Corby Distilleries Reports Second Quarter Dividend and Financial Results



    
             Second quarter dividend amounts to $0.14 per share
                 Year-to-date dividend totals $0.28 per share
    

    TORONTO, Feb. 10 /CNW/ - Corby Distilleries Limited ("Corby" or the
"Company") (TSX: CDL.A, TSX: CDL.B) today reported its dividend and financial
results for the three-month and six-month periods ended December 31, 2008. The
Corby Board of Directors today also declared a dividend of $0.14 per share
payable on March 16, 2009 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 February 27, 2009. All financial results are reported in Canadian
dollars.
    For the three-month period ended December 31, 2008, the Company reported
operating revenues of $47.8 million versus $48.8 million during the same
period in the previous year. Net income and earnings per share during the
second quarter amounted to $8.1 million and $0.28, respectively, compared to
$10.7 million and $0.37 per share, respectively during the same period in
2007. While operating results were in line with expectations, net earnings
were lower on a year-over-year comparison basis due to non-operating factors
including:

    
    -   24 percent decline in the Canadian dollar resulting in $1.2 million
        (pre-tax) of foreign exchange loss; and
    -   40 percent decrease in interest rates resulting in $0.4 million
        (pre-tax) of lower interest income on the Company's deposits.
    

    Excluding the impact of the above-mentioned, net income and earnings per
share amounted to $9.1 million and $0.32, respectively during the second
quarter.
    For the six-month period ended December 31, 2008, the Company reported
operating revenues of $93.9 million versus $90.7 million during the same
period in the previous year. Net income and earnings per share during the
first half of the fiscal year amounted to $17.9 million and $0.63,
respectively, compared to $19.9 million and $0.70 per share, respectively
during the same period in 2007.
    In addition to the above-mentioned impact of the devaluation of the
Canadian dollar and interest rates on deposits, a number of non-recurring
items during the corresponding period in 2007 negatively impacted the
comparability of the three-month and six-month financial results. These items
include:

    
    -   $0.9 million in one-time lump sum commission income received as a
        settlement in lieu of a contractually required notice period for a
        third party agency brand no longer represented by the Company;
    -   $1.1 million in non-recurring sales of bulk whisky to Hiram Walker &
        Sons Limited; and
    -   $0.5 million in reduced income tax expense as a result of changes to
        long-term federal income tax rates, as enacted by the government
        during the fall of 2007.
    

    Excluding the impact of the above items, net earnings for the six months
ended December 31, 2008 would have increased by 3 percent as compared to the
prior year. Excluding the impact of the non-recurring items in the prior
period, operating revenue growth was 6 percent for the six-month period ended
December 31, 2008. The underlying results of the Company were strong,
especially in light of the current economic downturn, and reflective of a
strong performance by Corby's brands during the retail holiday season.
    "I am pleased with our revenue and margin growth driven by our continued
focused brand investments," noted Con Constandis, President and Chief
Executive Officer of Corby Distilleries Limited. "Excluding the negative
impact of the rapid fall of the Canadian dollar, and declining interest rates
on our substantial deposits compared to previous periods, our operating
results once again demonstrated continued strength and were in line with our
expectations."
    For further details, please refer to Corby's management discussion and
analysis ("MD&A") and consolidated financial statements and accompanying notes
for the three months and six months ended December 31, 2008 prepared in
accordance with Canadian generally accepted accounting principles ("GAAP").

    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 Seagram Coolers. 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 and Kahlua liqueurs, Mumm champagne, and Jacob's Creek
and Wyndham Estate wines.
    The existing Voting Class A Common Shares and Non-voting Class B Common
Shares of the Company are traded on the Toronto Stock Exchange under the
symbols CDL.A and CDL.B.


    
    CORBY DISTILLERIES LIMITED
    INTERIM CONSOLIDATED BALANCE SHEETS

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

                                     December 31,  December 31,      June 30,
                                            2008          2007          2008
                                   ------------------------------------------
                                                     (Restated     (Restated
                                                      - Note 2)     - Note 2)
    ASSETS
    Current
      Deposits in cash
       management pools (Note 2)     $    66,548   $    67,511   $    58,553
      Accounts receivable                 27,125        22,631        21,873
      Inventories                         53,123        46,029        50,876
      Prepaid expenses                       539           499         1,936
      Future income taxes                    514           225           164
    -------------------------------------------------------------------------
                                         147,849       136,895       133,402
    Capital assets                        13,409         9,383        12,010
    Employee future benefits               9,315         6,799         8,135
    Goodwill                               9,856         9,856         9,856
    Intangible assets                     87,761        92,657        90,103
    -------------------------------------------------------------------------
                                     $   268,190   $   255,590   $   253,506
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES
    Current
      Accounts payable and accrued
       liabilities                   $    22,710   $    23,860   $    19,248
      Income and other taxes
       payable                             1,146         3,740         1,016
    -------------------------------------------------------------------------
                                          23,856        27,600        20,264
    Employee future benefits               5,631         4,488         5,023
    Future income taxes                    7,004         5,655         6,425
    -------------------------------------------------------------------------
                                          36,491        37,743        31,712
    -------------------------------------------------------------------------

    SHAREHOLDERS' EQUITY
    Share capital                         14,304        14,304        14,304
    Retained earnings                    217,395       203,543       207,490
    -------------------------------------------------------------------------
                                         231,699       217,847       221,794
    -------------------------------------------------------------------------
                                     $   268,190   $   255,590   $   253,506
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to interim consolidated financial statements



    CORBY DISTILLERIES LIMITED
    INTERIM CONSOLIDATED STATEMENTS OF EARNINGS

    (Unaudited)
    (in thousands of Canadian dollars,
     except per share amounts)
    -------------------------------------------------------------------------
                                   For the Three             For the Six
                                    Months Ended             Months Ended
                              ----------------------- -----------------------
                                December    December    December    December
                                31, 2008    31, 2007    31, 2008    31, 2007
                              ----------- ----------- ----------- -----------
                                           (Restated               (Restated
                                            - Note 2)               - Note 2)

    OPERATING REVENUE
      Sales                   $   42,821  $   43,254  $   84,627  $   81,012
      Commissions (Note 4)         4,969       5,540       9,226       9,694
    -------------------------------------------------------------------------
                                  47,790      48,794      93,853      90,706
    -------------------------------------------------------------------------

    OPERATING COSTS
      Cost of sales               23,066      22,528      43,278      40,868
      Marketing, sales
       and administration         12,503      11,563      23,870      21,150
      Amortization                   332         259         659         520
    -------------------------------------------------------------------------
                                  35,901      34,350      67,807      62,538
    -------------------------------------------------------------------------

    EARNINGS FROM OPERATIONS      11,889      14,444      26,046      28,168
    -------------------------------------------------------------------------

    OTHER INCOME AND
     EXPENSES
      Interest income                599         663       1,082       1,265
      Foreign exchange loss         (685)        (71)       (784)       (338)
      Gain on disposal of
       capital assets                279           -         195           -
    -------------------------------------------------------------------------
                                     193         592         493         927
    -------------------------------------------------------------------------

    EARNINGS BEFORE
     INCOME TAXES                 12,082      15,036      26,539      29,095
    -------------------------------------------------------------------------

    INCOME TAXES
      Current                      3,574       4,861       8,433       9,741
      Future                         456        (478)        229        (583)
    -------------------------------------------------------------------------
                                   4,030       4,383       8,662       9,158
    -------------------------------------------------------------------------

    NET EARNINGS              $    8,052  $   10,653  $   17,877  $   19,937
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    BASIC EARNINGS PER SHARE  $     0.28  $     0.37  $     0.63  $     0.70
    DILUTED EARNINGS
     PER SHARE                $     0.28  $     0.37  $     0.63  $     0.70
    -------------------------------------------------------------------------

    WEIGHTED AVERAGE COMMON
     SHARES OUTSTANDING

      Basic                   28,468,856  28,468,856  28,468,856  28,468,856
      Diluted                 28,468,856  28,468,856  28,468,856  28,468,856
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to interim consolidated financial statements



    CORBY DISTILLERIES LIMITED
    INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

    (Unaudited)
    (in thousands of Canadian dollars)
    -------------------------------------------------------------------------
                                   For the Three             For the Six
                                    Months Ended             Months Ended
                              ----------------------- -----------------------
                                December    December    December    December
                                31, 2008    31, 2007    31, 2008    31, 2007
                              ----------- ----------- ----------- -----------
                                           (Restated               (Restated
                                            - Note 2)               - Note 2)

    NET EARNINGS              $    8,052  $   10,653  $   17,877  $   19,937
    OTHER COMPREHENSIVE
     INCOME                            -           -           -           -
    -------------------------------------------------------------------------
    COMPREHENSIVE INCOME      $    8,052  $   10,653  $   17,877  $   19,937
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to interim consolidated financial statements



    CORBY DISTILLERIES LIMITED
    INTERIM CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

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

                                                   For the Six Months Ended
                                                 ----------------------------
                                                   December 31,  December 31,
                                                          2008          2007
                                                 ----------------------------
                                                                   (Restated
                                                                    - Note 2)

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

    RETAINED EARNINGS
      Balance, beginning of period as
       previously reported                         $   204,961   $   189,215
      Impact of adoption of new accounting
       standard (Note 2)                                 2,529         2,363
    -------------------------------------------------------------------------
      Retained earnings, beginning
       of period as restated                       $   207,490   $   191,578
      Net earnings                                      17,877        19,937
      Dividends                                         (7,972)       (7,972)
    -------------------------------------------------------------------------
      Balance, end of period                       $   217,395   $   203,543
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    See accompanying notes to interim consolidated financial statements



    CORBY DISTILLERIES LIMITED
    INTERIM CONSOLIDATED STATEMENTS OF CASH FLOW

    (Unaudited)
    (in thousands of Canadian dollars)
    -------------------------------------------------------------------------
                                   For the Three             For the Six
                                    Months Ended             Months Ended
                              ----------------------- -----------------------
                                December    December    December    December
                                31, 2008    31, 2007    31, 2008    31, 2007
                              ----------- ----------- ----------- -----------
                                           (Restated               (Restated
                                            - Note 2)               - Note 2)

    OPERATING ACTIVITIES
    Net earnings              $    8,052  $   10,653  $   17,877  $   19,937
    Items not affecting cash
      Amortization                 1,503       1,425       3,001       2,853
      Foreign exchange               685          71         784         338
      Gain on disposal of
       capital assets               (279)          -        (195)          -
      Future income taxes            456        (478)        229        (583)
    Employee future benefits        (935)        455        (572)        922
    -------------------------------------------------------------------------
                                   9,482      12,126      21,124      23,467
    Net change in non-cash
     working capital balances      4,113       9,742      (3,294)      5,261
    -------------------------------------------------------------------------
    Cash flows from
     operating activities         13,595      21,868      17,830      28,728
    -------------------------------------------------------------------------

    INVESTING ACTIVITIES
    Additions to capital
     assets                       (1,320)        (86)     (2,384)       (234)
    Proceeds from disposition
     of capital assets               516           -         521           -
    Deposits in cash
     management pools (Note 2)    (8,805)    (17,796)     (7,995)    (20,522)
    -------------------------------------------------------------------------
    Cash flows used in
     investing activities         (9,609)    (17,882)     (9,858)    (20,756)
    -------------------------------------------------------------------------

    FINANCING ACTIVITY
    Dividends paid                (3,986)     (3,986)     (7,972)     (7,972)
    -------------------------------------------------------------------------
    Cash flows used in
     financing activity           (3,986)     (3,986)     (7,972)     (7,972)
    -------------------------------------------------------------------------

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

    SUPPLEMENTAL CASH FLOW
     INFORMATION
    Interest received         $      596  $      661  $    1,078  $    1,263
    Income taxes paid         $    4,057  $    5,003  $    9,072  $    8,356
    -------------------------------------------------------------------------

    See accompanying notes to interim consolidated financial statements



    CORBY DISTILLERIES LIMITED
    NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

    FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2008 AND DECEMBER 31,
    2007
    (in thousands of Canadian dollars, except per share amounts)

    1.  BASIS OF PRESENTATION

    These unaudited interim consolidated financial statements (the "financial
    statements") have been prepared by management in accordance with Canadian
    generally accepted accounting principles ("GAAP") and include the
    accounts of Corby Distilleries Limited and its subsidiaries ("Corby" or
    the "Company"). These financial statements do not include all disclosures
    required by Canadian GAAP for annual financial statements and therefore
    should be read in conjunction with the most recently prepared annual
    financial statements for the year ended June 30, 2008.

    The interim financial statements should not be taken as indicative of the
    performance to be expected for the full year due to the seasonal nature
    of the spirits business. Corby's operations are typically subject to
    seasonal fluctuations in that the retail holiday season generally results
    in an increase in consumer purchases over the course of October, November
    and December. Further, the summer months traditionally result in higher
    consumer purchases of spirits as compared to the winter and spring
    months. As a result, the Company's first and second quarter of each
    fiscal year tend to reflect the impact of seasonal fluctuations in that
    more shipments are typically made during those quarters.

    2.  CHANGE IN ACCOUNTING POLICIES

    These financial statements follow the same accounting policies and
    methods of their application as the most recent annual financial
    statements for the year ended June 30, 2008, except as noted below.

    Deposits in cash management pools

    Corby reviewed its presentation of cash flow and its cash and cash
    equivalent balances on its balance sheet. As a result of this review,
    Corby determined that it would change its accounting policy defining cash
    and cash equivalents and correspondingly reclassify its balance sheet and
    cash flow presentation. The new policy classifies cash associated with
    the Mirror Netting Service Agreement (referred to in Note 6), which was
    previously included in cash and cash equivalents, as "Deposits in cash
    management pools" and reflects cash flows arising from deposits in and
    withdrawals from such cash pools as cash flows from investing activities.
    Although none of the agreements or conditions governing these deposits
    has changed since the inception of the cash management arrangements,
    Corby has decided to change its presentation of such deposits to show
    them as a separate investment and not as a component of cash and cash
    equivalents. Corby continues to have the contractual right to withdraw
    these funds or terminate these cash management arrangements upon
    providing five days written notice, and Corby continues to access funds
    deposited in these accounts on a daily basis.

    For more information regarding the Mirror Netting Service Agreement,
    please refer to Note 6 which further describes Corby's related party
    transactions.

    The fiscal 2009 and 2008 interim consolidated balance sheets have been
    reclassified to conform to this presentation. A summary of the effects of
    the reclassification and change in accounting policy is as follows:

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

                                                    June 30, 2008
                                       --------------------------------------
                                                As    Change in           As
                                        Previously   Accounting    Currently
    Increase (decrease)                   Reported       Policy     Reported
    -------------------------------------------------------------------------

    Interim Consolidated
     Balance Sheets

      Cash and cash equivalents        $    58,553  $   (58,553) $         -
      Deposits in cash
       management pools                          -       58,553       58,553
    -------------------------------------------------------------------------

    Interim Consolidated Statements
     of Cash Flow

      Operating Activities
      Net earnings, adjusted for
       items not affecting cash        $    38,378  $         -  $    38,378
      Net change in non-cash
       working capital                      (7,209)        (121)      (7,330)
    -------------------------------------------------------------------------
      Cash flows from operating
       activities                           31,169         (121)      31,048
    -------------------------------------------------------------------------

      Investing Activities
      Deposits in cash
       management pools                          -      (11,564)     (11,564)
    -------------------------------------------------------------------------
      Cash flows used in investing
       activities                           (3,540)     (15,104)     (15,104)
    -------------------------------------------------------------------------

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

      Net change in cash and cash
       equivalents                          11,564      (11,564)           -
      Cash and cash equivalents,
       beginning of year                    46,989      (46,989)           -
    -------------------------------------------------------------------------
      Cash and cash equivalents,
       end of year                     $    58,553  $   (58,553) $         -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

                                                   December 31, 2007
                                       --------------------------------------
                                                As    Change in           As
                                        Previously   Accounting    Currently
    Increase (decrease)                   Reported       Policy     Reported
    -------------------------------------------------------------------------

    Interim Consolidated
     Balance Sheets

      Cash and cash equivalents        $    67,511  $   (67,511) $         -
      Deposits in cash
       management pools                          -       67,511       67,511
    -------------------------------------------------------------------------

    Interim Consolidated Statements
     of Cash Flow

      Operating Activities
      Net earnings, adjusted for
       items not affecting cash        $    23,417  $        50  $    23,467
      Net change in non-cash
       working capital                       5,422         (161)       5,261
    -------------------------------------------------------------------------
      Cash flows from operating
       activities                           28,839         (111)      28,728
    -------------------------------------------------------------------------

      Investing Activities
      Deposits in cash
       management pools                          -      (20,522)     (20,522)
    -------------------------------------------------------------------------
      Cash flows used in investing
       activities                             (234)     (20,756)     (20,756)
    -------------------------------------------------------------------------

      Effect of exchange rate
       changes on cash                        (111)         111            -
    -------------------------------------------------------------------------

      Net change in cash and cash
       equivalents                          20,522      (20,522)           -
      Cash and cash equivalents,
       beginning of year                    46,989      (46,989)           -
    -------------------------------------------------------------------------
      Cash and cash equivalents,
       end of year                     $    67,511  $   (67,511) $         -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Inventories

    Effective July 1, 2008 (the first day of the Company's 2009 fiscal year),
    the Company implemented, on a retrospective basis with restatement, the
    new Canadian Institute of Chartered Accountants ("CICA") Handbook Section
    3031 "Inventories", which is effective for interim and annual financial
    statements for fiscal years beginning on or after January 1, 2008.

    The new standard provides the Canadian equivalent to International
    Financial Reporting Standard IAS 2 "Inventories". Section 3031 prescribes
    measurement of inventories at the lower of cost and net realizable value.
    It provides guidance on the determination of cost, including allocation
    of overheads and other costs to inventories, prohibits the use of the
    last-in, first-out (LIFO) method, and requires the reversal of previous
    write-downs when there is a subsequent increase in the value of
    inventories. It also requires greater disclosure regarding inventories
    and cost of sales.

    The Company's new policy to correspond with the new standard is as
    follows:

    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.

    As a result of the retrospective implementation of this new standard, the
    cumulative impact on previously reported balances on the following dates
    is as follows:

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

                                                  Three Months    Six Months
                                      Year Ended         Ended         Ended
                                         June 30,  December 31,  December 31,
    Increase (decrease)                     2008          2007          2007
    -------------------------------------------------------------------------

    Retained earnings, opening       $     2,363   $     2,280   $     2,363
    Retained earnings, ending              2,529         2,398         2,398
    Inventories                            3,574         3,389         3,389
    Future income tax liability            1,045           991           991
    Cost of sales                          1,464           315           832
    Marketing, sales and
     administration                       (1,699)         (435)         (882)
    Future income tax expense                 69             2            15
    Net earnings                             166           118            35

    Earnings per share:
      - Basic                               0.01             -             -
      - Diluted                             0.01             -             -
    -------------------------------------------------------------------------

    The cost of inventory recognized as an expense and included in cost of
    goods sold during the three and six month periods ended December 31, 2008
    was $18,131 and $34,989, respectively (2007 - $18,345 and $34,425,
    respectively). During the period, 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.

    Financial Instruments

    Effective July 1, 2008, the Company implemented the new CICA Handbook
    Section 3862 "Financial Instruments - Disclosures" and CICA Handbook
    Section 3863 "Financial Instruments - Presentation", which is effective
    for fiscal years beginning on or after October 1, 2007. These standards
    replace the existing CICA Handbook Section 3861 "Financial Instruments -
    Disclosure and Presentation". These new standards are harmonized with
    International Financial Reporting Standards ("IFRS").

    CICA Handbook Section 3862 requires increased disclosures regarding the
    risks associated with financial instruments and how these risks are
    managed. Section 3863 carries forward the presentation standards for
    financial instruments and non-financial derivatives and provides
    additional guidance for the classification of financial instruments, from
    the perspective of the issuer, between liabilities and equity. The
    adoption of these new standards does not require any changes to the
    Company's accounting, however does require additional note disclosure,
    which is included in note 7.

    Capital Disclosures

    Effective July 1, 2008, the Company implemented the new CICA Handbook
    Section 1535 "Capital Disclosures", which is effective for fiscal years
    beginning on or after October 1, 2007. The new standard requires entities
    to disclose information about their objectives, policies and processes
    for managing capital, as well as their compliance with any externally
    imposed capital requirements. The adoption of this standard does not
    require any changes to the Company's accounting, however does require
    additional note disclosure, which is included in note 8.

    3.  FUTURE ACCOUNTING STANDARDS

    Goodwill and Intangible Assets

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

    International Financial Reporting Standards

    In February 2008, the Accounting Standards Board 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 on 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.

    As a result, Corby has developed a plan to convert its consolidated
    financial statements to IFRS. The Company has also established a project
    team that is led by finance management, and will include representatives
    from various areas of the organization as necessary to plan for and
    achieve a smooth transition to IFRS. Regular progress reporting to the
    Audit Committee of the Board of Directors on the status of the IFRS
    implementation project has been instituted.

    A detailed analysis of the differences between IFRS and Corby's
    accounting policies as well as an assessment of the impact of various
    alternatives are in progress. Changes in accounting policies are likely
    and may materially impact the Company's consolidated financial
    statements.

    4.  COMMISSIONS

    Commissions for the three and six month periods ended December 31, 2008
    are reported net of long-term representation rights amortization in the
    amount of $1,171 and $2,342, respectively (2007 - $1,166 and $2,333,
    respectively).

    5.  EMPLOYEE FUTURE BENEFITS

    The Company has recorded a charge to earnings in the three and six month
    periods ended December 31, 2008 of $842 and $1,683, respectively (2007 -
    $884 and $1,768, respectively) to reflect the expense associated with its
    employee future benefit plans. Actual cash payments for the three and six
    month periods ended December 31, 2008 totaled $1,636 and $1,937,
    respectively (2007 - $402 and $802, respectively).

    6.  RELATED PARTY TRANSACTIONS

    Corby's voting shares are majority owned by Hiram Walker & Sons Limited
    ("HWSL") located in Windsor, Ontario. HWSL is a wholly owned subsidiary
    of the international wine and spirits company, Pernod Ricard, S.A.
    ("PR"). Therefore, Corby refers to HWSL as its parent company and PR as
    its ultimate parent.

    During the three and six month periods ended December 31, 2007, Corby
    sold three year old bulk whisky to its parent company, HWSL, at market
    prices for $415 and $1,100, respectively. There were no such sales made
    during the three and six month periods ended December 31, 2008. The
    transactions were measured at the exchange amount.

    On September 26, 2008, Corby entered into an agreement with its ultimate
    parent company, PR. The agreement provides Corby 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 will also receive the exclusive right to represent the Plymouth gin
    and Level vodka brands. The distribution of Absolut vodka is expected to
    add approximately $2.5 million annually to Corby's commission income and
    about $1.2 million annually to net earnings in the first full year. Corby
    has also agreed to continue to participate in the existing cash pooling
    arrangement with PR's wholly-owned Canadian subsidiaries for the next
    three years to October 1, 2011, unless earlier terminated by Corby.
    Further, during the next three years to October 1, 2011, Corby 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.

    As previously discussed, Corby participates in a cash pooling arrangement
    under a Mirror Netting Service Agreement ("Mirror Agreement") together
    with PR's other Canadian affiliates, the terms of which are administered
    by the Bank of Nova Scotia. The Mirror Agreement acts to aggregate each
    participant's net cash balance for purposes of having a centralized cash
    management function for all of PR's Canadian affiliates, including Corby.
    As a result of Corby's participation in this agreement, Corby's credit
    risk associated with its deposits in cash management pools is determinant
    upon PR's credit rating. PR's credit rating as at September 26, 2008, 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 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 Agreement at any
    time, subject to five days written notice.

    7.  FINANCIAL INSTRUMENTS

    Corby's financial instruments consist of its deposits in cash management
    pools, accounts receivable and accounts payable balances. Corby does not
    utilize derivative financial instruments, as management believes the
    risks arising from the Company's financial instruments to be at an
    already acceptably low level. Under Canadian GAAP, 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 and other financial liabilities. The carrying
    values of the Company's financial instruments are classified into the
    following categories:

    -------------------------------------------------------------------------
    Asset or Liability                       Dec. 31,    Dec. 31,    June 30,
     and Classification                         2008        2007        2008
    -------------------------------------------------------------------------

    Deposits in cash management pools
     - classified as held-for-trading     $   66,548  $   67,511  $   58,553
    Accounts receivable - classified
     as loans and receivables                 27,125      22,631      21,873
    Accounts payable - classified as
     other financial liabilities              22,710      23,860      19,248
    -------------------------------------------------------------------------

    Credit Risk

    Credit risk arises from cash held with PR via Corby's participation in
    the Mirror Agreement (further described in Note 6), 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 the Company's credit risk relating to
    accounts receivable is at an acceptably low level.

    Liquidity risk

    Corby's sources of liquidity are its deposits in cash management pools of
    $66,548 and its cash generated by operating activities. Corby's total
    contractual maturities are represented by its accounts payable and
    accrued liabilities balances which totaled $22,710 as at December 31,
    2008 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 are 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 significant impact to Corby's earnings.

    Foreign currency risk

    Foreign currency risk exists as the Company sources a relatively small
    proportion of its production requirements in foreign currencies,
    specifically the United States dollar and UK pound sterling. Partially
    mitigating this risk is the fact that the Company also sells certain of
    its goods in the same foreign currencies. In addition, and subject to
    competitive conditions, changes in foreign currency rates may be passed
    on to consumers through pricing.

    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.

    8.  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
    -   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:

    -------------------------------------------------------------------------
                                     December 31,  December 31,      June 30,
                                            2008          2007          2008
    -------------------------------------------------------------------------

    Share capital                    $    14,304   $    14,304   $    14,304
    Retained earnings                    217,395       203,543       207,490
    -------------------------------------------------------------------------

    Net capital under management     $   231,699   $   217,847   $   221,794
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    The Company's dividend policy, which was updated September 26, 2008,
    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 to
    certain restrictions from PR, one of which precludes the Company from
    declaring any special dividends until after October 1, 2011. These
    restrictions are further described in note 6. The Company's dividend
    policy prior to September 26, 2008 was to pay quarterly dividends on the
    basis of an annual amount of $0.56 per share.

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

    9.  SEGMENT INFORMATION

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

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



    CORBY DISTILLERIES LIMITED
    Interim Management's Discussion and Analysis
    December 31, 2008
    -------------------------------------------------------------------------
    

    The following Interim Management's Discussion and Analysis ("MD&A") dated
February 10, 2009 should be read in conjunction with the unaudited interim
consolidated financial statements and accompanying notes as at and for the
three and six month periods ended December 31, 2008 prepared in accordance
with Canadian generally accepted accounting principles ("GAAP").
    This MD&A contains forward-looking statements, including statements
concerning possible or assumed future results of operations of Corby
Distilleries Limited ("Corby" or the "Company"). Forward-looking statements
typically are preceded by, followed by or include the words "believes",
"expects", "anticipates", "estimates", "intends", "plans" or similar
expressions. Forward-looking statements are not guarantees of future
performance. They involve risks, uncertainties and assumptions, including, but
not limited to: the impact of competition; consumer confidence and spending
preferences; regulatory changes; general economic conditions; and the
Company's ability to attract and retain qualified employees and, as such, the
Company's results could differ materially from those anticipated in these
forward-looking statements. Accordingly, readers should not place undue
reliance on forward-looking statements.
    This document has been reviewed by the Audit Committee of Corby's Board
of Directors and contains certain information that is current as of February
10, 2009. 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.
    The Company's fiscal year end is June 30th. Unless otherwise indicated,
all comparisons of results for the second quarter of fiscal 2009 (three months
ended December 31, 2008) are against results for the second quarter of fiscal
2008 (three months ended December 31, 2007). All dollar amounts are in
Canadian dollars unless otherwise stated.

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

    Corby is a leading Canadian manufacturer and marketer of spirits and
importer of wines. Corby's national leadership is sustained by a diverse brand
portfolio which allows the Company to drive profitable organic growth with
strong, consistent cash flows. Corby is a publicly traded company, with its
shares being 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 (a private company) located in Windsor, Ontario. Hiram Walker & Sons
Limited ("HWSL") is a wholly owned subsidiary of international spirits and
wine company, Pernod Ricard S.A. (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 Pernod Ricard S.A. ("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 statement of earnings
and while it predominantly consists of sales made to each of the provincial
liquor boards in Canada, it also includes sales to international markets.
International sales are primarily to the United States and United Kingdom
markets, and typically account for less than 10% of Corby's total operating
revenue. Commission income earned from the representation of non-owned brands
is denoted as "Commissions" on the consolidated statement of earnings.
    Corby's portfolio of owned-brands include some of the most renowned
brands in Canada, including Wiser's rye whiskies, Lamb's rum, Polar Ice vodka,
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, Kahlua liqueur, Mumm champagne, and Jacob's Creek
and Wyndham Estate wines. In addition to representing PR's brands in Canada,
Corby also provides representation for certain selected unrelated third-party
brands ("Agency brands") when they fit within the Company's strategic
direction and thus complement Corby's existing brand portfolio.
    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 ten years, expiring September 2016. Corby and PR
further agreed that Corby will manage PR's business interests in Canada,
including HWSL's production facility.
    The Company sources approximately 72% of its spirits production
requirements from HWSL's production facility in Windsor, Ontario, while
another 24% of Corby's spirits production is sourced from the Company's
owned-plant in Montreal, Quebec. The remaining 4% is sourced through an
affiliated company located in Scotland which manufactures Lamb's rum for the
international market ("Lamb's International"). However, starting in January
2009, all production requirements for Lamb's International is sourced from
Corby's owned-plant in Montreal, Quebec. Essentially all of Corby's cooler
production requirements are outsourced to an unrelated third-party located in
Dorval, Quebec.
    Corby's operations are typically subject to seasonal fluctuations in that
the retail holiday season generally results in an increase in consumer
purchases over the course of October, November and December. Further, the
summer months traditionally result in higher consumer purchases of spirits as
compared to the winter and spring months. As a result, the Company's first and
second quarter of each fiscal year tend to typically reflect the impact of
seasonal fluctuations in that more shipments are typically made during those
quarters.

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

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

    
    Current Market Environment
    --------------------------

    Recent market events and the resulting tightening of credit have reduced
available liquidity and overall economic activity. Governments around the
world have taken unprecedented actions to limit the impact of these events,
but it is still too early to assess the severity and duration of this economic
slowdown. Over the past several years, the Company has strengthened its
operations and financial position, which should allow it to better face an
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
        $66.5 million currently on deposit in a cash management pool with
        PR's other Canadian affiliates;
    -   Corby's largest customers are government controlled liquor boards in
        each province, thus greatly reducing risk associated with collection
        of accounts receivable;
    -   The Company has an exceptionally diverse and strong brand portfolio,
        which is well positioned to meet consumer tastes across the spirits
        category in a wide range of price points;
    -   Corby is a leader in the Canadian spirits market and has a long
        history of profitability and uninterrupted dividends.

    The spirits business in Canada has historically not been as affected by
economic slowdowns like 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;
    -   Deteriorating financial health of key suppliers;
    -   Higher pension funding requirements.

    Currently, none of the above items have had a meaningful impact on Corby's
year-to-date financial position or financial results. However, the economic
slowdown is a reality both in Canada and globally, and as such the Company
will continue to monitor the situation closely and take proactive measures as
necessary.

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

    Corby's portfolio of owned-brands typically accounts for more than 85% 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, Seagram Coolers,
and Corby's mixable liqueur brands. The sales performance of these key brands
significantly impacts Corby's net earnings and, therefore, understanding each
key brand is essential to understanding the Company's overall performance.
    The following chart summarizes the performance of Corby's key brands in
terms of both volume (as measured by shipments to customers in equivalent nine
litre cases) and value (as measured by the change in sales revenue). The chart
below includes results for sales in both Canada and internationally.
Specifically, the brands Wiser's, Lamb's and Polar Ice are also sold to
international markets, particularly in the US and UK. However, international
sales typically account for less than 10% of Corby's total sales.

    
    BRAND PERFORMANCE CHART - INCLUDES BOTH CANADIAN AND INTERNATIONAL
    SHIPMENTS

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

                                              Three Months Ended
                                ---------------------------------------------
    Volumes                      Dec. 31,    Dec. 31,   % Volume     % Value
     (in 000's of 9L cases)         2008        2007      Change      Change
    -------------------------------------------------------------------------
    Brand
    Wiser's Canadian whisky          220         229         (4%)         1%
    Lamb's rum                       194         203         (4%)         0%
    Polar Ice vodka                  116         117         (1%)        12%
    Seagram Coolers                   48          53         (9%)       (11%)
    Mixable liqueurs                  76          94        (19%)        (9%)
    -------------------------------------------------------------------------
    Total Key Brands                 654         696         (6%)         1%
    All other Corby-owned brands     153         152          1%          1%
    -------------------------------------------------------------------------
    Total                            807         848         (5%)         1%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

                                              Six Months Ended
                                ---------------------------------------------

    Volumes                      Dec. 31,    Dec. 31,   % Volume     % Value
     (in 000's of 9L cases)         2008        2007      Change      Change
    -------------------------------------------------------------------------
    Brand
    Wiser's Canadian whisky          426         414          3%          9%
    Lamb's rum                       371         356          4%          9%
    Polar Ice vodka                  226         212          7%         18%
    Seagram Coolers                  147         184        (20%)       (22%)
    Mixable liqueurs                 139         155        (10%)        (4%)
    -------------------------------------------------------------------------
    Total Key Brands               1,309       1,321         (1%)         6%
    All other Corby-owned brands     310         308          1%          7%
    -------------------------------------------------------------------------
    Total                          1,619       1,629         (1%)         6%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    As previously discussed in the "Strategies and Outlook" section of this
MD&A, the Company has implemented a strategy which requires focused
investments on 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, while emphasizing less on smaller and
less profitable brands.
    The above chart demonstrates that overall, Corby's brands have delivered
strong value growth, as demonstrated by an increase of 6% from a value
perspective compared to the same six month period last year. Value growth was
achieved through higher average selling prices and favourable product mix, as
growth in brands such as Wiser's outweighed volume declines in brands such as
Seagram Coolers (which generally earn lower gross margins).
    Growth during the three month period ending December 31, 2008 was
negatively impacted by changes in the timing of customer orders leading up to
the holiday season. Customer orders were received earlier than in the prior
year and this resulted in additional shipments during the Company's previous
quarter, which ended on September 30, 2008. As a result, the growth rates for
the six months ended December 31, 2008 are more relevant when assessing the
performance of the Company's brands.
    Also of critical importance is the performance of Corby's brands at the
retail level in Canada, especially during the holiday season, as it provides
insight with regards to consumers' current purchasing patterns and trends.
Retail sales data, as provided by the Association of Canadian Distillers
("ACD"), has been provided in the following chart. It should be noted that the
retail sales information depicted does not include international retail sales
of Corby owned-brands, as this information is not readily available.

    
    RETAIL SALES FOR THE CANADIAN MARKET ONLY(1)

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

                                              Three Months Ended
                                ---------------------------------------------
    Volumes                      Dec. 31,    Dec. 31,   % Volume     % Value
     (in 000's of 9L cases)         2008        2007      Change      Change
    -------------------------------------------------------------------------
    Brand
    Wiser's Canadian whisky          228         229         (0%)         2%
    Lamb's rum                       157         161         (2%)        (1%)
    Polar Ice vodka                  102          98          4%          6%
    Seagram Coolers                   67          82        (18%)       (19%)
    Mixable liqueurs                  77          80         (4%)        (4%)
    -------------------------------------------------------------------------
    Total Key Brands                 631         650         (3%)         0%
    All other Corby-owned brands     151         156         (3%)        (3%)
    -------------------------------------------------------------------------
    Total                            782         806         (3%)         0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

                                              Six Months Ended
                                ---------------------------------------------
    Volumes                      Dec. 31,    Dec. 31,   % Volume     % Value
     (in 000's of 9L cases)         2008        2007      Change      Change
    -------------------------------------------------------------------------
    Brand
    Wiser's Canadian whisky          390         385          1%          3%
    Lamb's rum                       280         286         (2%)        (1%)
    Polar Ice vodka                  184         174          6%          7%
    Seagram Coolers                  190         236        (19%)       (17%)
    Mixable liqueurs                 126         130         (3%)        (3%)
    -------------------------------------------------------------------------
    Total Key Brands               1,170       1,211         (3%)         1%
    All other Corby-owned brands     287         299         (4%)        (3%)
    -------------------------------------------------------------------------
    Total                          1,457       1,510         (4%)         0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Refers to sales at the retail store level in Canada, as provided by
        the Association of Canadian Distillers.
    

    The following details provide more insight into the performance of each
of Corby's key brands.

    Wiser's Canadian Whisky

    Corby's flagship brand and Canada's biggest selling whisky family,
Wiser's Canadian whisky, delivered an excellent performance during the six
months ended December 31, 2008 as demonstrated by 3% growth in shipment
volumes and 9% value growth. Value growth exceeded volume growth, as a result
of higher average selling prices across the family in both Canada and the US,
in addition to better product mix, as the more premium Wiser's Deluxe grew at
a faster pace than Wiser's Special Blend (the entry level variant). The higher
selling prices were the result of strategic price increases, which were taken
over the past year.
    These outstanding results are reflective of an aggressive advertising and
promotional platform, combined with continued support from a loyal consumer
base. The Company invested in a new media campaign entitled "Welcome to the
Wiserhood" and also launched a new variant to the Wiser's family, entitled
Wiser's Small Batch. While Wiser's Small Batch is still in the early days of
the product life cycle, early indicators are very positive.
    The holiday season is a crucial time of year for whisky brands as it
represents the highest period of consumer purchases. Retail sales data show
that Wiser's Deluxe performed very well this past holiday season, as
demonstrated by a 6% increase in consumer purchases during the month of
December, while the overall category declined by 2%. The story is similar from
a year-to-date perspective as consumer purchases of Wiser's Deluxe for the six
months ended December 31, 2008 have grown by 4% compared to a decline of 2%
for the Canadian whisky category. This performance at the retail level has
further solidified the brand's leading position in the Canadian market.

    Lamb's Rum

    Lamb's rum, one of the top selling rum families in Canada, experienced
shipment volume growth of 4%, and value growth of 9% during the six months
ended December 31, 2008.
    The brand is currently performing very well in the UK and Newfoundland
and Labrador markets, while experiencing competitive challenges in the Ontario
and Alberta markets. Corby management has already taken some actions to
recover market share such as launching new environmentally friendly packaging
of Lamb's Palm Breeze in key markets and also increasing its level of
investment in the brand's critical Newfoundland and Labrador market.
Management is also considering other initiatives to help defend its position
in the Canadian market.

    Polar Ice Vodka

    Polar Ice vodka, which is among the top three largest vodka brands in
Canada, saw a 7% increase in shipment volumes and 18% growth from a value
perspective during the six months ended December 31, 2008. The volume growth
was partially attributable to the launch of new Polar Ice vodka flavors in
both Canada and the United States. Value growth significantly exceeded volume
growth as a result of price increases taken over the past year.
    The Polar Ice vodka brand has effectively capitalized on the dynamism of
the vodka category in general, which is the largest spirits category in
Canada, and has shown excellent growth over the past several years. For the
six months ended December 31, 2008, consumer purchases of Polar Ice vodka at
the retail level in Canada grew by 6%, while the category grew by 5%.

    Seagram Coolers

    With shipment volumes declining by 20% for the six months ending December
31, 2008, Seagram Coolers has clearly had disappointing results this year.
This was partially the effect of adverse summer weather being experienced in
the brand's key markets as the entire "Ready to Drink" segment, for which
consumer consumption is heavily weighted toward the summer months, experienced
negative growth at the retail level. However, the brand also underperformed
relative to its segment and key competitors. Management is optimistic about
the upcoming summer season as it is in the midst of preparing new innovative
products and is planning for an improved base of retail listings in this
highly competitive category.

    Mixable Liqueurs

    Corby's portfolio of mixable liqueur brands consist of McGuinness
liqueurs (which is Canada's largest mixable liqueur brand family), Meaghers
liqueurs, and De Kuyper liqueurs. The recent performance of Corby's mixable
liqueur brands mirrors the challenges being experienced by the overall liqueur
category in the Canadian market as consumer purchases of these products have
declined in recent months.
    Despite the challenges in the market, Corby management is highly focused
on maintaining its leadership position in the liqueur category and as such,
Company is working on several new initiatives to modernize and strengthen
these brands' positions in the Canadian market place.

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

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

    
    Financial and Operating Results
    -------------------------------

    The following table presents a summary of certain selected consolidated
financial information for the Company for the three and six months ending
December 31, 2008 and 2007.

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

                                              Three Months Ended
                                ---------------------------------------------
    (in millions of
     Canadian dollars, except    Dec. 31,    Dec. 31,         $$          %%
     per share amounts)             2008      2007(3)     Change      Change
    -------------------------------------------------------------------------
    Sales                       $   42.8    $   43.3    $   (0.5)        (1%)
    Commissions(1)                   6.2         6.7        (0.5)        (7%)
    -------------------------------------------------------------------------
    Operating revenue(1)            49.0        50.0        (1.0)        (2%)
    Cost of sales                   23.1        22.5         0.6          3%
    Marketing, sales and
     administration                 12.5        11.6         0.9          8%
    -------------------------------------------------------------------------
    EBITDA                          13.4        15.9        (2.5)       (16%)
    Amortization(2)                  1.5         1.4         0.1          7%
    -------------------------------------------------------------------------
    Earnings from operations        11.9        14.5        (2.6)       (18%)
    Interest income                  0.6         0.7        (0.1)       (14%)
    Foreign exchange loss           (0.7)       (0.1)       (0.6)       600%
    Gain on disposal of
     capital assets                  0.3           -         0.3           -
    -------------------------------------------------------------------------
    Earnings before income
     taxes                          12.1        15.1        (3.0)       (20%)
    Income taxes                     4.0         4.4        (0.4)        (9%)
    -------------------------------------------------------------------------
    Net earnings                $    8.1    $   10.7    $   (2.6)       (24%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Per common share
      - Basic net earnings      $   0.28    $   0.37    $  (0.09)       (24%)
      - Diluted net earnings    $   0.28    $   0.37    $  (0.09)       (24%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

                                              Six Months Ended
                                ---------------------------------------------
    (in millions of
     Canadian dollars, except    Dec. 31,    Dec. 31,         $$          %%
     per share amounts)             2008      2007(3)     Change      Change
    -------------------------------------------------------------------------
    Sales                       $   84.6    $   81.0    $    3.6          4%
    Commissions(1)                  11.6        12.0        (0.4)        (3%)
    -------------------------------------------------------------------------
    Operating revenue(1)            96.2        93.0         3.2          3%
    Cost of sales                   43.3        40.9         2.4          6%
    Marketing, sales and
     administration                 23.9        21.1         2.8         13%
    -------------------------------------------------------------------------
    EBITDA                          29.0        31.0        (2.0)        (6%)
    Amortization(2)                  3.0         2.8         0.2          7%
    -------------------------------------------------------------------------
    Earnings from operations        26.0        28.2        (2.2)        (8%)
    Interest income                  1.1         1.2        (0.1)        (8%)
    Foreign exchange loss           (0.8)       (0.3)       (0.5)       167%
    Gain on disposal of
     capital assets                  0.2           -         0.2           -
    ------------------------------------------------------------------------

    Earnings before income
     taxes                          26.5        29.1        (2.6)        (9%)
    Income taxes                     8.6         9.2        (0.6)        (7%)
    -------------------------------------------------------------------------
    Net earnings                $   17.9    $   19.9    $   (2.0)       (10%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Per common share
      - Basic net earnings      $   0.63    $   0.70    $  (0.07)       (10%)
      - Diluted net earnings    $   0.63    $   0.70    $  (0.07)       (10%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Amounts are presented gross of rep. rights amortization for the
        quarter and year-to-date of $1.2 and $2.3 (2007 - $1.2 and 2.3).
    (2) Amounts include both capital assets amortization and representation
        rights amortization.
    (3) The comparative figures have been restated for the adoption of CICA
        HB Section 3031 - Inventories, as required by the CICA.


    Overall Financial Results

    The underlying operating results for the six months ended December 31,
2008 are reflective of a successful retail holiday season for Corby. However,
the overall comparability of Corby's financial results for the three and six
months ended December 31, 2008 is negatively impacted by the inclusion of the
following non-recurring items in the comparative period:

    -   $0.9 million ($0.6 million on an after tax basis) in commission
        income which represented a one-time lump sum payment received as a
        settlement in lieu of a contractually required notice period for an
        Agency brand no longer represented by the Company.
    -   $1.1 million ($0.5 million after costs and net of tax) in non-
        recurring sales of bulk whisky to Corby's parent company.
    -   $0.5 million in reduced income tax expense as a result of changes to
        long-term federal income tax rates, as enacted by the government
        during the fall of 2007.

    Furthermore, the results for the period just ended were negatively
impacted by the sharp decline of the Canadian dollar relative to the US dollar
and the global decline in interest rates. Further details regarding the impact
of these two factors are as follows:

    1.  The Canadian dollar depreciated 24% relative to the US dollar during
        the quarter, when compared to the same period last year. As the
        Company's purchases from US based suppliers exceed its revenue
        sources to US based customers, a decline in the Canadian dollar
        versus the US dollar can have a negative impact on the Company's
        financial results (and vice-versa).

        Given that the recent decline of the Canadian dollar occurred during
        the Company's peak production period, this had a pronounced impact on
        Corby's second quarter results through higher "Cost of sales" and
        "Foreign exchange loss", which mainly reflects the impact of foreign
        exchange fluctuations between the date from when transactions are
        entered into and the date of actual settlement, in addition to the
        impact of applying current rates to foreign denominated assets and
        liabilities.

        The impact of the changes in foreign exchange rates negatively
        impacted Corby's net earnings by $0.8 million on an after-tax basis
        for both the three and six months ended December 31, 2008,
        respectively, as compared to the same period last year.

    2.  Corby's substantial deposits in cash management pools earn income
        based upon the LIBOR interest rate, which has decreased almost 40%
        when compared to average rates in effect during the same period last
        year. The impact of the decline in interest rates had an impact of
        $0.2 million and $0.3 million on Corby's net earnings for the three
        and six months ended December 31, 2008, respectively, as compared to
        the same period last year.
    

    Excluding the impact of all of the above items, net earnings for the six
months ended December 31, 2008 would have increased by 3% as compared to the
prior year. As mentioned previously, the underlying operating results of the
Company were strong, especially in light of the current economic downturn, and
reflective of a strong performance by Corby's brands during the retail holiday
season. Excluding the impact of the non-recurring items in the prior period,
revenue growth was 6% for the six months ended December 31, 2008. These
results were also achieved while maintaining strong levels of advertising and
promotional investments behind the Company's key brands.

    Operating revenue

    Operating revenue increased by $3.2 million or 3%, and decreased by $1.0
million or 2%, for the six and three months ended December 31, 2008,
respectively. Operating revenue is the aggregate of sales revenue and
commission income. Sales revenue is primarily comprised of revenue earned from
the sale of Corby-owned brands, while commission income is earned from the
representation of PR brands, and to a lesser extent, certain unrelated third
party brands ("Agency brands").
    As previously discussed, sales revenue growth on both a
quarter-over-quarter and year-to-date basis was diminished by the
aforementioned sale of bulk whisky to Corby's parent company and the lump-sum
termination settlement in the prior year. Excluding the effect of these
non-recurring transactions shows a solid 6% increase from a year-to-date
perspective.
    As previously discussed, based upon retail sales data provided by the
ACD, Corby's key brands performed well against the competition in almost all
key categories. The 6% increase in sales (after removing the effect of the
non-recurring transactions) was driven by an increase in average selling
prices, in addition to growth in contract bottling revenues. The growth in
average selling prices was the result of strategic price increases which were
taken over the past year and improved product mix. The price increases were
in-line with targeted competitive sets, and reflect the Company's continued
focus on value creation through the premiumization of its key brands.
    The following table highlights the various components which comprise
commissions:

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

                                              Three Months Ended
                                ---------------------------------------------
    (in millions of              Dec. 31,    Dec. 31,         $$          %%
     Canadian dollars)              2008        2007      Change      Change
    -------------------------------------------------------------------------
    Commission from PR brands   $    4.8    $    4.2    $    0.6         14%
    Commission from
     Agency brands                   1.4         2.5        (1.1)       (44%)
    -------------------------------------------------------------------------
    Commissions - net           $    6.2    $    6.7    $   (0.5)        (7%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

                                              Six Months Ended
                                ---------------------------------------------
    (in millions of              Dec. 31,    Dec. 31,         $$          %%
     Canadian dollars)              2008        2007      Change      Change
    -------------------------------------------------------------------------
    Commission from PR brands   $    8.9    $    8.2    $    0.7          9%
    Commission from
     Agency brands                   2.7         3.8        (1.1)       (29%)
    -------------------------------------------------------------------------
    Commissions - net           $   11.6    $   12.0    $   (0.4)        (3%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    As the above chart demonstrates, Corby's commission from PR brands
increased 14% over last quarter, with a year-to-date increase of 9%. This
increase is the result of Corby having begun to represent PR's newest brand,
Absolut vodka, on October 1, 2008.
    The majority of the decrease in commission from Agency brands was the
result of the Company earning a one-time lump sum of $0.9 million in the
comparative period from an Agency brand Corby ceased to represent on June 30,
2006. The lump-sum commission was in lieu of earnings Corby would have
otherwise received during the required notice period, as provided for under
the relevant representation agreement.

    Cost of sales

    Cost of sales increased $0.6 million or 3% on a quarter-over-quarter
basis, while year-to-date the increase in cost of sales was $2.4 million or
6%. The increase in cost of sales is mainly due to the previously mentioned
impact of the significant fluctuations in foreign exchange rates.

    Marketing, sales and administration

    Marketing, sales and administration expenses increased 8% to $12.5
million, as compared to $11.6 million during the same quarter last year.
Year-to-date analysis shows an increase of 13% or $2.8 million. The increase
on both a quarter and year-to-date basis reflects increased advertising and
promotional activity being invested behind the Company's key brands, as well
as additional costs associated with the recent move of the Company's head
office location.
    Specifically, the year-to-date increase in advertising and promotional
spend includes the costs associated with the production of a series of new
television commercials for the Wiser's Canadian whisky brand, entitled
"Welcome to the Wiserhood", which began airing in October, a new integrated
promotion for Lamb's rum targeted for the brand's critical Newfoundland and
Labrador market, and spend in support of the launch of new flavours for Polar
Ice vodka in both the US and Canada. Overall, the Company anticipates that the
cost of its marketing and promotional activities will return to more normal
levels during the remainder of the fiscal year.

    Income taxes

    Corby's effective rate of income tax, measured on both a quarterly and
year-to-date basis, closely approximates the Company's current statutory rate
of income tax. However, the effective tax rates in the comparative periods are
substantially lower than that of the current periods. The unusually low rate
is the result of the Government of Canada's decision in December 2007 to enact
reductions in long-term corporate income tax rates. As a result, Corby
recorded a one-time adjustment in the comparative period to revalue its
temporary differences to reflect the lower rates of taxation.

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

    Sources of liquidity

    Corby's sources of liquidity come from its cash management pools deposit
balance of $66.5 million as at December 31, 2008, along with cash generated by
operating activities. The Company does not have any liabilities under short or
long-term debt facilities.

    Cash flows

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

                            Three Months Ended          Six Months Ended
                        -------------------------- --------------------------
    (in millions of     Dec. 31, Dec. 31,      $$  Dec. 31, Dec. 31,      $$
     Canadian dollars)     2008   2007(1)  Change     2008   2007(1)  Change
    -------------------------------------------------------------------------
    Operating activities
      Net earnings,
       adjusted for
       non-cash items   $   9.5  $  12.1  $  (2.6) $  21.1  $  23.4  $  (2.3)
      Net change in
       non-cash working
       capital              4.1      9.8     (5.7)    (3.3)     5.3     (8.6)
    -------------------------------------------------------------------------
                           13.6     21.9     (8.3)    17.8     28.7    (10.9)
    -------------------------------------------------------------------------
    Investing activities
      Additions to
       capital assets      (1.3)    (0.1)    (1.2)    (2.3)    (0.2)    (2.1)
      Proceeds from
       disposition of
       capital assets       0.5        -      0.5      0.5        -      0.5
      Deposits in cash
       management pool     (8.8)   (17.8)     9.0     (8.0)   (20.5)    12.5
    -------------------------------------------------------------------------
                           (9.6)   (17.9)     8.3     (9.8)   (20.7)    10.9
    -------------------------------------------------------------------------
    Financing activities
      Dividends paid       (4.0)    (4.0)       -     (8.0)    (8.0)       -
    -------------------------------------------------------------------------
    Net change in cash  $     -  $     -  $     -  $     -  $     -  $     -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) The comparative figures have been restated for the adoption of CICA
        HB Section 3031 - Inventories, as required by the CICA, as well as
        for a change in accounting policy related to deposits in cash
        management pools.
    

    Operating activities

    Cash flows from operating activities for the six month period ended
December 31, 2008 were $17.8 million, representing a decrease of $10.9 million
when compared with the same period last year. Net earnings, adjusted for
non-cash items decreased $2.3 million on a year-to-date comparative basis.
This decrease is primarily the result of the comparative period including two
non-recurring type transactions (i.e., the sale of bulk whisky to Corby's
parent company, plus the one-time lump sum settlement from a formerly
represented Agency brand).
    The effect of the net change in non-cash working capital balances was a
decrease of $8.6 million on a year-to-date basis. The change reflects
increased investments in accounts receivable and inventories, partially offset
by increases in accounts payable. The change in accounts receivable is
primarily the result of receiving payments in advance of normal collection
dates from some of the Company's key customers in December 2007, in addition
to having higher balances in the current year as a result of the Company
representing PR's newly acquired brand, Absolut vodka, which Corby began
representing on October 1, 2008. The increase in inventories is the result of
moving production of Lamb's International from an affiliated company located
in the UK, to Corby's owned plant in Montreal, Quebec. In addition, the
Company continued to make investments in maturing whisky so as to ensure
sufficient supply continues to be available for our growing Wiser's Canadian
whisky brand.
    Cash flows from operating activities were $13.6 million this quarter,
representing a decrease of $8.3 million when compared to the same quarter last
year. Net earnings, adjusted for non-cash items decreased $2.6 million this
quarter when compared with the same quarter last year. The net change in
non-cash working capital balances decreased $5.7 million this quarter. The
decreases were the result of the same factors as those previously mentioned in
the year-to-date change analysis.

    Investing activities

    Cash used for investing activities decreased $8.3 million this quarter,
while also decreasing $10.9 million on a year-to-date basis. The Company's
capital asset additions are primarily a result of the Company relocating its
head office, but also reflect the purchase of oak barrels used in the whisky
maturation process.
    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. The change in the amount deposited into the
cash management pool is a function of the cash remaining from operations after
financing and investing activities. For more information on the cash
management pooling arrangement, refer to the "Related Party Transactions" and
"Accounting Policy Changes" sections of this MD&A.

    Financing activities

    Cash used for financing activities was $4.0 million this quarter ($8.0
million on a year-to-date basis), consistent with the amounts used during the
same periods last year. The payments reflect regular quarterly dividends being
paid to shareholders.

    Future liquidity

    Corby's sources of liquidity are its deposits in cash management pools of
$66.5 million as at December 31, 2008, and its cash generated from operating
activities. Corby's total contractual maturities are represented by its
accounts payable and accrued liabilities balances, which totaled $22.7 million
as at December 31, 2008, 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 of the
Company's most recently completed year-end date (i.e., June 30, 2008), certain
of the Company's defined benefit plans were in a deficit position. Of those
plans in a funded deficit position, the unfunded accrued benefit obligation
totaled $2.8 million.
    In the Company's most recently completed annual MD&A, it identified the
area of employee future benefits as a "critical accounting estimate" in that
accounting policies related to this area of accounting incorporates a higher
degree of judgment and/or complexity. Specifically, the cost and accrued
benefit plan obligations of the Company's defined benefit pension plans and
other post-retirement benefit plan are accrued based on actuarial valuations
which are dependent upon assumptions determined by management. These
assumptions included the discount rate, the expected long-term rate of return
on plan assets, the rate of compensation increases, retirement ages, mortality
rates and the expected inflation rate of health care costs. These assumptions
are reviewed annually by the Company's management and its actuaries. These
assumptions may change in the future and may have a material impact on the
accrued benefit obligations of the Company and the cost of these plans which
is reflected in the Company's consolidated 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 recent turmoil in capital markets, the fair value of
plan assets within these pension funds has declined. Somewhat mitigating the
impact of this market decline is 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.
    Corby's next actuarial valuation is not required to be completed until
December 31, 2010 and, therefore, the Company's contribution levels leading up
to December 31, 2010 are not expected to change by a material amount. However,
in the event that an extended period of depressed capital markets and low
interest rates were to continue, the Company could be required 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. It should be noted however, that current pension regulations permit
special funding payments relating to deficiencies to be amortized over a
period of five to ten years, further reducing the likelihood of a material
funding change to impact Corby in any one particular fiscal year.
    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 much-publicized global liquidity crisis has been tumultuous for many
companies, particularly for those entities holding short-term investments in
asset-backed commercial paper ("ABCP"). Corby does not have direct exposure to
this type of liquidity risk, as the Company does not hold any investments in
ABCP.

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

    There have been no changes in Corby's share data since June 30, 2008. As
at December 31, 2008, Corby had 24,274,320 Voting Class A common shares and
4,194,536 Non-Voting Class B common shares outstanding. There are no options
outstanding.

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

    HWSL, an indirectly wholly-owned subsidiary of PR, owns in excess of 50%
of the issued and outstanding voting Class A common shares of Corby and is
thereby considered to be the Company's parent. PR is considered to be Corby's
ultimate parent and affiliated companies are those that are also subsidiaries
of PR.
    Corby engages in a significant number of transactions with its parent
company, its ultimate parent and various affiliates. Specifically, Corby
renders services to its parent company, its ultimate parent, and affiliates
for the marketing and sale of beverage alcohol products in Canada.
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
services, data processing and other administrative services are also
outsourced to its parent company.
    The companies operate under the terms of agreements which became
effective on September 29, 2006 (excluding 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, as well as providing for the continuing production of
certain Corby brands by PR at its production facility in Windsor, Ontario for
10 years. Corby also manages PR's business interests in Canada, including the
Windsor production facility. Certain officers of Corby have been appointed as
directors and officers of PR's Canadian entities, as approved by Corby's Board
of Directors. 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.
    On September 26, 2008, Corby entered into an agreement with its ultimate
parent company, PR. The agreement provides Corby 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 will
also receive the exclusive right to represent the Plymouth gin and Level vodka
brands. The distribution of Absolut vodka is expected to add approximately
$2.5 million annually to Corby's commission income and about $1.2 million
annually to net earnings in the first full year. Corby has also agreed to
continue to participate in the existing cash management pooling arrangement
with PR's wholly-owned Canadian subsidiaries for the next three years to
October 1, 2011, unless earlier terminated by Corby. Further, during the next
three years to October 1, 2011, Corby 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.
    As previously discussed, Corby participates in a cash management pooling
arrangement under a Mirror Netting Service Agreement ("Mirror Agreement")
together with PR's other Canadian affiliates, the terms of which are
administered by the Bank of Nova Scotia. The Mirror Agreement acts to
aggregate each participant's net cash balance for purposes of having a
centralized cash management function for all of PR's Canadian affiliates,
including Corby. As a result of Corby's participation in this agreement,
Corby's credit risk associated with its deposits in cash management pools is
determinant upon PR's credit rating. PR's credit rating as at September 26,
2008, 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 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 Agreement at any time, subject to five days
written notice.
    In addition to the related party transactions previously described,
during the three and six month periods ended December 31, 2007, Corby sold
three year old bulk whisky to its parent company, HWSL, at market prices for
$0.4 million and $1.1 million, respectively. There were no such sales made
during the three and six month periods ended December 31, 2008. The
transaction was measured at the exchange amount.

    
    Accounting Policy Changes - Implemented in Fiscal 2009
    ------------------------------------------------------

    Deposits in cash management pools
    

    Corby reviewed its presentation of cash flow and its cash and cash
equivalent balances on its balance sheet. As a result of this review, Corby
determined that it would change its accounting policy defining cash and cash
equivalents and correspondingly reclassify its balance sheet and cash flow
presentation. The new policy classifies cash associated with the Mirror
Agreement, which was previously included in cash and cash equivalents, as
"Deposits in cash management pools" and reflects cash flows arising from
deposits in, and withdrawals from, such cash pools as cash flows from
investing activities. Although none of the agreements or conditions governing
these deposits has changed since the inception of the cash management
arrangements, Corby has decided to change its presentation of such deposits to
show them as a separate investment and not as a component of cash and cash
equivalents. Corby continues to have the contractual right to withdraw these
funds or terminate these cash management arrangements upon providing five days
written notice, and Corby continues to access funds deposited in these
accounts on a daily basis.
    This change in accounting policy had no impact on Corby's consolidated
statement of earnings or earnings per share figures.
    For more information regarding the Mirror Agreement, please refer to the
"Related Party Transactions" section of this MD&A.

    Inventories

    Effective July 1, 2008 (the first day of the Company's 2009 fiscal year),
the Company implemented, on a retrospective basis with restatement, the new
Canadian Institute of Chartered Accountants ("CICA") Handbook Section 3031
"Inventories", which is effective for interim and annual financial statements
for fiscal years beginning on or after January 1, 2008.
    The new standard provides the Canadian equivalent to International
Financial Reporting Standard IAS 2 "Inventories". Section 3031 prescribes
measurement of inventories at the lower of cost and net realizable value. It
provides guidance on the determination of cost, including allocation of
overheads and other costs to inventories, prohibits the use of the last-in,
first-out (LIFO) method, and requires the reversal of previous write-downs
when there is a subsequent increase in the value of inventories. It also
requires greater disclosure regarding inventories and cost of sales.
    The Company's new policy to correspond with the new standard is as
follows:
    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.
    As a result of the retrospective implementation of this new standard, the
cumulative impact on previously reported balances on the following dates is as
follows:

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

    Increase (decrease)                           Three Months    Six Months
    (stated in millions of            Year Ended         Ended         Ended
     Canadian dollars, except            June 30,  December 31,  December 31,
     per share amounts)                     2008          2008          2007
    -------------------------------------------------------------------------

    Retained earnings, opening       $       2.4   $       2.3   $       2.4
    Retained earnings, ending                2.5           2.4           2.4
    Inventories                              3.6           3.4           3.4
    Future income tax liability              1.0           1.0           1.0
    Cost of sales                            1.5           0.3           0.8
    Marketing, sales and
     administration                         (1.7)         (0.4)         (0.9)
    Future income tax expense                0.1           0.0           0.0
    Net earnings                             0.2           0.1           0.0

    Earnings per share:
      - Basic                               0.01             -             -
      - Diluted                             0.01             -             -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Financial Instruments

    Effective July 1, 2008, the Company implemented the new CICA Handbook
Section 3862 "Financial Instruments - Disclosures" and CICA Handbook Section
3863 "Financial Instruments - Presentation", which is effective for fiscal
years beginning on or after October 1, 2007. These standards replace the
existing CICA Handbook Section 3861 "Financial Instruments - Disclosure and
Presentation". These new standards are harmonized with International Financial
Reporting Standards ("IFRS").
    CICA Handbook Section 3862 requires increased disclosures regarding the
risks associated with financial instruments and how these risks are managed.
Section 3863 carries forward the presentation standards for financial
instruments and non-financial derivatives and provides additional guidance for
the classification of financial instruments, from the perspective of the
issuer, between liabilities and equity. The adoption of these new standards
does not require any changes to the Company's accounting, however, does
require additional note disclosure.

    Capital Disclosures

    Effective July 1, 2008, the Company implemented the new CICA Handbook
Section 1535 "Capital Disclosures", which is effective for fiscal years
beginning on or after October 1, 2007. The new standard requires entities to
disclose information about their objectives, policies and processes for
managing capital, as well as their compliance with any externally imposed
capital requirements. The adoption of this standard does not require any
changes to the Company's accounting, however, does require additional note
disclosure.

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

    International Financial Reporting Standards
    

    In February 2008, the Accounting Standards Board confirmed that Canadian
GAAP for publicly accountable enterprises will be replaced by International
Financial Reporting Standards ("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 on 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.
    As a result, Corby has developed a plan to convert its consolidated
financial statements to IFRS. The Company has also established a project team
that is led by finance management, and will include representatives from
various areas of the organization as necessary to plan for and achieve a
smooth transition to IFRS. Regular progress reporting to the Audit Committee
of the Board of Directors on the status of the IFRS implementation project has
been instituted.
    A detailed analysis of the differences between IFRS and Corby's
accounting policies as well as an assessment of the impact of various
alternatives are in progress. Changes in accounting policies are likely and
may materially impact the Company's consolidated financial statements.

    Goodwill and Intangible Assets

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

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

    Summary of Quarterly Financial Results(1)

    -------------------------------------------------------------------------
    (in millions of
     Canadian dollars,
     except per          Q2     Q1     Q4     Q3     Q2     Q1     Q4     Q3
     share amounts)    2009   2009   2008   2008   2008   2008   2007   2007
    -------------------------------------------------------------------------
    Operating
     revenue - net    $47.8  $46.1  $39.6  $33.0  $48.8  $41.9  $40.1  $33.3
    EBITDA             13.4   15.7   10.0    9.7   15.9   15.2   10.0    7.3
    Net earnings        8.1    9.8    5.9    6.0   10.7    9.3    5.5    4.3
    EBITDA per share   0.47   0.55   0.35   0.34   0.56   0.53   0.35   0.26
    Basic EPS          0.28   0.35   0.21   0.21   0.37   0.33   0.20   0.15
    Diluted EPS        0.28   0.35   0.21   0.21   0.37   0.33   0.20   0.15
    -------------------------------------------------------------------------
    (1) 2008 quarterly results have been restated for adoption of CICA HB
        3031 - Inventories, as required by the CICA. 2007 results have not
        been restated as the information required to calculate the
        restatement on a quarterly basis is not readily available.


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

    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, its compliance
with Canadian GAAP and the preparation of financial statements for external
purposes. Internal control systems, no matter how well designed, have inherent
limitations. Therefore, even those systems determined to be designed
effectively can provide only reasonable assurance with respect to financial
reporting and financial statement preparation.
    There were no changes in internal control over financial reporting during
the Company's most recent interim period that have materially affected, or are
reasonably likely to materially affect, the Company's internal control over
financial reporting.

    
    Risks & Risk Management
    -----------------------
    

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

    Industry and Regulatory

    The beverage alcohol industry in Canada is subject to government policy,
extensive regulatory requirements and significant rates of taxation at both
the federal and provincial levels. As a result, changes in the government
policy, regulatory and/or taxation environments within the beverage alcohol
industry may affect Corby's business operations, including changes in market
dynamics or changes in consumer consumption patterns. The Company continuously
monitors the potential risk associated with any proposed changes in its
government policy, regulatory and taxation environments and, as an industry
leader, actively participates in trade association discussions relating to new
developments.

    Consumer 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. Corby offers a diverse portfolio of products across all major spirit
categories and various price points, which complements consumer desires and
offers exciting innovation.

    Supply Chain Interruption

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

    Environmental Compliance

    Environmental liabilities may potentially arise when companies are in the
business of manufacturing products, and thus are required to handle
potentially hazardous materials. As Corby 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 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 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 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 liquor boards,
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 to Corby's earnings over the long-term.

    Exposure to Commodity Price Fluctuations

    Commodity risk exists as the manufacturer 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 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 United States
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 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, and 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 influence over how such third parties are
managed, it has entered into contractual arrangements to formalize these
relationships. In order to minimize operating risks, the Company actively
monitors and manages its relationship with its third-party service providers.

    Brand Reputations

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

    Employee Future Benefits

    The Company has certain obligations under its registered and
non-registered defined benefit pension plans and other post-retirement benefit
plan. There is no assurance that the Company's benefit plans will be able to
earn the assumed rate of return. New regulations and market-driven changes may
result in changes in the discount rates and other variables which would result
in the Company being required to make contributions in the future that differ
significantly from estimates. An extended period of depressed capital markets
and low interest rates could require the Company to make contributions to
these plans in excess of those currently contemplated which, in turn, could
have an adverse impact on the financial performance of the Company. For
further discussion of the potential liquidity risk associated with Corby's
defined benefit pension plans, refer to the "Liquidity" section of this MD&A.

    %SEDAR: 00001138E




For further information:

For further information: CORBY DISTILLERIES LIMITED, Ali Mahdavi,
Spinnaker Capital Markets Inc., Tel.: (416) 962-3300 (office), Cell: (416)
402-7300; Con Constandis, President and Chief Executive Officer, John
Nicodemo, Chief Operating Officer and Chief Financial Officer, Tel.: (416)
479-2400, investors@corby.ca, www.Corby.ca


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