MOLSON COORS BREWING COMPANY
(Exact name of registrant as specified in its charter)

DELAWARE		84-0178360
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1225 17^th Street, Denver, Colorado 1555 Notre Dame Street East, Montréal, Québec, Canada		80202 H2L 2R5
(Address of principal executive offices)		(Zip Code)

303-279-6565 (Colorado)
514-521-1786 (Québec)
(Registrant's telephone number, including area code)

Title of each class		Name of each exchange on which registered
Class A Common Stock (voting), $0.01 par value		New York Stock Exchange Toronto Stock Exchange
Class B Common Stock (non-voting), $0.01 par value		New York Stock Exchange Toronto Stock Exchange

Title of class
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ý NO o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES o NO ý

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ý NO o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. YES ý NO o

Indicate by check mark whether the registrant is a large accelerated filer ý, an accelerated filer o, or a non-accelerated filer o (check one). See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). o Yes ý No

The aggregate market value of the registrant's publicly-traded stock held by non-affiliates of the registrant at the close of business on June 26, 2005, was $4,075,391,702 based upon the last sales price reported for such date on the New York Stock Exchange. For purposes of this disclosure, shares of common and exchangeable stock held by persons holding more than 5% of the outstanding shares of stock and shares owned by officers and directors of the registrant as of June 26, 2005 are excluded in that such persons may be deemed to be affiliates. This determination is not necessarily conclusive of affiliate status.

The number of shares outstanding of each of the registrant's classes of common stock, as of February 28, 2006:
Class A Common Stock—1,364,867 shares
Class B Common Stock—62,412,173 shares

As of February 28, 2006, the following number of exchangeable shares was outstanding for Molson Coors Canada, Inc.:
Class A Exchangeable Shares—1,839,140
Class B Exchangeable Shares—20,051,909

In addition, the registrant has outstanding one share of special Class A voting stock, through which the holders of Class A Exchangeable shares and Class B exchangeable shares of Molson Coors Canada Inc. (a subsidiary of the registrant), respectively, may exercise their voting rights with respect to the registrant. The special Class A and Class B voting stock are entitled to one vote for each of the exchangeable shares, respectively, excluding shares held by the registrant or its subsidiaries, and generally vote together with the Class A common stock and Class B common stock, respectively, on all matters on which the Class A common stock and class B common stock are entitled to vote. The trustee holder of the special class A voting stock and the special Class B voting stock has the right to cast a number of votes equal to the number of then outstanding Class A exchangeable shares and Class B exchangeable shares, respectively.

Documents Incorporated by Reference: Portions of the registrant's definitive proxy statement for the registrant's 2006 annual meeting of stockholders are incorporated by reference under Part III of this Annual Report on Form 10-K.


		PART I.
Item 1.		Business
Item 1A.		Risk Factors
Item 1B.		Unresolved Staff Comments
Item 2.		Properties
Item 3.		Legal Proceedings
Item 4.		Submission of Matters to a Vote of Security Holders
		PART II.
Item 5.		Market for the Registrant's Common Equity and Issuer Purchases of Equity Securities
Item 6.		Selected Financial Data
Item 7.		Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.		Quantitative and Qualitative Disclosures About Market Risk
Item 8.		Financial Statements and Supplementary Data
Item 9.		Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A.		Controls and Procedures
Item 9B.		Other Information
		PART III.
Item 10.		Directors and Executive Officers of the Registrant
Item 11.		Executive Compensation
Item 12.		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13.		Certain Relationships and Related Transactions
Item 14.		Principal Accounting Fees and Services
		PART IV.
Item 15.		Exhibits and Financial Statement Schedules
Signatures

On February 9, 2005, Adolph Coors Company merged with Molson Inc. (the Merger). In connection with the Merger, Adolph Coors Company became the parent of the merged company and changed its name to Molson Coors Brewing Company. Unless otherwise noted in this report, any description of us includes Molson Coors Brewing Company (MCBC) (formerly Adolph Coors Company), principally a holding company, and its operating subsidiaries: Coors Brewing Company (CBC), operating in the United States (US); Coors Brewers Limited (CBL), operating in the United Kingdom (UK); Molson Inc. (Molson), operating in Canada; Cervejarias Kaiser S.A. (Kaiser), operated in Brazil and presented as a discontinued operation in this report; and our other corporate entities. Any reference to "Coors" means the Adolph Coors Company prior to the Merger. Any reference to Molson Inc. means Molson prior to the Merger. Any reference to "Molson Coors" means MCBC, after the Merger.

Unless otherwise indicated, information in this report is presented in US Dollars (US $).

Molson was founded in 1786 and Coors was founded in 1873. Since each company was founded, they have been committed to producing the highest-quality beers. Our brands are designed to appeal to a wide range of consumer tastes, styles and price preferences. Until Coors' acquisition of CBL in February 2002, and Molson Inc.'s acquisition of Kaiser in March 2002, we operated and sold our beverages predominately in North America and in a few international markets. As a result of the Merger, we became the fifth-largest brewer by volume in the world.

The Merger was effected by the exchange of Coors stock for Molson stock in a transaction that was valued at approximately $3.6 billion. Coors is considered the acquirer for accounting purposes, although the transaction was viewed as a merger of equals by the two companies. The transaction is discussed in Note 2 to the accompanying Consolidated Financial Statements in Item 8 on page 76.

On January 13, 2006, we sold a 68% equity interest in Kaiser to FEMSA Cerveza S.A. de C.V. (FEMSA). Kaiser is the third largest brewer in Brazil. Kaiser's key brands include Kaiser Pilsen®, and Bavaria®. We have retained a 15% ownership interest in the operations, which will be reflected as a cost method investment for accounting purposes. Our financial statements accompanying this report present Kaiser as a discontinued operation.

To focus on our core competencies in manufacturing, marketing and selling malt beverage products, we have entered into joint venture arrangements with third parties over the past decade to leverage their strengths in areas like can and bottle manufacturing, transportation, distribution, packaging, engineering, energy production and information technology. Additionally, before the Merger, Coors and Molson participated in joint ventures to market Coors products in Canada (Molson Coors Canada), and Molson Inc. products in the United States (Molson USA).

Our reporting segments have been realigned as a result of the Merger. We have three operating segments: United States, Canada and Europe. Prior to being segregated and reported as a discontinued

operation, and subsequent to the Merger in 2005, Brazil was a segment. A separate operating team manages each segment, and each segment consists of manufacturing, marketing and sale of beer and other beverage products.

See Note 6 in Item 8, Financial Statements and Supplementary Data on page 84, for financial information relating to our segments and operations, including geographic information.

Some of the following statements may describe our expectations regarding future products and business plans, financial results, performance and events. Actual results may differ materially from any such forward-looking statements. Please see Cautionary Statement Pursuant to Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995 on page 14, for some of the factors that may negatively impact our performance. The following statements are made, expressly subject to those and other risk factors.

Brands sold primarily in the United States include: Coors Light®, Coors®, Coors® Non-Alcoholic, Extra Gold®, Zima XXX®, Aspen Edge™, George Killian's® Irish Red™ Lager, Keystone®, Keystone Light®, Keystone Ice®, and Blue Moon™ Belgian White Ale. We also sell the Molson family of brands in the United States.

Brands sold primarily in Canada include Molson Canadian®, Coors Light, Molson Dry®, Molson Export®, Creemore Springs®, Rickard's Red Ale®, Carling® and Pilsner®. We also brew or distribute under license the following brands: Amstel Light® under license from Amstel Brouwerij B.V., Heineken® and Murphy's® under license from Heineken Brouwerijen B.V., Asahi® and Asahi Select® under license from Asahi Beer USA Inc., and Asahi Breweries, Ltd., Corona® under license from Cerveceria Modelo S.A. De C.V. and Canacermex, Inc., Miller Lite®, Miller Genuine Draft®, Milwaukee's Best® and Milwaukee's Best Dry® under license from Miller Brewing Company, and Foster's® and Foster's Special Bitter® under license from Carlton & United Beverages Limited.

Brands sold primarily in the United Kingdom include: Carling®, Coors Fine Light Beer®, Worthington's®, Caffrey's®, Reef®, Screamers™ and Stones®. We also sell Grolsch® in the United Kingdom through a joint venture. We also sell factored brands in our UK segment.

We sold approximately 56% of our 2005 reported volume in the United States segment, 18% in the Canada segment and 26% in the Europe segment. In 2005, our largest brands accounted for the following percentage of total consolidated volume: Coors Light accounted for approximately 39% of reported volume, Carling for approximately 17%, and Molson Canadian for approximately 4%.

Our sales volume from continuing operations totaled 40.4 million barrels in 2005 and 32.7 million barrels in both 2004 and 2003. Brazil volume was 5.5 million barrels in 2005. The barrel sales figures for periods prior to our Merger on February 9, 2005, do not include barrel sales of our products sold in Canada or the United States through the Molson Coors Canada or Molson USA joint ventures. An additional 1.6 and 1.5 million barrels of beer were sold by Molson Coors Canada in 2004 and 2003, respectively. Our Molson USA venture sold 0.8 and 0.9 million barrels in 2004 and 2003, respectively. Our reported sales volumes also do not include the CBL factored brands business.

No single customer accounted for more than 10% of our consolidated or segmented sales in 2005, 2004 or 2003.

The United States (US) segment produces, markets, and sells the Coors portfolio of brands in the United States and its territories and includes the results of the Rocky Mountain Metal Corporation

(RMMC) and Rocky Mountain Bottle Corporation (RMBC) joint ventures consolidated beginning in 2004 under FIN 46R. The US segment also includes a small amount of Coors brand volume that is sold outside of the United States and its territories, including primarily Mexico and the Caribbean, as well as sales of Molson products in the United States.

In the United States, beer is generally distributed through a three-tier system consisting of manufacturers, distributors and retailers. A national network of over 500 independent distributors purchases our products and distributes them to retail accounts. We also own three distributorships which collectively handled less than 3% of our total US segments volume in 2005. In Puerto Rico, we market and sell Coors Light through an independent distributor. We have a team of employees managing the marketing and promotional efforts in this market, where Coors Light is the leading brand. We also sell our products in a number of other Caribbean markets. During the second quarter of 2004, Cerveceria Cuauhtemoc Moctezuma, S.A. de C.V., a subsidiary of FEMSA Cerveza, became the sole and exclusive importer, marketer, seller and distributor of Coors Light in Mexico.

We use the highest-quality water, barley and hops to brew our products. We have acquired water rights to provide for long-term strategic growth and to sustain brewing operations in case of a prolonged drought in Colorado. We buy barley under long-term contracts from a network of independent farmers located in five regions in the United States.

We have three domestic production facilities and one small brewery, which we plan to sell, located in Mexico. We own and operate the world's largest single-site brewery located in Golden, Colorado. In addition, we have a packaging and brewing facility in Memphis, Tennessee, and a packaging facility located in the Shenandoah Valley in Virginia. We brew Coors Light, Coors, Extra Gold, Killian's and the Keystone brands in Golden, and package in Golden approximately 66% of the beer brewed in Golden. The remainder is shipped in bulk from the Golden brewery to either our Memphis or Shenandoah facility for packaging. We are in the process of adding brewing capability to our Virginia facility which we expect to have operational by 2007 and are in the process of closing our Memphis facility which we expect to complete by the end of 2006.

Approximately 61% of our domestic products were packaged in aluminum cans in 2005. We purchased a substantial portion of those cans from RMMC, our joint venture with Ball Corporation (Ball). In addition to our supply agreement with RMMC, we also have commercial supply agreements with Ball and other third-party can manufacturers to purchase cans and ends in excess of what is supplied through RMMC.

We used glass bottles for approximately 28% of our products in 2005. RMBC, our joint venture with Owens-Brockway Glass Container, Inc. (Owens), produces glass bottles at our glass manufacturing facility. On July 29, 2003, we extended our joint venture with Owens for 12 years, as well as a supply agreement with Owens for the glass bottles we require in excess of joint venture production.

Most of the remaining 11% of volume we sold in 2005 was packaged in quarter and half-barrel stainless steel kegs.

We purchase most of our paperboard and label packaging from a subsidiary of Graphic Packaging Corporation (GPC), a related party. These products include paperboard, multi-can pack wrappers, bottle labels and other secondary packaging supplies.

Our US sales volumes are normally lowest in the first and fourth quarters and highest in the second and third quarters.

Industry and competitive information in this section and elsewhere in this report was compiled from various industry sources, including beverage analyst reports (Beer Marketer's Insights, Impact Databank and The Beer Institute). While management believes that these sources are reliable, we cannot guarantee the accuracy of these numbers and estimates.

The beer industry in the United States is competitive and concentrated, with three major brewers controlling about 78% of the market. Growing or even maintaining market share has required increasing investments in marketing and sales. US beer industry shipments had an annual growth rate during the past 10 years of less than 1%. Pricing in the US beer industry became increasingly competitive in 2005. While front line price increases were similar to recent history, discounting activity increased approximately 30% in 2005, compared to 2004.

The beer market in Puerto Rico had extraordinary growth in the '70s and '80s. Since then, the market has experienced periodic growth and decline cycles. This market has traditionally been split among local brewers, US imports, and other imports. Coors Light is the market leader in Puerto Rico with approximately half the market.

Our malt beverages compete with numerous above-premium, premium, low-calorie, low-carbohydrate, popular-priced, non-alcoholic and imported brands. These competing brands are produced by national, regional, local and international brewers. We compete most directly with Anheuser-Busch and SABMiller (SAB), the dominant beer companies in the United States. According to Beer Marketer's Insights estimates, we are the nation's third-largest brewer, selling approximately 11% of the total 2005 US brewing industry shipments (including exports and US shipments of imports). This compares to Anheuser-Busch's 49% share and SAB's 18% share.

Our malt beverages also compete with other alcohol beverages, including wine and spirits, and thus our competitive position is affected by consumer preferences between and among these other categories.

Molson is Canada's largest brewer by volume and North America's oldest beer company. Molson brews, markets, sells and nationally distributes a wide variety of beer brands. Molson's portfolio consists of strength or leadership in all major product and price segments. Molson's strong market share and

visability are consistent across retail and on-premise channels. Priority focus and investment is leveraged behind key owned brands (Coors Light, Molson Canadian, Molson Export and Rickard's) and key strategic distribution partnerships (including Heineken, Corona and Miller).

Before the Merger, the Canada segment consisted of Coors' 50.1% interest in the Molson Coors Canada joint venture through which Coors Light was sold in Canada. The joint venture contracted with Molson for the brewing, distribution and sale of our products. Molson Coors Canada managed all marketing activities for our products in Canada. In connection with the Merger, Molson Coors Canada was dissolved into the Canadian business. Coors Light currently has a 10% market share, and is the largest-selling light beer and the second-best selling beer brand overall in Canada. Molson Canadian currently has a 9% market share and is the third-largest selling beer in Canada.

Following the Merger, our Canada segment consists primarily of Molson's beer business including the production and sale of the Molson brands, principally in Canada, our joint venture arrangements related to the distribution of beer in Ontario and the Western provinces, Brewers Retail, Inc. (BRI) (consolidated under FIN 46R), and Brewers Distribution Limited (BDL); and the Coors Light business in Canada.

In Canada, provincial governments have historically had a high degree of involvement in the regulation of the beer industry, particularly the regulation of the pricing, mark-up, container management, sale, distribution and advertising of beer.

Distribution and retailing of products in Canada involves a wide range and varied degree of government control through provincial liquor boards.

Consumers in Ontario can purchase beer only at retail outlets operated by BRI, at government-regulated retail outlets operated by the Liquor Control Board of Ontario, approved agents of the Liquor Control Board of Ontario or at any bar, restaurant or tavern licensed by the Liquor Control Board of Ontario to sell liquor for on premise consumption. All brewers pay a service fee, based on their sales volume, through BRI. Molson, together with certain other brewers, participates in the ownership of BRI in proportion to its provincial market share relative to other brewers. Ontario brewers may deliver directly to BRI's outlets or may choose to use BRI's distribution centers to access retail in Ontario, the Liquor Control Board of Ontario system and licensed establishments.

In Québec, beer is distributed directly by each brewer or through independent agents. Molson is the agent for the licensed brands it distributes. The brewer or agent distributes the products to permit holders for retail sales for on-premise consumption. Québec retail sales for home consumption are made through grocery and convenience stores as well as government operated stores.

In British Columbia, the government's Liquor Distribution Branch currently controls the regulatory elements of distribution of all alcohol products in the province. Brewers Distributors, Ltd. (BDL), which Molson co-owns with a competitor, manages the distribution of Molson's products throughout British Columbia. Consumers can purchase beer at any Liquor Distribution Branch retail outlet, at any independently owned and licensed wine or beer retail store or at any licensed establishment for on-premise consumption. Liquor-primary licensed establishments for on-premise consumption may also

be licensed for off-premise consumption. The British Columbia government announced in 2002 that the Liquor Distribution Branch would shift its role from managing distribution and retail operation to regulating these areas. A further announcement postponed this initiative indefinitely.

In Alberta, the distribution of beer is managed by independent private warehousing and shipping companies or by a government sponsored system in the case of US sourced products. All sales of liquor in Alberta are made through retail outlets licensed by the Alberta Gaming and Liquor Commission or licensees, such as bars, hotels and restaurants. BDL manages the distribution of Molson's products in Alberta.

Molson's products are distributed in the provinces of Manitoba and Saskatchewan through local liquor boards. Manitoba and Saskatchewan also have licensed private retailers. BDL manages the distribution of Molson's products in Manitoba and Saskatchewan. In the Maritime Provinces (other than Newfoundland), local liquor boards distribute and retail Molson's products. Yukon, Northwest Territories and Nunavat manage distribution and retail through government liquor commissioners.

Molson's goal is to procure quality materials and services at the lowest prices available. Molson works with the supplier community to select global suppliers for materials and services which best meet this goal. Molson also uses low risk hedging instruments to protect from pricing volatility in the commodities market.

Molson single sources cans, glass bottles, crowns and labels. Availability of these products has not been an issue and Molson does not expect any difficulties in accessing any of these products. However, the risk of glass bottle supply disruptions has increased with the reduction of local supply alternatives due to the consolidation of the glass bottle industry in North America.

Molson has six breweries, strategically located throughout Canada, which brew, bottle, package, market and distribute all owned and licensed brands sold in and exported from Canada: St. John's (Newfoundland), Montréal (Québec), Toronto (Ontario), Edmonton (Alberta), and Vancouver (British Columbia), and Creemore (Ontario).

Molson plans to complete the construction of a Cdn $35 million brewery in Moncton, New Brunswick by January 2007. The new brewery will feature bottling and keg lines and have the flexibility for the future installation of a canning line. Brewing capacity will be more than 6 million 12-packs annually or 250,000 hectoliters.

The distribution systems in each province generally provide the collection network for returnable bottles and cans. The standard container for beer brewed in Canada is the 341 ml returnable bottle, which represents approximately 69% of domestic sales in Canada, with cans accounting for 19% and draught for 12%.

Total industry volume in Canada is sensitive to factors such as weather, changes in demographics and consumer preferences. Consumption of beer in Canada is also seasonal with approximately 40% of industry sales volume occurring during the four months from May through August.

In the Canadian beer market, volumes have been gradually migrating from premium brands to super premium brands and value brands since 2001. After significant growth in 2004, the value segment in Canada began to stabilize in 2005. The national price gap between premium brands and value brands narrowed as value prices stabilized in all markets and increased in key markets. Brands in the premium segment held regular selling prices but used targeted feature price activity to generate growth.

The Canadian brewing industry is a mature market. It is characterized by aggressive competition for volume and market share from regional brewers, microbrewers and certain foreign brewers, as well as Molson's main domestic competitor. These competitive pressures require significant annual investment in marketing and selling activities.

There are three major beer segments based on price: super premium, which includes imports and represents 16% of total sales of the industry and 13% of total sales of Molson; premium, which includes the majority of domestic brands and the light sub-segment and represents 60% of total sales of the industry and 65% of total sales of Molson; and the discount segment which represents 22% of total sales of the industry and 21% of total sales of Molson.

During 2005, estimated industry sales volume in Canada, including sales of imported beers, increased by approximately 2%.

The Canada brewing industry is comprised principally of two major brewers, Molson and Labatt, whose combined market share is approximately 83% of beer sold in Canada.

The Ontario and Québec markets account for approximately 63% of the total beer market in Canada. The top ten brands in Canada account for approximately 56% of the packaged market in Canada in fiscal 2005.

The Europe segment consists of our production and sale of the CBL brands principally in the United Kingdom, our joint venture arrangement for the production and distribution of Grolsch in the United Kingdom and Republic of Ireland (consolidated under FIN 46R beginning in 2004), factored brand sales (beverage brands owned by other companies, but sold and delivered to retail by us), and our joint venture arrangement with Exel Logistics for the distribution of products throughout Great Britain (Tradeteam). Our Europe segment also includes a small volume of sales in Asia, Russia and other export markets.

CBL has headquarters in Burton-on-Trent, England, and is the United Kingdom's second-largest beer company with unit volume sales of approximately 10.3 million US barrels in 2005. CBL has an approximate 21% share of the UK beer market, Western Europe's second-largest market. Sales are primarily in England and Wales, with the Carling brand (a mainstream lager) representing approximately 75% of CBL's total beer volume.

Over the past three decades, volumes have shifted from the on-premise channel, where products are consumed in pubs and restaurants, to the off-premise channel, also referred to as the "take-home" market. Unlike the United States, where manufacturers are generally not permitted to distribute beer directly to retail, the large majority of our beer in the United Kingdom is sold directly to retailers.

Distribution activities for CBL are conducted by Tradeteam, which operates a system of satellite warehouses and a transportation fleet. Tradeteam also manages the transportation of certain raw materials, such as malt, to the CBL breweries.

We continue to develop markets in Japan and China, which are managed by the Europe segment's management team. The Japanese business is currently focused on the Zima and Coors brands.We also sell Coors Light and Coors in China. We have closed our operations in Taiwan.

The on-premise channel accounted for approximately 63% of our UK sales volumes in 2005. The installation and maintenance of draught beer dispensing equipment in the on-premise channel is generally the responsibility of the brewer in the United Kingdom. CBL, therefore, owns equipment used to dispense beer from kegs to consumers. This includes beer lines, line cooling equipment, taps and countermounts.

Similar to other UK brewers, CBL has traditionally used loans to secure supply relationships with customers in the on-premise market. Loans have been granted at below-market rates of interest, with the outlet purchasing beer at lower-than-average discount levels to compensate. We reclassify a portion of sales revenue as interest income to reflect the economic substance of these loans.

The off-premise channel accounted for approximately 37% of our UK sales volume in 2005. The off-premise market includes sales to supermarket chains, convenience stores, liquor store chains, distributors and wholesalers.

We use the highest-quality water, barley and hops to brew our products. We assure the highest-quality water by obtaining our water from private water sources which are carefully chosen for their purity and which are regularly tasted and tested both analytically and microbiologically to ensure their ongoing purity and to confirm that all the requirements of the UK private water regulations are met. Public supplies are used as back-ups to the private supplies in some breweries and these are again tasted and tested regularly to ensure their ongoing purity. For agricultural crops such as barley and hops, we place forward contracts to ensure we have availability of the volume and varieties we require.

We operate three breweries in the United Kingdom. The Burton-on-Trent brewery, located in the Midlands, is the largest brewery in the United Kingdom. The other smaller breweries are located in Tadcaster and Alton.

We used kegs and casks for approximately 57% of our UK products in 2005, reflecting a high percentage of product sold on-premise.

Approximately 34% of our UK products were packaged in cans in 2005. Virtually all of our cans were purchased through supply contracts with Ball.

The remaining 9% of our UK products are packaged in glass bottles purchased through supply contracts with third-party suppliers.

In the UK, the beer industry is subject to seasonal sales fluctuation primarily influenced by holiday periods, weather and by certain major televised sporting events. There is a peak during the summer and during the Christmas and New Year period. The Christmas/New Year holiday peak is most pronounced in the off-premise channel. Consequently, our largest quarters by volume are the third and fourth quarters, and the smallest are the first and second.

Beer consumption in the United Kingdom declined by an average of 0.9% per annum between 1980 and 2000. Over the last 5 years, volume has reached a plateau, providing some stability. The longer-term decline has been mainly attributable to the on-premise channel, where volumes are now approximately 44% lower than in 1980. Over the same period, off-premise volume has increased by approximately 210%. This trend is expected to continue and has been influenced by a number of factors, including changes in consumers' lifestyles and an increasing price difference between beer prices in the on- and off-premise channels. Both trends continued in 2005 with off-premise market growth of 0.9% and a decline in the on-premise market of 3.8%.

There has also been a steady trend away from ales and towards lager, driven predominantly by the leading lager brands. In 1980, lagers accounted for 31% of beer sales, and in 2005 lagers accounted for over 72%, up from 71% in 2004. While lager volume has been growing, ales, including stouts, have declined during this period, and this trend has accelerated in the last few years. The leading beer brands are generally growing at a faster rate than the market. The top 10 brands now represent approximately 65% of the total market, compared to only 34% in 1995.

Our beers and flavored alcohol beverages compete not only with similar products from competitors, but also with other alcohol beverages, including wines and spirits. With the exception of stout, where we do not have our own brand, our brand portfolio gives us strong representation in all major beer categories. Our strength in the growing lager category with Carling, Grolsch and Coors Fine Light Beer positions us well to take advantage of the continuing trend toward lagers.

Our principal competitors are Scottish & Newcastle UK Ltd., Inbev UK Ltd. and Carlsberg UK Ltd. We are Great Britain's second-largest brewer, with a market share of approximately 21% (excluding factored brands sales), based on AC Nielsen information. This compares to Scottish &

Newcastle UK Ltd.'s share of approximately 24%, Inbev UK Ltd.'s share of approximately 20% and Carlsberg UK Ltd.'s share of approximately 13%. Two of our three core brands—Carling, and Coors Fine Light Beer—increased their product category share in 2005.

We own trademarks on the majority of the brands we produce and have licenses for the remainder. We also hold several patents on innovative processes related to product formula, can making, can decorating and certain other technical operations. These patents have expiration dates through 2021. These expirations are not expected to have a significant impact on our business.

General inflation is not normally a factor in any of the segments in which we operate, although we periodically experience inflationary trends in specific areas, such as fuel costs, which were significantly higher in 2005 when compared to prior years.

Our business in the United States and its territories is highly regulated by federal, state and local governments. These regulations govern many parts of our operations, including brewing, marketing and advertising, transportation, distributor relationships, sales and environmental issues. To operate our facilities, we must obtain and maintain numerous permits, licenses and approvals from various governmental agencies, including the US Treasury Department; Alcohol and Tobacco Tax and Trade Bureau; the US Department of Agriculture; the US Food and Drug Administration; state alcohol regulatory agencies as well as state and federal environmental agencies.

Governmental entities also levy taxes and may require bonds to ensure compliance with applicable laws and regulations. US federal excise taxes on malt beverages are currently $18 per barrel. State excise taxes also are levied at rates that ranged in 2005 from a high of $33 per barrel in Hawaii to a low of $0.60 per barrel in Wyoming.

In Canada, provincial governments regulate the production, marketing, distribution, sale and pricing of beer and impose commodity taxes and license fees in relation to the production and sale of beer. In 2005, Canada excise taxes totaled $452 million or $61 per barrel sold. In addition, the federal government regulates the advertising, labeling, quality control, and international trade of beer, and also imposes commodity taxes, consumption taxes, excise taxes and in certain instances, custom duties on imported beer. Further, certain bilateral and multilateral treaties entered into by the federal government, provincial governments and certain foreign governments, especially with the government of the United States, affect the Canadian beer industry. While the beer industry in many countries, including the United States, is subject to government regulation, Canadian brewers have historically been subject to even greater regulation.

In the United Kingdom, regulations apply to many parts of our operations and products, including brewing, food safety, labeling and packaging, marketing and advertising, environmental, health and safety, employment, and data protection regulations. To operate our breweries and carry on business in the United Kingdom, we must obtain and maintain numerous permits and licenses from local Licensing

Justices and governmental bodies, including HM Customs & Excise; the Office of Fair Trading; the Data Protection Commissioner and the Environment Agency.

The UK government levies excise taxes on all alcohol beverages at varying rates depending on the type of product and its alcohol content by volume. In 2005, we incurred approximately $1.1 billion in excise taxes on gross revenues of approximately $2.6 billion, or approximately $102 per barrel.

We are one of a number of entities named by the Environmental Protection Agency (EPA) as a potentially responsible party (PRP) at the Lowry Superfund site. This landfill is owned by the City and County of Denver (Denver), and is managed by Waste Management of Colorado, Inc. (Waste Management). In 1990, we recorded a pretax charge of $30 million, a portion of which was put into a trust in 1993 as part of a settlement with Denver and Waste Management regarding the then outstanding litigation. Our settlement was based on an assumed remediation cost of $120 million (in 1992 adjusted dollars). The settlement requires us to pay a portion of future costs in excess of that amount.

Considering uncertainties at the site, including what additional remedial actions may be required by the EPA, new technologies, and what costs are included in the determination of when the $120 million threshold is reached, the estimate of our liability may change as facts further develop. We cannot predict the amount or timing of any such change, but additional accruals could be required in the future.

We are aware of groundwater contamination at some of our properties in Colorado resulting from historical, ongoing or nearby activities. There may also be other contamination of which we are currently unaware.

From time to time, we have been notified that we are or may be a PRP under the Comprehensive Environmental Response, Compensation and Liability Act or similar state laws for the cleanup of other sites where hazardous substances have allegedly been released into the environment. While we cannot predict our eventual aggregate cost for the environmental and related matters in which we may be or are currently involved, we believe that any payments, if required, for these matters would be made over a period of time in amounts that would not be material in any one year to our operating results, cash flows or our financial or competitive position. We believe adequate reserves have been provided for losses that are probable and estimable. See Note 19 to our consolidated financial statements in Item 8 on page 118.

Our Canadian brewing operations are subject to provincial environmental regulations and local permit requirements. Each of our Canadian breweries, other than the St. John's brewery, either has water pre-treatment capabilities or are permitted to discharge into the public sewer system. We have comprehensive environmental programs in Canada including organization, monitoring and verification, regulatory compliance, reporting, education and training, and corrective action.

MCBC remains responsible for sites relating to discontinued operations of Molson's chemical specialties business sold in 1996, which require environmental remediation programs. These programs are either under way or are planned. Most of these sites relate to properties associated with previously owned business of chemicals and we have established provisions for the costs of these remediation programs. Some of them involve sites in the United States.

We are subject to the requirements of government and local environmental and occupational health and safety laws and regulations. Compliance with these laws and regulations did not materially affect our 2005 capital expenditures, earnings or competitive position, and we do not anticipate that they will do so in 2006.

We have approximately 4,200 employees in our US segment. Memphis hourly employees, who constitute approximately 9% of our US work force, are represented by the Teamsters union; and a small number of other employees are represented by other unions. The Memphis union contract was renegotiated in 2005, which included provisions impacted by our plans to close the Memphis facility. We believe that relations with our US employees are good.

We have approximately 3,000 full-time employees in our Canada segment. Approximately 67% of this total workforce is represented by trade unions. Workplace change initiatives are continuing and as a result, joint union and management steering committees established in most breweries are focusing on customer service, quality, continuous improvement, employee training and a growing degree of employee involvement in all areas of brewery operations. We believe that relations with our Canada employees are good.

We have approximately 3,000 employees in our Europe segment. Approximately 29% of this total workforce is represented by trade unions, primarily at our Burton-on-Trent and Tadcaster breweries. Separate negotiated agreements are in place with the Transport and General Workers Union at the Tadcaster Brewery and the Burton-on-Trent Brewery. The agreements do not have expiration dates, and negotiations are conducted annually. We believe that relations with our Europe employees are good.

(d) Financial Information about Foreign and Domestic Operations and Export Sales

See Item 8, Financial Statements and Supplementary Data, for discussion of sales, operating income and identifiable assets attributable to our country of domicile, the United States, and all foreign countries.

Our internet website is http://www.molsoncoors.com. Through a direct link to our reports at the SEC's website at http://www.sec.gov, we make available, free of charge on our website, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports as soon as reasonably practicable after we electronically file or furnish such materials to the SEC.

Cautionary Statement Pursuant to Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995

This document and the documents incorporated in this document by reference contain forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact contained in this document and the materials accompanying this document are forward-looking statements.

Forward-looking statements are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Frequently, but not always, forward-looking statements are identified by the use of the future tense and by words such as "believes," "expects," "anticipates," "intends," "will," "may," "could," "would," "projects," "continues," "estimates," or similar expressions. Forward-looking statements are not guarantees of future performance and actual results could differ materially from those indicated by forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause our or our industry's actual results, level of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by the forward-looking statements.

The forward-looking statements contained or incorporated by reference in this document are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the Exchange Act) and are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. These statements include declarations regarding our plans, intentions, beliefs or current expectations.

Among the important factors that could cause actual results to differ materially from those indicated by forward-looking statements are the risks and uncertainties described under "Risk Factors" and elsewhere in this document and in our other filings with the SEC.

Forward-looking statements are expressly qualified in their entirety by this cautionary statement. The forward-looking statements included in this document are made as of the date of this document and we do not undertake any obligation to update forward-looking statements to reflect new information, subsequent events or otherwise.

The reader should carefully consider the following factors and the other information contained within this document. The most important factors that could influence the achievement of our goals, and cause actual results to differ materially from those expressed in the forward-looking statements, include, but are not limited to, the following:

We may not realize the cost savings and other benefits we currently anticipate due to challenges associated with integrating the operations, technologies, sales and other aspects of the businesses of Molson and Coors. Our success will depend in large part on management's success in integrating the operations, technologies and personnel of Molson and Coors. If we fail to integrate the operations of Molson and Coors or otherwise fail to realize any of the anticipated benefits of the Merger transaction, including the estimated cost savings of approximately $175 million annually by the third year following the Merger, our results of operations could be impaired. In addition, the overall integration of the two companies may result in unanticipated operations problems, expenses and liabilities, and diversion of management's attention.

If Pentland and the Coors Trust do not agree on a matter submitted to stockholders, generally the matter will not be approved, even if beneficial to the Company or favored by other stockholders. Pentland and the Coors Trust, which together control more than two-thirds of the Company's Class A Common and Exchangeable stock, have voting trust agreements through which they have combined their voting power over the shares of our Class A common stock and the Class A exchangeable shares that they own. However, in the event that these two stockholders do not agree to vote in favor of a matter submitted to a stockholder vote (other than the election of directors), the voting trustees will be required to vote all of the Class A common stock and Class A exchangeable shares deposited in the voting trusts against the matter. There is no other mechanism in the voting trust agreements to resolve

a potential deadlock between these stockholders. Therefore, if either Pentland or the Coors Trust is unwilling to vote in favor of a transaction that is subject to a stockholder vote, we may be unable to complete the transaction even if our board, management or other stockholders believe the transaction is beneficial for Molson Coors.

Indemnities provided to the purchaser of 68% of the Kaiser business in Brazil could result in future cash outflows and income statement charges. On January 13, 2006, we sold a 68% equity interest in Kaiser to FEMSA for $68 million cash, including the assumption by FEMSA of Kaiser-related debt and contingencies. The terms of the agreement require us to indemnify FEMSA for exposures related to certain tax, civil and labor contingencies. The ultimate resolution of these claims is not under our control, and we cannot predict the outcomes of administrative and judicial proceedings that will occur with regard to these claims. It is possible that we will have to make cash outlays to FEMSA with regard to these indemnities. While the fair values of these indemnity obligations will be recorded on our balance sheet in conjunction with the sale, we could incur future income statement charges as facts further develop resulting in changes to our fair value estimates.

Our success as an enterprise depends largely on the success of three primary products; the failure or weakening of one or more could materially adversely affect our financial results. Although we currently have 14 products in our US portfolio, Coors Light represented more than 72% of our US sales volume for 2005. Carling lager is the best-selling brand in the United Kingdom and represented approximately 75% of CBL sales volume in 2005. The combination of the Molson Canadian and Coors Light brands represented approximately 45% of our Canada segment's sales volume for the year ended December 25, 2005. Consequently, any material shift in consumer preferences away from these brands would have a disproportionately large adverse impact on our business.

We have indebtedness that is substantial in relation to our stockholders' equity, which could hinder our ability to adjust to rapid changes in market conditions or to respond to competitive pressures. As of December 25, 2005, we had $850 million in debt primarily related to our acquisition of CBL, and $1.4 billion of debt primarily related to our Merger with Molson. As a result, we must use a substantial portion of our cash flow from operations to pay principal and interest on our debt. If our financial and operating performance is insufficient to generate sufficient cash flow for all of our activities, our operations could be adversely impacted.

We rely on a small number of suppliers to obtain the packaging we need to operate our business, of which the loss or inability to obtain materials could negatively affect our ability to produce our products. For our US business, we purchase most of our paperboard and container supplies from a single supplier or a small number of suppliers. This packaging is unique and is not produced by any other supplier. Additionally, we are contractually obligated to purchase substantially all our can and bottle needs in the United States from our container joint ventures or from our partners in those ventures, Ball Corporation (RMMC) and Owens-Brockway Glass Container, Inc. (RMBC). Consolidation of the glass bottle industry in North America has reduced local supply alternatives and increased risks of glass bottle supply disruptions. CBL has only a single source for its can supply (Ball). The inability of any of these suppliers to meet our production requirements without sufficient time to develop an alternative source could have a material adverse effect on our business.

Our primary production facilities in Europe and the United States are located at single sites, so we could be more vulnerable than our competitors to transportation disruptions, fuel increases and natural disasters. Our primary production facility in the United States is in Golden, Colorado and in Europe, our primary production facility is located in Burton-on-Trent, England. In both countries, our competitors

have multiple geographically dispersed breweries and packaging facilities. As a result, we must ship our products greater distances than some of our competitors, making us more vulnerable to fluctuations in costs such as fuel, as well as the impact of any localized natural disasters should they occur.

The termination of one or more manufacturer/distribution agreements could have a material adverse effect on our business. We manufacture and/or distribute products of other beverage companies, including those of one or more competitors, through various licensing, distribution or other arrangements in Canada and the United Kingdom. The loss of one or more of these arrangements could have a material adverse effect on the results of one or more reporting segments.

Because we will continue to face intense global competition, operating results may be negatively impacted. The brewing industry is highly competitive and requires substantial human and capital resources. Competition in our various markets could cause us to reduce prices, increase capital and other expenditures or lose sales volume, any of which could have a material adverse effect on our business and financial results. In addition, in some of our markets, our primary competitors have substantially greater financial, marketing, production and distribution resources than Molson Coors has. In all of the markets where Molson Coors operates, aggressive marketing strategies by our main competitors could adversely affect our financial results.

Changes in tax, environmental or other regulations or failure to comply with existing licensing, trade and other regulations could have a material adverse effect on our financial condition. Our business is highly regulated by federal, state, provincial and local laws and regulations in various countries regarding such matters as licensing requirements, trade and pricing practices, labeling, advertising, promotion and marketing practices, relationships with distributors, environmental matters and other matters. Failure to comply with these laws and regulations could result in the loss, revocation or suspension of our licenses, permits or approvals. In addition, changes in tax, environmental or any other laws or regulations could have a material adverse effect on our business, financial condition and results of operations.

We are subject to fluctuations in foreign exchange rates, most significantly the British pound and the Canadian dollar. We hold assets and incur liabilities, earn revenues and pay expenses in different currencies, most significantly sales of Coors Light in Canada, and sales of the Carling brand in the United Kingdom. Since our financial statements are presented in US dollars, we must translate our assets, liabilities, income and expenses into US dollars at current exchange rates. Increases and decreases in the value of the US dollar will affect, perhaps adversely, the value of these items in our financial statements, even if their local currency value has not changed.

Our operations face significant commodity price change and foreign exchange rate exposure which could materially and adversely affect our operating results. We will use a large volume of agricultural and other raw materials to produce our products, including malt, hops, water and packaging materials. The supply and price of these raw materials can be affected by a number of factors beyond our control, including frosts, droughts and other weather conditions, economic factors affecting growth decisions, plant diseases, theft and market demand. To the extent any of the foregoing factors affect the prices of ingredients or packaging; our results of operations could be materially and adversely impacted. We have active hedging programs to address commodity price and foreign exchange rate changes. However, to the extent we fail to adequately manage the foregoing risks, including if our hedging arrangements do not effectively or completely hedge changes in foreign currency rates or commodity price risks, our results of operations may be adversely impacted.

We could be adversely affected by overall declines in the beer market. Industry trends in many global markets indicate increases in consumer preference for wine and spirits, as well as for lower priced, value segment beer brands in some Canada markets, which could result in loss of volume or operating margins.

Because of our reliance on a limited number of technical service suppliers, we could experience significant disruption to our business. We rely exclusively on one information technology services provider for our network, help desk, hardware, and software configuration for our US and UK businesses. Additionally, we rely on a single provider in Canada. If the service providers fail and we are unable to find a suitable replacement in a timely manner, we could be unable to properly administer our information technology systems.

Due to a high concentration of unionized workers in the United Kingdom and Canada, we could be significantly affected by labor strikes, work stoppages or other employee-related issues. Approximately 29% of CBL's total workforce and approximately 67% of Molson's total workforce is represented by trade unions. Although we believe relations with our employees are good, more stringent labor laws in the United Kingdom expose us to a greater risk of loss should we experience labor disruptions in that market.

Changes to the regulation of the distribution systems for our products could adversely impact our business. The US Supreme Court recently ruled that certain state regulations of interstate wine shipments are unlawful. As a result of this decision, states may alter the three-tier distribution system that has historically applied to the distribution of our products. Although it is too early to tell what, if any, changes states may make as a result of this decision, changes to the three-tier distribution system could have a materially adverse impact on our business. Further, in certain Canadian provinces, our products are distributed through joint venture arrangements that are mandated and regulated by provincial government regulators. If provincial regulation should change, effectively eliminating the distribution channels, the costs to adjust our distribution methods could have a material adverse impact on our business.

Litigation directed at the alcohol beverage industry may adversely affect our sales volumes, our business and our financial results. Molson Coors and many other brewers and distilled spirits manufacturers have been sued in several courts regarding advertising practices and underage consumption. The suits allege that each defendant intentionally marketed its products to "children and other underage consumers." In essence, each suit seeks, on behalf of an undefined class of parents and guardians, an injunction and unspecified money damages. We will vigorously defend these lawsuits and it is not possible at this time to estimate the possible loss or range of loss, if any, in these lawsuits.

We are highly dependent on independent distributors in the United States to sell our products, with no assurance that these distributors will effectively sell our products. We sell all of our products in the United States to distributors for resale to retail outlets. Some of our distributors are at a competitive disadvantage because they are smaller than the largest distributors in their markets. Our distributors also sell products that compete with our products. These distributors may give our competitors' products higher priority, thereby reducing sales of our products. In addition, the regulatory environment of many states makes it very difficult to change distributors. Consequently, if we are not allowed or are unable to replace unproductive or inefficient distributors, our business, financial position, and results of operation may be adversely affected.

We may be required to provide funding to or exercise control over the entity that owns the entertainment business and the Montréal Canadiens pursuant to the guarantees given to its lenders and the NHL. Pursuant to certain guarantees given to the lenders and the NHL in support of the entity that owns the majority of the entertainment business and the Montréal Canadiens professional hockey club (purchased from Molson in 2001), Molson shall provide funding to the entity to meet its obligations to the lenders and the entity's operating expenses and Molson shall exercise control over the entity that owns the hockey

club at predetermined conditions, subject to NHL approval, if the entity does not meet its obligations under various agreements.

An adverse result in a lawsuit brought by Miller could have an adverse impact on our business. In December 2005, Miller Brewing Company sued the Company and several subsidiaries in a Wisconsin federal court. Miller seeks to invalidate a licensing agreement allowing Molson Canada the sole distribution of Miller products in Canada. Miller claims US and Canadian antitrust violations, and violations of the Agreement's confidentiality provisions. Miller also claims that the Agreement's purposes have been frustrated as a result of the Molson Coors merger. If Miller were to prevail in this action, it could have an adverse impact on our business.

If we are unsuccessful in renegotiating licensing, distribution and related agreements, our business could suffer adverse effects. We manufacture and/or distribute products of other beverage companies in Canada, including those of one or more competitors, through various licensing, distribution or other arrangements. We are currently in negotiations with two of such companies to enter into new agreements. The loss of one or more of these arrangements could adversely impact our business.

If regulatory authorities determine that industry understandings regarding the bottle standards are invalid, our business could be adversely impacted. The Canadian Competition Bureau is currently reviewing the validity of industry arrangements regarding industry bottle standards. If the Bureau were to determine that the agreement is anticompetitive, we may be required to use multiple bottle types which could significantly increase our production and other related costs.

Consolidation of pubs and growth in the size of pub chains in the United Kingdom could result in less ability to achieve pricing. The trend toward consolidation of pubs, away from independent pub and club operations, is continuing in the United Kingdom. These larger entities have stronger price negotiating power, which could impact CBL's ability to obtain favorable pricing in the on-premise channel (due to spillover effect of reduced negotiating leverage) and could reduce our revenues and profit margins. In addition, these larger customers are beginning to purchase directly more of the products that, in the past, we have provided as part of our factored business. This consolidation could impact us adversely.

We depend exclusively on one logistics provider in England, Wales and Scotland for distribution of our CBL products. We are involved in a joint venture with Exel Logistics called Tradeteam. Tradeteam handles all of the physical distribution for CBL in England, Wales and Scotland, except where a different distribution system is requested by a customer. If Tradeteam were unable to continue distribution of our product and we were unable to find a suitable replacement in a timely manner, we could experience significant disruptions in our business that could have an adverse impact on our operations.

We are reliant on a single third party as a supplier for kegs in the United Kingdom. We do not own our kegs in the United Kingdom; rather we source our kegs from a logistics provider who is responsible for their ownership, upkeep, and to maintain an adequate stock. If this third party provider were to have a business failure, we may be required to purchase a stock of kegs, the estimated cost of which would be $61 million.

Sales volumes in the United Kingdom brewing industry have been moving from on-premise locations to off-premise locations, a trend which unfavorably impacts our profitability. We have noted in recent years that beer volume sales in the UK have been shifting from pubs and restaurants (on-premise) to retail stores (off-premise), for the industry in general. Margins on sales to off-premise customers tend to be lower than margins on sales to on-premise customers. A continuation of this trend could adversely impact our profitability.

Facility	Location	Character
United States
Corporate office(6)	Denver, CO	Office space
Brewery/packaging plants	Golden, CO Memphis, TN(1) Tecate, Mexico(2)	Malt beverages/packaged malt beverages
Packaging plant	Elkton, VA (Shenandoah Valley)	Packaged malt beverages
Can and end plant	Golden, CO	Aluminum cans and ends
Bottle plant	Wheat Ridge, CO	Glass bottles
Distributorship locations	Meridian, ID Glenwood Springs, CO Denver, CO	Wholesale beer distribution
Five distribution warehouses	Throughout the United States	Distribution centers
Europe
Brewery/packaging plants	Burton-on-Trent, Staffordshire Tadcaster Brewery, Yorkshire Alton Brewery, Hampshire	Malt and spirit-based beverages/packaged malt beverages
Distribution warehouse	Burton-on-Trent, Staffordshire	Distribution center
Canada
Corporate office	Montréal, Québec	Office space
Brewery/packaging plants	St Johns, Newfoundland Montréal, Québec Toronto, Ontario Creemore, Ontario Edmonton, Alberta Vancouver, British Columbia	Packaged malt beverages
Retail stores	Ontario Province(4)	Beer retail stores
Distribution warehouses	Montréal, Québec Ontario Province(5)	Distribution centers
Brazil(3)
Brewery/packaging plants	Araraquara, São Paulo Cuiabá, Mato Grosso do Sul Feira de Santana, Bahia Gravataí, Rio Grande do Sul Jacareí, São Paulo Manaus, Amazonas Pacatuba, Ceará Ponta Grossa, Paraná	Malt beverages/packaged malt beverages

We believe our facilities are well maintained and suitable for their respective operations. In 2005, our operating facilities were not constrained by capacity issues. Our satellite warehouses are owned and operated by third parties. Unless otherwise noted, all other locations are owned by the Company.

Beginning in May 2005, several purported class actions were filed in the United States and Canada, including Federal courts in Delaware and Colorado and provincial courts in Ontario and Québec, alleging, among other things, that the Company and its affiliated entities, including Molson Inc., and certain officers and directors misled stockholders by failing to disclose first quarter (January-March) 2005 US business trends prior to the Merger vote in January 2005. One of the lawsuits filed in Delaware federal court also alleges that the Company failed to comply with US GAAP. The Company will vigorously defend the lawsuits.

The Company has been contacted by the Central Regional Office of the US Securities and Exchange Commission in Denver (the SEC) requesting the voluntary provision of documents and other information from the Company and Molson Inc. relating primarily to corporate and financial information and communications related to the Merger, the Company's financial results for the first quarter of 2005 and other information. The SEC has advised the Company that this inquiry should not be construed as an indication by the SEC or its staff that any violations of law have occurred, nor should it be considered a reflection upon any person, entity, or security. The Company is cooperating with the inquiry.

The Company has also been contacted by the New York Stock Exchange. The Exchange has requested information in connection with events leading up to the Company's earnings announcement on April 28, 2005, which was the date we announced our first quarter 2005 losses attributed to lower sales and the Merger. The Exchange regularly conducts reviews of market activity surrounding corporate announcements or events and has indicated that no inference of impropriety should be drawn from its inquiry. The Company is cooperating with this inquiry.

On July 20, 2005, the Ontario Securities Commission requested information related to the trading of MCBC stock prior to April 28, 2005, which was the date we announced our first quarter 2005 losses attributed to lower sales and the Merger. We are cooperating with the inquiry.

The Audit Committee of the Company's Board of Directors is investigating whether a complaint that it received in the third quarter of 2005 has any merit. The Committee has hired independent counsel to assist it in conducting the investigation. The complaint relates primarily to disclosure in connection with the Merger, exercises of stock options by Molson Inc. option holders before the record date for the special dividend paid to Molson Inc. shareholders before the Merger (which were disclosed in the Company's Current Report on Form 8-K dated February 15, 2005), statements made concerning the special dividend to Molson Inc. shareholders, and sales of the Company's common stock in connection with exercise of stock options by the Company's chief executive officer and chief financial officer following the Merger, after the release of the year-end results for Coors and Molson Inc. and after the Company lifted the trading restrictions imposed before the Merger. The Board of Directors has full confidence in senior management, including the chief executive officer and chief financial officer.

In December 2005, Miller Brewing Company sued the Company and several subsidiaries in a Wisconsin federal court. Miller seeks to invalidate a licensing agreement (the Agreement) allowing Molson Canada the sole distribution of Miller products in Canada. Miller also seeks damages for US and Canadian antitrust violations, and violations of the Agreement's confidentiality provisions. Miller also claims that the Agreement's purposes have been frustrated as a result of the Merger. The Company intends to vigorously defend this lawsuit, and has filed a claim against Miller and certain related entities in Ontario, Canada, seeking a declaration that the licensing agreement remains in full force and effect.

Molson Coors and many other brewers and distilled spirits manufacturers have been sued in several courts regarding advertising practices and underage consumption. The suits have all been brought by the same law firm and allege that each defendant intentionally marketed its products to "children and other underage consumers." In essence, each suit seeks, on behalf of an undefined class of parents and guardians, an injunction and unspecified money damages. In each suit, the manufacturers have advanced motions for dismissal to the court. During the third quarter of 2005, one of the courts—the District Court for Jefferson County, Colorado—granted the manufacturers' motion, dismissed all claims with prejudice, and granted attorneys' fees to the defendants. In early 2006, two more courts (a federal court in Cleveland, Ohio, and a state court in Madison, Wisconsin) dismissed the suits. Plaintiffs have appealed two of three dismissals; the time to appeal the third has not arrived. We will vigorously defend these cases and it is not possible at this time to estimate the possible loss or range of loss, if any, in these lawsuits.

CBL replaced a bonus plan in the United Kingdom with a different plan under which a bonus was not paid in 2003. A group of employees pursued a claim against CBL for this issue with an arbitration board. During the second quarter of 2005, the board ruled against CBL. CBL has appealed the arbitration award and is confident that it will be reversed. We have estimated the cost of the award, if affirmed, to be $1 million, and accrued that amount as of June 26, 2005. If the award were applied to other groups of employees, the potential loss could be higher.

We are involved in other disputes and legal actions arising in the ordinary course of our business. While it is not feasible to predict or determine the outcome of these proceedings, in our opinion, based on a review with legal counsel, none of these disputes and legal actions is expected to have a material impact on our consolidated financial position, results of operations or cash flows. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters, including the above-described advertising practices case, may arise from time to time that may harm our business.

ITEM 5. Market for the Registrant's Common Equity and Issuer Purchases of Equity Securities

Prior to the Merger, our Class B non-voting common stock was traded on the New York Stock Exchange since March 11, 1999, under the symbol "RKY" since March 11, 1999 and prior to that was quoted on the NASDAQ National Market under the symbol "ACCOB." As a result of the Merger, our Class B non-voting common stock is trading on the New York Stock Exchange and the Toronto Stock Exchange under the symbol "TAP."

In connection with the Merger and effective February 9, 2005, our common equity is significantly different. We now have Class A and Class B common stock trading on the New York Stock Exchange under the symbols "TAP A" and "TAP," respectively, and on the Toronto Stock Exchange as "TAP.LV.A" and "TAP.NV," respectively. In addition, our indirect subsidiary, Molson Coors Exchangeco, has Exchangeable Class A and Exchangeable Class B shares trading on the Toronto Stock Exchange under the symbols "TPX.LV.A" and "TPX.NV," respectively. The exchangeable shares are a means to defer tax in Canada. The exchangeable shares can be exchanged for Molson Coors Class A or B common stock at any time and at the same exchange ratios described in the Merger documents, and will receive the same dividends. At the time of exchange, taxes are due. The exchangeable shares have voting rights through special voting shares held by a trustee and the holders thereof are able to elect members of the Board of Directors. See Note 2 on page 76 to the accompanying Consolidated Financial Statements for information on the exchange ratios used to effect the Merger. Refer to the definitive proxy statement, dated December 9, 2004, and supplemented on January 19, 2005, for complete descriptions of the Molson Coors capital stock.

The Merger was effected by the issuance of Coors stock for Molson stock in a transaction that was valued at approximately $3.6 billion. Coors is considered the accounting acquirer, although the transaction is viewed as a merger of equals by the two companies. The transaction is discussed in Note 2 on page 76 to the accompanying Consolidated Financial Statements in Item 8. The approximate number of record security holders by class of stock at February 28, 2006, is as follows:

Title of class		Number of record security holders
Class A common stock, voting, $0.01 par value		30
Class B common stock, non-voting, $0.01 par value		3,050
Class A Exchangeable Shares		348
Class B Exchangeable Shares		3,492

The following table sets forth the high and low sales prices per share of our Class A common stock and dividends paid for each fiscal quarter of 2005 and 2004 as reported by the New York Stock Exchange.

	HIGH		LOW		DIVIDENDS(1)
*2005*
First Quarter	$	75.75	$	68.50	$	0.320
Second Quarter	$	80.00	$	63.69	$	0.320
Third Quarter	$	69.00	$	62.50	$	0.320
Fourth Quarter	$	68.75	$	63.69	$	0.320
*2004*
First Quarter		—		—		—
Second Quarter		—		—		—
Third Quarter		—		—		—
Fourth Quarter		—		—		—

The following table sets forth the high and low sales prices per share of our Class B common stock and dividends paid for each fiscal quarter of 2005 and 2004 as reported by the New York Stock Exchange.

	HIGH		LOW		DIVIDENDS(1)
*2005*
First Quarter	$	76.30	$	67.73	$	0.320
Second Quarter	$	79.50	$	58.09	$	0.320
Third Quarter	$	67.08	$	59.87	$	0.320
Fourth Quarter	$	67.62	$	60.87	$	0.320
*2004*
First Quarter	$	68.36	$	53.89	$	0.205
Second Quarter	$	71.12	$	63.90	$	0.205
Third Quarter	$	76.50	$	65.74	$	0.205
Fourth Quarter	$	75.25	$	65.28	$	0.205

The following table sets forth the high and low sales prices per share of our Exchangeable Class A shares and dividends paid for each fiscal quarter of 2005 and 2004 as reported by the Toronto Stock Exchange.

The following table sets forth the high and low sales prices per share of our Exchangeable Class B shares and dividends paid for each fiscal quarter of 2005 and 2004 as reported by the Toronto Stock Exchange.

The table below summarizes selected financial information for the five years ended as noted. For further information, refer to our consolidated financial statements and notes thereto presented under Item 8, Financial Statements and Supplementary Data, beginning on page 60.

	2005(2)		2004(2)		2003		2002(1)		2001
	(In thousands)
*Consolidated Balance Sheet Data:*
Cash and cash equivalents	$	39,413		$	123,013		$	19,440		$	59,167		$	309,705
Working capital (deficit)	$	(768,374	)	$	91,319		$	(54,874	)	$	(93,995	)	$	88,984
Total assets	$	11,799,265		$	4,657,524		$	4,444,740		$	4,297,411		$	1,739,692
Current portion of long-term debt and other short-term borrowings	$	348,102		$	38,528		$	91,165		$	144,049		$	88,038
Long-term debt	$	2,136,668		$	893,678		$	1,159,838		$	1,383,392		$	20,000
Stockholders' equity	$	5,324,717		$	1,601,166		$	1,267,376		$	981,851		$	951,312
*Consolidated Cash Flow Data:*
Cash provided by operations	$	422,275		$	499,908		$	528,828		$	244,968		$	193,396
Cash (used in) investing activities	$	(312,708	)	$	(67,448	)	$	(214,614	)	$	(1,570,761	)	$	(196,749	)
Cash (used in) provided by financing activities	$	(188,775	)	$	(335,664	)	$	(357,393	)	$	1,291,668		$	(38,844	)
*Other Information:*
Barrels of beer and other beverages sold		40,431			32,703			32,735			31,841			22,713
Dividends per share of common stock	$	1.28		$	0.820		$	0.820		$	0.820		$	0.800
Depreciation, depletion and amortization	$	392,814		$	265,921		$	236,821		$	227,132		$	121,091
Capital expenditures and additions to intangible assets	$	406,045		$	211,530		$	240,458		$	246,842		$	244,548

ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Our 2005 financial results reflect a significant change in the Company due to the Merger with Molson, Inc., as well as challenging operating environments in all of our major businesses.

Our net sales of $5.5 billion increased by $1.2 billion, or 28%, while the volume of beer sold by our company increased by 7.7 million barrels, or 24%. The main driver of these increases was the inclusion of the result of Molson's business in Canada, as a result of the Merger which occurred on February 9, 2005. Our operating income increased to $422 million from $348 million as a result of Molson's inclusion in our results. Operating income in 2005 included special items, discussed in more detail below and later in this section, of $145 million of expense, while 2004 operating income included $8 million of special income items. Net income was $135 million ($1.69 per diluted share) in 2005,

down from $197 million ($5.19 per diluted share) in 2004. Net income for 2005 included a loss from discontinued operations, represented by our former Brazil segment, of $92 million.

For comparability purposes, certain discussions in this section, particularly those regarding Canada, and in some instances for consolidated results, will also include pro forma comparisons, as if Molson's results were included in our pre-Merger results from the beginning of 2004. On a pro forma basis, net sales from continuing operations were $5.6 billion for 2005, down 4.4% from 2004. Pro forma net income in 2005 was $93.4 million, or $1.10 per diluted share.

Net sales—Our net sales represent almost exclusively the sale of beer and malt beverages, the vast majority of which are brands that we own and brew ourselves. We import or brew and sell certain non-owned partner brands under licensing and related arrangements. We also sell certain "factored brands," as a distributor, to customers in the United Kingdom (Europe segment).

Cost of goods sold—Our cost of goods sold include costs we incur to make and ship beer. These costs include brewing materials, such as barley, in the United States and United Kingdom where we manufacture our own malt. In Canada, we purchase malt from third parties. Hops and various starches are other key brewing materials purchased by all of our segments. Packaging materials, including costs for glass bottles, aluminum cans, and cardboard and paperboard are also included in our cost of goods sold. Our cost of goods sold also include both direct and indirect labor, freight costs, utilities, maintenance costs, and other manufacturing overheads.

Marketing, general and administrative—These costs include media advertising (television, radio, print), tactical advertising (signs, banners, point-of-sale materials) and promotion costs planned and executed on both local and national levels within our operating segments. Also included here are costs to run our sales organizations, including labor and other overheads. Lastly, this classification also includes general and administrative costs for functions such as finance, legal, human resources and information technology, which consist primarily of labor and outside services.

Special Items—These are unique items which affect our income statement, which are discussed below.

Other income (expense)—This classification includes primarily gains and losses associated with activities not directly related to brewing and selling beer. For instance, gains or losses on sales of non-operating assets, our share of income or loss associated with our ownership in the Montréal Canadiens hockey club, and certain foreign exchange gains and losses are classified here.

Interest income (expense), net—Interest costs associated with borrowings to finance our operations are included in the corporate unallocated costs. Interest income in the Europe segment is associated with certain trade loans receivable from customers.

Discussions of income statement line items such as minority interests, discontinued operations and cumulative effect of a change in accounting principle are discussed in detail elsewhere in MD&A and in the notes to the financial statements.

The Company's business in Brazil, which was acquired as part of the Merger, is now reported as discontinued operations due to the sale of a controlling interest in the business on January 13, 2006.

During 2005, the Brazil business affected the Company's financial results in the following ways, all of which are not expected to impact the Company's results in reporting periods following the sale:

The Brazil business reduced the Company's free cash flow by $22 million during 2005 due primarily to operating losses and interest expense.

The Company reported special items totaling $145.4 million during 2005. These special charges were primarily related to accelerated initiatives to improve the Company's future performance and were as follows:

The US segment recorded special charges of $68.1 million during 2005, primarily related to closing the Memphis brewery, including accelerated asset depreciation and estimated costs associated with settling pension obligations for Memphis brewery workers.

The Canada segment recorded special charges of $5.2 million during 2005, related primarily to restructuring of the sales and marketing organizations.

The Europe segment recorded net special charges of $13.8 million during 2005, primarily attributable to restructuring expenses for cost-reduction initiatives, as well as costs related to the closure of the Company's sales operation in Russia and Taiwan, netted against a net gain on disposals of assets during the year. We estimate annual savings from the Europe initiatives to approximate $20 million allocated 75% to selling, general and administrative and 25% to cost of goods sold beginning 2007.

Special charges allocated to Corporate in 2005 were $58.3 million, substantially all of which ($55.9 million) were associated with severance and other costs related to change in control and other agreements with departing officers following the Merger. These costs are discussed in more detail in Note 8 to our consolidated financial statements included in Item 8 on page 93.

During 2005, the Company captured $59 million in Merger-related cost synergies, surpassing the Company's 2005 goal of $50 million. The Company's Merger-related synergies goals are an incremental $50 million in 2006 and total annual synergies of $175 million, which are expected by the third year following the completion of the Merger. As a result of work performed by our synergy and operating teams during the first year of the Merger, we now anticipate capturing $75 million in additional cost-reduction opportunities by the end of 2008, above and beyond the original $175 million year-three synergies target.

Molson Coors has adopted Financial Accounting Standards Board Interpretation No. 47, "Accounting for Conditional Asset Retirement Obligations, an interpretation of FASB Statement No. 143" (FIN 47) under which companies must recognize potential long-term liabilities related to the eventual retirement of assets. As a result of adopting FIN 47, the Company recorded a cumulative non-cash expense of $3.7 million, after tax, in the 2005 fourth quarter, reported as Cumulative Effect of Change in Accounting in the Company's income statement.

As reported in the Company's 2005 fourth quarter and full year results, this expense represents accumulated remediation and restoration costs expected to be incurred up to 30 years in the future for anticipated asset retirements. Following this catch-up expense in the 2005 fourth quarter, the Company does not expect FIN 47-related expense to have a significant impact on its annual operating results.

The United States (US) segment produces, markets, and sells the Coors portfolio of brands in the United States and its territories and includes the results of the Rocky Mountain Metal Corporation (RMMC) and Rocky Mountain Bottle Corporation (RMBC) joint ventures consolidated beginning in 2004 under FIN 46R. The US segment also includes a small amount of Coors brand volume that is sold outside of the United States and its territories, including primarily Mexico and the Caribbean and sales of Molson products in the United States.

Full year US sales increased in 2005 versus 2004, driven by volume increases in the Coors Light, Keystone Light, and Blue Moon brands, and the addition of Molson brands sold in the United States included in US results following the Merger. Coors Light's performance improved because of better sales execution, an ad campaign (the "Silver Bullet Train"), and increased promotional activities. In addition, Coors Light benefited from the strength of the premium light beer category which increased in 2005. Offsetting these were volume declines related to Coors Original, Aspen Edge and Zima.

Net sales per barrel increased 1.3% from 2004 to 2005. We saw favorable front-line pricing in 2005, partially offset by significant price promotions and coupons and reflective of the competitive landscape. These factors combined allowed for approximately one-half of the increase in revenue per barrel. Collection of fuel surcharges from customers was the next largest factor contributing to the increase in net sales per barrel. However, our efforts to recover the higher costs of fuel from customers do not completely mitigate our exposure in this area, as discussed below under cost of goods sold.

US net sales improved by 2.2% in 2004 versus 2003, although sales volumes were lower year over year. Net sales per barrel improved by 3.1% in 2004 versus 2003, benefiting from a favorable industry pricing environment and lower price promotion levels in 2004. US sales in 2004 benefited from the introduction of Aspen Edge early in the year, and strong growth from the Blue Moon and Zima XXX brands later in the year. Collection of fuel price surcharges from customers added $4.6 million.

Cost of goods sold per barrel increased by 1.6% from $66.27 per barrel in 2004 to $67.35 per barrel in 2005. The increase in cost of goods sold per barrel was driven by high inflation in freight, diesel fuel, packaging materials, and energy costs. Inflation alone would have accounted for an increase of approximately 4% in cost of goods per barrel. However, these unfavorable factors were offset partially by favorable cost trends from supply chain cost management, labor productivity and synergies from the Merger.

Cost of goods sold increased $2.4 million or 0.2% in 2004 versus 2003. On a per barrel basis, the increase was approximately 1.0%. The increase was the net effect of inflation (primarily higher fuel and packaging costs) ($15.1 million); as well as increased labor-related expenses ($12.1 million) and a mix shift to higher-cost brands and packages, such as Aspen Edge in 2004 ($10.9 million); offset by the cycling of extra expense related to our supply chain system implementation costs in 2003 ($6.5 million); and the implementation of FIN 46R which had the effect of reducing our cost of sales by re-allocating certain joint venture expenses in our income statement out of cost of sales ($13.0 million).

Marketing, general and administrative expenses increased by $3.8 million, or 0.5% in 2005 versus 2004. Increased spending on sales capabilities were offset by lower general and administrative overhead costs.

Marketing, general and administrative expenses increased $43.0 million in 2004, compared to 2003, or 6.0%. This represents an additional $2.18 per barrel increase. The increase is due to higher investments in sales and marketing efforts ($29.6 million), in addition to modestly higher labor-related costs ($5.1 million).

Special items in the US segment in 2005 were associated primarily with the planned closure of the Memphis brewery, targeted for late 2006. We recorded $33.3 million in accelerated depreciation on brewery assets, reflecting their revised useful lives, $3.2 million in direct impairments of assets, $1.7 million for accruals of severance and associated benefits, and $25.0 million representing an estimate of costs to settle multi-employer pension plan obligations associated with Memphis workers. We recorded an additional $4.9 million of restructuring charges associated with brewery operations in Golden.

Other income was lower in 2005 versus 2004, primarily due to two large factors that occurred in 2004 but did not occur in 2005. First, we recorded $11.7 million of gains on the sale of certain owned, non-operating real estate, and second, we recorded royalties of $8.3 million from the receipt of cash in 2004 associated with a settlement from the purchaser of a coal mine previously owned by Coors.

Other income increased in 2004 versus 2003 for primarily the same reasons listed in the previous paragraph.

Before the Merger, the Canada segment consisted of Coors Brewing Company's 50.1% interest in the Coors Canada partnership through which the Coors Light business in Canada was conducted. Molson was the other owner of the partnership. The partnership contracted with Molson for the brewing, distribution and the sale of Coors Light in Canada. Coors Canada managed all marketing activities for our products in Canada. In connection with the Merger, Coors Canada and sale of Coors Light in Canada was dissolved into the Canada segment. Coors Light is currently Molson Canada's largest selling beer, the largest-selling light beer and the second-best selling packaged beer brand overall in Canada.

The following represents the Canada segment's pro forma results, as if the Merger had occurred on December 29, 2003, the first day of Coors' 2004 fiscal year:

Our Canada segment (as stated in US dollars) benefited from a 6.9% year-over-year increase in the value of the Canadian dollar against the US dollar in 2005. The following summarizes the impact on the Canada segment's pro forma income statement.

		Increase due to currency effect
		2005
		(In thousands)
Net sales		$	112,869
Cost of goods sold			(55,923	)

	Gross profit		56,946
Marketing, general and administrative expenses			(30,143	)
Special items			(433	)

	Operating income		26,370
Other income (expense), net			(159	)

	Income before income taxes and minority interests	$	26,211

For the year ended December 25, 2005, pro forma net sales in the Canada Segment were $1.6 billion, 6.5% higher than the comparable period in the prior year. Net sales revenue per barrel in Canada grew slightly in local currency for the year ended December 25, 2005, driven by modest general price increases offset by unfavorable product mix. Net unfavorable sales mix was driven by value segment growth, primarily in Ontario and Alberta, which was partially offset by improved import sales at higher than average sale prices.

Canada segment net sales volume for the year ended December 25, 2005, decreased 1.1% to 8.2 million barrels (9.6 million hectoliters) on a comparable pro forma basis from a year ago. The decrease was driven by volume declines in the first quarter, partially offset by strong industry volume trends and improved sales activity and market performance over the balance of 2005.

On a pro forma basis, cost of goods sold increased 5.9% to $818.3 million for the year ended December 25, 2005 from $772.5 million in the same period for 2004. For the same period, in local currency, cost of goods sold per barrel in Canada decreased as synergy and other cost savings were offset by unfavorable product mix.

On a pro forma basis, marketing, general and administrative expenses increased 24.2% to $425.5 million for the year ended December 25, 2005 from $342.6 million in the same period for 2004.

Canada increased marketing and sales spending at a high-single-digit growth rate. In local currency general and administrative costs increased due to higher depreciation, increased employee costs and non-recurring items partially offset by Merger-related synergies.

Special charges of $5.2 million were attributed primarily to restructuring the sales and marketing organizations in Canada. These efforts will further integrate the marketing and selling organizations

into one team, improving our brand communications and customer focus. Special charges in 2004 of $20.4 million were Merger related, and therefore did not recur in 2005.

Other expense represents the equity earnings in the Montréal Canadiens Hockey Club.

Our Europe segment was adversely affected by a 0.5% year-over-year decrease in the value of the British Pound Sterling (GBP or £) against the US dollar in 2005. Conversely, the Europe segment

benefited from a 12.0% year-over-year increase in the value of the GBP against the US dollar in 2004. The following summarizes the impact on the Europe segment's income statement.

		Increase Due to Currency Effects(1)
		2005			2004
		(In thousands)
Net sales		$	(15,049	)	$	193,473
Cost of goods sold			9,892			(129,611	)

	Gross profit		(5,157	)		63,862
Marketing, general & administrative and special item			2,936			(47,311	)

	Operating income		(2,221	)		16,551
Interest income			(289	)		1,291
Other income (expense), net			322			(1,502	)

	Income before income taxes and minority interests	$	(2,188	)	$	16,340

Net sales for the Europe segment decreased 19.5% in 2005, while volume decreased 2.9% from the previous year. Currency exchange rates accounted for approximately 5% of the decrease in net sales. The volume decline was driven by the Grolsch brand, flavored alcohol beverages (FABs) and ales. This decline was partially offset by growth of the Carling brand. CBL's overall volume decline for the year was slightly worse than the overall market decline.

Beer volume in our on-premise business, which represents approximately two-thirds of our Europe volume and an even greater portion of margin, declined by 2% compared to 2004. This compared to an overall on-premise market decline for beer as a category of 3.8% in the year, yielding a small market share gain for us. Our off-premise volume for 2005 decreased approximately 2% over 2004, driven by decline in Grolsch volume. We experienced a small off-premise market share decline.

In addition to the volume movements documented above, we experienced unfavorable pricing in both the on-premise and the off-premise channels, and a decrease in the sales value of factored brands. These reductions were compounded by unfavorable channel and brand mix.

A change in our trading arrangements with one major factored brand customer has required us to move from gross reporting of sales and cost of goods sold to a net presentation for that customer, which caused a year-over-year reduction in both net sales and cost of goods sold of $243.4 million, but with no net impact on gross profit.

Net sales for the Europe segment increased 14.8% in 2004 from 2003, while volume increased 1.5% from the previous year. The volume growth was driven by the Carling and Grolsch brands. Volume growth for the year was restricted by the cooler and wetter summer weather in the United Kingdom compared to a record breaking summer in 2003 and the comparison to a period of high off-premise discounting in the first half of 2003.

Our on-premise business saw volume decline by 0.5% in 2004 compared to 2003. This compared to an overall on-premise market decline of 2% in the year, yielding a market share gain of approximately 1%. Our off-premise volume for 2004 increased approximately 6% over 2003, led by Carling and Grolsch. Our off-premise market share growth for the year was approximately 0.6 percentage points.

In addition to the volume movements documented above, we had positive pricing in 2004 in both the on-premise and the off-premise channels, and an increase in the sales value of factored brands. These gains were partially offset by negative channel and brand mix. Owned brand net sales per barrel increased approximately 3% in 2004.

Cost of goods sold decreased 22.6% in 2005 versus 2004. The decrease in local currency cost of goods sold was driven by the gross to net reporting of sales and cost of goods sold for the one major on-premise customer discussed above that reduced factored cost of goods sold by $243.4 million (but with no impact on gross profit), combined with a mix shift away from glass packaged products which have higher packaging costs. These reductions were partially offset by the de-leveraging of fixed costs, higher distribution costs due to the implementation of the European Working Time Directive, which has restricted the number of hours that drivers are allowed to work, and increased energy costs.

Cost of goods sold increased 13.5% in 2004 versus 2003, with approximately 12.0% of the increase being due to the effect of GBP currency exchange rates.

The increase in local currency cost of goods sold in 2004 was driven by increased volume and higher labor costs, together with a mix shift to the off-premise where products have higher packaging costs, and an increase in the value of factored brand purchases where the cost is included in our cost of goods sold.

These increases were offset by the benefit of a reduction in contract packaging costs from 2003, where we contracted with regional brewers to package some of our off-premise volume while we were commissioning the new and upgraded packaging lines in our Burton brewery.

On a per-barrel basis, cost of goods sold increased 11.9%; excluding the impact of GBP currency exchange rates cost of goods sold per barrel was broadly flat compared to 2003.

Europe marketing, general and administrative expenses decreased 3.8% during 2005 versus 2004, and 1.0% on a per-barrel basis. This decrease is primarily the result of lower overhead, sales and marketing and payroll related spending.

Europe marketing, general and administrative expenses increased 16.4% during 2004 versus 2003; and 14.7% on a per-barrel basis. GBP foreign exchange accounted for the great majority of this increase.

2005 special items of $13.8 million largely relate to employee restructuring activities associated with operations and supply chain restructuring efforts ($14.3 million) and asset impairments ($3.6 million), partly offset by profits on the sale of surplus real estate ($6.6 million). Also included in 2005 are exit costs associated with the closure of our Russia and Taiwan offices. Special income in 2004 represents the profit on sale of real estate.

The adverse movement in other (expense) income, net in 2005 and 2004 continues to be the result of declining Tradeteam operating performance, and increased non-operating leasehold expenses.

Interest income is earned on trade loans to UK on-premise customers. Interest income decreased 19.0% and 6.6% in 2005 and 2004, respectively, as a result of lower loan balances versus the prior years.

Corporate includes interest and certain other general and administrative costs that are not allocated to the operating segments. The majority of these corporate costs relates to worldwide finance and administrative functions, such as corporate affairs, legal, human resources, insurance and risk management.

General and administrative (G&A) expenses were higher in 2005 versus 2004, primarily due to establishing the new global organization and headquarters, significant legal fees for defense costs associated with shareholder lawsuits and regulatory inquiries, information technology projects, and a reallocation of certain G&A costs from segments to Corporate.

General and administrative expenses were higher in 2004, versus 2003, primarily due to increased incentive compensation and other labor-related costs.

Net interest expense nearly doubled in 2005, compared to 2004 due to the addition of Merger-related debt including debt assumed on Molson's opening balance sheet which approximated $1.5 billion. Subsequent to the Merger, we established a $1.0 billion bridge facility which was used to refinance pre-Merger Molson debt. We also established a $1.4 billion, five-year credit facility which was used to refinance a portion of the bridge facility borrowings. We had $163 million outstanding under the credit facility at December 25, 2005. Subsequent to establishing both of these facilities, the existing bank facilities at both Molson and Coors were terminated. The bridge loan facility was refinanced with proceeds from approximately $1.1 billion of senior notes, which were issued on September 22, 2005 (see related Note 13) on page 102.

Net interest expense decreased in 2004, compared to 2003 due to our paydown of debt and from swapping some of our debt from fixed to more favorable floating rates. Full-year 2004 debt repayments of $382 million were about 40% above 2003. Our cash flow and debt paydown benefited from asset monetizations and capital spending discipline in 2004.

Our primary sources of liquidity are cash provided by operating activities, external borrowings and asset monetizations. As of December 25, 2005, including cash and short-term borrowings, we had negative working capital of $768 million compared to positive working capital of $91 million at December 26, 2004. The largest contribution to the decrease in working capital is a $310 million increase in current portions of long-term debt and short term-borrowings. The increase attributable to current portions of long-term debt reflects the Company's intentions in 2006 with regard to debt paydown under our commercial paper and credit facilities. Cash balances were lower at the end of 2005 than 2004 by $84 million, which also contributed to our decrease in working capital. Cash balances were higher at the end of 2004, partially because of the unavailability of debt eligible for pay down in an economical manner at that time. Working capital associated with discontinued operations in Brazil amounted to a negative $107 million as of the end of 2005, an amount which did not exist at the end of 2004. Deferred tax assets and liabilities, net, related to working capital items contributed negatively to working capital by $84 million year-over-year. Most other working capital items increased expectedly with the addition of Molson to the balance sheet in 2005 versus 2004. However, it is notable that accounts receivable did not increase, due largely to the impact of the UK business at CBL. CBL maintains a comparatively larger receivables balance than other segments as a percentage of sales, and in 2005 their receivables balance dropped in US $ due to a weaker pound versus the dollar at the end of 2005 versus 2004, and their receivables were significantly lower in local currency because of lower sales.

At December 25, 2005, cash and cash equivalents totaled $39 million, compared to $123 million at December 26, 2004. Total outstanding debt, including current portions of long-term debt and short-term borrowings, was $2,485 million at December 25, 2005, and $932 million at December 26, 2004. The increase is due to debt assumed in the Merger, offset by debt pay downs during 2005.

We believe that cash flows from operations and cash provided by short-term borrowings, when necessary, will be sufficient to meet our ongoing operating requirements, scheduled principal and interest payments on debt, dividend payments and anticipated capital expenditures. However, our liquidity could be impacted significantly by a decrease in demand for our products, which could arise from competitive circumstances, a decline in the acceptability of alcohol beverages, any shift away from light beers and any of the other factors we describe in the section titled "Risk Factors" on page 15.

Our net cash provided by operating activities was $422 million, a decrease of $78 million from 2004. The addition of Molson's Canadian beer business made a significant positive contribution to our operating cash flow. However, there were several items that offset this increase. First, in early 2005 we made a $138 million Canadian tax payment, previously deferred by Molson. Our total tax expense for the year was only $50 million, and there were additional tax payments to other governmental authorities in addition to the $138 million. Second, we funded $202 million into our defined benefit pension plans in the United States, Canada and the United Kingdom, compared with book expense associated with these plans of $65 million. Operating cash flow in 2005 also diminished because of worse operating results in the Europe segment, and severance and change in control payments to officers who departed the Company following the Merger.

Net cash provided by operating activities in 2004 decreased by $29 million, compared to 2003. The decrease was primarily due to an increase in cash taxes in 2004 versus 2003 when favorable finalization of tax audits resulted in refunds, offset by the reporting of additional cash flows as a result of consolidating certain joint ventures in 2004. Also, improved sales at the end of 2004, compared to 2003 resulted in higher receivable and inventory balances, which served to lower cash flows from operations in 2004.

Net cash used in investing activities in 2005 was $313 million, compared to $67 million in 2004. Capital expenditures were higher by $195 million in 2005 due to the inclusion of Molson's Canada segment capital expenditures of $107 million following the Merger, and spending in the United States related to the build-out of the Shenandoah facility to a full brewery. We also spent $17 million in 2005 to acquire Creemore Springs, a small brewery in Canada, and spent $20 million on transaction costs associated with the Merger. These factors were offset by the favorable impact of acquiring $74 million in cash with the Merger and collecting a net $17 million on trade loan activity in the United Kingdom.

Cash used in investing activities decreased $147 million during 2004 compared to 2003. This improvement is attributable to reduced capital spending in 2004 ($29 million lower), cash received from the sale of kegs in the United Kingdom and the sales of real estate and other property in both the United States and the United Kingdom ($72 million in 2004 compared to $16 million in 2003), and a pension settlement received in 2004 ($26 million) from Interbrew (former owners of CBL in the United Kingdom). Also, we presented as an investing activity the inclusion of the opening cash balances of the joint ventures we began consolidating during the first quarter of 2004 as result of implementing FIN 46R.

Our debt position significantly affects our financing activity. See Note 13 on page 102 for a summary of our debt position at December 25, 2005 and December 26, 2004.

Net cash used in financing activities was $189 million in 2005, compared to $336 million in 2004. During 2005, we paid dividends to stockholders of $110 million, compared to $31 million in 2004, as a result of increased shares outstanding and a revised dividend policy following the Merger. The large increase in our balance sheet debt from $932 million at year end 2004 to $2,485 million at year-end 2005 was largely the result of a "non-cash" activity, that of assuming Molson's outstanding debt as of the Merger date (February 9, 2005). This debt assumed included borrowings Molson incurred prior to the Merger to pay the special dividends on Molson stock which preceded the Merger. Substantially all of our debt pay down occurred after the Merger date. Also, we collected approximately $11 million less in 2005 versus 2004 as a result of stock option exercises.

Net cash used in financing activities was $336 million in 2004, compared to $357 million in 2003. The change is mainly the result of increased repayments of debt in 2004, offset by cash received from increased stock option exercises during the year.

In 2005, we spent approximately $406 million (including approximately $47 million spent at consolidated joint ventures) on capital improvement projects worldwide. Of this, approximately half was in support of the US business with the remainder split almost equally between the European & Canadian businesses. Capital investment in the Brazilian discontinued operations and Corporate segment combined represented less than 5% of our total spending. The capital expenditure plan for 2006 is expected to be approximately $400 million (excluding capital spending by consolidated joint ventures), and will be impacted by the completion of the Shenandoah brewery build-out and synergy-related investments.

		Total			Less than 1 year			1 - 3 years			4 - 5 years			After 5 years
Interest and derivative payments, net of derivative receipts		$	1,059,800		$	136,520		$	252,810		$	255,210		$	415,260

As of December 25, 2005, our aggregate commitments for advertising and promotions, including marketing at sports arenas, stadiums and other venues and events, total approximately $1.2 billion over the next five years and thereafter. Our advertising and promotions commitments are included in other long-term obligations in the table above.

As of February 28, 2006, our credit rating with Standard & Poors with regard to our long-term debt was BBB. If this rating were to drop, our access to the commercial paper market for shorter-term borrowings could be unfavorably impacted, resulting in either higher interest rates or an inability to borrow through commercial paper at all. Our commercial paper borrowings at December 25, 2005 were $167 million.

Our consolidated, unfunded pension position at the end of 2005 was approximately $800 million, an increase of $176 million from the end of 2004. The increase is the result of adding Canada's unfunded position totaling $321 million after the Merger, netted against improvements in the US and UK unfunded pension positions. The primary cause of the improvements was the doubling of the actual UK returns on assets during 2005, compared to 2004, and additional pension contributions in the United States of $30 million in 2005, compared to 2004.

Our accumulated benefit obligation increased by $1.6 billion in 2005, primarily due to the addition of the Canadian plans after the Merger. The prior service cost component of our US pension obligations declined by approximately $35 million in 2005 due to changes in our salaried employee benefit formula in July 2005. The benefit formula is now calculated based upon a salaried employee's career average compensation, instead of the last five years' average compensation. The UK obligations decreased due to a plan amendment in 2005, as well. The UK plan amendment served to reduce obligations in accordance with new benefit calculations approved by pension regulators during the year. The net consolidated result of movements in pension obligations and pension assets was a net increase in minimum pension obligations of $142 million at the end of 2005.

It is our practice to fund pension plans to meet the minimum requirements set forth in applicable employee benefits laws. However, management may voluntarily increase funding levels to meet expense and asset return forecasts in any given year. Pension contributions on a consolidated basis were $202 million in 2005, reflecting statutory contribution levels in Canada and the United Kindgom, and $91 million of voluntary contributions in the United States. We anticipate making approximately $167 million of both statutory and voluntary contributions to our pension plans in 2006.

Consolidated pension expense was $65 million in 2005, an increase of $21 million from 2004. Canada accounted for $18 million of the increase, and change in control increases due to departing Coors executives accounted for the remaining $3 million. Primarily due to lower discount rates at the end of 2005, compared to 2004, we anticipate pension expense on a consolidated basis for 2006 of approximately $45.7 million.

On January 13, 2006, we sold a 68% equity interest in Kaiser to FEMSA for $68 million cash, plus the assumption by FEMSA of Kaiser-related debt and contingencies. Kaiser-related debt at year-end 2005 totaled approximately $60 million. Kaiser was our previously-reported Brazil operating segment. We retained a 15% interest in Kaiser and have one seat on its board. We determined that our Brazil segment represented a discontinued operation as of December 25, 2005. As a result, we have segregated the results of operations, financial position and cash flows for the Brazil segment in our financial statements to be reflected as discontinued operations. The terms of the agreement require us to indemnify FEMSA for certain exposures related to tax, civil and labor contingencies arising prior to FEMSA's purchase of Kaiser. First, we provided a full indemnity for any losses Kaiser may incur with respect to tax claims associated with previously utilized purchased tax credits. Any potential liabilities associated with these exposures were not considered probable during 2005. The total amount of potential claims in this regard, plus estimated accumulated penalties and interest, is $205 million. Second, we provided an indemnity related to all other tax, civil and labor contingencies provided, however, that FEMSA assumed their full share of all contingent liabilities that had been recorded and disclosed by us. We may have to provide indemnity to FEMSA if those liabilities are resolved for amounts greater than those amounts recorded or disclosed by us. We will be able to offset any indemnity exposures in these circumstances with amounts that are resolved favorably to amounts previously recorded. We will record these guarantee liabilities on the balance sheet at fair value, and

the creation of those liabilities will reduce the expected gain on the sale of 68% of the business to be reported in the first quarter of 2006.

Molson Inc. sold the majority of its ownership in the Montréal Canadiens professional hockey club (the Club) to a purchaser in 2001. Molson maintains a 19.9% common ownership interest in the Club, as well as a preferred interest, redeemable in 2009. The shareholders of the Club (the purchaser and Molson) and the National Hockey League (NHL) are parties to a consent agreement, which requires the purchaser and Molson to abide by funding requirements included in the terms of the shareholders' agreement and for Molson to provide a net working capital of $5 million and funding to enable the Club to meet its operating expenses. In addition, Molson has given certain guarantees to the NHL and the lenders of the purchaser of the Club and the Bell Centre (formerly the Molson Centre), such that in the event that the Club and the purchaser are not able to meet their obligations, or in the event of a default, we shall 1) provide adequate support to the purchaser through necessary cash payments so that the purchaser would have sufficient funds to meet its debt obligations, and 2) exercise control of the entity which owns the Club and the entertainment business operated at the Bell Centre at predetermined conditions, subject to NHL approval. The obligations of the purchaser to such lenders were Cdn $92 million (approximately US $79 million) at December 25, 2005. As part of the sale transaction, Molson reaffirmed an existing guarantee of the purchaser's payment obligations on a 99-year lease arrangement (which began in 1993) related to the land upon which the Bell Centre has been constructed. Annual lease payments in 2004 were Cdn $2.4 million (approximately US $2.1 million), and are adjusted annually to reflect prevailing interest rates and changes in the consumer price index. We have accrued the fair value of our guarantees under these arrangements as of December 25, 2005.

Coors Light is the key to success in the US business, and our primary sales and marketing programs revolve around this brand. In 2005, we focused on chain retail accounts, the Hispanic market, and the on-premise channel. Coors Light achieved a significant turn-around in 2005 by posting three consecutive growth quarters to finish 2005, following several quarters of declining sales to retail. Our plan in 2006 is to build on this momentum.

The US business also will focus on capturing the identified cost savings from Merger synergies and other cost initiatives. Much of the cost improvement potential as a merged company centers on the US business, and it is important to achieve these cost savings as inflationary pressures continue to impact our cost of goods sold.

We are planning to close the Memphis, Tennessee brewery in the fall of 2006. The Shenandoah, Virginia brewery is expected to be fully operational in 2007. We expect to continue to account for exit cost and other costs related to the Memphis brewery closure as special items in 2006, including accelerated depreciation, expected severance, and revisions of estimates for pension obligations.

A main objective of 2005 was to stabilize year-over-year volume with renewed investment in mainstream brands. Share trends in the fourth quarter continued to show strong progress on Coors Light, and the Molson Canadian brand was flat in the quarter, the best result in more than two years. The value segment continued its growth trend to close out 2005; however, as we have begun to cycle the substantial ramp-up of value-brand activity in the prior year, the value segment is expected to continue to grow on a year-over-year basis in 2006 at a lower rate.

Coors Light and Molson Canadian remain critical to our success. Our top-line programs are focused around these brands, while investing strategically across the entire portfolio.

During 2006 we will remain focused on the objectives laid out at the beginning of the Merger, leveraging the five key priorities below and building on the strong progress to-date to drive a platform for growth.

First, we will continue to drive accelerated growth for Coors Light with new marketing and sales programs. Coors Light commands approximately two-thirds of the light beer category in Canada and is now our largest brand in Canada, just ahead of Molson Canadian. This brand grew at a double-digit rate in 2005 and is our main growth engine in Canada.

Second, we are making progress in stabilizing our overall volume and share trends for our other core mainstream brands, in particular Molson Canadian. Our strategies in this area began to show results by the 4th quarter of 2005 as our supported brands experienced volume and share growth. After increasing marketing investment behind the Molson Canadian brand substantially in 2005, we intend to maintain a competitive investment level for this critical brand going forward.

Third, to drive volume growth, we are leveraging the strength of our world-class, partner-brand import portfolio, which includes Heineken, Corona and Miller Genuine Draft. These brands grew at significant rates in 2005 and will again benefit from new, innovative programming this year.

Fourth, we have adjusted our value-segment strategies to regain lost volume and reduce the rate of trading down by consumers. We began to see positive results from these strategies in the second half of 2005, but we have more work to do. Stabilizing pricing will also be a key issue for Molson and the Industry in 2006.

Fifth, we continue to focus on reducing costs to deliver the Canada-related Merger cost synergies. Through our initiatives, we will work to offset cost of goods inflation, specifically the costs of distribution, energy, and input materials, which remain near historical high levels. Sales trade investment, in particular the Québec market, is a potential area of profit pressure if trade cost escalation continues to far exceed inflation. Meanwhile, we expect to limit general and administrative increases to less than inflationary levels.

The competitive environment in the UK beer industry continues to be challenging, driving our focus is on two main strategies.

First, we are implementing cost reduction initiatives, especially related to overhead and supply chain costs. While these cost improvements were implemented in the latter part of 2005 and were not enough to offset all of the margin loss that our Europe business sustained in the past year, we believe that these aggressive improvements will help this business return to a solid earnings growth trend.

Second, we will continue to invest heavily behind our core lager brands—Carling, Grolsch and Coors Fine Light. The Carling brand has been consistently strong, growing market share every year for more than a decade and now represents three-fourths of our Europe volume.

Because there is goodwill included in the carrying value of the Europe reporting unit, its fair value was compared to its carrying value in 2005 to determine if there was a risk of goodwill impairment. The goodwill associated with the Europe reporting unit originated in the 2002 purchase of the CBL business by Coors. A reduction in the fair value of the Europe reporting unit in the future could lead to a goodwill impairment. We noted a reduction in the value of the Europe reporting unit from 2003 to 2004, but not enough of a decrease to warrant a goodwill impairment. Future reductions in fair value could occur for a number of reasons, including cost increases due to inflation, a negative beer pricing environment, and declines in industry or company-specific beer volume sales.

We expect general and administrative costs to be lower in 2006, because we experienced significant one time costs related to the formation of the new global organization and headquarters, and significant legal fees associated with regulatory and shareholder civil actions in 2005. Higher expected costs associated with incentive compensation, including costs for stock-based compensation, may offset these anticipated cost savings.

Because there is goodwill included in the carrying value of our three segments, its fair value was compared to its carrying value in 2005 to determine whether there was a risk of goodwill impairment. Most of the goodwill associated with the US and Canada segments originated in the Merger.

Canada's goodwill was determined through purchase accounting, requiring the purchase consideration to be allocated to Molson's assets and liabilities based upon their fair values, with the residual to goodwill. A portion of the Merger goodwill was allocated to the US segment, based on the level of Merger synergy savings expected to accrue to the US segment over time. A reduction in the fair value of the US or Canada segment in the future could lead to a goodwill impairment. Reductions in fair value could occur for a number of reasons, including cost increases due to inflation, a negative beer pricing environment, declines in industry or company-specific beer volume sales, or the inability to achieve synergies from the Merger.

The goodwill associated with the Europe segment originated in the 2002 purchase of the CBL business by Coors. A reduction in the fair value of the Europe segment in the future could lead to a goodwill impairment. We noted a reduction in the value of the Europe segment from 2003 to 2004, but not enough of a decrease to warrant a goodwill impairment. Future reductions in fair value could occur for a number of reasons, including cost increases due to inflation, a negative beer pricing environment, and declines in industry or company-specific beer volume sales.

We estimate that corporate interest expense in 2006 will be approximately $33-$34 million per quarter with the Brazil debt now removed from our balance sheet. Note that this excludes UK trade loan interest income.

For Molson Coors, as with many large companies, stock-based long-term incentive compensation will be an incremental expense starting in 2006 due to the new accounting guidelines around stock options, effective in the first quarter 2006. Combined with a re-design of our long-term incentive plan, we anticipate that this new accounting guidance will result in about $20 million ($25 million annualized) of increased expense in 2006 versus 2005. Less than 10% of this increased expense will be directly related to new accounting rules that will be applied to the 2006 stock option grant, expected to occur in mid-March 2006, which will involve approximately 350,000 shares—or about one-sixth the size of the 2005 option grant. Additionally, the new restricted- and performance-share programs will involve only about 500,000 shares per year. Approximately 200,000 of these shares will be awarded under the restricted stock unit program. Equally important, more than 300,000 of these new incentive shares will be awarded only if the Company achieves strong profit performance during the next few years.

We anticipate that our full-year 2006 effective tax rate will be in the range of 25% to 30%. It is important to note that the adoption of a permanent investment strategy for our UK business last year

pursuant to APB 23, provided a one-time benefit and lowered our 2005 tax rate, which will not recur in 2006.

We anticipate 2006 total-Company capital spending of approximately $400 million. This is higher than 2005 due to completing our Virginia brewery build-out and Merger-related capital projects. After this year, in the absence of major capacity projects, we expect capital spending to drop to the low $300 millions for the total Company.

One of our goals for 2006 is to generate more than $300 million of free cash flow available for debt repayments, including $68 million of cash proceeds from the Brazil business sale. It is important to note that some of the drivers of our 2005 free cash flow may not reoccur in 2006, including working capital timing, option exercises and asset monetizations which, taken together, totaled more than $100 million in 2005.

Our Merger-related special-dividend debt balance stood at $163 million at the beginning of 2006. We plan to use our free cash to pay off the special-dividend debt by some time this summer, which is well ahead of our original timeline. We anticipate increasing our free cash generation goal again in 2007 as we complete the construction of our Virginia brewery and realize more Merger cost synergies.

FASB Interpretation No. 46R, Consolidation of Variable Interest Entities—An Interpretation of ARB51 (FIN 46R) expands the scope of ARB51 and can require consolidation of "variable interest entities (VIEs)." Once an entity is determined to be a VIE, the party with the controlling financial interest, the primary beneficiary, is required to consolidate it. We have investments in VIEs, of which we are the primary beneficiary. These include Rocky Mountain Metal Container (RMMC), Rocky Mountain Bottle Company (RMBC), Grolsch (UK) Limited (Grolsch), and Brewers' Retail Inc. (BRI). Accordingly, we have consolidated these four joint ventures in 2005, three of which were effective December 29, 2003, the first day of our 2004 fiscal year.

The following summarizes the relative size of our consolidated joint ventures (including minority interests):

	Year Ended December 25, 2005		Year Ended December 26, 2004		Year Ended December 28, 2003
	Total Assets(2)		Sales(1)		Pre-tax Income	Total Assets(2)		Sales(1)		Pre-tax Income	Total Assets(2)		Sales(1)		Pre-tax Income (loss)
	(In thousands)
Grolsch	$	30,724		$	76,045	$	12,083		$	33,407	$	100,657		$	13,495	$	16,857	$	79,086	$	10,607
RMBC	$	48,437		$	90,855	$	15,438		$	43,441	$	84,343		$	19,507	$	42,953	$	85,307	$	12,281
RMMC	$	68,826		$	219,365	$	8,925		$	58,737	$	209,594		$	5,156	$	63,676	$	205,080	$	223
BRI(3)	$	324,160		$	180,562	$	—		$	—	$	—		$	—	$	—	$	—	$	—

Management's discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or US GAAP. We review our accounting policies on an on going basis. The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions we believe to be reasonable under the circumstances. By their nature, estimates are subject to uncertainty. Actual results may differ materially from these estimates under different assumptions or conditions. We have identified the accounting estimates below as critical to our financial condition and results of operations:

In the US segment, our allowance for doubtful accounts and credit risk is insignificant. The majority of the US segment accounts receivable balance is generated from sales to independent distributors with whom we have a predetermined collection date arranged through electronic funds transfer. Also, in the US segment, we secure substantially all of our credit risk with purchase money security interests in inventory and proceeds, personal guarantees and other letters of credit.

Because the majority of CBL sales are directly to retail customers and, because of the industry practice of making trade loans to customers, our ability to manage credit risk in this business is critical. We provide allowances for trade receivables and trade loans associated with the ability to collect outstanding receivables from our customers. Generally, provisions are recorded to cover the full exposure to a specific customer (total amount of all trade accounts and loans from a specific customer less the amount of security and insurance coverage) at the point the account is considered uncollectible. We record the provision as a bad debt in general and administrative expenses. Provisions are reversed upon recoverability of the account or relieved at the point an account is written off.

Canada's distribution channels are highly regulated by provincial regulation and experiences few collectibility problems. However, Canada does have direct sales to retail customers for which an allowance is recorded based upon aging analysis and historical experience.

We are not able to predict changes in financial condition of our customers and, if circumstances related to our customers deteriorate, our estimates of the recoverability of our trade receivables could be adversely affected, and we may be required to record additional allowances.

We have defined benefit plans that cover the majority of our employees in the United States, Canada, and the United Kingdom. We also have postretirement welfare plans in the United States and Canada that provide medical benefits for retirees and eligible dependents and life insurance for certain retirees. The accounting for these plans is subject to the guidance provided in Statement of Financial Accounting Standards No. 87, "Employers' Accounting for Pensions" (SFAS No. 87) and Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other than Pensions" (SFAS No. 106). Both of these statements require that management make certain assumptions relating to the long-term rate of return on plan assets, discount rates used to measure future obligations and expenses, salary increases, inflation, health care cost trend rates and other assumptions. We believe that the accounting estimates related to our pension and postretirement plans are critical accounting estimates because they are highly susceptible to change from period to period based on market conditions.

We performed an analysis of high yield bonds at the end of 2005 and compared the results to appropriate indices and industry trends to support the discount rates used in determining our pension liabilities in the United States, Canada and in the United Kingdom for the year ended December 25, 2005. Discount rates and expected rates of return on plan assets are selected at the end of a given fiscal year and impact expense in the subsequent year. A fifty basis point change in certain assumptions made at the beginning of 2005 would have had the following effects on 2005 pension expense:

	Impact to 2005 Pension Costs—50 basis points
Description of Pension Sensitivity Item	Reduction (Unfavorable)		Increase (Favorable)
	(In millions)
Expected return on US plan assets, 8.75% in 2005	$	(3.2	)	$	3.2
Expected return on UK plan assets, 7.8% in 2005	$	(8.9	)	$	8.9
Expected return on Canada plan assets, 7.9% in 2005	$	(3.8	)	$	3.8
Discount rate on US projected benefit obligation, 5.875% in 2005	$	(6.2	)	$	5.6
Discount rate on UK projected benefit obligation, 5.5% in 2005	$	(15.5	)	$	15.0
Discount rate on Canada projected benefit obligation, 5.65% in 2005	$	(0.4	)	$	0.4

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

	One-percentage- point increase (Unfavorable)
	(In millions)
US Plan
Effect on total of service and interest cost components	$	0.4	$	(0.4	)
Effect on postretirement benefit obligation	$	6.6	$	(5.9	)
Canada Plans
Effect on total of service and interest cost components	$	2.0	$	(1.7	)
Effect on postretirement benefit obligation	$	26.4	$	(23.6	)

The US, Europe and Canada plan assets consist primarily of equity securities with smaller holdings of bonds, real estate and other investments. Equity assets are well diversified between domestic and other international investments, with additional diversification in the domestic category through allocations to large-cap, small-cap, and growth and value investments. Relative allocations reflect the demographics of the respective plan participants. The following compares target asset allocation percentages as of February 24, 2006, with actual asset allocations at December 25, 2005:

	US Plan Assets		Europe Plan Assets		Canada Plan Assets
	Target Allocations		Actual Allocations		Target Allocations		Actual Allocations		Target Allocations		Actual Allocations
Equities	75	%	76	%	62	%	66	%	70	%	71	%
Fixed Income	15	%	19	%	28	%	25	%	30	%	29	%
Real Estate	10	%	5	%	7	%	6	%	0	%	0	%
Other	0	%	0	%	3	%	3	%	0	%	0	%

We estimate the range of liability related to environmental matters or other legal actions where the amount and range of loss can be estimated. We record our best estimate of a loss when the loss is

considered probable. As additional information becomes available, we assess the potential liability related to any pending matter and revise our estimates. Costs that extend the life, increase the capacity or improve the safety or efficiency of Company-owned assets or are incurred to mitigate or prevent future environmental contamination may be capitalized. Other environmental costs are expensed when incurred. We also expense legal costs as incurred. See Note 19 to the accompanying financial statements on page 118 for a discussion of the Company's contingencies, environmental and litigation reserves at December 25, 2005.

There are large numbers of contingent tax liabilities are associated with our discontinued operations in Brazil. Our approach in estimating loss contingencies for these items generally did not contemplate or anticipate negotiated resolutions or government-sponsored amnesty programs (which, when they occur, may apply to all companies in Brazil or whichever state in Brazil is assessing the tax) when setting our reserves for cases where a loss was considered probable. In effect, if a loss was considered probable, it was reserved at the assessed amount. This also applied where the nature of the challenge was constitutional; i.e., if Kaiser (and other companies) had been assessed taxes but were challenging the assessment based on the legal merits of the tax law itself, a full reserve was maintained and any successful outcome in the future would be recognized only when realized. Penalties on Brazil tax liabilities have potentially wide ranges, and we estimated the levels of penalties based on past experience and consultations with outside counsel on a case by case basis.

We sold 68% of the Kaiser business in January 2006. While we greatly reduced our risk profile as a result of this transaction, we retained some level of risk by providing indemnities to the buyer for certain purchased tax credits and for other tax, labor and civil contingencies in general. These are discussed in the section called "Contingencies" above. We will account for these indemnity obligations at fair value in accordance with FASB Interpretation No. 45 (FIN 45), Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. This rule requires us to carry the guarantee liability on the balance sheet at its fair value. We do not expect to amortize this liability, but rather make an annual estimate of its fair value, and record the change in the value through discontinued operations on the income statement (if it is material). If we conclude that we have to make payments on an indemnity provision and therefore the obligation converts to a monetary contingent liability, we will record the income statement charge through discontinued operations (again, if material).

We evaluate the carrying value of our goodwill and indefinite-lived intangible assets annually, and we evaluate our other intangible assets when there is evidence that certain events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. Significant judgments and assumptions are required in the evaluation of intangible assets for impairment, most significantly the estimated future cash flows to be generated by these assets and the rate used to discount those cash flows.

Our projections are based on various long-range plans completed by the Company and considered, when necessary, various scenarios deviating from a base case, both favorable and unfavorable. Discount rates used for enterprise value estimates for goodwill testing ranged from 7.5% for Canada to 8% for the United States and Europe. Canada represents our most profitable reporting unit, with the highest market share. Our US, Canada and UK segments operate in relatively mature beer markets, where we are reliant on a major brand for a high percentage of sales. Discount rates used for testing of indefinite-lived intangibles ranged form 7.7% for Canada core brands, 8.5% for our Coors Light distribution intangible in Canada, to 9.5% for the Carling brand in the United Kingdom. These rates largely reflect the rates for the overall enterprise valuations, with some level of premium associated with the specificity of the intangibles themselves. Changes in these estimates could have an adverse impact on the valuation of goodwill and other intangible assets, thereby requiring us to impair the

assets. We have allocated approximately $1.1 billion of goodwill from the Merger to the US reporting unit. We have done this allocation to more accurately allocate the goodwill to the reporting units that are expected to realize the synergy savings that will result from the Merger. It should be noted that this allocation of goodwill puts added pressure on the US business to achieve synergy savings to avoid an impairment of goodwill. There is also some level of impairment risk in 2006 and beyond associated with goodwill and indefinite-lived intangibles in the United Kingdom, given financial performance in the Europe reporting unit, and with the non-amortized core brands intangible in Canada, given the potential for inconsistent growth patterns and pricing for those brands.

The following tables present a roll forward of the fair values of debt and derivative contracts outstanding as well as their maturity dates and how those fair values were obtained (in millions):

Fair value of contracts outstanding at December 26, 2004	$	(1,179.6	)
Contracts realized or otherwise settled during the period		(13.9	)
Fair value of new contracts entered into during the period		(1,255.2	)
Other changes in fair values		134.1

Fair value of contracts outstanding at December 25, 2005	$	(2,314.6	)

	Fair Value of Contracts at December 25, 2005
Source of Fair Value	Maturity less than 1 year		Maturity 1 - 3 years		Maturity 4 - 5 years	Maturity in excess of 5 years		Total Fair Value
Prices actively quoted	$	—		$	—	$	(296.8	)	$	(1,666.3	)	$	(1,963.1	)
Prices provided by other external sources		2.6			3.4		(5.8	)		(351.7	)		(351.5	)

We use derivatives in the normal course of business to manage our exposure to fluctuations in production and packaging material prices, interest rates and foreign currency exchange rates. By policy, we do not enter into such contracts for trading purposes or for the purpose of speculation. All derivatives held by us are designated as hedges with the expectation that they will be highly effective in offsetting underlying exposures. We account for our derivatives on the Consolidated Balance Sheet as assets or liabilities at fair value in accordance with Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities, as amended and interpreted, incorporating FASB Statements No. 137, 138 and 149." (SFAS No. 133), which we early adopted on December 28, 1998. Such accounting is complex, as evidenced by significant interpretations of the primary accounting standard, which continues to evolve, as well as the significant judgments and estimates involved in the estimation of fair value in the absence of quoted market values. These estimates are based upon valuation methodologies deemed appropriate in the circumstances; however, the use of different assumptions could have a material effect on the estimated fair value amounts.

Our market-sensitive derivative and other financial instruments, as defined by the SEC, are foreign currency forward contracts, commodity swaps, interest rate swaps, and cross currency swaps. See discussions also in Item 7A, "Quantitative and Qualitative Disclosures About Market Risk" and Note 18 on page 115. We monitor foreign exchange risk, interest rate risk and related derivatives using two techniques—Value-at-Risk and sensitivity analysis.

We use Value-at-Risk to monitor the foreign exchange and interest rate risk of our cross-currency swaps. The Value-at-Risk provides an estimate of the level of a one-day loss that may be equaled or exceeded due to changes in the fair value of these foreign exchange rate and interest rate-sensitive financial instruments. The type of Value-at-Risk model used to estimate the maximum potential one-day loss in the fair value is a variance/covariance method. The Value-at-Risk model assumes

normal market conditions and a 95% confidence level. There are various modeling techniques that can be used to compute value at risk. The computations used to derive our values take into account various correlations between currency rates and interest rates. The correlations have been determined by observing foreign exchange currency market changes and interest rate changes over the most recent one-year period. We have excluded anticipated transactions, firm commitments, cash balances, and accounts receivable and payable denominated in foreign currencies from the Value-at-Risk calculation, some of which these instruments are intended to hedge.

The Value-at-Risk calculation is a statistical measure of risk exposure based on probabilities and is not intended to represent actual losses in fair value that we may incur. The calculated Value-at-Risk result does not represent the full extent of the possible loss that may occur. It attempts to represent the most likely measure of potential loss that may be experienced 95 times out of 100 due to adverse market events that may occur. Actual future gains and losses will differ from those estimated by Value-at-Risk because of changes or differences in market rates and interrelationships, hedging instruments, hedge percentages, timing and other factors.

The estimated maximum one-day loss in fair value on our cross-currency swaps, derived using the Value-at-Risk model, was $12.2 million, $10.7 million and $5.9 million at December 25, 2005, December 26, 2004, and December 28, 2003, respectively. Such a hypothetical loss in fair value is a combination of the foreign exchange and interest rate components of the cross currency swap. Value changes due to the foreign exchange component would be offset completely by increases in the value of our inter-company loan, the underlying transaction being hedged. The hypothetical loss in fair value attributable to the interest rate component would be deferred until termination or maturity.

We have performed a sensitivity analysis to estimate our exposure to market risk of interest rates, foreign exchange rates and commodity prices. The sensitivity analysis reflects the impact of a hypothetical 10% adverse change in the applicable market interest rates, foreign exchange rates and commodity prices. The volatility of the applicable rates and prices are dependent on many factors that cannot be forecast with reliable accuracy. Therefore, actual changes in fair values could differ significantly from the results presented in the table below.

The following table presents the results of the sensitivity analysis, which reflects the impact of a hypothetical 10% adverse change in the applicable market interest rates, foreign exchange rates and commodity prices of our derivative and debt portfolio:

		As of
Estimated Fair Value Volatility		December 25, 2005			December 26, 2004
		(In millions)
Foreign currency risk:
	Forwards, swaps	$	(13.4	)	$	(6.6	)
Interest rate risk:
	Debt, swaps	$	(75.6	)	$	(30.7	)
Commodity price risk:
	Swaps	$	(17.6	)	$	(8.4	)

We account for income taxes in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS No. 109) Judgment is required in determining our worldwide provision for income taxes. In the ordinary course of our global business, there are many transactions for which the ultimate tax outcome is uncertain. Additionally, our income tax provision is based on calculations and assumptions that are subject to examination by many different tax authorities. We adjust our income tax provision in the period it is probable that actual results will differ from our

estimates. Tax law and rate changes are reflected in the income tax provision in the period in which such changes are enacted.

We have historically provided US deferred income taxes on the undistributed earnings of certain of our foreign subsidiaries. During 2005, we assessed our corporate financing position with respect to all our foreign subsidiaries. As a result, we have elected to treat our portion of all foreign subsidiary earnings through December 25, 2005 as permanently reinvested. Under the accounting guidance of APB 23 and SFAS 109, we recorded a tax provision benefit in the third quarter of 2005 totaling $44 million, representing the reversal of a previously established deferred tax liability in our UK subsidiary. As of December 25, 2005, approximately $255 million of retained earnings attributable to international companies was considered to be permanently re-invested. The Company's intention is to reinvest the earnings permanently or to repatriate the earnings when it is tax effective to do so. It is not practicable to determine the amount of incremental taxes that might arise were these earnings to be remitted. However, the Company believes that US foreign tax credits would largely eliminate any US taxes and offset any foreign withholding taxes due on remittance.

On October 22, 2004, the American Jobs Creation Act of 2004 (the "Jobs Act") provided a deduction for income from qualified domestic production activities, which will be phased in from 2005 through 2010. In return, the Act also provides for a two-year phase-out of the existing extra-territorial income exclusion (ETI) for foreign sales that was viewed to be inconsistent with international trade protocols by the European Union. The net effect of the phase-out of the ETI and the phase-in of this new deduction did not materially impact the Company's effective tax rate in 2005.

In addition to the deduction for income from qualified domestic production activities, the Jobs Act also creates a temporary incentive for US corporations to repatriate accumulated income earned abroad by providing an 85 percent dividends received deduction for certain dividends from controlled foreign corporations. The deduction is subject to a number of limitations, which resulted in the Company not recognizing a benefit from this provision of the Jobs Act.

The FASB is currently considering changes to accounting for uncertain tax positions. Because the nature and extent of the changes are not fully known we are not able to predict the impact on our tax contingency reserve, if any.

We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. While we consider future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, in the event we were to determine that we would be able to realize our deferred tax assets in the future in excess of its net recorded amount, an adjustment to the deferred tax asset would increase income in the period a determination was made. Likewise, should we determine that we would not be able to realize all or part of our net deferred tax asset in the future, an adjustment to the deferred tax asset would be charged to income in the period such determination was made. Reductions to the valuation allowance related to the Merger with Molson or the acquisitions of CBL that relate to deferred taxes arising from those events would reduce goodwill, unless the reduction was caused by a change in law, in which case the adjustment would impact earnings.

During 2002, in connection with the purchase of CBL, we recorded a deferred tax liability on the books of CBL and a corresponding deferred tax asset on the books of the acquiring Company for the difference between the purchase price and historical basis of the CBL assets. Concurrently, we recorded a $40.0 million valuation allowance to reduce our deferred tax asset to the amount that is more likely than not to be realized. In 2005 the Company re-evaluated the purchase accounting and determined that recording this deferred tax asset was not appropriate as it did not represent either a tax carry-forward or a difference in the book and tax bases of the net assets at the time the purchase accounting adjustments were recorded. The impact of the misstatement on the Company's balance sheet was an overstatement of the long-term deferred tax asset account of $157 million, with a corresponding

understatement of goodwill of $147 million at December 26, 2004. The impact of this misstatement was not material to the consolidated balance sheets for December 26, 2004. This error resulted in immaterial misstatements in the Company's reported income tax provision for the year ended December 26, 2004. See Item 9A on page 136.

RMMC and RMBC are dedicated predominantly to our packaging and distribution activities and were formed with companies which have core competencies in the aluminum and glass container businesses. The CBL joint venture with Grolsch was formed to provide a long-term relationship with that brand's owner in a key segment of the UK beer market. In 2003, our share of the pre-tax joint venture profits for each of these investments was offset against cost of goods sold in our Consolidated Statements of Income. In 2004, as a result of implementing FIN 46R, these entities have been consolidated into our Consolidated Financial Statements as we have determined they are variable interest entities and that we are the primary beneficiary. We also consolidate the financial position and results of Brewers Retail, Inc. (BRI), which is 52% owned by Molson, and provides all distribution and retail sales of beer in the province of Ontario in Canada.

We have examined another potential business relationship during 2004 when implementing FIN 46R. This is the relationship we have with Trigen, the supplier of virtually all our energy needs at our Golden facility. Trigen purchased our power plant facilities in 1995 and signed a contract to provide our energy needs in Golden. We do not own any portion of the Trigen entity, but upon review of the supply contract, we believe that the relationship could be viewed as a variable interest, as defined by FIN 46R. However, despite exhaustive efforts to obtain financial information necessary to proceed with the analysis, we have been unable to obtain the information from Trigen, which cites privacy and competitive issues with releasing this financial information. We purchase approximately $34.0 million of energy each year from Trigen.

We have determined that any risk of a material loss is remote and that our total maximum loss cannot be reasonably estimated. We do not have another readily available option to obtain the steam energy required to run our plant. We could incur operational losses should we be unable to purchase steam from Trigen, and we are unable to estimate any such losses. In addition, we have a non-cancelable obligation to pay Trigen fixed costs through the remainder of the contract. The costs are adjusted annually for inflation and were approximately $17.5 million in 2005. We currently purchase some of our electricity requirements from another supplier at rates that do not significantly differ from the rates we pay Trigen. Our risk of loss relating to the difference in price from having to buy electricity from another third party rather than from Trigen is not significant. In the event that Trigen failed to perform its contractual obligations, MCBC has the right to step in and operate the power plant facilities. This circumstance would involve MCBC repurchasing the power plant assets, a cost that could be borne with MCBC's current capital resources.

FASB Interpretation No. 47 "Accounting for Conditional Asset Retirement Obligations, an interpretation of FASB Statement No. 143"

In March 2005, the FASB issued FASB Interpretation No. 47—"Accounting for Conditional Asset Retirement Obligations, an interpretation of FASB Statement No. 143," ("FIN 47") which clarifies the term "conditional asset retirement obligation" as used in SFAS No. 143, "Accounting for Asset Retirement Obligations." ("SFAS No. 143") Specifically, FIN 47 provides that an asset retirement obligation is conditional when either the timing and (or) method of settling the obligation is conditioned on a future event. Accordingly, an entity is required to recognize a liability for the fair value of a conditional asset retirement obligation if the fair market value of the liability can be

reasonably estimated. Uncertainty about the timing and (or) method of settlement of a conditional asset retirement obligation should be factored into the measurement of the liability when sufficient information exists.

We adopted FIN 47 on December 25, 2005, which resulted in an increase to properties of $0.5 million, goodwill of $2.2 million and liabilities of $9.6 million related to asset retirement obligations. For asset retirement obligations related to the properties acquired in the acquisition of Molson Inc. as of February 9, 2005, such obligations increased the goodwill amounts recognized upon the acquisition by $2.2 million as such properties were recorded at the appraised fair market value at the acquisition date. These asset retirement obligations relate primarily to clean-up, removal, or replacement activities and related costs for asbestos, coolants, waste water, oils and other contaminants contained within our manufacturing properties.

The adoption of FIN 47 was reflected in our financial statements as the cumulative effect of the change in accounting principle with the catch-up adjustment of $3.7 million, net of tax benefit of $2.2 million, in the 2005 income statement. This adjustment represents a depreciation charge and an accretion of liability from the time the obligation originated, which is either from the time of the acquisition or the construction of related long-lived assets, through December 25, 2005.

Inherent in the fair value calculation of asset retirement obligations are numerous assumptions and judgments including the ultimate settlement amounts, inflation factors, credit adjusted discount rates, timing of settlement, and changes in the legal, regulatory, environmental and political environments. To the extent future revisions to these assumptions impact the fair value of the existing asset retirement obligation liability, a corresponding adjustment will be made to the asset balance. If the obligation is settled for other than the carrying amount of the liability, we will recognize a gain or loss upon the settlement.

The net value of the asset retirement obligation liabilities calculated on a pro-forma basis as if the standard had been retrospectively applied to all periods presented are as follows:

December 25, 2005		December 26, 2004		December 28, 2003
$9,628,580		$5,926,852		$5,487,826

Statement of Financial Accounting Standard No. 123R (SFAS No. 123R) was issued in December 2004 and will be effective for us in the first quarter of 2006. SFAS No. 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized as compensation in the financial statements based on their fair values. Currently, under an exemption written into the guidance for qualifying stock option grants with no intrinsic value on the date of grant, we present pro forma share-based compensation expense for our stock option program in the notes to our financial statements. We have elected to use the modified-prospective transition method of implementing SFAS 123R. Under the modified prospective method, awards that are granted, modified, or settled after adoption of SFAS 123R are prospectively measured and accounted for in accordance with SFAS 123R. Unvested equity-classified awards that were granted prior to the adoption of SFAS 123R should continue to be accounted for in accordance with SFAS 123, except that amounts must be recognized in the income statement.

In March 2005, the SEC issued Staff Accounting Bulletin 107 (SAB 107) to assist preparers by simplifying some of the implementation challenges of SFAS 123R. In particular, SAB 107 provides supplemental implementation guidance on SFAS 123R, including guidance on valuation methods, classification of compensation expense, inventory capitalization of share-based compensation cost,

income tax effects, disclosures in Management's Discussion and Analysis and several other issues. We will apply the principles of SAB 107 in conjunction with our adoption of SFAS 123R.

We have elected to use the Black-Scholes option pricing model to value stock options granted in 2006 and will amortize the expense on a straight-line basis over the vesting period. We expect to use lattice modeling to determine our expected term assumption. Other equity instruments issued as compensation will be valued based upon the market price of our stock on the date of grant and will be amortized on a straight-line basis over their earnings periods.

The pro forma disclosures in Note 1 to the Consolidated Financial Statements included in Item 8 on page 70 illustrate the approximate impact of applying SFAS 123R to the historical periods presented. However, the 2005 historical period presented includes the effects of the accelerated vesting of all outstanding, but unvested stock options on the date of our Merger ($18 million) and the accelerated vesting of all outstanding, but unvested stock options with exercise prices above $70 approved by our Board of Directors in December 2005 ($29 million). The Board action in December, while serving to reduce future stock option amortization expense as a result of adoption of SFAS 123R, will be partially offset by new issuances of equity instruments to employees in 2006. We are finalizing our first quarter 2006 option expense calculations and do not yet know the impact to our income statement.

SFAS No. 151 is an amendment to ARB No. 43, Chapter 4 that will be effective for us in fiscal 2006. The standard clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs, and spoilage to require that those costs be expensed currently, as opposed to being included in overhead costs. We do not anticipate that the adoption will have a significant impact on our financial statements.

SFAS No. 154 replaces APB Opinion No. 20 and FAS No. 3 and will be effective for us in fiscal 2006. The standard introduces a new requirement to retrospectively apply accounting principle changes to prior years' comparative financial statements as if the Company had always applied the newly adopted accounting principle. Changes in depreciation, amortization and depletion methods previously considered a change in accounting principle are now considered a change in estimate under SFAS No. 154, requiring prospective adoption.

SFAS No. 155 was issued in February 2006 and will be effective for us in the first quarter of our 2007 fiscal year. Among other things, SFAS No. 155 simplifies the accounting for certain hybrid financial instruments by permitting fair value accounting for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation. We are still reviewing the impact that SFAS No. 155 will have on our financial statements.

FASB Staff Position ("FSP") No. FIN 45-3 "Application of FASB Interpretation No. 45 to Minimum Revenue Guarantees Granted to a Business or its Owners"

FSP No. FIN 45-3 is an amendment to FIN 45 requiring the recognition and disclosure of the fair value of an obligation undertaken for minimum revenue guarantees granted to a business or its owners that the revenue of the business for a specified period of time will be at least a specified minimum amount. The FSP is effective for new minimum revenue guarantees issued or modified on or after the beginning of the first quarter 2006. We do not anticipate that the adoption will have a significant impact on our financial statements.

We employ members of the Coors and Molson families, which collectively owned 81% of the voting A share, common and exchangeable stock of the Company after the Merger and throughout 2005. Hiring and placement decisions are made based upon merit, and compensation packages offered are commensurate with policies in place for all employees of the Company.

We purchase a large portion of our paperboard packaging requirements from Graphic Packaging Corporation (GPC), a related party. As of December 25, 2005, various Coors family trusts collectively owned approximately 40% of our Class A voting common stock, approximately 13% of our Class B common stock, and approximately 30% of GPC's common stock.

Our payments under the GPC packaging agreement in 2005, 2004 and 2003 totaled $75.3 million, $104.5 million and $106.4 million, respectively. Related accounts payable balances included in Affiliates Accounts Payable on the Consolidated Balance Sheets were $2.8 million and $3.4 million at December 25, 2005, and December 26, 2004, respectively.

In the normal course of business, we are exposed to fluctuations in interest rates, foreign currencies and the prices of production and packaging materials. We have established policies and procedures to govern the strategic management of these exposures through a variety of financial instruments. By policy, we do not enter into any contracts for the purpose of trading or speculation.

Our objective in managing our exposure to fluctuations in interest rates, foreign currency exchange rates and production and packaging materials prices is to decrease the volatility of our earnings and cash flows affected by potential changes in underlying rates and prices. To achieve this objective, we enter into foreign currency forward contracts, commodity swaps, interest rate swaps and cross currency swaps, the values of which change in the opposite direction of the anticipated cash flows. We do not hedge the value of net investments in foreign-currency-denominated operations or translated earnings of foreign subsidiaries. Our primary foreign currency exposures are Canadian dollar (Cdn $), British pound sterling (GBP or £) and Japanese yen (Yen).

Derivatives are either exchange-traded instruments, or over-the-counter agreements entered into with highly rated financial institutions. No losses on over-the-counter agreements due to counterparty credit issues are anticipated. All over-the-counter agreements are entered into with counterparties rated no lower than A (S&P) or A2 (Moody's). In some instances our counterparties and we have reciprocal collateralization agreements regarding fair value positions in excess of certain thresholds. These agreements call for the posting of collateral in the form of cash, treasury securities or letters of credit if a fair value loss position to our counterparties or us exceeds a certain amount. At December 25, 2005, no collateral was posted by our counterparties or us.

Details of all other market-sensitive derivative and other financial instruments, including their fair values, are included in the table below. These instruments include long-term fixed rate debt, foreign currency forwards, commodity swaps, interest rate swaps and cross-currency swaps. See related Value-at-Risk and sensitivity analysis on page 51.

Index to Financial Statements
Consolidated Financial Statements:
	Management's Report to Stockholders
	Report of Independent Registered Public Accounting Firm
	Consolidated Statements of Income and Comprehensive Income for each of the three years in the period ended December 25, 2005
	Consolidated Balance Sheets at December 25, 2005, and December 26, 2004
	Consolidated Statements of Cash Flows for each of the three years in the period ended December 25, 2005
	Consolidated Statements of Stockholders' Equity for each of the three years in the period ended December 25, 2005
	Notes to Consolidated Financial Statements

The preparation, integrity and objectivity of the financial statements and all other financial information included in this annual report are the responsibility of the management of Molson Coors Brewing Company. The financial statements have been prepared in accordance with generally accepted accounting principles, applying estimates based on management's best judgment where necessary. Management believes that all material uncertainties have been appropriately accounted for and disclosed.

The established system of accounting procedures and related internal controls provide reasonable assurance that the assets are safeguarded against loss and that the policies and procedures are implemented by qualified personnel.

PricewaterhouseCoopers LLP, the Company's independent registered public accounting firm, provides an objective, independent audit of the consolidated financial statements and internal control over financial reporting. Their accompanying report is based upon an examination conducted in accordance with standards of the Public Company Accounting Oversight Board (United States), including tests of accounting procedures, records and internal controls.

The Board of Directors, operating through its Audit Committee composed of independent, outside directors, monitors the Company's accounting control systems and reviews the results of the Company's auditing activities. The Audit Committee meets at least quarterly, either separately or jointly, with representatives of management, PricewaterhouseCoopers LLP, and internal auditors. To ensure complete independence, PricewaterhouseCoopers LLP and the Company's internal auditors have full and free access to the Audit Committee and may meet with or without the presence of management.

We have completed integrated audits of Molson Coors Brewing Company's 2005 and 2004 consolidated financial statements and of its internal control over financial reporting as of December 25, 2005, and an audit of its 2003 consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Molson Coors Brewing Company and its subsidiaries (the "Company") at December 25, 2005 and December 26, 2004, and the results of their operations and their cash flows for each of the three years in the period ended December 25, 2005 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of

these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in the notes to the consolidated financial statements, effective December 25, 2005, the Company adopted the provisions of Financial Accounting Standard Board Interpretation No. 47 "Accounting for Conditional Asset Retirement Obligations, an interpretation of FASB Statement No. 143."

Also, we have audited management's assessment, included in Management's Report on Internal Control over Financial Reporting appearing under Item 9A, that the Company did not maintain effective internal control over financial reporting as of December 25, 2005 because the Company did not maintain effective controls over the completeness and accuracy of the income tax provision and related balance sheet accounts, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management's assessment and on the effectiveness of the Company's internal control over financial reporting based on our audit.

We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management's assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial

statements will not be prevented or detected. The following material weakness has been identified and included in management's assessment. As of December 25, 2005, the Company did not maintain effective controls over the completeness and accuracy of the income tax provision and related balance sheet accounts. Specifically, the Company's controls over the processes and procedures related to the determination and review of the quarterly and annual tax provisions were not adequate to ensure that the income tax provision was prepared in accordance with generally accepted accounting principles. This control deficiency resulted in the restatement of the first quarter of 2005 as well as audit adjustments to the annual 2005 consolidated financial statements. Additionally, this control deficiency could result in a misstatement of the income tax provision and related balance sheet accounts that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected. Accordingly, the Company determined that this control deficiency constitutes a material weakness. This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2005 consolidated financial statements, and our opinion regarding the effectiveness of the Company's internal control over financial reporting does not affect our opinion on those consolidated financial statements.

As described in Management's Report on Internal Control over Financial Reporting, management has excluded its Molson Canada and Kaiser Brazil business units from its assessment of internal control over financial reporting as of December 25, 2005 because these business units were acquired by the Company in a purchase business combination during 2005. We have also excluded the Molson Canada and Kaiser Brazil business units from our audit of internal control over financial reporting. Molson Canada is a wholly-owned subsidiary whose total assets and total revenues represent 50% and 28%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 25, 2005. The Kaiser Brazil business unit is presented as a discontinued operation in the accompanying financial statements due to the sale of the business unit in January 2006 and whose total assets represent five percent of the consolidated financial statement amount as of December 25, 2005.

In our opinion, management's assessment that Molson Coors Brewing Company did not maintain effective internal control over financial reporting as of December 25, 2005, is fairly stated, in all material respects, based on criteria established in Internal Control—Integrated Framework issued by the COSO. Also, in our opinion, because of the effect of the material weakness described above on the achievement of the objectives of the control criteria, Molson Coors Brewing Company has not maintained effective internal control over financial reporting as of December 25, 2005, based on criteria established in Internal Control—Integrated Framework issued by the COSO.

MOLSON COORS BREWING COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

AND COMPREHENSIVE INCOME

(IN THOUSANDS, EXCEPT SHARE DATA)

MOLSON COORS BREWING COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)

(Mark One)
ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal year ended December 25, 2005
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .

		2005(2)			2004			2003			2002(1)			2001
		(In thousands, except per share data)
*Consolidated Statement of Operations:*
Gross sales		$	7,417,702		$	5,819,727		$	5,387,220		$	4,956,947		$	2,842,752
Beer excise taxes			(1,910,796	)		(1,513,911	)		(1,387,107	)		(1,180,625	)		(413,290	)

Net sales			5,506,906			4,305,816			4,000,113			3,776,322			2,429,462
Cost of goods sold			(3,306,949	)		(2,741,694	)		(2,586,783	)		(2,414,530	)		(1,537,623	)

Gross profit			2,199,957			1,564,122			1,413,330			1,361,792			891,839
Marketing, general and administrative			(1,632,516	)		(1,223,219	)		(1,105,959	)		(1,057,240	)		(717,060	)
Special items, net			(145,392	)		7,522			—			(6,267	)		(23,174	)

Operating income			422,049			348,425			307,371			298,285			151,605
Interest (expense) income, net			(113,603	)		(53,189	)		(61,950	)		(49,732	)		14,403
Other income (expense), net			(13,245	)		12,946			8,397			8,047			32,005

Income before income taxes			295,201			308,182			253,818			256,600			198,013
Income tax expense			(50,264	)		(95,228	)		(79,161	)		(94,947	)		(75,049	)

Income before minority interest			244,937			212,954			174,657			161,653			122,964
Minority interests(3)			(14,491	)		(16,218	)		—			—			—

Income from continuing operations			230,446			196,736			174,657			161,653			122,964

Loss from discontinued operations(4)			(91,826	)		—			—			—			—

Cumulative effect of change in accounting principle(5)			(3,676	)		—			—			—			—

Net income		$	134,944		$	196,736		$	174,657		$	161,653		$	122,964

Basic income (loss) per share:
	From continuing operations	$	2.90		$	5.29		$	4.81		$	4.47		$	3.33
	From discontinued operations		(1.16	)		—			—			—			—
	From cumulative effect of change in accounting principle		(0.04	)		—			—			—			—

Basic net income per common share		$	1.70		$	5.29		$	4.81		$	4.47		$	3.33

Diluted income (loss) per share:
	From continuing operations	$	2.88		$	5.19		$	4.77		$	4.42		$	3.31
	From discontinued operations		(1.15	)		—			—			—			—
	From cumulative effect of change in accounting principle		(0.04	)		—			—			—			—

Diluted net income per common share		$	1.69		$	5.19		$	4.77		$	4.42		$	3.31

		Fiscal Year Ended
		December 25, 2005			Percent Change		December 26, 2004			Percent Change		December 28, 2003
		(In thousands, except percentages)
Volume in barrels			22,645		2.6	%		22,068		(0.8	)%		22,257

Net sales		$	2,474,956		4.0	%	$	2,380,193		2.2	%	$	2,328,004
Cost of goods sold			(1,525,060	)	4.3	%		(1,462,373	)	0.2	%		(1,459,961	)

	Gross profit		949,896		3.5	%		917,820		5.7	%		868,043
Marketing, general and administrative expenses			(739,315	)	0.5	%		(735,529	)	5.8	%		(695,195	)
Special items, net			(68,081	)	—			—		—			—

Operating income			142,500		(21.8	)%		182,291		5.5	%		172,848
Other (expense), income, net(1)			(457	)	(102.3	)%		19,924		216.3	%		6,299

Segment earnings before income taxes(2)		$	142,043		(29.8	)%	$	202,215		12.9	%	$	179,147

		Fiscal Year Ended
		December 25, 2005(3)			Percent Change		December 26, 2004		Percent Change		December 28, 2003
		(In thousands, except percentages)
Volume in barrels			7,457		—			—	—			—

Net sales(1)		$	1,527,306		N/M		$	60,693	27.7	%	$	47,527
Cost of goods sold			(790,859	)	—			—	—			—

	Gross profit		736,447		N/M			60,693	27.7	%		47,527
Marketing, general and administrative expenses			(377,545	)	N/M			969	N/M			114
Special item			(5,161	)	—			—	—			—

Operating income			353,741		473.7	%		61,662	29.4	%		47,641
Other (expense) income, net			(2,183	)	—			—	—			—

Segment earnings before income taxes(2)		$	351,558		470.1	%	$	61,662	29.4	%	$	47,641

	Fiscal Year Ended
	December 25, 2005			Percent Change		December 26, 2004
	(In thousands, except percentages)
Volume in barrels	$	8,153		(1.1	)%	$	8,241

Net sales(1)		1,627,721		6.5	%		1,528,279
Cost of goods sold		(818,297	)	5.9	%		(772,510	)

Gross profit		809,424		7.1	%		755,769
Marketing, general and administrative expenses		(425,468	)	24.2	%		(342,635	)
Special item		(5,161	)	(74.7	)%		(20,404	)

Operating income		378,795		(3.5	)%		392,730
Other (expense) income, net		(1,490	)	(47.5	)%		(2,837	)

Segment earnings before income taxes(2)	$	377,305		(3.2	)%	$	389,893

	HIGH	LOW	DIVIDENDS(1)
*2005*
First Quarter	Cdn $92.91	Cdn $83.00	$	0.320
Second Quarter	Cdn $97.73	Cdn $72.01	$	0.320
Third Quarter	Cdn $80.00	Cdn $70.01	$	0.320
Fourth Quarter	Cdn $78.00	Cdn $70.00	$	0.320
*2004*
First Quarter	—	—		—
Second Quarter	—	—		—
Third Quarter	—	—		—
Fourth Quarter	—	—		—

	HIGH	LOW	DIVIDENDS(1)
*2005*
First Quarter	Cdn $91.40	Cdn $83.85	$	0.320
Second Quarter	Cdn $97.00	Cdn $72.22	$	0.320
Third Quarter	Cdn $79.50	Cdn $73.91	$	0.320
Fourth Quarter	Cdn $80.70	Cdn $71.40	$	0.320
*2004*
First Quarter	—	—		—
Second Quarter	—	—		—
Third Quarter	—	—		—
Fourth Quarter	—	—		—

		Payments Due By Period
		Total		Less than 1 year		1 - 3 years		4 - 5 years		After 5 years
		(In thousands)
Long term debt, including current maturities(1)		$	2,484,770	$	348,102	$	8,020	$	308,019	$	1,820,629
Interest payments(2)			877,109		129,676		241,298		239,284		266,851
Derivative payments(2)			1,727,985		84,828		165,010		469,519		1,008,628
Retirement plan expenditures(3)			403,962		188,514		45,423		48,198		121,827
Operating leases			262,207		55,130		79,740		46,583		80,754
Capital leases(4)			5,493		3,551		1,634		308		—
Other long-term obligations(5)			4,316,587		1,254,006		1,555,291		931,991		575,299

	Total obligations	$	10,078,113	$	2,063,807	$	2,096,416	$	2,043,902	$	3,873,988

		Amount of Commitment Expiration Per Period
		Total		Less than 1 year		1 - 3 years		4 - 5 years		After 5 years
		(In thousands)
Standby letters of credit		$	47,081	$	45,932	$	1,149	$	—	$	—

	Total commercial commitments	$	47,081	$	45,932	$	1,149	$	—	$	—

		Expected Maturity Date
		December
		2006		2007		2008		2009		2010			Thereafter			Total			Fair Value
Long-term debt (in thousands):
	US $300 million, 4.85% fixed rate, due 2010(2)	$	—	$	—	$	—	$	—	$	(300,000	)	$	—		$	(300,000	)	$	(296,796	)
	Cdn $200 million, 7.5% fixed rate, due 2011(5)		—		—		—		—		—			(171,600	)		(171,600	)		(194,801	)
	US $850 million, 6.375% fixed rate, due 2012(1), (4)		—		—		—		—		—			(850,000	)		(850,000	)		(901,026	)
	Cdn $900 million, 5.0% fixed rate, due 2015(2)		—		—		—		—		—			(772,201	)		(772,201	)		(765,251	)
Foreign currency management (in thousands):
	Forwards		137,126		24,879		—		—		—			—			162,005			(2,548	)
	Cross currency swaps(1), (2), (3)		217,800		—		—		—		300,000			773,800			1,291,600			(174,755	)
	Commodity pricing management:
	Swaps		32,019		10,098		3,322		—		—			—			45,439			9,422
	Interest rate pricing management
	Interest rate swaps(4), (5)		—		—		—		—		—			372,800			372,800			11,195

			As of
			December 25, 2005		December 26, 2004
Assets
Current assets:
	Cash and cash equivalents		$	39,413	$	123,013
	Accounts and notes receivable:
		Trade, less allowance for doubtful accounts of $9,480 and $9,110, respectively		692,638