PART I

ITEM 1. Business

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 or the Company) (formerly Adolph Coors Company), principally a holding company, and its operating subsidiaries: Coors Brewing Company (CBC), operating in the United States (U.S.); Coors Brewers Limited (CBL), operating in the United Kingdom (U.K.); Molson Canada (Molson), operating in Canada; 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 U.S. Dollars (USD or $).

(a) General Development of Business

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. Our largest markets are Canada, the United States and the United Kingdom.

The Merger

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

Sale of Kaiser

On January 13, 2006, we sold a 68% equity interest in Cervejarias Kaiser Brasil S.A. (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 retained a 15% ownership interest in Kaiser, which was reflected as a cost method investment for accounting purposes during most of 2006. During the fourth quarter of 2006, we divested our remaining 15% interest in Kaiser by exercising a put option, for which we collected $15.7 million, including interest. Our financial statements contained in this report present Kaiser as a discontinued operation, as discussed further in Note 4 to the Consolidated Financial Statements in Item 8.

Joint Ventures and Other Arrangements

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 such as can and bottle manufacturing, transportation and distribution. These joint ventures include Rocky Mountain Metal Container (RMMC) (aluminum can manufacturing in the U.S.), Rocky Mountain Bottle Company (RMBC) (glass bottle manufacturing in the U.S.) and Tradeteam, Ltd. (Tradeteam) (transportation and distribution in Great Britain within our Europe segment).

(b) Financial Information About Segments

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

discontinued operation during the fourth quarter of 2005, and subsequent to the Merger in the first quarter of 2005, Brazil was an operating segment. A separate operating team manages each segment, and each segment manufactures, markets and sells beer and other beverage products.

See Note 3 to the Consolidated Financial Statements in Item 8 for financial information relating to our segments and operations, including geographic information.

(c) Narrative Description of Business

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 beginning 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.

Our Products

Brands sold in Canada include Coors Light®, Molson Canadian®, Molson Dry®, Molson® Export, Creemore Springs®, Rickard’s Red Ale® and other Rickard’s brands, 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 U.S.A. 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 in the United States include: Coors Light®, Coors®, Coors® Non-Alcoholic, Blue Moon® Belgian White Ale and seasonal Blue Moon brands, George Killian’s® Irish RedÔ Lager, Keystone®, Keystone® Light, Keystone® Ice, and Zima® XXX. We also sell the Molson family of brands in the United States.

Brands sold in the United Kingdom include: Carling®, C2Ô, Coors Fine Light Beer®, Worthington’s® ales, Caffrey’s®, Reef®, Screamers® and Stones®. We also sell Grolsch® in the United Kingdom through a joint venture. Additionally, in order to be able to provide a full line of beer and other beverages to our on-premise customers, we sell factored brands in our Europe segment, which are third party brands for which we provide distribution to retail, typically on a non-exclusive basis.

We sold approximately 19% of our 2006 reported volume in the Canada segment, 56% in the United States segment, and 25% in the Europe segment. In 2006, our largest brands accounted for the following percentage of total consolidated volume: Coors Light accounted for approximately 45% of reported volume, Carling for approximately 19%, and Keystone Light for approximately 8%.

Our sales volume from continuing operations totaled 42.1 million barrels in 2006, 40.4 million barrels in 2005 and 32.7 million barrels in 2004, excluding Brazil volume in discontinued operations. 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 former Molson Coors Canada or Molson U.S.A. joint ventures. 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 2006, 2005 or 2004.

Canada Segment

Molson is Canada’s largest brewer by volume and North America’s oldest beer company, with an approximate 41% market share in Canada. Molson’s largest competitor, however, maintains a market share that is only slightly less than Molson’s. 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 has strong market share and visibility across retail and on-premise channels. Priority focus and investment is leveraged behind key owned brands (Coors Light, Molson Canadian, Molson Dry, Molson Export and Rickard’s) and key strategic distribution partnerships (including Heineken, Corona and Miller). Coors Light currently has an 11% market share and is the largest-selling light beer and the second-best selling beer brand overall in Canada. Molson Canadian currently has an 8% market share and is the third-largest selling beer in Canada.

Our Canada segment consists primarily of the production and sale of the Molson brands, Coors Light, and partner and other brands listed above under “Our Products.” The Canada segment also includes our partnership arrangements related to the distribution of beer in Ontario, Brewers Retail Inc. (BRI), and the Western provinces, Brewers’ Distributor Ltd. (BDL). BRI is consolidated in our financial statements. See Note 5 to the Consolidated Financial Statements in Item 8.

Sales and Distribution

Canada

In Canada, provincial governments regulate 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.

Province of Ontario

In Ontario, beer may only be purchased 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.

Province of Québec

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.

Province of British Columbia

In British Columbia, the government’s Liquor Distribution Branch currently controls the regulatory elements of distribution of all alcohol products in the province. Brewers’ Distributor 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.

Province of Alberta

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 U.S.-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.

Other Provinces

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.

Manufacturing, Production and Packaging

Brewing Raw Materials

Molson’s goal is to procure highest quality materials and services at the lowest prices available. Molson selects global suppliers for materials and services that best meet this goal. Molson also uses hedging instruments to protect from volatility in the commodities and foreign exchange markets.

Molson sources barley malt from two primary providers, with commitments through 2009. Hops are purchased from a variety of global suppliers in the U.S., Europe and New Zealand, with commitments through 2007. Other starch brewing adjuncts are sourced from two main suppliers, both in North America. We do not foresee any significant risk of disruption in the supply of these agricultural products. Molson and CBC in the U.S. have benefited from merger-driven cost synergies related to the acquisition of certain brewing materials. Water used in the brewing process is from local sources in the communities where our breweries operate.

Brewing and Packaging Facilities

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. The breweries are as follows: Montréal (Québec), Toronto (Ontario), Vancouver (British Columbia), Edmonton (Alberta), St. John’s (Newfoundland) and Creemore (Ontario). The Montréal and Toronto breweries account for approximately three-fourths of the company’s Canada production. The Moncton (New Brunswick) brewery is under construction with plans to be complete by September 2007.

Packaging Materials

Glass bottles

Molson single sources glass bottles, and has a committed supply through 2007. Availability of glass bottles has not been an issue, and Molson does not expect any difficulties in accessing them. 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. The distribution systems in each province generally provide the collection network for returnable bottles. The standard container for beer brewed in Canada is the 341 ml returnable bottle, which represents approximately 69% of domestic sales in Canada.

In October 2003, the Canadian Competition Bureau began a review into the validity of industry arrangements regarding industry bottle standards. The Bureau has recently advised that they have discontinued their review. The industry arrangements remain in place.

Aluminum cans

Molson single sources aluminum cans and has a committed supply through 2007. Availability of aluminum cans has not been an issue, and Molson does not expect any difficulties in accessing them. The distribution systems in each province generally provide the collection network for aluminum cans. Aluminum cans account for approximately 21% of domestic sales in Canada.

Kegs

Molson sells approximately 10% of its beer volume in stainless steel kegs. A limited number of kegs are purchased every year, and there is no long-term supply commitment.

Other packaging

Crowns, labels, corrugate and paperboard are purchased from concentrated sources unique to each product. Molson does not foresee difficulties in accessing these products in the near future.

Seasonality of Business

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 41% of industry sales volume occurring during the four months from May through August.

Competitive Conditions

2006 Canada Beer Industry Overview

Since 2001, the premium beer category in Canada has gradually lost volume to the super-premium and “value” (below premium) categories. The growth of the value category slowed in 2005 and 2006, and the price gap between premium and value brands was relatively stable, although the number of value brands increased. In 2006, we increased regular selling prices for our premium brands in select markets, 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; premium, which includes the majority of domestic brands and the light sub-segment; and value.

During 2006, estimated industry sales volume in Canada, including sales of imported beers, increased by approximately 2% on a year-over-year basis.

Our Competitive Position

The Canada brewing industry is comprised principally of two major brewers, Molson and Labatt, whose combined market share is approximately 81% of beer sold in Canada. The Ontario and Québec markets account for approximately 62% of the total beer market in Canada.

Sales of wine and spirits have grown faster than sales of beer in recent years, resulting in a reduction in the beer segment’s lead in the overall alcoholic beverages market.

United States Segment

Coors Brewing Company is the third-largest brewer by volume in the United States, with an approximate 11% market share. CBC 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. The U.S. segment also includes Coors brand volume, primarily Coors Light, that is sold outside of the United States and its territories, primarily Mexico and the Caribbean, as well as sales of Molson brand products in the United States.

Sales and Distribution

In the United States, beer is generally distributed through a three-tier system consisting of manufacturers, distributors and retailers. A national network of approximately 550 independent distributors purchases our products and distributes them to retail accounts. We estimate that approximately one-fourth of our product is sold on-premise in bars and restaurants, and the other three-fourths is sold off-premise in liquor stores, convenience stores, grocery stores and other retail outlets. We also own three distributorships which collectively handled approximately 2% of our total U.S. segment’s volume in 2006. Approximately 44% of our volume passes through one of our 11 satellite re-distribution centers throughout the United States prior to being sold to distributors. In Puerto Rico, we market and sell Coors Light through an independent distributor. Coors Light is the leading beer brand in Puerto Rico. Sales in Puerto Rico represented less than 5% of our U.S. sales volume in 2006. We also sell our products in several other Caribbean markets. Cerveceria Cuauhtemoc Moctezuma, S.A. de C.V., a subsidiary of FEMSA Cerveza, is the sole and exclusive importer, marketer, seller and distributor of Coors Light in Mexico.

Manufacturing, Production and Packaging in the United States

Brewing Raw Materials

We use the highest-quality water, barley and hops to brew our products. We malt 100% of our production requirements, using barley purchased under yearly contracts from a network of independent farmers located in five regions in the western United States. Hops and starches are purchased from suppliers primarily in the United States. 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. CBC also uses hedging instruments to protect from volatility in the commodities and foreign exchange markets.

Brewing and Packaging Facilities

We have two production facilities in the United States. We own and operate the world’s largest single-site brewery located in Golden, Colorado. We also operate a packaging facility located in the Shenandoah Valley in Virginia. In order to supply our markets in the eastern United States more efficiently, we are adding brewing capability to our Virginia facility, which we expect to have operational by summer of 2007. The Golden brewery has the capacity to brew and package more than 15 million barrels annually. The Shenandoah brewery will have a production capacity of approximately 7 million barrels. The Shenandoah facility will source its barley malt from the Golden malting facility.

We closed our Memphis brewing and packaging facility in September 2006 and shifted its production to other MCBC facilities. All products shipped to Puerto Rico or otherwise exported outside the U.S. are now packaged at the Shenandoah facility, and upon its full build-out, all Puerto Rico and export volume will be brewed in Shenandoah.

The U.S. segment imports Molson products and a portion of another U.S. brand volume from Molson’s Montréal brewery.

CBC faces cost challenges due to the concentration of its brewing activities at few locations, compared with our other operating segments and compared with our competitors in the United States, who operate more breweries in geographically diverse locations in the U.S. These cost challenges have been exacerbated by increases in diesel fuel costs in recent years. The Shenandoah brewery in part is an effort to address these challenges.

Packaging Materials

Aluminum cans

Approximately 61% of our U.S. products were packaged in aluminum cans in 2006. We purchased approximately 80% of those cans from RMMC, our joint venture with Ball Corporation (Ball), whose production facility is located adjacent to the brewery in Golden, Colorado. In addition to our supply agreement with RMMC, we also have a commercial supply agreement with Ball to purchase cans and ends in excess of what is supplied through RMMC. Aluminum is an exchange-traded commodity, and its price can be volatile. The RMMC joint venture agreement is scheduled to expire in 2012.

Glass bottles

We packaged approximately 28% of our U.S. products in 2006 in glass bottles. RMBC, our joint venture with Owens-Brockway Glass Container, Inc. (Owens), produces approximately 60% of our U.S. glass bottle requirements at our glass manufacturing facility in Wheat Ridge, Colorado. In July 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.

Kegs

The remaining 11% of U.S. volume we sold in 2006 was packaged in quarter-, half-, and one-sixth barrel stainless steel kegs. A limited number of kegs are purchased each year, and there is no long-term supply agreement.

Other packaging

Crowns, labels, corrugate and paperboard are purchased from concentrated sources unique to each product. We purchase most of our paperboard from a subsidiary of Graphic Packaging Corporation (GPC), a related party. CBC does not foresee difficulties in accessing these products in the future.

Seasonality of the Business

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

Competitive Conditions

Known Trends and Competitive Conditions

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), and distributors. While management believes that these sources are reliable, we cannot guarantee the accuracy of these numbers and estimates.

2006 U.S. Beer Industry Overview

The beer industry in the United States is highly competitive and increasingly fragmented, with a profusion of offerings in the above-premium category. With respect to premium lager-style beer, three major brewers control approximately 78% of the market. Growing or even maintaining market share has required increasing investments in marketing and sales. U.S. beer industry shipments had an annual growth rate during the past 10 years of 0.8%. Price discounting in the U.S. beer industry was less intense in 2006, compared with a high level of promotions in the second half of 2005.

Since the change in the Excise Tax structure in Puerto Rico in June 2002, the beer market there has been in modest decline. Additionally, while this market has traditionally been split among U.S. imports, other foreign imports and local brewers, due to the tax advantage held by the local brewer, the Medalla brand has gained significant share in the past several years. Coors Light remains the market leader in Puerto Rico with an approximate 50% market share.

Our Competitive Position

Our malt beverages compete with numerous above-premium, premium, low-calorie, 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 SAB Miller (SAB). We also compete with imported craft beer brands. According to Beer Marketer’s Insights estimates, we are the nation’s third-largest brewer, selling approximately 11% of the total 2006 U.S. brewing industry shipments (including exports and U.S. 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. Sales of wine and spirits have grown faster than sales of beer in recent years, resulting in a reduction in the beer segment’s lead in the overall alcoholic beverages market.

Europe Segment

Coors Brewers, Ltd (CBL) is the United Kingdom’s second-largest beer company with unit volume sales of approximately 10.4 million U.S. barrels in 2006. CBL has an approximate 21% share of the U.K. beer market, Western Europe’s second-largest market. Sales are primarily in England and Wales, with the Carling brand (a mainstream lager) representing more than three-fourths of CBL’s total beer volume. 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, factored brand sales (beverage brands owned by other companies, but sold and delivered to retail by us), and our joint venture arrangement with DHL (formerly Exel Logistics) for the distribution of products throughout Great Britain (through Tradeteam). Our Europe segment also manages a small volume of sales, primarily of Coors products, in Asia and other export markets.

Sales and Distribution

United Kingdom

In the United Kingdom, beer is generally distributed through a two-tier system consisting of manufacturers and retailers. 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. It is also common in the U.K. for brewers to distribute beer, wine, spirits and other products owned and produced by other companies to the on-premise channel, where products are consumed in bars and restaurants. Approximately 30% of CBL’s net sales value in 2006 was these “factored” brands.

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 malt to the CBL breweries.

Over the past three decades, volumes have shifted from the higher margin on-premise channel, where products are consumed in pubs and restaurants, to the lower margin off-premise channel, also referred to as the “take-home” market.

On-Premise Market Channel

The on-premise channel accounted for approximately 62% of our U.K. sales volumes in 2006. The on-premise channel is generally segregated further into two more specific categories: multiple on-premise and free on-premise. Multiple on-premise refers to those customers that own a number of pubs and restaurants and free on-premise refers to individual owner-operators of pubs and restaurants. The on-going market trend from the higher-margin free on-premise channel to the lower-margin multiple on-premise puts the Europe segment’s profitability at risk. In 2006, CBL sold approximately 70% and 30% of its on-premise volume to multiple and free on-premise customers, respectively. In recent years, pricing in the on-premise channel has intensified as the retail pub chains have consolidated. As a result, the larger pub chains have been able to negotiate lower beer prices from brewers, which have not consolidated during this time.

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. Accordingly, CBL owns equipment used to dispense beer from kegs to consumers. This includes beer lines, cooling equipment, taps and countermounts.

Similar to other U.K. brewers, CBL has traditionally used loans to secure supply relationships with customers in the on-premise market. Loans are normally 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.

Off-Premise Market Channel

The off-premise channel accounted for approximately 38% of our U.K. sales volume in 2006. The off-premise market includes sales to supermarket chains, convenience stores, liquor store chains, distributors and wholesalers.

Asia

We continue to develop markets in Asia, which are managed by the Europe segment’s management team. We have a Japanese business which is currently focused on the Zima and Coors brands. In China our business is principally focused on the Coors Light brand. Product sold in Japan and China is contract brewed by a third party in China. The small amount of remaining Asia volume is exported from the U.S.

Manufacturing, Production and Packaging

Brewing Raw Materials

We use the highest-quality water, barley and hops to brew our products. During 2006, CBL produced more than 90% of its required malt using barley purchased from sources in the United Kingdom. CBL does not anticipate significant challenges in procuring quality malt for the foreseeable future. Malt sourced externally is committed through 2008 and is produced through a toll malting agreement where CBL purchases the required barley and pays a conversion fee to the malt vendor. Hops and adjunct starches used in the brewing process are purchased from agricultural sources in the United Kingdom and on the European continent. CBL does not anticipate difficulties in accessing these products going forward.

We assure the highest-quality water by obtaining our water from private water sources that are carefully chosen for their purity and are regularly tested to ensure their ongoing purity and to confirm that all the requirements of the U.K. private water regulations are met. Public supplies are used as back-up to the private supplies in some breweries, and these are again tasted and tested regularly to ensure their ongoing purity.

Brewing and Packaging Facilities

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 and accounts for approximately two-thirds of CBL’s production. Smaller breweries are located in Tadcaster and Alton. Product sold in Ireland and certain Asia markets is produced by contract brewers.

Packaging Materials

Kegs and casks

We used kegs and casks for approximately 56% of our U.K. products in 2006, reflecting a high percentage of product sold on-premise. CBL does not own its own kegs but rather fills and ships kegs owned by a third party, who manages the supply and maintenance of kegs and casks. See Item 1A. Risk Factors related to the Europe segment for further discussion.

Aluminum Cans

Approximately 36% of our U.K. products were packaged in cans in 2006. All of our cans are purchased through a supply contract with Ball.

Glass bottles

Approximately 5% of our U.K. products are packaged in glass bottles purchased through supply contracts with third-party suppliers.

Other packaging

The remaining 3% of our U.K. sales are shipped in bulk tanker for other brewers to package.

Crowns, labels, corrugate and paperboard are purchased from concentrated sources unique to each product. CBL does not foresee difficulties in accessing these or other packaging materials in the foreseeable future.

Seasonality of Business

In the U.K., the beer industry is subject to seasonal sales fluctuations primarily influenced by holiday periods, weather and by certain major televised sporting events (such as the World Cup soccer tournament in the summer of 2006). Peak selling seasons occur during the summer and during the Christmas and New Year periods. 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.

Competitive Conditions

2006 U.K. Beer Industry Overview

Beer consumption in the United Kingdom declined by an average of 0.9% per annum between 1980 and 2000. Total trade beer market volume declined by 1.2% in 2006. This was the third consecutive year of

decline and reverses the relatively stable trend seen during 2000 to 2003. 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 caused by a number of factors, including changes in consumers’ lifestyles and an increasing price difference between beer prices in the on-premise (higher prices) and off-premise (lower prices) channels. Both trends continued in 2006 with off-premise industry market growth of 3.2% and a decline in the on-premise market of 4.3%.

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 2006 lagers accounted for almost 75% of U.K. beer sales. 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 66% of the total market, compared to only 34% in 1995.

Our Competitive Position

Our beers and flavored alcohol beverages compete not only with similar products from competitors, but also with other alcohol beverages, including wines, spirits and ciders. 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, Coors Fine Light Beer and C2 positions us well to take advantage of the continuing trend toward lagers. Our portfolio has been strengthened by the introduction of a range of imported and speciality beer brands, such as Sol, Zatec, Palm and Kasteel Cru.

Our principal competitors are Scottish & Newcastle U.K. Ltd., Inbev U.K. Ltd. and Carlsberg U.K. Ltd. We are the U.K.’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 U.K. Ltd.’s share of approximately 24%, Inbev U.K. Ltd.’s share of approximately 19% and Carlsberg U.K. Ltd.’s share of approximately 12%. In 2006 CBL achieved a small increase in its share of the U.K. beer market and two of our three core brands—Carling and Coors Fine Light Beer—increased their product category share in 2006.

Global Intellectual Property

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. We are not reliant on royalty or other revenue from third parties for our financial success. Therefore, these expirations are not expected to have a significant impact on our business.

Inflation

Inflation is typically a factor in the segments in which we operate, although we periodically experience inflationary trends in specific areas, such as fuel costs, which were significantly higher in 2006 when compared to prior years. Inflation in diesel fuel costs impacts the U.S. segment most significantly due to the geographic size of the U.S. market and the concentration of production at fewer facilities. The U.S. segment is also the most exposed to inflation in aluminum prices, since it packages the majority of its product in aluminum cans.

Regulation

Canada

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 2006, Canada excise taxes totaled $552.5 million or $66.71 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 United States, affect the Canadian beer industry.

United States

In the United States, the beer business is 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 U.S. Treasury Department; Alcohol and Tobacco Tax and Trade Bureau; the U.S. Department of Agriculture; the U.S. 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. U.S. federal excise taxes on malt beverages are currently $18 per barrel. State excise taxes also are levied at rates that ranged in 2006 from a high of $32.10 per barrel in Alaska to a low of $0.60 per barrel in Wyoming. In 2006, U.S. excise taxes totaled $417.6 million or $17.79 per barrel sold.

Europe

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 Her Majesty’s Revenue & Customs (HMRC); the Office of Fair Trading; the Data Protection Commissioner and the Environment Agency.

In 2007, a smoking ban in public places will take effect across the remainder of Great Britain. The ban will come into force on April 2, 2007 in Wales, April 30, 2007 in Northern Ireland and July 1, 2007 in England and is expected to have a significant unfavorable volume impact in the on-premise channel in the short-term but potentially increase volume in the off-premise market as consumers adjust their consumption patterns to the new environment. A ban already exists in Scotland and Republic of Ireland and in these geographies the experience was as we have outlined in our expectation for Wales, Northern Ireland and England.

The U.K. government levies excise taxes on all alcohol beverages at varying rates depending on the type of product and its alcohol content by volume. In 2006, we incurred approximately $1.1 billion in excise taxes on gross revenues of approximately $2.5 billion, or approximately $104.58 per barrel.

Environmental Matters

Canada

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, has water treatment facilities to pre-treat waste water before it goes to the respective local governmental facility for final treatment. We have environmental programs in Canada including organization, monitoring and verification, regulatory compliance, reporting, education and training, and corrective action.

Molson sold a chemical specialties business in 1996. The company is responsible for certain aspects of environmental remediation, undertaken or planned, at the business sites. We have established provisions for the costs of these remediation programs.

United States

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 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.

Europe

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 2006 capital expenditures, earnings or competitive position, and we do not anticipate that they will do so in 2007.

Employees and Employee Relations

Canada

Molson has approximately 3,000 full-time employees in Canada. 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. The agreement governing our relationship with 100 employees at the Edmonton brewery is set to expire in 2007. We believe that relations with our Canada employees are good.

United States

We have approximately 3,800 employees in our U.S. segment. Less than 1% of our U.S. work force is represented by unions. We believe that relations with our U.S. employees are good.

Europe

We have approximately 2,750 employees in our Europe segment. Approximately 23% of this total workforce is represented by trade unions, primarily at our Burton-on-Trent and Tadcaster breweries. 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 the Consolidated Financial Statements in Item 8 for discussion of sales, operating income and identifiable assets attributable to our country of domicile, the United States, and all foreign countries.

(e) Available Information

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.

ITEM 1A. Risk Factors

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:

Risks specific to our Company

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.

Our success as an enterprise depends largely on the success of three primary products in three mature markets; the failure or weakening of one or more could materially adversely affect our financial results. Although we currently have 14 products in our U.S. portfolio, Coors Light represented more than 71% of our U.S. segment’s sales volume for 2006. Carling lager is the best-selling brand in the United Kingdom and represented more than 77% of our European segment’s sales volume in 2006. The combination of the Molson Canadian and Coors Light brands represented more than 42% of our Canada segment’s sales volume in 2006. Consequently, any material shift in consumer preferences away from these brands, or from the categories in which they compete, would have a disproportionately large adverse impact on our business. Moreover, each of our three major markets is mature, and we face large competitors who have greater financial, marketing and distribution resources and are more diverse in terms of their geographies and brand portfolios.

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 31, 2006, we had approximately $850 million in debt primarily related to our acquisition of CBL and $1.1 billion of debt primarily related to our Merger with Molson. As a result, we must use a portion of our cash flow from operations to pay interest on our debt. If our financial and operating performance does not 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. The inability to obtain materials could unfavorably affect our ability to produce our products. For our U.S. 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 and Canada 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 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 segments, 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 unfavorably 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, smoking bans at on-premise locations 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.

Our consolidated financial statements 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 in Canada and in the United Kingdom. Since our financial statements are presented in USD, we must translate our assets, liabilities, income and expenses into USD at current exchange rates. Increases and decreases in the value of the USD 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 use a large volume of agricultural and other raw materials to produce our products, including barley, barley malt, hops, various starches, water and packaging materials, including aluminum and paper products. We also use a significant amount of diesel

fuel in our operations. The supply and price of these raw materials and commodities can be affected by a number of factors beyond our control, including market demand, global geo-political events (especially as to their impact on crude oil prices and the resulting impact on diesel fuel prices), frosts, droughts and other weather conditions, economic factors affecting growth decisions, plant diseases and theft. 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, including price risk associated with diesel fuel and aluminum, both of which are at historically high price levels, our results of operations may be adversely impacted.

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

Because of our reliance on a single information technology service supplier, we could experience significant disruption to our business. We rely exclusively on one information technology services provider worldwide for our network, help desk, hardware and software configuration. If that service provider fails 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 67% of Molson’s total workforce and approximately 23% of CBL’s total workforce is represented by trade unions. Although we believe relations with our employees are good, 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. In 2006, the U.S. Supreme Court 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. 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.

Risks specific to our Discontinued Operations

Indemnities provided to the purchaser of 83% of the Kaiser business in Brazil could result in future cash outflows and statement of operations charges. On January 13, 2006, we agreed to sell a 68% equity interest in Kaiser to FEMSA for $68 million cash, including the assumption by FEMSA of Kaiser-related debt and certain contingencies. In November 2006, we divested our remaining 15% ownership interest in Kaiser and received $15.7 million, resulting in an increase of FEMSA’s purchased ownership of Kaiser to 83%. The terms of our 2006 agreement require us to indemnify FEMSA for exposures related to certain tax, civil and labor contingencies and certain purchased tax credits. 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 are recorded as liabilities on our balance sheet in conjunction with the sale, we could incur future statement of operations charges as facts further develop resulting in changes to our fair value estimates or change in assessment of probability of loss on these items. Due to the uncertainty involved in the ultimate outcome and timing of these contingencies, significant adjustments to the carrying value of our indemnity liabilities and corresponding statement of operations charges/credits could result in the future.

Risks specific to the Canada Segment

We may be required to provide funding to the entity that owns the Montréal Canadiens hockey club and the related entertainment business pursuant to the guarantees given to the National Hockey League (NHL). Pursuant to certain guarantees given to the NHL as a minority owner of the entertainment business and the Montréal Canadiens professional hockey club (majority ownership sold by Molson in 2001), Molson may have to provide funding to the Club (joint and severally based on our 19.9% ownership) to meet its obligations and its operating expenses if the Club cannot 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 U.S. 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, and we may be required to record an impairment charge on all or a portion of the $112.0 million carrying value of our intangible asset associated with the Miller arrangements.

If we are unsuccessful in maintaining 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. The loss of one or more of these arrangements could adversely impact our business.

If the Maritime Provinces refuse to recognize our new brewery in Moncton, New Brunswick, as a “local brewer,” we will not be able to use that facility as planned. We are completing a brewery in Moncton, New Brunswick. We decided to build it on the basis of assurances from Canada’s Maritime Provinces (which include New Brunswick and Nova Scotia) that the facility would qualify as a “local brewer,” under the Maritime Accord so that beer shipped to other Maritime Provinces would be subject to much lower handling fees than beer shipped from elsewhere in Canada. There is risk that certain Maritime Provinces will not honor their previous assurances. If so, our return on investment would be substantially lower than planned, and we may be required to record an impairment charge on all or a portion of the $25.2 million spent to construct the brewery.

Risks specific to the U.S. Segment

Litigation directed at the alcohol beverage industry may adversely affect our sales volumes, our business and our financial results. Molson Coors and 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, several of which have been dismissed and are now on appeal. It is not possible at this time to estimate the possible loss or range of loss, if any, that may result from 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.

Risks specific to the Europe Segment

Sales volume trends in the United Kingdom brewing industry reflect movement from on-premise channels to off-premise channels, a trend which unfavorably impacts our profitability. We have noted in recent years that beer volume sales in the U.K. have been shifting from pubs and restaurants (on-premise) to retail stores (off-premise), for the industry in general. The progression to a ban on smoking in pubs and restaurants across the whole of the U.K. anticipated to be effective in 2007 is likely to accelerate this trend. Margins on sales to off-premise customers tend to be lower than margins on sales to on-premise customers, hence these trends could adversely impact our profitability.

Consolidation of pubs and growth in the size of pub chains in the United Kingdom could result in less ability to achieve favorable 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, and therefore continuation of this trend 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 continue to move to purchasing directly more of the products that, in the past, we have provided as part of our factored business. Further 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 a party to a joint venture with DHL 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 products 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 financial impact.

We are reliant on a single third party as a supplier for kegs in the United Kingdom. Our CBL business uses kegs managed by a logistics provider who is responsible for providing an adequate stock of kegs as well as their upkeep. Due to greater than anticipated keg losses as well as reduced fill fees (attributable to reduced overall volume), the logistics provider has encountered financial difficulty. As a result of action taken by the logistics provider's lending institution, related to perceived financial difficulties of the borrower, the logistics provider has been forced into administration (restructuring proceedings) and the bank, on February 20, 2007, exercised its option to put the keg population to CBL. As a result, we expect to purchase the existing keg population from the logistics provider's lender at fair value pursuant to the terms of the agreement between CBL and the logistics provider’s lender. We estimate that this potential capital expenditure, which may be financed over a period of time in excess of one year, could amount to approximately $70 million to $100 million, which is not included in the 2007 capital expenditures plan. As a result of this capital requirement, we may reduce other elements of our 2007 capital expenditures plan, or offset risk posed by the potential keg purchase through increased cash generation efforts.

We may incur impairments of the carrying value of our goodwill and other intangible assets that have indefinite useful lives. In connection with various business combinations, we have allocated material amounts of the related purchase prices to goodwill and other intangible assets that are considered to have indefinite useful lives. These assets are tested for impairment at least annually, using estimates and assumptions affected by factors such as economic and industry conditions and changes in operating performance. In the event that the adverse financial impact of current trends with respect to our U.K. business continue and including the potential impact of an expected smoking ban in on-premise locations across the whole of the U.K. in 2007 are worse than we anticipate, we may be required to record impairment charges. This could be material and could adversely impact our results of operations.

ITEM 1B. Unresolved Staff Comments

None.

ITEM 2. Properties

As of December 31, 2006, our major facilities were:

Facility	Location	Character
Canada
Administrative Offices	Toronto, Ontario	Canada Segment Headquarters
	Montréal, Québec	Corporate Headquarters
Brewery / packaging plants	St Johns, Newfoundland	Packaged malt beverages
	Montréal, Québec
	Toronto, Ontario
	Creemore, Ontario
	Edmonton, Alberta
	Vancouver, British Columbia
	Moncton, New Brunswick(1)
Retail stores	Ontario Province(2)	Beer retail stores
Distribution warehouses	Montréal, Québec	Distribution centers
	Ontario Province(3)
United States
Administrative Offices	Golden, CO	U.S. Segment Headquarters
	Denver, CO(4)	Corporate Headquarters
Brewery / packaging plants	Golden, CO	Malt beverages / packaged malt beverages
	Elkton, VA (Shenandoah Valley)(5)	Malt beverages / packaged malt beverages
Can and end plant	Golden, CO	Aluminum cans and ends
Bottle plant	Wheat Ridge, CO	Glass bottles
Distributorship locations	Meridian, ID	Wholesale beer distribution
	Glenwood Springs, CO
	Denver, CO
Distribution warehouses	Golden, CO	Distribution centers
	Elkton, VA
Europe
Administrative Office	Burton-on-Trent, Staffordshire	Europe Segment Headquarters
Brewery / packaging plants	Burton-on-Trent, Staffordshire	Malt and spirit-based beverages / packaged malt beverages
	Tadcaster Brewery, Yorkshire	Malt and spirit-based beverages / packaged malt beverages
	Alton Brewery, Hampshire
Distribution warehouse	Burton-on-Trent, Staffordshire	Distribution center

(1) Construction of brewery of malt beverages/packaging plant to be completed and operational in 2007.

(2) Approximately 400 stores owned or leased by BRI joint venture in various locations in Ontario Province.

(3) We have six warehouses owned or leased by our BRI joint venture and one warehouse owned by Molson in the Ontario Province.

(4) Leased facility.

(5) Completion of a brewery of malt beverages in 2007.

We believe our facilities are well maintained and suitable for their respective operations. In 2006, our operating facilities were not capacity constrained.

ITEM 3. Legal Proceedings

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 U.S. business trends prior to the Merger vote in January 2005. The Colorado case has since been transferred to Delaware and consolidated with one of those cases. One of the lawsuits filed in Delaware federal court also alleges that the Company failed to comply with U.S. GAAP. The Company will vigorously defend the lawsuits.

In May 2005, the Company was contacted by the Central Regional Office of the U.S. 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. In November 2006, the Company received a letter from the SEC stating that this matter (In the Matter of Molson Coors Brewing Company, D-02739-A) has been recommended for termination, and no enforcement action has been recommended to the Commission. The information in the SEC’s letter was provided under the guidelines in the final paragraph of Securities Act Release No. 5310.

The Company was contacted by the New York Stock Exchange in June 2005, requesting 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 cooperated with this inquiry. As a matter of policy, the Exchange does not comment publicly on the status of its investigations. However, we have not been contacted by the NYSE with respect to this investigation in approximately 18 months. If there were any formal action taken by the NYSE, it would be in the form of an Investigatory Panel Decision. Such Decisions are publicly available.

In July 2005, the Ontario Securities Commission (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. The Company cooperated with the inquiry. The Commission has advised the Company that it has closed the file on this matter without action of any kind.

In early October 2006, the Audit Committee of the Company’s Board of Directors concluded its investigation of whether a complaint that it received in the third quarter of 2005 had any merit. The complaint related 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 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 Audit Committee’s independent counsel, which was retained to assist in conducting the investigation, reviewed and discussed with the staff of the SEC the various findings of an approximately 12-month long investigation conducted by the independent counsel. The Audit Committee determined, after thoroughly reviewing the facts, and in consultation with its independent counsel, to conclude the

investigation. In concluding the investigation, the Audit Committee determined that the various matters referred to in the complaint were without merit.

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 U.S. and Canadian antitrust violations, and violations of the Agreement’s confidentiality provisions. Miller also claimed that the Agreement’s purposes have been frustrated as a result of the Merger. The Company 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. We are currently in discussions with Miller regarding a resolution of this dispute. There can be no assurances that we will arrive at such a resolution.

In late October 2006, Molson Canada received a letter from Foster’s Group Limited providing twelve months’ notice of its intention to terminate the Foster’s U.S. License Agreement due to the Merger. The Agreement provides Molson Canada with the right to produce Foster’s beer for the U.S. marketplace. In November 2006, Molson Canada filed a notice of action in Ontario, Canada disputing the validity of the termination notice. In December 2006, Foster’s filed a separate application in Ontario, Canada seeking termination of the Agreement. Molson Canada will vigorously defend its rights in these matters.

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. Several of the lawsuits have been dismissed on appeal. There have been no appellate decisions. 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, related to 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 with respect to this issue with an employment tribunal. During the second quarter of 2005, the tribunal ruled against CBL. CBL appealed this ruling, and the appeal was heard in the first quarter of 2006, where most impacts of the initial tribunal judgments were overturned. However, the employment appeal tribunal remitted two specific issues back to a new employment tribunal. CBL appealed the employment appeal tribunal’s judgment. In January 2007, the appeal decision was ruled in the Company’s favor, holding that the employment tribunal had no jurisdiction to hear the employees’ claims, and the claims were dismissed. It is possible that the employees may attempt to advance their claims in a different forum.

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 4. Submission of Matters to a Vote of Security Holders

Not applicable.

PART II

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

Our Class B non-voting common stock is traded on the New York Stock Exchange and the Toronto Stock Exchange under the symbol “TAP.” Prior to the Merger, our Class B non-voting common stock was traded on the New York Stock Exchange, under the symbol “RKY” (since March 11, 1999) and prior to that was quoted on the NASDAQ National Market under the symbol “ACCOB.”

In connection with the Merger and effective February 9, 2005, 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.A” and “TAP.B,” respectively. In addition, our indirect subsidiary, Molson Coors Canada Inc., has Exchangeable Class A and Exchangeable Class B shares trading on the Toronto Stock Exchange under the symbols “TPX.A” and “TPX.B,” respectively. The Class A and B exchangeable shares are a means for shareholders to defer tax in Canada and have substantially the same economic and voting rights as the respective common shares. The exchangeable shares can be exchanged for Molson Coors Class A or B common stock at any time and at the exchange ratios described in the Merger documents, and receive the same dividends. At the time of exchange, shareholders’ 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 in the Consolidated Financial Statements in Item 8 for information on the exchange ratios used to effect the Merger.

The Merger was effected by the issuance of Adolph Coors Company stock for Molson, Inc. 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 to the Consolidated Financial Statements in Item 8. The approximate number of record security holders by class of stock at February 20, 2007, is as follows:

Title of class	Number of record security holders
Class A common stock, voting, $0.01 par value		28
Class B common stock, non-voting, $0.01 par value		2,993
Class A exchangeable shares		317
Class B exchangeable shares		3,264

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 2006 and 2005 as reported by the New York Stock Exchange.

	High		Low		Dividends
2006
First quarter	$	70.50	$	62.60		$	0.32
Second quarter	$	72.85	$	65.69		$	0.32
Third quarter	$	71.11	$	65.90		$	0.32
Fourth quarter	$	76.00	$	65.50		$	0.32
2005
First quarter	$	75.75	$	68.50		$	0.32
Second quarter	$	80.00	$	63.69		$	0.32
Third quarter	$	69.00	$	62.50		$	0.32
Fourth quarter	$	68.75	$	63.69		$	0.32

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 2006 and 2005 as reported by the New York Stock Exchange.

	High		Low		Dividends
2006
First quarter	$	70.55	$	62.35		$	0.32
Second quarter	$	73.86	$	63.98		$	0.32
Third quarter	$	71.45	$	66.21		$	0.32
Fourth quarter	$	76.45	$	64.59		$	0.32
2005
First quarter	$	76.30	$	67.73		$	0.32
Second quarter	$	79.50	$	58.09		$	0.32
Third quarter	$	67.08	$	59.87		$	0.32
Fourth quarter	$	67.62	$	60.87		$	0.32

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 2006 and 2005 as reported by the Toronto Stock Exchange.

	High	Low	Dividends
2006
First quarter	CAD 81.85	CAD 68.00		$	0.32
Second quarter	CAD 78.46	CAD 73.25		$	0.32
Third quarter	CAD 78.00	CAD 75.00		$	0.32
Fourth quarter	CAD 88.50	CAD 75.64		$	0.32
2005
First quarter	CAD 92.91	CAD 83.00		$	0.32
Second quarter	CAD 97.73	CAD 72.01		$	0.32
Third quarter	CAD 80.00	CAD 70.01		$	0.32
Fourth quarter	CAD 78.00	CAD 70.00		$	0.32

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 2006 and 2005 as reported by the Toronto Stock Exchange.

	High	Low	Dividends
2006
First quarter	CAD 82.25	CAD 71.50		$	0.32
Second quarter	CAD 83.30	CAD 70.93		$	0.32
Third quarter	CAD 80.95	CAD 74.39		$	0.32
Fourth quarter	CAD 89.12	CAD 72.95		$	0.32
2005
First quarter	CAD 91.40	CAD 83.85		$	0.32
Second quarter	CAD 97.00	CAD 72.22		$	0.32
Third quarter	CAD 79.50	CAD 73.91		$	0.32
Fourth quarter	CAD 80.70	CAD 71.40		$	0.32

ITEM 6. Selected Financial Data

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.

	2006(1)			2005(2)			2004			2003			2002(3)
	(In thousands, except per share data)
*Consolidated Statement of Operations:*
Gross sales	$	7,901,614		$	7,417,702		$	5,819,727		$	5,387,220		$	4,956,947
Beer excise taxes	(2,056,629		)	(1,910,796		)	(1,513,911		)	(1,387,107		)	(1,180,625		)
Net sales	5,844,985			5,506,906			4,305,816			4,000,113			3,776,322
Cost of goods sold	(3,481,081		)	(3,306,949		)	(2,741,694		)	(2,586,783		)	(2,414,530		)
Gross profit	2,363,904			2,199,957			1,564,122			1,413,330			1,361,792
Marketing, general and administrative	(1,705,405		)	(1,632,516		)	(1,223,219		)	(1,105,959		)	(1,057,240		)
Special items, net	(77,404		)	(145,392		)	7,522			—			(6,267		)
Operating income	581,095			422,049			348,425			307,371			298,285
Interest expense, net	(126,781		)	(113,603		)	(53,189		)	(61,950		)	(49,732		)
Other income (expense), net	17,736			(13,245		)	12,946			8,397			8,047
Income from continuing operations before income taxes	472,050			295,201			308,182			253,818			256,600
Income tax expense	(82,405		)	(50,264		)	(95,228		)	(79,161		)	(94,947		)
Income from continuing operations before minority interests	389,645			244,937			212,954			174,657			161,653
Minority interests(4)	(16,089		)	(14,491		)	(16,218		)	—			—
Income from continuing operations	373,556			230,446			196,736			174,657			161,653
Loss from discontinued operations, net of tax(5)	(12,525		)	(91,826		)	—			—			—
Cumulative effect of change in accounting principle, net of tax(6)	—			(3,676		)	—			—			—
Net income	$	361,031		$	134,944		$	196,736		$	174,657		$	161,653
Basic income (loss) per share:
Continuing operations	$	4.34		$	2.90		$	5.29		$	4.81		$	4.47
Discontinued operations	(0.15		)	(1.16		)	—			—			—
Cumulative effect of change in accounting principle	—			(0.04		)	—			—			—
Basic net income per share	$	4.19		$	1.70		$	5.29		$	4.81		$	4.47
Diluted income (loss) per share:
Continuing operations	$	4.31		$	2.88		$	5.19		$	4.77		$	4.42
Discontinued operations	(0.14		)	(1.15		)	—			—			—
Cumulative effect of change in accounting principle	—			(0.04		)	—			—			—
Diluted net income per share	$	4.17		$	1.69		$	5.19		$	4.77		$	4.42

	2006(1)			2005(2)			2004		2003			2002(3)
	(In thousands, except per share data)
*Consolidated Balance Sheet data:*
Cash and cash equivalents	$	182,186		$	39,413		$	123,013	$	19,440		$	59,167
Working capital (deficit)	$	(341,760	)	$	(768,374	)	$	91,319	$	(54,874	)	$	(93,995	)
Total assets	$	11,603,413		$	11,799,265		$

DELAWARE		84-0178360
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
1225 17th Street, Denver, Colorado 1555 Notre Dame Street East, Montréal, Québec, Canada		80202 H2L 2R5
(Address of principal executive offices)		(Zip 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

		Page(s)
	PART I.
Item 1.	Business		3
Item 1A.	Risk Factors		17
Item 1B.	Unresolved Staff Comments		21
Item 2.	Properties		22
Item 3.	Legal Proceedings		23
Item 4.	Submission of Matters to a Vote of Security Holders		24
	PART II.
Item 5.	Market for the Registrant’s Common Equity and Issuer Purchases of Equity Securities		25
Item 6.	Selected Financial Data		27
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		28
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		63
Item 8.	Financial Statements and Supplementary Data		65
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure		148
Item 9A.	Controls and Procedures		148
Item 9B.	Other Information		149
	PART III.
Item 10.	Directors, Executive Officers and Corporate Governance		150
Item 11.	Executive Compensation		150
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		150
Item 13.	Certain Relationships and Related Transactions, and Director Independence		150
Item 14.	Principal Accounting Fees and Services		150
	PART IV.
Item 15.	Exhibits and Financial Statement Schedules		151
Signatures			157