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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Commission File Number: 1-14829

Molson Coors Brewing Company
(Exact name of registrant as specified in its charter)

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

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

           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 (§ 229.405 of this chapter) 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. ý

           Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" 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). YES o NO ý

           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 27, 2008, was $7,819,107,814 based upon the last sales price reported for such date on the New York Stock Exchange and the Toronto 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 27, 2008 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 13, 2009:

Class A Common Stock—2,586,764 shares
Class B Common Stock—157,652,202 shares

           Exchangeable shares:

           As of February 13, 2009, the following number of exchangeable shares was outstanding for Molson Coors Canada, Inc.:

Class A Exchangeable Shares 3,172,810
Class B Exchangeable Shares 20,435,312

           These Class A and Class B exchangeable shares offer substantially the same economic and voting rights as the respective classes of common shares of the registrant. This is achieved via the following structure: The registrant has outstanding one share each of special Class A and Class B 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 2009 annual meeting of stockholders are incorporated by reference under Part III of this Annual Report on Form 10-K.

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MOLSON COORS BREWING COMPANY AND SUBSIDIARIES
INDEX

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PART I

ITEM 1.    Business

        Unless otherwise noted in this report, any description of we, us or our includes Molson Coors Brewing Company ("MCBC" or the "Company"), principally a holding company, and its operating subsidiaries: Molson Canada ("Molson"), operating in Canada; Coors Brewing Company ("CBC"), operating in the United States prior to the formation of MillerCoors LLC ("MillerCoors"); Coors Brewers Limited ("CBL"), operating in the United Kingdom and Ireland; and our other corporate entities. Any reference to "Coors" means the Adolph Coors Company prior to the 2005 merger with Molson Inc. (the "Merger"). Any reference to Molson Inc. means Molson prior to the Merger. Any reference to "Molson Coors" means MCBC after the Merger.

        Effective July 1, 2008, MCBC and SABMiller plc ("SABMiller") combined the U.S. and Puerto Rico operations of their respective subsidiaries, CBC and Miller Brewing Company ("Miller"), in the MillerCoors joint venture. The results and financial position of U.S. operations, which had historically comprised substantially all of our U.S. reporting segment were, in all material respects, deconsolidated from MCBC prospectively upon formation of MillerCoors. Our interest in MillerCoors is accounted for by us under the equity method of accounting.

        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, we 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.

        Coors was incorporated in June 1913 under the laws of the State of Colorado. In August 2003, Coors changed its state of incorporation to the State of Delaware. During February 2005 upon completion of the Merger, Coors changed its name to Molson Coors Brewing Company.

Joint Ventures and Other Existing Arrangements

MillerCoors joint venture

        Effective, July 1, 2008, MCBC and SABMiller combined the U.S. and Puerto Rico operations of their respective subsidiaries, CBC and Miller. Each party contributed its business and related operating assets and certain liabilities into an operating joint venture company. The percentage interests in the profits of the joint venture are 58% for SABMiller and 42% for MCBC. Voting interests are shared 50%-50%, and each investing company has equal board representation within MillerCoors. Each party to the joint venture has agreed not to transfer its economic or voting interests in the joint venture for a period of five years, and certain rights of first refusal apply to any subsequent assignment of such interests.

        MCBC and SABMiller expect that the enhanced brand portfolio, scale and combined management strength of the joint venture will allow their businesses to compete more vigorously in the aggressive and rapidly changing U.S. marketplace and thus improve the standalone operational and financial performance of both Miller and CBC through:

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Building a Stronger Brand Portfolio and Giving Consumers More Choice
The combined company will have a more complete and differentiated brand portfolio and the ability to invest more effectively in marketing its brands to consumers. MillerCoors will build on the unique attributes of both Miller Lite and Coors Light to ensure compelling differentiation. We also expect that MillerCoors will be better positioned to meet the increasingly diverse demands of U.S. alcohol beverage consumers through the joint venture's [offerings/delivery/sale]

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of imports like Peroni, Molson brands and Pilsner Urquell; craft varieties including Leinenkugel's, Blue Moon and Henry Weinhard's; and specialty beers like Miller Chill, Killian's and Sparks. MillerCoors will have more flexibility and resources for brand-building initiatives and increased levels of innovation in taste, product attributes and packaging.

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Capturing Synergies and Improving Productivity
The combination of the businesses is expected to result in identified annual cost synergies of $500 million, to come from optimization of production over the existing brewery network, reduced shipping distances, economies of scale in brewery operations and the elimination of duplication in corporate and marketing services. The expected timing to achieve the original goal of $50 million in synergies in the first twelve months of operations has accelerated, and the MillerCoors team now expects to realize $128 million of synergies by June 30, 2009. By the end of calendar year 2009, MillerCoors expects to achieve a total of $238 million in synergies, surpassing the original forecast of $225 million. While the timing of synergy delivery has accelerated, MillerCoors' goal remains $500 million of annual cost synergies to be delivered by the third year of combined operations. One-time cash outlays required to achieve these synergies are expected to amount to a net $450 million, consisting of costs of approximately $230 million and net capital expenditures of approximately $220 million.



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Creating a More Effective Competitor
MillerCoors creates a stronger U.S. brewer with the scale, operational efficiency and distribution platform to compete more effectively in the U.S. against large-scale brewers, both domestic and global, craft brewers, and wine and spirits producers. We anticipate that MillerCoors will be positioned to respond more effectively to the needs of a consolidating distributor and retailer market, as well as to the cost pressures in the industry.



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Improving the Route to Market and Benefiting Distributors and Retailers
By leveraging complementary geographic strengths and distribution systems where state law or voluntary transactions enable it to do so, MillerCoors will be able to better align production with consumer location. Prior to the formation of MillerCoors, approximately 60% of the volume of the combined operation utilized a shared distributor network, and the companies anticipate that this combined network will produce enhanced distributor effectiveness. As of the end of 2008, volume through the combined distributor network had increased to 69% of the MillerCoors total. MillerCoors will also have greater capacity to invest to meet the diverse product, packaging and service requirements of increasingly demanding consumers, distributors and the retail trade. In addition, streamlined processes and systems and more effective marketing programs will help improve distributors' ability to compete and benefit retailers.



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Optimizing Organizational Strength
MillerCoors will focus on creating a high-performing, results- and value-based culture which will take the best elements of both companies to create a competitive organization, capable of the highest standards of operational and service excellence in the industry. They will continue to comply with all provisions of existing labor agreements.

Grupo Modelo joint venture

        Effective, January 1, 2008, Molson and Grupo Modelo, S.A.B. de C.V. ("Modelo") established a 50%/50% joint venture, Modelo Molson Imports, L.P. ("MMI"), to import, distribute, and market the Modelo beer brand portfolio across all Canadian provinces and territories. Under this new arrangement, Molson's sales team is responsible for selling the brands across Canada on behalf of the joint venture. Modelo will continue to produce the products sold through the joint venture. The new alliance will enable MMI to effectively leverage the existing resources and capabilities of Molson to achieve greater distribution coverage in the Western provinces of Canada. MMI is being accounted for under the equity method of accounting.

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Other existing arrangements

        Brewers' Retail Inc. is a joint venture beer distribution and retail network for the Ontario region of Canada, owned by Molson, and two other brewers. Brewers' Distributor Ltd. ("BDL") is a distribution operation owned by Molson and one other brewer and pursuant to an operating agreement, BDL acts as an agent for the distribution of the brewers' products in the western provinces of Canada.

        Grolsch is a joint venture between CBL and Royal Grolsch N.V. which markets Grolsch branded beer in the United Kingdom and the Republic of Ireland. The majority of the Grolsch branded beer is produced by CBL under a contract brewing.

        To focus on our core competencies in manufacturing, marketing and selling malt beverage products, we have entered into joint venture arrangements with third parties to leverage their strengths in areas such as can and bottle manufacturing, transportation and distribution. These joint ventures have historically included 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 U.K. segment). Subsequent to the formation of MillerCoors, RMMC and RMBC are consolidated by MillerCoors.

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. Initially, 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. Our financial statements contained in this report present Kaiser as a discontinued operation, as discussed further in Part II—Financial Statements and Supplementary Data, Item 8 Note 4 "DISCONTINUED OPERATIONS" to the Consolidated Financial Statements.

(b)   Financial Information About Segments

        MCBC operates the following business segments: Canada, the United States, the United Kingdom, and Global Brand and Market Development (Global Markets). Our Global Markets results are reported with our Corporate group's results. A separate operating team manages each segment, and each segment manufactures, markets and sells beer and other beverage products.

        See Part II—Financial Statements and Supplementary Data, Item 8 Note 2 "SEGMENT AND GEOGRAPHIC INFORMATION" to the Consolidated Financial Statements 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 19, 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 financial sales volume from continuing operations totaled 29.7 million barrels in 2008, 41.8 million barrels in 2007, and 41.8 million barrels in 2006, excluding Brazil volume in discontinued operations. The decrease in sales volume is a result of the formation of MillerCoors on July 1, 2008. Our reported sales volumes do not include the CBL factored brands business. The fiscal years ended

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December 28, 2008, and December 30, 2007, were 52 week periods and fiscal year ended December 31, 2006, was a 53 week period.

        See the Executive Summary in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations for a discussion of our volume reporting policy.

        No single customer accounted for more than 10% of our consolidated or segmented sales in 2008, 2007, or 2006.

Our Products

        Brands sold in Canada include Coors Light, Canadian, Molson Dry, Export, Creemore, Rickard's Red and other Rickard's brands, Carling and Pilsner as well as a number of other regional brands. 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., Miller Lite, Miller Genuine Draft, Milwaukee's Best and Milwaukee's Best Dry under license from Miller Brewing Company, a subsidiary of SABMiller, Foster's under license from Foster's Group Limited and Tiger under license from Asia Pacific Breweries Limited. Starting on January 1, 2008, we entered into a joint venture agreement with Grupo Modelo, to import, distribute and market the Modelo beer brand portfolio, including the Corona, Coronita, Negra Modelo and Pacifico brands, across all Canadian provinces and territories.

        MillerCoors sells a wide variety of brands in the United States. Its flagship light brands are Coors Light and Miller Lite. Brands in the domestic premium segment include Coors Banquet, Miller Genuine Draft and MGD 64. Brands in the domestic super premium segment include Miller Chill and Sparks. Brands in the below premium segment include Miller High Life, Keystone Light, Icehouse, Mickey's, Milwaukee's Best Light and Old English 800. Craft and import brands include the Blue Moon brands, Henry Weinhard's, George Killian's Irish Red, the Leinenkugel's brands, the Molson brands, Foster's, Peroni Nastro Azzurro, Pilsner Urquell and Grolsch. Brands in the non-alcoholic segment include Coors Non-Alcoholic and Sharp's. MCBC assigned the United States and Puerto Rican ownership rights to the legacy Coors brands, including Coors Light, Coors Banquet, Keystone Light, and the Blue Moon brands, to MillerCoors. We retained all ownership of these brands outside the United States and Puerto Rico. MillerCoors licenses the right to brew and sell George Killian's Irish Red. MCBC sells the Molson brands to MillerCoors through related party transactions.

        Brands sold in the United Kingdom include: Carling, C2, Coors Light, Worthington's, Caffrey's, and Kasteel Cru, as well as a number of smaller regional ale brands. We also sell the Grolsch brands (Grolsch Premium Lager, Grolsch Weizen and Grolsch Blond) in the United Kingdom through a joint venture with Royal Grolsch N.V. and are the exclusive distributor for several brands which are sold under license, including Sol, Dos Equis Amber, Zatec and Magners Draught Cider. 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. Beginning in 2008, we have entered into a contract brewing and kegging agreement with Scottish & Newcastle U.K. Ltd. for the Fosters and Kronenbourg brands.

Canada Segment

        Molson is Canada's second largest brewer by volume and North America's oldest beer company. Measuring market share consistent with prior years, Molson has an approximate 41.9% market share in Canada. Due to accounting policy changes arising from the 2008 MillerCoors joint venture, this market share is adjusted to record 50% of any Canada joint venture volume. With this change implemented, Molson has an approximate 40.5% market share in Canada which is virtually unchanged versus a pro forma 2007 level.

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        Molson brews, markets, sells and nationally distributes a wide variety of beer brands. Molson's portfolio has leading brands in all major product and price segments. Molson has strong market share and visibility across retail and on-premise channels. Molson's focus and investment is on key owned brands (Coors Light, Canadian, Molson Dry, Molson Export and Rickard's) and key strategic distribution partnerships (including Heineken, Corona and Miller). Coors Light currently has a 13% market share and is the largest-selling light beer and the second-best selling beer brand overall in Canada. 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 currently consolidated in our financial statements. See Part II—Financial Statements and Supplementary Data, Item 8 Note 5 "VARIABLE INTEREST ENTITIES" to the Consolidated Financial Statements for further discussion.

Sales and Distribution

Canada

        In Canada, provincial governments regulate the beer industry, particularly with regard to the pricing, mark-up, container management, sale, distribution, and advertising of beer. Distribution and retailing of products containing alcohol involves a wide range and varied degree of Canadian government control through their respective 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 in the ownership group. Ontario brewers may deliver directly to BRI's outlets or may choose to use BRI's distribution centers to access retail stores 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 off-premise consumption are made through grocery and convenience stores as well as government operated outlets.

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. 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. Establishments licensed primarily for on-premise liquor sales may also be licensed for off-premise consumption.

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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 sell Molson's products. Yukon, Northwest Territories and Nunavat manage distribution and sell through government liquor commissioners.

Manufacturing, Production and Packaging

Brewing Raw Materials

        Molson's goal is to procure the 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 mitigate the risk of volatility in certain 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 2009. 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. 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), Moncton (New Brunswick), St. John's (Newfoundland) and Creemore (Ontario). The Montréal and Toronto breweries account for approximately four-fifths of our Canada production.

Packaging Materials

Glass bottles

        Molson single sourced glass bottles in 2008 and has a committed supply through 2009 from three suppliers. 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 65% of domestic sales in Canada.

Aluminum cans

        Molson single sources aluminum cans and has a committed supply through 2011. Availability of aluminum cans has not been an issue, and Molson does not expect any difficulties in accessing them.

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The distribution systems in each province generally provide the collection network for aluminum cans. Aluminum cans account for approximately 26% of domestic sales in Canada.

Kegs

        Molson sells approximately 9% 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

2008 Canada Beer Industry Overview

        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.

        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 2006 and 2007, and the price gap between premium and value brands remained relatively stable in 2008, although the number of value brands being marketed by competitors increased. In 2008, we increased selling prices for our premium brands in select markets, but constantly monitor competitive activity to ensure we appropriately balance pricing with volume growth.

        During 2008, estimated industry sales volume in Canada, including sales of imported beers, increased by 1.1% 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 85% of beer sold in Canada. The Ontario and Québec markets account for approximately 63% of the total beer market in Canada.

        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.

United States Segment

        Prior to the formation of MillerCoors, CBC produced, marketed, and sold the Coors portfolio of brands in the United States and its territories and included the results of the RMMC and RMBC joint ventures. The U.S. segment also included sales of Molson brand products sold in the United States.

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Effective July 1, 2008, MCBC's equity investment in MillerCoors will represent our U.S. operating segment going forward.

        MillerCoors is currently the second-largest brewer by volume in the United States, with an approximate 29% market share. MillerCoors produces, markets, and sells a broad portfolio of brands in the United States and Puerto Rico.

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 700 independent distributors purchases MillerCoors' products and distributes them to retail accounts. MillerCoors estimates that approximately 19% of product is sold on-premise in bars and restaurants, and the other 81% is sold off-premise in liquor stores, convenience stores, grocery stores, and other retail outlets. MillerCoors wholly owns a distributorship, which handled less than 1% of their total volume in 2008.

Manufacturing, Production and Packaging in the United States

Brewing Raw Materials

        MillerCoors uses the highest quality water, hops and barley and other cereal grains to brew its products. MillerCoors malts a portion of its production requirements, using barley purchased under yearly contracts from a network of independent farmers located in five regions in the western United States. Other barley, malt, and cereal grains are purchased from suppliers primarily in the United States. Hops are purchased from suppliers in the United States and New Zealand and other European countries. MillerCoors has access or acquired water rights to provide for and to sustain brewing operations in case of a prolonged drought in the regions for which they have operations. MillerCoors utilizes hedging instruments to manage risks associated with volatility in the commodities (including aluminum for cans and ends) and foreign exchange markets.

Brewing and Packaging Facilities

        There are eight major breweries/packaging facilities which provide MillerCoors products to distributors across the United States and Puerto Rico. The breweries have capacity to brew and package approximately 85 million barrels of beer annually. MillerCoors imports Molson brands and a portion of another U.S. brand volume from various Molson breweries. MillerCoors imports Peroni, Pilsner Urquell, Grolsch, and other smaller import brands from SABMiller.

Packaging Materials

Aluminum cans

        Over half of U.S. products sold were packaged in aluminum cans in 2008. A portion of aluminum cans were purchased from RMMC, a joint venture with Ball Corporation ("Ball"), whose production facility is located adjacent to the brewery in Golden, Colorado. In addition to the supply agreement with RMMC, MillerCoors has a commercial supply agreement with Ball to purchase cans and ends in excess of what is supplied through RMMC; these agreements have various expiration dates. The RMMC joint venture agreement is scheduled to expire in 2012. Aluminum is an exchange-traded commodity, and its price can be volatile.

Glass bottles

        Less than half of U.S. products in 2008 were packaged in glass bottles. RMBC, a joint venture with Owens-Brockway Glass Container, Inc. ("Owens"), produces a portion of their U.S. glass bottle requirements at its glass manufacturing facility in Wheat Ridge, Colorado. The joint venture with

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Owens, as well as a supply agreement with Owens for the glass bottles required in excess of RMBC's production, expires in 2015.

Kegs

        The remaining U.S. production volume sold in 2008 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. MillerCoors does not foresee difficulties in accessing packaging products in the future.

Contract Manufacturing

        MillerCoors has an agreement with S&P Company whereby MillerCoors will brew, package, and ship products for sale to Pabst Brewing Company through 2014. Additionally, MillerCoors produces beer under contract for our Global Brands and Market Development group, Miller Brewing International and Foster's LLC.

Seasonality of the Business

        MillerCoors' U.S. sales volumes are normally lowest in the winter months (first and fourth quarters) and highest in the summer months (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 MillerCoors distributors. While management believes that these sources are reliable, we cannot guarantee the accuracy of data and estimates obtained from these sources.

2008 U.S. Beer Industry Overview

        The beer industry in the United States is highly competitive, and the two largest brewers, of which MillerCoors is the smaller, occupy approximately 78% of the category. The combination of Miller and Coors in mid-2008 was designed to create a stronger U.S. brewer with the scale, operational efficiency and distribution platform to compete more effectively against larger brewers, both domestic and global. Growing or even maintaining market share has required increasing investments in marketing. U.S. beer industry shipments had an annual growth rate during the past 10 years of 1.0%, compared with 0.7% in 2008. Front-line pricing pressure and discounting in the U.S. beer industry was less intense in 2008, 2007 and 2006, contrasted with a high level of promotions in the second half of 2005.

Our Competitive Position

        The MillerCoors portfolio of beers competes with numerous above premium, premium, low-calorie, popular priced, non-alcoholic, and imported brands. These competing brands are produced by international, national, regional and local brewers. MillerCoors competes most directly with Anheuser-Busch Inbev ("A-B Inbev"), but also competes with imported and craft beer brands. According to Beer Marketer's Insights estimates, MillerCoors is the nation's second-largest brewer, selling approximately 29% of the total 2008 U.S. brewing industry shipments (including exports and U.S. shipments of imports). This compares to A-B Inbev's 49% share.

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        MillerCoors' 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 alcohol beverage market.

United Kingdom Segment

        Coors Brewers Limited is the United Kingdom's second-largest beer company with unit volume sales of approximately 9.0 million U.S. barrels in 2008. CBL has an approximate 20% share of the U.K. beer market, Western Europe's second-largest market. Sales are primarily in England and Wales, with Carling (a mainstream lager) representing more than three-fourths of CBL's total beer volume. The U.K. segment consists of our production and sale of the CBL brands in the U.K., our joint venture arrangement for the production and distribution of Grolsch brands in the U.K. and the Republic of Ireland, factored brand sales (beverage brands owned by other companies, but sold and delivered to retail by us), and our Tradeteam joint venture arrangement with DHL (formerly Exel Logistics) for the distribution of products throughout Great Britain.

Sales and Distribution

United Kingdom

        In the U.K., beer is generally distributed through a two-tier system consisting of manufacturers and retailers. Unlike the U.S., where manufacturers are generally not permitted to distribute beer directly to retail, the large majority of our beer in the U.K. 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 ("factored" brands) to the on-premise channel (bars and restaurants). Approximately 32% of CBL's net sales value in 2008 was composed of "factored" brands. Factored brand sales are included in our net sales and cost of goods sold when sold but are not included in the reported volumes.

        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 58% of our U.K. sales volumes in 2008. 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 category to the lower-margin multiple on-premise category places downward pressure on the profitability of our U.K. segment. In 2008, CBL sold approximately 69% and 31% of its on-premise volume to multiple and free on-premise customers, respectively. In recent years, pricing competition 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. A national smoking ban was enacted in 2007 affecting all pubs and restaurants in the U.K., which has had an unfavorable impact on beer volume sold in this channel.

        The installation and maintenance of draught beer dispensing equipment in the on-premise channel is generally the responsibility of the brewer in the U.K. Accordingly, CBL owns equipment used to

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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 to interest income to reflect the economic substance of these loans.

Off-Premise Market Channel

        The off-premise channel accounted for approximately 42% of our U.K. sales volume in 2008. The off-premise market includes sales to supermarket chains, convenience stores, liquor store chains, distributors, and wholesalers. The off-premise channel has become increasingly concentrated among a small number of super-store chains, placing increasing downward pressure on pricing.

Manufacturing, Production and Packaging

Brewing Raw Materials

        We use high quality water, barley and hops to brew our products. During 2008, CBL produced approximately 97% of its required malt using barley purchased from sources in the U.K. Malt sourced externally was committed through 2009 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 agricultural products going forward, although prices have continued to rise over the past year.

        We ensure high 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 we meet all of the U.K. private water regulations. Public water supplies are used as back-up to the private supplies in some breweries, and these are again tested regularly to ensure their ongoing purity.

Brewing and Packaging Facilities

        We operate three breweries in the U.K. The Burton-on-Trent brewery, located in the Midlands region of England, 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 is produced by contract brewers.

Packaging Materials

Kegs and casks

        We used kegs and casks for approximately 53% of our U.K. products in 2008, reflecting a high percentage of product sold on-premise. In April 2007, CBL purchased the existing keg population that had been owned and managed by a third-party service provider which was placed in receivership early in 2007. A limited number of additional kegs will be purchased every year, and there is no long-term supply commitment.

Cans

        Approximately 38% of our U.K. products were packaged in steel cans with aluminum ends in 2008. All of our cans are purchased through a supply contract with Ball.

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Glass bottles

        Approximately 6% 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. 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 second and fourth quarters, and the smallest are the first and third. Weather conditions can significantly impact sales volumes, as noted during 2008 and 2007 when unusually cool, rainy weather in the summer months resulted in lower sales volumes.

Competitive Conditions

2008 U.K. Beer Industry Overview

        After being relatively stable between 2000 to 2003, U.K. beer consumption has seen 5 years of decline. This has been driven by a number of factors, including changes in consumers' lifestyles, falling discretionary income and pressure from other drinks categories, notably wine. These factors are expected to continue to affect the beer market in the near future. In 2008, beer consumption declined by 5.5%, with performance affected by poor summer weather and the impact of smoking bans in England, Wales and Northern Ireland.

        On-premise sales fell by 9.3% in 2008, with the smoking bans accelerating the switch from on- to off-premise. A widening price differential between the on-premise (higher prices) and the off-premise (lower prices) has tended to benefit off-premise sales. Off-premise sales in 2008 were virtually unchanged from the prior year.

        The industry has also experienced a steady trend away from ales and towards lager. Sales of lagers accounted for 75% of the U.K. market in 2008. Continuing in 2008, was the long-term trend of the market shifting from ales to lager. The top 10 beer brands now represent approximately 66% of the total market, compared to only 34% in 1995.

Our Competitive Position

        Our beers 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 Light, 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 specialty 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 20%

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(excluding factored brands sales), based on AC Nielsen information. This compares to Scottish & Newcastle U.K. Ltd.'s share of approximately 25%, Inbev U.K. Ltd.'s share of approximately 18%, and Carlsberg U.K. Ltd.'s share of approximately 13%. In 2008, CBL had a small gain in its share of the U.K. beer market.

Global Brand and Market Development and Corporate

        The objectives of the Global Brand and Market Development ("Global Markets") group are to grow and expand our business and brand portfolios in global development markets. Our current businesses in Asia, continental Europe, Mexico and the Caribbean (excluding Puerto Rico) are included in Global Markets and combined with our corporate business activities for reporting purposes. Corporate also includes corporate interest and certain other general and administrative costs that are not allocated to any of the operating segments.

Asia

        Our Japanese business is currently focused on the Zima and Coors brands. Our business in China is principally focused on Coors Light. Product sold in Japan and China is contract brewed by a third party in China. The small amount of remaining volume sold in Asia is exported from the U.S. under a brewing agreement with MillerCoors.

Europe

        Our European business is focused on selling Carling, Caffrey's and small amount of Coors Light to the British tourist destinations in continental Europe focused primarily in but not limited to Spain, Greece, Sweden and Cyprus. We also sell products to British Military in Germany. The products are produced and exported by our CBL breweries through agreements with independent distributors.

Mexico Central America and the Caribbean

        Coors Light is sold in Mexico through an exclusive licensing agreement with Cerveceria Cuauhtemoc Moctezuma, S.A. de C.V. ("CCM"), a subsidiary of FEMSA Cerveza. CCM is responsible for the brewing of our products sold in Mexico. In addition, our products sold in a number of non-Puerto Rico Caribbean and Panama markets are produced under a brewing agreement by MillerCoors and are exported to and sold through agreements with independent distributors.

Corporate

        Corporate includes interest and certain other general and administrative costs that are not allocated to any of the operating segments. The majority of these corporate costs relate to worldwide administrative functions, such as corporate affairs, legal, human resources, accounting, treasury, insurance and risk management. Corporate also includes certain royalty income and administrative costs related to the management of intellectual property.

Other Information

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.

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Inflation

        Inflation is typically a factor in the segments in which we operate and we experience inflationary trends in specific areas, such as freight and fuel, agricultural commodities (barley, corn and hops), aluminum packaging materials and employment costs. 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. Each of our segments has different levels of exposure to inflation based on the specific characteristics of the market.

Regulation

Canada

        In Canada, provincial governments regulate the production, marketing, distribution, selling, and pricing of beer (including the establishment of minimum prices), and impose commodity taxes and license fees in relation to the production and sale of beer. In 2008, Canada excise taxes totaled $564.5 million or $74.72 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 U.S., the beer business is regulated by federal, state, and local governments. These regulations govern many parts of MillerCoors operations, including brewing, marketing and advertising, transportation, distributor relationships, sales, and environmental issues. To operate their facilities, they 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; and 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 are levied at varying rates with a U.S. mean of $1.22 per barrel in 2008.

United Kingdom

        In the U.K., 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.

        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 2008, we incurred approximately $1.1 billion in excise taxes on gross revenues of approximately $2.4 billion, or $118.88 per barrel.

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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 still responsible for certain aspects of environmental remediation, undertaken or planned, at those chemical specialties business locations. 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.

United Kingdom

        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 2008 capital expenditures, earnings or competitive position, and we do not anticipate that they will do so in 2009.

        Environmental expenditures at each of our segments for 2008, 2007 and 2006 to evaluate and remediate such sites were not material.

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Employees and Employee Relations

Canada

        We have approximately 2,700 full-time employees in our Canada segment. Approximately 63% 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.

United States

        MillerCoors has approximately 9,000 employees. Approximately 33% of its work force is represented by unions. We believe that MillerCoors' relations with its U.S. employees are good.

        We have approximately 180 employees in our corporate headquarters in Denver, Colorado. We believe that relations with our U.S. employees are good.

United Kingdom

        We have approximately 2,300 employees in our U.K. segment. Approximately 29% 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 U.K. employees are good.

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

        See Part II—Financial Statements and Supplementary Data, Item 8 Note 2 "SEGMENT AND GEOGRAPHIC INFORMATION" to the Consolidated Financial Statements 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.

        In addition, all of Molson Coors' directors and employees, including its Chief Executive Officer, Chief Financial Officer, and other senior financial officers, are bound by Molson Coors' Code of Business Conduct, which complies with the requirements of the New York Stock Exchange and the SEC to ensure that the business of Molson Coors is conducted in a legal and ethical manner. The Code of Business Conduct covers all areas of professional conduct, including employment policies, conflicts of interest, fair dealing, and the protection of confidential information, as well as strict adherence to all laws and regulations applicable to the conduct of our business. Molson Coors intends to disclose future amendments to, or waivers from, certain provisions of the Code of Business Conduct for executive officers and directors on its website within four business days following the date of such amendment or waiver.

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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.

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Executive Officers and Directors

        The following tables set forth certain information regarding our Executive Officers and Directors as of February 13, 2009:

Executive Officers

Board of Directors

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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 us or favored by other stockholders.    Pentland Securities (a company controlled by Eric Molson, a related party) ("Pentland") and the Coors Trust, which together control more than two-thirds of our Class A common stock and Class A exchangeable shares, 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. 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 would 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 relatively few products in several mature markets; the failure or weakening of one or more of these products or markets could materially adversely affect our financial results.    The combination of the Canadian and Coors Light brands represented more than 53% of our Canada segment's sales volume in 2008. Similarly, MillerCoors is dependent on Miller Lite and Coors Light in the U.S. Carling lager is the best-selling brand in the United Kingdom and represented more than 80% of our U.K. segment sales volume in 2008. 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 major markets is mature, and in each we face large competitors who have greater financial, marketing, and distribution resources and are more diverse in terms of their geographies and brand portfolios.

        Poor investment performance of pension plan holdings and other factors impacting pension plan costs could unfavorably impact liquidity and results of operations.    Our costs of providing defined benefit pension plans are dependent upon a number of factors, such as the rates of return on the plans' assets, discount rates, the level of interest rates used to measure the required minimum funding levels of the plans, exchange rate fluctuations, future government regulation, and our required and/or voluntary contributions made to the plans. While we comply with the minimum funding requirements, we have certain qualified pension plans with obligations which exceed the value of the plans' assets. The recent significant worldwide decline in equity prices and in the value of other financial investments, together with unfavorable foreign exchange rate movements, has significantly increased our pension liabilities. Without sustained growth in the pension investments over time to increase the value of the plans' assets and depending upon the other factors as listed above, we could be required to fund the plans with significant amounts of cash. Such cash funding obligations could have a material impact on our cash flows, credit rating and cost of borrowing, financial position, or results of operations.

        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.    We purchase certain types of packaging materials from a small number of suppliers. This packaging (including aluminum cans, aluminum can sheet, glass bottles and paperboard) is unique and is produced by a limited number of suppliers. Consolidation of the packaging materials suppliers has reduced local

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supply alternatives and increased risks of supply disruptions. The inability of any of these suppliers to meet our production requirements, or those of MillerCoors, without sufficient time to develop an alternative source could have a material adverse effect on our business.

        Consolidation of brewers worldwide may lead to the termination of one or more manufacturer/distribution agreements, which 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. Beer industry consolidation may increase the competitive environment, straining our current and future relationships with our partners. 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 markets could require us to reduce prices or increase capital and other expenditures or cause us to 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 in which Molson Coors operates, aggressive marketing strategies by our main competitors could adversely affect our financial results.

        We may not properly execute, or realize the anticipated $250 million of cost savings or benefits from, our ongoing strategic initiatives.    Our success is partly dependent upon properly executing and realizing cost savings or other benefits from the additional cost savings initiatives identified during 2007. These initiatives are primarily designed to make the company more efficient across the whole of the business, which is a necessity in our highly competitive industry. These initiatives are often complex, and a failure to implement them properly may, in addition to not meeting projected cost savings or benefits, result in a strain on the company's sales, manufacturing, logistics, customer service, or finance and accounting functions. Any of these results could have a material adverse effect on the business and financial results of the company.

        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 or changes in these laws and regulations or in tax, environmental, excise tax levels imposed or any other laws or regulations could result in the loss, revocation or suspension of our licenses, permits or approvals and could have a material adverse effect on our business, financial condition, and results of operations. Additionally, the combination of the Miller and Coors businesses may expose Molson Coors to regulatory risk arising from the legacy Miller portfolio.

        Our consolidated financial statements are subject to fluctuations in foreign exchange rates, most significantly the British pound ("GBP") and the Canadian dollar ("CAD").    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 U.S. Dollars ("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. We have active hedging programs to address foreign exchange rate changes. However, to the extent that we fail to adequately manage these risks, including if our hedging arrangements do not effectively or completely hedge changes in foreign currency rates, our results of operations may be adversely impacted.

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        Our operations face significant commodity price change 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, corn, other various starches, water, and packaging materials, including aluminum, cardboard and other 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 geopolitical 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 changes. However, to the extent we fail to adequately manage these risks, including if our hedging arrangements do not effectively or completely hedge changes in commodity price risks, including price risk associated with diesel fuel and aluminum, 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, which could result in loss of volume or a deterioration of operating margins.

        The success of our business relies heavily on brand image, reputation, and product quality. Deterioration to our brand equity may have a material effect on our operations and financial results.    It is important we have the ability to maintain and increase the image and reputation of our existing products. The image and reputation of our products may be reduced in the future; concerns about product quality, even when unsubstantiated, could be harmful to our image and reputation of our products. Restoring the image and reputation of our operations may be costly; operations and financial results may be adversely impacted.

        Due to a high concentration of unionized workers in the United Kingdom, Canada and at MillerCoors in the U.S., we could be significantly affected by labor strikes, work stoppages, or other employee-related issues.    Approximately 63%, 29% and 33% of the Molson, CBL and MillerCoors workforces, respectively, are represented by trade unions. Although we believe relations with our employees and the MillerCoors employees are good, stringent labor laws in the U.K. 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 products now sold through MillerCoors (including our on-U.S. products). Changes to the three-tier distribution system could have a materially adverse impact on MillerCoors. 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.

        Because of our reliance on third-party service providers for certain administrative functions, we could experience a disruption to our business.    We rely exclusively on one information services provider worldwide for our information technology functions including network, help desk, hardware, and software configuration. Additionally, during the first quarter of 2008, we signed a contract with another third-party service provider to outsource a significant portion of work associated with our finance and accounting, human resources, and other information technology functions. We transitioned much of the work to our service provider during 2008, and will continue that process, specifically for HR related activities during the first half of 2009. If one of these service providers were to fail and we were unable

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to find a suitable replacement in a timely manner, we could be unable to properly administer our information technology systems or other administrative tasks associated with the outsourced functions.

        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 Canada, a significant portion of the purchase price of the 2005 merger between Molson and Coors was allocated to Molson's core brands, which have been assigned an indefinite life. Projected declines in sales volume or net price realization, or projected increases in costs to produce these brands, could cause an impairment in their value. Further, in the event that the adverse financial impact of current trends with respect to our U.K. business continues and is worse than we anticipate, we may be required to record impairment charges. These charges could be material and could adversely impact our results of operations.

Risks Specific to Our Discontinued Operations

        Indemnities provided to the purchaser of 83% of the Cervejarias Kaiser Brasil S.A. ("Kaiser") business in Brazil could result in future cash outflows and statement of operations charges.    In 2006, we sold our 83% ownership interest in Kaiser to FEMSA Cerveza S.A. de C.V. ("FEMSA"). 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. 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 estimates or changes in our 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 certain related entertainment businesses 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 Montréal Canadiens professional hockey club (majority ownership was sold by Molson in 2001) and certain related entertainment businesses, 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.

        We may experience continued discounting in Canada.    Price discounting in Quebec, especially in the Quebec off-premise channel, negatively impacted our volume performance and margins in our Canadian segment in 2008. The continuation, or the increase of such discounting, in Quebec or other in provinces, could further adversely impact our business.

Risks Specific to the U.S. Segment and MillerCoors

        We may not realize cost savings and other benefits from MillerCoors due to challenges associated with integrating operations, technologies, sales, and other aspects of the operations.    The success of MillerCoors will depend in part on the success of the management team in integrating the operations, technologies, and personnel of MCBC's and SABMiller's former U.S. operations. The failure of MillerCoors to

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integrate the two operations or otherwise realize the anticipated benefits of the joint venture transaction, including the estimated $500 million annual cost savings that we previously projected, could unfavorably impact the results of operations of MillerCoors. In addition, the overall integration of MCBC and SABMiller's respective U.S. operations is a complex undertaking and, accordingly, may result in unanticipated operational problems, expenses and liabilities, and diversion of management's attention.

        The challenges involved in this integration include the following:

•

integrating successfully the respective Miller and Coors U.S. operations, technologies, products and services;



•

reducing the costs associated with each company's U.S. operations;



•

coordinating sales, distribution, and marketing efforts to effectively promote the products of MillerCoors;



•

preserving distribution, marketing, or other important relationships of the U.S. operations of both Miller and Coors and resolving potential conflicts that may arise;



•

successful integration of the distributorship structure of the two entities, including the resolution of disputes arising from the consolidation of distributors arising from the MillerCoors joint venture;



•

coordinating and rationalizing research and development activities to accelerate introduction of new products and other innovations;



•

retaining management, key employees and business partners;



•

assimilating the personnel and business cultures of both companies; and building employee morale and motivation.

Any adverse financial, operation or other events affecting MillerCoors could adversely affect our financial results or prospects.

        We do not fully control the operations and administration of MillerCoors, our investment in which represents our interests in the U.S. beer business.    We jointly control MillerCoors with SABMiller, and hold 42% economic interest in it. MillerCoors management is responsible for the day to day operations of the business including brewing, distribution, sales, marketing (including the growth and preservation of brand equities), finance, information technology, human resources, legal, technical operations, safety, environmental compliance, and relationships with governments. As we do not have full control over the activities of MillerCoors, our results of operations for those ventures are dependent upon the efforts of MillerCoors management, our ability to govern the joint venture effectively with SABMiller, and factors beyond our control that may affect SABMiller. Additionally, our disclosure controls and procedures with respect to MillerCoors are necessarily substantially more limited than those we maintain with respect to our consolidated subsidiaries.

        MillerCoors is highly dependent on independent distributors in the United States to sell its products, with no assurance that these distributors will effectively sell its and our products.    MillerCoors sells all of its products and our non-U.S. products in the United States to distributors for resale to retail outlets. Some of these distributors are at a competitive disadvantage because they are smaller than the largest distributors in their markets. In addition, the regulatory environment of many states makes it very difficult to change distributors. Consequently, if MillerCoors is not allowed or is unable to replace unproductive or inefficient distributors, their business, financial position, and results of operation may be adversely affected. Consolidation of distributors is expected to occur following the formation of MillerCoors. The current state of the financial and credit markets may make it more difficult for consolidation among distributors to occur.

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Risks Specific to the United Kingdom 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.    In recent years, 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. A ban on smoking in pubs and restaurants across the whole of the U.K. enacted in 2007 accelerated this trend. Margins on sales to off-premise customers tend to be lower than margins on sales to on-premise customers, and, as a result, continuation of these trends would further adversely impact our profitability.

        In the event that a significant pub chain were to go bankrupt, or experience similar financial difficulties, our business could be adversely impacted.    We extend credit to pub chains in the U.K. in which some cases the amounts are significant. The continuing challenging economic environment in the U.K. has caused business at on-premise outlets to slow in late 2008 and early 2009, and some pub chains may face increasing financial difficulty if economic conditions do not improve. In the event that a pub chain were to be unable to pay amounts owed to the Company as a result of bankruptcy or similar financial difficulties, our business could be adversely impacted.

        Consolidation of pubs and growth in the size of pub chains in the United Kingdom could unfavorably impact 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 the 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 contribute to an adverse financial impact.

        We depend exclusively on one logistics provider in England, Wales, and Scotland for distribution of our CBL products.    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.

ITEM 1B.    Unresolved Staff Comments

        None.

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ITEM 2.    Properties

        As of December 28, 2008, our major facilities were:

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(1)

Approximately 441 stores owned or leased by BRI joint venture in various locations in Ontario Province.

(2)

We own 17 warehouses, lease 12 warehouses and lease one additional distribution center in the Québec Province.

(3)

We have 10 warehouses owned or leased by our BRI joint venture and one warehouse owned by Molson in the Ontario Province.

(4)

Leased facility.

        We believe our facilities are well maintained and suitable for their respective operations. In 2008, our operating facilities were not capacity constrained.

ITEM 3.    Legal Proceedings

        Beginning in May 2005, several purported shareholder 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 in connection with the Merger. The

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Colorado case was transferred to Delaware and consolidated with those cases. The Québec Superior Court heard arguments in October 2007 regarding the plaintiffs' motion to authorize a class in that case. We opposed the motion.

        During the first quarter of 2008, the Company agreed in principle with counsel for plaintiffs in all pending securities cases in Delaware, Québec, and Ontario to settle all such claims on a worldwide basis. Pursuant to the settlement, the Company would pay, except one case discussed below, a total of $6.0 million in settlement, which amounts would be paid by the Company's insurance carrier. The settlement agreement is awaiting final approval in the various courts in which the cases are pending. We anticipate receiving such approval in April 2009. This agreement in principle did not settle one remaining case in Delaware. That case seeks to recover on behalf of certain Molson Coors employees who invested in Company securities around the same time through two employee retirement savings plans. The complaint in that case essentially relies on the same allegations as the other shareholder lawsuits. This case has been settled for $0.2 million, an amount that will be paid by the Company's insurance carrier.

        From time to time, we have been notified that we are or may be a potentially responsible party ("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. For example, we are one of approximately 60 entities named by the Environmental Protection Agency ("EPA") as a PRP at the Lowry Superfund site. This landfill is owned by the City and County of Denver and is managed by Waste Management of Colorado, Inc. ("Waste Management"). In the fourth quarter of 2008, we were informed that the State of Colorado may bring an action against the City and County of Denver and Waste Management for the Lowry Superfund Site to recover for natural resources damages. In the event that the State of Colorado were to bring such an action against the City and County of Denver and Waste management, Denver and Waste Management would likely bring an action against the PRPs to recover a portion of the amount of such claim. Although no formal action has been brought, the State of Colorado is informally asserting total damages of approximately $10 million. However, the Company is potentially liable for only a portion of those damages. The Company will defend any such claims vigorously.

        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 ruled in the Company's favor, holding that the employment tribunal had no jurisdiction to hear the employees' claims, and the claims were dismissed. Employee claims in this matter were filed during the third quarter of 2008 in a U.K. county court. A trial date is expected in 2009. CBL will defend the claims vigorously. If CBL were held to be liable to the claimants, the amounts of the liability would be immaterial. If such liabilities were asserted by other groups of employees and upheld in subsequent litigation, 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, for example, 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

        None.

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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. The approximate number of record security holders by class of stock at February 13, 2009, is as follows:

        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 2008 and 2007 as reported by the New York Stock Exchange, adjusted to give effect to the 2-for-1 stock split effective October 3, 2007.

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        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 2008 and 2007 as reported by the New York Stock Exchange, adjusted to give effect to the 2-for-1 stock split effective October 3, 2007.

        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 2008 and 2007 as reported by the Toronto Stock Exchange, adjusted to give effect to the 2-for-1 stock split effective October 3, 2007.

        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 2008 and 2007 as reported by the Toronto Stock Exchange, adjusted to give effect to the 2-for-1 stock split effective October 3, 2007.

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PERFORMANCE GRAPH

        The following graph compares Molson Coors' cumulative total stockholder return over the last five fiscal years with the Standard and Poor's 500 Index® and the Russell 3000 Beverage Brewers Wineries Industry Index a group of peer companies which includes Molson Coors, Anheuser-Busch Companies, Inc., The Boston Beer Company, Inc., and Constellation Brands Inc. (collectively, the "Peer Group")(1). Note that Anheuser-Busch Companies, Inc. de-listed from the New York Stock Exchange following the completion of its merger with InBev. As such, the "Peer Group" excludes Anheuser-Busch Companies, Inc. effective November 19, 2008. The graph assumes $100 was invested on December 28, 2003, (the last trading day of fiscal year 2003) in Molson Coors common stock, the Standard and Poor's 500 Index® and the Peer Group, and assumes reinvestment of all dividends.

Molson Coors Brewing Company
Comparison of Five-Year Cumulative Total Return

        

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(1)

Peer Group is the Russell 3000® Beverage Brewers Wineries Industry Index. Bloomberg's® code for this index is R3BVBW.

(2)

Adolph Coors Company and Molson Inc. merged on February 9, 2005, to form Molson Coors Brewing Company. Performance prior to the merger is for Adolph Coors Company only.

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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 Part II—Financial Statements and Supplementary Data, Item 8.

---

(1)

52-weeks reflected in 2008, 2007, 2005 and 2004 versus 53-weeks included in 2006.

(2)

Share and per share amounts have been adjusted from previously reported amounts to reflect a 2-for-1 stock split issued in the form of a stock dividend effective October 3, 2007.

(3)

Results prior to February 9, 2005 exclude Molson, Inc.

(4)

As a result of the MillerCoors formation on July 1, 2008, and MCBC's prospective equity accounting for MillerCoors, net sales for the fifty-two weeks ended December 28, 2008, only include net U.S. sales through the period ended June 30, 2008.

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

Executive Summary

        The following table highlights summarized components of our condensed consolidated summary of operations for the years ended December 28, 2008, December 30, 2007, and December 31, 2006.

---

(1)

Per share amounts have been adjusted from previously reported amounts for the effect of our 2-for-1 stock split issued in the form of a stock dividend on October 3, 2007.

(2)

The 53^rd week in our fiscal 2006 increased total company sales volume by approximately 600,000 barrels and increased reported pre-tax profit of $472.1 million by approximately $6 million.

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        The following table highlights summarized components of our sales volume for the years ended December 28, 2008, December 30, 2007 (actual and pro forma) and December 31, 2006.

---

(1)

Reflects the exclusion of the U.S. segment volume reported for the twenty-six weeks ended December 31, 2007.

(2)

Reflects the addition of MCBC's proportionate share of MillerCoors and Molson Modelo sales-to-retail for the periods presented, adjusted for comparable trading days, including on a pro forma basis for the twenty-six weeks ended December 31, 2007.

        Worldwide beer volume is composed of our financial volume, royalty volume and proportionate share of equity investment sales-to-retail. Financial volume represents owned beer brands sold to unrelated external customers within our geographical markets. Royalty beer volume consists of product produced and sold by third parties under various license and contract-brewing agreements. Equity investment sales-to-retail brands volume represents the company's ownership percentage share of volume in its subsidiaries accounted for under the equity method, including MillerCoors and Modelo Molson Imports, L.P.

2008 Key Financial Highlights:

        Our performance in 2008 demonstrated that our brand growth strategies and cost-reduction efforts continue to strengthen our competitive capabilities and financial performance. We achieved a few highlights from a year full of challenges—but also transformation and progress—for our company. The following are several critical successes in 2008:

•

We made great progress on brand-building, front-line pricing and cost reductions, however we were challenged by commodity inflation, weak industry volume in key markets, and unfavorable foreign currency toward the end of the year.



•

The completion of MillerCoors in the U.S. led our transformational moves, and integration is progressing well.



•

In Canada, we grew net pricing based on the strength of our strategic brand portfolio and secured the opportunity to grow the Modelo brands across Canada for the long term.



•

In the U.K., we grew net pricing for the year, launched Magners draught cider, and began implementing a contract brewing arrangement that will be beneficial for years to come.



•

Globally, we



•

exceeded all of our cost-savings goals,

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•

appropriately funded our pensions and reduced the future size and volatility of our pension liabilities,



•

created a stronger Global Market Development organization, and



•

reduced interest and corporate overhead expenses.

Synergies and other cost savings initiatives

        For the full year, we achieved $87 million of savings, which exceeded our 2008 goal by $10 million. These cost reductions include our 42% share of Resources for Growth ("RFG") cost savings initiatives that were carried forward by MillerCoors in the back half of 2008. The benefit MillerCoors' cost savings will generate, which we expect to realize through higher income from the joint venture, which are in addition to the $500 million of committed MillerCoors cost synergies, will enable us to deliver on our overall commitment to cost savings initiatives. Our share of these assumed RFG savings was $6 million in the second half. For the entire RFG program, which began in 2007, we have now delivered $178 million of our total projected $250 million in savings.

        MillerCoors is progressing towards its stated goal of $500 million of synergies in the first three years of combined operations. Since combining operations, MillerCoors has delivered $28 million in synergies. The timing to achieve MillerCoors' original goal of $50 million in synergies in the first twelve months of operations has accelerated, and MillerCoors now expects to realize $128 million of synergies by June 30, 2009. By the end of calendar year 2009, MillerCoors expects to achieve a total of $238 million in synergies surpassing its original forecast of $225 million. While the timing of synergy delivery has accelerated, MillerCoors' goal remains $500 million in three years.

Components of our Statement of Operations

        Net sales—Our net sales represent almost exclusively the sale of beer and other 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 on-premise customers in the United Kingdom.

        Cost of goods sold—Our cost of goods sold includes costs we incur to make and ship beer. These costs include brewing materials, such as barley, hops, various grains and other key brewing materials purchased. Packaging materials, including costs for glass bottles, aluminum and steel cans, 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, depreciation, and other manufacturing overheads, as well as the cost to purchaser of "factored" brands from suppliers.

        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. These costs also include our marketing and sales organizations, including labor and other overheads. This classification also include general and administrative costs for functions such as finance, legal, human resources and information technology, which consist primarily of labor and outside services. Last, this line item includes amortization costs associated with intangible assets, as well as certain depreciation costs related to non-production equipment.

        Special Items—These are infrequent and/or unusual items which affect our statement of operations, and are discussed in each segment's Results of Operations discussion.

        Equity income in MillerCoors— This item represents our proportionate share for the period of the undistributed net income (loss) of our investment in MillerCoors accounted for under the equity method. Such amount typically reflects adjustments similar to those made in preparing consolidated

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statements, including adjustments to eliminate intercompany gains and losses, and to amortize, if appropriate, any difference between cost and underlying equity in net assets upon the formation of MillerCoors.

        Interest expense, net—Interest costs associated with borrowings to finance our operations are classified here. Interest income in the U.K. segment is associated with trade loans receivable from customers.

        Debt extinguishment costs—The costs are associated with payments to settle the notes at fair value given interest rates at the time of extinguishment, incentive payments to note holders for early tendering of the notes, and a write-off of the proportionate amount of unamortized discount and issuance fees associated with the extinguished debt.

        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.

        Discussions of statement of operations line items such as minority interests and discontinued operations are discussed in detail elsewhere in MD&A and in the Notes to Part II—Financial Statements and Supplementary Data, Item 8.

Depreciation

        Depreciation and amortization expense decreased from 2008 versus 2007 excluding special items, as a result of the formation of MillerCoors. There were no other material factors contributing to the reduction in depreciation and amortization expense as experienced in 2007.

        We realized a 6% decrease related to depreciation and amortization expense of assets in 2007 versus 2006 excluding special items, due to the net effect of five factors:

•

We evaluated the estimated useful lives of a substantial portion of our property, plant and equipment on a global basis, in light of improvements in maintenance, new technology and changes in expected patterns of usage. The lengthening of certain depreciable asset lives as a result of this evaluation resulted in a reduction of our consolidated depreciation expense for the full year 2007.



•

Substantial existing assets became fully depreciated, so expense related to these assets was significantly lower in 2007 than 2006.



•

Adding packaging capacity in our Toronto and Shenandoah facilities during 2006 and brewing capacity in our Shenandoah facility in the first half of 2007.



•

Installing cold dispense units in pubs and restaurants in the U.K. resulted in a year over year increase.



•

Purchase of the keg population in the U.K. increased depreciation in the Europe segment.

Income Taxes

        Our full year effective tax rates were approximately 20%, 1% and 17% in 2008, 2007 and 2006, respectively. Our 2008, 2007 and 2006 effective tax rates were significantly lower than the federal statutory rate of 35% primarily due to the following factors, lower effective income tax rates applicable to our Canadian and U.K. businesses, and one time benefits from revaluing our deferred tax assets and liabilities to give effect to reductions in foreign income tax rates and tax law changes.

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Discontinued Operations

        The Company's former Brazil business, Kaiser, is reported as a discontinued operation due to the sale of an 83% controlling interest in the business in 2006. See Part II—Financial Statements and Supplementary Data, Item 8 Note 4 "DISCONTINUED OPERATIONS" to the Consolidated Financial Statements for further discussion.

        The loss from discontinued operations of $12.1 million for the year ended 2008 is associated with adjustments to the indemnity liabilities due to changes in estimates and foreign exchange losses.

        The net loss from discontinued operations of $17.7 million for the year ended 2007 is composed of the following components:

•

A net loss of $20.4 million associated with adjustments to the indemnity liabilities due to changes in estimates and foreign exchange losses.



•

A gain of $2.7 million due to an income tax adjustment related to the sale of Kaiser.

        In conjunction with this transaction, the purchaser (FEMSA) assumed $63 million of financial debt and assumed contingent liabilities of approximately $260 million, related primarily to tax claims, subject to our indemnification. As a result, we have a level of continuing potential exposure to these contingent liabilities of Kaiser, as well as previously disclosed but less than probable unaccrued claims. While we believe that all significant contingencies were disclosed as part of the sale process and adequately reserved for on Kaiser's financial statements, resolution of contingencies and claims above reserved or otherwise disclosed amounts could, under some circumstances, result in additional cash outflows for Molson Coors because of transaction-related indemnity provisions. We have recorded these indemnity liabilities at fair value and have a carrying value at December 28, 2008, and December 30, 2007, of $133.2 million and $155.0 million, respectively. Due to the uncertainty involved with the ultimate outcome and timing of these contingencies, there could be significant adjustments in the future.

Results of Operations

Canada Segment

        Our Canada segment consists primarily of Molson's beer business, including the production and sale of the Molson brands, Coors Light and other licensed brands, in Canada. Effective, January 1, 2008, Molson and Grupo Modelo, S.A.B. de C.V. established a joint venture, Modelo Molson Imports, L.P. ("MMI"), to import, distribute, and market the Modelo beer brand portfolio across all Canadian provinces and territories. Under this arrangement, Molson's sales teams are responsible for promoting and selling the brands across Canada on behalf of the joint venture. The alliance will enable Grupo Modelo to effectively utilize the resources and capabilities of Molson to achieve greater distribution coverage in the Western provinces of Canada. The MMI joint venture is accounted for using the equity method. The Canada segment also includes our arrangements related to the distribution of beer in Ontario and the Western provinces, through Brewers Retail, Inc. ("BRI") a consolidated joint venture, and Brewers' Distributor Ltd. ("BDL") a joint venture accounted for under the equity method.

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        See "Outlook for 2009" for discussion of forward looking trends regarding the Canada segment.

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N/M = Not meaningful

(1)

52-weeks reflected in 2008 and 2007 versus 53-weeks included in 2006.

(2)

Volumes represent net sales of MCBC owned brands and partner brands.

Foreign currency impact on results

        Our Canada segment (as stated in USD) was unfavorably impacted by a 0.5% year-over-year decrease in the value of the CAD against the USD in 2008 versus 2007. The Canada segment benefited from a 7% year-over-year increase in the value of CAD against USD in 2007 versus 2006.

Volume and net sales

        With the completion of the MillerCoors joint venture, our net sales and cost of goods sold related to products sold by Molson in Canada for U.S. distribution, which were previously treated as inter-company transactions and eliminated upon consolidation, are now included in Canada segment results. The sales volume continues to be excluded from our Canada results, as this volume is reported by MillerCoors. This reporting had the effect of increasing net sales per barrel by approximately 5% to 6% and increasing cost of goods sold per barrel approximately 9% to 10% in the third and fourth quarter 2008, with minimal impact on gross profit.

        For the fifty-two weeks ended December 28 2008, sales volume in Canada decreased by 4.4% to 7.6 million barrels versus prior year volume of 7.9 million barrels for the 52 weeks ended December 30, 2007. This decline is entirely the result of excluding our reported Modelo volumes in 2008 with the creation of our joint venture. Excluding this factor, full year sales volume of 7.6 million barrels increased 0.1% on a comparable basis versus prior year.

        Our Canada comparable sales to retail ("STRs") for 2008 increased 0.8% versus the prior calendar year driven by mid-single-digit growth of our strategic brands lead by Coors Light and Carling, which experienced double-digit growth compared to the prior year. In addition, the Rickard's and Creemore brands, as well as our partner import brands, all grew at high single-digit rates on a full year basis. These increases were partially offset by declines in non-strategic brands and other premium brands.

        Canada industry volumes grew an estimated 1.1% in 2008 compared to the prior calendar year. As a result, Molson experienced a slight market share decrease on a full year comparable basis. This

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decrease was driven by softness in the Québec market, partially offset by strong performance in the Ontario and Atlantic markets.

        On a full year basis, 2008 net sales revenue declined $48.9 million or 2.6% versus prior year.

        For the full year 2008, net sales revenue was $246.84 per barrel, an increase of 1.9% over 2007 net sales revenue of $242.15 per barrel. Excluding the effects of a U.S. production contract with Foster's that was terminated in the fourth quarter 2007, the Modelo Molson joint venture and the impact of sales to MillerCoors as disclosed above, net sales per barrel increased 2.3% as a result of higher net pricing and favorable sales mix of our products, including sales increases of our higher-revenue per barrel partner-import brands.

        For the 52 weeks ended December 30, 2007, sales volume in Canada decreased by 0.6% to 7.9 million barrels versus prior year volume of 7.95 million barrels for the fifty-three weeks ended December 31, 2006. Excluding the effects associated with the change in the volume reporting policy, sales volume for 2007 of 8.2 million barrels decreased 1.6% versus prior year volume of 8.3 million barrels for the 53 weeks ended December 31, 2006. The 53rd week in 2006 delivered approximately 130,000 barrels, accounting for all of the year-over-year decrease. In addition, the termination of the Foster's U.S. production contract early in the fourth quarter 2007, drove a further sales volume reduction in 2007. Excluding the impact of the 53rd week in 2006 and the volume reductions attributable to Foster's and other exported volume, comparable sales volume in Canada increased by approximately 1.5% or 110,000 barrels.

        Our Canada STRs for 2007 increased 1.0% versus the prior calendar year driven by mid-single-digit growth of our Molson strategic brands, lead by Coors Light, which experienced double-digit growth compared to the prior year. In addition, the Rickard's, Creemore and Carling brands, and our partner import brands, all grew at double-digit rates on a full year basis. These increases were partially offset by declines in non-strategic brands and other premium brands.

        Canada industry volumes grew an estimated 0.9% in 2007 compared to the prior calendar year. As a result, Molson experienced a slight market share increase on a full year basis, fueled by share growth over the key summer selling period and the strength of our strategic brands.

        On a full year basis, 2007 net sales revenue grew $119.6 million or 6.7% versus prior year with approximately 2% growth in local currency on a per barrel basis.

        For the full year 2007, net sales revenue was $242.15 per barrel, an increase of 7.3% over 2006 net sales revenue of $225.72 per barrel. Excluding the effects associated with the change in the volume reporting policy, net sales revenue was $234.66 per barrel, an increase of 8.4% over 2006 net sales revenue of $216.57. An approximate 7% appreciation in the value of CAD against USD during the year increased net sales revenue by approximately $114 million or $14.00 per barrel. Net pricing contributed half of the remaining increase with the year over year impact of modest general price increases being partially offset by increased price discounting in Québec and Ontario. Improved sales mix from increased import sales, which are at higher than average retail prices, and decreased export sales, which are at lower than average retail prices, accounted for the remaining net increase. The decrease in export sales can be attributed to the termination of our Foster's US production contract in the fourth quarter of 2007.

Cost of goods sold and gross profit

        Full year 2008 cost of goods sold per barrel increased 3.3% in local currency versus 2007. Excluding current year impacts of the termination of the Foster's contract, the changes associated with

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MMI and sales to MillerCoors, cost of goods sold per barrel increased 7.4% on a comparable basis in local currency. The underlying cost of goods increase was due to the net effect of three factors:

•

Higher commodity, packaging material and other input costs drove a 6% increase, combined with a 1% increase due to higher fuel and distribution costs,



•

These inflationary increases were partially offset by a 2.5% decrease from our Resources for Growth cost savings initiatives, and



•

Finally, an increase of about 3% was due to the ongoing shift in sales mix.

        For the full year 2007, cost of goods sold on a per barrel basis was $124.66 per barrel, an increase of 12.1% over 2006 cost of goods sold of $111.20 per barrel. Excluding the effects associated with the change in the volume reporting policy for the full year 2007, cost of goods sold on a per barrel basis was $120.81 per barrel, an increase of 13.2% over 2006 cost of goods sold of $106.70 per barrel. After adjusting for the approximate 7% appreciation in the value of CAD against USD, cost of goods sold increased by slightly less than 7% in 2007 in local currency. Inflationary cost increases across nearly all inputs drove approximately 3% of the increase in cost of goods sold per barrel, but was completely offset by the implementation of synergies and other cost savings initiatives in the year. The impacts of increased import sales, lower export sales due to the Foster's contract termination and non-cash adjustments in both the current and prior years of certain foreign currency positions to their market values account for the increase in cost of goods sold per barrel.

Marketing, general and administrative expenses

        For the full year, marketing, general and administrative expenses were $421.3 million, a decrease of $26.3 million or 5.9% lower versus prior year. In local currency total marketing, general, and administrative expenses decreased 7.3% versus the prior year driven by lower intangible amortization, combined with the elimination of all expenses associated with the Modelo brands, which are now managed by MMI.

        For the full year 2007, marketing, general and administrative expenses were $447.6 million, an increase of $7.7 million or 1.8% from 2006. In local currency, total marketing, general and administrative expenses decreased by 4% driven by lower general and administrative costs through reduced intangible amortization expense and a focus on more efficient general and administrative spending, including lower employee costs and other cost savings. In addition, 2006 included certain nonrecurring costs including contract costs incurred to achieve longer term information technology synergies, and additional costs associated with the additional week in 2006 results. Promotional spending and brand investments were relatively flat in 2007 compared to the prior year.

Special items, net

        The Canada segment recognized $10.9 million of special items expense during 2008. The special items represent costs associated with ongoing Edmonton brewery closing expenses, restructuring activities, and an asset impairment. See Part II—Financial Statements and Supplementary Data, Item 8 Note 8 "SPECIAL ITEMS, NET" to the Consolidated Financial Statements for further discussion.

        The Canada segment recognized $75.2 million of special items expense during 2007. The special items represent $46.5 million relating to the Edmonton brewery closure, in which significant charges included a $31.9 million impairment charge on the carrying value of the fixed assets and an additional $14.6 million charge for severance and other costs associated with closing the brewery. Current plans are to demolish the building and sell the land, which has a carrying value of $10.1 million at December 30, 2007. Other charges include $24.1 million relating to the Foster's intangible asset impairment and $4.6 million relating to employee termination costs associated with production and sales, general and administrative functions. See Part II—Financial Statements and Supplementary Data,

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Item 8 Note 8 "SPECIAL ITEMS, NET" to the Consolidated Financial Statements for further discussion.

Other income (expense), net

        Other income in 2008 was $14.7 million lower than the prior year largely due to cycling the gain on the sale of our equity investment in the House of Blues Canada which resulted in an approximate $16.7 million income benefit in 2007.

        Other income in 2007 was $8.3 million higher than the prior year largely due to a gain on the sale of our equity investment in the House of Blues Canada which resulted in an approximate $16.7 million income benefit in the year. This was partially offset by the non-recurrence of the approximate $9.0 million gain in 2006 from the reduction of guarantee liabilities related to our investment in the Montréal Canadiens hockey club in the prior year.

United States Segment

        During the first two quarters of 2008 and all of 2007 and 2006, the United States ("U.S.") segment produced, marketed and sold the Coors portfolio of leading beer brands in the United States and Puerto Rico and includes the results of the Rocky Mountain Metal Corporation and Rocky Mountain Bottle Corporation, which are consolidated joint ventures. The U.S. segment also includes sales of Molson products in the United States. As of July 1, 2008, MillerCoors began operations. The results and financial position of our U.S. segment operations were prospectively deconsolidated upon contribution to the joint venture, and our interest in MillerCoors is being accounted for and reported by us under the equity method of accounting. MCBC's equity investment in MillerCoors will represent our U.S. operating segment going forward. See Part II—Financial Statements and Supplementary Data, Item 8 Note 1 "BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES" to the Consolidated Financial Statements regarding the MillerCoors joint venture.

        We review first below the results and financial position of our U.S. segment operations on an as reported basis, reflecting our operation of the segment for the first six months of 2008 and of the joint venture for the second six months of 2008, and then review the results and financial position of the U.S. segment on a pro forma basis for the six month period ended December 30, 2007.

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        See "Outlook for 2009" for discussion of forward looking trends regarding the United States segment.

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N/M = Not meaningful

(1)

52-weeks reflected in 2008 and 2007 versus 53-weeks included in 2006.

(2)

Volumes represent net sales of MCBC owned brands and partner brands.

        Our discussion of U.S. segment results of operations consists of two parts. A discussion of the first half of 2008 (prior to the formation of MillerCoors) versus the first half of 2007 is presented below, along with a discussion of results of 2007 versus 2006. A discussion of the last half of 2008 (after the formation of MillerCoors) is presented immediately afterward, with a comparison to the same period in 2007 on a pro forma basis.

Before the formation of MillerCoors on July 1, 2008:

Volume and net sales

        Sales volume to wholesalers increased by 7.2% in the first half of 2008 while STRs were up 5.7% during the same period, with Coors Light, Coors Banquet, Keystone Light and Blue Moon driving increased volume. Net sales per barrel increased by 3.8% in 2008, due to price increases and higher revenue from commercial can sales.

        Sales volume to wholesalers grew 3.3% in 2007 compared to 2006, due to strong STR growth, partially offset by a difference in the timing of our fiscal calendar. Our 50-states U.S. distributors' STRs increased 4.6% and we continued to grow market share throughout 2007. This sales increase was driven by mid-single-digit growth for Coors Light, along with strong double-digit growth of Blue Moon and low-double-digit growth of Keystone Light. Also Coors Banquet grew at a mid-single-digit rate on a year-over-year basis.

        Net sales per barrel increased 2.2% in 2007 due to higher base pricing and reduced discounting compared to the level of price promotion activity we experienced during 2006.

Cost of goods sold

        Cost of goods sold per barrel increased by 3.4% in the first half of 2008. The year to date change is the result of higher commodity, transportation and packaging material costs partially offset by cost

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savings initiatives. Cost savings initiatives, offset more than half of our U.S. inflation during the first half of 2008.

        Cost of goods sold increased marginally to $70.73 per barrel in 2007 versus $70.11 per barrel in 2006. The net increase in cost of goods sold was driven by an increase in commodity, transportation and packaging costs, more than 60% offset by our merger synergies and other operations cost-reduction initiatives.

Marketing, general and administrative expenses

        Marketing, general and administrative expenses were up 8.0% in the first half of 2008. Marketing investments increased at a low-single-digit rate, while general and administrative expenses grew at a low-double digit rate due to the organization achieving our stock-based long-term incentive payout targets.

        Marketing, general and administrative expenses increased by $9.9 million, or 1.3%, in 2007 versus 2006. Marketing investments decreased at a low-single-digit rate, while general and administrative expenses grew at a mid-single digit rate due to higher employee incentive programs.

Special items, net

        Special charges for the first half of 2008 were primarily a result of an impairment of an intangible asset associated with Molson brands sold in the U.S., and costs associated specifically with the MillerCoors transaction composed of employee retention and integration planning costs, partially offset by the net gain from the sale of the wholly owned distributor facilities in Boise, Idaho, and Glenwood Springs, Colorado. See Part II—Financial Statements and Supplementary Data, Item 8 Note 8 "SPECIAL ITEMS, NET" and Note 12 "GOODWILL AND INTANGIBLE ASSETS" to the Consolidated Financial Statements for further discussion.

        We recognized $9.5 million of special charges in 2007 compared to $73.7 million of net special charges in 2006. In 2007, the special charges were related to employee retention costs in anticipation of the proposed MillerCoors joint venture and a newly initiated program focused on long term labor savings across the supply chain areas. Special items, net, in the U.S. segment in 2006 were associated primarily with the closure and sale of the Memphis brewery, completed in the third quarter of 2006. In 2006, we recorded approximately $60 million in accelerated depreciation on brewery assets and impairments of fixed assets, reflecting their sales value, $12.5 million for accruals of severance and other costs associated with the plant closure, and a $3.1 million increase in the estimate of costs to withdraw from a multi-employer pension plan benefiting former Memphis workers. Memphis-related accelerated depreciation was higher in 2006 than in 2005 due to a lower sales price for the Memphis plant than our original estimate in 2005.

        The 2006 special items were partially offset by the receipt of a $2.4 million cash distribution from bankruptcy proceedings of a former insurance carrier for a claim related to our environmental obligations at the Lowry Superfund site in Denver, Colorado. We recorded the cash receipt as a special benefit consistent with the classification of the charge recorded in a previous year. The estimated environmental liability associated with this site was not impacted by the proceeds received. See Part II—Financial Statements and Supplementary Data, Item 8 Note 8 "SPECIAL ITEMS, NET" to the Consolidated Financial Statements for further discussion.

Other income (expense), net

        Other income was higher in 2008 versus 2007 primarily due to a $1.9 million gain on the disposal of non-operating long-lived assets.

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        Other income was lower in 2007 versus 2006 primarily due to the recognition of a portion of a previously deferred gain on the sale of real estate. This amount was recognized in the second quarter of 2006 upon the satisfaction of certain conditions pertaining to the sale contract.

After the formation of MillerCoors on July 1, 2008:

        The results of operations for MillerCoors for the six months ended December 28, 2008, and pro forma results of operations for the six month period ended December 30, 2007 are as follows:

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N/M = Not meaningful

        This pro forma combined financial information has been derived from the historical financial results of the respective U.S. businesses of MCBC and Miller, giving effect to the MillerCoors transaction and other related adjustments, described below. These pro forma results are not necessarily indicative of the results of operations that would have been achieved had the MillerCoors transaction taken place at the beginning of the pro forma period, and do not purport to be indicative of future operating results.

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MILLERCOORS LLC
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT
For the Six Months Ended December 31, 2007

Description of Pro Forma Adjustments

A

With the formation of MillerCoors in the third quarter of 2008, amortization was initiated on certain intangible assets contributed by Miller that had formerly been classified as indefinite-lived. Since this decision was due in large part to the combined brand portfolio at MillerCoors following its formation, a comparable amortization amount was included in the pro forma period.

B

Adjustment to reflect mark-to-market accounting for share based compensation held by MillerCoors employees.

C

Adjustments to conform classification between the MCBC U.S. business and the Miller U.S. business, and to conform the MCBC U.S. business accounting calendar from a twenty-six week to a six calendar months ended December 31, 2007.

D

Adjustments to conform accounting policies with regard to inventory valuation, pension and postretirement plans and allocation of advertising costs between interim periods.

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        The following represents MCBC's proportional share of MillerCoors net income reported under the equity method (in millions):

---

(1)

See Part II—Financial Statements and Supplementary Data, Item 8 Note 3 "EQUITY INVESTMENTS", for a detailed discussion of these equity method adjustments.



(2)

We anticipate income of approximately $7.2 million in the first quarter of 2009 associated with this category. We do not anticipate any further amounts subsequent to the first quarter of 2009.



(3)

We anticipate that basis amortization income will be approximately $12 million for the full year of 2009. Asset impairments recorded by MillerCoors could change that amount significantly.

        The discussions below highlight the MillerCoors results of operations for the six months ended December 28, 2008, versus pro forma results for the same period in 2007.

Volume and net sales

        Total reported volume declined 2.6% during the six months ended December 31, 2008, versus the six months ended December 31, 2007. Contract packaging volume declined 4.6% during the period, while sales volume to wholesalers declined 2.3% due largely to a higher depletion of distributor inventories since July 1, 2008, versus the same period in 2007. Domestic STRs increased 0.1% during the period (STRs decreased 0.7% when adjusting for trading day differences). STR performance reflects strong growth in five of MillerCoors' six focus brands (Coors Light and Miller High Life reflecting single digit growth, with double digit growth experienced in MGD64, Blue Moon, and Keystone Light), which was largely offset by reductions in Miller Lite and Miller Chill performance. STR trends slowed during the fourth quarter, in line with an industry-wide slowdown and during a time of significant price increases.

        Total net sales per barrel increased 5.3% in 2008 due to higher domestic business base pricing and reduced discounting compared to the level of price promotion activity we experienced during the second half of 2007. Revenue increases were due in part to the acceleration of price increases from early 2008 to the fall of 2008.

Cost of goods sold

        Cost of goods sold increased to $66.96 per barrel in the six months ending December 31, 2008, versus $63.63 per barrel in the six months ending December 31, 2007. The net increase in cost of goods sold was driven by an increase in commodity, transportation and packaging costs, partly offset by the

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MillerCoors legacy cost-reduction initiatives (internally named Resources for Growth and Project Unicorn).

Marketing, general and administrative expenses

        Marketing, general and administrative expenses decreased by $20.7 million, or 2.0%, in 2008 versus 2007. Reductions were largely realized in general and administrative expenses and reflect the realization of organizational and non-organizational synergy savings during the period. Marketing investments increased slightly, as incremental spending on MGD64 launch costs, increases in Coors Light media spending, and tactical sales expenses were partly offset by the non-recurrence of prior year Miller Chill launch costs.

Contract Settlement

        During the second half of 2007, Miller recognized a $43.1 million nonrecurring contract settlement from an aluminum supplier. The contract settlement relates to periods prior to 2007.

Special Items

        MillerCoors recognized $103.8 million of special charges in 2008 compared to $28.2 million of net special charges in 2007. In 2008, the special charges were for integration related expenses for the MillerCoors joint venture and the impairment of the Sparks brand. MCBC's equity method accounting includes a favorable basis amortization income adjustment which offsets our 42% ($27.3 million) share of the $65.1 million Sparks impairment charge. Integration charges in 2008 include costs for severance, relocation, sales office closures and consulting costs. In 2007, the special charges were related to employee retention costs in anticipation of the MillerCoors joint venture and a newly initiated program focused on long term labor savings across the supply chain areas.

United Kingdom Segment

        The United Kingdom segment consists of our production and sale of the CBL brands principally in the United Kingdom, our consolidated 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 the equity method Tradeteam joint venture for the distribution of products throughout Great Britain.

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        See "Outlook for 2009" for discussion of forward looking trends regarding the United Kingdom segment.

---

N/M = Not meaningful

(1)

52-weeks reflected in 2008 and 2007 versus 53-weeks included in 2006.

(2)

Volumes represent net sales of owned brands, joint venture brands and exclude factored brand net sales volumes.

(3)

Interest income is earned on trade loans to U.K. on-premise customers and is typically driven by note receivable balances outstanding from period-to-period.

Foreign currency impact on results

        Our United Kingdom segment results were negatively affected by an 8% year-over-year decrease in the value of the British Pound Sterling ("GBP") against the USD in 2008. In 2007, the GBP strengthened versus the USD resulting in an 8% appreciation impact to USD earnings before income taxes over 2006.

Volume and net sales

        Our United Kingdom segment owned-brand volumes decreased 4% in 2008 versus 2007, reflecting poor summer weather, continuing effects from smoking bans in the first half of 2008, and a weakening economy in the U.K.

        Our United Kingdom segment net revenue per barrel in local currency increased by 4% in 2008, with approximately 2% of this change related to non-owned factored brands that we deliver to retail, and our contract brewing arrangements which began mid-year. Comparable U.K. owned-brand net revenue per barrel in local currency increased by 4% in the year, due mainly to improved pricing in both the on-premise and the off-premise channels, along with favorable brand mix.

        Our United Kingdom segment owned-brand volumes decreased in 2007 on a 52 week versus 53 week basis. After excluding the 53^rd week, volume decreased 6% due to an extended period of unusually rainy and cool weather conditions throughout the summer in 2007, and the impact of the enacted smoking bans on the U.K. on-premise channel beer market in the second half of 2007.

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        Our United Kingdom segment net revenue per barrel in local currency increased by 5% in 2007, with approximately 3% of this change related to non-owned factored brands that we deliver to retail. In particular, we acquired the Camerons on-premise distribution business early in the third quarter. The addition of this business will raise our Europe net sales per barrel and cost of goods per barrel several percentage points for the next year, due to a step-up in our factored brand sales. U.K. owned-brand net revenue per barrel in local currency increased nearly 3% in the year, due mainly to pricing improvements predominantly in the on-premise channel.

Cost of goods sold

        Cost of goods sold per barrel in local currency increased by 4% in the year, with approximately 2% of this change related to factored brand sales, and contract brewing sales. Comparable cost of goods sold for our U.K. owned brands increased about 6% per barrel in local currency, driven by input cost inflation, higher pension costs, and the impact of spreading fixed costs over lower sales volume, partly offset by cost savings.

        Cost of goods sold per barrel in local currency increased by 5% in 2007, with approximately 4% of this change related to factored brand sales, including Camerons. Cost of goods sold for our U.K. owned brands increased about 1% per barrel in local currency, driven by input cost inflation and the impact of spreading fixed costs over lower sales volume, partly offset by cost savings.

Marketing, general and administrative expenses

        Marketing, general and administrative expenses in the U.K. were relatively flat compared to 2007 in local currency. Marketing spending decreased by approximately 9% as management took action to reduce spending in line with the trading environment. General and administrative costs increased 6% compared to 2007 predominantly due to higher bad debt and pension charges.

        In 2007, marketing, general and administrative expenses in the U.K. decreased approximately 3% in local currency. Marketing spending increased 2% due to the continued roll-out of our new advertising campaigns for Carling, C2, and re-launching Coors Light. General and administrative costs decreased 6% compared to 2006 due to cost reduction programs.

Special items, net

        We recognized a net special credit of $4.5 million in 2008 and $14.1 million of special charges 2007. The 2008 items were predominately employee termination costs associated with the U.K. supply chain and back office restructuring efforts offset by a one-time gain on the sale of non core business assets of $2.7 million and a one time pension gain of $10.4 million due to the cessation of employee service credit to its defined benefit pension plan. The 2007 items are noted below. See Part II—Financial Statements and Supplementary Data, Item 8 Note 8 "SPECIAL ITEMS, NET" to the Consolidated Financial Statements for further discussion.

        We recognized $14.1 million and $7.8 million of special charges in 2007 and 2006, respectively. The 2007 items were predominately employee termination costs associated with the U.K. supply chain and back office restructuring efforts and an increased pension liability in recognition of our existing pension benefit in accordance with U.K. law. The 2006 items were also a result of charges recognized as part of restructuring the supply chain operation and back office organization, partly offset by a pension curtailment gain due to the reduction in our workforce. See Part II—Financial Statements and Supplementary Data, Item 8 Note 8 "SPECIAL ITEMS, NET" to the Consolidated Financial Statements for further discussion.

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Other (expense) income, net

        We incurred net other expense of $4.2 million and $0.1 in 2008 and 2007, respectively. The increase noted is due to profit from our distribution joint venture, Tradeteam, being included in other income in 2007, but reclassified to cost of goods sold in 2008.

        We incurred net other expense of $0.1 million in 2007 as compared to a net other income of $4.8 million for 2006. The decrease noted is due to a non-recurring gain recognized on a sale of a surplus property in 2006, partly offset by improved year-over-year profit performance by our distribution joint venture, Tradeteam.

Interest income

        Interest income is earned on trade loans to U.K. on-premise customers. Interest income in local currency versus the prior years was flat in 2008 and decreased by 2% in 2007. The year over year change for 2007 and 2006 is also a result of lower loan balances when compared to the prior year.

Global Markets and Corporate

        Global Markets includes results of operations in developing markets around the world, including Asia, Mexico, the Caribbean (not including Puerto Rico) and continental Europe. 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.

Global Markeets and Corporate

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N/M = Not meaningful

(1)

52-weeks reflected in 2008 and 2007 versus 53-weeks included in 2006.

(2)

Volumes represent net sales of owned brands, joint venture brands and exclude factored brand net sales volumes.

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Volume, net sales and cost of goods sold

        Volume, net sales and cost of goods sold reflect our operations in Asia, continental Europe, Mexico and the Caribbean (excluding Puerto Rico) and represent our initiatives to grow and expand our business and brand portfolios in global development markets.

Marketing, general and administrative expenses

        Marketing, general and administrative expenses in 2008 were $137.7 million, down $6.9 million from 2007. This decrease was largely attributed to transfers of allocable costs to the operating segments from the corporate center, lower legal fees and reduced severance fees partially offset by increased incentive compensation.

        Marketing, general and administrative expenses in 2007 were $144.6 million, down $8.9 million from 2006. This decrease was largely attributed to transfers of allocable costs to the operating segments from the corporate center, lower legal fees and reduced severance fees partially offset by increased incentive pay resulting from improved operating performance over prior year.

Special items, net

        The $58.2 million of special items in 2008 were a result of $28.8 million of deal costs and integration planning costs associated with the formation of MillerCoors. We also recognized $22.8 million of transition costs paid to our third-party vendor associated with the start-up of our outsourced administrative functions. Last, we incurred $6.6 million associated with other strategic initiatives. See Part II—Financial Statements and Supplementary Data, Item 8 Note 8 "SPECIAL ITEMS, NET" to the Consolidated Financial Statements for further discussion.

        The $13.4 million of special items in 2007 were a result of costs incurred associated with the proposed MillerCoors joint venture, and consist primarily of outside professional services. The special benefit of $4.0 million for 2006 was a result of $5.3 million adjustment to the floor provided on the exercise price of stock options held by former Coors officers who left the Company under change in control agreements following the Merger, partially offset by costs incurred in closing our sales operations in Russia. We did not recognize a charge related to the floor provided on the exercise price of the stock options as the stock price exceeded the floor price in 2008 and 2007. See Part II—Financial Statements and Supplementary Data, Item 8 Note 8 "SPECIAL ITEMS, NET" to the Consolidated Financial Statements for further discussion.

Interest expense, net

        Net interest expense totaled $96.7 million for 2008, $14.7 million lower than the prior year. The decrease was primarily a result of lower average net debt levels outstanding. We also recognized a $12.4 million charge as a result of the debt extinguishment costs during 2008. See Part II—Financial Statements and Supplementary Data, Item 8 Note 13 "DEBT AND CREDIT ARRANGEMENTS" to the Consolidated Financial Statements for further discussion.

        Net interest expense totaled $111.3 million for 2007, $27.1 million lower than the prior year. The decrease was primarily a result of lower average net debt levels outstanding. We also recognized a $24.5 million charge as a result of the debt extinguishment costs during 2007. See Part II—Financial Statements and Supplementary Data, Item 8 Note 13 "DEBT AND CREDIT ARRANGEMENTS" to the Consolidated Financial Statements for further discussion.

Other income (expense), net

        Other expense, net in 2008 increased from 2007 due to greater foreign currency exchange losses throughout the current year. Other expense, net in 2007 increased from 2006 due to greater foreign currency exchange losses throughout the current year.

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Liquidity and Capital Resources

        Our primary sources of liquidity are provided by operating activities, external borrowings and asset monetizations. As of December 28, 2008, and December 30, 2007, we had net working capital of $121.0 million and $41.3 million, respectively. We commonly operate at a low level of working capital or working capital deficits given the relatively quick turnover of our receivables and inventory. We had total cash and cash equivalents of $216.2 million at December 28, 2008, compared to $377.0 million at December 30, 2007. Long-term debt was $1,831.7 million and $2,260.6 million at December 28, 2008, and December 30, 2007, respectively. Debt as of the end of 2008 consisted primarily of notes with longer-term maturities. We believe that cash flows from operations, including distributions from MillerCoors, and cash provided by short-term borrowings, when necessary, will be more than adequate to meet our ongoing operating requirements, scheduled principal and interest payments on debt, dividend payments and anticipated capital expenditures. Our business generates positive operating cash flow, and our debt maturities are of a longer-term nature. As a result, we believe the current unstable state of the financial and credit markets will not significantly impact our liquidity in the near term. However, our liquidity could be impacted significantly by a decrease in demand for our products, which could arise from competitive circumstances, a downturn in consumer spending, a decline in the acceptability of alcohol beverages or any of the other factors we describe in Item 1A. "Risk Factors."

Operating Activities

        Net cash provided by operating activities of $411.5 million for the 52 weeks ended December 28, 2008, was lower by $204.5 million from the 52-week period ending December 30, 2007. Our 2008 operating cash flow and related comparisons to 2007 were influenced by a number of discrete factors.

•

Contributions to defined benefit pension plans (excluding MillerCoors' contributions in the second half of 2008) were higher in 2008 versus 2007 by $25.9 million, the impact of which is represented in changes in other assets and other liabilities. We made a $100 million contribution to the U.K. pension plan near the end of the year, making contributions to the U.K. plan higher in 2008 by $95.8 million when compared with 2007. Contributions to plans in Canada were higher by $4.0 million, offset by lower contributions to U.S. plans of $73.9 million (again, excluding MillerCoors contributions in the second half of 2008). There was a discretionary $50.0 million contribution to the U.S. plan in 2007.



•

Cash outflows paid by our U.S. business (prior to formation of MillerCoors) and our corporate group related to the formation of MillerCoors were higher by $59.5 million in 2008 than in 2007, the impact of which is represented in changes in other assets and other liabilities. These costs included employee retention costs, deal costs, and integration planning costs.



•

We paid approximately $40 million in employee withholding taxes during 2008 with the vesting of performance share units ("PSUs"). We withheld shares from employees, allowing them to satisfy their withholding obligation, which was a non-cash activity. However, cash was paid to the taxing authorities by the Company to satisfy the employees' obligation, which reduced operating cash flow. There was no comparable event in 2007.



•

Offsetting these items was the 2007 final contribution to the Memphis employees' multiemployer pension plan of $27.6 million, an outflow that did not occur in 2008.



•

Distributions from MillerCoors for the six months ended December 31, 2008, were $136.5 million. With regard to MillerCoors, there were several items which directly impacted the level of cash distributions received in the last half of 2008:



•

MillerCoors placed approximately $170.0 million on deposit with aluminum suppliers and derivative counterparties due to collateral requirements related to an unfavorable fixed price contract and derivative positions related to aluminum hedging and other price risk mitigation programs. Our 42% portion of the collateral amount is $71.4 million. (These

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amounts effectively amount to prepayments of amounts that could be due over the next one to three years if aluminum and other commodity prices stay at their currently low levels.)

•

MillerCoors incurred severance restructuring and integration costs of $38.7 million in the last half of 2008, our 42% portion of which is $16.3 million. These costs are necessary to attain the synergies of the MillerCoors combination. In addition, MillerCoors incurred approximately $70.0 million of capital expenditures related specifically to synergy attainment, our 42% portion of which is $29.4 million. MillerCoors also incurred baseline capital expenditures not related specifically to synergy attainment.



•

MillerCoors contributed $71 million to defined benefit pension plans in the last half of 2008, our 42% portion of which is $29.8 million.

        Net cash provided by operating activities of $616.0 million for the 52 weeks ended December 30, 2007, was lower by $217.2 million from the 53-week period ending December 31, 2006. Net income was higher by $136.2 million in 2007 versus 2006, the reasons for which are discussed in detail in the Results of Operations discussion in this section. However, various non-cash components of net income resulted in a lower amount of our expenses in 2007 versus 2006 by $135.4 million. Therefore, net income adjusted for its various non-cash components was effectively flat year over year. These non-cash components consisted of depreciation and amortization (lower in 2007 by $92.5 million), amortization of debt costs, share-based compensation and related tax benefits, gains and losses on sales of assets, impairment losses on long-lived assets, and deferred taxes. The lower operating cash flows in 2007 were therefore due primarily to cash movements associated with working capital and other assets and liabilities. Specifically, collections on accounts receivable were lower in 2007 due primarily to lower collections in the U.K., where the 53-week year in 2006 resulted in an extra week of collections in that year. Cash paid for inventories was higher in 2007 as our Canada segment increased finished goods and packaging materials inventories in anticipation of an expansion of business in western Canada as a result of a new joint venture agreement with Modelo. Cash outflows associated with accrued expenses and other liabilities were greater in 2007 versus 2006 due to higher defined benefit pension contributions of $47.6 million, a one-time payment to a non-employer pension plan associated with our former Memphis, Tennessee, brewery of $27.6 million, and higher cash taxes of $39.2 million. Offsetting these items was lower cash paid for interest of $28.1 million.

        We expect that 2009 operating cash flows will continue to be challenged by a difficult operating environment, and MillerCoors continuing investments as part of their $500 million synergy generation initiatives. Also, our indemnity obligations to FEMSA related to our discontinued business in Brazil represent an ongoing risk due to the uncertain nature of those obligations. Offsetting these risks is a positive pricing environment in nearly all of our markets early in 2009, and the expectation that MillerCoors will begin delivering substantial cost synergies in 2009.

Investing Activities

        Net cash used in investing activities of $269.5 million for the year ended December 28, 2008 was lower by $169.6 million compared to 2007. The primary reason for the variance between years was lower additions to properties in 2008. Higher additions in 2007 were related to the completion of the build-out and conversion of CBC's Shenandoah, Virginia facility from a packaging facility to a full brewery and packaging facility. The Shenandoah facility was contributed to MillerCoors in 2008 along with CBC's other assets and liabilities. 2007 additions also included CBL's $90.0 million expenditure for the purchase of kegs in the U.K. from our former third party logistics service provider. Investing activities were also favorable by $45.6 million due to purchases in 2007 and subsequent sales in 2008 of investment securities. We also purchased a U.K. wholesaler business for $26.7 million in 2007, with no comparable purchases in 2008. 2008 outflows included $84.3 million of cash contributed to MillerCoors at its initial formation.

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        Net cash used in investing activities of $439.1 million for the year ended December 30, 2007 was higher by $144.3 million compared to 2006. The primary reason for the variance between years was lower cash inflows associated with sales of assets and businesses. In 2007, these proceeds totaled approximately $38.1 million, with the largest proceeds associated with the sale of our investment in the House of Blues Canada business, which resulted in $30.0 million of proceeds. However, in 2006, we collected $145.1 million of proceeds; specifically, we collected $79.5 million from the sale of the Kaiser business in Brazil, $36.5 million from the sale of our preferred equity interests in the Montréal Canadiens hockey club, and $29.1 million from various other sales. In 2007, we spent $26.7 million to acquire an on-premise distribution business in the U.K., while we had no business acquisitions in 2006, and invested $22.8 million in short-term investments, versus no such investments in 2006. Partially offsetting these items in 2007 versus 2006, additions to properties and intangible assets were lower by $18.0 million due primarily to higher capital additions in 2006 associated with the build-out of the Shenandoah brewery in the U.S., offset by CBL's large purchase of kegs in April 2007 of $90.0 million.

Financing Activities

        Our debt position significantly affects our financing activity. See Part II—Financial Statements and Supplementary Data, Item 8 Note 13 "DEBT AND CREDIT ARRANGEMENTS" to the Consolidated Financial Statements for a summary of our debt position at December 28, 2008 and December 30, 2007.

        Net cash used in financing activities totaled $266.9 million in 2008, compared to net cash provided of $8.4 million during 2007, an unfavorable variance of $275.3 million. We collected $150.5 million less in proceeds from employee exercises of stock options in 2008 versus 2007. During 2008, we repaid $181.3 million of long-term notes through early retirement. During 2007, our primary activities involved refinancing a significant portion of our debt portfolio by issuing $575.0 million in convertible notes, while repaying $625.0 million of our previously existing senior notes. We also spent a net $49.7 million for the purchase of a note hedge and sale of warrants associated with the convertible notes and $10.2 million for costs directly associated with the convertible notes offering.

        Net cash provided by financing activities totaled $8.4 million in 2007, compared to net cash used of $401.2 million during 2006, a favorable variance of $409.7 million. We collected $126.2 million more in proceeds from employee exercises of stock options in 2007 versus 2006. Debt-related cash flows during 2007 were discussed above. During 2006, most of our activity associated with debt obligations was associated with repayments, which totaled $355.4 million.

Capital Resources

        See Part II—Financial Statements and Supplementary Data, Item 8 Note 13 "DEBT AND CREDIT ARRANGEMENTS" to the Consolidated Financial Statements for a complete discussion and presentation of all borrowings and available sources of borrowing, including lines of credit. As discussed in the Financing Activities section above, during the second quarter of 2007, we issued $575.0 million of senior convertible notes, with a coupon rate of interest of 2.5%. In the third quarter of 2007, we used the proceeds of the convertible notes issuance, combined with other sources of cash, to retire $625.0 million of 6.375% senior notes due 2012 and fund additional related charges as noted above. On February 7, 2008, we announced a tender for and repurchase of any and all principal amount of our remaining 6.375% $225 million Senior Notes due 2012, with the tender period running through February 14, 2008. The amount actually repurchased was $180.4 million. The net costs of $12.4 million related to this extinguishment of debt and termination of related interest rate swaps was recorded in the first quarter of 2008. The debt extinguishment was funded by existing cash resources.

        The vast majority of our remaining debt borrowings as of December 28, 2008, consisted of publicly traded notes totaling $1.7 billion principal amount, with maturities ranging from 2010 to 2015. Our remaining debt other than the notes consists of various notes payable of $176.0 million at consolidated

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joint ventures, which mature in 2011. We maintain a $750 million revolving multi-currency bank credit facility to manage short-term liquidity requirements through periods of lower operating cash flow. There were no outstanding borrowings under this financing vehicle as of December 28, 2008. We maintained a $500 million commercial paper program through 2008 and in prior years. We had not borrowed under the commercial paper program since 2006. In consideration of the costs to maintain the program, as well as the relatively high interest costs that would be incurred should we borrow under the program given our credit rating standings and the current financial credit markets, we anticipate that we will close our commercial paper program in February 2009.

        While the start-up of MillerCoors entails potential demands for capital for integration and restructuring efforts, we will need to consider different alternatives for the use of cash generated from operations. We expect to take a balanced approach to our alternatives in 2009 and beyond, which could include pension plan funding elections, dividend increases, stock repurchases, reinvesting cash into our existing businesses and preserving cash flexibility for potential strategic investments. Any repurchases of MCBC stock on the open market would require a board-approved plan, which does not currently exist.

        Credit markets in the United States and across the globe are currently unstable due to the recent financial crisis. Based on communications with lenders that are party to our $750 million committed credit facility, we have no indication of any issues with our ability to draw on such credit facility if the need arose. We currently have no borrowings outstanding under this facility.

Credit Rating

        On July 3, 2008, Moody's affirmed our Baa2/Prime2 ratings and changed the outlook to positive from developing, following the formation of MillerCoors. Our long-term credit rating with Standard and Poor's is BBB. On February 11, 2009, Standard and Poor's announced it had placed MCBC on credit watch with negative implications. Standard and Poor's indicated that if any downgrade were to occur, it would be limited to one notch (BBB-), which is still "investment grade," but only one notch above "below investment grade." Any future downgrade to "below investment grade" would increase borrowing costs under our revolving line of credit (under which there were no borrowings as of December 28, 2008), and trigger certain collateral requirements on out-of-the money derivative liabilities, as discussed in Part II—Financial Statements and Supplementary Data, Item 8 Note 18 "DERIVATIVE INSTRUMENTS" to the Consolidated Financial Statements.

MillerCoors

        MillerCoors distributes its excess cash to its owners, SABMiller and MCBC, on a 58%/42% basis, respectively. MillerCoors does not carry significant debt obligations, and there are no restrictions from external sources on its ability to make cash distributions to its owners. However, we expect that our 2009 operating cash flows and investing cash flows will be unfavorably impacted by MillerCoors' internal cash flow requirements. We anticipate that MillerCoors will spend approximately $170 million in 2009 related to restructuring and integration costs, and capital spending, to capture synergies. Also, MillerCoors' contributions to its defined benefit pension plans are expected to be $100-$140 million in 2009.

Capital Expenditures

        In 2008, we spent $230.5 million (including approximately $21.4 million spent at consolidated joint ventures) on capital improvement projects worldwide. Of this, approximately 38% was in support of the U.K. segment, with the remainder split between the U.S. first half of 2008 (24%), Canada (32%) and Global Markets and Corporate (6%). The capital expenditure plan for 2009 is expected to be approximately $140 million, excluding MillerCoors and our consolidated joint ventures.

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Contractual Obligations and Commercial Commitments

Contractual Cash Obligations as of December 28, 2008

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(1)

Refer to debt schedule in Part II—Financial Statements and Supplementary Data, Item 8 Note 13 "DEBT AND CREDIT ARRANGEMENTS" to the Consolidated Financial Statements.

(2)

The "interest payments" line includes interest on our bonds and other borrowings outstanding at December 28, 2008, excluding the cash flow impacts of any interest rate or cross currency swaps. Current floating interest rates and currency exchange rates are assumed to be constant throughout the periods presented. The "derivative payments" line includes the floating rate payment obligations, which are paid to counterparties under our interest rate and cross currency swap agreements, £530 million ($773 million at December 28, 2008 exchange rates) payment due the cross currency swap counterparty in 2012, CAD$1,201 million ($983 million at December 28, 2008 exchange rates) payment due the cross currency swap counterparty in 2012, CAD $355 million ($291 million at December 28, 2008 exchange rates) payment due the cross currency swap counterparty in 2010, and CAD $100 million ($82 million at December 28, 2008 exchange rates) payment due the cross currency swap counterparty in 20011. Current floating interest rates and currency exchange rates are assumed to be constant throughout the periods presented. We anticipate receiving a total of $2,315 million in fixed and floating rate payments from our counterparties under the swap arrangements, which offset the payments included in the table. As interest rates increase, payments to or receipts from our counterparties will also increase.

(3)

Represents expected contributions under our defined benefit pension plans in the next twelve months and our benefits payments under retiree medical plans for all periods presented.

(4)

Approximately $447 million of the total other long-term obligations relate to long-term supply contracts with third parties to purchase raw material and energy used in production. Approximately $1,236 million relates to commitments associated with Tradeteam in the United Kingdom. The remaining amounts relate to sales and marketing, information technology services, open purchase orders and other commitments.

        Not included in these contractual cash obligations are $230.4 million of unrecognized tax benefits and $124.8 million of indemnities provided to FEMSA for which we are unable to make estimates for timing of any related cash payments.

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Other Commercial Commitments as of December 28, 2008

Advertising and Promotions

        As of December 28, 2008, our aggregate commitments for advertising and promotions, including marketing at sports arenas, stadiums and other venues and events, total approximately $281 million over the next five years and thereafter. Our advertising and promotions commitments are included in other long-term obligations in the contractual cash obligations table above.

Pension Plans

        Our consolidated, unfunded pension position at the end of 2008 was approximately $319 million, an increase of $144 million from the end of 2007. Our unfunded position in the U.K. increased from $91.3 million at the end of the 2007 to $222.9 million at the end of 2008, despite employer contributions of $127.5 million, actuarial gains to the discounted benefit obligation of $167.1 million (due mainly to a higher discount rate in 2008), and a $98.5 million reduction to the net liability as a result of foreign exchange translation (GBP weakened versus the USD during 2008). Offsetting these items was a $371.0 million loss on plan assets. Our unfunded position in Canada increased from $63.6 million to $89.2 million, despite $100.4 million of employer contributions, actuarial gains to the discounted benefit obligation of $197.1 million (due mainly to a higher discount rate in 2008), and a $25.6 million reduction to the net liability as a result of foreign exchange translation (CAD weakened versus the USD during 2008). Offsetting these items was a $194.5 million loss on plan assets. Our contribution of the CBC pension plan to MillerCoors had little impact because it was largely funded at the end of 2007. The decline in the market value of the plans' assets was the result of the global financial and economic crisis in late 2008. Approximately $29.6 million of the underfunded pension position at the end of 2008 was the responsibility of the minority owners of BRI. See Part II—Financial Statements and Supplementary Data, Item 8 Note 16 "EMPLOYEE RETIREMENT PLANS" to the Consolidated Financial Statements for more detail on the funded status of these plans.

        We fund pension plans to meet the requirements set forth in applicable employee benefits laws. Sometimes we voluntarily increase funding levels to meet expense and asset return forecasts in any given year. Pension contributions on a consolidated basis were $228.6 million in 2008, which include a discretionary $100 million contribution in the United Kingdom. MillerCoors contributed $71 million to its pension plans in the last half of 2008. We anticipate making approximately $69.4 million (including approximately $20.8 million at consolidated joint ventures) of both statutory and voluntary contributions to our pension plans in 2009. We have taken numerous steps in recent years to reduce our exposure to these long-term obligations, including the closure of the U.K. pension plan to future earning of service credit in late 2008. However, the cash requirements of these plans, and their dependence upon the global financial markets for their financial health, will continue to require potentially significant amounts of cash funding.

Postretirement Benefit Plans

        Our consolidated, unfunded postretirement benefit position at the end of 2008 was approximately $210.2 million, a decrease of $259.8 million from the end of 2007. Benefits paid under our postretirement benefit plans were approximately $17.6 million in 2008 and $24.5 million in 2007. The largest component of this decrease was the contribution of the U.S. plan to MillerCoors, which had $146.3 million unfunded position when contributed. Actuarial gains due to higher discount rates and

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liability reductions due to foreign exchange translation accounted for the remainder of the decrease. Under our postretirement benefit plans, we expect payments of approximately $9.1 million in 2009. See Part II—Financial Statements and Supplementary Data, Item 8 Note 17 "POSTRETIREMENT BENEFITS" to the Consolidated Financial Statements for more detail on these plans.

Contingencies

        In the ordinary course of business or in the course of the sale of a business, we enter into contractual arrangements under which we may agree to indemnify third-parties from any losses or guarantees incurred relating to pre-existing conditions for losses or guarantees arising from certain events as defined within the particular contract, which may include, for example, litigation or claims relating to past performance. Such indemnification obligations may not be subject to maximum loss clauses. See Part II—Financial Statements and Supplementary Data, Item 8 Note 20 "COMMITMENTS AND CONTINGENCIES" to the Consolidated Financial Statements under the captions "Environmental," "Indemnity Obligations—Sale of Kaiser" and See Part II—Financial Statements and Supplementary Data, Item 8 Note 3 "EQUITY INVESTMENTS" to the Consolidated Financial Statements under the caption "Montréal Canadiens."

MillerCoors-Sparks

        Sparks, a MillerCoors brand, is a leading product in the caffeinated alcohol beverages category. During 2008, a task force of the National Association of Attorneys General, the umbrella organization for the states' attorneys general in the U.S., had expressed concern about this category and product (collectively, the "AGs' Investigations"). In December 2008, MillerCoors reached an agreement with the AGs to reformulate the Sparks products to remove all caffeine, guarana, ginseng and taurine. In addition, with limited exceptions, MillerCoors agreed to not produce any additional products containing caffeine or guarana, and also made certain changes to its marketing to reflect concerns raised by the AGs. MillerCoors also agreed to pay $0.6 million for the costs of the AGs' Investigations.

        In September 2008, a public interest litigation group filed suit against MillerCoors in a local court in the District of Columbia, alleging that Sparks is an "adulterated product" because it contains caffeine and other ingredients that the group claims have not been determined by the U.S. Food & Drug Administration (FDA) to be generally recognized as safe for use in alcoholic beverages (D.C. Superior Court No. 2008 CA 6605). Because of the above-referenced AG agreement, MillerCoors is confident that this lawsuit will be dismissed.

Off-Balance Sheet Arrangements

        As of December 28, 2008, we did not have any material off-balance sheet arrangements (as defined in Item 303(a)(4)(ii) of Regulation S-K).

Outlook for 2009

        We will continue our focus on being a world-class, brand-led Company. We will promote our strategic brands by investing in the "front end" of our business—our marketing and sales activities. We will do so with a complete commitment to corporate social responsibility.

        In 2009, we will continue to focus on building strong brands, reducing costs in each of our businesses, and generating cash.

•

In Canada, as with our other global markets, we will balance the priorities of price and volume, with a bias to invest in and grow our brands. Price discounting activity has continued, especially in the Québec off-premise channel, which has hurt our volume trends. Recent price increases across the major Canadian provinces have offset some of the impact of competitive discounting. We will remain focused on balancing our strategic volume priorities and building the equity of

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our brands, while ensuring that we continue to be price competitive on a market-by-market basis. Also, late in 2008, Blue Moon production was moved from our Montréal brewery to MillerCoors, and we have taken action to reduce staffing levels and other costs to offset the negative financial impact of lower production levels.

•

In the U.S., MillerCoors will continue working to deliver upon the $500 million synergy commitment, while maintaining the strong momentum of the MillerCoors strategic brands.



•

In the U.K., we anticipate a challenging trading environment to continue in 2009 due to the weak local economy. Commodity inflation will also be a challenge in 2009. Nonetheless, we believe that our U.K. business is now on a firmer footing as it benefits from our new contract brewing arrangement, the Magners cider agreement, and recent supplier renegotiations. Moreover, our brand strength has consistently supported positive pricing, and we increased prices effective the first quarter of 2009.

        Regarding costs, our management teams continue to exceed their goals for reducing costs in each business. The current inflationary environment presents a significant challenge for us to overcome by continuing to drive pricing and cost savings across many areas of our business.

•

Looking to the final year of the RFG program, we are confident that we can achieve our three-year RFG goal of $250 million. These savings will be incremental to the $500 million anticipated MillerCoors cost synergies.



•

In Canada, we expect our comparable 2009 cost of goods sold per barrel in local currency to increase at a low-single-digit rate versus 2008 due to continued inflationary pressures, partially offset by anticipated reductions in certain commodity and fuel inflation rates in 2009, along with continued delivery of our RFG savings inititives.



•

MillerCoors plans to deliver approximately $128 million of its cost synergies in the first half of 2009. By the end of calendar 2009, MillerCoors expects to achieve a total of $238 million in synergies, surpassing MillerCoors' original forecast of $225 million. This does not reflect a change in the original $500 million, three-year program, but rather an acceleration in the delivery of those synergies.



•

Our U.K. team is targeting substantial savings as part of the RFG program, driven by supplier negotiations and operational efficiencies. In a challenging industry volume environment, our preliminary view for 2009 is that U.K. owned-brand cost of goods will increase at a low-double-digit rate per barrel in local currency, driven by mid-single-digit inflation and production mix changes, which are related to relative growth in contract brewing, Magners cider, and off-premise sales. Most of these mix changes also increase net sales per barrel and are broadly neutral to gross margin.

        Finally, with regard to foreign currency impacts, if the Canadian Dollar and British Pound remain consistent relative to the U.S. Dollar, we may face substantial currency translation impacts in the first three quarters of 2009 when compared with the 2008 actual results for those periods:

•

At 2008 year end rates, Canadian Dollar devaluation would negatively impact our Canada pretax earnings by approximately 15% to 20% over prior-year pretax earnings in each of the first three quarters of 2009, with minimal impact in the 4th quarter. We anticipate our debt structure and currency hedging programs would offset about 50% to 60% of this foreign currency translation impact in 2009.



•

British Pound devaluation would negatively impact our U.K. pretax earnings by about 25% to 30% in the second and third quarters of the year, with a 10% impact in the fourth quarter. Our U.K. business generally reports a small loss in the first quarter, so currency effects are minimized. We have no significant currency hedges focused on British Pound exposures.

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        Beginning in the first quarter of 2009, we expect to deconsolidate Brewers Retail Inc. ("BRI"), which operates the Ontario beer stores. BRI is a variable interest entity, and until now we have held a majority of the variable interests in it, requiring its consolidation. Since our variable interests are based on market share and usage levels of BRI's services, another variable interest holder's acquisition activity has caused our variable interests to decrease, causing us to no longer be the primary beneficiary. Upon deconsolidation we will account for BRI using the equity method of accounting. This change will decrease Canada pretax income and decrease Corporate interest expense a similar amount, resulting in no significant impact on consolidated results of operations. In 2008, we reported approximately $10 million related to BRI pretax income and interest expense. Upon adoption of FASB issued Financial Accounting Standards No. 160, "Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51" ("SFAS 160"), we may record a one-time gain or loss related to deconsolidation of BRI as we apply fair value accounting to the deconsolidation of this entity.

Global Markets and Corporate

        We forecast full-year 2009 global markets and corporate general and administrative expense of approximately $150 million, plus or minus 5%.

Interest

        We anticipate 2009 corporate net interest expense of approximately $90 million at December 28, 2008 foreign exchange rates, excluding U.K. trade loan interest income.

Tax

        Our tax rate is volatile and may move up or down with changes in, among other things, the amount and source of income or loss, our ability to utilize foreign tax credits, changes in tax laws, and the movement of liabilities established pursuant to FIN 48 for uncertain tax positions as statute of limitations expire or positions are otherwise effectively settled. During 2009, the Company expects to recognize a $50 to $60 million income tax benefit due to a reduction in unrecognized tax benefits. This income tax benefit is primarily due to penalties and interest associated with issues subject to audits that we believe are going to close in the next year. As a result, we anticipate that our 2009 effective tax rate on income will be in the range of 16% to 20%. We note, however, that there are other pending tax law changes in Canada that, if enacted, would result in an approximate $100 million additional decrease to unrecognized tax benefit liabilities. This one-time, non-cash income tax benefit would be recognized in the quarter in which the bill is enacted. In addition, there are other pending law changes in the U.S., U.K., and Canada that, if enacted, could have an impact on our effective tax rate.

Critical Accounting Policies and Estimates

        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 U.S. 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.

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Pension and Postretirement Benefits

        We have defined benefit plans that cover the majority of our employees in Canada and the United Kingdom. We also have postretirement welfare plans in Canada and the United States 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 87") and Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other than Pensions" ("SFAS 106") and SFAS No. 158 "Employers' Accounting for Defined Benefit Pension and Other Postretirement Benefits—an amendment of FASB Statements No. 87, 88, 106, and 132(R)." 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.

        At the end of each fiscal year, we perform an analysis of high quality corporate bonds and compare the results to appropriate indices and industry trends to support the discount rates used in determining our pension liabilities in Canada. We reference a published bond index rate whose duration reflects our obligations in determining our discount rate with respect to U.K. pension liabilities. 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 50 basis point change in certain assumptions made at the beginning of 2008 would have had the following effects on 2008 pension expense:

        Certain components of pension and postretirement benefits expense are impacted by methodologies that normalize, or "smooth," changes to the funded status of the liabilities with respect to their recognition in the income statement. We employ two primary methodologies in this respect: the "market-related value" approach for assets valuation and the "corridor approach" for amortizing actuarial gains and losses.

•

Our expected return on assets percentage factor is not applied to the actual market value of assets as of the end of the preceding year in determining that component of pension expense; rather it is applied to the "market-related value," which employs an asset smoothing approach to the asset pools. While employer contributions and realized gains and losses (such as dividends received or gains and losses on sales of assets) are reflected immediately in the "market-related value" of assets, unrealized gains and losses are amortized into the "market-related value" over five years. Therefore, only 20% of the significant unrealized losses in asset values experienced in the later part of 2008 will enter into "market-related value" asset pools upon which 2009

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expected return on plan assets (a component of pension expense) will be calculated. However, those losses continue to be amortized into the "market-related value" pools of assets through 2013. Therefore, if asset values do not recover or recover more slowly than they declined, future years' pension expense will continue to be impacted by the losses experienced in late 2008.

•

Our pension and postretirement plans expense is also influenced by the amortization (or non-amortization) of gains and losses. Gains and losses occur when actual experience differs from estimates and assumptions with regard to asset returns, discount rates and other estimates related to plan participants, such as turnover, mortality and rate of salary increases.

Such gains and losses impact the funded status of our plans when they are measured, with an offset in other comprehensive income, thereby deferring their recognition in the income statement. We employ a "corridor" approach for determining the potential amortization of these gains and losses as a component of pension and postretirement plans' expense. To the extent gains and losses are greater than a set threshold or "outside the corridor," the difference is amortized over the remaining working life of the plan's participants. If a plan has been closed, such as our U.K. Plan as of April 1, 2009, the remaining life of all plan participants (including retirees) is used for the amortization period. The corridor is defined as the greater of 10% of a plan's projected benefit obligation or 10% of a plan's assets.

The "market-related value" approach for asset impacts the amortization of gains and losses because any one year's plan assets' gains or losses are amortized over a five year period (20% per year) when determining the gains and losses to be compared to the 10% corridor. Similar to the impact on expected return on plan assets discussed above, this may result in significant movements in pension expense for several years following a significant loss or gain, such as the loss we experienced in 2008 due to the global financial crisis.

Additionally, increases in discount rates, such as we experienced in 2008, created gains in our plans, which offset asset losses within the corridor. As a result, we will reflect little if any amortization of gains or losses in 2009 pension expense for the U.K. and Canada plans because their relevant gains and losses are inside the corridor. However, the significant asset losses from late 2008 will continue to enter into the calculation of gains and losses to be compared against the corridor through 2013. To the extent that asset values do not recover, or do not recover as rapidly as they declined, this factor creates risk of higher pension expense in future years due to the potential amortization of losses.

The table above demonstrates the potential impact of the amortization of gains and losses, specifically with regard to the last line showing the hypothetical impact on 2008 pension expense of a 50 basis point decrease the U.K. plan's discount rate. Had the discount rate chosen for the U.K. plan at the end of 2007 been 5.5% instead of 6.0%, the U.K. plan's losses would have exceeded the corridor and higher pension expense for 2008 in the amount of $12.8 million would have been recognized due the amortization of a portion of those losses.

        MillerCoors also employs a corridor approach with regard to amortizing gains and losses present in their pension and postretirement plans. However, MillerCoors uses the "market value" approach to determine plan asset gains and losses to be compared to the corridor, meaning there is no smoothing of those asset gains and losses over five years. As a result, MillerCoors pension expense is subject to additional volatility when compared to MCBC's plan. As a result, their 2009 pension expense will be significantly higher than 2008 pension expense, unfavorably impacting our equity method income in 2009 from MillerCoors.

        See Part II—Financial Statements and Supplementary Data, Item 8 Note 16 "EMPLOYEE RETIREMENT PLANS" and Note 17 "POSTRETIREMENT BENEFITS" to the Consolidated Financial Statements, for further information about the financial status of these plans.

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        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:

        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 with actual asset allocations at December 28, 2008:

Contingencies, Environmental and Litigation Reserves

        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 Part II—Financial Statements and Supplementary Data, Item 8 Note 20 "COMMITMENTS AND CONTINGENCIES" to the Consolidated Financial Statements for a discussion of our contingencies, environmental and litigation reserves at December 28, 2008.

        In 2006, we sold our interest in the Kaiser business. While we reduced our risk profile as a result of this transaction, we retained risk by providing indemnities to the buyer for certain purchased tax credits and for other tax, labor and civil contingencies in general. These are referenced in the section called "Contingencies" above and discussed in Part II—Financial Statements and Supplementary Data, Item 8 Note 20 "COMMITMENTS AND CONTINGENCIES" to the Consolidated Financial Statements.

        We use multiple probability-weighted scenarios in determining the values of indemnity liabilities. As discussed in Part II—Financial Statements and Supplementary Data, Item 8 Note 20

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"COMMITMENTS AND CONTINGENCIES" to the Consolidated Financial Statements, we have recorded probable loss liabilities of $51.4 million and have estimated the value of the indemnity liability associated with purchased tax credits at $69.3 million, based on a total exposure of $306.0 million with regard to those liabilities. If the indemnity obligations were recorded as probable losses, our liabilities would have been higher by approximately $17.1 million at December 28, 2008.

Goodwill and Other Intangible Asset Valuation

        We evaluate the carrying value of our goodwill and indefinite-lived intangible assets for impairment annually, and we evaluate our other intangible assets for impairment when there is evidence that events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. We completed the evaluations of goodwill and indefinite-lived intangible assets during the third quarter of 2008. With regard to goodwill, the fair values of our reporting units exceeded their carrying values, allowing us to conclude that no impairments of goodwill have occurred. With regard to our indefinite-lived intangible assets, most significantly Molson's core brands sold in Canada, the Carling brand sold in the U.K., and distribution rights to sell Coors Light in Canada, the fair values of the assets also exceeded their carrying values. Significant judgments and assumptions were required in the evaluation of goodwill and intangible assets for impairment. See Part II—Financial Statements and Supplementary Data, Item 8 Note 12 "GOODWILL AND INTANGIBLES" to the Consolidated Financial Statements for further discussion and presentation of these amounts.

        We use a combination of discounted cash flow analyses and evaluations of values derived from market comparable transactions and earnings multiples of comparable public companies to determine the fair value of reporting units. Our cash flow projections are based on various long-range financial and operational plans of the Company and considered, when necessary, various scenarios, both favorable and unfavorable. In 2008, discount rates used for fair value estimates for reporting units was 9%. These rates are based on weighted average cost of capital, driven by, among other factors, the prevailing interest rates in geographies where these businesses operate, as well as the credit ratings and financing abilities and opportunities of each reporting unit. We use an excess earnings approach to determine the fair values of our indefinite-lived intangible assets. Discount rates used for testing of indefinite-lived intangibles ranged from 9% to 10%. These rates largely reflect the rates for the overall enterprise valuations, with some level of premium associated with the specificity of the intangibles themselves. Our reporting units operate in relatively mature beer markets, where we are reliant on a major brand for a high percentage of sales. Changes in the factors used in the estimates, including declines in industry or company-specific beer volume sales, margin erosion, termination of brewing and/or distribution agreements with other brewers, and discount rates used, could have a significant impact on the fair values of the reporting units and, consequently, may result in goodwill or indefinite-lived intangible asset impairment charges in the future.

Derivatives and Other Financial Instruments

        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):

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        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, and for other strategic purposes related to our core business. We record our derivatives on the Consolidated Balance Sheet as assets or liabilities at fair value. Such accounting is complex, as are 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. The fair values of our derivatives are determined primarily from observable inputs that generally fall into Level 2 in the fair value hierarchy defined by SFAS No. 157, "Fair Value Measurements." See Part II—Financial Statements and Supplementary Data, Item 8 Note 1 "BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES" under the caption "Adoption of New Accounting Pronouncements" to the Consolidated Financial Statements for further discussion. The fair values of our derivatives include credit risk adjustments to account for counterparties' credit risk (for derivative assets) and MCBC's non-performance risk (for derivative liabilities). These non-performance reserves resulted in a $7 million favorable adjustment to other comprehensive income, mainly because derivative liabilities exceed derivative assets as of the end of 2008.

        Our market-sensitive derivative and other financial instruments, as defined by the Securities and Exchange Commission ("SEC"), are foreign currency forward contracts, commodity swaps, interest rate swaps, cross currency swaps and total return equity swaps. We monitor foreign exchange risk, interest rate risk, commodity risk, equity price risk and related derivatives using sensitivity analysis.

        We have performed a sensitivity analysis to estimate our exposure to market risk of interest rates, foreign exchange rates, commodity prices and equity prices. The sensitivity analysis reflects the impact of a hypothetical 10% adverse change in the applicable market interest rates, foreign exchange rates, commodity prices and equity price, specifically the stock price of Foster's Group ("Foster's") (ASX:FGL). During the third quarter of 2008, we entered into a cash settled total return swap with a Deutsche Bank in order to gain an economic exposure to Foster's, a major global brewer. The swap gives MCBC exposure to nearly 5% of Foster's outstanding common stock. 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.

        We are required to post collateral with the counterparty if the swap is in an out-of-the-money position. If our credit ratings with Standard & Poor's and Moody's with regard to our long-term debt remain at an investment grade level, we are required to post collateral for only that portion of the out-of-the-money liability exceeding $20.0 million. If either of our credit ratings falls below investment grade, we must post collateral for the entire out-of-the-money liability. As of December 28, 2008, neither party to this swap agreement has posted any collateral. 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.

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        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:

Income Tax Assumptions

        We account for income taxes in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 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 apply a two-step process to determine the amount of tax benefit to be recognized in cases where uncertainty exists. First, the tax position is evaluated to determine the likelihood that it will be sustained upon examination. If the tax position is deemed "more-likely-than-not" to be sustained, the tax position is then valued to determine the amount of benefit to be recognized in the financial statements. Our balance sheet reflects liabilities for such unrecognized tax benefits of $230.4 million as of December 28, 2008. During 2009, we expect to recognize a $50 million to $60 million income tax benefit due to a reduction in income tax benefits, related mainly to penalties and interest associated with issues subject to audits we believe are going to close in the next year. There are other pending tax law changes in Canada that, if enacted, would decrease our unrecognized tax benefits by approximately $100 million.

        We have elected to treat our portion of all foreign subsidiary earnings through December 28, 2008, as permanently reinvested under the accounting guidance of APB 23 and SFAS 109. As of December 28, 2008, approximately $970 million of retained earnings attributable to foreign subsidiaries was considered to be indefinitely invested. Our intention is to reinvest the indefinitely invested 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, we believe that U.S. foreign tax credits would largely eliminate any U.S. taxes and offset any foreign withholding taxes due upon remittance.

        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

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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.

Consolidations under FIN 46R

        RMMC and RMBC were dedicated predominantly to our packaging and distribution activities and were formed with companies which have core competencies in the aluminum and glass container businesses. Effective July 1, 2008, RMMC and RMBC were contributed to MillerCoors (who consolidates their results) and de-consolidated by MCBC. 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 U.K. beer market. We also consolidate the financial position and results of Brewers Retail, Inc. ("BRI"), of which Molson owns just over 50%, and provides all distribution and retail sales of beer in the province of Ontario in Canada. Our ownership of BRI is determined by our market share in the province of Ontario. Our market share and ownership percentage could be reduced as a result of lower trade or consolidation of certain of our competitors.

New Accounting Pronouncements

SFAS No. 141R "Business Combinations"

        In December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business Combinations" ("SFAS 141R"), which replaces SFAS No. 141, "Business Combinations." Under the provisions of SFAS 141R, acquisition costs will generally be expensed as incurred; noncontrolling interests will be valued at fair value at the acquisition date; in-process research and development will be recorded at fair value as an indefinite-lived intangible asset at the acquisition date; restructuring costs associated with a business combination will generally be expensed subsequent to the acquisition date; and changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally will affect income tax expense. SFAS 141R will be effective, on a prospective basis, for all business combinations for which the acquisition date is after the beginning of our fiscal year 2009, with the exception of the accounting for valuation allowances on deferred taxes and acquired tax contingencies for which the adoption is retrospective. We are currently evaluating the effects, that SFAS 141R will have on our financial statements. The immediate impact of the income tax accounting provisions will increase volatility to our effective tax rate in 2009 and subsequent years. We have no business combination activity in process as of December 28, 2008. However, if we were to initiate business combination activity in 2009, the application of FAS 141R would have an immediate impact on our financial results as it requires acquisition costs to be expensed as incurred. Also, the significant differences in purchase price accounting required by FAS 141R could add volatility to our results if we complete acquisitions in future periods.

SFAS No. 160 "Noncontrolling interests in Consolidated Financial Statements"

        In December 2007, the FASB issued Financial Accounting Standards No. 160, "Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51" ("SFAS 160") and is effective for us beginning in fiscal year 2009. This Statement requires the recognition of a noncontrolling interest, (formerly referred to as minority interest), as equity in the consolidated financial statements and separate from the parent's equity. The amount of net income attributable to the noncontrolling interest will be included in consolidated net income on the face of the income statement. It also amends certain of ARB No. 51's consolidation procedures for consistency with the requirements of SFAS 141R, including procedures associated with the deconsolidation of a subsidiary. This statement also includes expanded disclosure requirements regarding the interests of the parent and its noncontrolling interest. The adoption of SFAS 160 in the first quarter of 2009 will require the reclassification of our reported non-controlling interests to stockholders' equity. The adoption of SFAS 160 will also change our reported Net Income in the first quarter of 2009, which will include the

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share of Net Income attributable to non-controlling interests. A new deduction will be presented at the bottom of the income statement to arrive at a new bottom-line total indicating net income attributable to the consolidating parent company. Earnings per share will still be calculated on net income attributable to the consolidating parent company.

        Due to a change in our ownership level of BRI, we expect to deconsolidate this entity from our financial statements during the first quarter of 2009, and begin to account for it under the equity method at that time. As a result, we may record a gain or loss upon BRI's deconsolidation due to SFAS 160's requirement that we apply fair value to our equity interest.

FASB Staff Position APB 14-1, "Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement)"

        In May 2008, the FASB issued FSP No. APB 14-1, "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)" ("FSP APB 14-1"). This FSP requires that issuers of convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) should separately account for the liability and equity (conversion feature) components of the instruments. As a result, interest expense should be imputed and recognized based upon the entity's nonconvertible debt borrowing rate, which will result in incremental non-cash interest expense, and as result, lower net income. Our 2007 2.5% Convertible Senior Notes due July 30, 2013 will be subject to FSP APB 14-1. Prior to FSP APB 14-1, Accounting Principles Board Opinion No. 14, "Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants" ("APB 14"), provided that no portion of the proceeds from the issuance of the instrument should be attributable to the conversion feature. Our preliminary analyses have determined that if the liability and equity components of the Convertible Senior Notes had been separately valued at the time of their issuance on June 15, 2007, the amount allocated to long-term debt would have been approximately $463 million, and the amount allocated to equity would have been approximately $112 million. When we are required to retroactively adopt FSP APB 14-1 in fiscal 2009, interest expense for fiscal 2007 and 2008 will be increased retrospectively by non-cash amounts of approximately $9.0 million and $17.0 million, respectively. We anticipate recording additional non-cash interest expense on the Convertible Senior Notes in 2009 through 2013 of approximately $18 million to $20 million annually, thereby increasing the carrying value of the debt to $575 million by its maturity date in July 2013. Further, we expect that the carrying amount of the 2.5% Convertible Senior Notes will be discounted (decreased) and additional paid-in capital increased by approximately $86 million as of December 29, 2008.

FASB Staff Position FASB 142-3 "Determination of the Useful Life of Intangible Assets"

        In April 2008, the FASB issued FSP No. FASB 142-3, "Determination of the Useful Life of Intangible Assets" ("FSP FAS 142-3"). This FSP amends the factors that should be considered in developing renewal or extension assumptions used to determine recognized intangible asset under SFAS Statement No. 142, "Goodwill and Other Intangible Assets." This FSP applies to recognized intangible assets that are accounted for pursuant to SFAS No. 142. For a recognized intangible asset, an entity will be required to disclose information that enables users of financial statements to assess the extent to which expected future cash flows associated with the asset are affected by the entity's intent and/or ability to renew or extend the arrangement. This FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008 and early adoption is prohibited. We do not believe the adoption of FSP FAS 142-3 will have a significant impact on our financial statements.

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Related Party Transactions

Transactions with Management and Others

        We employed members of the Coors and Molson families, who collectively owned 86% of the class A shares, common and exchangeable, of the Company throughout 2008. 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.

        As of December 28, 2008, the Molson Foundation and other entities controlled by the Molson family collectively owned 43% of our Class A common and exchangeable stock, approximately 3% of our Class B common and exchangeable stock. As of December 28, 2008, various Coors family trusts collectively owned approximately 43% of our Class A common and exchangeable stock, approximately 12% of our Class B common and exchangeable stock.

Certain Business Relationships

        See Part II—Financial Statements and Supplementary Data, Item 8 Note 3 "EQUITY INVESTMENTS" to the Consolidated Financial Statements regarding our significant related party transactions.

ITEM 7A.    Quantitative and Qualitative Disclosures About Market Risk

        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.

        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 also use derivatives for other strategic purposes related to our core business. 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 the Canadian dollar ("CAD") and the British pound sterling ("GBP").

        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 (Standard & Poor's) or A2 (Moody's). In some instances we have reciprocal collateralization agreements with our counterparties 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 28, 2008, 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

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currency forwards, commodity swaps, interest rate swaps, and cross currency swaps. See related value at risk and sensitivity analysis in the Derivatives and Other Financial Instruments section of Item 7.

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(1)

Prior to issuing the bonds on September 22, 2005 (See Part II—Financial Statements and Supplementary Data, Item 8 Note 13 "DEBT AND CREDIT ARRANGEMENTS" to the Consolidated Financial Statements), we entered into a bond forward transaction for a portion of the Canadian offering. The bond forward transaction effectively established, in advance, the yield of the government of Canada bond rates over which the Company's private placement was priced. At the time of the private placement offering and pricing, the government of Canada bond rates was trading at a yield lower than that locked in with the Company's interest rate lock. This resulted in a loss of $4.0 million on the bond forward transaction. Per FAS 133 accounting, the loss will be amortized over the life of the Canadian issued private placement and will serve to increase the Company's effective cost of borrowing by 4.9 basis points compared to the stated coupon on the issue.

Simultaneously with the U.S. private placement we entered into a cross currency swap transaction for the entire USD $300.0 million issue amount and for the same maturity. In this transaction we exchanged our $300.0 million for a CAD $355.5 million obligation with a third party. The terms of the transaction are such that the Company will pay interest at a rate of 4.28% to the third party on the amount of CAD $355.5 million and will receive interest at a rate of 4.85% on the $300.0 million amount. There was an exchange of principal at the inception of this transaction and there will be a subsequent exchange of principal at the termination of the transaction. We have designated this transaction as a hedge of the variability of the cash flows associated with the payment of interest and principal on the USD securities. Consistent with FAS 133 accounting, all changes in the value of the transaction due to foreign exchange will be recorded through the statement of operations and will be offset by a revaluation of the associated debt instrument. Changes in the value of the transaction due to interest rates will be recorded to other comprehensive income.

(2)

The BRI joint venture is a party to interest rate swaps, converting CAD $100.0 million notional amount from fixed rates to floating rates and mature in 2011. There was no exchange of principal at the inception of the swaps. These interest rate swaps qualify for hedge accounting treatment.

(3)

We are a party to certain cross currency swaps totaling GBP £530.0 million (approximately USD $774 million at prevailing foreign currency exchange rates in 2002, the year we entered into the swaps). The swaps included an initial exchange of principal in 2002 and will require final principal exchange on the settlement date of our 6³/8% notes due in 2012 (See Part II—Financial Statements and Supplementary Data, Item 8 Note 18 "DERIVATIVE INSTRUMENTS" to the Consolidated Financial Statements for further discussion). The swaps also call for an exchange of fixed GBP interest payments for fixed USD interest receipts. At the initial principal exchange, we paid USD to a counterparty and received GBP. Upon final exchange, we will provide GBP to the counterparty and receive USD. The cross currency swaps have been designated as cash flow hedges.

(4)

On June 15, 2007, MCBC issued $575 million of 2.5% Convertible Senior Notes in a public offering discussed further in Part II—Financial Statements and Supplementary Data, Item 8 Note 13 "DEBT AND CREDIT ARRANGEMENTS" to the Consolidated Financial Statements.

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ITEM 8.    Financial Statements and Supplementary Data

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MANAGEMENT'S REPORT

        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. The Company's management assessed the effectiveness of the Company's internal control over financial reporting as of December 28, 2008. In making this assessment, the Company's management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework. Based upon its assessment, management concluded that, as of December 28, 2008, the Company's internal control over financial reporting was effective.

        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.

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders
    of Molson Coors Brewing Company:

        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 at December 28, 2008 and December 30, 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 28, 2008 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 appearing 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. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 28, 2008 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 these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included 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. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

        As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for defined benefit pension and other postretirement plans in 2006 and the manner in which it accounts for uncertain tax positions in 2007.

        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

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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.

PricewaterhouseCoopers LLP
Denver, Colorado
February 24, 2009

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MOLSON COORS BREWING COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME

(IN MILLIONS, EXCEPT PER SHARE DATA)

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(1)

Share and per share amounts have been adjusted from previously reported amounts to reflect a 2-for-1 stock split issued in the form of a stock dividend effective October 3, 2007.

See notes to consolidated financial statements

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MOLSON COORS BREWING COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN MILLIONS)

(continued)

See notes to consolidated financial statements.

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CONSOLIDATED BALANCE SHEETS (Continued)

(IN MILLIONS, EXCEPT PAR VALUE)

See notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN MILLIONS)

        (continued)

See notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(IN MILLIONS)

See notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(IN MILLIONS)

See notes to consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation and Summary of Significant Accounting Policies

        Unless otherwise noted in this report, any description of we, us or our includes Molson Coors Brewing Company ("MCBC" or the "Company"), principally a holding company, and its operating subsidiaries: Molson Canada ("Molson"), operating in Canada; Coors Brewers Limited ("CBL"), operating in the United Kingdom ("U.K."); Coors Brewing Company ("CBC"), which operated in the United States ("U.S.") prior to the formation of MillerCoors LLC ("MillerCoors") (see below); and our other corporate entities.

        Effective July 1, 2008, MCBC and SABMiller plc ("SABMiller") combined the U.S. and Puerto Rico operations of their respective subsidiaries, CBC and Miller Brewing Company ("Miller"). The results and financial position of U.S. operations, which had historically comprised substantially all of our U.S. reporting segment were, in all material respects, deconsolidated from MCBC prospectively upon formation of MillerCoors. Our interest in MillerCoors is accounted for by us under the equity method of accounting. See Note 2, "Segment and Geographic Information," and Note 3, "Equity Investments."

        Unless otherwise indicated, information in this report is presented in U.S. dollars ("USD" or "$").

Our Fiscal Year

        Our fiscal year is a 52 or 53 week period ending on the last Sunday in December. The fiscal years ended December 28, 2008 and December 30, 2007, were 52 week periods and fiscal year ended December 31, 2006, was a 53 week period.

Principles of Consolidation

        Our consolidated financial statements include our accounts and our majority-owned and controlled domestic and foreign subsidiaries, as well as entities consolidated under FASB Interpretation No. 46R, Consolidation of Variable Interest Entities—An Interpretation of ARB 51 ("FIN 46R"). All significant intercompany accounts and transactions have been eliminated in consolidation.

Reporting Periods Presented

        The results of Kaiser and our joint venture, Brewers Retail Inc. (BRI), consolidated under FIN 46R, are reported one month in arrears for this and future reporting periods. For the year ended December 31, 2006, Kaiser's results include the results for December 2005 through January 13, 2006, (the date of the sale).

Stock Split

        On August 1, 2007, our Board of Directors declared a two-for-one stock split issued in the form of a dividend for all classes of capital stock, with a record date of September 19, 2007, and an effective date of October 3, 2007. All share and per share data included in the consolidated financial statements and accompanying notes have been adjusted to reflect this stock split.

Use of Estimates

        Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and

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1. Basis of Presentation and Summary of Significant Accounting Policies (Continued)

assumptions used to determine certain amounts that affect the financial statements are reasonable, based on information available at the time they are made. To the extent there are material differences between these estimates and actual results, our consolidated financial statements may be affected.

Reclassifications

        Certain reclassifications have been made to the 2006 and 2007 financial statements to conform to the 2008 presentation.

Revenue Recognition

        Depending upon the method of distribution, revenue is recognized when the significant risks and rewards of ownership are transferred to the customer or distributor, which is either at the time of shipment to distributors or upon delivery of product to retail customers.

        In the United Kingdom, excise taxes are included in the purchase price we pay the vendor on beverages for the factored brands business purchased from third parties for resale, and are included in our net sales and cost of goods sold when ultimately sold.

        The cost of various programs, such as price promotions, rebates and coupon programs are treated as a reduction of sales. Sales of products are for cash or otherwise agreed upon credit terms. Revenue is stated net of incentives, discounts and returns.

        Outside of unusual circumstances, if product is returned, it is generally for failure to meet our quality standards, not caused by customer actions. Products that do not meet our high quality standards are returned and destroyed. We do not have standard terms that permit return of product. We estimate the costs for product returns and record those costs in cost of goods sold each period. We reduce revenue at the value of the original sales price in the period that the product is returned.

Cost of Goods Sold

        Our cost of goods sold includes beer raw materials, packaging materials (including promotional packaging), manufacturing costs, plant administrative support and overheads, inbound and outbound freight charges, purchasing and receiving costs, inspection costs, warehousing, and internal transfer costs.

Equity Method Accounting

        We generally apply the equity method of accounting to 20% to 50% owned investments where we exercise significant influence, except for certain joint ventures that must be consolidated as variable interest entities under FIN 46R. These equity method investments include our equity ownership in MillerCoors in the U.S., Tradeteam (a transportation and logistics services company in the U.K.), and investments in Modelo Molson Imports, L.P., the Montréal Canadiens, BDL and House of Blues, all in Canada. See Note 3, "Equity Investments."

        There are no related parties that own interests in our equity method investments as of December 28, 2008.

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1. Basis of Presentation and Summary of Significant Accounting Policies (Continued)

Marketing, General and Administrative Expenses

        Our marketing, general and administrative expenses consist of advertising, sales costs, non-manufacturing administrative, and overhead costs. The creative portion of our advertising activities is expensed as incurred. Production costs of advertising and promotional materials are generally expensed when the advertising is first run. Advertising expense was $610.0 million, $858.1 million, and $906.9 million for years 2008, 2007, and 2006, respectively. Prepaid advertising costs of $8.1 million and $27.3 million, were included in other current assets in the Consolidated Balance Sheets at December 28, 2008, and December 30, 2007, respectively.

Trade Loans

        CBL extends loans to a portion of the retail outlets that sell our brands. Some of these loans provide for no interest to be payable, and others provide for payment of a below market interest rate. In return, the retail outlets receive smaller discounts on beer and other beverage products purchased from us, with the net result being CBL attaining a market return on the outstanding loan balance. We therefore reclassify a portion of beer revenue into interest income to reflect a market rate of interest on these loans. In 2008, 2007 and 2006, these amounts were $10.7 million, $11.5 million and $11.7 million, respectively. This interest income is included in the U.K. segment since it is related solely to CBL.

        Trade loan receivables are classified as either other receivables or non-current notes receivable in our Consolidated Balance Sheets. At December 28, 2008, and December 30, 2007, total loans outstanding, net of allowances, were $68.8 million and $98.4 million, respectively.

Allowance for Doubtful Accounts

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

        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. At CBL, we provide allowances for uncollectible trade receivables and trade loans from our customers. Generally, provisions are recorded to cover the full exposure to a specific customer at the point the account is considered uncollectible. Accounts are typically deemed uncollectible based on the sales channel, after becoming either one hundred twenty days or one hundred eighty days overdue. We record the provision in marketing, general and administrative expenses. Provisions are reversed upon recoverability of the account or at the point an account is written off.

        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 and trade loans could be materially affected.

Inventories

        Inventories are stated at the lower of cost or market. Cost is determined by the first-in, first-out ("FIFO") method. Prior to the formation of MillerCoors, substantially all of the inventories in the United States were determined on the last-in, first-out ("LIFO") method. As of December 30, 2007,

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1. Basis of Presentation and Summary of Significant Accounting Policies (Continued)

the percentage of total inventories on the LIFO method was approximately 25%. Current cost in the United States, determined on the FIFO method, exceeded LIFO cost by $47.9 million at December 30, 2007.

        We regularly assess the shelf-life of our inventories and reserve for those inventories when it becomes apparent the product will not be sold within our freshness specifications. There were no allowances for obsolete finished or packaging materials at December 28, 2008. At December 30, 2007, the allowances for obsolete inventories were $1.0 million for finished inventories and $0.6 million for packaging materials.

Fair Value of Financial Instruments

        The carrying amounts of our cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, approximate fair value as recorded due to the short-term maturity of these instruments. The fair value of long-term obligations for derivatives was estimated by discounting the future cash flows using market interest rates, adjusted for non-performance credit risk associated with our counterparties (assets) or with MCBC (liabilities), see Note 18, "Derivative Instruments." Assuming current market rates for similar instruments, the fair value of long-term debt is presented in Note 13, "Debt and Credit Arrangements."

Foreign Currency Translation

        Assets and liabilities recorded in foreign currencies that are the functional currencies for the respective operations are translated at the prevailing exchange rate at the balance sheet date. Revenue and expenses are translated at the average exchange rates during the period. Translation adjustments resulting from this process are reported as a separate component of other comprehensive income.

Factored Brands

        In addition to supplying our own brands, CBL sells other beverage companies' products to on-premise customers to provide them with a full range of products for their retail outlets. These factored brand sales are included in our financial results, but the related volume is not included in our reported sales volumes. We refer to this as the "factored brand business." In the factored brand business, CBL normally purchases factored brand inventory, taking orders from customers for such brands, and invoicing customers for the product and related costs of delivery. In accordance with EITF 99-19, "Reporting Revenue Gross as a Principal Versus Net as an Agent," sales under the factored brands are generally reported on a gross income basis.

Goodwill and Other Intangible Asset Valuation

        We evaluate the carrying value of our goodwill and indefinite-lived intangible assets for impairment at least annually, and we evaluate our other intangible assets for impairment 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 goodwill and intangible assets for impairment. See Note 12, "Goodwill and Intangible Assets."

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1. Basis of Presentation and Summary of Significant Accounting Policies (Continued)

Statement of Cash Flows Data

        Cash equivalents represent highly liquid investments with original maturities of 90 days or less. The fair value of these investments approximates their carrying value. The following presents our supplemental cash flow information:

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(1)

2008 and 2007 includes cash paid for interest of $3.0 and $6.2 million associated with debt extinguishment costs, respectively.

        See Note 3, "Equity Investments," for a summary of assets and liabilities contributed to MillerCoors, the formation of which was a significant non-cash activity.

Adoption of New Accounting Pronouncements

FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes—an Interpretation of FASB Statement No. 109"

        On January 1, 2007, we adopted the FASB's Interpretation No. 48, "Accounting for Uncertainty in Income Taxes—an Interpretation of FASB Statement No. 109" ("FIN 48"). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements. FIN 48 prescribes a two-step process to determine the amount of tax benefit to be recognized. However, the tax position must be evaluated to determine the likelihood that it will be sustained upon examination. If the tax position is deemed "more-likely-than-not" to be sustained, the tax position is then valued to determine the amount of benefit to be recognized in the financial statements. As a result of the adoption of FIN 48, we increased tax related liabilities by a total of $132.1 million and recorded $3.9 million as a current liability for unrecognized tax benefits and $128.2 million as a non-current liability for unrecognized tax benefits. The cumulative effect of applying the new requirement has been recorded as a reduction to the beginning balance of retained earnings in the amount of $105.4 million, an increase to goodwill in the amount of $2.3 million (See Note 12, "Goodwill and Intangible Assets") and an increase to deferred tax assets of $24.4 million. The adjustment to goodwill reflects the changes to liabilities for uncertain tax positions established in the opening balance sheet regarding our historical merger and acquisition activity. See Note 7, "Income Taxes," for further discussion.

SFAS No. 157 "Fair Value Measurements"

        In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements," ("SFAS 157") which was, in part, effective for us beginning in fiscal year 2008. This statement defines fair value, establishes a framework for measuring fair value and expands the related disclosure requirements. The

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statement indicates, among other things, that a fair value measurement assumes that the transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. Subsequent to the issuance of SFAS 157, the FASB issued FASB Staff Positions ("FSP") 157-1, "Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13" and FSP FAS 157-2 "Effective Date of FASB Statement No. 157." FSP FAS 157-1 excludes from the scope of SFAS 157, in certain circumstances, SFAS 13 and other accounting pronouncements that address fair value measurements for purposes of lease classification or measurement under SFAS 13. FSP FAS 157-2 delays the effective date of SFAS 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis. For the instruments subject to the delay in the effective date under FSP FAS 157-2, the effective date to adopt the fair value provisions for us will be the first quarter of 2009.

        In October 2008, the FASB issued FSP FAS 157-3, "Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active." This FSP clarifies the application of SFAS No. 157 in a market that is not active and applies to financial assets within the scope of accounting pronouncements that require or permit fair value measurements in accordance with SFAS No. 157. FSP FAS 157-3 was effective upon issuance, including prior periods for which financial statements have not been issued. Accordingly, we adopted this guidance effective September 28, 2008. Our adoption of this guidance did not have a material effect on our consolidated financial position or results of operations.

        The table below summarizes our financial assets and liabilities that are measured at fair value on a recurring basis as of December 28, 2008. Upon adoption of SFAS 157, in the first quarter of 2008, we considered our indemnity obligations related to our discontinued operations from Kaiser (see Note 20, "Commitments and Contingencies") to be within the scope of the first phase of SFAS 157 adoption in 2008. During the fourth quarter of 2008, we determined that the principles of SFAS 157 should be applied to these liabilities in the second phase of adoption in 2009, because of the non-routine nature of fair value determinations associated with these obligations. As a result, these indemnity obligations have been excluded from the table below.

        SFAS 157 establishes a hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach and cost approach). We utilize a combination of market and income approaches to value derivative instruments, and use an income approach for valuing our indemnity obligations. Our financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels of the hierarchy are as follows:

        Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access at the measurement date.

        Level 2—Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are less active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

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        Level 3—Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability. We develop these inputs based on the best information available, including our own data.

        The following presents our assets and liabilities that are measured at fair value based on a recurring basis:

        The table below illustrates a rollforward of the amounts included in our consolidated balance sheet for derivative financial instruments that we have classified within Level 3 under SFAS 157. The determination to classify a financial instrument within Level 3 is based upon the significance of the unobservable factors used in determining the overall fair value of the instrument. Since financial instruments classified as Level 3 typically include a combination of observable components (that is, components that are actively quoted and can be validated to external sources) and unobservable components, the gains and losses in the table below may include changes in fair value due in part to observable market factors, or changes to our assumptions on the unobservable components. Depending upon the information readily observable in the market, and/or the use of unobservable inputs, which are significant to the overall valuation, the classification of any individual financial instrument may differ from one measurement date to the next. In the event that there is a movement to/from the classification of an instrument as Level 3, we have reflected such items in the table below within the "Transfers In/Out of Level 3" caption. We manage our overall risk at the portfolio level, and in the execution of our strategy, we may use a combination of financial instruments, which may be classified within any level. Since Level 1 and Level 2 risk management instruments are not included in the rollforward below, the gains or losses in the table do not reflect the effect of our total risk management activities.