Corporate Responsibility Report 2004

McDonald’s USA

Table of Contents PageINTRODUCTION 1 Who We Are About This Report Feedback

Letter from McDonald’s USA Chief Executive Officer 2

Responsibility & McDonald’s Business Plan 3

PRODUCTS: BALANCED, ACTIVE LIFESTYLES 4-7 Our Commitment Menu Choice Physical Activity Information & Education

PRODUCTS: RESPONSIBLE PURCHASING 8-11 Social Responsibility in Our Supply Chain Established Supply Chain Programs Food Quality & Safety Animal Welfare Supplier Social Accountability Environmental Policies Recent Developments Antibiotics Policy for Suppliers Beef Safety Changing Happy Meal Toy Batteries

PEOPLE: OUR GREATEST RESOURCE 12-15 Our People Priority Learning and Development Diversity

PLACE: IN YOUR COMMUNITY 16-23 McDonald’s in the Community Environmental Stewardship at the Restaurant Level Restaurant-Level Environmental Priorities Electrical Energy Use Packaging Targeting Waste Reduction Litter Communities Grow with McDonald’s Local Community Involvement World Children’s Day System Support for RMHC Education Health Care Youth Sports Support for Disaster Relief

Online Corporate Responsibility Resources & Report Credits 24

Who We AreMcDonald’s is a leading food service retailer. Worldwide, we have more than 30,000 restaurants in 119 countries. We manage this system based on geographic segments. The largest, in terms of both restaurants and revenues, is McDonald’s USA.

In the U.S., we have more than 12,300 traditional restaurants, plus approximately 1,320 satellite locations in facilities like hospitals. They serve more than 21.8 million customers a day. Approximately 85.5% of the restaurants are operated, under franchise agreements, by local independent business people – our Owner/Operators.

We provide employment for approximately 85,200 people in the U.S. Our Owner/Operators collectively employ approximately five times as many.

About This ReportOn August 5, 2004, McDonald’s issued its second Worldwide Corporate Responsibility Report. The report focuses on what the System is doing, on a global basis, to address the corporate responsibility issues our customers and other stakeholders consider most material and relevant to our business.

This report complements the worldwide report by highlighting the ways McDonald’s global core values, principles and policies are being implemented by our U.S. company and our U.S. Owner/Operators and suppliers.

The report is organized according to key elements of McDonald’s business strategy – the Plan to Win. The Plan to Win focuses our efforts on five key drivers of exceptional customer experiences, each beginning with the letter P. This report highlights the corporate responsibility aspects of three of the P’s – Products, People and Place.

FeedbackYour thoughts and perspectives help guide our activities and communications. We value and welcome your feedback.

For comments or questions about this report, please write to:

Michael A. DonahueVice PresidentU.S. CommunicationsMcDonald’s CorporationOak Brook, IL 60523

For inquiries or input on other issues, please use our toll-free customer hotline, 1-800-244-6227.Or e-mail us through the Contact Us section of our website, www.mcdonalds.com/usa/html.You may access the section from any page of the website or any page of McDonald’s corporate website, mcdonalds.com.

To download this report and learn more about McDonald’s U.S. corporate responsibility efforts, please visit www.mcdonalds.com/usa/good.html. The 2004 Worldwide Corporate Responsibility Report is available at www.mcdonalds.com/corp/values/socialrespons.html. Web addresses for other online documents referenced in this report are listed on the last page.

McDonald’s USACorporate Responsibility Report: 2004

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Our customers expect a lot from us —

AS THEY SHOULD.

I want to begin by saying how proud I am to introduce the first corporate responsibility report for McDonald’s U.S. business. This report is part of our effort to share what we’re doing and foster dialogue we all can learn from.

This report, though, is only one step in our progress. We have come far since our founder, Ray Kroc, established our tradition of community involvement. But we know we can do more. We can do more in the communities we serve. We can do more for our employees. And we can do more for our customers. So we’re committed to enhancing our efforts because doing good is fundamental to who we are and what we stand for.

Candidly speaking, our customers expect a lot from us – as they should. Corporate responsibility used to mean supporting charitable organizations, sponsoring events in the community and extending a helping hand to those in need.

Today, this definition has broadened – and so has our commitment. Our customers want to know we care about the issues important to them. Issues such as leading balanced, active lifestyles. Energy conservation. Being a good employer and providing lifelong opportunity for our people. And modeling diversity in all we do.

It means so much to me personally – as it does to all of our employees – to know that McDonald’s is dedicated to providing leadership on all of these issues and more. We’re dedicated to doing the right thing because it is the right thing to do – and because our customers expect it of us. We work every day to deserve their trust.

So, to our U.S. employees, Owner/Operators and suppliers – thank you for all you do to give life to our commitment to corporate responsibility.

And to our customers, shareholders and others – we hope this report gives you some insight into what we’re doing, what we have achieved and what we aim to accomplish.

Mike RobertsChief Executive Officer McDonald’s USA

letter from chief executive officer, mcdonald’s usa

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Responsibility at McDonald’s

Responsibility at McDonald’s means striving to do what is right, being a good neighbor in the community and integrating social and environmental priorities into our restaurants and our relationships with suppliers and business partners. We work toward responsible actions by understanding the perspectives and needs of our customers and other important stakeholders, by collaborating with experts to understand issues and opportunities and by inspiring the people in our System – company employees, Owner/Operators and suppliers – to share and act on our core values. We pursue our commitment to corporate responsibility in addressing each of the five critical success factors of our business plan, the Plan to Win.

products

We will serve food and beverages people prefer to enjoy regularly.

We have a responsibility to provide a variety of safe, quality product choices that our customers trust and to partner with suppliers that operate ethically and meet our social responsibility standards.

Plan to Win Vision Our Responsibility

people

Our well-trained employees will proudly provide fast, friendly and accurate service with a smile, in a way that delights our customers.

We have a responsibility to maintain a work environment where everyone feels valued and respected, to provide training and other opportunities for personal and professional growth and to promote job satisfaction.

promotion

All of our marketing and communications will be relevant to our customers and consistent with our Brand.

We have a responsibility to maintain and build trust with all our stakeholders by ensuring that our marketing and communications efforts are truthful and appropriate.

price

We will be the most efficient provider so that we can be the best value to the most people.

We have a responsibility to maintain our values and high standards as we provide food that is affordable to a wide range of customers.

place

Our restaurants and drive-thru’s will be clean, relevant and inviting to the customers of today and tomorrow.

We have a responsibility to manage our business by integrating environmental considerations into daily operations and by constantly seeking ways to add value to the community.

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“From sample menus for people with diabetes to fact sheets with ways to trim calories from meals, we provide tools that incorporate simple steps into an approach that is convenient and actionable. Ultimately, McDonald’s role as a socially responsible company is to understand the broader needs of our customers and to translate evolving science into realistic, motivating steps that fit those needs.”

Dr. Cathy Kapica Global Director of Nutrition

McDonald ’s Corporation

Our Commitment As a food service company, we focus on preparing and serving safe, high-quality foods and beverages that can help people meet their everyday nutritional needs. But we also focus on other things our customers care about. These days, maintaining balanced, active lifestyles for themselves and their families is high on the list. The trends in overweight

and obesity, especially among children, require involvement and collaboration by many sectors. We are committed to playing an important role in effecting positive change.

Our goal is to provide leadership in our industry on the health and well-being issues that so many of our customers care about. We are focusing our efforts on fun, practical approaches in three areas – menu choice, physical activity and information and education.

“One of my highest priorities is to encourage healthy living and disease prevention. And I appreciate McDonald’s contributions to this cause. By promoting healthy behaviors among their customers, McDonald’s is taking an important step in the right direction. I encourage more companies to follow their lead.”

Tommy ThompsonU.S. Secretary of Health and

Human Services April 2004

Menu ChoiceOur balanced, active lifestyles approach begins with our core menu, which includes products made from staples such as beef, chicken, fish, eggs, milk,

bread and vegetables. In addition to these traditional favorites, we are adding main dish, side and beverage alternatives with a variety of different nutritional profiles, creating a range of choices that can fit into a balanced, active lifestyle. These choices include new fruit and vegetable offerings and Happy Meal options.

Premium SaladsIn March 2003, we introduced three meal-size Premium Salads topped with grilled or crispy chicken breast paired with Newman’s Own® dressings. A side salad is also available. A fourth Premium Salad was launched, as a limited-time promotional item, in May 2004. We plan another new salad launch for 2005 and continue to test further expansion of our salad line.

Based on the serving size defined by the U.S. Department of Agriculture’s Food Guide Pyramid, each Premium Salad provides two servings of vegetables, and the side salad provides one serving of vegetables. In 2003, we sold approximately 150 million Premium Salads – about 300 million servings of vegetables.

Go Active! Happy Meal for AdultsIn May 2004, we launched our first ever Go Active! Happy Meal. This promotional Happy Meal for adults brought together all three elements of balanced living. It included a Premium Salad and bottled water, a Step with It!™ booklet by noted exercise physiologist Bob Greene and a Stepometer™ – a small step counter customers can use to keep track of how many steps they take a day. Inspired by the promotion and related activities, customers in diverse communities have formed local walking groups. We continue to explore approaches to supporting balanced, active lifestyles for adults.

Products: Balanced, Active Lifestyles

New Happy Meal ChoicesWe recently completed successful tests of new menu choices for Happy Meals. During summer 2004, we launched, on a national basis:• 1% low-fat regular and chocolate

Milk Jugs – cool containers that make drinking milk more fun

• 100% pure Minute Maid®apple juice

• Apple Dippers (sliced apples served with a low-fat caramel dip). Based on USDA-defined serving sizes, each order of Apple Dippers contains one serving of fruit.

Other Menu ChoicesIn November 2003, we introduced new

Chicken McNuggets made with white meat. Our restaurants also offer a Chicken McGrill sandwich, Fruit ’n Yogurt Parfaits, 100% orange juice and, at many restaurants, soup. The Made For You cooking system allows customers to special order menu items to help meet their

nutritional needs.

Further Menu DevelopmentsBy the end of 2004, all participating McDonald’s U.S. restaurants will have a national core menu that simplifies restaurant operations and provides a balance of choices for customers. This core menu will effect a phase-out of the Super Size fry and drink options. This is part of a global phase-out of the Super Size option as a standard option in the McDonald’s System.

Physical ActivityPhysical activity is a critical component of the energy balance equation. We are working in various ways to help people identify realistic, fun ways to incorporate fitness and exercise into their everyday lives.

McDonald’s recently launched a global program called Go Active!, which aims to coordinate and accelerate our worldwide efforts to support participation in regular physical activity. Highlights in the U.S. include:

Promoting WalkingIn June 2003, McDonald’s announced the expansion of the successful Step With It! program, developed by The Coca Cola Company in collaboration with the National Association for Sport and Physical Education and the President’s Challenge Physical Activity and Fitness Awards Program (an initiative of the President’s Council on Physical Fitness and Sports). The global program features Stepometers, which serve as motivators to increase daily walking. Leading the way, Our Go Active! Happy Meal for adults implemented the program in the U.S.

In spring 2004, B o b G r e e n e joined with us in an unprecedented public awareness campaign – the McDonald’s Go Active! American Challenge. In this campaign, Greene walked and biked across the country to promote our balanced, active lifestyles initiatives and encourage people to lead active lives. During his 36-day, 3,000 mile journey, he met one-on-one with thousands of individuals and offered tips for fun, easy ways to add more activity to their daily schedules and live more balanced lives.

Continuing the momentum of the Go Active! American Challenge, Greene has recently visited 12 additional northern cities. Each visit included a special walking event, remarks by McDonald’s local Owner/Operator and company leadership and a sampling of our newer menu items.

We are also partnering with Bob Greene on other initiatives that incorporate his expertise about health and fitness into our physical activity and educational initiatives. For example, in 2003, our restaurants nationwide featured a Bob Greene trayliner, with Greene’s “Tips for Leading an Active Lifestyle,” a quiz on balanced, active lifestyles and abbreviated nutrition information for popular McDonald’s menu items. Helping Kids “Get Moving with Ronald McDonald” In 2003, we premiered a new Ronald McDonald show to help provide motivation for starting and maintaining a more physically active lifestyle. “Get Moving with Ronald McDonald” is a 30-minute, fun-

filled show that incorporates magic, music, dancing and games to get kids and families moving. It can be performed at McDonald’s restaurants, community events, summer

camps and other appropriate venues. The American Academy of Pediatrics provided a technical review of the show.

Continuing Support for Grassroots Sports and Amateur AthleticsMcDonald’s restaurants have long supported community-level youth sports. At the company level, McDonald’s USA has sponsored the McDonald’s All American High School Basketball Game since 1978. This event recognizes exceptional student athletes around the country for accomplishments both on and off the basketball court. For the last three years, we have sponsored both a Girls Game and a Boys Game. In 2004, 2,500 top male and female high school basketball players were nominated and 48 final team members selected. This program raises funds for Ronald McDonald House Charities (RMHC). More than $3 million has been raised thus far.

Since 2002, McDonald’s USA has also co-sponsored McDonald’s All American Soccer Games, in partnership with POWERade™, adidas™ and the National Soccer Coaches Association of America (NSCAA). For the 2003 games, 36 boys and 36 girls were selected by NSCAA as “best of the best” among high school seniors competing during the 2003-2004 school year. This program also raises funds for RMHC.

New Happy Meal ChoicesWe recently completed successful tests of new menu choices for Happy Meals. During summer 2004, we launched, on

1% low-fat regular and chocolate

®

In spring 2004, B o b G r e e n e joined with us in an unprecedented public awareness campaign – the McDonald’s Go Active! American Challenge. In this campaign, Greene walked and biked

In November 2003, we introduced new Chicken McNuggets made with

white meat. Our restaurants also offer a Chicken McGrill sandwich, Fruit ’n Yogurt Parfaits, 100% orange juice and, at many restaurants, soup. The Made For You cooking system allows customers to special order menu items to help meet their

nutritional needs.

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McDonald’s has been a proud sponsor of the Olympic games since 1976 and a Worldwide Olympic Sponsor since 1997. We have renewed this commitment through 2012. In fall 2004, we will be launching an Olympic skills soccer program for youth soccer leagues across the U.S. To further excite kids about going active, we are now engaging former Olympics athletes in local “Get Moving with Ronald McDonald” shows.

Information & EducationMcDonald’s has been providing U.S. customers with nutrition information on our food products for more than 30 years. Building on this heritage, we are expanding the ways we deliver the information and exploring new ways of making it relevant to personal menu choices.

In addition to trayliners, we offer brochures, wallet cards that show nutrient breakdowns and food exchanges, menu information for people with food allergies and sensitivities, nutrition fact sheets for people with diabetes and fact sheets forthose interested in topics like how to cut calories, carbohydrates or fat.

Our comprehensive Food and Nutrition website provides a host of nutrition information, education and menu planning tools. Registered dietitians help develop and manage the site. Site features added or improved in 2003 include:

• Bag a McMeal, which lets customers get nutrition facts on a meal of their choice

• Customize a Menu Item, which allows customers to recalculate the nutrition information of menu items based on personal changes they specify, such as omitting mayonnaise

• Printable nutrition tip sheetsMeal suggestions, Happy Meal nutrition values, answers to frequently asked questions and articles on health

topics like teaching kids healthy habits and how to eat well and stay active on driving trips

In 2003, we also re-launched the What’s on Your Plate nutrition education program, which was first introduced in 1992. The program features Willie Munchright, a

clay animation character who helps kids learn to make choices for balanced eating and a healthy lifestyle. It is a comprehensive kit of classroom activity materials, including video segments and activity brochures. To help reinforce its nutrition messages, we began airing a series of 60-second What’s On Your Plate vignettes during children’s TV programming.

We are working with the Children’s Nutrition Research Center at Baylor

College of Medicine in Houston on further child-focused

interactive programs and in-restaurant educational materials on the importance of physical activity and nutrition.

As a major employer, McDonald’s recognizes a special opportunity to contribute to public health by providing balanced, active lifestyles education and motivation for our own people. In 2003, we launched an internal website on balanced, active lifestyles. This site provides information on our initiatives, access to news about our efforts around the world and practical advice on an ever-increasing number of topics by McDonald’s Global Director of Nutrition, Dr. Cathy Kapica.

Products: Balanced, Active Lifestyles

• Printable nutrition tip sheets• Meal suggestions, Happy Meal

nutrition values, answers to frequently asked questions and articles on health

topics like teaching kids healthy

stay active on driving trips

In 2003, we also re-launched the What’s on Your Plate nutrition education program, which was first introduced in 1992. The program features Willie Munchright, a

clay animation character who helps kids learn to make choices for balanced eating and a healthy lifestyle. It is a comprehensive kit of classroom activity materials, including video segments and activity brochures. To help reinforce its nutrition messages, we began airing a series of 60-second What’s On Your Plate vignettes during children’s TV programming.

We are working with the Children’s Nutrition Research Center at Baylor

Director of Nutrition, Dr. Cathy Kapica.

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“McDonald’s ... the food manufacturers ... all of them stepped up to help us. And you’ve seen it already. Look at what McDonald’s has done. They have a Happy Meal for adults that’s a healthy meal. They’ve got more information for increasing health literacy for the population.”

Dr. Richard CarmonaU.S. Surgeon General

June 2004

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“In the course of our 13-year partnership, we’ve seen McDonald’s recognize the business importance of a healthy environment, both to sustain the trust of customers and to sustain yields of high-quality raw materials for their products.”

Glenn PrickettSenior Vice President

Conservation International Executive Director, Center for

Environmental Leadership in Business

Social Responsibility in Our Supply Chain

As a consumer with a very large shopping basket, we know that our purchasing decisions influence what our suppliers produce and how. We are, in fact, one of the largest purchasers of U.S. agricultural products. Our standards have served as a model for U.S. government regulations and other companies in our industry. Thus, supporting responsible actions in our supply chain helps to advance important social, economic and environmental goals. It will also help ensure the continued supply

of high-quality ingredients we will need in the future. We know these objectives are important to our customers, as they are to us. We work closely with our suppliers to incorporate socially responsible practices into their operations and build capabilities for continuous improvement.

McDonald’s USA has a history of leadership on supply chain-related social responsibility issues. In 1990, we inaugurated one of the first large-scale U.S. programs to purchase goods made with recycled materials. And we helped lead our industry by establishing animal welfare guidelines and a code of conduct for our suppliers that establishes expectations for their employment practices.

Systematic ApproachOver the last several years, we have col laborated with Conser vation International and The Natural Step – two nonprofit organizations with special expertise in this area – to develop a more systematic approach. With their help, we have developed a vision for a socially responsible food system and related principles. Building on these, we have developed more specific social and environmental guidelines, which provide a framework for our further work with suppliers. We are now working on initiatives to incorporate social responsibility measures into our global fish and agricultural product supply chains.

Environmental Guidelines on Fish SourcingOur Environmental Guidelines on Fish Sourcing establish clear, measurable criteria related to the environmental health and management of whitefish fisheries. They were introduced into our worldwide supply chain in the first half of 2004. We will use the criteria to assess the fisheries

from which our suppliers source, and we will work with those that do not meet the criteria to encourage improvement. This initiative will help ensure that we and others can still buy high-quality whitefish many years from now.

Socially Responsible Food Supply InitiativeOur Socially Responsible Food Supply Initiative aims to develop a measurement system that will promote the long-term health and productivity of land-based agriculture and food processing systems in our supply chain. Working with Conservation International and five of our major suppliers, we are pilot testing an assessment and goal-setting scorecard. Suppliers’ progress toward agreed-upon social responsibility goals will be a factor in our regular evaluations of supplier performance.

Established Supply Chain Programs

Food Quality & SafetyMeasures to ensure the quality and safety of McDonald’s products extend from farm to front counter.

Our global food safety system is based on the Hazard Analysis Critical Control Point approach – a globally-accepted method of preventing food-borne illnesses. The approach involves identifying hazards to which products may be exposed and the critical points where prevention must occur. Plans are then developed to monitor these points and provide for corrective action if potential problems are found. Our suppliers must have a HACCP plan for every food they supply to McDonald’s.

Products: Responsible Purchasing

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Our product specifications incorporate quality and safety criteria. For example, our beef patty specification requires that hamburger patties be made from 100% beef, with no additives or fillers. We have numerous beef safety firewalls. For example, we have never permitted use of mechanical deboning, which many believe can lead to contamination with bacteria and the materials that cause the human equivalent of BSE. We work only with suppliers who can consistently meet our standards. Many of these suppliers are familiar brands that consumers choose for themselves, like Kraft, Nestlé and Tyson.

At the restaurant level, food safety measures include:• Equipment designed with food quality and safety in mind• Food preparation procedures that incorporate safe food

handling practices• Sanitation and food safety training for crew members and

additional food safety training for entry into restaurant management

• Food safety monitoring based on a checklist of important food safety standards and procedures. Company restaurant managers must complete the checklist daily.

In 2002, we introduced a new system – the Restaurant Operations Improvement Process (ROIP) – to evaluate how effectively our restaurants are meeting our hallmark Quality, Safety and Cleanliness standards. The aim is to ensure that every time a customer visits one of our restaurants, he or she receives safe, hot, fresh, good-tasting food, served accurately in a fast and friendly manner and a clean environment. ROIP involves onsite assessments of twelve essential areas, with specific criteria for each. Food safety is one of these areas.

“For more than two decades, McDonald’s has quietly been at the forefront in helping the industry address food safety issues. From promoting the implementation of food safety interventions in the slaughterhouse to developing automated grills for cooking hamburgers to educating thousands of employees annually in safe food handling practices, McDonald’s has had a far-reaching influence in providing greater public health protection through safer foods.”

Dr. Michael P. DoyleRegents Professor and Director

Center for Food Safety, University of Georgia

Animal WelfareIn 2001, McDonald’s established an Animal Welfare Council of independent experts and, with the benefit of their advice, issued global Animal Welfare Guiding Principles. The core of our global program consists of onsite meat processing facility audits and supplier training to ensure compliance with the Principles. In 2003, all facilities that supply meat for our national U.S. menu were audited. Under our procedures, facilities that do not pass an audit are given 30 days to remedy problems unless egregious abuse, neglect or cruelty is involved. No such problems were involved in 2003.

“I have worked with McDonald’s and its suppliers for seven years. When McDonald’s started to make animal welfare requirements part of their quality assurance system, animal welfare leaped into the mainstream. As a result of their expectations, there is much more training and sensitivity to animals.”

Dr. Temple Grandin Colorado State University

McDonald ’s Principal Animal Welfare Consultant

In the U.S. and Canada, we have supplemented our global Animal Welfare Guiding Principles with specific standards for egg suppliers. Consistent with recommendations of the Scientific Advisory Committee on Animal Welfare for the United Egg Producers (UEP) and our own Animal Welfare Council, our Laying Hen Guidelines specify 76 square inches as the acceptable minimum amount of living space per bird, prohibit the practice of withdrawing feed and water to induce molting and require that beak trimming practices comply with UEP standards. These guidelines apply to facilities dedicated to producing eggs for the McDonald’s System and are recommended for non-dedicated facilities.

Supplier Social AccountabilityMcDonald’s Code of Conduct for Suppliers establishes our expectations for reasonable work schedules, fair compensation, safe and healthy work environments and more. We monitor compliance through external assessments and encourage continuous improvement by training and by requiring facility enhancement plans, where needed. In 2003, our supplier social accountability program trained 184 U.S. suppliers and completed 31 external assessments of U.S. supplier facilities. Our goal for 2004 is to train 187 U.S. suppliers and complete 372 U.S. supplier facilities assessments.

We are working with suppliers to help them develop their own systems of accountability so that they can identify and address problems on an ongoing basis, rather than only in the context of periodic assessments. These dynamic systems will help ensure sustained compliance with our Code of Conduct by the whole spectrum of our suppliers in our diverse markets. U.S. suppliers have responded well to the challenge.

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Products: Responsible Purchasing

Environmental PoliciesSupply chain practices in the U.S. reflect global environmental policies. Since 1989, our beef specifications have included a policy against purchasing beef from rain forests or recently deforested rain forest land. Our global environmental policy, adopted in 1990, commits us to ongoing efforts to reduce the amount of materials we use in packaging, reuse materials when feasible, make maximum use of recycled materials and recycle as much as we can. Our U.S. programs, performance and plans in these areas are discussed in the following chapter on Place.

Recent DevelopmentsAntibiotics Policy for SuppliersOver the past several years, scientific evidence has increasingly shown that disease-causing bacteria are developing resistance to antibiotics that were once effective. Research shows a connection to antibiotic misuse in humans but also to the use of antibiotics in food animals. We have responded with new policies for antibiotics use by suppliers to the McDonald’s System.

In 2001, McDonald’s USA agreed with our principal poultry suppliers that they would no longer, except in unforeseeable emergencies, use fluoroquinolones—a class of drugs used to treat human ailments. We subsequently testified in support of a nationwide mandatory ban on fluoroquinolones in animal feed, as proposed by the U.S. Food and Drug Administration.

In 2003, McDonald’s issued a broader global Policy on Antibiotic Use in Food Animals. This policy establishes principles to guide our suppliers’ uses of antibiotics

in animal production. It also calls for the phase-out of the use for growth promotion of antibiotics used in human medicine. The requirements apply primarily to poultry suppliers, but compliance by other suppliers will be a favorable factor in purchasing decisions.

Beef Safety LeadershipFor many years, our supply chain has included protections against BSE beyond those required by government agencies. Four years ago, following an outbreak of BSE in continental Europe, we convened a meeting of experts to review our firewalls and identify ways we might strengthen them even more. Participants included representatives of the federal agencies responsible for BSE prevention and control, the major U.S. beef and dairy producers associations, one of our key beef suppliers, our most senior Worldwide Supply Chain Management officer and our chief beef specialists.

The meeting had several results. One was the establishment of a standing International Scientific Advisory Committee to provide expert advice on beef safety. Another was development of our feed certification program. This program requires McDonald’s beef suppliers to certify that their suppliers are complying with a Food and Drug Administration ban against using cattle feed containing meat or bone meal from cattle or other ruminants. BSE-contaminated feed is believed to be the major way the disease is transmitted.

We also developed an agenda of regulatory priorities, initiated discussions with U.S. food safety and health agencies and built broad-based support for the priorities by engaging the principal grocery and restaurant trade associations.

Following the identification of BSE cases in Canada and the U.S., we again offered federal policy-makers recommendations for strengthening BSE protections. Some of these have been adopted and others are in the process of becoming final regulations.

Changing Happy Meal Toy BatteriesB u t t o n c e l l b a t t e r i e s — t h e s m a l l , r o u n d batteries used to power toys—t r a d i t i o n a l l y co n t a i n s o m e trace amount of mercury. Mercury is a natural ly-occurring element, but when it enters the environment as pollution it can affect human health. We, therefore, worked closely with our toy suppliers to develop an alternative battery. At the end of the first quarter of 2004, we completed a phase-out of intentionally-added mercury in the batteries used in electronic toys for Happy Meals.

Following the identification of BSE cases in Canada and the U.S., we again offered federal policy-makers recommendations for strengthening BSE protections. Some of these have been adopted and others are in the process of becoming final

B u t t o n c e l l b a t t e r i e s — t h e s m a l l , r o u n d batteries used to power toys—t r a d i t i o n a l l y co n t a i n s o m e trace amount of mercury. Mercury is a natural ly-occurring element, but when it enters the environment as pollution it can affect human health. We, therefore, worked closely with our toy suppliers to develop an alternative battery. At the end of the first quarter of 2004, we completed a phase-out of intentionally-added mercury in the batteries used in electronic toys for Happy Meals.

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“People say McDonald ’s is just hamburgers, just fast food, but we don’t let it be just that. We look after people – our employees, their families and their communities. It means a lot to be part of a system that cares about these things.”

Ben FitzpatrickTeam Leader, Worldwide Mid-Management

DevelopmentMcDonald ’s Corporation

Our People PriorityAt McDonald’s, we know that people are our most valuable resource. Our People Principles commit us to fair and respectful treatment, openness, appreciation of diverse opinions, support for personal and professional development and recognition and rewards for good work. Our business strategy – the Plan to Win – hinges on well-trained people who are proud to work under the Arches.

The hallmarks of our people programs are opportunity and inclusion. In our restaurants, people can learn what it takes to succeed. Olympic gold medalists,

physicians, business owners, teachers, even some members of the U.S. Congress gained their first work experience as restaurant crew members. So did our President and CEO Charlie Bell; Claire Babrowski, our Chief Restaurant Operations Officer; Janice Fields, President of our U.S. Central Division; and Mats Lederhausen, Managing Director of McDonald’s Ventures. Approximately 39% of U.S. Owner/Operators are also former McDonald’s restaurant employees.

Learning and Development

We have formal learning and development programs in place worldwide and for employees at every level, from restaurant crew members through executive officers. There is also a formal training program for prospective Owner/Operators and additional courses Owner/Operators may take for further business expertise.

Since 1961, learning and development at McDonald’s has been centered at Hamburger University (HU) – our own learning academy. HU has seven

campuses around the world, including a main 130,000-square-foot facility at our headquarters in Oak Brook, Illinois – the Hamburger University Fred L. Turner Training Center. The American Council on Education has accredited HU courses, signifying that they are equivalent to courses offered by major colleges and universities throughout the U.S.

Crew Member TrainingOur program provides a structured career path from entry-level crew duties to restaurant management and beyond.

Standard operating procedures require training for all crew members. Global templates for the curriculum and materials help ensure high quality, consistency

and comprehensiveness. Traditionally, crew member training has been delivered by experienced, specially-trained crew members, using a broad range of materials developed at HU. We have recently introduced a computer-based e-learning program, available in both English and Spanish, as part of a blended approach. Our studies indicate that the e-learning option tends to produce faster learning, better retention and greater employee satisfaction than instructor-led training.

Restaurant Management TrainingAs with crew member training, there is a global core curriculum for restaurant management. Completion of this curriculum is also a prerequisite for approval as an Owner/Operator. Each course includes a self-study component and classroom sessions of three to five days each. In 2003, more than 34,000 U.S. employees participated in restaurant management courses.

Mid-Management TrainingExperienced restaurant managers may become what we call “operations supervisors” and “business consultants” – that is, full-time, expert resources for restaurant managers and Owner/Operators. Two core courses at HU develop essential consultant skills such as data collection and analysis, planning, performance measurement and effective communications. There is also a self-study course in financial skills and an additional

People: Our Greatest Resource

course for consultants who will specialize in training. The sequence includes two further courses in leadership, coaching and strategic decision-making for department managers and directors.

Additional Training OpportunitiesThrough the McDonald’s intranet, corporate employees may access approximately 450 online courses in business skills, software programs for essential business functions and programs used in graphic design and other media-related work. The library includes, where available, versions to accommodate disabilities. Employees may, in many cases, secure independent online verification and certification of skills.

We also provide financial support for college and university coursework. Qualifying corporate headquarters and McDonald’s USA employees may receive partial reimbursement for tuition up to $5,250 per year for courses relevant to their present jobs or functions, jobs they may become eligible for in the future or business courses in approved programs, even if not directly related to their job. In 2003, approximately 640 employees received a total of more than $1.6 million in tuition support.

U.S. Owner/Operators and company-owned restaurants offer scholarships for student-employees through our National Employee Scholarship Program. Recipients are selected on the basis of academic excellence, community service and commitment to delivering outstanding experience to our customers. Every academic year, the program awards a $1,000 scholarship to an

outstanding student-employee in each state and the District of Columbia and a $5,000 scholarship to the student-employee judged to demonstrate the highest commitment to school, community service and work.

Some Owner/Operators provide additional financial support for employee education. For example, Birmingham, Alabama Owner/Operators Max Cooper and Ed Levins provide college scholarship ”bonuses” for their restaurant crew members. Over the years, thousands of crew members have received a total of approximately $500,000 in financial assistance.

DiversityDiversity As a Business StrategyWe know that seeking diversity is good business strategy as well as good corporate citizenship. We have long promoted inclusion with ever-expanding opportunities because we want the best people and the benefits of varied perspectives, skills and energies. Today, we have a diverse customer base and one that is becoming even more so. Employees, Owner/Operators andsuppliers who reflect the diversity of the market can help ensure culturally-sensitive environments and give us insights into how to best serve our customers’ diverse needs and preferences.

Diversity Initiatives ProgramWe have had a formal diversity program in the U.S. since 1974. Today, it has a full-time staff of four, headed by a vice president.The success of the program is widely recognized. Indeed, for the last two years in a row, McDonald’s has been named Best Company for Minorities by Fortune magazine.

The program has three main points of focus:

• Education. We view staff education as key to embedding diversity throughout the organization. Uniquely designed diversity education seminars are offered on a regular basis, and diversity components are built into the training and development curricula for restaurant managers, mid-level managers and executive officers.

• Guidance. Headquarters and field office staffs receive expert guidance on such issues as building diversity into business plans, coaching and problem-solving and developing partnerships in diverse communities.

• Outreach and Leadership. To maximize outreach, responsiveness and appreciation of our commitment, we maintain close relationships with diverse national and community organizations. These include, among others, the NAACP, the National Urban League, the National Council of La Raza, the U.S. Hispanic Chamber of Commerce, the U.S. Pan Asian American Chamber of Commerce, the Women’s Foodservice Forum, the American Association of People with Disabilities and the World Congress and Exposition on Disabilities.Patricia Harris

Vice President, McDonald ’s USA Chief Diversity Officer

“The U.S. is at a pivotal place in history with the increasing diversity of the population. The changing demographics provide both opportunities and challenges for corporate America. My task and my passion is to understand the implications for our customer base and our workforce and to translate differences into business enablers.”

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Performance ResultsWith strong top management support, guidance and outreach, we have achieved measurable results in building an inclusive, high-performing workforce. Indeed, for the last two years, Fortune magazine has ranked McDonald’s number one in its list of “best companies for minorities.”

Approximately 53.1% of our headquarters and U.S. company workforce are members of a racial or ethnic minority, and approximately 58.5% are women.

Particularly significant is the diversity in policy-making and managerial ranks. In our headquarters and U.S. company workforce, approximately 24% of officers, directors and senior directors and managers, not including managers of company-owned restaurants, are minorities, and approximately 44% are women.

Our diversity initiatives Our diversity initiatives are likewise reflected are likewise reflected in our franchising and in our franchising and supply chain operations. supply chain operations. As of June 30, 2004, As of June 30, 2004, approximately 40% of approximately 40% of U.S. Owner/Operators U.S. Owner/Operators w e r e m i n o r i t i e s w e r e m i n o r i t i e s and women. And in and women. And in 2003 we purchased 2003 we purchased

approximately $3.9 billion in food and approximately $3.9 billion in food and paper products from U.S. minority paper products from U.S. minority and women suppliers. A U.S. Treasury and women suppliers. A U.S. Treasury Department and Small Business Department and Small Business Administration report highlighted Administration report highlighted McDonald’s for effective strategies McDonald’s for effective strategies in minority franchisee and supplier in minority franchisee and supplier recruitment and development.recruitment and development.

Awards and Other RecognitionOur diversity initiatives have earned Our diversity initiatives have earned recognition from a number of respected recognition from a number of respected organizations. Recent examples in the organizations. Recent examples in the U.S. include:• Best Company for Minorities Best Company for Minorities

(2003 and 2004) (also ranked (2003 and 2004) (also ranked among the best, 2000–2002) – among the best, 2000–2002) – Fortune magazine.

• Patriot Award (2003) – League of Patriot Award (2003) – League of United Latin American CitizensUnited Latin American Citizens

• PUSH-Excel Corporate Partner PUSH-Excel Corporate Partner Award (2003) – Rainbow PUSH Award (2003) – Rainbow PUSH Coalition

• Among Best Companies for Among Best Companies for Minorities (2003) – National Minorities (2003) – National Hispanic Corporate CounciHispanic Corporate Council

OFFICERS SR. DIRECTORS/DIRECTORS MANAGERSOFFICERS SR. DIRECTORS/DIRECTORS MANAGERS Minority Men 14.20% 12.74% 13.12% Minority Men 14.20% 12.74% 13.12% Minority Women 5.56% 7.33% 12.06% Minority Women 5.56% 7.33% 12.06% Non-Minority Men 63.58% 50.09% 40.90% Non-Minority Men 63.58% 50.09% 40.90% Non-Minority Women 38.27% 29.84% 33.92% Non-Minority Women 38.27% 29.84% 33.92%

These figures are current as of June 30, 2004. Figures for managers do not include managers of company-owned restaurants.

People: Our Greatest Resource

% IN WORKFORCE White (Not of Hispanic Origin) 46.94% Black (Not of Hispanic Origin) 18.58% Hispanic 27.74% Asian or Pacific Islander 3.69% American Indian or Alaskan Native 3.05% Men 41.55% Women 58.45%

These figures are current as of September 30, 2003 and represent headquarters and U.S. division, regional and company-owned restaurant staffs. The categories used here are those established, for required employer reports, by the U.S. Equal Employment Opportunity Commission.

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“When I see the Arches, I look beyond a “When I see the Arches, I look beyond a physical structure. I see a community leader running a successful business that employs people who may not find work otherwise. I see customers whose children play on McDonald’s-sponsored teams. And I see a group of caring and committed individuals who help our Ronald McDonald House children and families every day.”

Tom Soma Executive Director

Ronald McDonald House Charities of Oregon and Southwest Washington

McDonald’s in the Community

Many see their local McDonald’s as a place to have a meal or snack at a reasonable price. And it is. But our restaurants play a broader role in the communities we serve. They invest money in the community – as employers, taxpayers and purchasers of goods and services. They sponsor community programs and help support the good work of Ronald McDonald House Charities (RMHC) and its local Chapters. They also have environmental impacts, and with more than 13,000 restaurants in the U.S., the cumulative effects are significant. We are working to better understand these impacts and how to manage them more effectively. effectively. effectively

Environmental Stewardship at the Restaurant Level

Approach to Environmental ManagementOur global environmental policy establishes guiding principles for our programs. It commits us to environmental leadership in effectively managing solid waste, conserving and protecting

natural resources and encouraging environmental values and practices in the local communities we serve. In the U.S., as in other countries, these principles are translated into programs responsive to local priorities and opportunities.

Restaurant-Level Environmental PrioritiesA McDonald’s restaurant is a compact system that requires environmental resources, such as energy, packaging and water, to support the cooking, lighting, cooling and heating required to serve up to 2,000 meals and snacks per day. This means that running good, efficient restaurants will not only increase customer satisfaction, but reduce our impacts on the environment and improve cost controls. Two key priorities, from both a business and an environmental perspective, are energy consumption and solid wastes.

Electrical Energy UseElectrical energy consumption is our restaurants’ most significant direct environmental impact. In the U.S., they consume, on average, 550,000 kilowatt hours (kWh) per year. So for us and our Owner/Operators, energy management serves two compelling objectives – protecting the environment and – protecting the environment and controlling operating costs.

On the environmentalside, managing our energy uses not only conserves energy sources like natural gas and coal, but also reduces emissions associated with climate change. On the cost side, we have found that energy management strategies can reduce energy expenditures by 10% – perhaps more.

Place: In Your Community

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For the last three years, McDonald’s U.S. Energy Team has been pursuing an aggressive initiative to further improve energy management at the restaurant level. The current strategy focuses on five areas and identifies priority actions and/or results for each.

The Team is implementing this strategy in a variety of ways, including:• Developing energy tools that can be used by restaurant

operations staff to reduce energy consumption and costs • Providing detailed step-by-step training on the energy tools

and energy-efficient behaviors• Maintaining an intranet site that includes the tools, online

training and other energy-related information, including specifications and recommendations for energy-efficient lighting and equipment

• Negotiating energy procurement contracts in gas and electricity markets that are no longer state-regulated monopolies

• Implementing a tracking and benchmarking system for our company-owned restaurants. This will help measure progress toward the ultimate energy reduction goal.

PackagingUse and disposal of packaging are also major restaurant impacts. In 2003, our restaurants purchased, on average, approximately 24.6 tons of packaging each. Reducing packaging impacts

is thus a second major priority – one we have pursued for nearly 15 is thus a second major priority – one we have pursued for nearly 15 years. years.

Our environmental focus on packaging began in the late 1980s, Our environmental focus on packaging began in the late 1980s, when we were one of the first major food service companies to when we were one of the first major food service companies to phase out use of foam packaging containing chlorofluorocarbons phase out use of foam packaging containing chlorofluorocarbons (CFCs). In 1990, we formalized a continuing collaboration with (CFCs). In 1990, we formalized a continuing collaboration with Environmental Defense (ED) to focus on packaging reduction and Environmental Defense (ED) to focus on packaging reduction and related solid waste issues. It was one of the first collaborations of its related solid waste issues. It was one of the first collaborations of its type in the U.S. Through an ongoing series of changes in packaging type in the U.S. Through an ongoing series of changes in packaging design – for example, reducing the size and weight of napkins and design – for example, reducing the size and weight of napkins and the thickness of straws – we achieved, by 1999, packaging reductions the thickness of straws – we achieved, by 1999, packaging reductions totaling 297 million pounds.totaling 297 million pounds.1 We have continued implementing further changes, reducing packaging by an average of 8.5 million further changes, reducing packaging by an average of 8.5 million pounds per year.pounds per year.

1 Here and throughout, the packaging data cited are for our U.S. business. 1 Here and throughout, the packaging data cited are for our U.S. business.

“Our partnership to reduce packaging waste was pivotal for the environmental community. Corporate America realized that what McDonald’s started was smart business – it was leadership. The project had a huge impact on how businesses – and non-profits – go about addressing environmental programs and how both sides view each other more positively.”

Gwen RutaDirector of Corporate Partnerships

Environmental Defense

While seeking to reduce the amount of material used in our packaging, we also work with our suppliers to incorporate post-consumer recycled content – that is, materials that have been diverted or recovered from the waste stream after consumer use. We balance environmental criteria, as we must, with functionality, quality, legal requirements, cost and our own food quality and safety standards.

As our business expands, total packaging use inevitably increases. We thus measure the results of our packaging reduction efforts in terms of weight per $1,000 in sales. Measured this way, our use of packaging in 2003 was approximately 4.9% greater than in 2002, principally because we changed some of our sandwich packaging from flexible wraps to cardboard containers. However, our use of recycled content also increased, by approximately 6.3% – again due to our 2003 packaging initiative.

Balancing Our Commitments: Our 2003 Packaging InitiativeIn 2003, McDonald’s USA changed the packaging for some of our sandwiches and introduced new carryout bags. The changes were among many initiatives to improve our customers’ experience. The new packaging was designed with the environment in mind, but it still increased environmental impacts. Our approach to the issues exemplifies the way we balance – and attempt to reconcile – our commitments to exceptional customer experience and environmental responsibility.

The new packaging was for the Quarter Pounder with Cheese, the Big N’ Tasty, Filet-O-Fish, Chicken McGrill, Crispy Chicken sandwiches

and the Big Mac sandwich. Instead of flexible wraps, our restaurants began using rigid corrugated containers made of multiple layers of paper. These provide better insulation and so can help keep the sandwiches hotter and fresher. They also hold the sandwich in place.

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Energy efficiency Energy efficiency

Operational efficiency

Energy commodity procurement

Price risk management

Environmental and social responsibility

- Reduce energy consumption by installing energy-efficient equipment in new and existing restaurants

- Improve energy information management- Utilize optimal operating and equipment maintenance procedures

- Reduce gas and electricity commodity costs

- Manage the energy commodity process through risk management products- Reduce energy price volatility to minimize cash flow impact

- Be recognized as an environmentally responsible company and an industry leader in energy conservation

U.S. Energy Team Strategy

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And the combination of layers and corrugated fluting makes for a package that is stronger and more crush-resistant but still relatively lightweight.

The corrugated containers include 46% post-consumer recycled fiber. Unbleached materials in the middle and outer layers further improve the environmental profile.

The new carryout bags contain 40% post-consumer recycled material, 10% less than the bags they replaced. Because the bags are white, the paper must be bleached, whereas the brown bags they replaced were unbleached.

Working with our suppliers and Environmental Defense, we initiated changes to offset 100% of the increased environmental impacts of both the containers and carryout bags by January 2004. We also committed to achieving an additional 5% reduction in impacts by March 2004. Both these objectives were achieved. The offsets included, among others, increasing the post-consumer recycled content in our napkins and using lighter-weight paperboard for our five-ounce and six-ounce fry cartons. We thus found a way to honor our commitment to environmental leadership while also advancing our goal of improving customer experience.

Advancing Our Responsible Packaging CommitmentPaper products in some form account for more than 80% of the materials in our packaging. One of our global objectives is to develop sustainable forestry principles. With these principles, our procurement specifications for packaging will systematically help promote proper management of forests – a renewable resource. We are also investigating the use of biodegradable polymers, which could increase composting in local markets where conditions permit this approach.

Targeting Waste ReductionSince 1993, we have commissioned waste characterization studies to help us understand the makeup of our restaurant waste and target areas for reduction. These studies measure and track the amounts and types of waste discarded behind the counter, in the customer seating area and in the parking lot, using a sample of McDonald’s U.S. restaurants. Ten restaurants have thus far been audited. The findings generally indicate that:• Our restaurants’ inputs into the waste

stream have decreased since 1993. • Approximately 70% of our restaurant

waste is generated behind the counter.

• This waste consists largely of the corrugated shipping containers in which products arrive at our restaurants and organic materials, like used cooking oil.

Many of our U.S. restaurants recycle both corrugated paper and used cooking oil. We are now pursuing a bulk cooking oil management strategy that, among other things, reduces behind-the-counter waste by eliminating some packaging.

Bulk Cooking Oil InitiativeSince 1999, we have been engaged in a supplier initiative to develop a bulk cooking oil management program, as an alternative to transporting new and used cooking oil in plastic jug containers. The program eliminates, on average, 1,500 pounds of packaging waste per restaurant per year – both jugs and the corrugated cardboard boxes that hold them. It also eliminates the waste of residual oil in used jugs.

Although costs are slightly higher, the program has offsetting advantages. Because employees need no longer handle cooking oil, safety and security are improved, potentially reducing insurance costs and increasing job satisfaction. And the labor saved may be reallocated to value-adding tasks. According to a study by Restaurant Technologies, Inc., bulk

delivery of oil eliminates management and handling of, on average, 17,080 pounds of cooking oil per restaurant per year. The labor savings are thus considerable.

The program is voluntary for Owner/Operators. So we are making ongoing – and demonstrably successful – efforts to communicate the business case. As of May 2004, approximately 3,500 McDonald’s U.S. restaurants were participating. Approximately 70% of these were franchised operations. Our target is to achieve participation by all restaurants capable of receiving bulk oil (approximately 87% of all U.S. restaurants) by 2008.

LitterPreventing litter is ultimately an individual responsibility. However, our restaurants have long played an active role in controlling litter. Our training materials for company-owned restaurants include procedures for regular clean-ups in areas immediately surrounding the restaurants. These materials are made available, as resources, to Owner/Operators and their managers. Litter control is also incorporated into the new ROIP. For wider impact, our restaurants have provided support for community clean-up programs.

Place: In Your Community

Communities Grow with McDonald’sMcDonald’s has been a force in our communities since 1955, when Ray Kroc opened his first restaurant in Des Plaines, Illinois and began hiring local residents, purchasing from local suppliers and paying local fees and taxes.

For the past four years, we have focused on strengthening our understanding of our economic contributions so that we may improve our investments in local communities. This effort involves going beyond the data in our own management records to projections of the effects of the jobs we provide and the business we do with local suppliers. For example, when we become a customer of a local business, that business may hire

additional employees to serve our needs. Those employees will use at least some of their earnings to make purchases from other local businesses, which may hire additional employees and so forth. A similar multiplier effect applies to taxes and the local programs they support.

To quantify such effects, we have retained Professor Dennis H. Tootelian, a business school faculty member at California State University at Sacramento. He has developed a customized model for our restaurants and has thus far completed studies of four U.S. metropolitan areas and five western states. Additional state impact studies are underway. We have also compiled supply chain data to provide some perspectives on our impact on U.S. agriculture.

Professor Dennis H.TootelianCalifornia State University at Sacramento

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McDonald’s restaurants are major contributors to states’ local economies. They employ a large number of people who reside in the communities in which the restaurants are located and spend large amounts of money locally on labor and goods and services. The combination of restaurant employment and expenditures has a pronounced positive impact on local economies because they recycle money back into the states that is used to purchase other goods and services and thereby create jobs.

Because of the volume of business, McDonald’s incurs substantial expenses in the form of business taxes, licenses and payroll taxes. Additional taxes are generated by the economic activities McDonald’s stimulates.

The following table indicates the economic contributions of McDonald’s restaurants in the sample states. 2

Texas(1,139 Restaurants)

Oklahoma(170 Restaurants)

California(1,297 Restaurants)

People employed in management, support & operations staff positions

37,265 8,480 56,060

Expenditures on salaries & wages >$381.8 million$1.05 million/day

~$71.9 million $197,000/day

>$550.1 million$1.5 million/day

Expenditures on benefits Nearly $130.6 million Nearly $17.9 million Nearly $72.1 million

Percent of sales revenues consumed by wages & benefits

33.4% 34.3% 23.5%

Spent in the community 3 $611.2 million~$1.7 million/day

$110.1 million>$301,725/day

>$1 billion>$2.7 million/day

Returned to the local economy/ $1.00 earned >40¢ >42¢ 43¢

Investment in area 4 > $911.2 million >$136 million Nearly $2 billion

Jobs created > 96,900 >22,050 >145,600

Spending created ~$2 billion ~$371.3 million >$2.8 billion

Payments in business taxes, licenses & payroll taxes

$55.2 millionNearly $151,100/day

$7.4 millionNearly $20,375/day

$75.4 millionNearly $206,500/day

Taxes created by generation of new jobs & purchases from other local businesses

$347.8 million $50.5 million $385.8 million

2 All data in the table are from Professor Tootelian’s reports of his studies. The Texas and Oklahoma data are from 2002. The California data are from 2003.3 Totals consist of expenditures for employee wages and benefits, plus purchases of local goods and services.4 Investment figures represent the value of physical facilities, based on average construction costs.

Summary of State-Level ReportsBy Professor Dennis H. Tootelian

Local Community Involvement“Every McDonald ’s Owner/Operator and every McDonald ’s employee knows that we are part of a community and involved. We want to be involved.”

Estelle MusicoMcDonald ’s Owner/Operator

Somerset, Pennsylvania

At the corporate level, McDonald’s helps support programs that benefit children and families around the world, principally through its support for RMHC and World Children’s Day. At the local level, our U.S. Owner/Operators and company-owned restaurants participate in these programs and, in some instances, create and/or sponsor programs of their own. Suppliers are also often active supporters.

While the programs vary considerably, they tend to reflect emphases consistent with our brand, our core values and our relationship with customers – health, education, youth sports and amateur athletics. Owner/Operators and company-owned restaurants also play a significant role in disaster relief efforts.

World Children’s DayIn 2002, McDonald’s inauguratedWorld Children’s Day – a uniquefundraiser involving concurrent activities by McDonald’s restaurants around the world. The event benefits local RMHC Chapters and other programs for children. McDonald’s U.S. restaurants have actively participated, donating a portion of sales from certain popular menu offerings and paper cutout hands to the 134 RMHC Chapters across the country. In 2002–2003, we raised a total of more than $7.4 million.

The funds will help support RMHC, local RMHC Chapters and their core programs – Ronald McDonald House, Ronald McDonald Family Room and Ronald McDonald Care Mobile. There will also be additional support for the RMHC scholarship program and for grants to other organizations that directly improve the health and well-being of children.

The well-known Ronald McDonald Houses provide a “home away from home” for families with seriously ill children who are receiving treatment at nearby hospitals. Ronald McDonald Family Rooms provide a haven within the hospitals for such families. The newest of these initiatives – the Ronald McDonald Care Mobiles – are state-of-the-art mobile health care programs that deliver cost-effective medical, dental and educational services to underserved children. As of July 2004, there were 152 Ronald McDonald Houses, 39 Ronald McDonald Family Rooms, and 19 Ronald McDonald Care Mobiles in the U.S.

System Support for RMHCSystem support for RMHC goes far beyond our annual World Children’s Days. McDonald’s Corporation covers the majority of general and administrative costs of the RMHC global office and provides free use of facilities, equipment and materials. And McDonald’s Owner/Operators, employees, suppliers and business partners provide support at every level of the Charities activities. Many Owner/Operators serve as volunteers on the boards and committees of local RMHC Chapters, working with other members of their community to address the challenges of operating a public charity that directly serves children and families. Year in and year out, Owner/Operators leverage their resources to sponsor fund-raising programs and events. These have raised millions of dollars to help the Charity fulfill its mission.

EducationIn collaboration with local school districts, the Greater San Antonio (Texas) Operators Association sponsors an innovative education and training program called Camp Mickey D’s. It was initiated by Owner/Operator Sybil Pici, and she is still actively involved in its development. Through a combination of classroom instruction and in-restaurant training, Camp Mickey D’s helps high school students learn about workplace values and the connection between school and work. In 2003, the program served 38 high schools in 14 school districts in and around San Antonio. A new junior college program expands its scope, and four hotel chains have used it as a model for similar programs of their own.

In several regions, McDonald’s restaurants provide grants to local school teachers to support creative hands-on programs that enhance students’ learning experience. The MAC (Make Activities Count) grants program has been active in the Pittsburgh and Johnston-Altoona areas of Pennsylvania for 10 years and in Central Indiana for six years. It is also one way our Erie, Pennsylvania, Dayton, Ohio, and Syracuse and Buffalo, New York, area restaurants support education in their local communities.

McDonald’s USA has been a corporate sponsor of the National Merit Scholarship Corporation (NMSC) since 1992. The company awards scholarships for up to four years of undergraduate study to children of Owner/Operators and company employees selected by the NMSC competitive process. Thirty-eight outstanding students have thus far received financial assistance for their college careers through our sponsorship.

Health Care Since 2001, the Women Owners Network (WON) in our West Division has sponsored an annual Mother’s Day weekend fundraiser to support the fight against breast cancer. Proceeds from sales of special items at McDonald’s restaurants throughout the West go to support breast cancer work, principally at the City of Hope – one of the world’s leading research and treatment centers for cancer and other serious diseases. WON members include McDonald’s women Owner/Operators, corporate employees and suppliers. In the last four years, the program has raised more than $1.6 million for the cause. McDonald’s Central and East Divisions also sponsor Mother’s Day fundraisers for breast cancer efforts.

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For 11 years, our U.S. restaurants have participated in Immunize for Healthy Lives – a program jointly sponsored by the American Academy of Pediatrics and RMHC. Working with local healthcare providers, local RMHC Chapters and other organizations, we help educate parents on the importance of timely vaccinations for their children.

Youth SportsFor the last 14 years, McDonald’s Owner/Operators in the Chicago and Northwest Indiana area have sponsored an annual Kids Triatholon – a combination swimming, bicycling and racing competition for boys and girls ages seven through 14. In 2003, more than 800 kids participated.

McDonald’s restaurants in Southern California serve as sponsors of American Youth Soccer Organization (AYSO) programs, helping to provide opportunities for physical activity to nearly 250,000 boys and girls. With extensive in-restaurant communications, they raise awareness of AYSO’s core philosophies, which emphasize inclusion, fun, positive coaching and good sportsmanship. The restaurants also fund the development and distribution of informational kits for AYSO volunteers and sponsor tournaments for players with special needs.

Support for Disaster ReliefWhen wildfires raged through Southern California, in October 2003, McDonald’s restaurants mobilized to support the rescue workers and evacuees. We delivered more than 30,000 hot meals to emergency workers and displaced families at relief centers and also provided complimentary meals for police and firefighters. The corporation donated $100,000 to the relief effort, and a special fund to assist employees affected by the fires was established within McDonald’s Family Charities – a public charity created to help McFamily members affected by natural disasters.

After the Columbia space shuttle crash, in February 2003, Texas Owner/Operator Will May moved swiftly to support the recovery effort. Working with his suppliers, he had breakfast and snacks available at the central command post every morning and even airlifted sandwiches to volunteers in the field. Members of the National Guard, Red Cross and anyone else in uniform received complimentary meals at his restaurants. May was introduced to McDonald’s tradition of giving back to the community 36 years ago, when he began his career as a crew member in one of our restaurants.

In the wake of the 2004 Florida hurricanes, McDonald’s restaurants in the affected areas mobilized their resources to support disaster relief efforts and aid employees and their families. With help from one another and their distributors, Owner/Operators kept their restaurants functioning, when possible, to provide complimentary meals and beverages and temporary shelter to emergency workers. They also provided crew members and managers with assistance in finding alternative housing, hands-on help in restoring their homes and clearing debris, food, financial assistance and other aid. RMHC donated $25,000 to the American Red Cross to help bring supplies and other help to those in need.

Place: In Your Community

After the Columbia space shuttle crash, in February 2003, Texas Owner/Operator Will May moved swiftly to support the recovery effort. Working with his suppliers, he had breakfast and snacks available at the central command post every morning and even airlifted sandwiches to volunteers in the field. Members of the National Guard, Red Cross and anyone else in uniform received complimentary meals at his restaurants. May was introduced to McDonald’s tradition of giving back to the community 36 years ago, when he began his career as a crew member in one of our

In the wake of the 2004 Florida hurricanes, McDonald’s restaurants in the affected areas mobilized their resources to support disaster relief efforts and aid employees and their families. With help from one another

“We call our business ‘The Yin organization’ because it’s all about family in many, many ways. It’s the family Regina and I have raised with our three daughters, it’s our family of employees and it’s the families we support through the variety of charitable programs our success has enabled us to offer.”

C.C. YinMcDonald ’s Owner/Operator2003 U.S. Commerce Department National Minority Retail Firm of the Year

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Online Resources Referenced in This ReportThe following resources are available on McDonald’s corporate website at www.mcdonalds.com/corp/values/socialrespons.html:

• McDonald’s 2004 Worldwide Corporate Responsibility Report• Global Advisory Council on Balanced Lifestyles Members, with Qualifications• Socially Responsible Food Supply Principles• List of Animal Welfare Council Members, with Qualifications• Global Animal Welfare Guiding Principles• Code of Conduct for Suppliers• Global Rain Forest Policy• Global Environmental Policy• Global Policy for Antibiotic Use in Food Animals• List of International Scientific Advisory Committee Members, with Qualifications

The following resources are available on the McDonald’s USA website, www.mcdonalds.com/usa.html:

• U.S. Food and Nutrition Information• Willie Munchright Videos, Leader Guide and Other Materials• U.S. Laying Hen Guidelines

McDonald’s Global People Principles are available at www.mcdonalds.com/corp/values/ppromise/our_commitment.html.

Information about Ronald McDonald House Charities Programs is available at www.rmhc.org.

CreditsThis report was designed by McDonald’s Creative Services Department.

Photographs were taken by Mark Smalling (www.marksmalling.com), Rosalie Winard (www.birdfactory.org), Mary Yin Liu and McDonald’s Supplier Social Accountability Team. Additional photographs were provided by Franchise Times, the U.S. Department of Health and Human Services and McDonald’s Creative Services Department.

The report was printed by Litho Inc. on Mohawk Options, 100% post-consumer white, which contains 100% post-consumer waste fiber, is Forest Stewardship Council certified and is manufactured with wind power. The printing process is waterless.

This McDonald’s Corporate Responsibility Report for the U.S. System, issued October 2004, provides information about pertinent aspects of our business related to our products, the communities we serve, the environment, our people and our relationships with suppliers. The report presents our progress through the first half of 2004, augmented by some additional information from the third quarter of the year. Forward-looking statements included in the report reflect management’s expectations regarding future events and future performance as of June 2004. McDonald’s continues to launch new initiatives and make changes to our business. These developments, together with the uncertainties inherent in forward-looking statements, mean that programs and results may differ from those described when the report was first issued.

The following trademarks used herein are owned by McDonald’s Corporation and its affiliates: McDonald’s, McFamily, The Golden Arches Logo, Ronald McDonald, Ronald McDonald House, Ronald McDonald House Charities, RMHC, Ronald McDonald Family Room, Ronald McDonald Care Mobile, World Children’s Day, Mickey D’s, Immunize for Healthy Lives, Hamburger University, HU, Happy Meal, Go Active, Go Active!, Made for You, Quarter Pounder, Big Mac, Super Size, Chicken McNuggets, Chicken McGrill, Filet-O-Fish, Big ’N Tasty, Get Moving With Ronald McDonald, McDonald’s All American High ’N Tasty, Get Moving With Ronald McDonald, McDonald’s All American High ’School Basketball Game, McDonald’s All American Soccer Game and What’s On Your Plate.

© 2004 McDonald’s Corporation

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This corporate responsibility report reflects the values and commitments of the entire McDonald’s USA System, which comprises our independent Owner/Operators,

our employees and our suppliers.

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