McDonalds USA

Corporate Responsibility Report 2004

Table of Contents
INTRODUCTION
Who We Are About This Report Feedback

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Letter from McDonalds USA Chief Executive Officer Responsibility & McDonalds Business Plan

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PRODUCTS: BALANCED, ACTIVE LIFESTYLES

Our Commitment Menu Choice Physical Activity Information & Education

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PRODUCTS: RESPONSIBLE PURCHASING

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

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PEOPLE: OUR GREATEST RESOURCE

Our People Priority Learning and Development Diversity

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PLACE: IN YOUR COMMUNITY

McDonalds in the Community Environmental Stewardship at the Restaurant Level Restaurant-Level Environmental Priorities Electrical Energy Use Packaging Targeting Waste Reduction Litter Communities Grow with McDonalds Local Community Involvement World Childrens Day System Support for RMHC Education Health Care Youth Sports Support for Disaster Relief

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Online Corporate Responsibility Resources & Report Credits

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McDonalds USA Corporate Responsibility Report: 2004

Who We Are
McDonalds 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 McDonalds 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 Report

On August 5, 2004, McDonalds 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 McDonalds 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 McDonalds 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 Ps Products, People and Place.

Feedback
Your 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. Donahue Vice President U.S. Communications McDonalds Corporation Oak 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 McDonalds corporate website, mcdonalds.com. To download this report and learn more about McDonalds 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.

letter from chief executive officer, mcdonalds usa

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 McDonalds U.S. business. This report is part of our effort to share what were 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 were 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 McDonalds is dedicated to providing leadership on all of these issues and more. Were 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 were doing, what we have achieved and what we aim to accomplish.

Mike Roberts Chief Executive Officer McDonalds USA

Responsibility at McDonalds
Responsibility at McDonalds 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.

Plan to Win Vision

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

Our Responsibility
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.

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.

place
Our restaurants and drive-thrus 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.

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.

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.

Balanced, Active Lifestyles

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.

Products:

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 Salads

In March 2003, we introduced three mealsize Premium Salads topped with grilled or crispy chicken breast paired with Newmans 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 Agricultures 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.

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, McDonalds 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 McDonalds Corporation

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

Go Active! Happy Meal for Adults

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

Tommy Thompson
U.S. Secretary of Health and Human Services April 2004

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

In 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.

New Happy Meal Choices

W recently completed successful tests e 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 Choices

In November 2003, we introduced new Chicken McNuggets made with white meat. Our restaurants also offer a Chicken McGrill sandwich, Fruit n Y ogurt 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.

In spring 2004, Bob Greene joined with us in an unprecedented public awareness campaign the McDonalds 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 McDonalds 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 Greenes Tips for Leading an Active Lifestyle, a quiz on balanced, active lifestyles and abbreviated nutrition information for popular McDonalds menu items.

Further Menu Developments

By the end of 2004, all participating McDonalds 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 McDonalds System.

Helping Kids Get Moving with Ronald McDonald

Physical Activity
Physical 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. McDonalds 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:

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, funfilled show that incorporates magic, music, dancing and games to get kids and families moving. It can be performed at McDonalds 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 Athletics

Promoting Walking

In June 2003, McDonalds 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 Presidents Challenge Physical Activity and Fitness Awards Program (an initiative of the Presidents 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.

McDonalds restaurants have long supported community-level youth sports. At the company level, McDonalds USA has sponsored the McDonalds 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, McDonalds USA has also co-sponsored McDonalds 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.

Balanced, Active Lifestyles

McDonalds 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. 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 for those 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 sheets Meal 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

Products:

interactive programs and in-restaurant educational materials on the importance of physical activity and nutrition. As a major employer, McDonalds 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 McDonalds Global Director of Nutrition, Dr. Cathy Kapica.

Information & Education

McDonalds 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 2003, we also re-launched the Whats 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 Whats On Your Plate vignettes during childrens TV programming. We are working with the Childrens Nutrition Research Center at Baylor College of Medicine in Houston on further child-focused

McDonalds ... the food manufacturers ... all of them stepped up to help us. And youve seen it already. Look at what McDonalds has done. They have a Happy Meal for adults thats a healthy meal. Theyve got more information for increasing health literacy for the population. Dr. Richard Carmona
U.S. Surgeon General June 2004

Responsible Purchasing
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. McDonalds 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. In the course of our 13-year partnership, weve seen McDonalds 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.

Products:

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.

Our 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.

Socially Responsible Food Supply Initiative

Established Supply Chain Programs

Food Quality & Safety
Measures to ensure the quality and safety of McDonalds 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 McDonalds.

Systematic Approach

Glenn Prickett
Senior 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

Over the last several years, we have collaborated 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 Sourcing

Our 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

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, Nestl 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, McDonalds 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, McDonalds has had a far-reaching influence in providing greater public health protection through safer foods.

I have worked with McDonalds and its suppliers for seven years. When McDonalds 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 McDonalds 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 McDonalds System and are recommended for non-dedicated facilities.

Supplier Social Accountability

Dr. Michael P. Doyle

Regents Professor and Director Center for Food Safety, University of Georgia

Animal Welfare

In 2001, McDonalds 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.

McDonalds 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.

Responsible Purchasing
Environmental Policies
Supply 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. 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.

Products:

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.

Beef Safety Leadership

Recent Developments
Antibiotics Policy for Suppliers
Over 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 McDonalds System. In 2001, McDonalds USA agreed with our principal poultry suppliers that they would no longer, except in unforeseeable emergencies, use fluoroquinolonesa 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, McDonalds issued a broader global Policy on Antibiotic Use in Food Animals. This policy establishes principles to guide our suppliers uses of antibiotics

For 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 McDonalds 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. BSEcontaminated 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.

Button cell batteriesthe small, round batteries used to power toys traditionally contain some trace amount of mercury. Mercury is a natural l yoccurring 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.

Changing Happy Meal Toy Batteries

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Our Greatest Resource

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 McDonaldsVentures. Approximately 39% of U.S. Owner/Operators are also former McDonalds restaurant employees.

People:

Our 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

Crew Member Training

Learning and Development

People say McDonald s is just hamburgers, just fast food, but we dont 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. 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 McDonalds has been centered at Hamburger University (HU) our own learning academy. HU has seven

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 Training

Ben Fitzpatrick
Team Leader, Worldwide Mid-Management Development McDonalds Corporation

Our People Priority

At McDonalds, 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,

As 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 Training
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.

Experienced 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

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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.

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.

Additional Training Opportunities

Through the McDonalds 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 McDonalds 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

Diversity
Diversity As a Business Strategy
We 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 and suppliers 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 Program

We 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, McDonalds 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 Womens Foodservice Forum, the American Association of People with Disabilities and the World Congress and Exposition on Disabilities.

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.

Patricia Harris
Vice President, McDonalds USA Chief Diversity Officer

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Our Greatest Resource

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

People:

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

% 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 Women

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.

Performance Results

Our diversity initiatives are likewise reflected in our franchising and supply chain operations. As of June 30, 2004, approximately 40% of U.S. Owner/Operators 41.55% were minorities 58.45% and women. And in 2003 we purchased approximately $3.9 billion in food and paper products from U.S. minority and women suppliers. A U.S. Treasury Department and Small Business Administration report highlighted McDonalds for effective strategies in minority franchisee and supplier recruitment and development.

With 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 McDonalds 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.

Awards and Other Recognition

Our diversity initiatives have earned recognition from a number of respected organizations. Recent examples in the U.S. include: Best Company for Minorities (2003 and 2004) (also ranked among the best, 20002002) Fortune magazine. Patriot Award (2003) League of United Latin American Citizens PUSH-Excel Corporate Partner Award (2003) Rainbow PUSH Coalition Among Best Companies for Minorities (2003) National Hispanic Corporate Counci Council

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In Your Community
McDonalds in the Community
Many see their local McDonalds 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.

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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 Priorities

A McDonalds 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 Use

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 McDonalds-sponsored teams. And I see a group of caring and committed individuals who help our Ronald McDonald House children and families every day.

Electrical 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 controlling operating costs. On the environmental side, 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.

Environmental Stewardship at the Restaurant Level

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

Tom Soma
Executive Director Ronald McDonald House Charities of Oregon and Southwest Washington

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U.S. Energy Team Strategy

Energy efficiency Operational efficiency - Reduce energy consumption by installing energy-efficient equipment in new and existing restaurants - Improve energy information management - Utilize optimal operating and equipment maintenance procedures

Energy commodity procurement - Reduce gas and electricity commodity costs Price risk management Environmental and social responsibility - 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

For the last three years, McDonalds 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. Use 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 years. Our environmental focus on packaging began in the late 1980s, when we were one of the first major food service companies to phase out use of foam packaging containing chlorofluorocarbons (CFCs). In 1990, we formalized a continuing collaboration with Environmental Defense (ED) to focus on packaging reduction and 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 design for example, reducing the size and weight of napkins and the thickness of straws we achieved, by 1999, packaging reductions totaling 297 million pounds.1 We have continued implementing further changes, reducing packaging by an average of 8.5 million pounds per year.
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 McDonalds 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 Ruta
Director 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 postconsumer 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.

Packaging

Balancing Our Commitments: Our 2003 Packaging Initiative

In 2003, McDonalds 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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In Your Community
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% postconsumer 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 fiveounce 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.

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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 McDonalds 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.

Targeting Waste Reduction

Since 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 McDonalds 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.

Litter

Preventing 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.

Bulk Cooking Oil Initiative

Advancing Our Responsible Packaging Commitment

Paper 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.

Since 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

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Communities Grow with McDonalds

McDonalds 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.Tootelian

California State University at Sacramento

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Summary of State-Level Reports

By Professor Dennis H. Tootelian

McDonalds 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, McDonalds incurs substantial expenses in the form of business taxes, licenses and payroll taxes. Additional taxes are generated by the economic activities McDonalds stimulates. The following table indicates the economic contributions of McDonalds restaurants in the sample states. 2

Texas (1,139 Restaurants) People employed in management, support & operations staff positions Expenditures on salaries & wages 37,265

Oklahoma (170 Restaurants) 8,480

California (1,297 Restaurants) 56,060

>$381.8 million $1.05 million/day

~$71.9 million $197,000/day

>$550.1 million $1.5 million/day Nearly $72.1 million

Expenditures on benefits

Nearly $130.6 million Nearly $17.9 million

Percent of sales revenues consumed by wages & benefits Spent in the community 3

33.4%

34.3%

23.5%

$611.2 million ~$1.7 million/day >40 > $911.2 million > 96,900 ~$2 billion $55.2 million Nearly $151,100/day $347.8 million

$110.1 million >$301,725/day >42 >$136 million >22,050 ~$371.3 million $7.4 million Nearly $20,375/day $50.5 million

>$1 billion >$2.7 million/day 43 Nearly $2 billion >145,600 >$2.8 billion $75.4 million Nearly $206,500/day $385.8 million

Returned to the local economy/ $1.00 earned Investment in area 4 Jobs created Spending created Payments in business taxes, licenses & payroll taxes Taxes created by generation of new jobs & purchases from other local businesses

2 All data in the table are from Professor Tootelians 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.

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Local Community Involvement

Every McDonalds Owner/Operator and every McDonalds employee knows that we are part of a community and involved. We want to be involved.

System Support for RMHC

Estelle Musico
McDonalds Owner/Operator Somerset, Pennsylvania At the corporate level, McDonalds helps support programs that benefit children and families around the world, principally through its support for RMHC and World Childrens 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.

System support for RMHC goes far beyond our annual World Childrens Days. McDonalds Corporation covers the majority of general and administrative costs of the RMHC global office and provides free use of facilities, equipment and materials. And McDonalds 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. Y in ear 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.

Education

World Childrens Day

In 2002, McDonalds inaugurated World Childrens Day a unique fundraiser involving concurrent activities by McDonalds restaurants around the world. The event benefits local RMHC Chapters and other programs for children. McDonalds 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 20022003, 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 costeffective 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.

In collaboration with local school districts, the Greater San Antonio (Texas) Operators Association sponsors an innovative education and training program called Camp Mickey Ds. 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 Ds 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, McDonalds 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 Y ork, area restaurants support education in their local communities. McDonalds 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 Mothers Day weekend fundraiser to support the fight against breast cancer. Proceeds from sales of special items at McDonalds restaurants throughout the West go to support breast cancer work, principally at the City of Hope one of the worlds leading research and treatment centers for cancer and other serious diseases. WON members include McDonalds women Owner/Operators, corporate employees and suppliers. In the last four years, the program has raised more than $1.6 million for the cause. McDonalds Central and East Divisions also sponsor Mothers Day fundraisers for breast cancer efforts.

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In Your Community
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. 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 McDonalds 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, McDonalds 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. We call our business The Yin organization because its all about family in many, many ways. Its the family Regina and I have raised with our three daughters, its our family of employees and its the families we support through the variety of charitable programs our success has enabled us to offer.

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C.C. Yin

Youth Sports

For the last 14 years, McDonalds 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. McDonalds restaurants in Southern California serve as sponsors of American Y outh 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 AYSOs 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.

McDonalds Owner/Operator 2003 U.S. Commerce Department National Minority Retail Firm of the Year

Support for Disaster Relief

When wildfires raged through Southern California, in October 2003, McDonalds 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 McDonalds Family Charities a public charity created to help McFamily members affected by natural disasters.

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Online Resources Referenced in This Report

The following resources are available on McDonalds corporate website at www.mcdonalds.com/corp/values/ socialrespons.html: McDonalds 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 McDonalds 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 McDonalds 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.

Credits
This report was designed by McDonalds Creative Services Department. Photographs were taken by Mark Smalling (www.marksmalling.com), Rosalie Winard (www.birdfactory.org), Mary Yin Liu and McDonalds Supplier Social Accountability Team. Additional photographs were provided by Franchise Times, the U.S. Department of Health and Human Services and McDonalds Creative Services Department. The report was printed by Litho Inc. on Mohawk Options, 100% post-consumer white, which contains 100% postconsumer waste fiber, is Forest Stewardship Council certified and is manufactured with wind power. The printing process is waterless.

This McDonalds 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 managements expectations regarding future events and future performance as of June 2004. McDonalds 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 McDonalds Corporation and its affiliates: McDonalds, McFamily, The Golden Arches Logo, Ronald McDonald, Ronald McDonald House, Ronald McDonald House Charities, RMHC, Ronald McDonald Family Room, Ronald McDonald Care Mobile, World Childrens Day, Mickey Ds, Immunize for Healthy Lives, Hamburger University, HU, Happy Meal, Go Active, Go Active!, Made for Y Quarter Pounder, Big Mac, Super Size, Chicken ou, McNuggets, Chicken McGrill, Filet-O-Fish, Big N Tasty, Get Moving With Ronald McDonald, McDonalds All American High School Basketball Game, McDonalds All American Soccer Game and Whats On Y Plate. our
2004 McDonalds Corporation

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This corporate responsibility report reflects the values and commitments of the entire McDonalds USA System, which comprises our independent Owner/Operators, our employees and our suppliers.

CS-5565 MCD02-4190A