Corby Distilleries reports solid fiscal 2009 results despite economic downturn



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

    TORONTO, Aug. 26 /CNW/ - Corby Distilleries Limited ("Corby" or the
"Company") (TSX:CDL.A, TSX:CDL.B) today reported its dividend and financial
results for the year ended June 30, 2009. The Corby Board of Directors today
also declared a dividend of $0.14 per share payable on September 30, 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 September 14,
2009. All financial results are reported in Canadian dollars.
    Net earnings for the quarter ended June 30, 2009 increased to $7.4
million or $0.26 per share, compared to $6.0 million or $0.21 per share during
the quarter ended June 30, 2008. The 24% increase in net earnings was mainly
the result of increased commission income (primarily due to the addition of
Absolut vodka), a decrease in advertising and promotional expenditures versus
the same period last year, and the benefit of additional sales at LCBO
locations in Ontario as a result of the threat of a labour disruption.
    For the year ended June 30, 2009, operating revenues increased to $169.3
million versus $163.3 million last year. Net earnings and earnings per share
in fiscal 2009 amounted to $30.4 million and $1.07, respectively, compared to
$31.9 million and $1.12 per share, respectively during fiscal 2008. The
decline in net earnings as compared to 2008 year was due to the inclusion of
some non-recurring items in the prior year in addition to the negative impact
of foreign currency movements and the significant decline in market interest
rates.
    Excluding the impact of the above items, net earnings for the year ended
June 30, 2009 would have increased by 7% as compared to the prior year,
representing a strong performance by the underlying business, especially in
light of the current economic downturn.
    "I am pleased with the Company's performance during such turbulent
economic conditions. We continue to strive to further expand and grow Corby's 
product portfolio in the Canadian spirits and wine markets in an effort to
increase sales and maximize earnings in future periods," noted Patrick
O'Driscoll, President and Chief Executive Officer of Corby. "We have
successfully transitioned the senior management team during the past couple of
months and we are encouraged that the Company will continue to be managed by
industry veterans focused on expanding market share and increasing shareholder
value."
    Mr. Michel Bord resigned from the Board of Directors effective August 26,
2009. In addition to his current role as Deputy Managing Director,
Distribution Network, Pernod Ricard S.A., Mr. Bord previously also served as
interim Chairman and Chief Executive Officer of Pernod Ricard Americas until
his successor, Mr. Philippe Dréano, was determined. The Corby Board of
Directors appointed Mr. Dréano a director of the Company on August 26, 2009.
Mr. Dréano, a native of (France), is a graduate of the ESSEC Business School
in France and has over 19 years of industry experience in Europe and Asia with
Pernod Ricard S.A., after six years of sales and marketing experience at
Unilever Group. Prior to his current role, Mr. Dréano was Chairman and Chief
Executive Officer of Pernod Ricard Asia since 2000 after serving as Chairman
and Chief Executive Officer of Pernod Ricard Japan since 1996. "We greatly
appreciate Michel's many contributions to Corby and look forward to benefiting
from Philippe's insight and invaluable experience," said George McCarthy,
Chairman, Corby Board of Directors.
    For further details, please refer to Corby's management discussion and
analysis and consolidated financial statements and accompanying notes for the
year ended June 30, 2009, prepared in accordance with Canadian generally
accepted accounting principles.

    About Corby

    Corby's portfolio of owned-brands includes some of the most renowned
brands in Canada, including Wiser's Canadian whiskies, Lamb's rum, Polar Ice
vodka and 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 Kahlúa 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
    Management's Discussion and Analysis
    June 30, 2009
    -------------------------------------------------------------------------
    

    The following Management's Discussion and Analysis ("MD&A") dated August
26, 2009 should be read in conjunction with the audited consolidated financial
statements and accompanying notes for the year ended June 30, 2009 prepared in
accordance with Canadian generally accepted accounting principles ("GAAP").
    This MD&A contains forward-looking statements, including statements
concerning possible or assumed future results of operations of Corby
Distilleries Limited ("Corby" or the "Company"). Forward-looking statements
typically are preceded by, followed by or include the words "believes",
"expects", "anticipates", "estimates", "intends", "plans" or similar
expressions. Forward-looking statements are not guarantees of future
performance. They involve risks, uncertainties and assumptions, including, but
not limited to: the impact of competition; consumer confidence and spending
preferences; regulatory changes; general economic conditions; and the
Company's ability to attract and retain qualified employees. There can be no
assurance that forward-looking statements will prove to be accurate, as actual
results and future events could differ materially from those anticipated in
such statements. Accordingly, readers should not place undue reliance on
forward-looking statements. These factors are not intended to represent a
complete list of the factors that could affect the Company. Additional factors
are noted elsewhere in this MD&A.
    This document has been reviewed by the Audit Committee of Corby's Board
of Directors and contains certain information that is current as of August 26,
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.
    Unless otherwise indicated, all comparisons of results for the fourth
quarter of fiscal 2009 (three months ended June 30, 2009) are against results
for the fourth quarter of fiscal 2008 (three months ended June 30, 2008). All
dollar amounts are in Canadian dollars unless otherwise stated.

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

    Corby is a leading Canadian manufacturer and marketer of spirits and
importer of wines. Corby's national leadership is sustained by a diverse brand
portfolio, which allows the Company to drive profitable organic growth with
strong, consistent cash flows. Corby is a publicly-traded company, with its
shares listed on the Toronto Stock Exchange under the symbols "CDL.A" (voting
Class A common shares) and "CDL.B" (non-voting Class B common shares). Corby's
voting Class A common shares are majority-owned by Hiram Walker & Sons Limited
(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, Kahlúa liqueur, Mumm champagne, and Jacob's Creek
and Wyndham Estate wines. In addition to representing PR's brands in Canada,
Corby also provides representation for certain selected unrelated third-party
brands ("Agency brands") when they fit within the Company's strategic
direction and, thus, complement Corby's existing brand portfolio.
    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, during that same ten year period.
    The Company sources approximately 73% of its spirits production
requirements from HWSL's production facility in Windsor, Ontario, with the
balance of Corby's spirits production being sourced from the Company'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.

    
    Significant Events
    ------------------
    

    Corby Announces Management Changes

    Corby's Board of Directors announced on March 26, 2009 that Con
Constandis, President and Chief Executive Officer of Corby, would leave the
Company, effective July 1, 2009, to assume the role of Chairman and Chief
Executive Officer of Pernod Ricard China. On May 7, 2009, Corby announced that
Patrick O'Driscoll was appointed as President and Chief Executive Officer of
Corby effective July 1, 2009.
    Mr. O'Driscoll is a native of the United Kingdom and holds a Bachelor of
Science in Environmental Biology from the University of London. He has over 25
years of industry experience in North America, Europe and Asia, both with PR
and previously International Distillers & Vintners. Mr. O'Driscoll brings
invaluable commercial and marketing experience to Corby, having served in
various executive capacities. Prior to joining Corby, he served as Chairman
and Chief Executive Officer of Malibu-Kahlúa International, an affiliate of
PR, based in New York.
    On June 5, 2009, the Corby Board of Directors also announced that John
Nicodemo, Chief Financial Officer and Chief Operating Officer of Corby, would
leave the Company, effective June 30, 2009, to assume the role of Chief
Operating Officer of Pernod Ricard Korea. Thierry Pourchet has been appointed
as his successor as Vice President and Chief Financial Officer of Corby.
    A native of France, Thierry Pourchet graduated from Ecole de Management
de Lyon (France). He has over 16 years of industry experience in North America
and Europe with several PR affiliates. Mr. Pourchet brings extensive financial
and operational experience to Corby, having served in various executive
capacities. Prior to joining Corby, he served as Chief Operating Officer of
Malibu-Kahlúa International, based in New York.

    
    Alberta Gaming and Liquor Commission Announces Cancellation of
    Significant Increase in Provincial Mark-up Applied to Beverage Alcohol
    products
    

    On April 7, 2009, the Alberta Gaming and Liquor Commission announced a
30% increase in the provincial mark-up applied to beverage alcohol products.
This increase, which became effective on April 8, 2009, resulted in higher
retail prices for the consumer. However, on July 7, 2009, Alberta Premier Ed
Stelmach announced the cancellation of the aforementioned increase in the
Alberta mark-up applied to beverage alcohol products.
    Since the increased mark-up was only in effect for a relatively short
period of time, it is not possible to know what effect the increased retail
prices would have had on overall consumer consumption in the long-term.
However, it should be noted that sales of Corby's spirit products in Alberta
declined by 5% during the three-month period in which the increased mark-up
was in effect.

    The Government of Ontario Announces its 2009 Budget

    On March 26, 2009, the Government of Ontario announced its 2009 budget
which among other things, outlined proposed cuts to its corporate income tax
rates, and its intention to join a framework agreement for federal collection
of a single value-added sales tax.
    Specifically, the budget proposes to cut provincial income tax rates on
manufacturing and processing businesses by 2%, beginning July 1, 2010. While
Corby's current income tax expense will benefit from these reduced rates
beginning in fiscal 2010, the Company has not yet recognized the impact of the
decreased rates on its future income tax expense as the proposed decreases
have yet to be substantively enacted.
    Also beginning on July 1, 2010, the Ontario Retail Sales Tax will be
converted to a value added tax structure and combined with the federal GST to
create a federally administered single sales tax with a rate of 13%, which is
the same as the combined rate currently in effect. However, differences in
application will exist as the new single sales tax will generally use the same
rules and tax base as the federal GST. The effect of this change on Corby's
business is currently being assessed, however, it is not anticipated that it
will have a material impact on the Company's financial results.

    Corby Obtains Right to Represent Absolut Vodka

    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 five
years to September 30, 2013. As part of this agreement, Corby also received
the exclusive right to represent the Plymouth gin and Level vodka brands. 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 Signs Agreement to Continue Representation of Stolichnaya Vodka

    On March 5, 2009, Corby entered into an agreement with S.P.I. Spirits
(Cyprus) Limited to continue representing the Stolichnaya ("Stoli") and
Moskovskya vodka brands in Canada. Under the terms of the agreement, Corby
will continue to represent Stoli and Moskovskya for an additional period of
five years.

    PR Sells Tia Maria Brand

    On July 27, 2009, PR announced the sale of the coffee liqueur brand Tia
Maria to an unrelated third party for 125 million Euros (equivalent to
approximately $192.5 million Canadian dollars).
    Corby previously owned a 45% non-controlling interest of Tia Maria but
sold its interests to PR on September 29, 2006. The purchase and sale
agreement between Corby and PR contained a purchase price adjustment clause,
which would allow for the Company to share in any after-tax profits (as per a
defined formula in the agreement) earned by PR in the event they sold 100% of
Tia Maria within three years of buying the minority interest from Corby.
    While the Tia Maria brand was sold within the three year timeframe as
outlined above, PR's net after-tax proceeds on an equivalent 45% basis are
approximately $72 million, which is less than Corby's after-tax proceeds of
$79.8 million. As a result, there will be no additional proceeds paid to Corby
as an adjustment to the original purchase price agreed to between Corby and
PR.

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

    Recent market events and the resultant 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 $62.7
        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 spirit
        categories at a wide range of price points; and
    -   Corby is a leader in the Canadian spirits market and has a long
        history of profitability and uninterrupted dividends.
    

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

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

    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.

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

    Corby defines "EBITDA" as net earnings before equity earnings, foreign
exchange, interest income, income taxes, depreciation, and amortization. This
non-GAAP financial measure has been included in this MD&A as it is a measure
which management believes is useful in evaluating and measuring the Company's
operating performance. EBITDA is also a common measure used by investors,
financial analysts and rating agencies. These groups may use EBITDA and other
non-GAAP financial measures to value the Company and assess its performance.
    However, EBITDA is not a measure recognized by GAAP and it does not have
a standardized meaning prescribed by GAAP. Therefore, EBITDA may not be
comparable to similar measures presented by other issuers. Investors are
cautioned that EBITDA should not be construed as an alternative to net
earnings as determined in accordance with GAAP as an indicator of performance.
    A reconciliation of EBITDA to the most directly comparable GAAP measure
can be found under "Results of Operations - Fiscal 2009" in this Management's
Discussion and Analysis.

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

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


    -------------------------------------------------------------------------
    (in millions of Canadian dollars,
     except per share amounts)                  2009      2008(1)     2007(1)
    -------------------------------------------------------------------------
    Operating revenue - net                $   169.3   $   163.3   $   153.6

    EBITDA(2)                                   49.6        50.8        44.0
      - EBITDA per common share                 1.74        1.78        1.55

    Net earnings                                30.4        31.9       100.4
      - Basic earnings per share                1.07        1.12        3.53
      - Diluted earnings per share              1.07        1.12        3.53

    Total assets                               270.2       253.5       238.0
    Total liabilities                           33.9        31.7        34.5

    Dividends paid per share                    0.56        0.56        2.06
    -------------------------------------------------------------------------
    (1) The 2008 figures have been restated for adoption of CICA HB 3031 -
        Inventories, as required by the CICA. The 2007 figures have not been
        restated as the information required to calculate the restatement is
        not readily available.
    (2) EBITDA for the year ended June 30, 2007, excludes the gain on sale of
        the Company's investment in Tia Maria Group.
    


    The Company fared relatively well in light of the economic downturn
experienced in Canada, and throughout the world. Operating revenue has
increased $15.7 million since 2007 (representing an average annual growth rate
of 5%), and was buoyed by strong performances from the Company's key brands.
In addition to a solid performance by Corby's owned-brands, the growth in
operating revenue also reflects the benefits of agreements with PR, which
provided the Company with the exclusive right to represent PR's brands in
Canada. Corby's representation of these brands accounted for $2.5 million of
the Company's operating revenue growth since 2007. Growth in operating revenue
was also derived from Corby's acquisition of the Lamb's rum international and
Seagram Coolers Canada businesses on September 29, 2006. The addition of these
businesses has combined for $1.7 million of the growth in operating revenues
since 2007.
    EBITDA has increased $5.6 million since 2007 (representing an average
annual growth rate of 6%). The increase since 2007 is largely driven by the
same factors which drove operating revenue higher during that same period. The
slight decrease in EBITDA in 2009 from 2008 results can largely be attributed
to adverse foreign currency movements experienced this year versus last, as
the Canadian dollar declined sharply relative to the US dollar, thereby
increasing the Company's raw material costs in 2009.
    Net earnings in 2007 included a one time gain recognized on the sale of
the Tia Maria Group to PR. After removing the effect of this one-time gain,
net earnings has increased $1.6 million since 2007 (representing an average
annual growth rate of 3%). The increase since 2007 is consistent with the
aforementioned reasons outlined in the EBITDA discussion above, with
additional downward pressure on net earnings coming from decreased interest
income on the Company's deposits in cash management pools. This was due to the
significant decline in market rates of interest over the past year directly
attributable to the global economic recession, as governments around the world
drastically reduced interest rates in the hopes of encouraging consumer
spending.
    The Company continued to strengthen an already strong 2007 balance sheet
by increasing its total assets by $32.2 million over a three year span, while
total liabilities have declined by $0.6 million over that same period. Such
performance was achieved while the Company maintained consistent regular
dividend payments and continued to increase its investments in advertising and
promotional activities behind its key brands.
    Significant increases in assets relate primarily to the Company having
increased deposits in cash management pools, accounts receivable and
inventories. The increase in these balances can be largely attributed to the
aforementioned growth in sales since 2007. The growth in inventories has
outpaced the increase in sales, which is the result of a specific focus to
increase lay-downs of maturing bulk whisky which is necessary to ensure that
an adequate future supply is available to support Corby's growing whisky
brands, specifically Wiser's Canadian whisky. In addition, the Company also
increased its lay-downs of maturing rum, as a result of its decision to move
Lamb's International production from a PR affiliate located in the UK, to
Corby's production facility located in Montreal, Quebec. The production move
was successfully completed in January 2009.

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

    Corby's portfolio of owned-brands accounts for more than 80% of the
Company's total operating revenue. Included in this portfolio are its key
brands: Wiser's Canadian whisky, Lamb's rum, Polar Ice vodka, Corby's mixable
liqueur brands, and Seagram Coolers. 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.

    Shipment Volume and Sales Value Performance

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

    
    -------------------------------------------------------------------------
    BRAND PERFORMANCE CHART - INCLUDES BOTH CANADIAN AND INTERNATIONAL
    SHIPMENTS
    -------------------------------------------------------------------------
                    Three Months Ended                 Year Ended
              ------------------------------  -------------------------------
    Volumes                Shipment                        Shipment
    (in 000's  Jun.   Jun.        %    Sales   Jun.   Jun.        %    Sales
    of          30,    30,   Volume  % Value    30,    30,   Volume  % Value
    9L cases)  2009   2008   Change   Change   2009   2008   Change   Change
    -------------------------------------------------------------------------
    Brand
    Wiser's
     Canadian
     whisky     183    173        6%     15%    760    747       2%       9%
    Lamb's
     rum        133    143       (7%)    (4%)   620    628      (1%)      3%
    Polar Ice
     vodka       92    103      (11%)     0%    396    391       1%      11%
    Mixable
     liqueurs    54     51        6%      5%    231    235      (2%)      0%
    Seagram
     Coolers    129    145      (11%)   (12%)   320    388     (18%)    (19%)
    -------------------------------------------------------------------------
    Total Key
     Brands     591    615       (4%)     3%  2,327  2,389      (3%)      4%
    All other
     Corby-
     owned
     brands     133    134       (1%)     2%    568    583      (3%)      2%
    -------------------------------------------------------------------------
    Total       724    749       (3%)     3%  2,895  2,972      (3%)      4%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    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 brand performance chart demonstrates that, overall, Corby's brands
have delivered strong value growth in both the Canadian and international
markets. This is demonstrated by the fact that sales value grew significantly
in excess of shipment volumes on both a quarter-over-quarter, and
year-over-year basis. Sales value growth was achieved through higher average
selling prices and favourable product mix, as growth in Corby's larger brands
(such as Wiser's), outweighed volume declines in brands such as Seagram
Coolers (which generally earn lower gross margins).
    The decline in Corby's shipment volumes for the quarter ended June 30,
2009 was primarily attributable to lower shipments of the Seagram Coolers
brand. Consistent with the year-over-year results, the Seagram Coolers brand
continued to struggle within the highly competitive ready-to-drink segment, as
is further discussed below in the "Summary of Key Brands" section.
    Excluding Seagram Coolers, shipment volumes in the final quarter were
consistent with last year. This reflects the benefit of additional sales at
LCBO locations in Ontario as a result of the threat of a labour disruption,
offset by lower sales volumes in Alberta and a change in the timing of orders
received from another liquor board.

    Retail Volume and Retail Value Performance

    It is of critical importance to understand the performance of Corby's
brands at the retail level in Canada. Analysis of performance at the retail
level provides insight with regards to consumers' current purchasing patterns
and trends. Retail sales data, as provided by the Association of Canadian
Distillers ("ACD"), is set out 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.
International sales typically account for less than 10% of Corby's total
annual sales.

    
    -------------------------------------------------------------------------
    RETAIL SALES FOR THE CANADIAN MARKET ONLY(1)
    -------------------------------------------------------------------------
                    Three Months Ended                 Year Ended
              ------------------------------  -------------------------------
    Volumes                       %        %                      %        %
    (in 000's  Jun.   Jun.   Retail   Retail   Jun.   Jun.   Retail   Retail
    of          30,    30,   Volume    Value    30,    30,   Volume    Value
    9L cases)  2009   2008   Change   Change   2009   2008   Change   Change
    -------------------------------------------------------------------------
    Brand
    Wiser's
     Canadian
     whisky     150    148       1%       3%    683    677       1%       3%
    Lamb's
     rum        113    117      (3%)      1%    487    500      (3%)      0%
    Polar Ice
     vodka       69     74      (7%)     (1%)   320    309       4%       6%
    Mixable
     liqueurs    42     43      (2%)     (3%)   206    213      (3%)     (3%)
    Seagram
     Coolers     90    111     (19%)    (14%)   317    394     (20%)    (17%)
    -------------------------------------------------------------------------
    Total Key
     Brands     464    493      (6%)      0%  2,013  2,093      (4%)      1%
    All other
     Corby-
     owned
     brands     121    127      (5%)      2%    526    549      (4%)     (2%)
    -------------------------------------------------------------------------
    Total       585    620      (6%)      1%  2,539  2,642      (4%)      0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Refers to sales at the retail store level in Canada, as provided by
        the Association of Canadian Distillers.
    

    The spirits business in Canada has historically not been as affected by
economic slowdowns as other consumer and manufacturing businesses. However, no
business is completely immune to a slowdown in the economy and while consumer
purchases of spirits in Canada have continued to grow, they are doing so at a
slower pace than in previous years.
    Recent trends also show a shift in consumption patterns as consumers are
purchasing fewer products from certain discretionary spirit categories, such
as liqueurs, but have continued to purchase spirit staples such as vodka,
whisky, and rum. Furthermore, the overall decline in consumer spending has
resulted in more at home consumption as consumers are trending away from
consumption at licensed establishments, such as bars and restaurants.
    Corby's own portfolio of brands reflects this shift in consumer
consumption patterns, as evidenced by the performance of its mixable liqueurs
brands, while the Company's vodka and whisky brands continue to deliver strong
growth from both a retail volume and retail value perspective. While the
industry's rum category is showing growth as a whole, the performance of
Corby's Lamb's rum brand reflects the impact of increased competition in
certain key markets, which is discussed further in the following "Summary of
Corby's Key Brands" section of this MD&A.

    
    Summary of Corby's Key Brands

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

    Corby's flagship brand and Canada's best selling whisky family, Wiser's
Canadian whisky, delivered a solid performance this year, as demonstrated by
2% growth in shipment volumes and a 9% increase in sales value. Sales value
growth exceeded shipment volume growth as a result of better product mix, as
the more premium Wiser's Deluxe grew at a faster pace than Wiser's Special
Blend (the entry level variant), in addition to higher average selling prices
across the brand family in both Canada and the US. The higher selling prices
were the result of strategic price increases, which were implemented over the
past year.
    Wiser's continues to lead its competitive segment, with retail volumes in
Canada growing by 1% and retail value growing by 3%. In comparison, retail
volumes for the Canadian whisky category as a whole declined by 2%, with
retail value remaining relatively flat compared to the prior year. Corby's
flagship brand continues to increase its market share in Canada, continuing
the trend exhibited over the past several years.
    These results reflect 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.

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

    Lamb's rum, one of the top selling rum families in Canada, saw its
shipment volumes for the year decline slightly against the prior year, while
during the same period experiencing an increase in sales value of 3%.
    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 taken action 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. Corby recently launched a
Lamb's spiced variant in the UK and Canadian markets (entitled "Lamb's Spiced"
and "Lamb's Black Sheep", respectively), as the Company looks to capitalize on
the growing consumer demand in the spiced rum segment.

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

    Polar Ice vodka, which is among the top three largest vodka brands in
Canada, experienced a 1% increase in shipment volumes and 11% growth from a
sales value perspective during the year ended June 30, 2009. The volume growth
was due to increased sales in the Canadian market, partially offset by a
decline in volumes sold in the US due to difficult market conditions. However,
value growth significantly exceeded volume growth, driven by the positive
impact of price increases implemented over the past year coupled with the
effect of a stronger US dollar on sales in the US market.
    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 managed to grow into the 3rd largest vodka in the Canadian
market. Building upon several years of strong consistent growth, retail
volumes of Polar Ice in Canada for the year grew 4%, which is consistent with
the growth rate experienced by the vodka category as a whole.

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

    Corby's portfolio of mixable liqueur brands consists of McGuinness
liqueurs (which is Canada's largest mixable liqueur brand family), Meaghers
liqueurs, and De Kuyper liqueurs. The recent performance of Corby's mixable
liqueur brands mirrors the challenges experienced by the overall liqueur
category in the Canadian market, as consumer purchases of these products have
declined by 4% in recent months. The liqueur segment as a whole has been
negatively impacted by the decline in consumer spending, particularly as it
relates to consumption at licensed establishments, such as bars and
restaurants.
    It should be noted that shipment volumes in the final quarter benefitted
from the launch of two new liqueur products (McGuinness Exotics Blueberry and
McGuinness Exotics Pomegranate) in addition to the aforementioned increase in
LCBO sales in Ontario due to the threat of a labour disruption.
    Despite the challenges in the market, Corby management is highly focused
on maintaining its leadership position in the liqueur category and, as such,
the Company is working on new initiatives to modernize and strengthen these
brands' positions in the Canadian market place.

    
    Seagram Coolers
    ---------------
    

    With retail volumes declining by 20% for the year ended June 30, 2009,
Seagram Coolers has clearly had disappointing results this year. This was
partially due to adverse summer weather in both 2008 and 2009 that was
experienced in the brand's key markets. However, the brand also significantly
underperformed relative to its segment and key competitors. Management is in
the process of evaluating several strategic options to improve the performance
of this brand going forward.

    
    Financial and Operating Results - Fiscal 2009
    ---------------------------------------------

    The following table presents a summary of certain selected consolidated
financial information for the Company for the years ended June 30, 2009 and
2008:

    -------------------------------------------------------------------------
    (in millions of Canadian
     dollars, except per share
     amounts)                       2009      2008(1)   $ Change    % Change
    -------------------------------------------------------------------------
    Sales                      $   152.6   $   147.9   $     4.7          3%
    Commissions(2)                  21.4        20.3         1.1          5%
    -------------------------------------------------------------------------
    Operating revenue(2)           174.0       168.2         5.8          3%
    Cost of sales                   79.6        76.5         3.1          4%
    Marketing, sales and
     administration                 44.8        40.9         3.9         10%
    -------------------------------------------------------------------------
    EBITDA                          49.6        50.8        (1.2)        (2%)
    Amortization(3)                  6.2         6.1         0.1          2%
    -------------------------------------------------------------------------
    Earnings from operations        43.4        44.7        (1.3)        (3%)
    Interest income                  1.7         2.4        (0.7)       (29%)
    Foreign exchange loss           (0.8)       (0.3)       (0.5)       167%
    Gain on disposal of capital
     assets                          0.2           -         0.2         n/a
    -------------------------------------------------------------------------
    Earnings before income
     taxes                          44.5        46.8        (2.3)        (5%)
    Income taxes                    14.1        14.9        (0.8)        (5%)
    -------------------------------------------------------------------------
    Net earnings               $    30.4   $    31.9   $    (1.5)        (5%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Per common share
      - Basic net earnings     $    1.07   $    1.12   $   (0.05)        (5%)
      - Diluted net earnings   $    1.07   $    1.12   $   (0.05)        (5%)
    -------------------------------------------------------------------------
    (1) The 2008 figures have been restated for adoption of CICA HB 3031 -
        Inventories, as required by the CICA.
    (2) Amounts are presented gross of representation rights amortization of
        $4.7 (2008 - $4.9).
    (3) Amounts include capital assets amortization of $1.5 (2008 - $1.2) and
        representation rights amortization of $4.7 (2008 - $4.9).
    

    Overall Financial Results

    Comparing Corby's overall financial results for the year ended June 30,
2009 with those of the prior year demonstrates the resilience of Corby's
business, even during times of economic decline. After excluding the impact of
some non-recurring items having occurred in 2008 (see below for further
details), Corby experienced sales growth of 3%, which reflects the benefits of
a strong and diverse brand portfolio along with a solid business strategy that
is focused on delivering value.
    However, it should be noted that the comparability of net earnings has
been negatively skewed by the inclusion of some non-recurring items in the
2008 financial results, in addition to the impact of changes in foreign
exchange and interest rates compared to the prior year. The impact of all
these items is outlined below.

    
    The results of the prior year included the following non-recurring items:

    -   $0.9 million (impact to net earnings of $0.6 million) 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 (impact to net earnings of $0.5 million) 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, Corby's financial results for the year ended June 30, 2009
have been negatively impacted by the significant decline in the average value
of the Canadian dollar relative to the US dollar, in addition to the dramatic
fall in market interest rates as governments around the world continue to drop
base lending rates in hopes of stimulating consumer spending. The quantified
impacts of these two factors on Corby's financial results are discussed in
more detail below:

    
    1.  The Canadian dollar depreciated 15% relative to the US dollar in
        fiscal 2009 when compared to fiscal 2008. As the Company's purchases
        from US based suppliers typically 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).

        The initial decline of the Canadian dollar occurred during the
        Company's peak production period and, thus, had a pronounced impact
        on Corby's fiscal 2009 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.

        Changes in foreign exchange rates negatively impacted Corby's net
        earnings by approximately $1.6 million on a year-over-year comparison
        basis.

    2.  Corby's substantial deposits in cash management pools earn income
        based upon the market LIBOR interest rate. The average LIBOR rate for
        the year just ended was 1.95%, as compared to 4.21% last year. This
        decline in market interest rates had the effect of reducing Corby's
        net earnings by approximately $0.8 million in 2009.
    

    Excluding the impact of all of the above items, net earnings for the year
ended June 30, 2009 would have increased by 7% when compared with last year.
    As mentioned previously, the underlying operating results of the Company
were strong, especially in light of the current economic downturn, and are
reflective of a solid performance by Corby's spirit brands. The Company has
also managed to maintain, and in some cases, increase the level of advertising
and promotional investment behind its key brands.

    Operating revenue

    Operating revenue, which is comprised of sales and commissions, increased
3% when compared with last year. Sales revenue represents revenue earned from
the sale of Corby-owned brands, while commissions are earned from the
representation of PR brands in the Canadian market, and to a lesser extent,
through the representation of a select number of Agency brands.
    As previously discussed, operating revenue growth 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, operating revenue grew by 5% on a year-over-year
basis.
    Based upon analysis of retail sales data provided by the ACD, Corby's key
brands performed well against the competition in many key categories. The
increased sales were driven by an increase in average selling prices,
resulting from strategic price increases implemented over the past year,
combined with improved product mix. 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:

    -------------------------------------------------------------------------
    (in millions of Canadian
     dollars)                       2009        2008    $ Change    % Change
    -------------------------------------------------------------------------
    Commission from PR brands  $    16.8   $    14.3   $     2.5         17%
    Commission from Agency
     brands                          4.6         6.0        (1.4)       (23%)
    -------------------------------------------------------------------------
    Commissions                $    21.4   $    20.3   $     1.1          5%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    As the above chart demonstrates, Corby's commission from PR brands
increased 17% this year versus last. The increase is primarily 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. The remaining amount of the decrease
was the result of Corby ceasing to represent other smaller brands which were
considered to be non-strategic to the Company's portfolio.

    Cost of sales

    Cost of sales for the year ended June 30, 2009 increased $3.1 million or
4% when compared with last year. The increase in cost of sales is mainly due
to the previously mentioned impact of the significant fluctuations in foreign
exchange rates. After excluding the impact of exchange rates, cost of sales
would have increased by 2% on a year-over-year basis, which reflects increased
input costs and inflation.

    Marketing, sales and administration

    Marketing, sales and administration expenses increased 10% to $44.8
million in fiscal 2009, as compared to $40.9 million last year. The increase
partially reflects higher levels of 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. The
Company also incurred additional administrative expenses in conjunction with
its representation of PR's Absolut vodka brand, which Corby began to represent
in Canada effective October 1, 2008.
    The aforementioned 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.

    Amortization

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

    
    -------------------------------------------------------------------------
    (in millions of Canadian
     dollars)                       2009        2008    $ Change    % Change
    -------------------------------------------------------------------------
    Representation rights
     amortization              $     4.7   $     4.9   $    (0.2)        (4%)
    Capital assets amortization      1.5         1.2         0.3         25%
    -------------------------------------------------------------------------
    Amortization               $     6.2   $     6.1   $     0.1          2%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Income taxes

    Corby's effective rate of income tax in 2009 of 32% (2008 - 32%) closely
approximates the Company's current statutory rate of income tax of 32% (2008 -
33%). Corporate income tax rates in Canada are generally decreasing, and Corby
expects further reduced rates in the future when the Ontario government's
recently announced corporate income tax rate reductions become effective
beginning July 1, 2010. The Ontario Government's announced rate reductions
have not been recognized in these financial statements as they have yet to
become substantively enacted.

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

    Corby's sources of liquidity are its deposits in cash management pools of
$62.7 million as at June 30, 2009, and its cash generated from operating
activities. Corby's total contractual maturities are represented by its
accounts payable and accrued liabilities balances, which totaled $20.4 million
as at June 30, 2009, and are all due to be paid within one year.
    The Company also has funding obligations related to its employee future
benefit plans, which include defined benefit pension plans. As at June 30,
2009, 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 $1.8 million.
    The Company has identified the area of employee future benefits as a
"critical accounting estimate" in that accounting policies related to this
area include various assumptions which incorporate a high degree of judgment
and complexity. These assumptions may change in the future and may have a
material impact on the accrued benefit obligations of the Company and the cost
of these plans, which is reflected in the Company's consolidated statements of
earnings. In addition, the actual rate of return on plan assets and changes in
interest rates could result in changes in the Company's funding requirements
for its defined benefit pension plans.
    As a result of the 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. (See Note 7
of the consolidated financial statements for more information on the Company's
employee future benefit plans).
    The Company believes that its deposits in cash management pools, combined
with its historically strong operational cash flows, provide for sufficient
liquidity to fund its operations, investing activities and commitments for the
foreseeable future. The Company's cash flows from operations are subject to
fluctuation due to commodity, foreign exchange and interest rate risks. Please
refer to the "Risks and Risk Management" section of this MD&A for further
information.
    The much-publicized global liquidity crisis has been tumultuous for many
companies, particularly 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.

    
    Cash flows

    -------------------------------------------------------------------------
    (in millions of Canadian dollars)           2009      2008(1)     Change
    -------------------------------------------------------------------------
    Operating activities
      Net earnings, adjusted for
       non-cash items                      $    34.8   $    38.3   $    (3.5)
      Net change in non-cash working
       capital                                 (10.9)       (7.3)       (3.6)
    -------------------------------------------------------------------------
                                                23.9        31.0        (7.1)
    -------------------------------------------------------------------------
    Investing activities
      Additions to capital assets               (4.4)       (3.5)       (0.9)
      Proceeds from disposition of capital
       assets                                    0.6           -         0.6
      Deposits in cash management pools         (4.2)      (11.6)        7.4
    -------------------------------------------------------------------------
                                                (8.0)      (15.1)        7.1
    -------------------------------------------------------------------------
    Financing activities
      Dividends paid                           (15.9)      (15.9)          -
    -------------------------------------------------------------------------
    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 were $23.9 million in 2009, compared
to $31.0 million in the prior year. This decline is the combined result of
having decreased net earnings, adjusted for non-cash items, along with an
increased investment in non-cash working capital balances in 2009 when
compared with 2008. Growth in accounts receivable comprised the bulk of this
investment, and was the result of several factors. The most significant
factors included an exceptionally high sales performance in June 2009 versus
June 2008, in addition to the fact that Corby's balance sheet now includes
accounts receivable balances related to its newly represented brand, Absolut
vodka, which it began representing on October 1, 2008. (See Note 13 to the
consolidated financial statements of the Company).

    Investing activities

    After excluding deposits in cash management pools, the Company invested
$3.8 million in the acquisition of capital assets. Capital additions were on
account of the Company relocating its head office, in addition to increased
purchases 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 $15.9 million and is consistent
with the amounts used last year. The payments reflect regular dividends being
paid to shareholders on a quarterly basis.

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

    As at August 26, 2009, Corby had 24,274,320 Voting Class A common shares
and 4,194,536 Non-Voting Class B common shares outstanding. The Company does
not have a stock option plan, and therefore, there are no options outstanding.

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

    The following table presents a summary of the maturity periods of the
Company's contractual obligations as at June 30, 2009:

    -------------------------------------------------------------------------
                                                           Obliga-
                  Payments  Payments  Payments  Payments     tions
                              due in    due in             with no
                    During      2011      2013 due after     fixed
                      2010  and 2012  and 2014      2014  maturity     Total
    -------------------------------------------------------------------------
    Operating lease
     obligations  $    1.4  $    2.4  $    1.5  $    2.9  $      -  $    8.2
    Employee future
     benefits            -         -         -         -      10.1      10.1
    -------------------------------------------------------------------------
                  $    1.4  $    2.4  $    1.5  $    2.9  $   10.1  $   18.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Operating lease obligations represent future minimum payments under
long-term operating leases for premises and office equipment as at June 30,
2009. Employee future benefits represent the Company's unfunded pension and
other post retirement benefit plan obligations as at June 30, 2009. Please
refer to Note 7 of the consolidated financial statements for further
information with respect to Corby's employee future benefit plans.

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

    Corby engages in a significant number of transactions with its parent
company, its ultimate parent and various affiliates. Specifically, Corby
renders services to its parent company, its ultimate parent, and affiliates
for the marketing and sale of beverage alcohol products in Canada.
Furthermore, Corby sub-contracts the large majority of its distilling,
maturing, storing, blending, bottling and related production activities to its
parent company. A significant portion of Corby's bookkeeping, record keeping
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. In addition to the
aforementioned related party transactions, the Company also participated in
the following activities with related parties:

    Absolut Vodka Representation Agreement

    On September 26, 2008, Corby entered into an agreement with its ultimate
parent company, PR. The agreement provides Corby with the exclusive right to
represent the Absolut vodka brand in Canada effective October 1, 2008 for the
next five years. As part of this agreement, Corby also received the exclusive
right to represent the Plymouth gin and Level vodka brands. 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 (the Mirror Netting Service
Agreement) 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.

    Deposits in Cash Management Pools

    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.

    Sales and Purchases of Bulk Whisky

    During the year ended June 30, 2008, Corby sold three year-old bulk
whisky to HWSL at market prices for $1.1 million. There were no such sales
made during the year ended June 30, 2009. Furthermore, during the year ended
June 30, 2008, Corby purchased $1.4 million of three year-old bulk whisky from
HWSL, also at market prices. There were no such purchases made during the year
ended June 30, 2009. For further details related to the sale and purchase of
bulk whisky from HWSL refer to Note 14 of the consolidated financial
statements.

    
    Results of Operations - Fourth Quarter of Fiscal 2009
    -----------------------------------------------------

    The following table presents a summary of certain selected consolidated
financial information for the Company for the three month periods ended June
30, 2009 and 2008:

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

                                 Three Months Ended
    (in millions of Canadian   ----------------------
     dollars, except per share   June 30,    June 30,
     amounts)                       2009      2008(1)   $ Change    % Change
    -------------------------------------------------------------------------
    Sales                      $    36.9   $    36.4   $     0.5          1%
    Commissions(2)                   5.7         4.4         1.3         30%
    -------------------------------------------------------------------------
    Operating revenue(2)            42.6        40.8         1.8          4%
    Cost of sales                   20.0        19.8         0.2          1%
    Marketing, sales and
     administration                 10.9        11.0        (0.1)        (1%)
    -------------------------------------------------------------------------
    EBITDA                          11.7        10.0         1.7         17%
    Amortization(3)                  1.6         1.6           -          0%
    -------------------------------------------------------------------------

    Earnings from operations        10.1         8.4         1.7         20%
    Interest income                  0.2         0.4        (0.2)       (50%)
    Foreign exchange loss           (0.1)       (0.1)          -          0%
    -------------------------------------------------------------------------
    Earnings before income taxes    10.2         8.7         1.5         17%
    Income taxes                     2.8         2.7         0.1          4%
    -------------------------------------------------------------------------
    Net earnings               $     7.4   $     6.0   $     1.4         23%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Per common share
      - Basic net earnings     $    0.26   $    0.21   $    0.05         24%
      - Diluted net earnings   $    0.26   $    0.21   $    0.05         24%
    -------------------------------------------------------------------------
    (1) The 2008 figures have been restated for adoption of CICA HB 3031 -
        Inventories, as required by the CICA.
    (2) Amounts are presented gross of representation rights amortization of
        $1.2 (2008 - $1.2).
    (3) Amounts include capital assets amortization of $0.4 (2008 - $0.4) and
        representation rights amortization of $1.2 (2008 - $1.2).
    

    Overall Results for the Quarter

    Comparing the Company's overall financial results for the quarter versus
the same period last year, saw a significant increase in EBITDA of 17%, which
translated to an increase of 23% in net earnings. These results relate
primarily to the increased level of commissions this quarter over last, due
primarily to Corby's new representation of the Absolut vodka brand, which
commenced October 1, 2008. Also of importance to achievement of these results
was the Company's ability to maintain costs consistent with levels experienced
in the comparative quarter, in addition to a lower effective rate of income
tax.

    Operating revenue

    Operating revenue, consisting of sales and commissions, was $42.6 million
for the fourth quarter compared to $40.8 million in the same quarter last
year, an increase of $1.8 million or 4%. Sales increased 1%
quarter-over-quarter totalling $36.9 million, while commissions increased $1.3
million, or 30%, to $5.7 million for the three month period ended June 30,
2009.

    Sales

    Fourth quarter sales increased 1% when compared to the same quarter last
year. This was the result of increased average selling prices and positive mix
being partially offset by a 1% decline in quarter-over-quarter shipment
volumes of spirits, in addition to a 11% decline in shipment volumes for the
Seagram Coolers brand. The quarter-over-quarter decline in shipment volumes of
spirits, reflects lower sales volumes in Alberta and a change in the timing of
orders received from another liquor board, offset by the benefit of additional
sales at LCBO locations in Ontario as a result of the threat of a labour
disruption. The decline in shipment volumes for the Seagram Coolers brand
reflect the increased competitive environment in the segment, and is
consistent with the challenges the Company experienced with the brand
throughout 2009.

    Commissions

    The following table highlights the various components which comprise
commissions:

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

                                 Three Months Ended
                               ----------------------
    (in millions of Canadian     June 30,    June 30,
     dollars)                       2009        2008    $ Change    % Change
    -------------------------------------------------------------------------
    Commission from PR brands  $     4.6   $     3.4   $     1.2         35%
    Commission from Agency
     brands                          1.1         1.0         0.1         10%
    -------------------------------------------------------------------------
    Commissions                $     5.7   $     4.4   $     1.3         30%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Commissions from PR brands increased $1.2 million quarter-over-quarter
while commissions from Agency brands increased only slightly when compared
with the same quarter last year. As previously discussed, the increased
commission from PR brands is primarily the result of Corby having begun to
represent PR's newest brand, Absolut vodka, beginning October 1, 2008.

    Cost of sales

    Cost of sales was $20.0 million compared to $19.8 million for the same
quarter last year. The slight increase in costs were in-line with the
Company's fourth quarter sales, which also remained relatively consistent
quarter-over-quarter. Gross margin was 45.8%, as compared with 45.6% for the
same quarter last year.

    Marketing, sales and administration

    Marketing, sales and administration expenses were $10.9 million, as
compared to $11.0 million during the same quarter last year as lower
advertising and promotional expenses served to offset higher general and
administrative costs. The decrease in advertising and promotion expenses
reflect a shift in the timing of expenditures (note the increase in
advertising and promotional expenditures for the year in total) while the
increase in general and administrative costs is reflective of full year
trends.

    Amortization

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

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

                                 Three Months Ended
                               ----------------------
    (in millions of Canadian     June 30,    June 30,
     dollars)                       2009        2008    $ Change    % Change
    -------------------------------------------------------------------------
    Representation rights
     amortization              $     1.2   $     1.2   $       -          0%
    Capital assets amortization      0.4         0.4           -          0%
    -------------------------------------------------------------------------
    Amortization               $     1.6   $     1.6   $       -          0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Interest income

    Interest income is earned on Corby's deposits in cash management pools.
These deposits earn interest based on the Canadian LIBOR market rate. As a
result of the recent economic situation in Canada and in the rest of the
world, market rates of interest have been at historic lows, thus explaining
the decrease this quarter when compared to the same quarter last year.

    Income taxes

    Income tax expense increased only $0.1 million when compared with the
same quarter last year even though earnings before income tax increased $1.5
million over the same period. The decreased effective income tax rate was
primarily the result of a favourable change in estimate being recognized in
the quarter in combination with the Company being subject to lower corporate
income tax rates.

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

    Summary of Quarterly Financial Results(1)

    -------------------------------------------------------------------------
    (in millions of
     Canadian dollars,
     except per share    Q4     Q3     Q2     Q1     Q4     Q3     Q2     Q1
     amounts)          2009   2009   2009   2009   2008   2008   2008   2008
    -------------------------------------------------------------------------
    Operating revenue
     - net            $41.4  $34.0  $47.8  $46.1  $39.6  $33.0  $48.8  $41.9
    EBITDA             11.7    8.8   13.4   15.7   10.0    9.7   15.9   15.2
    Net earnings        7.4    5.1    8.1    9.8    6.0    6.0   10.7    9.3
    EBITDA per share   0.41   0.31   0.47   0.55   0.35   0.34   0.56   0.53
    Basic EPS          0.26   0.18   0.28   0.35   0.21   0.21   0.37   0.33
    Diluted EPS        0.26   0.18   0.28   0.35   0.21   0.21   0.37   0.33
    -------------------------------------------------------------------------
    (1) 2008 quarterly results have been restated for adoption of CICA HB
        3031 - Inventories, as required by the CICA.


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

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

    The Company's consolidated financial statements are prepared in
accordance with Canadian GAAP, which require management to make certain
estimates, judgments and assumptions that affect the reported amounts of
assets and liabilities and related disclosures as at the date of the
consolidated financial statements. The Company bases its estimates, judgments
and assumptions on historical experience, current trends and other factors
that management believes to be important at the time the consolidated
financial statements are prepared. The Company reviews its accounting policies
and how they are applied on a regular basis. While the Company believes that
the historical experience, current trends and other factors considered support
the preparation of its consolidated financial statements in accordance with
Canadian GAAP, actual results could differ from its estimates and such
differences could be material.
    The Company's significant accounting policies are discussed in Note 1 to
the consolidated financial statements. The following accounting policies
incorporate a higher degree of judgement and/or complexity and, accordingly,
are considered to be critical accounting policies.

    Goodwill and Indefinite-lived Intangible Assets

    The Company records as goodwill the excess amount of the purchase price
of an acquired business over the fair value of the underlying net assets,
including intangible assets, at the date of acquisition. Indefinite-lived
intangible assets represent the value of trademarks and licenses acquired.
Goodwill and indefinite-lived intangible assets accounts for a significant
amount of the Company's total assets. These balances are evaluated for
impairment annually. The process of evaluating these items for impairment
involves the determination of fair value. Inherent in such fair value
determinations are certain judgements and estimates including, but not limited
to, projected future sales, earnings and capital investment, discount rates,
and terminal growth rates. These judgements and estimates may change in the
future due to uncertain competitive, market and general economic conditions,
or as a result of changes in the business strategies and outlook of the
Company.
    An impairment loss would be recognized to the extent that the carrying
value of the goodwill or trademarks and licenses exceeds the implied fair
value. Any impairment would result in a reduction in the carrying value of
these items on the consolidated balance sheet of the Company and the
recognition of a non-cash impairment charge in net earnings. Based on the
analyses performed, the Company has not identified any impairment.

    Employee Future Benefits

    The cost and accrued benefit plan obligations of the Company's defined
benefit pension plans and other post-retirement benefit plan are accrued based
on actuarial valuations which are dependent upon assumptions determined by
management. These assumptions include the discount rate, the expected
long-term rate of return on plan assets, the rate of compensation increases,
retirement ages, mortality rates and the expected inflation rate of health
care costs. These assumptions are reviewed annually by the Company's
management and its actuary. These assumptions may change in the future and may
have a material impact on the accrued benefit obligations of the Company and
the cost of these plans which is reflected in the Company's consolidated
statement of earnings. In addition, the actual rate of return on plan assets
and changes in interest rates could result in changes in the Company's funding
requirements for its defined benefit pension plans. (See Note 7 of the
consolidated financial statements for detailed information regarding the major
assumptions utilized).

    Income and Other Taxes

    The Company accounts for income taxes using the liability method of
accounting. Under the liability method, future income tax assets and
liabilities are determined based on differences between the carrying amounts
of balance sheet items and their corresponding tax values. The determination
of the income tax provision requires management to interpret regulatory
requirements and to make certain judgements. While income, capital and
commodity tax filings are subject to audits and reassessments, management
believes that adequate provisions have been made for all income and other tax
obligations. However, changes in the interpretations or judgements may result
in an increase or decrease in the Company's income, capital or commodity tax
provisions in the future. The amount of any such increase or decrease cannot
be reasonably estimated.

    
    Accounting Standards - Implemented in 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 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
required greater disclosure regarding inventories and cost of sales in the
notes to the consolidated financial statements.
    The Company's new policy to correspond with the new inventory 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 for the year ended June 30,
2008 is as follows:

    
    -------------------------------------------------------------------------
                                                  As   Change in          As
    (stated in millions of Canadian       Previously  Accounting   Currently
     dollars, except per share amounts)     Reported      Policy    Reported
    -------------------------------------------------------------------------
    Retained earnings, beginning of year   $   189.2   $     2.4   $   191.6
    Retained earnings, end of year             205.0         2.5       207.5
    Inventories                                 47.3         3.6        50.9
    Future income tax liability                  5.4         1.0         6.4
    Cost of sales                               75.1         1.5        76.6
    Marketing, sales and administration         42.6        (1.7)       40.9
    Future income tax expense                    0.2         0.1         0.2
    Net earnings                                31.7         0.2        31.9

    Earnings per share:
      - Basic                              $    1.11   $    0.01   $    1.12
      - Diluted                                 1.11        0.01        1.12
    -------------------------------------------------------------------------
    

    Financial Instruments

    Effective July 1, 2008, the Company implemented 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
did not require any changes to the Company's accounting, however required
additional disclosure in the notes to the consolidated financial statements.

    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 did not require any
changes to the Company's accounting, however did require additional disclosure
in the notes to the consolidated financial statements.

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

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

    International Financial Reporting Standards

    In February 2008, the Accounting Standards Board of the CICA ("AcSB")
confirmed that Canadian generally accepted accounting principles ("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.
    In response, the Company created a transition plan and established a
timeline for the execution and completion of the conversion project to guide
Corby toward its reporting deadlines. The transition plan included a
high-level assessment of the key areas where conversion to IFRS may have a
significant impact or present a significant challenge. The key areas
identified included inventories, employee future benefits, impairment
analysis, IFRS 1 choices, capital assets, income taxes, and financial
statement presentation and disclosure. Initial findings indicate that changes
in accounting policies will be required and are likely to materially impact
the Company's consolidated financial statements. As described in the
"Accounting Standards - Implemented in 2009" section of this MD&A, the
conversion of inventories has already been implemented in this year's
financial statements. The impact on other business activities, disclosure
controls and procedures and internal controls over financial reporting will be
assessed once the impacts of the standards as a whole are identified.
    To date the Company has engaged an external advisor and established a
working team, held an IFRS training session tailored specifically to Corby for
key members of management and the Audit Committee. The IFRS team has performed
detailed assessments on certain key areas identified and continues to report
its progress and results to the Audit Committee on a quarterly basis.
    The company will continue to execute the transition in accordance with
its plan, and also continue to provide training to its key employees and
monitor standards development as issued by the International Accounting
Standards Board and the AcSB as well as regulatory developments as issued by
the Canadian Securities Administrators, which may affect the timing, nature or
disclosure of its adoption of IFRS.

    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.

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

    The Company maintains a system of disclosure controls and procedures that
has been designed to provide reasonable assurance that information required to
be disclosed by the Company in its public filings is recorded, processed,
summarized and reported within required time periods and includes controls and
procedures designed to ensure that all relevant information is accumulated and
communicated to senior management, including the Company's Chief Executive
Officer ("CEO") and Chief Financial Officer ("CFO"), to allow timely decisions
regarding required disclosure.
    Management, with the participation of the CEO and CFO, has evaluated the
effectiveness of the Company's disclosure controls and procedures (as defined
in National Instrument 52-109) as at June 30, 2009 and has concluded that such
disclosure controls and procedures are effective based upon such evaluation.

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

    In addition, the CEO and CFO have designed, or caused to be designed
under their supervision, internal controls over financial reporting to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
Canadian GAAP. Internal controls systems, no matter how well designed, have
inherent limitations. Therefore, even those systems determined to be designed
effectively can provide only reasonable assurance with respect to financial
reporting and financial statement preparation.
    Management, with the participation of the CEO and CFO, has evaluated the
effectiveness of the Company's internal control over financial reporting as at
June 30, 2009 and has concluded that internal control over financial reporting
is designed and operating effectively to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with Canadian GAAP.
Management's assessment was based on the framework established in Internal
Control - Integrated Framework published by the Committee of Sponsoring
Organizations of the Treadway Commission.
    There were no changes in internal control over financial reporting during
the Company's most recent interim period that have materially affected, or are
reasonably likely to materially affect, the Company's internal 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.
    A specific example of such a situation is the previously mentioned
increase in provincial mark-up applied to beverage alcohol products sold in
Alberta, as announced by the Alberta Gaming and Liquor Commission. However,
three months later, the Alberta Premier reversed this decision. Please see the
"Significant Events" section of this MD&A for further details.
    In addition, certain Canadian whiskies are subject to an increased rate
of excise duty effective July 1, 2009. This increase is the result of
legislation passed by the federal government on May 2, 2006, which served to
increase the rate of excise duty on spirits by 5.7%. It is estimated that the
application of these higher excise duty rates will reduce Corby's annual sales
by $1.3 million, and translate to a reduction of net earnings of $0.9 million.
It is not anticipated that these higher excise rates can be passed on to
consumers through higher prices in the near term.
    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. The overall decline in consumer spending has resulted in more at home
consumption, as consumers are trending away from consumption at licensed
establishments, such as bars and restaurants. As a result, the industry is
experiencing declines in product categories which tend to have a higher
consumption rate at these establishments, such as liqueurs. Corby offers a
diverse portfolio of products across all major spirit categories and various
price points, which complements consumer desires and offers exciting
innovation.

    Distribution/Supply Chain Interruption

    The Company is susceptible to risks relating to distributor and supply
chain interruptions. Distribution in Canada is largely accomplished through
the government owned provincial liquor boards, and therefore an interruption
(e.g., labour strike) for any length of time may have a significant impact on
the Company's ability to sell its products in a particular province and or
market.
    Supply chain interruptions could impact 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 financial position 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 typically exceed revenues from US based customers, a decline
in the Canadian dollar versus the US dollar can have a negative impact on the
Company's financial results. In addition, 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.

    Valuation of Goodwill and Intangible Assets

    Goodwill and intangible assets account for a significant amount of the
Company's total assets. Goodwill and intangible assets are subject to
impairment tests which involve the determination of fair value. Inherent in
such fair value determinations are certain judgments and estimates, including
but not limited to, projected future sales, earnings and capital investment,
discount rates, and terminal growth rates. These judgments and estimates may
change in the future due to uncertain competitive, market and general economic
conditions, or as changes in the business strategies and outlook of the
Company. Given the current state of the economy, certain of the aforementioned
factors affecting the determination of fair value may be impacted, and as a
result the Company's financial results may be adversely affected.
    The following chart summarizes Corby's goodwill and intangible assets and
details the amounts associated with each brand (or basket of brands) and
market:

    
    -------------------------------------------------------------------------
                                                Value as at June 30, 2009
                                            ---------------------------------
    Associated Brand     Associated Market  Goodwill  Intangibles      Total
    -----------------    ------------------ ---------------------------------
    Various PR brands               Canada   $     -     $  57.3     $  57.3
    Seagram Coolers                 Canada       4.0        16.3        20.3
    Lamb's rum              United Kingdom       1.4        11.8        13.2
    Meaghers and De Kuyper
     liqueurs                       Canada       4.5           -         4.5
    -------------------------------------------------------------------------
                                             $   9.9     $  85.4     $  95.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

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

    Employee Future Benefits

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

    
    CORBY DISTILLERIES LIMITED
    CONSOLIDATED BALANCE SHEETS
    As at June 30, 2009 and 2008

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

                                                            2009      2008(1)
                                                      -----------------------
    ASSETS
    Current
      Deposits in cash management pools (Note 2)       $  62,726   $  58,553
      Accounts receivable                                 28,640      21,873
      Income and other taxes recoverable                   1,478           -
      Inventories (Note 4)                                53,987      50,876
      Prepaid expenses                                     1,582       1,936
      Future income taxes (Note 5)                           551         164
    -------------------------------------------------------------------------
                                                         148,964     133,402
    Capital assets (Note 6)                               14,553      12,010
    Employee future benefits (Note 7)                     11,382       8,135
    Goodwill (Note 8)                                      9,856       9,856
    Intangible assets (Note 9)                            85,420      90,103
    -------------------------------------------------------------------------
                                                       $ 270,175   $ 253,506
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES
    Current
      Accounts payable and accrued liabilities         $  20,416   $  19,248
      Income and other taxes payable                           -       1,016
    -------------------------------------------------------------------------
                                                          20,416      20,264
    Employee future benefits (Note 7)                      5,923       5,023
    Future income taxes (Note 5)                           7,605       6,425
    -------------------------------------------------------------------------
                                                          33,944      31,712
    -------------------------------------------------------------------------

    SHAREHOLDERS' EQUITY
    Share capital (Note 10)                               14,304      14,304
    Retained earnings                                    221,927     207,490
    -------------------------------------------------------------------------
                                                         236,231     221,794
    -------------------------------------------------------------------------
                                                       $ 270,175   $ 253,506
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Refer to Note 2 for impact of new accounting policies

    See accompanying notes to consolidated financial statements



    CORBY DISTILLERIES LIMITED
    CONSOLIDATED STATEMENTS OF EARNINGS

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

                                             For the
                                  Three Months Ended      For the Year Ended
                              ----------------------- -----------------------
                                 June 30,    June 30,    June 30,    June 30,
                                    2009      2008(1)       2009      2008(1)
                              ----------------------- -----------------------

    OPERATING REVENUE
      Sales                    $  36,887   $  36,398   $ 152,592   $ 147,916
      Commissions (Note 9)         4,554       3,200      16,694      15,402
    -------------------------------------------------------------------------
                                  41,441      39,598     169,286     163,318
    -------------------------------------------------------------------------

    OPERATING COSTS
      Cost of sales               19,983      19,810      79,638      76,560
      Marketing, sales and
       administration             10,905      11,008      44,786      40,934
      Amortization                   415         420       1,457       1,199
    -------------------------------------------------------------------------
                                  31,303      31,238     125,881     118,693
    -------------------------------------------------------------------------

    EARNINGS FROM OPERATIONS      10,138       8,360      43,405      44,625
    -------------------------------------------------------------------------

    OTHER INCOME AND EXPENSES
      Interest income                204         463       1,649       2,427
      Foreign exchange loss         (112)       (129)       (783)       (302)
      (Loss) gain on disposal
        of capital assets             (5)          -         178           -
    -------------------------------------------------------------------------
                                      87         334       1,044       2,125
    -------------------------------------------------------------------------

    EARNINGS BEFORE INCOME
     TAXES                        10,225       8,694      44,449      46,750
    -------------------------------------------------------------------------

    INCOME TAXES (Note 5)
      Current                      2,472       2,055      13,275      14,646
      Future                         385         693         793         248
    -------------------------------------------------------------------------
                                   2,857       2,748      14,068      14,894
    -------------------------------------------------------------------------

    NET EARNINGS               $   7,368   $   5,946   $  30,381   $  31,856
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    BASIC EARNINGS PER SHARE
     (Note 12)                 $    0.26   $    0.21   $    1.07   $    1.12
    DILUTED EARNINGS PER SHARE
     (Note 12)                 $    0.26   $    0.21   $    1.07   $    1.12
    -------------------------------------------------------------------------
    (1) Refer to Note 2 for impact of new accounting policies

    See accompanying notes to consolidated financial statements



    CORBY DISTILLERIES LIMITED
    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

                                             For the
                                  Three Months Ended      For the Year Ended
                              ----------------------- -----------------------
                                 June 30,    June 30,    June 30,    June 30,
                                    2009      2008(1)       2009      2008(1)
                              ----------------------- -----------------------

    NET EARNINGS               $   7,368   $   5,946   $  30,381   $  31,856
    OTHER COMPREHENSIVE INCOME         -           -           -           -
    -------------------------------------------------------------------------
    COMPREHENSIVE INCOME       $   7,368   $   5,946   $  30,381   $  31,856
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Refer to Note 2 for impact of new accounting policies

    See accompanying notes to consolidated financial statements



    CORBY DISTILLERIES LIMITED
    CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

    (in thousands of Canadian dollars)
    -------------------------------------------------------------------------
                                                          For the Year Ended
                                                      -----------------------
                                                         June 30,    June 30,
                                                            2009      2008(1)
                                                      -----------------------
    SHARE CAPITAL
      Balance, beginning of year                       $  14,304   $  14,304
      Transactions, net                                        -           -
    -------------------------------------------------------------------------
      Balance, end of year                             $  14,304   $  14,304
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    RETAINED EARNINGS
      Balance, beginning of year as previously
       reported                                        $ 204,961   $ 189,215
      Impact of adoption of new accounting standard
       (Note 2)                                            2,529       2,363
    -------------------------------------------------------------------------
      Retained earnings, beginning of year as
       restated                                        $ 207,490   $ 191,578
      Net earnings                                        30,381      31,856
      Dividends                                          (15,944)    (15,944)
    -------------------------------------------------------------------------
      Balance, end of year                             $ 221,927   $ 207,490
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    ACCUMULATED OTHER COMPREHENSIVE INCOME
      Balance, beginning of year                       $       -   $       -
      Other comprehensive income for the year                  -           -
    -------------------------------------------------------------------------
      Balance, end of year                             $       -   $       -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Refer to Note 2 for impact of new accounting policies

    See accompanying notes to consolidated financial statements



    CORBY DISTILLERIES LIMITED
    CONSOLIDATED STATEMENTS OF CASH FLOW

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

                                             For the
                                  Three Months Ended      For the Year Ended
                              ----------------------- -----------------------
                                 June 30,    June 30,    June 30,    June 30,
                                    2009      2008(1)       2009      2008(1)
                              ----------------------- -----------------------

    OPERATING ACTIVITIES
    Net earnings               $   7,368   $   5,946   $  30,381   $  31,856
    Items not affecting cash
       Amortization                1,585       1,638       6,140       6,086
       Loss (gain) on disposal
        of capital assets              5           -        (178)          -
       Future income taxes           385         693         793         248
    Employee future benefits      (1,896)     (1,265)     (2,347)        121
    -------------------------------------------------------------------------
                                   7,447       7,012      34,789      38,311
    Net change in non-cash
     working capital balances
     (Note 13)                     1,758      (2,885)    (10,850)     (7,263)
    -------------------------------------------------------------------------
    Cash flows provided by
     operating activities          9,205       4,127      23,939      31,048
    -------------------------------------------------------------------------

    INVESTING ACTIVITIES
    Additions to capital assets     (932)     (2,436)     (4,403)     (3,540)
    Proceeds from disposal of
     capital assets                   12           -         581           -
    (Deposits in) draws from
     cash management pools        (4,299)      2,295      (4,173)    (11,564)
    -------------------------------------------------------------------------
    Cash flows used in investing
     activities                   (5,219)       (141)     (7,995)    (15,104)
    -------------------------------------------------------------------------

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

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

    SUPPLEMENTAL CASH FLOW
     INFORMATION
    Interest received          $     204   $     417   $   1,649   $   2,381
    Income taxes paid          $   4,600   $   3,472   $  16,203   $  15,512
    -------------------------------------------------------------------------
    (1) Refer to Note 2 for impact of new accounting policies

    See accompanying notes to consolidated financial statements



    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    FOR THE YEARS ENDED JUNE 30, 2009 AND JUNE 30, 2008
    (In thousands of Canadian dollars, except per share amounts)

    1.  SIGNIFICANT ACCOUNTING POLICIES

    Description of Business

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

    Corby Distilleries Limited is controlled by Hiram Walker & Sons Limited
    ("HWSL"), a wholly owned subsidiary of Pernod Ricard, S.A. ("PR"), a
    French public limited company, which owned 51.6% of the outstanding
    voting Class A Common Shares of Corby as at June 30, 2009.

    Basis of Consolidation

    The consolidated financial statements include the accounts of Corby
    Distilleries Limited and its subsidiaries, collectively referred to as
    "Corby" or the "Company". All intercompany balances and transactions are
    eliminated on consolidation.

    Use of Estimates

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

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

    Revenue Recognition

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

    Deposits in Cash Management Pools

    Corby participates in a cash pooling arrangement under a Mirror Netting
    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.

    Corby accesses these funds on a daily basis and has the contractual right
    to withdraw these funds or terminate these cash management arrangements
    upon providing five days written notice. For additional information on
    these balances, see Note 2, "Changes in Accounting Policies" and Note 14,
    "Related Party Transactions".

    Inventories

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

    Capital Assets

    Buildings, machinery and equipment and other capital assets are recorded
    at cost, net of accumulated amortization. Amortization is recorded on a
    straight-line basis over the estimated useful lives of the assets as
    indicated below.

    Buildings                                                 40 to 50 years
    Machinery and equipment                                    3 to 12 years
    Other capital assets                                       1 to 25 years

    Employee Future Benefits

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

    The Company has the following policies:

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

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

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

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

    -   The measurement date of the plans' assets and obligations is
        June 30, 2009.

    Long-lived Assets

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

    Goodwill

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

    Intangible Assets

    Intangible assets are comprised of long-term representation rights, and
    trademarks and licenses. Long term representation rights represent the
    cost of the Company's exclusive right to represent PR's brands in Canada.
    These representation rights are carried at cost, less accumulated
    amortization. Amortization is provided for on a straight line basis over
    the 15 year term of the agreement which began October 1, 2006, and is
    scheduled to expire on September 30, 2021.

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

    Income Taxes

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

    Foreign Currency Translation

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

    Stock Based Compensation Plans

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

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

    Classification of Financial Instruments

    Financial instruments are classified into one of the following five
    categories: held for trading, held-to-maturity investments, loans and
    receivables, available-for-sale financial assets, or other financial
    liabilities. The classification determines the accounting treatment of
    the instrument. The classification is determined by the Company when the
    financial instrument is initially recorded, based on the underlying
    purpose of the instrument.

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

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

    Deposits in cash
     management pools           Held for trading              Fair value

    Accounts receivable         Loans and receivables         Amortized cost

    Accounts payable and
     accrued liabilities        Other financial liabilities   Amortized cost
    -------------------------------------------------------------------------

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

    2.  CHANGES IN ACCOUNTING POLICIES

    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 (referred to in Note 14), 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 Agreement, please refer to Note
    14 which further describes Corby's related party transactions.

    Deposits in Cash Management Pools (continued)

    The June 30, 2008 consolidated balance sheet has been reclassified to
    conform to the current year's presentation. A summary of the effects of
    the reclassification and change in accounting policy is as follows:

    -------------------------------------------------------------------------
                                                  As   Change in          As
                                          Previously  Accounting   Currently
                                            Reported      Policy    Reported
    -------------------------------------------------------------------------

    Consolidated Balance Sheet

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

    Consolidated Statement of Cash Flow

      Operating Activities
      Net earnings, adjusted for items not
       affecting cash                      $  38,378   $     (67)  $  38,311
      Net change in non-cash working
       capital                                (7,209)        (54)     (7,263)
    -------------------------------------------------------------------------
      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)  $      -
    -------------------------------------------------------------------------

    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.

    As a result of the retrospective implementation of this new standard, the
    impact on previously reported balances for the year ended June 30, 2008
    is as follows:

                                                  As   Change in          As
                                          Previously  Accounting   Currently
                                            Reported      Policy    Reported
    -------------------------------------------------------------------------

    Retained earnings, beginning of year   $ 189,215   $   2,363   $ 191,578
    Retained earnings, end of year           204,961       2,529     207,490
    Inventories                               47,302       3,574      50,876
    Future income tax liability                5,380       1,045       6,425
    Cost of sales                             75,096       1,464      76,560
    Marketing, sales and administration       42,633      (1,699)     40,934
    Future income tax expense                    179          69         248
    Net earnings                              31,690         166      31,856

    Earnings per share:
      - Basic                              $    1.11   $    0.01   $    1.12
      - Diluted                                 1.11        0.01        1.12
    -------------------------------------------------------------------------

    Financial Instruments

    Effective July 1, 2008, the Company implemented 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 16.

    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 17.

    3.  FUTURE ACCOUNTING STANDARDS

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

    International Financial Reporting Standards

    In February 2008, the Accounting Standards Board ("AcSB") confirmed that
    Canadian generally accepted accounting principles ("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.

    In response, the Company created a transition plan and established a
    timeline for the execution and completion of the conversion project to
    guide Corby toward its reporting deadlines. The transition plan included
    a high-level assessment of the key areas where conversion to IFRS may
    have a significant impact or present a significant challenge. The key
    areas identified included inventories, employee future benefits,
    impairment analysis, IFRS 1 choices, capital assets, income taxes, and
    financial statement presentation and disclosure. Initial findings
    indicate that changes in accounting policies will be required and are
    likely to materially impact the Company's consolidated financial
    statements. As described in Note 2, the conversion of inventories has
    already been implemented in this year's financial statements.

    To date the Company has engaged an external advisor, established a
    working team and held an IFRS training session tailored specifically to
    Corby for key members of management and the Audit Committee. The IFRS
    team has performed detailed assessments on certain of the key areas
    identified and continues to report its progress and results to the Audit
    Committee on a quarterly basis.

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

    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.

    4.  INVENTORIES

                                                            2009        2008
    -------------------------------------------------------------------------

    Raw materials                                      $   5,919   $   6,026
    Work-in-progress                                      39,180      32,296
    Finished goods                                         8,888      12,554
    -------------------------------------------------------------------------
                                                       $  53,987   $  50,876
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The cost of inventory recognized as an expense and included in cost of
    goods sold during the year ended June 30, 2009 was $61,877 (2008 -
    $63,068). During the year, there were no significant write-downs of
    inventory as a result of net realizable value being lower than cost and
    no inventory write-downs recognized in previous years were reversed.

    5.  INCOME TAXES

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

                                                            2009        2008
    -------------------------------------------------------------------------

    Future income tax assets
    Current
      Bad debt and inventory reserves                  $      63   $     107
      Non-capital losses available for carry forward           -          57
      Restricted stock unit reserve                          201           -
      Tax credit carry-forward                                12           -
      Unrealized foreign exchange                            275           -
    -------------------------------------------------------------------------
                                                       $     551   $     164
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Future income tax liabilities
    Long term
      Employee future benefits                         $   1,225   $     902
      Capital assets                                       1,419         529
      Inventories                                            877       1,045
      Intangible assets and goodwill                       4,084       3,949
    -------------------------------------------------------------------------
                                                       $   7,605   $   6,425
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    The effective tax rate of 32% for the years ended June 30, 2009 and 2008
    approximates the statutory tax rates of 32% and 33% for the years ended
    June 30, 2009 and 2008, respectively.

    6.  CAPITAL ASSETS

                                          2009                          2008
    -------------------------------------------------------------------------
                              Accum.  Net Book              Accum.  Net Book
                      Cost    Amort.     Value      Cost    Amort.     Value
    -------------------------------------------------------------------------
    Land          $    638  $      -  $    638  $    638  $      -  $    638
    Buildings        7,899     4,604     3,295     7,840     5,021     2,819
    Machinery and
     equipment      13,242     5,677     7,565    11,700     5,311     6,389
    Other            4,280     1,225     3,055     3,167     1,003     2,164
    -------------------------------------------------------------------------
                   $26,059  $ 11,506  $ 14,553  $ 23,345  $ 11,335  $ 12,010
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    7.  EMPLOYEE FUTURE BENEFITS

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

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

                                                2009                    2008
    -------------------------------------------------------------------------
                                               Other                   Other
                                 Pension     Benefit     Pension     Benefit
                                   Plans       Plans       Plans       Plans
    -------------------------------------------------------------------------

    Fair value of plan assets
    Fair value of plan assets,
     beginning of year         $  41,896   $       -   $  42,843   $       -
      Actual return on plan
       assets                     (4,464)          -           6           -
      Employer contributions       4,828         700       2,765         616
      Employee contributions         194           -         178           -
      Benefits paid               (3,266)       (700)     (3,896)       (616)
    -------------------------------------------------------------------------
    Fair value of plan assets,
     end of year               $  39,188   $       -   $  41,896   $       -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Accrued benefit obligation
    Benefit obligation,
     beginning of year         $  42,920   $  11,782   $  44,771   $  11,574
      Service cost                 1,203         439       1,444         621
      Interest cost                2,421         669       2,360         619
      Employee contributions         194           -         177           -
      Actuarial gain              (5,685)       (703)     (1,936)       (391)
      Benefits paid               (3,266)       (700)     (3,896)       (641)
    -------------------------------------------------------------------------
    Accrued benefit obligation,
     end of year               $  37,787   $  11,487   $  42,920   $  11,782
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Funded status
    Funded status: plan
     surplus (deficit)         $   1,401   $ (11,487)  $  (1,024)  $ (11,782)
      Unamortized net
       transition (asset)
       obligation                 (2,136)      3,682      (2,468)      4,085
      Unamortized past service
       costs                         777           -         856           -
      Unamortized net
       actuarial loss             11,340       1,882      10,771       2,674
    -------------------------------------------------------------------------
    Accrued benefit asset
     (liability)               $  11,382   $  (5,923)  $   8,135   $  (5,023)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    All pension plans other than the supplementary executive retirement plan
    are in a funded deficit position. The aggregate fair value of plan assets
    and accrued benefit obligation for these deficit position plans as at
    June 30, 2009 is $30,695 and $32,534, respectively (2008 - $34,163 and
    $37,001).

    Significant actuarial assumptions adopted are, as follows:

                                                2009                    2008
    -------------------------------------------------------------------------
                                               Other                   Other
                                 Pension     Benefit     Pension     Benefit
                                   Plans       Plans       Plans       Plans
    -------------------------------------------------------------------------
    Accrued benefit obligation,
     end of year
    Discount rate                  7.10%       7.10%       5.85%       5.85%
    Compensation increase          3.50%         N/A       3.50%         N/A
    Benefit expense, for the
     year
    Discount rate                  5.85%       5.85%       5.50%       5.50%
    Expected long term return
     on assets                     6.50%         N/A       6.75%         N/A
    Compensation increase          3.50%         N/A       4.00%         N/A


    The medical cost trend rates used was 10.0% for 2009 (2008 - 11% ), with
    5.0% being the ultimate trend rate for years 2014 and thereafter. The
    dental cost rates used was 5.0% for 2009 (2008 - 5%).

    Assumed health care cost trend rates have a significant effect on the
    amounts reported for the health care plans. A one-percentage-point change
    in assumed health care cost trend rates would have the following effects
    in 2009:

                                                        Increase    Decrease
    -------------------------------------------------------------------------
    Service and interest cost                          $      79   $     (60)
    Accrued benefit obligation                             1,145        (956)
    -------------------------------------------------------------------------

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

                                                2009                    2008
    -------------------------------------------------------------------------
                                               Other                   Other
                                 Pension     Benefit     Pension     Benefit
                                   Plans       Plans       Plans       Plans
    -------------------------------------------------------------------------
    Service cost (including
     provision for plan
     expenses)                 $   1,203   $     439   $   1,444   $     621
    Interest cost                  2,421         669       2,360         619
    Actual return on plan
     assets                        4,464           -          (6)          -
    Actuarial loss                (5,685)       (703)     (1,936)       (391)
    -------------------------------------------------------------------------
    Costs arising in the period    2,403         405       1,862         849

    Differences between:
      Actual and expected
       return on plan assets      (6,687)          -      (2,214)          -
      Actuarial gain or loss
       recognized for the year
       and actuarial gain or
       loss on accrued benefit
       obligation                  6,119         791       2,377         503
      Amortization of plan
       amendments and actual
       plan amendments                80           -          80           -
      Amortization of
       transitional (asset)
       obligation                   (333)        403        (333)        403
    -------------------------------------------------------------------------
    Net expense                $   1,582   $   1,599   $   1,772   $   1,755
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Plan assets by category are, as follows:

                                                            2009        2008
    -------------------------------------------------------------------------
    Equity                                                 50.9%       48.7%
    Fixed income                                           34.9%       40.3%
    Refundable taxes at Canada Revenue Agency / other      14.2%       11.0%
    -------------------------------------------------------------------------
                                                          100.0%      100.0%
    -------------------------------------------------------------------------

    8. GOODWILL

                                                            2009        2008
    -------------------------------------------------------------------------
    Associated brands:
      Meaghers and De Kuyper                           $   4,476   $   4,476
      Seagram Coolers                                      3,970       3,970
      Lamb's rum International (1)                         1,410       1,410
    -------------------------------------------------------------------------
                                                       $   9,856   $   9,856
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Relates solely to the Lamb's rum business outside of Canada.

    9.  INTANGIBLE ASSETS

                                          2009                          2008
    -------------------------------------------------------------------------
                             Accumu-                       Accumu-
                               lated                         lated
                             Amorti-  Net Book             Amorti-  Net Book
                      Cost    zation     Value      Cost    zation     Value
    -------------------------------------------------------------------------

    Long-term
     representation
     rights       $ 70,440  $ 13,070  $ 57,370  $ 70,440  $  8,387  $ 62,053
    Trademarks and
     licenses       28,050         -    28,050    28,050         -    28,050
    -------------------------------------------------------------------------
                  $ 98,490  $ 13,070  $ 85,420  $ 98,490  $  8,387  $ 90,103
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The Company amortized $4,683 (2008 - $4,887) of long-term representation
    rights into commission income during the current fiscal year.

    There were no write downs of intangible assets due to impairment during
    the years ended June 30, 2009 and 2008.

    10. SHARE CAPITAL

                                                            2009        2008
    -------------------------------------------------------------------------

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

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

    11. RESTRICTED SHARE UNITS PLAN

                                                2009                    2008
    -------------------------------------------------------------------------
                                            Weighted                Weighted
                              Restricted     Average  Restricted     Average
                                   Share  Grant Date       Share  Grant Date
                                   Units  Fair Value       Units  Fair Value
    -------------------------------------------------------------------------

    Non-vested, beginning of
     year                         38,931   $   25.17      13,550   $   24.92
      Granted                     34,261       19.76      24,576       25.40
      Reinvested dividend
       equivalent units            2,556       16.23         805       22.39
      Vested                           -           -           -           -
      Forfeited                        -           -           -           -
    -------------------------------------------------------------------------
    Non-vested, end of year       75,748   $   22.42      38,931   $   25.17
    -------------------------------------------------------------------------

    Compensation expense related to this plan for the year ended June 30,
    2009 was $374 (2008 - $156).

    12. EARNINGS PER SHARE

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

                                                            2009        2008
    -------------------------------------------------------------------------
    Numerator:
      Net earnings                                       $30,381     $31,856
    Denominator:
      Weighted average shares outstanding             28,468,856  28,468,856
    -------------------------------------------------------------------------

    13. CHANGES IN NON-CASH WORKING CAPITAL

                                                            2009        2008
    -------------------------------------------------------------------------
    Accounts receivable                                $  (6,767)  $   3,091
    Inventories                                           (3,111)     (4,489)
    Prepaid expenses                                         354        (923)
    Income tax and other tax recoverable                  (1,478)          -
    Accounts payable and accrued liabilities               1,168      (3,357)
    Income and other taxes payable                        (1,016)     (1,585)
    -------------------------------------------------------------------------
                                                       $ (10,850)  $  (7,263)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    14. RELATED PARTY TRANSACTIONS

    Absolut Vodka Representation Agreement

    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 also received 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 (the Mirror Netting Service Agreement) 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.

    Deposits in Cash Management Pools

    As previously discussed in Note 2, Corby participates in a cash pooling
    arrangement under a 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 June 30, 2009, 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 earned interest income of
    $1,634 from PR during the year ended June 30, 2009 (2008 - $2,313). Corby
    has the right to terminate its participation in the Mirror Agreement at
    any time, subject to five days written notice.

    HWSL, a wholly owned subsidiary of PR, owns in excess of 50% of the
    issued voting common shares of Corby and therefore, for purposes of the
    chart denoted below, HWSL is 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.

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

    -------------------------------------------------------------------------
                                               Financial
                                               Statement
                              Nature of        Classifi-
    Nature of Transaction     Relationship        cation       2009     2008
    -------------------------------------------------------------------------

    I   The Company renders   Parent company   Sales,       $   807  $   847
        blending and                           accounts
        bottling services                      receivable

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

    II  The Company sells     Affiliated       Sales,       $   180  $   734
        certain of its        companies        accounts
        products for resale                    receivable
        at an export level

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

    III The Company renders   Parent company,  Commissions, $16,753  $14,226
        services, as the      Ultimate         accounts
        sole and exclusive                     receivable
        representative, for   Parent company
        purposes of           and Affiliated
        marketing and sales   companies
        of beverage alcohol
        products in Canada

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

    IV  The Company           Parent company   Cost of      $24,059  $25,161
        sub-contracts         and an           sales,
        virtually all of its  Affiliated       inventories
        distilling, blending, company          and accounts
        bottling, storing and                  payable
        production activities

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

    V   The Company           Parent company   Marketing,   $ 2,287  $ 2,168
        sub-contracts a                        sales and
        significant portion                    administration
        of its bookkeeping,
        record keeping
        services, certain
        administrative
        services, related
        data processing and
        maintenance of data
        processing activities

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

    VI  The Company          Parent company    Cost of      $ 3,095  $ 2,523
        purchases a portion                    sales,
        of its inventory                       inventories
        used in production                     and accounts
        activities                             payable

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

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

    Sales and Purchases of Bulk Whisky

    In addition to the transactions noted above, during 2008 Corby purchased
    and sold bulk whisky from/to HWSL at market prices, which was $2.70 per
    original litre of alcohol ("OLA"). Note that there were no sales or
    purchases of bulk whisky in 2009. The quantities of OLA and the related
    exchange amount for each type of transaction are listed in the following
    chart:

                                                2009                    2008
    -------------------------------------------------------------------------
    (Quantities stated in 000's
     of original litres of                  Exchange    Exchange
     alcohol)                 Quantities      Amount  Quantities      Amount
    -------------------------------------------------------------------------
    Sales                              -   $       -         407   $   1,100
    Purchases                          -   $       -         506   $   1,365
    -------------------------------------------------------------------------

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

                                                            2009        2008
    -------------------------------------------------------------------------
    Accounts receivable - related parties              $   6,647   $   5,072
    Accounts payable - related parties                    (6,921)     (3,997)
    -------------------------------------------------------------------------
    Net amount (payable to) receivable from related
     parties                                           $    (274)  $   1,075
    -------------------------------------------------------------------------

    15. 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 Canadian whisky, Lamb's rum, Polar Ice vodka,
    McGuinness liqueurs and Seagram Coolers.

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

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

    Geographic information regarding the Company is as follows:

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

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

    In 2009, operating revenue to three major customers accounted for 32%,
    16%, and 11%, respectively (2008 - 29%, 17%, and 13%).

    16. FINANCIAL INSTRUMENTS

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

    Fair Value of Financial Instruments
    -----------------------------------

    The fair value of a financial instrument is the estimated amount that the
    Company would receive or pay to settle the financial assets and financial
    liabilities as at the reporting date. The fair values of deposits in cash
    management pools, accounts receivable and accounts payable approximate
    their carrying values given their short-term maturities.

    Financial Risk Management Objectives
    ------------------------------------

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

    Credit Risk
    -----------

    Credit risk arises from cash held with PR via Corby's participation in
    the Mirror Agreement (further described in Note 14), 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. With respect to Corby's deposits in PR's cash
    management pools, the Company monitors PR's credit rating in the normal
    course of business, and has the right to terminate its participation in
    the Mirror Agreement at any time, subject to five days written notice.

    Liquidity Risk
    --------------

    Corby's sources of liquidity are its deposits in cash management pools of
    $62,726 and its cash generated by operating activities. Corby's total
    contractual maturities are represented by its accounts payable and
    accrued liabilities balances which totaled $20,416 as at June 30, 2009
    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 material impact to Corby's financial position over the long-term.

    Foreign Currency Risk
    ---------------------

    Foreign currency risk exists as the Company sources a proportion of its
    production requirements in foreign currencies, specifically the 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.

    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.

    17.  CAPITAL MANAGEMENT

    The Company's objectives when managing capital are:

    -   to ensure sufficient capital exists to allow management the
        flexibility to execute its strategic plans; and

    -   to ensure shareholders receive a reasonable return on their
        investment in the form of quarterly dividends.

    Management includes the following items in its definition of capital:

                                                            2009        2008
    -------------------------------------------------------------------------
    Share capital                                      $  14,304   $  14,304
    Retained earnings                                    221,927     207,490
    -------------------------------------------------------------------------
    Net capital under management                       $ 236,231   $ 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 with PR
    to certain restrictions, one of which precludes the Company from
    declaring any special dividends until after October 1, 2011. These
    restrictions are further described in Note 14. 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.

    18. COMMITMENTS

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

    -------------------------------------------------------------------------
    2010                                                               1,379
    2011                                                               1,266
    2012                                                               1,138
    2013                                                                 848
    2014                                                                 719
    Thereafter                                                         2,856
    -------------------------------------------------------------------------
                                                                   $   8,206
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    19. GUARANTEES

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

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

    20. CONTINGENCIES

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

    21. SUBSEQUENT EVENT

    On July 27, 2009, PR announced the sale of the coffee liqueur brand Tia
    Maria to an unrelated third party for 125 million Euros (equivalent to
    approximately $192.5 million Canadian dollars).

    Corby previously owned a 45% non-controlling interest of Tia Maria but
    sold its interests to PR on September 29, 2006. The purchase and sale
    agreement between Corby and PR contained a purchase price adjustment
    clause which would allow for the Company to share in any after-tax
    profits (as per a defined formula in the agreement) earned by PR in the
    event they sold 100% of Tia Maria within three years of buying the
    minority interest from Corby.

    While the Tia Maria brand was sold within the three year timeframe as
    outlined above, PR's net after-tax proceeds on an equivalent 45% basis
    are approximately $72 million, which is less than Corby's after-tax
    proceeds of $79.8 million. As a result, there will be no additional
    proceeds paid to Corby as an adjustment to the original purchase price
    agreed to between Corby and PR.
    

    %SEDAR: 00001138E




For further information:

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


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