CORBY DISTILLERIES REPORTS INCREASE IN FOURTH QUARTER OPERATING REVENUE

    
             Fourth quarter dividend amounts to $0.14 per share
                 Year-to-date dividend totals $0.56 per share
    

TORONTO, Aug. 26 /CNW/ - Corby Distilleries Limited ("Corby" or the "Company") (TSX:CDL.A, TSX:CDL.B) today reported its dividend and financial results for the year ended June 30, 2010. The Corby Board of Directors today also declared a dividend of $0.14 per share payable on September 30, 2010 on Voting Class A Common Shares and Non-voting Class B Common Shares of the Company to shareholders of record as at the close of business on September 15, 2010. All financial results are reported in Canadian dollars.

Corby's fourth quarter operating revenue increased $0.6 million to $42.0 million, up from $41.4 million achieved during the same quarter last year. Fourth quarter sales in the domestic market held virtually equal to the same quarter last year, even though the comparative period included additional sales resulting from a threatened labour disruption in Ontario. The increase in fourth quarter sales was derived from the Company's contract bottling business, in addition to having increased shipment volumes to international customers.

Net earnings for the quarter ended June 30, 2010 decreased to $6.6 million or $0.23 per share, compared to $7.4 million or $0.26 per share, during the quarter ended June 30, 2009. The 11% decrease in net earnings was mainly the result of increased advertising and promotional expenditures being invested behind the Company's key brands, and was partially offset as a result of the aforementioned increased operating revenue along with the Company having benefited from reduced production costs.

For the year ended June 30, 2010, operating revenues decreased to $162.2 million versus $169.3 million last year. Net earnings and earnings per share in fiscal 2010 amounted to $20.7 million and $0.73, respectively, compared to $30.4 million and $1.07 per share, respectively during fiscal 2009. The decline in net earnings as compared to fiscal 2009 was largely due to the impact of a non-cash impairment charge being taken in the second quarter of fiscal 2010. Excluding the impact of the impairment charge, net earnings and earnings per share would have been $30.1 million and $1.06 per share, respectively, representing only a nominal decrease this year versus last.

Challenging economic conditions continued to impact consumer consumption, which also contributed to increasingly competitive market conditions, primarily in the form of aggressive price discounting. The depressed economic environment also brought historically low interest rates as governments around the world acted to stimulate growth, and as a result, interest income earned from cash deposits decreased $1.2 million this year versus last. Partially offsetting these factors were increases in average prices, positive changes in product mix, and lower production costs resulting from favourable foreign exchange rates on US dollar production inputs.

"I am pleased with the Company's recent performance during such turbulent economic conditions. We continue to strive to increase sales and maximize earnings, while expanding the visibility of Corby's brand portfolio in the Canadian spirits and wine markets," noted Patrick O'Driscoll, President and Chief Executive Officer of Corby.

For further details, please refer to Corby's management discussion and analysis and consolidated financial statements and accompanying notes for the year ended June 30, 2010, prepared in accordance with Canadian generally accepted accounting principles.

About Corby

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 McGuinness liqueurs. Through its affiliation with Pernod Ricard, Corby also represents leading international brands such as ABSOLUT vodka, Chivas Regal, The Glenlivet and Ballantine's scotches, Jameson Irish whiskey, Beefeater gin, Malibu rum, Kahlúa liqueur, Mumm champagne, and Jacob's Creek and Wyndham Estate wines.

The 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.

This press release contains forward-looking statements, including statements concerning possible or assumed future results of Corby's operations. Forward-looking statements typically are preceded by, followed by or include the words "believes", "expects", "anticipates", "estimates", "intends", "plans" or similar expressions. Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions and, as such, the Company's results could differ materially from those anticipated in these forward-looking statements. Accordingly, readers should not place undue reliance on forward-looking statements.

    
    CORBY DISTILLERIES LIMITED
    Management's Discussion and Analysis
    June 30, 2010

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The following Management's Discussion and Analysis ("MD&A") dated August 26, 2010, should be read in conjunction with the audited consolidated financial statements and accompanying notes for the year ended June 30, 2010, 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. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. These factors are not intended to represent a complete list of the factors that could affect the Company. Additional factors are noted elsewhere in this MD&A.

This document has been reviewed by the Audit Committee of Corby's Board of Directors and contains certain information that is current as of August 26, 2010. 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 2010 (three months ended June 30, 2010) are against results for the fourth quarter of fiscal 2009 (three months ended June 30, 2009). 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. Corby is a publicly traded company, with its shares listed on the Toronto Stock Exchange under the symbols "CDL.A" (voting Class A common shares) and "CDL.B" (non-voting Class B common shares). Corby's voting Class A common shares are majority-owned by Hiram Walker & Sons Limited ("HWSL") (a private company) located in Windsor, Ontario. HWSL is a wholly owned subsidiary of international spirits and wine company, Pernod Ricard S.A. ("PR") (a French public limited company), which is headquartered in Paris, France. Therefore, throughout the remainder of this MD&A, Corby refers to HWSL as its parent, and to PR as its ultimate parent. Affiliated companies are those that are also subsidiaries of PR.

The Company derives its revenues from the sale of its owned-brands 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 statements 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 statements of earnings.

Corby's portfolio of owned-brands include some of the most renowned brands in Canada, including Wiser's Canadian whisky, Lamb's rum, Polar Ice vodka, McGuinness liqueurs and Seagram Coolers. Through its affiliation with PR, Corby also represents leading international brands such as ABSOLUT vodka, Chivas Regal, The Glenlivet and Ballantine's scotches, Jameson Irish whiskey, Beefeater gin, Malibu rum, Kahlúa liqueur, Mumm champagne, and Jacob's Creek and Wyndham Estate wines. 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.

The Company sources approximately 72% of its spirits production requirements from HWSL at its production facilities in Windsor, Ontario, with the balance of Corby's spirits production being sourced from the Company's owned-plant in Montréal, Québec. Essentially all of Corby's cooler production requirements are outsourced to an unrelated third-party located in Woodbridge, Ontario.

In September 2006, PR and Corby agreed upon terms for the continuation of production of Corby's owned-brands by PR at HWSL's production facility in Windsor, Ontario, for the next 10 years, expiring September 2016. Corby and PR further agreed that Corby will manage PR's business interests in Canada, including HWSL's production facility, during that same 10-year period.

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

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

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

Corby's operations are 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 typically tend to reflect the impact of seasonal fluctuations in that, generally, more shipments are made during those quarters.

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

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

Management believes that having a focused brand prioritization strategy will permit 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 on, and leverage the long-term growth potential of, its key brands. As a result, Corby will continue to invest behind its brands to promote its premium offerings where it makes the most sense and drives the most value for shareholders.

Brand prioritization requires an evaluation of each brand's potential to deliver upon this strategy. Such evaluation facilitates Corby's marketing and sales teams' focus on maximizing value creation within the brand prioritization strategy. Over the long term, management 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 the responsible consumption of its products in its activities. The Company stresses its core values throughout its organization, including those of value creation, social responsibility, tradition, substance over style, and character above all.

    
    Current Market Environment
    

Indicators of the Canadian economy continue to be mixed. The June Consumer Confidence Index, as reported by the Conference Board of Canada, fell in Ontario and British Columbia (two of Corby's largest markets) and remained well below its most recent peak in January. There has, however, been renewed strength in the Canadian dollar.

It appears that the recovery in Canada is fragile, as the unemployment rate remains relatively high. Furthermore, while a strong Canadian dollar may benefit some parts of the economy, it tends to negatively affect the export-driven manufacturing sector, which is a key pillar of Ontario's economy and one of Corby's largest markets. Given these facts, there remains substantial uncertainty regarding the length of time for which these difficult economic conditions will continue.

Prior to the recession, the Company had strengthened its operations and financial position, which has allowed it to better face the economic downturn. Of particular consideration are the following factors:

    
    -   Corby has no long-term debt and, therefore, no financial or other
        covenants;
    -   The Company has significant sources of liquidity via its $74.7
        million currently on deposit in a cash management pool with PR's
        other Canadian affiliates;
    -   Corby's largest customers are government-controlled LBs in each
        province, which greatly reduces the risk associated with the
        collection of accounts receivable;
    -   The Company has an exceptionally diverse and strong brand portfolio,
        which is well positioned to meet consumer tastes across spirit
        categories at a wide range of price points; and
    -   Corby is a leader in the Canadian spirits market and has a long
        history of profitability and uninterrupted dividends.
    

Moreover, the spirits business in Canada has, historically, been less affected by economic slowdowns than other consumer and manufacturing businesses. However, no business is completely immune to a slowdown in the economy. As a result, Corby closely monitors its exposure to the following potential risks, which could impact future profitability and cash flows, so it can be in a position to proactively respond should any of the following materialize:

    
    -   Long-term decline in the level of spirits consumption by consumers;
    -   Deterioration of the financial health of key suppliers;
    -   Valuation of goodwill and intangible assets; and
    -   Higher pension funding requirements.
    

Corby's financial results have been unfavourably impacted by what is believed to be only a short-term decline in consumer demand, and by an impairment charge recorded during the second quarter ended December 31, 2009 against its goodwill and intangible assets values related specifically to the Seagram Coolers brand. Further information related to the impairment charge can be found in the "Significant Event" section of this MD&A. The other factors noted in the list above have not had a measurable impact on the Company. Management will continue to closely monitor the ongoing economic environment and take proactive measures, as necessary.

    
    Significant Event
    -----------------

    Corby Reports a Non-Cash Impairment Charge
    

In accordance with Canadian GAAP, the Company recorded a non-cash impairment charge of $11.5 million (after-tax impact of $9.4 million) against its goodwill and intangible assets balances related to its Seagram Coolers brand during the quarter ended December 31, 2009. The Seagram Coolers business in Canada was acquired by Corby on September 29, 2006. Initially, the brand had been quite successful and achieved the internal goals and objectives management had set for it. However, over the past two years, the brand underperformed relative to its competitive set due to aggressive competition and investment from both category leaders and new entrants in adjacent categories.

As a result, the Company revised its long-term outlook to reflect changes in expectations for the brand and accordingly has estimated that the fair value of the associated goodwill and intangible assets related to the brand fell below its recorded carrying amounts. As such, net earnings for the year ended June 30, 2010, include the after-tax impact of the non-cash impairment charge of $9.4 million or $0.33 per share. Management remains committed to the Seagram Coolers brand and has recently completed and implemented a comprehensive brand rejuvenation plan, including label and packaging redesign, new flavour innovation, and increased advertising and promotional activities.

    
    Non-GAAP Financial Measure
    --------------------------
    

Corby defines "Earnings from Operations" as earnings before impairment, interest income, foreign exchange, gains or losses on disposal of capital assets, and income taxes. This non-GAAP financial measure has been included in this MD&A, as management believes it is useful in measuring the Company's operating performance.

However, Earnings from Operations is not a measure recognized by GAAP and it does not have a standardized meaning prescribed by GAAP. Therefore, Earnings from Operations may not be comparable to similar measures presented by other issuers. Investors are cautioned that Earnings from Operations should not be construed as an alternative to net earnings, as determined, in accordance with GAAP, as indicators of performance. A reconciliation of Earnings from Operations to net earnings can be found in the "Financial and Operating Results" section of this MD&A.

    
    Three-Year Review of Selected Financial Information
    ---------------------------------------------------
    

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

    
    -------------------------------------------------------------------------

    (in millions of Canadian dollars,
     except per share amounts)                  2010        2009        2008
    -------------------------------------------------------------------------

    Operating revenue                      $   162.2   $   169.3   $   163.3

    Earnings from operations                    43.0        43.4        44.6
      - Earnings from operations per
        common share                            1.51        1.52        1.57

    Net earnings                                20.7        30.4        31.9
      - Basic earnings per share                0.73        1.07        1.12
      - Diluted earnings per share              0.73        1.07        1.12

    Net earnings excluding impairment           30.1        30.4        31.9
      - Basic earnings per share,
         excluding impairment                   1.06        1.07        1.12
      - Diluted earnings per share,
         excluding impairment                   1.06        1.07        1.12

    Total assets                               271.2       270.2       253.5
    Total liabilities                           30.3        33.9        31.7

    Dividends paid per share                    0.56        0.56        0.56
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Financial results since 2008 are largely reflective of the economic conditions experienced in Canada and throughout the world during that time period. While operating revenue increased in 2009, it was primarily attributable to increased average selling prices and favourable changes in product mix, as consumer consumption actually declined. In addition, operating revenue in 2009 benefited from the initiation of the Company's representation of the ABSOLUT vodka brand. In 2010, operating revenue continued its decline from 2009 levels, as customers continued to adjust inventory levels to better match forecasted consumer demand.

Ultimately, net earnings were also unfavourably impacted by the deteriorating economic conditions. In addition to the aforementioned impacts to operating revenue, the recessionary economy also had an adverse impact on the level of interest income Corby earned from its substantial cash deposits as a result of a decline in market interest rates. Lastly, net earnings in 2010 were also impacted by the recording of a non-cash impairment charge related to Corby's goodwill and intangible assets balances associated with the Seagram Coolers business. The impairment charge reduced net earnings by $9.4 million or $0.33 per share.

Excluding the impact of the impairment, net earnings over the past three years have been fairly resilient in light of the global recession and resulting drop in consumer confidence levels. This is especially evident when one considers the fact that net earnings for 2008 included $1.1 million in favourable non-recurring items. It is also important to note that, throughout these economically challenging years, Corby continued to invest in the long-term success of its brands by increasing its advertising and promotional expenditures in each of the last three years.

The Company has continued to strengthen its balance sheet, as net equity increased by $19.0 million since 2008, while dividend levels have been maintained at $0.56 per share, which is consistent with Corby's dividend policy.

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

Corby's portfolio of owned-brands 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 Corby's mixable liqueur brands. The sales performance of these key brands significantly impacts Corby's net earnings. Therefore, understanding each key brand is essential to understanding the Company's overall performance.

Shipment Volume and Value Performance

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

    
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    BRAND PERFORMANCE CHART - INCLUDES BOTH CANADIAN AND INTERNATIONAL
    SHIPMENTS
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                                                Three Months Ended
                                    -----------------------------------------
                                                         Shipment   Shipment
                                    Jun. 30,   Jun. 30,  % Volume    % Value
    Volumes (in 000's of 9L cases)     2010       2009     Change     Change
    -------------------------------------------------------------------------
    Brand
    Wiser's Canadian whisky             208        183        14%         9%
    Lamb's rum                          138        133         4%         4%
    Polar Ice vodka                     100         92         9%         7%
    Mixable liqueurs                     51         54        (6%)       (5%)
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    Total Key Brands                    497        462         8%         6%
    All other Corby-owned brands        222        262       (15%)      (10%)
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    Total                               719        724        (1%)        4%
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                                                   Year Ended
                                    -----------------------------------------
                                                         Shipment   Shipment
                                    Jun. 30,   Jun. 30,  % Volume    % Value
    Volumes (in 000's of 9L cases)     2010       2009     Change     Change
    -------------------------------------------------------------------------
    Brand
    Wiser's Canadian whisky             780        760         3%         2%
    Lamb's rum                          599        620        (3%)       (2%)
    Polar Ice vodka                     367        396        (7%)       (7%)
    Mixable liqueurs                    211        231        (9%)       (8%)
    -------------------------------------------------------------------------
    Total Key Brands                  1,957      2,007        (2%)       (2%)
    All other Corby-owned brands        773        888       (13%)      (11%)
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    Total                             2,730      2,895        (6%)       (4%)
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As previously discussed in the "Strategies and Outlook" section of this MD&A, the Company has implemented a brand prioritization strategy that requires focused investments in key brands and in key markets, with the long-term objective of maximizing value growth. This strategy is designed to leverage the long-term growth potential of Corby's key brands.

The above chart demonstrates that Corby experienced significant challenges this year, as shipment volumes decreased by 6% compared to last year. However, fourth-quarter shipment volumes of the Company's key brands improved by 8% compared to the same quarter last year. The Canadian economy has recently demonstrated mild GDP growth; however, a strong recovery in consumer demand continues to be hampered by relatively high rates of unemployment. In addition to the overall market conditions, competition for market share has been difficult as key competitors are becoming increasingly aggressive, particularly in relation to pricing strategies and discounting.

Certain markets within Canada have experienced softer-than-expected market conditions, specifically those in the provinces of Alberta, British Columbia and Ontario. The reduced consumer demand also led to customer destocking in the private channels in Western Canada, further impacting shipments. As a secondary factor, the threatened labour disruption that occurred in Ontario near the end of June 2009 had the effect of accelerating some shipments into fiscal 2009 and, therefore, reduced the amount of shipments that would have otherwise occurred in fiscal 2010.

International market conditions have remained difficult, with shipment value decreasing by 7% on a year-over-year basis. The decreased performance in international markets is mainly due to competitive challenges for Polar Ice vodka in the US market. In addition, unfavourable movements in foreign exchange rates have also applied downward pressure on shipment value. Volumes for Wiser's Deluxe Canadian whisky and Lamb's rum have demonstrated resiliency despite challenging market conditions in the US and UK, respectively.

Retail Volume and Retail Value Performance

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

    
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    RETAIL SALES FOR THE CANADIAN MARKET ONLY(1)
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                                                Three Months Ended
                                    -----------------------------------------
                                                         % Retail   % Retail
                                    Jun. 30,   Jun. 30,    Volume      Value
    Volumes (in 000's of 9L cases)     2010       2009     Change     Change
    -------------------------------------------------------------------------
    Brand
    Wiser's Canadian whisky             152        150         1%         1%
    Lamb's rum                          107        112        (4%)       (7%)
    Polar Ice vodka                      70         69         1%         0%
    Mixable liqueurs                     43         45        (4%)       (4%)
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    Total Key Brands                    372        376        (1%)       (2%)
    All other Corby-owned brands        182        211       (14%)      (12%)
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    Total                               554        587        (6%)       (5%)
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                                                    Year Ended
                                    -----------------------------------------
                                                         % Retail   % Retail
                                    Jun. 30,   Jun. 30,    Volume      Value
    Volumes (in 000's of 9L cases)     2010       2009     Change     Change
    -------------------------------------------------------------------------
    Brand
    Wiser's Canadian whisky             689        683         1%         1%
    Lamb's rum                          468        485        (4%)       (3%)
    Polar Ice vodka                     308        320        (4%)       (3%)
    Mixable liqueurs                    208        221        (6%)       (6%)
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    Total Key Brands                  1,673      1,709        (2%)       (2%)
    All other Corby-owned brands        765        843        (9%)       (8%)
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    Total                             2,438      2,552        (4%)       (3%)
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    (1) Refers to sales at the retail store level in Canada, as provided by
        the Association of Canadian Distillers.
    -------------------------------------------------------------------------
    

Trends over the past year have shown a shift in consumption patterns as consumers are purchasing fewer products from certain discretionary spirits categories, such as liqueurs, when compared to the spirits staples, such as whisky, vodka and rum. Furthermore, the overall decline in consumer spending has resulted in more at-home consumption, as consumers are trending away from consumption at licensed establishments, such as bars and restaurants.

Summary of Corby's Key Brands

    
    Wiser's Canadian Whisky
    -----------------------
    

Corby's flagship brand, Wiser's Canadian whisky, has continued to perform exceptionally well despite a challenging economy, and has continued to gain market share, from both a volume and value perspective, at the expense of its direct competitors in Canada. On a year-over-year basis, the brand grew by 1% in both retail volume and value, while the Canadian whisky segment as a whole declined by 3%.

The Company continued to invest strongly behind the brand this year, especially during the holiday season, which is a key selling period for whisky, and maintained its investment behind the brand's highly successful media and television campaign entitled Welcome to the Wiserhood. This campaign has proven to be highly impactful from a consumer perspective and has also received critical acclaim by having been awarded two gold medals at the prestigious Canadian Marketing Awards ("Best Promotion for Consumer Products" and "Best Integrated Campaign for Consumer Products"). The Company intends to continue to build upon the success of this campaign in order to expand Wiser's market-leading position.

    
    Lamb's Rum
    ----------
    

Lamb's rum, one of the top-selling rum families in Canada, saw its retail volumes decrease by 4% this year versus last. Retail volumes for the rum segment in Canada increased by 1%; however, the segment has been entirely driven by growth in the spiced and dark rum categories. The white rum category continued to underperform and adversely impact the rum segment as a whole. The Lamb's rum family has a significant amount of its volume weighted in the white category and, thus, its performance is reflective of the rum segment as a whole.

In response, the Company launched a Lamb's spiced rum variant in select Canadian provinces and the UK market (called Lamb's Black Sheep and Lamb's Spiced, respectively) as the Company looks to capitalize on the growing consumer demand in the spiced rum segment. While the product is still in the very early stages of its life cycle, initial results and indicators continued to be very positive.

From an international perspective, the brand's volumes have shown some resiliency in the midst of a very difficult UK market. However, its profitability has been impacted by the depreciation in the British pound sterling relative to the Canadian dollar.

The Company has also taken other actions to improve brand performance, such as introducing updated packaging and increasing the level of investments in core markets.

    
    Polar Ice Vodka
    ---------------
    

Polar Ice vodka, which is among the top three largest vodka brands in Canada, experienced a challenging year as retail sales volumes decreased by 4% when compared with last year. However, the brand has recently demonstrated improvement as its fourth-quarter retail sales volumes increased slightly against those of the same three-month period last year. This year's performance is reflective of challenging market conditions as the brand faced increased pressure from its key competitors across most major markets, mainly in the form of aggressive price discounting. Also contributing to the negative performance this year is the downturn in the on-premise sector where the brand is well represented. The vodka category in Canada experienced an increase in retail volumes of only 2%, which is demonstrative of a marked slowdown in this dynamic and competitive category.

Performance in the US market has also suffered due to a saturated competitive environment and the negative impact of the depreciation of the US dollar on the brand's revenues. It should be noted that the comparative period also included additional volumes associated with the launch of Polar Ice flavours in both the US and Canadian markets.

    
    Mixable Liqueurs
    ----------------
    

Corby's portfolio of mixable liqueur brands consists of McGuinness liqueurs (which is Canada's largest mixable liqueur brand family), Meaghers liqueurs and De Kuyper liqueurs. The Company's mixable liqueur portfolio experienced a 6% decrease in retail sales volumes, while shipment volumes decreased by 9% on a year-over-year basis. The performance of Corby's liqueur brands is relatively consistent with the challenges experienced by the overall liqueur category in the Canadian market, in which retail volumes decreased by 4% this year versus last. The mixable liqueur segment is most affected by the decline in consumer spending, particularly as it relates to consumption at licensed establishments, such as bars and restaurants.

    
    All Other Corby-Owned Brands
    ----------------------------
    

This group includes various Corby brands, such as Seagram Coolers, Royal Reserve and Silk Tassel Canadian whiskies, and Red Tassel vodka. The decreased performance of this group can be attributed largely to the Seagram Coolers brand, which makes up approximately 34% of this group's total retail volumes, as it experienced a decrease of 17% this year versus last. However, management completed and implemented a comprehensive rejuvenation plan for this brand, including label and packaging redesign, new flavour innovation, and advertising and promotional activities, that also encompassed a renewed focus on the brand's core product lines. The new, refreshed product began shipping at the beginning of the fourth quarter. Excluding the Seagram Coolers brand, the Corby-owned brands group, as a whole, experienced a decline in retail volumes of 5%, which is reflective of the challenging economic conditions in addition to the overall brand prioritization strategy.

    
    Financial and Operating Results - Fiscal 2010
    ---------------------------------------------
    

The following table presents a summary of certain selected consolidated financial information for the Company for the years ended June 30, 2010 and 2009:

    
    -------------------------------------------------------------------------
    (in millions of Canadian
     dollars, except per share
     amounts)                       2010        2009    $ Change    % Change
    -------------------------------------------------------------------------
    Sales                      $   147.0   $   152.6   $    (5.6)        (4%)
    Commissions                     15.2        16.7        (1.5)        (9%)
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    Operating revenue              162.2       169.3        (7.1)        (4%)
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    Cost of sales                   73.1        79.6        (6.5)        (8%)
    Marketing, sales and
     administration                 44.4        44.8        (0.4)        (1%)
    Amortization                     1.7         1.5         0.2         13%
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    Operating costs                119.2       125.9        (6.7)        (5%)
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    Earnings from operations        43.0        43.4        (0.4)        (1%)
    -------------------------------------------------------------------------
    Impairment charge              (11.5)          -       (11.5)        n/a
    Interest income                  0.5         1.7        (1.2)       (71%)
    Foreign exchange loss           (0.6)       (0.8)        0.2        (25%)
    Gain on disposal
     of capital assets               0.1         0.2        (0.1)       (50%)
    -------------------------------------------------------------------------
    Other income and expenses      (11.5)        1.1       (12.6)    (1,145%)
    -------------------------------------------------------------------------
    Earnings before income
     taxes                          31.5        44.5       (13.0)       (29%)
    Income taxes                    10.8        14.1        (3.3)       (23%)
    -------------------------------------------------------------------------
    Net earnings               $    20.7   $    30.4   $    (9.7)       (32%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Per common share
      - Basic net earnings     $    0.73   $    1.07   $   (0.34)       (32%)
      - Diluted net earnings   $    0.73   $    1.07   $   (0.34)       (32%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Operating Revenue

Operating revenue, which is comprised of sales and commissions, decreased by 4% when compared with last year. Sales revenue represents revenue earned from the sale of Corby-owned brands, while commissions are earned from the representation of PR brands in the Canadian market and, to a lesser extent, through the representation of a select number of Agency brands.

Sales revenue declined by $5.6 million, or 4%, when compared with last year. The decrease was primarily volume driven as shipments were down 6%, with the Company's non-key brands accounting for most of this decrease. Market conditions existing in Western Canada and Ontario posed specific challenges this year, as the Company worked against both poor economic conditions and increasing competitive challenges, primarily in the form of aggressive price discounting. Furthermore, customer destocking in the private channels in Western Canada, and the aforementioned impact of a threatened labour disruption in Ontario, also reduced shipment volumes.

In addition to experiencing a reduction in shipment volumes, sales were also unfavourably impacted by certain of the Company's Canadian whisky brands being subjected to $1.2 million in additional excise tax this year, as a result of legislation passed by the federal government in May 2006. Lastly, unfavourable movements in foreign currencies (primarily, the US dollar and the British pound sterling) further applied downward pressure on sales derived from Corby's international businesses, even though total international shipment volumes were mostly consistent on a year-over-year basis. Partially offsetting the aforementioned items were increases in average selling prices, particularly in the British Columbia and Ontario markets, and positive changes to product mix.

The following table highlights the various components that comprise commissions:

    
    -------------------------------------------------------------------------
    (in millions of
     Canadian dollars)              2010        2009   $  Change   %  Change
    -------------------------------------------------------------------------

    Commission from PR brands  $    16.4   $    16.8   $    (0.4)        (2%)
    Commission from Agency
     brands                          3.4         4.6        (1.2)       (26%)
    Amortization of
     representation rights          (4.6)       (4.7)        0.1         (2%)
    -------------------------------------------------------------------------
    Commissions                $    15.2   $    16.7   $    (1.5)        (9%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Commissions earned from the representation of PR brands in Canada were relatively consistent on a year-over-year basis. However, the current-year results include an extra three months of commissions from the ABSOLUT vodka brand (which Corby began representing on October 1, 2008), which have served to partially offset an 8% decline in commissions earned from PR's other brands. This decline is primarily the result of the same factors that have affected shipment volumes of Corby-owned brands (difficult market conditions in Western Canada and customer destocking in the private retail channel combined with the effect of the aforementioned threatened labour disruption in Ontario). As a secondary factor, Corby ceased to represent three PR brands (Wild Turkey, Tia Maria and Lemon Hart) as a result of PR's decision to dispose of these brands. It is estimated that these disposals reduced current-year commission from PR brands by $0.4 million. As a result of PR's decision to dispose of these brands, Corby received $1.7 million in early termination fees from PR, which were accounted for as a reduction in the original cost of the intangible asset. For more information regarding the PR termination fees received, please refer to the "Cash Flows" section of this MD&A.

Commission income from Agency brands has declined by $1.2 million, or 26%, this year versus last. The decrease is the result of the prior year's inclusion of commissions from brands that are no longer represented by Corby.

Cost of Sales

Cost of sales was $73.1 million, representing a decrease of 8% when compared with last year. The decrease was largely the result of the Company experiencing a 6% decrease in shipment volumes, in addition to an appreciating Canadian dollar (which served to reduce US dollar denominated production input costs). To a lesser extent, the Company also benefited from reduced prices on certain of its commodity costs.

Corby's gross margin on case goods was 50.3% this year, compared to 47.8% last year. The improved margin was the result of the aforementioned factors impacting cost of sales (favourable foreign exchange rates on US dollar denominated production inputs and lower commodity prices), in addition to the Company having an improved product mix (lower sales in the US and of Seagram Coolers, both of which earn lower gross margins than the domestic spirits business), along with increased average selling prices in certain Canadian provinces. The impact of these items was partially offset by increased rates of excise tax being applied to certain of the Company's Canadian whisky brands, as a result of federal legislation introduced in 2006.

Marketing, Sales and Administration

Marketing, sales and administration expenses declined by $0.4 million, or 1%, when compared with last year. The change is comprised of an increase in marketing and sales expenditures (impact of $0.4 million) being more than offset by savings achieved on administrative expenses (impact of $0.8 million).

The increased marketing and sales expenditures reflect the Company's commitment to continue investing behind its brands, and they specifically relate to Wiser's media spend, the Seagram Coolers re-invention strategy and the Canadian launch of Lamb's Black Sheep (which marks Corby's entrance into the high-growth spiced rum category).

The savings experienced on administrative expenses is due to a combination of management's increased focus on cost control and the inclusion of some non-recurring expenses in 2009, such as the relocation of the Company's head office and costs associated with obtaining the right to represent the ABSOLUT vodka brand in Canada.

Earnings from Operations

Earnings from operations totalled $43.0 million this year, representing a decline of $0.4 million, or 1%, when compared with last year. The impact of declining shipment volumes and increased rates of excise tax were offset by increased average selling prices, favourable changes in product mix, and reduced production costs primarily due to a stronger Canadian dollar.

Other Income and Expenses

Other income and expenses this year included a non-cash impairment charge of $11.5 million applied against the Company's goodwill and intangible assets balances and related to the Seagram Coolers brand. For more information related to the impairment charge, please refer to the "Significant Event" section of this MD&A. In addition to the impairment, fiscal 2010 also experienced a $1.2 million reduction in interest income earned from the Company's substantial deposits balance. The year-over-year decline in interest income is a direct result of market rates of interest being at historical lows throughout 2010, as governments around the world reduced rates in the hope of stimulating economic growth.

Income Taxes

Corby's effective tax rate of 34% reflects a 2% increase over last year and is explained by the following table:

    
    -------------------------------------------------------------------------
                                                            2010        2009
    -------------------------------------------------------------------------
    Combined basic Federal and Provincial tax rates          31%         32%
    Impact of impairment charge                               5%          0%
    Impact of substantively enacted rate decreases in
     Ontario                                                 (2%)         0%
    -------------------------------------------------------------------------
                                                             34%         32%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Net Earnings

Net earnings for the year amounted to $20.7 million, versus $30.4 million last year. Excluding the impact of the aforementioned non-cash impairment charge, net earnings would have been $30.1 million, representing a negligible decrease from the prior year.

    
    Liquidity and Capital Resources
    -------------------------------
    

Corby's sources of liquidity are its deposits in cash management pools of $74.7 million as at June 30, 2010, and its cash generated from operating activities. Corby's total contractual maturities are represented by its accounts payable and accrued liabilities balances, which totalled $18.3 million as at June 30, 2010, and are all due to be paid within one year.

The Company also has funding obligations related to its employee future benefit plans, which include defined benefit pension plans. As at June 30, 2010, certain of the Company's defined benefit pension plans were in a deficit position. Of those plans in a funded deficit position, the unfunded accrued benefit obligation totalled $7.9 million.

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

As a result of the turmoil in capital markets experienced in 2009, the fair value of plan assets within these pension funds has declined. Somewhat mitigating the impact of the market decline was the fact that the Company monitors its pension plan assets closely and follows strict guidelines to ensure pension fund investment portfolios are diversified in-line with industry best practices. Nonetheless, pension fund assets are not immune to market fluctuations and, as a result, the Company may be required to make additional cash contributions in the future. For more information regarding Corby's employee future benefit plans, please refer to Note 8 to the consolidated financial statements.

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

The much-publicized global liquidity crisis has been tumultuous for many companies, particularly those entities holding short-term investments in asset-backed commercial paper ("ABCP"). Corby does not have direct exposure to this type of liquidity risk, as the Company does not hold any investments in ABCP.

    
    Cash Flows
    ----------

    -------------------------------------------------------------------------
    (in millions of Canadian dollars)           2010        2009      Change
    -------------------------------------------------------------------------
    Operating activities
      Net earnings, adjusted for
       non-cash items                      $    36.5   $    34.8   $     1.7
      Net change in non-cash working
       capital                                  (7.9)      (10.9)        3.0
    -------------------------------------------------------------------------
                                                28.6        23.9         4.7
    -------------------------------------------------------------------------
    Investing activities
      Additions to capital assets               (2.4)       (4.4)        2.0
      Proceeds from disposition of capital
       assets                                      -         0.6        (0.6)
      Proceeds on account of PR brand
       disposals                                 1.7           -         1.7
      Deposits in cash management pools        (12.0)       (4.2)       (7.8)
    -------------------------------------------------------------------------
                                               (12.7)       (8.0)       (4.7)
    -------------------------------------------------------------------------
    Financing activities
      Dividends paid                           (15.9)      (15.9)          -
    -------------------------------------------------------------------------
    Net change in cash                     $       -   $       -   $       -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Operating Activities

Cash flows from operating activities were $28.6 million in 2010, compared to $23.9 million last year. The $4.7 million increase is largely the result of favourable changes in non-cash working capital balances, principally attributed to the timing of accounts receivable, and was partially offset by increased investment in maturing inventories. Net earnings, after adjustment for non-cash items, also contributed to the increased cash flows. This was primarily the result of having made a special pension plan contribution payment in 2009 that was not required in 2010.

Investing Activities

The Company increased its deposits in cash management pools by $7.8 million this year compared with the amount invested in 2009. Deposits made to cash management pools represent cash on deposit with The Bank of Nova Scotia via Corby's Mirror Netting Services Agreement with PR. Corby has daily access to these funds and earns a market rate of interest from PR on balances contained within. For more information related to these deposits, please refer to the "Related Party Transactions" section of this MD&A.

The increase in the amount deposited in cash pools this year versus last year is the combined result of having generated additional cash from operations of $4.7 million, having reduced capital asset additions by $2.0 million, and having received early termination fees of $1.7 million from PR.

Additions to capital assets in 2010 returned to pre-2009 levels as 2009 included asset additions associated with the Company's head office relocation. The $1.7 million in early termination fees received from PR was on account of their decision to dispose of the Tia Maria, Wild Turkey, and Lemon Hart brands, thus early terminating the original 15-year representation agreement with Corby (signed in September 2006) with respect to these brands. The amounts of the termination fees were calculated in accordance with the formula stipulated in the representation agreement. It should also be noted that the termination fees are accounted for as a reduction to the original cost of the intangible asset on the balance sheet, and, therefore, have no impact on net earnings or earnings per share.

Financing Activities

Cash used for financing activities reflects regular dividends being paid to shareholders and totalled $15.9 million, or $0.56 per share, this year and is equal to the amount of dividends paid last year. The amount of dividends paid is in accordance with the Company's stated dividend policy. For further information regarding the Company's dividend policy, please refer to Note 19 to the consolidated financial statements.

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

As at August 26, 2010, Corby had 24,274,320 Voting Class A common shares and 4,194,536 Non-Voting Class B common shares outstanding. The Company does not have a stock option plan, and therefore, there are no options outstanding.

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

The following table presents a summary of the maturity periods of the Company's contractual obligations as at June 30, 2010:

    
    -------------------------------------------------------------------------
                                                            Oblig-
                            Payments  Payments  Payments    ations
                  Payments       due       due       due   with no
                    During   in 2012   in 2014     after     fixed
                      2011  and 2013  and 2015      2015  maturity     Total
    -------------------------------------------------------------------------
    Operating lease
     obligations    $  1.5    $  2.6    $  1.6    $  2.1    $    -    $  7.8
    Employee future
     benefits            -         -         -         -      19.9      19.9
    -------------------------------------------------------------------------
                    $  1.5    $  2.6    $  1.6    $  2.1    $ 19.9    $ 27.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Operating lease obligations represent future minimum payments under long-term operating leases for premises and office equipment as at June 30, 2010. Employee future benefits represent the Company's unfunded pension and other post-retirement benefit plan obligations as at June 30, 2010. For further information regarding Corby's employee future benefit plans, please refer to Note 8 to the consolidated financial statements.

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

Corby engages in a significant number of transactions with its parent company, its ultimate parent and various affiliates. Specifically, Corby renders services to its parent company, its ultimate parent and affiliates for the marketing and sale of beverage alcohol products in Canada. Furthermore, Corby sub-contracts the large majority of its distilling, maturing, storing, blending, bottling and related production activities to its parent company. A significant portion of Corby's bookkeeping, record-keeping, data processing and other administrative services are also outsourced to its parent company.

The companies operate under the terms of agreements that became effective on September 29, 2006 (and the agreement signed on September 26, 2008, which is described separately below). These agreements provide the Company with the exclusive right to represent PR's brands in the Canadian market for 15 years, and provide for the continuing production of certain Corby brands by PR at its production facility in Windsor, Ontario, for 10 years. Corby also manages PR's business interests in Canada, including the Windsor production facility. Certain officers of Corby have been appointed as directors and officers of PR's Canadian entities, as approved by Corby's Board of Directors. 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 aforementioned related party transactions, the Company also participated in the activities below with related parties.

ABSOLUT Vodka Representation Agreement

On September 26, 2008, Corby entered into an agreement with its ultimate parent company, PR. The agreement provides Corby with the exclusive right to represent the ABSOLUT vodka brand in Canada effective October 1, 2008, for the next five years. As part of this agreement, Corby also received the exclusive right to represent the Plymouth gin and Level vodka brands. Corby also agreed to continue to participate in the cash management pooling arrangement (the Mirror Netting Service Agreement) with PR's wholly owned Canadian subsidiaries until October 1, 2011, unless earlier terminated by Corby. Further, until October 1, 2011, Corby agreed that it will not declare any special dividends, repurchase shares or make acquisitions or capital investments outside the normal course of business without PR's prior approval. Corby also agreed that, barring any unanticipated developments, regular dividends will be paid quarterly, on the basis of an annual amount equal to the greater of 50% of net earnings per share in the preceding fiscal year ended June 30, and $0.56 per share.

Deposits in Cash Management Pools

As previously discussed, Corby participates in a cash management pooling arrangement under the Mirror Netting Service Agreement together with PR's other Canadian affiliates, the terms of which are administered by The Bank of Nova Scotia. The Mirror Netting Service Agreement acts to aggregate each participant's net cash balance for the purposes of having a centralized cash management function for all of PR's Canadian affiliates, including Corby. As a result of Corby's participation in this agreement, Corby's credit risk associated with its deposits in cash management pools is contingent upon PR's credit rating. PR's credit rating as at August 26, 2010, as published by Standard & Poor's and Moody's, was BB+ and Ba1, respectively. PR compensates Corby for the benefit it receives from having the Company participate in the Mirror Netting Service Agreement by paying interest to Corby based upon the 30-day LIBOR rate plus 0.40%. Corby has the right to terminate its participation in the Mirror Netting Service Agreement at any time, subject to five days' written notice.

    
    Results of Operations - Fourth Quarter of Fiscal 2010
    -----------------------------------------------------
    

The following table presents a summary of certain selected consolidated financial information for the Company for the three month periods ended June 30, 2010 and 2009:

    
    -------------------------------------------------------------------------

                                 Three Months Ended
    (in millions of Canadian   ----------------------
     dollars, except per share   June 30,    June 30,
     amounts)                       2010        2009    $ Change    % Change
    -------------------------------------------------------------------------
    Sales                      $    38.2   $    36.9   $     1.3          4%
    Commissions                      3.8         4.5        (0.7)       (16%)
    -------------------------------------------------------------------------
    Operating revenue               42.0        41.4         0.6          1%
    -------------------------------------------------------------------------
    Cost of sales                   19.3        20.0        (0.7)        (4%)
    Marketing, sales and
     administration                 12.9        10.9         2.0         18%
    Amortization                     0.4         0.4           -          0%
    -------------------------------------------------------------------------
    Operating costs                 32.6        31.3         1.3          4%
    -------------------------------------------------------------------------
    Earnings from operations         9.4        10.1        (0.7)        (7%)
    -------------------------------------------------------------------------

    Interest income                  0.2         0.2           -          0%
    Foreign exchange gain (loss)     0.3        (0.1)        0.4       (400%)
    -------------------------------------------------------------------------
    Other income and expenses        0.5         0.1         0.4        400%
    -------------------------------------------------------------------------

    Earnings before income
     taxes                           9.9        10.2        (0.3)        (3%)
    Income taxes                     3.3         2.8         0.5         18%
    -------------------------------------------------------------------------
    Net earnings               $     6.6   $     7.4   $    (0.8)       (11%)
    -------------------------------------------------------------------------
    Per common share
      - Basic net earnings     $    0.23   $    0.26   $   (0.03)       (12%)
      - Diluted net earnings   $    0.23   $    0.26   $   (0.03)       (12%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Operating Revenue

Operating revenue, consisting of sales and commissions, was $42.0 million for the quarter, compared to $41.4 million for the same quarter last year, which is an increase of $0.6 million or 1%. Sales increased by 4% quarter-over-quarter, totalling $38.2 million, while commissions decreased by $0.7 million, or 16%, to $3.8 million for the three-month period ended June 30, 2010.

Fourth-quarter sales in the domestic market were virtually equal to the same quarter last year, even though the comparative period included additional sales resulting from a threatened labour disruption in Ontario. The increase in fourth-quarter sales derived from the Company's contract bottling business and increased shipment volumes to international customers.

The following table highlights the various components that comprise commissions:

    
    -------------------------------------------------------------------------

                                 Three Months Ended
                                ----------------------
    (in millions of Canadian     June 30,    June 30,
      dollars)                      2010        2009    $ Change    % Change
    -------------------------------------------------------------------------
    Commission from PR brands  $     4.2   $     4.6   $    (0.4)        (9%)
    Commission from Agency
     brands                          0.7         1.1        (0.4)       (36%)
    Amortization of
     representation rights          (1.1)       (1.1)          -          0%
    -------------------------------------------------------------------------
    Commissions                $     3.8   $     4.6   $    (0.8)       (17%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Commissions decreased by $0.8 million this quarter versus the same quarter last year. The decrease is represented equally by declines of $0.4 million in commissions earned from the representation of PR brands and Agency brands. The decline noted on PR brands is reflective of the challenging market conditions these higher-priced premium international brands face with consumers, primarily in Western Canada. The decrease in commission from Agency brands is primarily the result of the comparative quarter's inclusion of commission from brands Corby no longer represents.

Cost of Sales

Cost of sales decreased by $0.7 million in the fourth quarter compared to the same period last year. The decrease is consistent with what has been experienced throughout the year as a stronger Canadian dollar helped to reduce US dollar denominated production inputs. Gross margin has improved by 3.8% this quarter versus the same quarter last year. Improved margins are the result of increased average selling prices in Ontario and British Columbia, improved product mix, and the aforementioned production cost savings.

Marketing, Sales and Administration

Marketing, sales and administration expenses were $12.9 million, compared to $10.9 million during the same quarter last year. Marketing and sales expenditures were largely responsible for the increase and they mostly relate to the aforementioned Seagram Coolers rejuvenation plan and increased media costs associated with the Company's Wiser's Canadian whisky brand. Administrative expenses increased by approximately 4% this quarter when compared with the same quarter last year, and are reflective of costs incurred to implement certain organizational changes.

Earnings from Operations

Earnings as a result of operations were $9.4 million this quarter, compared with $10.1 million in the same quarter last year. The $0.7 million decrease is largely the result of the aforementioned timing of marketing and sales expenditures being partially offset by increased operating revenue and reduced production costs.

Income Taxes

Income tax expense increased by $0.5 million when compared with the same quarter last year. The increase is largely the result of the comparative period's inclusion of a favourable change in estimate, thus reducing the effective tax rate in the comparative period to below statutory rates.

Net Earnings

Net earnings for the fourth quarter totalled $6.6 million, representing a decrease of $0.8 million, or 11%, when compared against the same quarter last year. The decreased earnings were the result of the aforementioned factors impacting earnings from operations and income taxes.

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

    Summary of Quarterly Financial Results

    -------------------------------------------------------------------------
    (in millions of
     Canadian dollars,
     except per share    Q4     Q3     Q2     Q1    Q4      Q3     Q2     Q1
     amounts)          2010   2010   2010   2010  2009    2009   2009   2009
    -------------------------------------------------------------------------
    Operating revenue $42.0  $32.2  $46.9  $41.1  $41.4  $34.0  $47.8  $46.1
    Earnings from
     operations         9.4    6.8   14.7   12.2   10.1    7.2   11.9   14.2
    Net earnings,
     excluding
     impairments        6.6    4.5   10.5    8.4    7.4    5.1    8.1    9.8
    Net earnings        6.6    4.5    1.1    8.4    7.4    5.1    8.1    9.8
    Basic EPS          0.23   0.16   0.04   0.30   0.26   0.18   0.28   0.35
    Diluted EPS        0.23   0.16   0.04   0.30   0.26   0.18   0.28   0.35
    -------------------------------------------------------------------------
    

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

Also highlighted in the chart is the aforementioned effect an impairment charge had on the Company's financial results in the second quarter of 2010. Specifically, the impairment charge had the effect of reducing net earnings by $9.4 million and reducing both basic and diluted earnings per share by $0.33. For more information related to the non-cash impairment charge, please refer to the "Significant Event" section of this MD&A.

    
    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 licences acquired. Goodwill and indefinite-lived intangible assets account for a significant amount of the Company's total assets. These balances are evaluated annually for impairment. The process of evaluating these items for impairment involves the determination of fair value. Inherent in such fair value determinations are certain 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 licences exceeds the implied fair value. Any impairment would result in a reduction in the carrying value of these items on the consolidated balance sheets of the Company and the recognition of a non-cash impairment charge in net earnings. During the year, the Company recognized a non-cash impairment charge of $11.5 million (after-tax impact of $9.4 million) against its goodwill and intangible assets balances related to its Seagram Coolers brand. For more information related to the impairment, please refer to the "Significant Event" section of this MD&A.

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 that are dependent upon assumptions determined by management. These assumptions include the discount rate, the expected long-term rate of return on plan assets, the rate of compensation increases, retirement ages, mortality rates and the expected inflation rate of health care costs. These assumptions are reviewed annually by the Company's management and its actuary. These assumptions may change in the future and may have a material impact on the accrued benefit obligations of the Company and the cost of these plans, which is reflected in the Company's consolidated statement of earnings. In addition, the actual rate of return on plan assets and changes in interest rates could result in changes in the Company's funding requirements for its defined benefit pension plans. See Note 8 to the consolidated financial statements for detailed information regarding the major assumptions utilized.

Income and Other Taxes

The Company accounts for income taxes using the liability method of accounting. Under the liability method, 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 2010
    ------------------------------------------

    Financial Statement Concepts
    

Effective July 1, 2009, the Company applied the amendments to Canadian Institute of Chartered Accountants ("CICA") Handbook Section 1000, "Financial Statement Concepts". These amendments clarify the criteria for recognition of an asset and the timing of expense recognition, specifically deleting the guidance permitting the deferral of costs. The new requirements are effective for interim and annual financial statements for fiscal years beginning on or after October 1, 2008. The Company applied the amendments to Section 1000 in conjunction with Section 3064 "Goodwill and Intangible Assets" which is further described below. The adoption of this standard had no impact on the Company's financial statements or note disclosures.

Goodwill and Intangible Assets

Effective July 1, 2009, the Company implemented a new accounting standard, Section 3064, "Goodwill and Intangible Assets", which is effective for fiscal years beginning on or after October 1, 2008. This standard replaces the existing Section 3062, "Goodwill and Other Intangible Assets", and Section 3450, "Research and Development Costs". The new standard prescribes new methods for recognizing, measuring, presenting and disclosing goodwill and intangible assets, with the objective of eliminating the practice of deferring costs that do not meet the definition and recognition criteria of assets. The new standard is equivalent to the corresponding provisions of International Financial Reporting Standards ("IFRS") IAS 38, "Intangible Assets". The adoption of this standard had no impact on the Company's financial statements or note disclosures.

Financial Instruments - Disclosures

In June 2009, the Canadian Accounting Standards Board ("AcSB") amended Section 3862, "Financial Instruments - Disclosures", to adopt the amendments recently issued by the International Accounting Standards Board to International Financial Reporting Standard IFRS 7, "Financial Instruments: Disclosures", in March 2009. These amendments are applicable to publicly accountable enterprises and those private enterprises, co-operative business enterprises, rate-regulated enterprises and not-for-profit organizations that choose to adopt Section 3862. The amendments were made to enhance disclosures about fair value measurements, including the relative reliability of the inputs used in those measurements, and about the liquidity risk of financial instruments.

The amendments were effective for annual financial statements for fiscal years ending after September 30, 2009, with early adoption permitted. The Company adopted these amendments to Section 3862 in its 2010 annual consolidated financial statements. See Note 18 to the consolidated financial statements for a discussion on fair value measurement and the liquidity risk of financial instruments.

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

    International Financial Reporting Standards
    

In February 2008, the AcSB confirmed that Canadian GAAP for publicly accountable enterprises will be replaced by IFRS for fiscal years beginning on or after January 1, 2011. IFRS uses a conceptual framework similar to Canadian GAAP; however, there are significant differences in regards to recognition, measurement and disclosures. Accordingly, the conversion from Canadian GAAP to IFRS will be applicable to the Company's reporting for the first quarter of fiscal 2012, for which current and comparative information will be prepared under IFRS.

In response, the Company created a transition plan and established a timeline for the execution and completion of the conversion project to guide Corby toward its reporting deadlines. The transition plan included a high-level assessment of the key areas where conversion to IFRS may have a significant impact or present a significant challenge. Six key areas were identified and include IFRS 1 choices, employee benefits, impairment of assets, capital assets, income taxes, and financial statement presentation and disclosure.

The IFRS changeover is a significant undertaking for the Company. As such, the Company has engaged an external advisor, established a working team and held multiple IFRS training sessions tailored specifically to Corby for finance employees, members of management and the Audit Committee. The IFRS team has performed detailed assessments of five of the six key areas identified, and it continues to report its progress and results to the Audit Committee on a quarterly basis.

A qualitative summary of expected impacts is provided below. Note that identified differences have not yet been fully quantified as the IFRS opening balance sheet date for Corby has only recently passed (July 1, 2010).

    
    First-Time Adoption of IFRS (IFRS 1)
    ------------------------------------
    

This standard sets out the protocol for converting a set of financial statements from another basis of preparation (e.g., Canadian GAAP) to IFRS. IFRS 1 generally requires that a first-time adopter apply IFRS accounting principles retrospectively to all periods presented in its first IFRS financial statements. IFRS 1 also provides certain mandatory and optional exemptions to the full retrospective application.

As Corby's ultimate parent company currently reports in accordance with IFRS, the Company is provided the option of using the carrying amount of assets and liabilities that would be included in PR's consolidated financial statements if no adjustments were made for consolidation procedures and for the effects of the business combination in which PR acquired its interest in Corby. Choosing this option simplifies Corby's conversion process and reduces the need for Corby to maintain two parallel sets of records in addition to providing other benefits. Therefore, Corby has decided to choose this option under IFRS 1. This decision impacts the optional exemptions for business combinations, employee benefits and capital assets. The individual accounting policy impacts are further described below.

    
    Employee Benefits (IAS 19)
    --------------------------
    

Corby has elected to adopt the measurement basis of its ultimate parent company, which is an option available under IFRS 1. Under IFRS, Corby will continue to utilize the "corridor" approach currently followed under Canadian GAAP.

    
    -   It is anticipated that, as at Corby's opening balance sheet date,
        conversion to IFRS will result in a decrease in accrued benefit
        asset, an increase in accrued benefit liability, and a decrease in
        equity.

    -   Subsequent to transition, it is anticipated that pension cost will be
        lower given the reduced amount of unrecognized net actuarial losses,
        which are a direct result of Corby adopting its ultimate parent
        company's measurement basis, as permitted under IFRS 1.

    Impairment of Assets (IAS 36)
    -----------------------------
    

IFRS requires a one-step impairment test for identifying and measuring impairment: comparing an asset's carrying value to the higher of its value in use and fair value less cost to sell. Under Canadian GAAP, impairment is based on discounted cash flows only if an asset's undiscounted cash flows are below its carrying value. In addition, IFRS requires the reversal of previously recognized impairment losses when a change in circumstances indicates that the impairment has been reduced, other than for goodwill and indefinite-lived intangibles, while Canadian GAAP does not allow a reversal under any circumstances.

    
    -   The impact on the opening balance sheet is not yet known, as the test
        must be completed using facts and circumstances in existence as at
        the opening balance sheet date, which has yet to arrive.

    -   Subsequent to transition, the one-step impairment test under IFRS may
        result in more frequent write-downs of assets, and reversals of
        previous write-downs may be required in future periods.

    Capital Assets (IAS 16)
    -----------------------
    

Corby has elected to adopt the measurement basis of its ultimate parent company, which is an option available under IFRS 1, and, currently, this measurement basis is essentially equivalent to that reported under Canadian GAAP. The Company has also opted to use the cost model to measure its assets subsequent to transition, which is consistent with current practice under Canadian GAAP. In addition, IFRS requires that major components of an asset be separately amortized, whereas Canadian GAAP is less explicit. The Company's assessment has not identified any significant differences in this area.

    
    -   It is not expected that there will be a substantial impact on the
        opening balance sheet, nor is it expected that amortization expense
        will differ substantially subsequent to the transition date.

    Income Taxes (IAS 12)
    ---------------------
    

The differences that exist between IFRS and Canadian GAAP for Corby relate primarily to changes as a result of adopting IFRS accounting policies in areas where such changes impact the timing and amount of temporary basis differences between accounting and taxation.

    
    -   The opening balance sheet will be impacted as future income tax
        assets and liabilities will be re-measured upon completion of the
        IFRS opening balance sheet.

    -   Subsequent to transition, the impact of adopting IAS12 will depend on
        the net amount of all differences in accounting policies.

    Financial Statement Presentation and Disclosure
    -----------------------------------------------
    

The Company has not yet completed its assessment of this area. However, based on information gathered to date, it is anticipated that disclosures will increase significantly when compared to those currently required by Canadian GAAP.

Overall, the transition plan remains on track and the Company believes it is well positioned to transition to IFRS in accordance with the timelines mandated by the AcSB. The work completed to date suggests that there will be a minimal impact on the Company's business activities, IT systems, disclosure controls and procedures, and internal controls over financial reporting. However, these preliminary conclusions may change as Corby continues to progress through its transition plan and considers any new IFRS developments leading up to the Company's changeover date.

The Company will continue to execute the transition in accordance with its plan, and it will also continue to monitor standards development as issued by the International Accounting Standards Board and the AcSB, as well as regulatory developments as issued by the Canadian Securities Administrators, which may affect the timing, nature or disclosure of its adoption of IFRS.

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

The Company maintains a system of disclosure controls and procedures that has been designed to provide reasonable assurance that information required to be disclosed by the Company in its public filings is recorded, processed, summarized and reported within required time periods and includes controls and procedures designed to ensure that all relevant information is accumulated and communicated to senior management, including the Company's Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), to allow timely decisions regarding required disclosure.

Management, with the participation of the CEO and CFO, has evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in National Instrument 52-109) as at June 30, 2010, 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 Canadian 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.

Management, with the participation of the CEO and CFO, has evaluated the effectiveness of the Company's internal controls over financial reporting as at June 30, 2010, and has concluded that internal control over financial reporting is designed and operating effectively to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with Canadian GAAP. Management's assessment was based on the framework established in Internal Control - Integrated Framework, published by the Committee of Sponsoring Organizations of the Treadway Commission.

There were no changes in internal control over financial reporting during the Company's most recent interim period that have materially affected, or are reasonably likely to materially affect, the Company's internal controls over financial reporting.

    
    Risks and 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. In addition, the Company's provincial LB customers have the ability to mandate changes that can lead to increased costs, as well as other factors that may impact financial results.

A recent example is that, as of July 1, 2009, the Company is subject to a higher rate of excise tax on certain of its Canadian whisky brands. This increase is the result of legislation passed by the federal government on May 2, 2006, which served to increase the rate of excise duty on spirits by 5.7%. It is estimated that the application of these higher excise duty rates reduced Corby's annual sales by approximately $1.2 million and translated to a reduction in net earnings of $0.8 million.

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

Consumer Consumption Patterns

Beverage alcohol companies are susceptible to risks relating to changes in consumer consumption patterns. Consumer consumption patterns are affected by many external influences, not the least of which is the current economic outlook and overall consumer confidence in the stability of the economy as a whole. The overall decline in consumer spending has resulted in more at-home consumption, as consumers are trending away from consumption at licensed establishments, such as bars and restaurants. As a result, the industry is experiencing declines in product categories that tend to have a higher consumption rate at these establishments, such as liqueurs. Corby offers a diverse portfolio of products across all major spirits categories and at various price points, which complements consumer desires and offers exciting innovation.

Distribution/Supply Chain Interruption

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

Supply chain interruptions, including manufacturing or inventory disruption, could impact product quality and availability. The Company adheres to a comprehensive suite of quality programs and proactively manages production and supply chains to mitigate any potential risk to consumer safety or Corby's reputation and profitability.

Environmental Compliance

Environmental liabilities may potentially arise when companies are in the business of manufacturing products and, thus, required to handle potentially hazardous materials. As Corby outsources 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 the 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. Industry consolidation can have varying degrees of impact and, in some cases, may even create exceptional opportunities. Either way, management believes that the Company is well positioned to deal with this or other changes to the competitive landscape in Canada.

Competition

The Canadian beverage alcohol industry is also extremely competitive. Competitors may take actions to establish and sustain a competitive advantage. They may also affect Corby's ability to attract and retain high-quality employees. The Company's long heritage attests to Corby's strong foundation and successful execution of its strategies. Being a leading Canadian beverage alcohol company helps facilitate recruitment efforts. Corby appreciates and invests in its employees to partner with them in achieving corporate objectives and creating value.

Credit Risk

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

Exposure to Interest Rate Fluctuations

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

Exposure to Commodity Price Fluctuations

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

Foreign Currency Exchange Risk

Foreign currency risk exists, as the Company sources a proportion of its production requirements in foreign currencies, specifically the US dollar. Partially mitigating this risk is the fact that the Company also sells certain of its goods in the same foreign currencies. As purchases from US-based suppliers typically exceed revenues from US-based customers, a decline in the Canadian dollar versus the US dollar can have a negative impact on the Company's financial results. In addition, subject to competitive conditions, changes in foreign currency rates may be passed on to consumers through pricing over the long term.

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 control over how such third parties are managed, it has entered into contractual arrangements to formalize these relationships. In order to minimize operating risks, the Company actively monitors and manages its relationships with its third-party service providers.

Brand Reputation and Trademark Protection

The Company promotes nationally branded, non-proprietary products as well as proprietary products. Damage to the reputation of any of these brands, or to the reputation of any supplier or manufacturer of these brands, could negatively impact consumer opinion of the Company or the related products, which could have an adverse impact on the financial performance of the Company.

Valuation of Goodwill and Intangible Assets

Goodwill and intangible assets account for a significant amount of the Company's total assets. Goodwill and intangible assets are subject to impairment tests which involve 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 the Company makes changes in its business strategies. Given the current state of the economy, certain of the aforementioned factors affecting the determination of fair value may be impacted and, as a result, the Company's financial results may be adversely affected.

During the second quarter ended December 31, 2009, Corby recognized an $11.5 million non-cash impairment charge against its goodwill and intangible asset balances related to the Seagram Coolers brand. For more information regarding the impairment charge, please refer to the "Significant Event" section of this MD&A.

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

    
    -------------------------------------------------------------------------
                                                             Carrying Values
                                                         as at June 30, 2010
                                              -------------------------------
    Associated Brand      Associated Market   Goodwill  Intangibles    Total
    --------------------- ------------------  -------------------------------

    Various PR brands     Canada              $      -   $   51.0   $   51.0
    Seagram Coolers       Canada                   0.9        7.7        8.6
    Lamb's rum            United Kingdom(1)        1.4       11.8       13.2
    Meaghers and De
     Kuyper liqueurs      Canada                   4.6          -        4.6
    -------------------------------------------------------------------------

                                              $    6.9   $   70.5   $   77.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) The international business for Lamb's rum is primarily focused in the
        UK, however, the trademarks and licenses purchased, relate to all
        international markets outside of Canada, as Corby previously owned
        the Canadian rights.
    -------------------------------------------------------------------------
    

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

Employee Future Benefits

The Company has certain obligations under its registered and non-registered defined benefit pension plans and other post-retirement benefit plan. There is no assurance that the Company's benefit plans will be able to earn the assumed rate of return. New regulations and market-driven changes may result in changes in the discount rates and other variables, which would result in the Company being required to make contributions in the future that differ significantly from estimates. An extended period of depressed capital markets and low interest rates could require the Company to make contributions to these plans in excess of those currently contemplated, which, in turn, could have an adverse impact on the financial performance of the Company. Somewhat mitigating the impact of a potential market decline is the fact that the Company monitors its pension plan assets closely and follows strict guidelines to ensure that pension fund investment portfolios are diversified in-line with industry best practices. For further details related to Corby's defined benefit pension plans, please refer to Note 8 to the consolidated financial statements.

    
    CORBY DISTILLERIES LIMITED
    CONSOLIDATED BALANCE SHEETS
    As at June 30, 2010 and 2009

    (in thousands of Canadian dollars)
    -------------------------------------------------------------------------

                                                            2010        2009
                                                     ------------------------

    ASSETS
    Current
      Deposits in cash management pools               $   74,685  $   62,726
      Accounts receivable                                 28,340      28,640
      Income and other taxes recoverable                   1,070       1,478
      Inventories (Note 5)                                60,502      53,987
      Prepaid expenses                                     1,551       1,582
      Future income taxes (Note 6)                           135         551
    -------------------------------------------------------------------------
                                                         166,283     148,964
    Capital assets (Note 7)                               15,238      14,553
    Employee future benefits (Note 8)                     12,292      11,382
    Goodwill (Note 9)                                      6,857       9,856
    Intangible assets (Note 10)                           70,571      85,420
    -------------------------------------------------------------------------
                                                      $  271,241  $  270,175
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES
    Current
      Accounts payable and accrued liabilities        $   18,285  $   20,416
    -------------------------------------------------------------------------
    Employee future benefits (Note 8)                      6,748       5,923
    Future income taxes (Note 6)                           5,246       7,605
    -------------------------------------------------------------------------
                                                          30,279      33,944
    -------------------------------------------------------------------------

    SHAREHOLDERS' EQUITY
    Share capital (Note 11)                               14,304      14,304
    Retained earnings                                    226,658     221,927
    -------------------------------------------------------------------------
                                                         240,962     236,231
    -------------------------------------------------------------------------
                                                      $  271,241  $  270,175
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements



    CORBY DISTILLERIES LIMITED
    CONSOLIDATED STATEMENTS OF EARNINGS

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

                                For the Three Months
                                       Ended             For the Year Ended
                              ----------------------- -----------------------
                                 June 30,    June 30,    June 30,    June 30,
                                    2010        2009        2010        2009
                              ----------------------- -----------------------

    OPERATING REVENUE
      Sales                   $   38,249  $   36,887  $  147,046  $  152,592
      Commissions (Note 12)        3,777       4,554      15,184      16,694
    -------------------------------------------------------------------------
                                  42,026      41,441     162,230     169,286
    -------------------------------------------------------------------------

    OPERATING COSTS
      Cost of sales               19,282      19,983      73,061      79,638
      Marketing, sales and
       administration             12,934      10,905      44,440      44,786
      Amortization                   413         415       1,704       1,457
    -------------------------------------------------------------------------
                                  32,629      31,303     119,205     125,881
    -------------------------------------------------------------------------

    EARNINGS FROM OPERATIONS       9,397      10,138      43,025      43,405
    -------------------------------------------------------------------------

    OTHER INCOME AND EXPENSES
      Impairment charge (Note 4)       -           -     (11,510)          -
      Interest income                166         204         537       1,649
      Foreign exchange gain (loss)   301        (112)       (573)       (783)
      (Loss) gain on disposal
       of capital assets               -          (5)          3         178
    -------------------------------------------------------------------------
                                     467          87     (11,543)      1,044
    -------------------------------------------------------------------------

    EARNINGS BEFORE INCOME TAXES   9,864      10,225      31,482      44,449
    -------------------------------------------------------------------------

    INCOME TAXES (Note 6)
      Current                      2,750       2,472      12,750      13,275
      Future                         496         385      (1,943)        793
    -------------------------------------------------------------------------
                                   3,246       2,857      10,807      14,068
    -------------------------------------------------------------------------

    NET EARNINGS              $    6,618  $    7,368  $   20,675  $   30,381
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    BASIC EARNINGS PER SHARE
     (Note 14)                $     0.23  $     0.26  $     0.73  $     1.07
    DILUTED EARNINGS PER
     SHARE (Note 14)          $     0.23  $     0.26  $     0.73  $     1.07
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements



    CORBY DISTILLERIES LIMITED
    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

    (Unaudited)
    (in thousands of Canadian dollars)
    -------------------------------------------------------------------------

                                For the Three Months
                                       Ended             For the Year Ended
                              ----------------------- -----------------------
                                 June 30,    June 30,    June 30,    June 30,
                                    2010        2009        2010        2009
                              ----------------------- -----------------------

    NET EARNINGS              $    6,618  $    7,368  $   20,675  $   30,381
    OTHER COMPREHENSIVE
     INCOME                            -           -           -           -
    -------------------------------------------------------------------------
    COMPREHENSIVE INCOME      $    6,618  $    7,368  $   20,675  $   30,381
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements



    CORBY DISTILLERIES LIMITED
    CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

    (Unaudited)
    (in thousands of Canadian dollars)
    -------------------------------------------------------------------------

                                                         For the Year Ended
                                                      -----------------------
                                                         June 30,    June 30,
                                                            2010        2009
                                                      -----------------------

    SHARE CAPITAL
      Balance, beginning of period                    $   14,304  $   14,304
      Transactions, net                                        -           -
    -------------------------------------------------------------------------
      Balance, end of period                          $   14,304  $   14,304
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    RETAINED EARNINGS
      Retained earnings, beginning of period          $  221,927  $  207,490
      Net earnings                                        20,675      30,381
      Dividends                                          (15,944)    (15,944)
    -------------------------------------------------------------------------
      Balance, end of period                          $  226,658  $  221,927
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    ACCUMULATED OTHER COMPREHENSIVE INCOME
      Balance, beginning of period                    $        -  $        -
      Other comprehensive income for the period                -           -
    -------------------------------------------------------------------------
      Balance, end of period                          $        -  $        -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements



    CORBY DISTILLERIES LIMITED
    CONSOLIDATED STATEMENTS OF CASH FLOW

    (Unaudited)
    (in thousands of Canadian dollars)
    -------------------------------------------------------------------------

                                For the Three Months
                                       Ended             For the Year Ended
                              ----------------------- -----------------------
                                 June 30,    June 30,    June 30,    June 30,
                                    2010        2009        2010        2009
                              ----------------------- -----------------------

    OPERATING ACTIVITIES
    Net earnings              $    6,618  $    7,368  $   20,675  $   30,381
    Items not affecting cash
      Amortization                 1,550       1,585       6,312       6,140
      Impairment charge (Note 4)       -           -      11,510           -
      Loss (gain) on disposal
       of capital assets               -           5          (3)       (178)
      Future income taxes            496         385      (1,943)        793
    Employee future benefits        (610)     (1,896)        (85)     (2,347)
    -------------------------------------------------------------------------
                                   8,054       7,447      36,466      34,789
    Net change in non-cash
     working capital balances     (1,101)      1,758      (7,907)    (10,850)
    -------------------------------------------------------------------------
    Cash flows provided by
     operating activities          6,953       9,205      28,559      23,939
    -------------------------------------------------------------------------

    INVESTING ACTIVITIES
    Additions to capital assets   (1,343)       (932)     (2,389)     (4,403)
    Proceeds from disposition
     of capital assets                 -          12           3         581
    Proceeds on account of PR
     brand disposals (Note 10)         -           -       1,730           -
    Deposits in cash management
     pools                        (1,624)     (4,299)    (11,959)     (4,173)
    -------------------------------------------------------------------------
    Cash flows used in
     investing activities         (2,967)     (5,219)    (12,615)     (7,995)
    -------------------------------------------------------------------------

    FINANCING ACTIVITY
    Dividends paid                (3,986)     (3,986)    (15,944)    (15,944)
    -------------------------------------------------------------------------
    Cash flows used in
     financing activity           (3,986)     (3,986)    (15,944)    (15,944)
    -------------------------------------------------------------------------

    NET CHANGE IN CASH                 -           -           -           -
    CASH, BEGINNING OF PERIOD          -           -           -           -
    -------------------------------------------------------------------------
    CASH, END OF PERIOD       $        -  $        -  $        -  $        -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    SUPPLEMENTAL CASH FLOW
     INFORMATION
    Interest received         $      166  $      204  $      537  $    1,649
    Income taxes paid         $    1,980  $    4,600  $   11,864  $   16,203
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements



    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    FOR THE YEARS ENDED JUNE 30, 2010 AND 2009
    (in thousands of Canadian dollars, except per share amounts)


    1.  SIGNIFICANT ACCOUNTING POLICIES

    Description of Business

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

    Corby is controlled by Hiram Walker & Sons Limited ("HWSL"), which is a
    wholly owned subsidiary of Pernod Ricard, S.A. ("PR"), a French public
    limited company that owned 51.6% of the outstanding Voting Class A Common
    Shares of Corby as at June 30, 2010.

    Basis of Consolidation

    The consolidated financial statements include the accounts of Corby and
    its subsidiaries. All intercompany balances and transactions are
    eliminated on consolidation.

    Use of Estimates

    The preparation of the consolidated financial statements in conformity
    with Canadian generally accepted accounting principles ("GAAP") requires
    management to make estimates and assumptions that affect the reported
    amounts of assets and liabilities and the 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 intangible assets, 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.

    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.

    Deposits in Cash Management Pools

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

    Corby accesses these funds on a daily basis and has the contractual right
    to withdraw these funds or terminate these cash management arrangements
    upon providing five days' written notice. For additional information on
    these balances, see Note 16, "Related Party Transactions".

    Inventories

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

    Capital Assets

    Buildings, machinery and equipment, and other capital assets 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:

    Buildings                                                 40 to 50 years
    Machinery and equipment                                    3 to 12 years
    Casks                                                           12 years
    Other capital assets                                       3 to 20 years

    Employee Future Benefits

    The Company accrues its obligations under employee future benefit plans
    and their 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,
        2010.

    Long-Lived Assets

    The Company's long-lived assets are comprised of its capital assets and
    its finite-lived intangible assets relating to Corby's long-term
    representation rights. Long-lived assets are tested for impairment when
    events or changes in circumstances indicate that 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 flows calculations.

    Goodwill

    Goodwill represents 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. Goodwill is
    deemed to have an indefinite life and is, therefore, 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 licences. Long-term representation rights represent the
    cost of the Company's exclusive right to represent PR's brands in Canada.
    These representation rights are carried at cost, less accumulated
    amortization. Amortization is provided for on a straight-line basis over
    the 15-year term of the agreement, which began on October 1, 2006, and is
    scheduled to expire on September 30, 2021.

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

    Monetary assets and liabilities of the Company are translated at exchange
    rates in effect on 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 utilizes a Restricted Share Units Plan as its long-term
    incentive plan. Through this plan, restricted share units ("RSUs") will
    be granted to certain officers and employees at a grant price equal to
    the market closing price of the Company's Voting Class A Common Shares on
    the last day prior to grant. RSUs vest at the end of a three-year term,
    subject to the achievement of pre-determined corporate performance
    targets. The related compensation expense is recognized over this period.

    Unvested RSUs will attract dividend-equivalent units whenever dividends
    are paid on the Voting Class A Common Shares of the Company and will be
    immediately reinvested into additional RSUs, which will vest and become
    payable at the end of the three-year vesting period, subject to the same
    performance conditions as the original RSU award. On the date of vesting,
    the holder will be entitled to the cash value of the number of RSUs
    granted, plus any RSUs received from reinvested dividend-equivalents.
    RSUs do not entitle participants to acquire any rights or entitlements as
    a shareholder of the Company.

    Classification of Financial Instruments

    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. The classification determines the accounting treatment of
    the instrument. The classification is determined by the Company when the
    financial instrument is initially recorded, based on the underlying
    purpose of the instrument.

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

    -------------------------------------------------------------------------

    Financial Asset/Liability                      Category      Measurement
    -------------------------------------------------------------------------

    Deposits in cash management pools      Held for trading       Fair value
    Accounts receivable               Loans and receivables   Amortized cost
    Accounts payable and accrued                      Other
     liabilities                      financial liabilities   Amortized cost
    -------------------------------------------------------------------------

    Financial instruments measured at amortized cost are initially recognized
    at fair value and then, subsequently, at amortized cost, with gains and
    losses recognized in earnings in the period in which the gain or loss
    occurs. Changes in fair value of financial instruments classified as held
    for trading are recorded in net earnings in the period of change.

    2.  CHANGES IN ACCOUNTING POLICIES

    Financial Statement Concepts

    Effective July 1, 2009, the Company applied the amendments to Canadian
    Institute of Chartered Accountants ("CICA") Handbook Section 1000,
    "Financial Statement Concepts". These amendments clarify the criteria for
    recognition of an asset and the timing of expense recognition,
    specifically deleting the guidance permitting the deferral of costs. The
    new requirements are effective for interim and annual financial
    statements for fiscal years beginning on or after October 1, 2008. The
    Company applied the amendments to Section 1000 in conjunction with
    Section 3064, "Goodwill and Intangible Assets", which is further
    described below. The adoption of this standard had no impact on the
    Company's financial statements or note disclosures.

    Goodwill and Intangible Assets

    Effective July 1, 2009, the Company implemented a new accounting
    standard, Section 3064, "Goodwill and Intangible Assets", which is
    effective for fiscal years beginning on or after October 1, 2008. This
    standard replaces the existing Section 3062, "Goodwill and Other
    Intangible Assets", and Section 3450, "Research and Development Costs".
    The new standard prescribes new methods for recognizing, measuring,
    presenting and disclosing goodwill and intangible assets, with the
    objective of eliminating the practice of deferring costs that do not meet
    the definition and recognition criteria of assets. The new standard is
    equivalent to the corresponding provisions of International Financial
    Reporting Standards ("IFRS") IAS 38, "Intangible Assets". The adoption of
    this standard had no impact on the Company's financial statements or note
    disclosures.

    Financial Instruments - Disclosures

    In June 2009, the Canadian Accounting Standards Board ("AcSB") amended
    Section 3862, "Financial Instruments - Disclosures", to adopt the
    amendments recently issued by the International Accounting Standards
    Board ("IASB") to IFRS 7, "Financial Instruments: Disclosures", in March
    2009. These amendments are applicable to publicly accountable enterprises
    and those private enterprises, co-operative business enterprises,
    rate-regulated enterprises and not-for-profit organizations that choose
    to adopt Section 3862. The amendments were made to enhance disclosures
    about fair value measurements, including the relative reliability of the
    inputs used in those measurements, and about the liquidity risk of
    financial instruments.

    The amendments were effective for annual financial statements for fiscal
    years ending after September 30, 2009, with early adoption permitted. The
    Company adopted these amendments to Section 3862 in its 2010 annual
    consolidated financial statements. See Note 18 for a discussion on fair
    value measurement and the liquidity risk of financial instruments.

    3.  FUTURE ACCOUNTING STANDARDS

    International Financial Reporting Standards

    In February 2008, the AcSB confirmed that Canadian GAAP for publicly
    accountable enterprises will be replaced by IFRS for fiscal years
    beginning on or after January 1, 2011. IFRS uses a conceptual framework
    similar to Canadian GAAP; however, there are significant differences in
    regards to recognition, measurement and disclosures. Accordingly, the
    conversion from Canadian GAAP to IFRS will be applicable to the Company's
    reporting for the first quarter of fiscal 2012, for which current and
    comparative information will be prepared under IFRS.

    The Company expects the transition to IFRS to impact accounting,
    financial reporting, internal control over financial reporting, taxes,
    and information systems and processes. The Company has established a
    transition plan to ensure the timely conversion to IFRS.

    4.  IMPAIRMENT CHARGE

    During the year ended June 30, 2010, the Company recorded a non-cash
    impairment charge against its goodwill and intangible assets balances
    related to its Seagram Coolers brand as outlined in the following chart:

    -------------------------------------------------------------------------
    Intangible assets                                             $    8,511
    Goodwill                                                           2,999
    -------------------------------------------------------------------------
    Impairment charged against goodwill and intangible assets         11,510
    Income tax effect                                                 (2,128)
    -------------------------------------------------------------------------
    Net earnings impact of impairment charge                      $    9,382
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The Seagram Coolers business in Canada was acquired by Corby on
    September 29, 2006. Initially, the brand had been quite successful and
    achieved the internal goals and objectives management had set for it.
    However, over the past two years, the brand underperformed relative to
    its competitive set due to aggressive competition from both category
    leaders and new entrants in adjacent categories.

    As a result, the Company revised its long-term outlook to reflect changes
    in expectations for the brand. Accordingly, it has estimated that the
    fair value of the associated goodwill and intangible assets related to
    the brand fell below its recorded carrying amounts. As such, an
    impairment charge of $11,510 was recorded during the Company's second
    quarter of fiscal 2010. Management remains committed to the Seagram
    Coolers brand and has recently completed and implemented a comprehensive
    brand rejuvenation plan, including label and packaging redesign, new
    flavour innovation, and increased advertising and promotional activities.

    5.  INVENTORIES

                                                            2010        2009
    -------------------------------------------------------------------------
    Raw materials                                     $    6,390  $    5,919
    Work-in-progress                                      43,990      39,180
    Finished goods                                        10,122       8,888
    -------------------------------------------------------------------------
                                                      $   60,502  $   53,987
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The cost of inventory recognized as an expense and included in cost of
    goods sold during the year ended June 30, 2010, was $59,810 (2009 -
    $63,938). During the year, there were no significant write-downs of
    inventory as a result of net realizable value being lower than cost, and
    no inventory write-downs recognized in previous years were reversed.

    6.  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:

                                                            2010        2009
    -------------------------------------------------------------------------

    Future income tax assets
    Current
      Bad debt and inventory reserves                 $      106  $       63
      Restricted stock unit reserve                           29         201
      Tax credit carry-forward                                 -          12
      Unrealized foreign exchange                              -         275
    -------------------------------------------------------------------------
                                                      $      135  $      551
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Future income tax liabilities
    Long term
      Employee future benefits                        $    1,160  $    1,225
      Capital assets                                       1,772       1,419
      Inventories                                            696         877
      Intangible assets and goodwill                       1,618       4,084
    -------------------------------------------------------------------------
                                                      $    5,246  $    7,605
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

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

                                                            2010        2009
    -------------------------------------------------------------------------
    Combined basic Federal and Provincial tax rates          31%         32%
    Impact of impairment charge                               5%          0%
    Impact of substantively enacted rate decreases
     in Ontario                                              (2%)         0%
    -------------------------------------------------------------------------
                                                             34%         32%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    7.  CAPITAL ASSETS

                                          2010                          2009
    -------------------------------------------------------------------------
                                           Net                           Net
                               Accum.     Book               Accum.     Book
                      Cost     Amort.    Value      Cost     Amort.    Value
    -------------------------------------------------------------------------
    Land          $    638  $      -  $    638  $    638  $      -  $    638
    Buildings        7,931     4,864     3,067     7,899     4,604     3,295
    Machinery and
     equipment      13,954     6,765     7,189    13,242     5,677     7,565
    Casks            5,387     1,331     4,056     3,757     1,013     2,744
    Other              538       250       288       523       212       311
    -------------------------------------------------------------------------
                  $ 28,448  $ 13,210  $ 15,238  $ 26,059  $ 11,506  $ 14,553
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    8.  EMPLOYEE FUTURE BENEFITS

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

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

                                                  2010                  2009
    -------------------------------------------------------------------------
                                                 Other                 Other
                                    Pension    Benefit    Pension    Benefit
                                      Plans      Plans      Plans      Plans
    -------------------------------------------------------------------------

    Fair value of plan assets
    Fair value of plan assets,
     beginning of year            $  39,188  $       -  $  41,896  $       -
      Actual return on plan
       assets                         2,561          -     (4,464)         -
      Employer contributions          2,727        672      4,828        700
      Employee contributions            208          -        194          -
      Benefits paid                  (3,079)      (672)    (3,266)      (700)
    -------------------------------------------------------------------------
    Fair value of plan assets,
     end of year                  $  41,605  $       -  $  39,188  $       -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Accrued benefit obligation
    Benefit obligation,
     beginning of year            $  37,787  $  11,487  $  42,920  $  11,782
      Service cost                      885        336      1,203        439
      Interest cost                   2,581        763      2,421        669
      Employee contributions            208          -        194          -
      Actuarial loss (gain)           9,325      2,749     (5,685)      (703)
      Past service costs                  -       (815)         -          -
      Benefits paid                  (3,079)      (672)    (3,266)      (700)
    -------------------------------------------------------------------------
    Accrued benefit obligation,
     end of year                  $  47,707  $  13,848  $  37,787  $  11,487
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Funded status
    Funded status: plan surplus
     (deficit)                    $  (6,102) $ (13,848) $   1,401  $ (11,487)
      Unamortized net transition
       asset (obligation)            (1,802)     2,512     (2,136)     3,682
      Unamortized past service
       costs                            697          -        777          -
      Unamortized net actuarial
       loss                          19,499      4,588     11,340      1,882
    -------------------------------------------------------------------------
    Accrued benefit asset
     (liability)                  $  12,292  $  (6,748) $  11,382  $  (5,923)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    All pension plans, other than one of the supplementary executive
    retirement plans, 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, 2010, are $32,756 and $40,673, respectively
    (2009 - $30,695 and $32,534).

    Significant actuarial assumptions adopted are as follows:

                                                  2010                  2009
    -------------------------------------------------------------------------
                                                 Other                 Other
                                    Pension    Benefit    Pension    Benefit
                                      Plans      Plans      Plans      Plans
    -------------------------------------------------------------------------
    Accrued benefit obligation,
     end of year
    Discount rate                     5.25%      5.25%      7.10%      7.10%
    Compensation increase             3.50%        N/A      3.50%        N/A
    Benefit expense, for the year
    Discount rate                     7.10%      7.10%      5.85%      5.85%
    Expected long term return
     on assets                        6.25%        N/A      6.50%        N/A
    Compensation increase             3.50%        N/A      3.50%        N/A


    The medical cost trend rate used was 10.0% for 2010 (2009 - 10%), with
    5.0% being the ultimate trend rate for 2015 and years thereafter. The
    dental cost trend rate used was 5.0% for 2010 (2009 - 5.0%).

    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
    in 2010:

    -------------------------------------------------------------------------
                                                        Increase    Decrease
    -------------------------------------------------------------------------
    Service and interest cost                         $      243  $     (187)
    Accrued benefit obligation                             1,946      (1,565)
    -------------------------------------------------------------------------

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

                                                  2010                  2009
    -------------------------------------------------------------------------
                                                 Other                 Other
                                    Pension    Benefit    Pension    Benefit
                                      Plans      Plans      Plans      Plans
    -------------------------------------------------------------------------
    Service cost (including
     provision for plan
     expenses)                    $     885  $     336  $   1,203  $     439
    Interest cost                     2,581        763      2,421        669
    Actual return on plan assets     (2,561)         -      4,464          -
    Actuarial loss                    9,326      2,749     (5,685)      (703)
    Plan amendments                       -       (815)         -          -
    -------------------------------------------------------------------------
    Costs arising in the period      10,231      3,033      2,403        405

    Differences between:
      Actual and expected return
       on plan assets                   665          -     (6,687)         -
      Actuarial gain or loss
       recognized for the year
       and actuarial gain or
       loss on accrued benefit
       obligation                    (8,825)    (2,706)     6,119        791
      Amortization of plan
       amendments and actual
       plan amendments                   80        815         80          -
      Amortization of
       transitional (asset)
       obligation                      (333)       356       (333)       403
    -------------------------------------------------------------------------
    Net expense                   $   1,818  $   1,498  $   1,582  $   1,599
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Plan assets by category are as follows:

                                                            2010        2009
    -------------------------------------------------------------------------
    Equity                                                 50.0%       50.9%
    Fixed income                                           38.0%       34.9%
    Refundable taxes at Canada Revenue Agency/other        12.0%       14.2%
    -------------------------------------------------------------------------
                                                          100.0%      100.0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    9.  GOODWILL

                                          2010                          2009
    -------------------------------------------------------------------------
                   Opening  Movements   Ending   Opening  Movements   Ending
                      Book    in the      Book      Book    in the      Book
                     Value      year     Value     Value      year     Value
    -------------------------------------------------------------------------
    Associated
     brand:
    Seagram
     Coolers      $  3,970  $ (2,999) $    971  $  3,970  $      -  $  3,970
    Lamb's rum
     International   1,410         -     1,410     1,410         -     1,410
    Meaghers and
     De Kuyper
     liqueurs        4,476         -     4,476     4,476         -     4,476
    -------------------------------------------------------------------------
                  $  9,856  $ (2,999) $  6,857  $  9,856  $      -  $  9,856
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    During the year, the Company recognized an impairment charge on its
    goodwill balance related to the Seagram Coolers brand. For additional
    information related to the impairment charge, please refer to Note 4.

    10. INTANGIBLE ASSETS

                                                                        2010
    -------------------------------------------------------------------------
                                      Movements in the Year
                     Opening    ---------------------------------     Ending
                        Book      Amorti-     Impair-   PR Brand        Book
                       Value      zation       ments   Disposals       Value
    -------------------------------------------------------------------------
    Long-term
     representation
     rights         $ 57,370    $ (4,608)   $      -    $ (1,730)   $ 51,032
    Trademarks and
     licenses         28,050           -      (8,511)          -    $ 19,539
    -------------------------------------------------------------------------
                    $ 85,420    $ (4,608)   $ (8,511)   $ (1,730)   $ 70,571
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                                        2009
    -------------------------------------------------------------------------
                                      Movements in the Year
                     Opening    ---------------------------------     Ending
                        Book      Amorti-     Impair-   PR Brand        Book
                       Value      zation       ments   Disposals       Value
    -------------------------------------------------------------------------

    Long-term
     representation
     rights         $ 62,053    $ (4,683)   $      -    $      -    $ 57,370
    Trademarks and
     licenses         28,050           -           -           -      28,050
    -------------------------------------------------------------------------
                    $ 90,103    $ (4,683)   $      -    $      -    $ 85,420
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    As depicted in the above chart, intangible assets are comprised of
    long-term representation rights and trademarks and licences. Trademarks
    and licences represent the value of trademarks and licences of businesses
    acquired. These intangible assets are deemed to have an indefinite life
    and are, therefore, not amortized. Trademarks and licences are tested for
    impairment on an annual basis or more frequently if events or changes in
    circumstances indicate that the assets might be impaired. Please refer to
    Note 4 for additional information regarding the impairment charge
    recognized during fiscal 2010.

    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 that began on October 1, 2006, and is scheduled to expire on
    September 30, 2021.

    During the year ended June 30, 2010, PR provided cash compensation to
    Corby as a result of PR's decision to dispose of the Wild Turkey bourbon,
    Tia Maria coffee liqueur and Lemon Hart rum brands, and thus early
    terminate Corby's representation of these brands in Canada. The
    compensation received is presented in the previous chart, under the
    heading "PR Brand Disposals". The amount of compensation was calculated
    in accordance with a prescribed formula contained in the representation
    agreement, and was accounted for as a reduction of Corby's original cost.
    Corby ceased representation of the Wild Turkey brand in May 2009, the Tia
    Maria brand in October 2009, and the Lemon Hart brand in February 2010.
    The resulting impact of lost commissions on Corby's fiscal 2010 net
    earnings is estimated to be less than $275.

    11. SHARE CAPITAL

                                                           2010         2009
    -------------------------------------------------------------------------

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

    Number of shares issued and fully paid:
      Voting Class A Common Shares                   24,274,320   24,274,320
      Non-voting Class B Common Shares                4,194,536    4,194,536
    -------------------------------------------------------------------------
                                                     28,468,856   28,468,856
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Stated value                                     $   14,304   $   14,304
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    12. COMMISSIONS

    Commissions for the year ended June 30, 2010, are reported net of
    long-term representation rights amortization in the amount of $4,608
    (2009 - $4,683). Long-term representation rights represent the cost of
    the Company's exclusive right to represent PR's brands in Canada. These
    rights are being amortized on a straight-line basis over the 15-year term
    of the agreement that began on October 1, 2006, and is scheduled to
    expire on September 30, 2021.

    13. RESTRICTED SHARE UNITS PLAN

                                                2010                    2009
    -------------------------------------------------------------------------
                                            Weighted                Weighted
                              Restricted     Average  Restricted     Average
                                   Share  Grant Date       Share  Grant Date
                                   Units  Fair Value       Units  Fair Value
    -------------------------------------------------------------------------

    Non-vested, beginning
     of year                      75,748  $    22.42      38,931  $    25.17
      Granted                          -           -      34,261       19.76
      Reinvested dividend
       equivalent units            2,266       15.37       2,556       16.23
      Vested                     (14,370)      24.60           -           -
      Forfeited                        -           -           -           -
    -------------------------------------------------------------------------
    Non-vested, end of year       63,644  $    21.68      75,748  $    22.42
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Compensation expense related to this plan for the year ended June 30,
    2010, was $329 (2009 - $374).

    14. EARNINGS PER SHARE

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

                                                            2010        2009
    -------------------------------------------------------------------------
    Numerator:
      Net earnings                                    $   20,675  $   30,381
    Denominator:
      Weighted average shares outstanding             28,468,856  28,468,856
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    15. CHANGES IN NON-CASH WORKING CAPITAL

                                                            2010        2009
    -------------------------------------------------------------------------

    Accounts receivable                               $      300  $   (6,767)
    Inventories                                           (6,515)     (3,111)
    Prepaid expenses                                          31         354
    Income tax and other taxes recoverable                   408      (2,494)
    Accounts payable and accrued liabilities              (2,131)      1,168
    -------------------------------------------------------------------------
                                                      $   (7,907) $  (10,850)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    16. RELATED PARTY TRANSACTIONS

    Deposits in Cash Management Pools

    Corby participates in a cash management pooling arrangement under the
    Mirror Netting Services Agreement together with PR's other Canadian
    affiliates, the terms of which are administered by The Bank of Nova
    Scotia. The Mirror Netting Services Agreement acts to aggregate each
    participant's net cash balance for the purposes of having a centralized
    cash management function for all of PR's Canadian affiliates, including
    Corby. As a result of Corby's participation in this agreement, Corby's
    credit risk associated with its deposits in cash management pools is
    contingent upon PR's credit rating. PR's credit rating as at August 26,
    2010, as published by Standard & Poor's and Moody's, was BB+ and Ba1,
    respectively. PR compensates Corby for the benefit it receives from
    having the Company participate in the Mirror Netting Services Agreement
    by paying interest to Corby based upon the 30-day LIBOR rate plus 0.40%.
    Corby earned interest income of $529 from PR during the year ended June
    30, 2010 (2009 - $1,634). Corby has the right to terminate its
    participation in the Mirror Netting Services Agreement at any time,
    subject to five days' written notice.

    ABSOLUT Vodka Representation Agreement

    On September 26, 2008, Corby entered into an agreement with its ultimate
    parent company, PR. The agreement provides Corby with the exclusive right
    to represent the ABSOLUT vodka brand in Canada effective October 1, 2008,
    for the next five years to September 30, 2013. As part of this agreement,
    Corby also received the exclusive right to represent the Plymouth gin and
    Level vodka brands. Corby also agreed to continue to participate in the
    cash management pooling arrangement (the Mirror Netting Service
    Agreement) with PR's wholly owned Canadian subsidiaries until October 1,
    2011, unless earlier terminated by Corby. Further, until October 1, 2011,
    Corby agreed that it will not declare any special dividends, repurchase
    shares or make acquisitions or capital investments outside the normal
    course of business without PR's prior approval.

    Related Party Transactions in the Normal Course of Operations

    HWSL, a wholly owned subsidiary of PR, owns in excess of 50% of the
    issued voting common shares of Corby and, therefore, for the purposes of
    the chart below, HWSL is considered to be the Company's parent. PR is
    considered to be Corby's ultimate parent, and affiliated companies are
    also subsidiaries of PR.

    Transactions and balances with parent and affiliated companies include
    the following:

    -------------------------------------------------------------------------
                                                 Financial
                             Nature of           Statement
    Nature of Transaction    Relationship   Classification     2010     2009
    -------------------------------------------------------------------------

    I   The Company renders  Parent company          Sales, $   331  $   807
        blending and                              accounts
        bottling services                       receivable

    -------------------------------------------------------------------------

    II  The Company sells    Affiliated              Sales, $   372  $   180
        certain of its       companies            accounts
        products for resale                     receivable
        at an export level

    -------------------------------------------------------------------------

    III The Company renders  Parent company,   Commissions, $16,428  $16,753
        services, as the     Ultimate             accounts
        sole and exclusive                      receivable
        representative, for  Parent company
        purposes of          and Affiliated
        marketing and sales  companies
        of beverage
        alcohol products
        in Canada

    -------------------------------------------------------------------------

    IV  The Company sub-     Parent company        Cost of  $23,328  $24,059
        contracts the large  and an                  sales,
        majority of its      Affiliated        inventories
        distilling,          company          and accounts
        blending, bottling,                        payable
        storing and
        production activities

    -------------------------------------------------------------------------

    V   The Company          Parent company      Marketing, $ 2,299  $ 2,287
        sub-contracts a                          sales and
        significant portion                 administration
        of its bookkeeping,
        record keeping
        services, certain
        administrative
        services, related
        data processing
        and maintenance of
        data processing
        activities

    -------------------------------------------------------------------------

    VI  The Company          Parent company        Cost of  $ 3,071  $ 3,095
        purchases a portion                          sales,
        of its inventory                       inventories
        used in production                    and accounts
        activities                                 payable

    -------------------------------------------------------------------------

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

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

                                                            2010        2009
    -------------------------------------------------------------------------

    Accounts receivable - related parties             $    6,196  $    6,647
    Accounts payable - related parties                    (5,730)     (6,921)
    -------------------------------------------------------------------------
    Net amount receivable from (payable to)
     related parties                                  $      466  $     (274)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    Corby's Commissions segment earns commission income from the
    representation of non-owned beverage alcohol brands in Canada. Corby
    represents leading international brands such as ABSOLUT vodka, Chivas
    Regal, The Glenlivet and Ballantine's scotches, Jameson Irish whiskey,
    Beefeater gin, Malibu rum, Kahlua liqueur, Mumm champagne, and Jacob's
    Creek and Wyndham Estate wines.

    The Commissions segment's financial results are fully reported as
    "Commissions" on the consolidated statements of 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:

                                                                        2010
    -------------------------------------------------------------------------
                                        United
                                        States
                                            of    United   Rest of
                              Canada   America   Kingdom     World     Total
    -------------------------------------------------------------------------
    Operating revenue       $151,522  $  5,060  $  4,441  $  1,207  $162,230
    Capital assets            15,238         -         -         -    15,238
    Goodwill                   5,447         -     1,410         -     6,857
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                                        2009
    -------------------------------------------------------------------------
                                        United
                                        States
                                            of    United   Rest of
                              Canada   America   Kingdom     World     Total
    -------------------------------------------------------------------------
    Operating revenue       $157,789  $  5,982  $  5,090  $    425  $169,286
    Capital assets            14,553         -         -         -    14,553
    Goodwill                   8,446         -     1,410         -     9,856
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    In 2010, operating revenue to three major customers accounted for 28%,
    16% and 13%, respectively (2009 - 32%, 16% and 11%).

    18. FINANCIAL INSTRUMENTS

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

    Financial Risk Management Objectives and Policies

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

    Credit Risk
    -----------
    Credit risk arises from cash held with PR via Corby's participation in
    the Mirror Netting Services Agreement (further described in Note 16), as
    well as credit exposure to customers, including outstanding accounts
    receivable. The maximum exposure to credit risk is equal to the carrying
    value of the financial assets.

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

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

    Liquidity Risk
    --------------
    Corby's sources of liquidity are its deposits in cash management pools of
    $74,685 and its cash generated by operating activities. Corby's total
    contractual maturities are represented by its accounts payable and
    accrued liabilities balances which totalled $18,285 as at June 30, 2010,
    and are all due to be paid within one year. The Company believes that its
    deposits in cash management pools, combined with its historically strong
    and consistent operational cash flows, is more than sufficient to fund
    its operations, investing activities and commitments for the foreseeable
    future.

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

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

    Foreign Currency Risk
    ---------------------
    Foreign currency risk exists, as the Company sources a proportion of its
    production requirements in foreign currencies, specifically the US
    dollar. Partially mitigating this risk is the fact that the Company also
    sells certain of its goods in the same foreign currencies. As purchases
    from US-based suppliers typically exceed revenues from US-based
    customers, a decline in the Canadian dollar versus the US dollar can have
    a negative impact on the Company's financial results. In addition,
    subject to competitive conditions, changes in foreign currency rates may
    be passed on to consumers through pricing over the long term.

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

    Fair Value of Financial Instruments

    The Company adopted the amendments to CICA Handbook Section 3862,
    "Financial Instruments - Disclosures", for these annual consolidated
    financial statements. The amendments require the use of a fair value
    hierarchy in order to classify the fair value disclosures related to the
    Company's financial assets and financial liabilities recognized in the
    balance sheets at fair value.

    The fair value hierarchy has the following levels:

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

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

    Corby only has one financial instrument that it records at fair value in
    its balance sheets - "deposits in cash management pools". Based on the
    hierarchy just described, this financial asset is categorized as Level 1.
    For Corby's financial assets and liabilities that are valued at other
    than fair value on its balance sheets (i.e., accounts receivable,
    accounts payable and accrued liabilities), fair value approximates their
    carrying value at June 30, 2010 and 2009, due to their short-term
    maturities.

    19. CAPITAL MANAGEMENT

    The Company's objectives when managing capital are:

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

    Management includes the following items in its definition of capital:

                                                            2010        2009
    -------------------------------------------------------------------------

    Share capital                                     $   14,304  $   14,304
    Retained earnings                                    226,658     221,927
    -------------------------------------------------------------------------
    Net capital under management                      $  240,962  $  236,231
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    The Company's dividend policy stipulates that, barring any unanticipated
    developments, regular dividends will be paid quarterly, on the basis of
    an annual amount equal to the greater of 50% of net earnings per share in
    the preceding fiscal year ended June 30, and $0.56 per share. In
    addition, Corby has agreed with PR on certain restrictions, one of which
    precludes the Company from declaring any special dividends until after
    October 1, 2011. These restrictions are further described in Note 16.
    The Company is meeting all of its objectives and stated policies with
    respect to its management of capital.

    20. COMMITMENTS

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

    -------------------------------------------------------------------------
    2011                                                          $    1,535
    2012                                                               1,453
    2013                                                               1,141
    2014                                                                 975
    2015                                                                 616
    Thereafter                                                         2,125
    -------------------------------------------------------------------------
                                                                  $    7,845
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    21. GUARANTEES

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

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

    22. 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.
    

%SEDAR: 00001138E

SOURCE Corby Spirit and Wine Limited

For further information: For further information: CORBY DISTILLERIES LIMITED, Ali Mahdavi, Spinnaker Capital Markets Inc., Tel.: 416-962-3300; Thierry Pourchet, Vice President and Chief Financial Officer, Tel.: 416-479-2400, investors@corby.ca, www.Corby.ca


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