961   $189,215
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    CUMULATIVE TRANSLATION ADJUSTMENTS
      Balance, beginning of year                         $      -   $ (3,019)
      Transitional adjustment on adoption of new
       accounting policies (Note 2)                             -      3,019
    -------------------------------------------------------------------------
      Balance, end of year                               $      -   $      -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    ACCUMULATED OTHER COMPREHENSIVE INCOME
      Balance, beginning of year                         $      -   $      -
      Transitional adjustment on adoption of new
       accounting policies (Note 2)                             -     (3,019)
      Other comprehensive income                                -      3,019
    -------------------------------------------------------------------------
      Balance, end of year                               $      -   $      -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements



    CORBY DISTILLERIES LIMITED
    CONSOLIDATED STATEMENTS OF CASH FLOW

    For the Years Ended June 30, 2008 and June 30, 2007
    (in thousands of Canadian dollars)
    -------------------------------------------------------------------------
                                                             2008       2007
                                                        ---------------------
    OPERATING ACTIVITIES
    Net earnings                                         $ 31,690   $100,424
    Items not affecting cash
      Amortization                                          6,086      4,859
      Future income taxes                                     179      1,350
      Equity earnings from companies subject to
       significant influence                                    -     (2,091)
      Gain on disposition of investment in companies
       subject to significant influence                         -    (72,595)
    Foreign exchange                                          302          9
    Employee future benefits                                  121       (832)
    -------------------------------------------------------------------------
                                                           38,378     31,124
    Net change in non-cash working capital
     balances (Note 15)                                    (7,209)     2,277
    -------------------------------------------------------------------------
    Cash flows from operating activities                   31,169     33,401
    -------------------------------------------------------------------------

    INVESTING ACTIVITIES
    Dividends received from companies subject to
     significant influence (Note 4)                             -     28,573
    Acquisitions of businesses and long-term
     representation rights, net of disposal of
     long-term investments (Note 4)                             -    (21,668)
    Additions to capital assets                            (3,540)    (3,020)
    -------------------------------------------------------------------------
    Cash flows (used in) provided from
     investing activities                                  (3,540)     3,885
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
    Dividends paid                                        (15,944)   (58,546)
    Proceeds on issuance of capital stock                       -        296
    -------------------------------------------------------------------------
    Cash flows used in financing activities               (15,944)   (58,250)
    -------------------------------------------------------------------------

    Effect of exchange rate changes on cash                  (121)       266
    -------------------------------------------------------------------------

    NET CHANGE IN CASH                                     11,564    (20,698)
    CASH, BEGINNING OF YEAR                                46,989     67,687
    -------------------------------------------------------------------------
    CASH, END OF YEAR                                    $ 58,553   $ 46,989
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    SUPPLEMENTAL CASH FLOW INFORMATION
    Interest received                                    $  2,381   $  3,033
    Income taxes paid                                    $ 15,512   $ 14,044
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements



    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    FOR THE YEARS ENDED JUNE 30, 2008 AND JUNE 30, 2007
    (In thousands of Canadian dollars, except share amounts)

    1.  SIGNIFICANT ACCOUNTING POLICIES

    Description of Business

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

    Basis of Consolidation

    The consolidated financial statements include the accounts of Corby
    Distilleries Limited and its subsidiaries, collectively referred to as
    "Corby" or the "Company". Up until September 29, 2006, Corby owned a 45%
    investment in Tia Maria Limited and Tia Maria International Limited
    (collectively referred to as the "Tia Maria Group") and accounted for
    this investment via the equity method. Corby disposed of its investment
    in the Tia Maria Group as part of a transaction with Pernod Ricard S.A.
    ("PR"), the Company's ultimate parent. Refer to Note 4 for further
    details on the PR transaction.

    Revenue Recognition

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

    Cash

    Cash represents bank balances on hand at Corby's financial institutions
    adjusted for outstanding cheques and outstanding deposits. Corby earns
    market rates of interest on its cash balances from a related party via
    its participation in a Mirror Netting Service Agreement with its
    financial institution. Additional information is contained in Note 14 of
    these financial statements.

    Inventories

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

    Capital Assets

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

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

    Employee Future Benefits

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

    The Company has the following policies:

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

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

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

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

    -   The measurement date of the plans' assets and obligations is
        June 30, 2008.

    Long-lived Assets

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

    Goodwill

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

    Intangible Assets

    Intangible assets are comprised of long-term representation rights, and
    trademarks and licenses. 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 October 1, 2006.

    Trademarks and licenses represent the value of trademarks and licenses of
    businesses acquired. These intangible assets are deemed to have an
    indefinite life and therefore are not amortized. Trademarks and licenses
    are tested for impairment on an annual basis or more frequently if events
    or changes in circumstances indicate that the assets might be impaired.
    In the event of impairment, the excess of the carrying amount over the
    fair value of these assets would be charged to earnings.

    Income Taxes

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

    Foreign Currency Translation

    The Tia Maria Group, in which the Company had an investment of a self-
    sustaining nature, had the UK Pound Sterling as its functional currency
    and translated its financial results to Canadian Dollars as follows:
    assets and liabilities at the exchange rates in effect at the balance
    sheet dates and the translation of revenues and expenses at the exchange
    rates prevailing on the transaction dates. Unrealized gains or losses on
    translation are recorded as accumulated other comprehensive income, which
    is a separate component in shareholders' equity. Corby disposed of its
    investment in the Tia Maria Group on September 29, 2006 as part of a
    transaction with PR as disclosed in Note 4.

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

    Stock Based Compensation Plans

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

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

    Use of Estimates

    The preparation of the consolidated financial statements in conformity
    with Canadian generally accepted accounting principles requires
    management to make estimates and assumptions that affect the reported
    amounts of assets and liabilities and disclosure of contingent assets and
    liabilities at the date of the financial statements and the reported
    amounts of revenues and expenses during the reporting year.

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

    2. CHANGES IN ACCOUNTING POLICIES

    The CICA issued the following new accounting standards that apply to the
    Company as of the first day of Corby's 2008 fiscal year:

    a. CICA Handbook Section 3855 "Financial Instruments - Recognition and
        Measurement";
    b. CICA Handbook Section 3861 "Financial Instruments - Disclosure and
        Presentation";
    c. CICA Handbook Section 3865 "Hedges";
    d. CICA Handbook Section 1530 "Comprehensive Income"; and
    e. CICA Handbook Section 3251 "Equity"

    These accounting standards require retrospective adoption without
    restatement with the exception of the translation of self-sustaining
    foreign operations. Accordingly, the prior period cumulative foreign
    currency translation adjustments and accumulated other comprehensive
    income has been restated as described under Comprehensive Income and
    Equity.

    Financial Assets and Liabilities
    ---------------------------------

    Section 3855 establishes standards for recognizing and measuring
    financial assets, financial liabilities and non-financial derivatives.
    Under the new standard, all financial instruments are classified into one
    of the following five categories: held-for-trading; held-to-maturity;
    loans and receivables; available-for-sale financial assets; and other
    financial liabilities.

    All financial instruments are measured at fair value upon initial
    recognition. Transaction costs are included in the initial carrying
    amount of financial instruments except for held-for-trading items in
    which case they are expensed as incurred. Measurement in subsequent
    periods depends on the classification of the financial instrument.

    Financial assets and liabilities classified as "held-for-trading" are
    subsequently measured at fair value with changes in fair value recognized
    in net income. Financial assets classified as "available-for-sale" are
    subsequently measured at fair value with changes in fair value recognized
    in other comprehensive income, net of tax. Financial assets classified as
    either "held-to-maturity", "loans and receivables", and financial
    liabilities classified as "other financial liabilities" are subsequently
    amortized using the effective interest rate method. Financial instruments
    that are derivative contracts are considered "held-for-trading" unless
    they are designated as a hedge.

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

    Asset or Liability           Category                     Measurement
    -------------------------------------------------------------------------
    Cash                         Held-for-trading             Fair value
    Accounts receivable          Loans and receivables        Amortized cost
    Accounts payable             Other liabilities            Amortized cost

    The fair values of cash, accounts receivable, and accounts payable
    approximate their carrying amount given the short-term maturity of these
    financial instruments.

    The classification of financial assets and financial liabilities and
    resulting measurement basis did not have any impact on Corby's net
    earnings, basic or diluted earnings per share, nor its financial
    position.

    Derivatives and Hedge Accounting
    ---------------------------------

    The Company does not utilize derivative financial instruments nor does it
    have any embedded features in its contractual arrangements that require
    separate presentation from the related host contract. As a result, the
    implementation of these new accounting standards did not have any impact
    on Corby's net earnings, basic or diluted earnings per share, nor its
    financial position.

    The Company does not actively manage its exposure to foreign currency or
    interest rate risk as management believes these risks are already at an
    acceptably low level. The Company's exposure to credit risk is
    significantly reduced as its accounts receivable are substantially with
    the provincial liquor boards of Canada.

    Comprehensive Income and Equity
    --------------------------------

    Section 1530 introduces comprehensive income, which is comprised of net
    earnings and other comprehensive income ("OCI"). Comprehensive income
    comprises all changes in shareholders' equity from transactions and other
    events and circumstances from non-owner sources, and OCI includes
    unrealized gains and losses arising from the translation of the financial
    statements of self-sustaining foreign operations, unrealized gains and
    losses, net of tax, arising from changes in the fair value of available-
    for-sale financial assets, as well as the portion of gains or losses, net
    of tax, on the hedging item that is determined to be an effective cash
    flow hedge or hedge of net investments in self-sustaining foreign
    operations.

    Section 3251 establishes standards for the presentation of equity and
    changes in equity during the reporting period. The main feature of this
    new standard is the requirement for an enterprise to present separately
    each of the changes in equity during the reporting period.

    As a result of the implementation of these new standards, the financial
    statements include a consolidated statement of comprehensive income, with
    the cumulative amount of other comprehensive income presented as a new
    category of shareholders' equity in the consolidated balance sheets. In
    addition, the financial statements include a consolidated statement of
    shareholders' equity which presents separately each of the changes in
    equity during the period.

    In addition to the changes just described, adoption of these standards
    required the prior period cumulative translation adjustments and
    accumulated other comprehensive income balances to be restated as
    follows:

                                                   Transitional
                                                  Adjustment on
                                   As Previously    Adoption of           As
    Increase (decrease)                 Reported  New Standards     Restated
    -------------------------------------------------------------------------
    Cumulative translation
     adjustments - June 30, 2006      $   (3,019)    $    3,019   $        -
    Accumulated other comprehensive
     income - June 30, 2006           $        -     $   (3,019)  $   (3,019)

    Cumulative translation
     adjustments - June 30, 2008      $        -     $        -   $        -
    Accumulated other comprehensive
     income - June 30, 2007           $        -     $        -   $        -

    Other comprehensive income -
     for the year ended
     June 30, 2007                    $        -     $    3,019   $    3,019
    -------------------------------------------------------------------------

    Corby's foreign self-sustaining equity investments were disposed of as a
    result of the transaction with Pernod Ricard (Note 4) and therefore the
    related cumulative translation adjustment was recognized in earnings on
    September 29, 2006. Other than the presentation changes just described,
    these newly adopted standards did not have any impact on Corby's net
    earnings, basic or diluted earnings per share, nor its financial
    position.

    3. FUTURE ACCOUNTING STANDARDS

    The CICA has recently issued or proposes to issue the following new
    accounting standards, however they have not yet become effective as per
    the transitional guidelines contained within each standard:

    International Financial Reporting Standards

    In 2006 the Accounting Standards Board has announced that Canadian
    generally accepted accounting principles for publicly accountable
    enterprises will be replaced with International Financial Reporting
    Standards ("IFRS") over a five year transitional period. As the
    changeover is effective for fiscal years beginning on or after January 1,
    2011, Corby will changeover July 1, 2011. The Company has launched an
    internal initiative to govern the conversion process and is currently in
    the process of evaluating the potential impact of the conversion on its
    financial statements.

    Inventories

    In June 2007, the CICA issued new accounting standard Section 3031
    "Inventories", which replaces CICA section 3030 "Inventories". The new
    standard provides the Canadian equivalent to International Financial
    Reporting Standard IAS 2 "Inventories". Section 3031 prescribes
    measurement of inventories at the lower of cost and net realizable value.
    It provides guidance on the determination of cost, including allocation
    of overheads and other costs to inventories, prohibits the use of the
    last-in, first-out (LIFO) method, and requires the reversal of previous
    write-downs when there is a subsequent increase in the value of
    inventories. It also requires greater disclosure regarding inventories
    and cost of sales. As this new standard is effective for fiscal years
    beginning on or after January 1, 2008, Corby will implement it in the
    first quarter of fiscal 2009. The Company is currently assessing the
    impact of this new standard on its consolidated financial statements.

    Financial Instruments - Disclosure and Presentation

    In December 2006, the Accounting Standards Board issued two new
    accounting standards, Section 3862 "Financial Instruments - Disclosure"
    and Section 3863 "Financial Instruments - Presentation". These standards
    will replace existing Section 3861 "Financial Instruments - Disclosure
    and Presentation". These new standards are harmonized with International
    Financial Reporting Standards. Section 3862 requires increased
    disclosures regarding the risks associated with financial instruments and
    how these risks are managed. Section 3863 carries forward the
    presentation standards for financial instruments and non-financial
    derivatives and provides additional guidance for the classification of
    financial instruments, from the perspective of the issuer, between
    liabilities and equity. As these new standards are effective for fiscal
    years beginning on or after October 1, 2007, Corby will implement them in
    the first quarter of fiscal 2009.

    Capital Disclosures

    In December 2006, the Accounting Standards Board issued a new accounting
    standard, Section 1535 "Capital Disclosures", which establishes standards
    for disclosing information about an entity's capital and how it is
    managed. As this new standard is effective for fiscal years beginning on
    or after October 1, 2007, Corby will implement it in the first quarter of
    fiscal 2009.

    Goodwill and Intangible Assets

    In February 2008, the Accounting Standards Board issued a new accounting
    standard, Section 3064 "Goodwill and Intangible Assets", to replace
    current Section 3062 "Goodwill and Other Intangible Assets". The new
    standard prescribes new methods for recognizing, measuring, presenting
    and disclosing goodwill and intangible assets. As this new standard is
    effective for fiscal years beginning on or after October 1, 2008, Corby
    will implement it in the first quarter of fiscal 2010.

    4. AGREEMENT WITH PERNOD RICARD S. A.

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

    Under the agreement, Corby acquired the exclusive right to represent PR's
    brands in Canada for a 15 year period, expiring 2021. Furthermore, Corby
    also acquired the international rights to Lamb's rum (excluding the
    Canadian rights, which Corby already owned) and the Canadian rights to
    Seagram's Coolers. Both Lamb's rum ("Lamb's International") and Seagram's
    Coolers meet the definition of a business.

    The companies also agreed upon the terms for the continuation of
    production of Corby's owned brands by PR at its production facility in
    Windsor, Ontario for a 10 year period, expiring 2016. The companies
    further agreed that Corby will manage PR's business interests in Canada,
    including the Windsor production facility.

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

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

    Corby received a dividend of $28,573 from TMG just prior to its
    disposition. The Company has reflected a gain of $72,595, net of
    cumulative translation adjustments of $3,019, associated with the
    disposition of TMG in its financial results for the year ended June 30,
    2008. Also included in the financial results for the three months ended
    September 30, 2006 is $1,045 for withholding and other taxes related to
    the disposition of TMG. The transaction was not subject to further tax
    expense as a result of the use of Section 85 rollover provisions in the
    Canadian Income Tax Act. Corby has been indemnified for any further tax
    liabilities resulting from the disposition of TMG, should they occur, up
    to a maximum of $16,000.

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

    5. ACQUISITION OF BUSINESSES

    As described in Note 4, the acquisition of Lamb's International gives
    Corby worldwide rights to the Lamb's business and assets in addition to
    the Canadian rights which Corby already owned. The Company is entitled to
    intellectual property such as product specifications and the recipe for
    the Lamb's Navy Rum brand, and the "Alfred Lamb International Limited"
    trademark.

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

    Corby also acquired the Canadian assets and business of Seagram's Coolers
    (as described in Note 4). The Company is entitled to an irrevocable,
    perpetual, royalty free and transferable license for Canada for the
    intellectual property (such as product specifications and recipes)
    related to the use of the Seagram name in connection with the Seagram's
    Coolers assets and business. Corby also acquired all of the inventory and
    other assets used in connection with the Seagram's Coolers business in
    Canada in addition to acquiring all of PR's rights under applicable co-
    pack and other agreements.

    Virtually all of the Seagram's Coolers are produced by an unrelated third
    party located in Dorval, Quebec under a co-packing agreement that expires
    in December 2010. This agreement requires a minimum annual production
    volume of 300,000 cases and a maximum annual production volume of
    1,005,000 cases. Management anticipates annual volumes to be within this
    contracted range.

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


    Seagram's Coolers                                                   2007
    -------------------------------------------------------------------------

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

    Lamb's International                                                2007
    -------------------------------------------------------------------------

    Inventory                                                     $      349
    Trademarks and licenses                                           11,800
    Goodwill                                                           1,410
    -------------------------------------------------------------------------
                                                                  $   13,559
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    6. INVENTORIES

                                                           2008         2007
    -------------------------------------------------------------------------
    Raw materials                                    $    5,843   $    5,674
    Work-in-progress                                     28,906       26,806
    Finished goods                                       12,553       10,568
    -------------------------------------------------------------------------
                                                     $   47,302   $   43,048
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    7. CAPITAL ASSETS


                                          2008                          2007
    -------------------------------------------------------------------------
                                Accu-                         Accu-
                             mulated       Net             mulated       Net
                              Amorti-     Book              Amorti-     Book
                      Cost    zation     Value      Cost    zation     Value
    -------------------------------------------------------------------------
    Land          $    638  $      -  $    638  $    638  $      -  $    638
    Buildings        7,288     4,457     2,831     7,284     4,318     2,966
    Machinery and
     equipment      15,419     6,878     8,541    14,195     8,130     6,065
    -------------------------------------------------------------------------
                  $ 23,345  $ 11,335  $ 12,010  $ 22,117  $ 12,448  $  9,669
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    8. EMPLOYEE FUTURE BENEFITS

    The Company has two defined benefit plans for executives and salaried
    employees, two supplementary executive retirement plans for retired and
    current senior executives of the Company, and a post retirement benefit
    plan covering retiree life insurance, health and dental care. Benefits
    under these plans are based on years of service and compensation levels.
    The latest valuations completed for these plans are dated December 31,
    2007. The next required valuations must be completed with an effective
    date no later than December 31, 2010.

    Information about the Company's pension and other post retirement benefit
    plans is as follows:

                                                    2008                2007
    -------------------------------------------------------------------------
                                                   Other               Other
                                       Pension   Benefit   Pension   Benefit
                                         Plans     Plans     Plans     Plans
    -------------------------------------------------------------------------
    Fair value of plan assets
    Fair value of plan assets,
     beginning of year                $ 42,843  $      -  $ 37,941  $      -
      Actual return on plan assets           6         -     4,278         -
      Employer contributions             2,765       641     3,714       610
      Employee contributions               178         -       162         -
      Benefits paid                     (3,896)     (641)   (3,523)     (610)
      Net transfer in from Parent
       Company's pension plan                -         -       271         -
    -------------------------------------------------------------------------
    Fair value of plan assets,
     end of year                      $ 41,896  $      -  $ 42,843  $      -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Accrued benefit obligation
    Benefit obligation, beginning
     of year                          $ 44,771  $ 11,574  $ 43,144  $ 10,622
      Actuarial loss, beginning
       of year                               -         -         -         -
      Service cost                       1,444       621     1,260       496
      Interest cost                      2,360       619     2,392       592
      Employee contributions               177         -       162         -
      Actuarial loss (gain)             (1,936)     (391)    1,065       474
      Benefits paid                     (3,896)     (641)   (3,523)     (610)
      Net transfer in from Parent
       Company's pension plan                -         -       271         -
    -------------------------------------------------------------------------
    Accrued benefit obligation,
     end of year                      $ 42,920  $ 11,782  $ 44,771  $ 11,574
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Funded status
    Funded status: plan deficit       $ (1,024) $(11,782) $ (1,928) $(11,574)
      Unamortized net transition
       obligation (asset)               (2,468)    4,085    (2,801)    4,488
      Unamortized past service costs       856         -       937         -
      Unamortized net actuarial loss    10,771     2,674    10,934     3,177
    -------------------------------------------------------------------------
    Accrued benefit asset (liability) $  8,135  $ (5,023) $  7,142  $ (3,909)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    All pension plans other than the salaried employees' plan are in a funded
    deficit position. The aggregate fair value of plan assets and accrued
    benefit obligation for these deficit position plans as at June 30, 2008
    is $34,163 and $37,001 respectively (2007 - $35,479 and $39,003).

    Significant actuarial assumptions adopted are as follows:

                                                    2008                2007
    -------------------------------------------------------------------------
                                                   Other               Other
                                       Pension   Benefit   Pension   Benefit
                                         Plans     Plans     Plans     Plans
    -------------------------------------------------------------------------
    Accrued benefit obligation,
     end of year
    Discount rate                         5.85%     5.85%     5.50%     5.50%
    Compensation increase                 3.50%      N/A      4.00%      N/A
    Benefit expense, for the year
    Discount rate                         5.50%     5.50%     5.75%     5.75%
    Expected long term return on assets   6.75%      N/A      6.75%      N/A
    Compensation increase                 4.00%      N/A      4.00%      N/A


    The medical cost trend rates used was 11.0% for 2008 and 2007, with 5.0%
    being the ultimate trend rate for years 2014 and thereafter. The dental
    cost rates used was 5.0% for 2008 and 2007.

    Assumed health care cost trend rates have a significant effect on the
    amounts reported for the health care plans. A one-percentage-point change
    in assumed health care cost trend rates would have the following effects
    for 2008:

                                                          Increase  Decrease
    -------------------------------------------------------------------------
    Service and interest cost                             $    165  $   (129)
    Post retirement benefit obligation                       1,457    (1,081)


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

                                                    2008                2007
    -------------------------------------------------------------------------
                                                   Other               Other
                                       Pension   Benefit   Pension   Benefit
                                         Plans     Plans     Plans     Plans
    -------------------------------------------------------------------------
    Service cost (including provision
     for plan expenses)               $  1,444  $    621  $  1,578  $    496
    Interest cost                        2,360       619     2,392       592
    Actual return on plan assets            (6)        -    (4,278)        -
    Actuarial loss (gain)               (1,936)     (391)    1,065       474
    -------------------------------------------------------------------------
    Costs arising in the period          1,862       849       757     1,562

    Differences between:
      Actual and expected return on
       plan assets                      (2,214)        -     1,933         -
      Actuarial gain or loss
       recognized for the year and
       actuarial gain or loss on
       accrued benefit obligation        2,377       503      (501)     (378)
      Amortization of plan amendments
       and actual plan amendments           80         -        79         -
      Amortization of transitional
       obligation (asset)                 (333)      403      (333)      403
    -------------------------------------------------------------------------
    Net expense                       $  1,772  $  1,755  $  1,935  $  1,587
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Plan assets by category are as follows:

                                                              2008      2007
    -------------------------------------------------------------------------
    Equity                                                    48.7%     54.2%
    Fixed income                                              40.3%     37.1%
    Other                                                     11.0%      8.7%
    -------------------------------------------------------------------------
                                                             100.0%    100.0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    9.  INTANGIBLE ASSETS

                                                    2008                2007
    -------------------------------------------------------------------------
                              Accumu-                       Accumu-
                               lated                         lated
                              Amorti- Net Book              Amorti- Net Book
                      Cost    zation     Value      Cost    zation     Value
    -------------------------------------------------------------------------
    Long-term
     representa-
     tion
     rights       $ 70,440  $  8,387  $ 62,053  $ 70,440  $  3,500  $ 66,940
    Trademarks
     and licenses   28,050         -    28,050    28,050         -    28,050
    -------------------------------------------------------------------------
                  $ 98,490  $  8,387  $ 90,103  $ 98,490  $  3,500  $ 94,990
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    10. INCOME TAXES

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

                                                              2008      2007
    -------------------------------------------------------------------------
    Future income tax assets
    Current
      Bad debt and inventory reserves                     $    107  $    171
      Non-capital losses available for carry forward            57         -
      Restructuring reserves                                     -       192
    -------------------------------------------------------------------------
                                                               164       363
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Future income tax liabilities
    Long term
      Employee future benefits                            $    902  $  1,039
      Capital assets                                           529       482
      Intangible assets and goodwill                         3,949     3,879
    -------------------------------------------------------------------------
                                                          $  5,380  $  5,400
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    The effective tax rate of 32% for the year ended June 30, 2008 and 14%
    for the year ended June 30, 2007 differ from the basic Federal and
    Provincial rates due to the following:

                                                              2008      2007
    -------------------------------------------------------------------------
    Combined basic Federal and
     Provincial tax rates                                       33%       35%
    Impact of substantively enacted rate decreases             (1%)        0%
    Equity in net earnings of companies subject to
     significant influence                                       0%      (1%)
    Income not subject to tax 0% (22%)
    Other                                                        0%        2%
    -------------------------------------------------------------------------
                                                                32%       14%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    11. SHARE CAPITAL

                                                           2008         2007
    -------------------------------------------------------------------------
    Number of shares authorized:
      Voting Class A Common Shares - no par value     Unlimited    Unlimited
      Non-voting Class B Common Shares - no
       par value                                      Unlimited    Unlimited

    Number of shares issued and fully paid:
      Voting Class A Common Shares                   24,274,320   24,274,320
    -------------------------------------------------------------------------

      Non-voting Class B Common Shares, beginning
       of year                                        4,194,536    4,176,336
      Non-voting Class B Common Shares, issued
       during the year                                        -       18,200
    -------------------------------------------------------------------------
      Non-voting Class B Common Shares, end of year   4,194,536    4,194,536
    -------------------------------------------------------------------------
                                                     28,468,856   28,468,856
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Stated value                                    $    14,304  $    14,304
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    In prior years, the Company established a Non Voting Class B Common Share
    Option Plan ("Share Option Plan") and set aside 800,000 Non-Voting Class
    B Common Shares. Through the Share Option Plan, options were granted to
    certain officers and employees for the purchase of Non-Voting Class B
    Common Shares. Options were granted at prices equal to the closing market
    value on the last trading day prior to the grant and are exercisable from
    six to nine years from the date of vesting. Options vest from one to four
    years after the grant date. There were no options outstanding at anytime
    during the year ended June 30, 2008. During the year ended June 30, 2007,
    the last remaining 18,200 options were exercised for total proceeds
    of $296. The last options granted through the Share Option Plan were
    granted on October 23, 2000.

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

                                                    2008                2007
    -------------------------------------------------------------------------
                                                Weighted            Weighted
                                                 Average             Average
                                     Number of  Exercise Number of  Exercise
                                       Options     Price   Options     Price
    -------------------------------------------------------------------------
    Outstanding, beginning of year           -  $      -    18,200  $  16.23
    Exercised through the purchase
     option                                  -         -   (18,200)    16.23
    -------------------------------------------------------------------------
    Outstanding, end of year                 -  $      -         -  $      -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    12. RESTRICTED SHARE UNITS PLAN

                                                    2008                2007
    -------------------------------------------------------------------------
                                                Weighted            Weighted
                                                 Average             Average
                                       Restric-    Grant   Restric-    Grant
                                           ted      Date       ted      Date
                                         Share      Fair     Share      Fair
                                         Units     Value     Units     Value
    -------------------------------------------------------------------------
    Non-vested, beginning of year       13,550  $  24.92    26,328  $  24.90
      Granted                           24,576     25.40         -         -
      Reinvested dividend equivalent
       units                               805     22.39       959     25.57
      Vested                                 -         -         -         -
      Forfeited                              -         -   (13,737)    24.93
    -------------------------------------------------------------------------
    Non-vested, end of year             38,931  $  25.17    13,550  $  24.92
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Compensation expense related to this plan for the year ended June 30,
    2008 was $156 (2007 - $111).


    13. EARNINGS PER SHARE

    The following table sets forth the computation of basic and diluted
    earnings per share:

                                                           2008         2007
    -------------------------------------------------------------------------

    Numerator:
      Net earnings                                  $    31,690  $   100,424
    Denominator:
      Denominator for basic earnings per share:
       weighted average shares outstanding           28,468,856   28,457,694
      Effect of stock options                                 -        3,276
    -------------------------------------------------------------------------
    Denominator for diluted earnings per share       28,468,856   28,460,970
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    14. INTEREST INCOME

    During the year ended June 30, 2008, Corby changed its financial
    institution to the Bank of Nova Scotia ("Scotiabank"). As a result, all
    of the Company's banking and cash management needs are addressed by
    Scotiabank and under this arrangement, Corby participates in a Mirror
    Netting Service Agreement ("Mirror Agreement") with PR's other Canadian
    affiliates. The Mirror Agreement acts to notionally aggregate each of the
    participants' net cash balance on a nightly basis for purposes of
    interest calculation.

    Corby earns interest income, which is settled on a monthly basis, from PR
    at market rates on its cash balances held at its financial institution.
    Corby's participation in the Mirror Agreement places no restrictions on
    its cash balance, and the funds contained in Corby's bank account are
    never physically moved as a result of the Company's participation in this
    agreement.

    15. CHANGES IN NON-CASH WORKING CAPITAL

                                                           2008         2007
    -------------------------------------------------------------------------
    Increase (decrease)
    Accounts receivable                             $     2,910  $    (1,851)
    Inventories                                          (4,254)      (3,741)
    Prepaid expenses                                       (923)        (218)
    Deferred costs                                            -          680
    Accounts payable and accrued liabilities             (3,357)       6,427
    Income and other taxes payable                       (1,585)         980
    -------------------------------------------------------------------------
                                                    $    (7,209) $     2,277
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    16. RELATED PARTY TRANSACTIONS

    Hiram Walker & Sons Limited, a wholly owned subsidiary of PR, owns in
    excess of 50% of the issued voting common shares of Corby and is thereby
    considered to be the Company's parent. PR is considered to be Corby's
    ultimate parent and affiliated companies are those that are also
    subsidiaries of PR.

    In addition to the information provided in Notes 4, 5 and 14,
    transactions and balances with parent and affiliated companies include
    the following:


    -------------------------------------------------------------------------
                                                Financial
                                                Statement
                                 Nature of       Classifi-
    Nature of Transaction      Relationship        cation       2008     2007
    -------------------------------------------------------------------------
    I   The Corporation        Parent company   Sales,       $   847  $   868
        renders blending and                    accounts
        bottling services                       receivable
    -------------------------------------------------------------------------
    II  The Corporation sells  Affiliated       Sales,       $   734  $ 3,478
        certain of its         companies        accounts
        products for resale                     receivable
        at an export level
    -------------------------------------------------------------------------
    III The Corporation        Parent company,  Commissions, $14,226  $12,345
        renders services, as   companies        accounts
        the sole and           subject to       receivable
        exclusive              significant
        representative, for    influence,
        purposes of marketing  ultimate Parent
        and sales of beverage  company and
        alcohol products in    Affiliated
        Canada                 companies
    -------------------------------------------------------------------------
    IV  The Corporation sub-   Parent company   Cost of      $25,161  $24,206
        contracts virtually    and an           sales,
        all of its distilling, Affiliated       inventories
        blending, bottling,    company          and
        storing and production                  accounts
        activities                              payable
    -------------------------------------------------------------------------
    V   The Corporation sub-   Parent company   Marketing,   $ 2,168  $ 2,100
        contracts an important                  sales and
        portion of its                          administration
        bookkeeping, record
        keeping services,
        certain administrative
        services, related data
        processing and
        maintenance of data
        processing activities
    -------------------------------------------------------------------------
    VI  The Corporation        Parent company   Cost of      $ 2,523  $ 2,262
        purchases some of the                   sales,
        inventory used in                       inventories
        production activities                   and
                                                accounts
                                                payable
    -------------------------------------------------------------------------

    These transactions, which are settled the following month, are in the
    normal course of operations and are measured at the exchange amount,
    which is the amount of consideration established and agreed to by the
    related parties. Transactions in sections III, IV, and V above are
    covered under the terms of agreements with related parties and are
    further described in Note 4. These agreements include a non-competition
    clause whereby the Company ceded its rights to sell beverage alcohol in
    bulk to third parties in favour of its parent company.

    In addition to the transactions noted above, Corby purchased and sold
    bulk whisky from/to HWSL at market prices, which was $2.70 per original
    litre of alcohol ("OLA"). The quantities of OLA and the related exchange
    amount for each type of transaction are listed in the following chart:

                                                    2008                2007
    -------------------------------------------------------------------------
    (Quantities stated in 000's
     of original litres of                      Exchange            Exchange
     alcohol)                       Quantities    Amount Quantities   Amount
    -------------------------------------------------------------------------
    Sales                                  407  $  1,100       339  $    915
    Purchases                              506  $  1,365         -         -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Approximately $974 of bulk whisky purchased from HWSL remains in
    inventory at June 30, 2008.

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

                                                              2008      2007
    -------------------------------------------------------------------------
    Accounts receivable - related parties                 $  5,072  $    982
    Accounts payable - related parties                      (3,997)   (7,103)
    -------------------------------------------------------------------------
    Net amount receivable from (payable to)
     related parties                                      $  1,075  $ (6,121)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    17. SEGMENT INFORMATION

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

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

    Geographic information regarding the Company is as follows:

                                                                        2008
    -------------------------------------------------------------------------
                                        United
                                     States of    United   Rest of
                              Canada   America   Kingdom     World     Total
    -------------------------------------------------------------------------
    Operating revenue       $152,409  $  5,372  $  5,165  $    372  $163,318
    Capital assets            12,010         -         -         -    12,010
    Goodwill                   8,446         -     1,410         -     9,856
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                                        2007
    -------------------------------------------------------------------------
                                        United
                                     States of    United   Rest of
                              Canada   America   Kingdom     World     Total
    -------------------------------------------------------------------------

    Operating revenue       $143,509  $  4,609  $  4,487  $    991  $153,596
    Capital assets             9,669         -         -         -     9,669
    Goodwill                   8,446         -     1,410         -     9,856
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    In 2008, operating revenue to three major customers accounted for 29%,
    17%, and 13% respectively (2007 - 31%, 16%, and 13%).

    18. FINANCIAL INSTRUMENTS

    Credit Risk
    -----------
    The Company has credit risk associated with accounts receivable. The risk
    of collection has been mitigated since substantially all of these
    balances have been billed to government owned provincial liquor boards.

    Liquidity Risk
    --------------
    Corby's sources of liquidity are its cash balance of $58,553 along with
    cash generated by operating activities. The Company believes that the
    available cash balance combined with its historically strong and
    consistent cash flow from operations are sufficient to fund its
    operations, investing activities and commitments for the foreseeable
    future.

    Interest Rate Risk
    ------------------
    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
    cash balances. The Company believes that changes in interest rates would
    not have a significant impact on its earnings and therefore does not
    utilize derivative instruments or other measures to manage this risk.

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

    19. COMMITMENTS

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

    -------------------------------------------------------------------------
    2009                                                            $  1,198
    2010                                                               1,176
    2011                                                               1,014
    2012                                                                 808
    2013                                                                 639
    Thereafter                                                         3,313
    -------------------------------------------------------------------------
                                                                    $  8,148
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    20. GUARANTEES

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

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

    21. CONTINGENCIES

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

    22. COMPARATIVE FIGURES

    Certain of the comparative figures have been reclassified to conform to
    the financial statement presentation adopted in 2008.
    

    %SEDAR: 00001138E




For further information:

For further information: CORBY DISTILLERIES LIMITED, Con Constandis,
President and Chief Executive Officer; John Nicodemo, Chief Operating Officer
and Chief Financial Officer, Tel.: (416) 479-2400, investors@corby.ca,
www.Corby.ca


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