Business Strategy

Annual Report 2009 2009 Highlights: Comparable Sales Growth 3. 8% Earnings Per Share Growth 9% Total Cash Returned to Shareholders 2007–2009 $ 16. 6 Billion To Our Valued Shareholders: To state the obvious, 2009 was a tumultuous year economically. Despite this tough environment, McDonald’s delivered another exceptional year of growth, posting strong sales and increased market share around the world. In 2009, global comparable sales increased 3. 8 percent, fueled by solid gains in the United States (+2. 6 percent), Europe (+5.  percent), Asia/Pacific, Middle East and Africa (+3. 4 percent), Latin America (+5. 3 percent) and Canada (+5. 8 percent). Earnings per share for the year increased 9 percent to $4. 11 (13 percent in constant currencies), while consolidated operating income increased 6 percent (10 percent in constant currencies). We also returned $5. 1 billion to shareholders through share repurchases and dividends paid, bringing our three-year cash return total to $16. 6 billion—notably at the high end of our stated target of $15 to $17 billion for the years 2007 through 2009.

Concerning McDonald’s performance, there are three milestones that I want to recognize: First, our 2009 comparable sales increase marked the sixth consecutive year of positive sales in every geographic segment of our business. Second, our increasingly relevant menu options, combined with clear competitive advantages in convenience and value, enabled us to serve 60 million customers per day last year. This is up 2 million from the prior year and a remarkable 14 million more per day compared to 2002.

Third, as a result of these sustained operating results, McDonald’s total stock return for the three-year period ending in 2009 was ranked number one among the 30 blue-chip companies that comprise the Dow Jones Industrial Average. These singular achievements relate directly to our historic decision in 2003 to reinvent McDonald’s by becoming “better, not just bigger. ” I say historic because we could not have made a more wise decision for our System than to implement our Plan to Win and refocus our efforts on restaurant execution—with the goal of improving the overall experience for our customers.

There is nothing profound about our Plan to Win. It essentially identifies the five core drivers of our business—people, products, place, price and promotion—and aligns our industry-leading owner/operators, world-class suppliers and talented, experienced employees around initiatives that drive results. Jim Skinner Vice Chairman and CEO Operating Income (In billions) * Includes $1. 7 billion of charges related to the Latin America developmental license transaction. 3-year Compound Annual Total Return (2007–2009) 1 McDonald’s Corporation Annual Report 2009

As we survey the business and competitive landscape today, it’s clear our investment in the Plan to Win has paid off. We are operating from a position of strength and continue to become more relevant in the lives of our customers. It’s also remarkable how our Company culture has evolved since we initiated our Plan to Win. Today, we are aligned throughout the System. We have a leadership culture that embraces change and rejects complacency. We are continually focused on what’s working and then leveraging our scale around the world for the overall good of our customers and our System.

For example, our intense effort on restaurant reimaging, which initially excited customers in Europe, is now a foundational element of each Area of the World business plan. Similarly, our successful value menu, pioneered so well in the United States, now appears on McDonald’s menu boards throughout the world. From restaurant operations to marketing … from consumer insights to menu management … in virtually every aspect of our business … we are continually improving and will never be satisfied. We truly are “better, not just bigger. Looking ahead, we see tremendous opportunity for brand McDonald’s, an opportunity to further differentiate our brand and truly distance ourselves from the rest of the industry. We bring to the table what no one else can—a scale advantage in voice, convenience and cost; a brand advantage in predictable value, family fun and familiar taste. We also have a balance sheet and cash flows that are strong and support our ability to continue investing in our business. We’re determined to build on our competitive advantages, investing in our brand to energize future performance.

We will continue to pursue opportunities to extend our relevance with a particular emphasis on three key areas: service enhancements, restaurant reimaging and menu innovation. With service, we will leverage technology to make it easier for managers and crew to quickly and accurately serve the customer. To enhance brand perception and drive higher sales and returns, we’re accelerating our interior and exterior reimaging efforts around the world. And we will innovate at every tier of our menu to sustain our momentum and create excitement for our customers.

This is just one more step on our journey to modernize our brand and improve customer relevance. 80 Consecutive months of global comparable sales increases through December 2009 million Customers served on average every day 60 2 McDonald’s Corporation Annual Report 2009 In addition to our customer-focused strategies, our success is the direct result of our people—our owner/operators, suppliers and Company employees. The best plans are only as good as the people who execute them. That’s why our efforts around talent management and leadership development are so important.

Our collaborative management approach has resulted in the strongest global leadership team in McDonald’s history. Because of the constant cross-fertilization of ideas and innovations, our leaders are better able to assume new challenges and responsibilities on behalf of the Company. This was most recently demonstrated in the election of Don Thompson as President and Chief Operating Officer. In his previous role as President of McDonald’s USA, he worked side by side with his counterparts on the global leadership team and became familiar with their challenges and successes.

Don has hit the ground running in his new role and I’m confident he will add extraordinary value as we work to further differentiate brand McDonald’s. Clearly, we have a strong and deep bench of talent; people who are ready to step in and step up to every challenge and opportunity. They can be found at every level of our global System … in our restaurants, among the ranks of our outstanding franchisees and suppliers as well as inside our Company. Collectively, they personify an evolving leadership approach that continues to elevate our brand and drive our growth.

As McDonald’s Chief Executive Officer, I am delighted to provide you these highlights. I take considerable pride in our people and performance. We’re determined to keep stretching our business, increasing traffic, and going to where our customers are headed. And we will continue to work hard to deliver sustainable business results for the long-term benefit of our shareholders. Thank you for your investment. Sincerely, Combined Operating Margin (Operating income as a percent of total revenues) * Includes 7. 4 percentage point negative impact related to the Latin America developmental license transaction.

Cash Returned to Shareholders* (In billions) * Via dividends and share repurchases. Earnings Per Share * Includes $1. 32 of charges related to the Latin America developmental license transaction. Jim Skinner Vice Chairman and CEO 3 McDonald’s Corporation Annual Report 2009 Dear Fellow Shareholders: Your Board of Directors is pleased to report that McDonald’s Corporation continued to perform well in 2009, despite a difficult economic environment around the world. In a year when sales in the Informal Eating Out segment declined, McDonald’s continued to execute our Plan to Win … and sales increased.

We believe that McDonald’s performance under these circumstances is due in large part to the commitment and experience of your senior management team, led by Jim Skinner, Vice Chairman and CEO. Jim is a strong leader and a tireless advocate for McDonald’s customers and for our shareholders. McDonald’s is well positioned to elevate our industry leadership. Management’s ongoing focus on enhancing long-term profitable growth, giving constant attention to talent management and leadership development, and continuing to provide relevant offerings and support balanced lifestyles all contribute to the Company’s continued success.

And while we cannot control outside economic conditions, we can—and do—control how we manage our future and achieve our goals. Your Board of Directors is mindful of our obligation to serve as representatives for you, our shareholders. We pay special attention to our responsibility to keep your interests in mind as we review the Company’s performance and plans. We believe McDonald’s continues to operate under a clear strategic business vision for the decade ahead, and that our people work diligently and enthusiastically executing our plans.

Finally, the Board is also responsible for promoting strong corporate governance principles and effective management oversight. Our team of directors, who bring a range of independent and experienced voices to our deliberations, is diligent in executing these responsibilities. And as always, we remain united in our commitment to deliver shareholder value. We are honored to serve you, and believe that McDonald’s best days lie ahead. Very truly yours, Andy McKenna Chairman Andy McKenna Chairman 4 McDonald’s Corporation Annual Report 2009 2009 Financial Report 2009 Financial Report 8 9 28 29 30 31 32 45 46 47 48 49 50 52 6-year Summary Stock Performance Graph Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Statement of Income Consolidated Balance Sheet Consolidated Statement of Cash Flows Consolidated Statement of Shareholders’ Equity Notes to Consolidated Financial Statements Quarterly Results (Unaudited) Management’s Assessment of Internal Control over Financial Reporting Report of Independent Registered Public Accounting Firm Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting Executive Management & Business Unit Officers Board of Directors Investor Information 6 McDonald’s Corporation Annual Report 2009 6-Year Summary Dollars in millions, except per share data

Company-operated sales Franchised revenues Total revenues Operating income Income from continuing operations Net income Cash provided by operations Cash used for investing activities Capital expenditures Cash used for (provided by) financing activities Treasury stock repurchased Common stock cash dividends Financial position at year end: Total assets Total debt Total shareholders’ equity Shares outstanding in millions Per common share: Income from continuing operations–diluted Net income–diluted Dividends declared Market price at year end Company-operated restaurants Franchised restaurants Total Systemwide restaurants Franchised sales(11) 2009 $15,459 $ 7,286 $22,745 $ 6,841(1) $ 4,551(1,2) $ 4,551(1,2) $ 5,751 $ 1,655 $ 1,952 $ 4,421 $ 2,854 $ 2,235 $30,225 $10,578 $14,034 1,077 $ 4. 11(1,2) $ 4. 11(1,2) $ 2. 05 $ 62. 44 6,262 26,216 32,478 $56,928 2008 2007 2006 2005 2004 6,561 16,611 6,961 6,176 23,522 22,787 6,443 3,879(4) (3) 4,313 2,335(4,5) (3) 4,313 2,395(4,5,6) 5,917 4,876 1,625 1,150 2,136 1,947 4,115 3,996 3,981 3,949 1,823 1,766 28,462 10,218 13,383 1,115 29,392 9,301 15,280 1,165 15,402 14,018 5,493 5,099 20,895 19,117 4,433(7) 3,984 2,866(7) 2,578(9) (7,8) 3,544 2,602(9) 4,341 4,337 1,274 1,818 1,742 1,607 5,460 (442) 3,719 1,228 1,217 842 28,974 8,408 15,458 1,204 29,989 10,137 15,146 1,263 13,055 4,834 17,889 3,554(10) 2,287(10) 2,279(10) 3,904 1,383 1,419 1,634 605 695 27,838 9,220 14,201 1,270 1. 80(10) 1. 79(10) . 55 32. 06 8,179 22,317 30,496 37,052 3. 76(3) 1. 93(4,5) (3) 3. 76 1. 98(4,5,6) 1. 63 1. 50 62. 19 58. 91 6,502 6,906 25,465 24,471 31,967 31,377 54,132 46,943 2. 29(7) 2. 02(9) (7,8) 2. 83 2. 04(9) 1. 00 . 67 44. 33 33. 2 8,166 8,173 22,880 22,593 31,046 30,766 41,380 38,913 (1) Includes net pretax income of $65. 2 million ($87. 0 million after tax or $0. 08 per share) primarily related to the resolution of certain liabilities retained in connection with the 2007 Latin America developmental license transaction. (2) Includes income of $58. 8 million ($0. 06 per share-basic, $0. 05 per share-diluted) due to the sale of the Company’s minority ownership interest in Redbox Automated Retail, LLC. (3) Includes income of $109. 0 million ($0. 09 per share) due to the sale of the Company’s minority ownership interest in U. K. – based Pret A Manger. (4) Includes pretax operating charges of $1. billion ($1. 32 per share) related to impairment and other charges primarily as a result of the Company’s sale of its businesses in 18 Latin American and Caribbean markets to a developmental licensee (see Latam transaction note to the consolidated financial statements for further details). (5) Includes a tax benefit of $316. 4 million ($0. 26 per share) resulting from the completion of an Internal Revenue Service (IRS) examination of the Company’s 2003-2004 U. S. federal tax returns. (6) Includes income of $60. 1 million ($0. 05 per share) related to discontinued operations primarily from the sale of the Company’s investment in Boston Market. 7) Includes pretax operating charges of $134 million ($98 million after tax or $0. 08 per share) related to impairment and other charges. (8) Includes income of $678 million ($0. 54 per share) related to discontinued operations primarily resulting from the disposal of our investment in Chipotle. (9) Includes a net tax benefit of $73 million ($0. 05 per share) comprised of $179 million ($0. 14 per share) of income tax benefit resulting from the completion of an IRS examination of the Company’s 2000-2002 U. S. tax returns, partly offset by $106 million ($0. 09 per share) of incremental tax expense resulting from the decision to repatriate certain foreign earnings under the Homeland Investment Act (HIA). 10) Includes pretax operating charges of $130 million related to impairment and $121 million ($12 million related to 2004 and $109 million related to prior years) for a correction in the Company’s lease accounting practices and policies, as well as a nonoperating gain of $49 million related to the sale of the Company’s interest in a U. S. real estate partnership, for a total pretax expense of $202 million ($148 million after tax or $0. 12 per share). (11) While franchised sales are not recorded as revenues by the Company, management believes they are important in understanding the Company’s financial performance because these sales are the basis on which the Company calculates and records franchised revenues and are indicative of the financial health of the franchisee base. McDonald’s Corporation Annual Report 2009 7 Stock performance graph At least annually, we consider which companies comprise a readily identifiable investment peer group.

McDonald’s is included in published restaurant indices; however, unlike most other companies included in these indices, which have no or limited international operations, McDonald’s does business in more than 100 countries and a substantial portion of our revenues and income is generated outside the U. S. In addition, because of our size, McDonald’s inclusion in those indices tends to skew the results. Therefore, we believe that such a comparison is not meaningful. Our market capitalization, trading volume and importance in an industry that is vital to the U. S. economy have resulted in McDonald’s inclusion in the Dow Jones Industrial Average (DJIA) since 1985. Like McDonald’s, many DJIA companies generate mean- ingful revenues and income outside the U. S. and some manage global brands.

Thus, we believe that the use of the DJIA companies as the group for comparison purposes is appropriate. The following performance graph shows McDonald’s cumulative total shareholder returns (i. e. , price appreciation and reinvestment of dividends) relative to the Standard & Poor’s 500 Stock Index (S&P 500 Index) and to the DJIA companies for the five-year period ended December 31, 2009. The graph assumes that the value of an investment in McDonald’s common stock, the S&P 500 Index and the DJIA companies (including McDonald’s) was $100 at December 31, 2004. For the DJIA companies, returns are weighted for market capitalization as of the beginning of each period indicated.

These returns may vary from those of the Dow Jones Industrial Average Index, which is not weighted by market capitalization, and may be composed of different companies during the period under consideration. COMPARISON OF CUMULATIVE FIVE YEAR TOTAL RETURN $250 $200 $150 $100 $50 $0 Dec ’04 100 100 100 ’05 107 105 102 ’06 144 121 121 ’07 197 128 132 ’08 214 81 90 ’09 222 102 110 McDonald’s Corporation S;P 500 Index Dow Jones Industrials Source: Capital IQ, a Standard ; Poor’s business 8 McDonald’s Corporation Annual Report 2009 Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview DESCRIPTION OF THE BUSINESS The Company franchises and operates McDonald’s restaurants.

Of the 32,478 restaurants in 117 countries at year-end 2009, 26,216 were operated by franchisees (including 19,020 operated by conventional franchisees, 3,160 operated by developmental licensees and 4,036 operated by foreign affiliated markets (affiliates)—primarily in Japan) and 6,262 were operated by the Company. Under our conventional franchise arrangement, franchisees provide a portion of the capital required by initially investing in the equipment, signs, seating and decor of their restaurant businesses, and by reinvesting in the business over time. The Company owns the land and building or secures long-term leases for both Company-operated and conventional franchised restaurant sites.

This maintains long-term occupancy rights, helps control related costs and assists in alignment with franchisees. In certain circumstances, the Company participates in reinvestment for conventional franchised restaurants. Under our developmental license arrangement, licensees provide capital for the entire business, including the real estate interest, and the Company has no capital invested. In addition, the Company has an equity investment in a limited number of affiliates that invest in real estate and operate or franchise restaurants within a market. We view ourselves primarily as a franchisor and believe franchising is important to delivering great, locally-relevant customer experiences and driving profitability.

However, directly operating restaurants is paramount to being a credible franchisor and is essential to providing Company personnel with restaurant operations experience. In our Company-operated restaurants, and in collaboration with franchisees, we further develop and refine operating standards, marketing concepts and product and pricing strategies, so that only those that we believe are most beneficial are introduced Systemwide. We continually review our mix of Company-operated and franchised (conventional franchised, developmental licensed and affiliated) restaurants to help maximize overall performance. The Company’s revenues consist of sales by Companyoperated restaurants and fees from restaurants operated by franchisees.

Revenues from conventional franchised restaurants include rent and royalties based on a percent of sales along with minimum rent payments, and initial fees. Revenues from restaurants licensed to affiliates and developmental licensees include a royalty based on a percent of sales, and may include initial fees. Fees vary by type of site, amount of Company investment, if any, and local business conditions. These fees, along with occupancy and operating rights, are stipulated in franchise/license agreements that generally have 20-year terms. The business is managed as distinct geographic segments. Significant reportable segments include the United States (U. S. ), Europe, and Asia/Pacific, Middle East and Africa (APMEA).

In addition, throughout this report we present “Other Countries ; Corporate” that includes operations in Canada and Latin America, as well as Corporate activities. The U. S. , Europe and APMEA segments account for 35%, 41% and 19% of total revenues, respectively. France, Germany and the United Kingdom (U. K. ), collectively, account for approximately 55% of Europe’s revenues; and Australia, China and Japan (a 50%-owned affiliate accounted for under the equity method), collectively, account for over 50% of APMEA’s revenues. These six markets along with the U. S. and Canada are referred to as “major markets” throughout this report and comprise over 70% of total revenues.

The Company continues to focus its management and financial resources on the McDonald’s restaurant business as we believe opportunities remain for long-term growth. Accordingly, in 2009, the Company sold its minority ownership interest in Redbox Automated Retail, LLC (Redbox) for total consideration of $140 million. In 2008, the Company sold its minority ownership interest in U. K. -based Pret A Manger for cash proceeds of $229 million. In connection with both sales, the Company recognized nonoperating gains. During 2007, the Company sold its investment in Boston Market. As a result of the disposal, Boston Market’s results of operations and transaction gain are reflected as discontinued operations.

As of December 31, 2009, the Company had disposed of all non-McDonald’s restaurant businesses. In analyzing business trends, management considers a variety of performance and financial measures, including comparable sales and comparable guest count growth, Systemwide sales growth, restaurant margins and returns. • Constant currency results exclude the effects of foreign currency translation and are calculated by translating current year results at prior year average exchange rates. Management reviews and analyzes business results in constant currencies and bases certain incentive compensation plans on these results because they believe this better represents the Company’s underlying business trends. Comparable sales and comparable guest counts are key performance indicators used within the retail industry and are indicative of acceptance of the Company’s initiatives as well as local economic and consumer trends. Increases or decreases in comparable sales and comparable guest counts represent the percent change in sales and transactions, respectively, from the same period in the prior year for all restaurants in operation at least thirteen months, including those temporarily closed. Some of the reasons restaurants may be temporarily closed include reimaging or remodeling, rebuilding, road construction and natural disasters. Comparable sales exclude the impact of currency translation.

McDonald’s reports on a calendar basis and therefore the comparability of the same month, quarter and year with the corresponding period of the prior year will be impacted by the mix of days. The number of weekdays and weekend days in a given timeframe can have a positive or negative impact on comparable sales and guest counts. The Company refers to these impacts as calendar shift/trading day adjustments. In addition, the timing of holidays can impact comparable sales and guest counts. These impacts vary geographically due to consumer spending patterns and have the greatest effect on monthly comparable sales and guest counts while the annual impacts are typically minimal. In 2008, there was an incremental full day of sales and guest counts due to leap year. Systemwide sales include sales at all restaurants, whether operated by the Company or by franchisees. While franchised sales are not recorded as revenues by the Company, management believes the information is important in understanding the Company’s financial performance because these sales are the McDonald’s Corporation Annual Report 2009 9 basis on which the Company calculates and records franchised revenues and are indicative of the financial health of the franchisee base. • Return on incremental invested capital (ROIIC) is a measure reviewed by management over one-year and three-year time periods to evaluate the overall profitability of the business units, the effectiveness of capital deployed and the future allocation of capital.

The return is calculated by dividing the change in operating income plus depreciation and amortization (numerator) by the adjusted cash used for investing activities (denominator), primarily capital expenditures. The calculation assumes a constant average foreign exchange rate over the periods included in the calculation. STRATEGIC DIRECTION AND FINANCIAL PERFORMANCE The strength of the alignment between the Company, its franchisees and suppliers (collectively referred to as the System) has been key to McDonald’s success over the years. This business model enables McDonald’s to consistently deliver locally-relevant restaurant experiences to customers and be an integral part of the communities we serve. In addition, it facilitates our ability to identify, implement and scale innovative ideas that meet customers’ changing needs and preferences.

McDonald’s customer-focused Plan to Win—which is centered around being better, not just bigger—provides a common framework for our global business yet allows for local adaptation. Through the execution of multiple initiatives surrounding the five key drivers of exceptional customer experiences—People, Products, Place, Price and Promotion—we have enhanced the restaurant experience for customers worldwide and grown sales and customer visits in each of the last six years. This Plan, coupled with financial discipline, has delivered strong results for shareholders. We have exceeded our long-term, constant currency financial targets of average annual Systemwide sales growth of 3% o 5%; average annual operating income growth of 6% to 7%; and annual returns on incremental invested capital in the high teens every year since the Plan’s implementation in 2003, after adjusting 2007 for the Latin America developmental license transaction. Given the size and scope of our global business, we believe these financial targets are realistic and sustainable, while keeping us focused on making the best decisions for the longterm benefit of shareholders. In 2009, we continued to elevate the customer experience by remaining focused on the Company’s key global success factors of branded affordability, menu variety and beverage choice, convenience and daypart expansion, ongoing restaurant reinvestment and operations excellence.

Locally-relevant initiatives around these factors successfully resonated with consumers driving increases in sales, customer visits and market share in many countries despite challenging global economies and a contracting informal eating out market. As a result, each reportable segment contributed to 2009 global comparable sales and guest counts, which increased 3. 8% and 1. 4%, respectively. In the U. S. , we grew sales and market share with comparable sales up for the 7th consecutive year, rising 2. 6% in 2009. This performance was the result of a continued focus on classic menu favorites such as the Big Mac and Quarter Pounder, increased emphasis on everyday affordability, and the national marketing launch of the new McCafe premium coffees and premium Angus Third Pounder. Complementing these efforts were our strategies 10 McDonald’s Corporation Annual Report 2009 elated to convenient locations, extended hours, efficient drivethru service and value-oriented local beverage promotions. In conjunction with the introduction of the McCafe premium coffees, reinvestment was needed in many restaurants to accommodate the new equipment required to prepare these beverages as well as facilitate the national introduction of smoothies and frappes in mid-2010. In most cases, this reinvestment involved expanding and optimizing the efficiency of the drive-thru booth, enabling us to better serve even more customers faster. In Europe, comparable sales rose 5. 2%, marking the 6th consecutive year of comparable sales increases.

This performance reflected Europe’s strategic priorities to upgrade the customer and employee experience, enhance local relevance, and build brand transparency. Initiatives surrounding these priorities encompassed: leveraging our tiered menu featuring locally relevant selections of premium, classic core and everyday affordable menu offerings as well as dessert and limited-time food promotions; and reimaging nearly 900 restaurants including adding about 290 McCafes—an upscale area with coffeehousestyle ambiance inside an existing McDonald’s restaurant. In addition, we addressed growing interest in portable snack offerings with platforms such as the Little Tasters in the U. K. , launched breakfast in Germany and increased our convenience with extended hours.

In order to support greater menu variety, we completed the roll-out of a new more efficient kitchen operating system in substantially all of our European restaurants. Finally, we enhanced customer trust in our brand through communications that emphasized the quality and origin of McDonald’s food and our sustainable business practices. In APMEA, we continued to execute our four growth platforms of breakfast, convenience, core menu and value. Comparable sales rose 3. 4% primarily due to the ongoing momentum of our business in Australia where multiple initiatives surrounding menu variety including the launch of the premium Angus burger, greater convenience and reimaging further strengthened our brand relevance.

In addition, across the segment, we enhanced our convenience by increasing the number of restaurants open 24-hours to over 4,600, expanding delivery service to more than 1,300 locations including about 300 in China, and enhancing drive-thru efficiency. We sustained the momentum of our breakfast business, currently in about 75% of our restaurants, by increasing customer awareness and visit frequency with the launch of premium roast coffee in key markets like Japan and China and promoting it through successful sampling programs. We continued to appeal to customers with branded affordability menus, especially our value lunch platforms, and highlighted classic menu favorites like the Quarter Pounder.

Our customer-centered strategies seek to optimize price, product mix and promotion as a means to drive sales and profits. This approach is complemented by a focus on driving operating efficiencies and effectively managing restaurant-level costs by leveraging our scale, supply chain infrastructure and risk management practices. Our ability to successfully execute our strategies in every area of the world contributed to improved profitability as measured by combined operating margin of 30. 1% in 2009, an improvement of 2. 7 percentage points over 2008. Strong global performance positively impacted cash from operations, which totaled $5. 8 billion in 2009.

Our substantial cash flow, strong credit rating and continued access to credit provide us significant flexibility to fund capital expenditures as well as return cash to shareholders. About $2. 0 billion of cash from operations was invested in our business primarily to open 868 restaurants (511 net, after 357 closings) and reimage about 1,850 existing locations. After these capital expenditures, we returned our free cash flow to shareholders through dividends and share repurchases. In 2009, we returned $5. 1 billion consisting of $2. 2 billion in dividends and $2. 9 billion in share repurchases. This brought the total return to shareholders to $16. billion under our $15 billion to $17 billion target for 2007 through 2009. Cash from operations continues to benefit from our evolution toward a more heavily franchised business model as the rent and royalty income received from owner/operators is a very stable revenue stream that has relatively low costs, and is less capitalintensive. In addition, we believe locally-owned and operated restaurants help us maximize brand performance and are at the core of our competitive advantage, making McDonald’s not just a global brand but also a locally-relevant one. To that end, for 2008 and 2009 combined, we refranchised about 1,100 restaurants, increasing the percent of restaurants franchised worldwide to 81%.

Refranchising impacts our consolidated financial statements as follows: • Consolidated revenues are initially reduced because we collect rent and royalty as a percent of sales from a refranchised restaurant instead of 100% of its sales. • Company-operated margin dollars decline while franchised margin dollars increase. • Margin percentages are affected depending on the sales and cost structures of the restaurants refranchised. • Other operating (income) expense fluctuates as we recognize gains and/or losses resulting from sales of restaurants. • Combined operating margin percent improves. • Return on average assets increases primarily due to a decrease in average asset balances. HIGHLIGHTS FROM THE YEAR INCLUDED: • Comparable sales grew 3. % and guest counts rose 1. 4%, building on 2008 increases of 6. 9% and 3. 1%, respectively. • Growth in combined operating margin of 2. 7 percentage points from 27. 4% in 2008 to 30. 1% in 2009. • Operating income increased 6% (10% in constant currencies). • Net income per share was $4. 11, an increase of 9% (13% in constant currencies). • Cash provided by operations totaled $5. 8 billion. • The Company increased the quarterly cash dividend per share 10% to $0. 55 for the fourth quarter–bringing the current annual dividend rate to $2. 20 per share. • One-year ROIIC was 38. 0% and three-year ROIIC was 42. 9% for the period ended December 31, 2009. OUTLOOK FOR 2010

We will continue to drive success in 2010 and beyond by remaining focused on our “better, not just bigger” strategy and the key drivers of exceptional customer experiences—People, Products, Place, Price and Promotion. Our global System is energized by our ongoing momentum, strong competitive position and growth opportunities. We intend to further differentiate our brand, increase customer visits and grow market share by pursuing initiatives in three key areas: service enhancement, restaurant reimaging and menu innovation. These efforts will include leveraging technology to make it easier for restaurant staff to quickly and accurately serve customers, accelerating our interior and exterior reimaging efforts and innovating at every tier of our menu to deliver great taste and value to customers.

As we execute along these priorities and remain disciplined in operations and financial management, we expect to increase McDonald’s brand relevance, widen our competitive lead and, in turn, grow sales, profits and returns. As we do so, we are confident we can meet or exceed the long-term constant currency financial targets previously discussed despite expectations for a continued challenging global economic environment in 2010. In the U. S. , our strategies include strengthening our core menu and value offerings, aggressively pursuing new growth opportunities in chicken, breakfast, beverages and snacking options, and elevating the brand experience.

Our initiatives include highlighting the enduring appeal of core menu classics such as the Big Mac, emphasizing the value our menu offers all-day-long including the new breakfast value menu, and encouraging the trial of new products with the Mac Snack Wrap and—by mid-year—frappes and smoothies. In addition, our plans to elevate the brand experience encompass updating our technology with a new point of sale system, enhancing restaurant manager and crew retention and productivity, and initiating a multi-year program to contemporize the interiors and exteriors of our restaurants through reimaging, completing about 500 in 2010. These efforts combined with the convenience of our locations, optimized drive-thru service, free wireless service and longer operating hours will further reinforce McDonald’s position as an easy, enjoyable eating-out experience.

Our plans for Europe are focused on building market share as we continue to execute along Europe’s three key priorities. This includes upgrading our restaurant ambiance by reimaging approximately 1,000 restaurants, primarily in France and the U. K. , as we make progress toward our goal to reimage more than 85% of our restaurants by the end of 2011. In addition, we expect to leverage technologies such as self-order kiosks, hand-held order devices and drive-thru customer order displays to enhance the customer experience and help speed service. We will further enhance our local relevance by complementing our tiered-menu with limited-time food events as well as new snack and dessert options.

Finally, we will remain approachable and accessible as we continue to educate consumers about the quality and origin of our food and communicate our sustainable business practices. In APMEA, we will execute initiatives that best support our goal to be customers’ first choice for eating out: convenience, core menu, branded affordability, improved operations and reimaging. Our convenience initiatives include leveraging the success of 24-hour or extended operating hours, expanding delivery service and building drive-thru traffic. At the same time, we will continue to elevate the role of our classic core and breakfast menus, complementing both with locally-relevant food news.

We will maximize the impact of our everyday affordability platforms with mid-tier and value lunch programs and intensify our focus on operations to drive efficiencies. In addition, we will accelerate our reimaging efforts using a set of standard interior and exterior designs. Finally, given its size and long-term McDonald’s Corporation Annual Report 2009 11 potential, we will continue to aggressively open new restaurants in China with a goal of opening about 600 restaurants over the next three years. We will continue to evaluate opportunities to optimize our mix of Company-operated and franchised restaurants and expect to refranchise restaurants when and where appropriate.

As previously discussed, our evolution toward a more heavily franchised, less capital-intensive business model has favorable implications for the strength and stability of our cash flow, the amount of capital we invest and long-term returns. As a result, we expect free cash flow—cash from operations less capital expenditures—will continue to grow in the future. We remain committed to returning all this cash to shareholders via dividends and share repurchases over the long term. We will remain disciplined financially as we seek to maximize the impact of all of our spending from selling, general ; administrative expenses to capital expenditures. In making capital allocation decisions, our goal is to elevate the McDonald’s experience to drive sustainable growth in sales and market share while earning strong returns. To that end, about half of the $2. billion of planned 2010 capital expenditures will be invested to reimage existing restaurants with the other half primarily used to build new locations. McDonald’s does not provide specific guidance on net income per share. The following information is provided to assist in analyzing the Company’s results: • Changes in Systemwide sales are driven by comparable sales and net restaurant unit expansion. The Company expects net restaurant additions to add nearly 2 percentage points to 2010 Systemwide sales growth (in constant currencies), most of which will be due to the 609 net traditional restaurants added in 2009. • The Company does not generally provide specific guidance on changes in comparable sales.

However, as a perspective, assuming no change in cost structure, a 1 percentage point increase in comparable sales for either the U. S. or Europe would increase annual net income per share by about 3 cents. • With about 75% of McDonald’s grocery bill comprised of 10 different commodities, a basket of goods approach is the most comprehensive way to look at the Company’s commodity costs. For the full year 2010, the total basket of goods cost is expected to be relatively flat in the U. S. and Europe. Some volatility may be experienced between quarters in the normal course of business, with more favorable comparisons in the first half of the year. • The Company expects full-year 2010 selling, general ; administrative expenses to be relatively flat, in constant currencies, lthough fluctuations will be experienced between quarters due to certain items in 2010 such as the Vancouver Winter Olympics and the biennial Worldwide Owner/Operator Convention in April. • Based on current interest and foreign currency exchange rates, the Company expects interest expense in 2010 to increase slightly compared with 2009. • A significant part of the Company’s operating income is generated outside the U. S. , and about 45% of its total debt is denominated in foreign currencies. Accordingly, earnings are affected by changes in foreign currency exchange rates, particularly the Euro, British Pound, Australian Dollar and Canadian Dollar.

Collectively, these currencies represent approximately 70% of the Company’s operating income outside the U. S. If all four of these currencies moved by 10% in the same direction compared with 2009, the Company’s annual net income per share would change by about 17 to 19 cents. At current foreign currency rates, the Company expects foreign currency translation to positively impact full year 2010 revenues and net income per share, with most of the benefit occurring in the first half of the year. • The Company expects the effective income tax rate for the fullyear 2010 to be approximately 29% to 31%. Some volatility may be experienced between the quarters resulting in a quarterly tax rate that is outside the annual range. McDonald’s Japan (a 50%-owned affiliate) announced plans to close approximately 430 restaurants over the next 12-18 months in conjunction with the strategic review of the market’s real estate portfolio. These actions are designed to enhance the customer experience, overall profitability and returns of the market. As a result of these closures, McDonald’s Corporation expects to record after tax impairment charges totaling approximately $40 million to $50 million, primarily in the first half of the year. • The Company expects capital expenditures for 2010 to be approximately $2. 4 billion. About half of this amount will be reinvested in existing restaurants, including the reimaging of over 2,000 locations worldwide.

The rest will primarily be used to open about 1,000 restaurants (975 traditional and 25 satellites). These restaurant numbers include new unit openings (about 350 restaurants) in affiliated and developmental licensed markets, such as Japan and Latin America, where the Company does not fund any capital expenditures. The Company expects net additions of about 325 restaurants (475 net traditional additions and 150 net satellite closings), which reflect the McDonald’s Japan closings. 12 McDonald’s Corporation Annual Report 2009 Consolidated Operating Results Operating results 2009 Dollars in millions, except per share data Amount Increase/ (decrease) Amount 2008 Increase/ (decrease) 2007 Amount

Revenues Sales by Company-operated restaurants Revenues from franchised restaurants Total revenues Operating costs and expenses Company-operated restaurant expenses Franchised restaurants—occupancy expenses Selling, general ; administrative expenses Impairment and other charges (credits), net Other operating (income) expense, net Total operating costs and expenses Operating income Interest expense Nonoperating (income) expense, net Gain on sale of investment Income from continuing operations before provision for income taxes Provision for income taxes Income from continuing operations Income from discontinued operations (net of taxes of $35) Net income Income per common share—diluted Continuing operations Discontinued operations Net income Weighted-average common shares outstanding— diluted nm Not meaningful. $ 15,459 7,286 22,745 12,651 1,302 2,234 (61) (222) 15,904 6,841 473 (24) (95) 6,487 1,936 4,551 $ 4,551 $ $ 4. 11 4. 11 (7)% 5 (3) (7) 6 (5) nm (35) (7) 6 (9) 69 41 5 5 6 6% 9% 9% $ 16,561 6,961 23,522 13,653 1,230 2,355 6 (165) 17,079 6,443 523 (78) (160) 6,158 1,845 4,313 $ 4,313 $ $ 3. 76 3. 76 1,146. 0 % 13 3 (1) 8 — nm nm (10) 66 27 25 nm 72 49 85 80% 95% 90% $ 16,611 6,176 22,787 13,742 1,140 2,367 1,670 (11) 18,908 3,879 410 (103) 3,572 1,237 2,335 60 $ 2,395 $ $ 1. 93 0. 05 1. 98 1,211. 8 1,107. 4 In August 2007, the Company completed the sale of its businesses in Brazil, Argentina, Mexico, Puerto Rico, Venezuela and 13 other countries in Latin America and the Caribbean, which totaled 1,571 restaurants, to a developmental licensee organization. The Company refers to these markets as “Latam. ” As a result of the Latam transaction, the Company receives royalties in these markets instead of a combination of Company-operated sales and franchised rents and royalties.

Based on approval by the Company’s Board of Directors on April 17, 2007, the Company concluded Latam was “held for sale” as of that date in accordance with guidance on the impairment or disposal of long-lived assets. As a result, the Company recorded an impairment charge of $1. 7 billion in 2007, substantially all of which was noncash. The charge included $896 million for the difference between the net book value of the Latam business and approximately $675 million in cash proceeds received. This loss in value was primarily due to a historically difficult economic environment coupled with volatility experienced in many of the markets included in this transaction. The charges also included historical foreign currency translation losses of $769 million recorded in shareholders’ equity.

The Company recorded a tax benefit of $62 million in 2007 in connection with this transaction. As a result of meeting the “held for sale” criteria, the Company ceased recording depreciation expense with respect to Latam effective April 17, 2007. In connection with the sale, the Company agreed to indemnify the buyers for certain tax and other claims, certain of which are reflected as liabilities on McDonald’s Consolidated balance sheet, totaling $97 million at December 31, 2009 and $142 million at December 31, 2008. The change in the balance was primarily a result of the resolution of certain of these liabilities as well as the impact of foreign currency translation.

The Company mitigates the currency impact to income of these foreign currency denominated liabilities through the use of forward foreign exchange agreements. The buyers of the Company’s operations in Latam entered into a 20-year master franchise agreement that requires the buyers, among other obligations to (i) pay monthly royalties commencing at a rate of approximately 5% of gross sales of the restaurants in these markets, substantially consistent with market rates for similar license arrangements; (ii) commit to adding approximately 150 new McDonald’s restaurants by the end of 2010 and pay an initial fee for each new restaurant opened; and (iii) commit to specified annual capital expenditures for existing restaurants. McDonald’s Corporation Annual Report 2009 13

In addition to the consolidated operating results shown on the previous page, consolidated results for 2007 and adjusted growth rates for 2008 are presented in the following table excluding the impact of the Latam transaction. These results include the effect of foreign currency translation further discussed in the section titled Impact of foreign currency translation on reported results. While the Company has converted certain other markets to a developmental license arrangement, management believes the Latam transaction and the associated charge are not indicative of ongoing operations due to the size and scope of the transaction. Management believes that the adjusted operating results better reflect the underlying business trends relevant to the periods presented. Dollars in millions, except per share data

Operating income Income from continuing operations Income from discontinued operations Net income Income per common share – diluted Continuing operations(2,3) Discontinued operations Net income(2,3) nm Not meaningful. 2009 $6,841 4,551 4,551 4. 11 4. 11 2008 $6,443 4,313 4,313 3. 76 3. 76 2007(1) $3,879 2,335 60 2,395 1. 93 0. 05 1. 98 Latam Transaction(1) 2007 Excluding Latam Transaction 2009 % Inc 2008 Adjusted % Inc $(1,641) (1,579) (1,579) (1. 30) (1. 30) $5,520 3,914 60 3,974 3. 23 0. 05 3. 28 6 6 6 9 9 17 10 9 16 15 (1) The results for the full year 2007 included impairment and other charges of $1,665 million, partly offset by a benefit of $24 million due to eliminating depreciation on the assets in Latam in mid-April 2007, and a tax benefit of $62 million. 2) The following items impact the comparison of growth in diluted income per share from continuing operations and diluted net income per share for the year ended December 31, 2009 compared with 2008. On a net basis, these items positively impact the comparison by 1 percentage point: 2009 • $0. 08 per share after tax income primarily due to the resolution of certain liabilities retained in connection with the 2007 Latam transaction. • $0. 05 per share after tax gain on the sale of the Company’s minority ownership interest in Redbox. 2008 • $0. 09 per share after tax gain on the sale of the Company’s minority ownership interest in Pret A Manger. 3) The following items impact the comparison of adjusted growth in diluted income per share from continuing operations and diluted net income per share for the year ended December 31, 2008 compared with 2007. On a net basis, these items negatively impact the comparison by 7 and 6 percentage points, respectively: 2008 • $0. 09 per share after tax gain on the sale of the Company’s minority ownership interest in Pret A Manger. 2007 • $0. 26 per share of income tax benefit resulting from the completion of an Internal Revenue Service (IRS) examination of the Company’s 2003-2004 U. S. federal income tax returns; partly offset by • $0. 02 per share of income tax expense related to the impact of a tax law change in Canada. NET INCOME AND DILUTED NET INCOME PER COMMON SHARE

In 2009, net income and diluted net income per common share were $4. 6 billion and $4. 11. Results benefited by after tax income of $87 million or $0. 08 per share primarily due to the resolution of certain liabilities retained in connection with the 2007 Latam transaction. Results also benefited by an after tax gain of $59 million or $0. 05 per share due to the sale of the Company’s minority ownership interest in Redbox. Results were negatively impacted by $0. 15 per share due to the effect of foreign currency translation. In 2008, net income and diluted net income per common share were $4. 3 billion and $3. 76. Results benefited by a $109 million or $0. 9 per share after tax gain on the sale of the Company’s minority ownership interest in Pret A Manger. Results also benefited by $0. 09 per share due to the effect of foreign currency translation. In 2007, net income and diluted net income per common share were $2. 4 billion and $1. 98. Income from continuing operations was $2. 3 billion or $1. 93 per share, which included $1. 6 billion or $1. 30 per share of net expense related to the Latam transaction. This reflects an impairment charge of $1. 32 per share, partly offset by a $0. 02 per share benefit due to eliminating depreciation on the assets in Latam in mid-April 2007 in accordance with accounting rules.

In addition, 2007 results included a net tax benefit of $288 million or $0. 24 per 14 McDonald’s Corporation Annual Report 2009 share resulting from the completion of an IRS examination of the Company’s 2003-2004 U. S. federal income tax returns, partly offset by the impact of a tax law change in Canada. Income from discontinued operations was $60 million or $0. 05 per share. The Company repurchased 50. 3 million shares of its stock for $2. 9 billion in 2009 and 69. 7 million shares for $4. 0 billion in 2008, driving reductions of over 3% and 4% of total shares outstanding, respectively, net of stock option exercises. IMPACT OF FOREIGN CURRENCY TRANSLATION ON REPORTED RESULTS

While changing foreign currencies affect reported results, McDonald’s mitigates exposures, where practical, by financing in local currencies, hedging certain foreign-denominated cash flows, and purchasing goods and services in local currencies. In 2009, foreign currency translation had a negative impact on consolidated operating results, primarily driven by the Euro, British Pound, Russian Ruble, Australian Dollar and Canadian Dollar. In 2008, foreign currency translation had a positive impact on consolidated operating results, driven by the stronger Euro and most other currencies, partly offset by the weaker British Pound. In 2007, foreign currency translation had a positive impact on consolidated operating results, primarily driven by the Euro, British Pound, Australian Dollar and Canadian Dollar. Impact of foreign currency translation on reported results

Reported amount In millions, except per share data Currency translation benefit/(cost) Revenues Company-operated margins Franchised margins Selling, general ; administrative expenses Operating income Income from continuing operations Net income Income from continuing operations per common share—diluted Net income per common share—diluted REVENUES 2009 $22,745 2,807 5,985 2,234 6,841 4,551 4,551 4. 11 4. 11 2008 $23,522 2,908 5,731 2,355 6,443 4,313 4,313 3. 76 3. 76 2007 $22,787 2,869 5,036 2,367 3,879 2,335 2,395 1. 93 1. 98 2009 $(1,340) (178) (176) 75 (273) (164) (164) (. 15) (. 15) 2008 $441 63 120 (21) 163 103 103 . 09 . 09 2007 $988 129 179 (73) 230 138 138 . 12 . 12

The Company’s revenues consist of sales by Company-operated restaurants and fees from restaurants operated by franchisees. Revenues from conventional franchised restaurants include rent and royalties based on a percent of sales along with minimum rent payments, and initial fees. Revenues from franchised restaurants that are licensed to affiliates and developmental licensees include a royalty based on a percent of sales, and generally include initial fees. The Company continues to optimize its restaurant ownership mix, cash flow and returns through its refranchising strategy. For the full years 2008 and 2009 combined, the Company refranchised about 1,100 restaurants, primarily in its major markets.

The shift to a greater percentage of franchised restaurants negatively impacts consolidated revenues as Company-operated sales shift to franchised sales, where the Company receives rent and/or royalties based on a percent of sales. Revenues In 2009, constant currency revenue growth was driven by positive comparable sales and expansion, partly offset by the impact of the refranchising strategy in certain of the Company’s major markets. As a result of the refranchising strategy, franchised restaurants represent 81%, 80% and 78% of Systemwide restaurants at December 31, 2009, 2008 and 2007, respectively. In 2008, constant currency revenue growth was driven by positive comparable sales, partly offset by the refranchising strategy and the impact of the Latam transaction. Upon completion of the Latam transaction in August 2007, he Company receives royalties based on a percent of sales in these markets instead of a combination of Company-operated sales and franchised rents and royalties. Amount Dollars in millions Increase/(decrease) Increase/(decrease) excluding currency translation 2009 $ 4,295 6,721 3,714 729 $15,459 $ 3,649 2,553 623 461 $ 7,286 $ 7,944 9,274 4,337 1,190 $22,745 2008 $ 4,636 7,424 3,660 841 $16,561 $ 3,442 2,499 571 449 $ 6,961 $ 8,078 9,923 4,231 1,290 $23,522 2007 $ 4,682 6,817 3,134 1,978 $16,611 $ 3,224 2,109 465 378 $ 6,176 $ 7,906 8,926 3,599 2,356 $22,787 2009 (7)% (9) 1 (13) (7)% 6% 2 9 3 5% (2)% (7) 3 (8) (3)% 2008 (1)% 9 17 (57) —% 7% 18 23 19 13 % 2% 11 18 (45) 3% 009 (7)% 3 5 (7) —% 6% 10 12 9 8% (2)% 5 6 (2) 2% 2008 (1)% 6 14 (58) (2)% 7% 13 20 17 10 % 2% 7 15 (46) 1% Company-operated sales: U. S. Europe APMEA Other Countries ; Corporate Total Franchised revenues: U. S. Europe APMEA Other Countries ; Corporate Total Total revenues: U. S. Europe APMEA Other Countries ; Corporate Total McDonald’s Corporation Annual Report 2009 15 In the U. S. , revenues in 2009 and 2008 were positively impacted by the ongoing appeal of our iconic core products and the success of new products, as well as continued focus on everyday value and convenience. In addition, our market-leading breakfast business contributed to revenue growth in 2008.

New products introduced in 2009 included McCafe premium coffees and the Angus Third Pounder, while new products introduced in 2008 included Southern Style Chicken products, Iced Coffee and Sweet Tea. The refranchising strategy negatively impacted revenue growth in both years. Europe’s constant currency increases in revenues in 2009 and 2008 were primarily driven by comparable sales increases in the U. K. , France and Russia (which is entirely Companyoperated) as well as expansion in Russia. In both years, these increases were partly offset by the impact of the refranchising strategy, primarily in the U. K. and Germany. In APMEA, the constant currency increase in revenues in 2009 was primarily driven by comparable sales increases in Australia and most other Asian markets, partly offset by negative comparable sales in China.

The 2008 increase was primarily driven by strong comparable sales in Australia and China, as well as positive comparable sales throughout the segment. In addition, expansion in China contributed to the increases in both years. In Other Countries ; Corporate, Company-operated sales declined in 2008 while franchised revenues increased primarily as a result of the Latam transaction in August 2007. Revenues in both years were negatively impacted by the refranchising strategy in Canada. The following tables present Systemwide sales and comparable sales increases/(decreases): Systemwide sales increases/(decreases) Excluding currency translation $695 million or 14% (11% in constant currencies) in 2008.

The refranchising strategy contributed to the growth in franchised margin dollars in both 2009 and 2008 and the August 2007 Latam transaction contributed to the growth in 2008. Franchised margins In millions U. S. Europe APMEA Other Countries ; Corporate Total Percent of revenues 2009 $3,031 1,998 559 397 $5,985 2008 $2,867 1,965 511 388 $5,731 2007 $2,669 1,648 410 309 $5,036 U. S. Europe APMEA Other Countries ; Corporate Total 83. 1% 78. 3 89. 6 86. 1 82. 1% 83. 3% 78. 6 89. 6 86. 4 82. 3% 82. 8% 78. 1 88. 3 81. 7 81. 5% U. S. Europe APMEA Other Countries ; Corporate Total 2009 3% (2) 8 — 2% 2008 5% 15 19 16 11% 2009 3% 7 7 7 6% 2008 5% 10 12 14 9% Comparable sales increases U. S. Europe APMEA Other Countries ; Corporate Total

RESTAURANT MARGINS 2009 2. 6% 5. 2 3. 4 5. 5 3. 8% 2008 4. 0% 8. 5 9. 0 13. 0 6. 9% 2007 4. 5% 7. 6 10. 6 10. 8 6. 8% In the U. S. , the franchised margin percent decrease in 2009 was due to additional depreciation primarily related to the Company’s investment in the beverage initiative, partly offset by positive comparable sales. The 2008 increase was primarily driven by positive comparable sales, partly offset by the refranchising strategy. Europe’s franchised margin percent decreased in 2009 as positive comparable sales were offset by higher occupancy expenses, the refranchising strategy and the cost of strategic brand and sales building initiatives.

The 2008 increase was primarily due to strong comparable sales in most markets, partly offset by the impact of the refranchising strategy, higher rent expense and the cost of strategic brand and sales building initiatives. In APMEA, the franchised margin percent increase in 2008 was primarily driven by positive comparable sales. In Other Countries ; Corporate, the franchised margin percent increased in 2008 as a result of the 2007 Latam transaction. The franchised margin percent in APMEA and, beginning in 2008, Other Countries ; Corporate is higher relative to the U. S. and Europe due to a larger proportion of developmental licensed and/or affiliated restaurants where the Company receives royalty income with no corresponding occupancy costs. Company-operated margins Company-operated margin dollars represent sales by Companyoperated restaurants less the operating costs of these restaurants. Company-operated margin dollars decreased $101 million or 3% (increased 3% in constant currencies) in 2009 and increased $39 million or 1% (decreased 1% in constant currencies) in 2008. After the Latam transaction in August 2007, there are no Company-operated restaurants remaining in Latin America. Company-operated margin dollars were negatively impacted by this transaction in 2008 and 2007 and by the refranchising strategy in 2009 and 2008. The refranchising strategy had a positive impact on the margin percent in 2009 and 2008, primarily in the U. S. and Europe. Franchised margins Franchised margin dollars represent revenues from franchised restaurants less the Company’s occupancy costs (rent and depreciation) associated with those sites. Franchised margin dollars represented nearly 70% of the combined restaurant margins in 2009 and about 65% of the combined restaurant margins in 2008 and 2007. Franchised margin dollars increased $254 million or 4% (7% in constant currencies) in 2009 and 16 McDonald’s Corporation Annual Report 2009 Company-operated margins In millions U. S. Europe APMEA Other Countries ; Corporate Total Percent of sales 2009 $ 832 1,240 624 111 $2,807 2008 $ 856 1,340 584 128 $2,908 2007 $ 876 1,205 471 317 $2,869 U. S. Europe APMEA Other Countries ; Corporate Total 19. % 18. 4 16. 8 15. 2 18. 2% 18. 5% 18. 0 15. 9 15. 3 17. 6% 18. 7% 17. 7 15. 0 16. 1 17. 3% In the U. S. , the Company-operated margin percent increased in 2009 due to positive comparable sales and the impact of the refranchising strategy, partly offset by additional depreciation related to the beverage initiative and higher commodity costs. The margin percent decreased in 2008 due to cost pressures including higher commodity and labor costs, partly offset by positive comparable sales. Europe’s Company-operated margin percent increased in 2009 and 2008 primarily due to positive comparable sales, partly offset by higher commodity and labor costs.

In 2009, local inflation and the impact of weaker currencies on the cost of certain imported products drove higher costs, primarily in Russia, and negatively impacted the Company-operated margin percent. In APMEA, the Company-operated margin percent in 2009 and 2008 increased due to positive comparable sales, partly offset by higher labor costs. The margin percent in 2008 was also negatively impacted by higher commodity costs. In Other Countries ; Corporate, the Company-operated margin in 2007 benefited by about 100 basis points related to the discontinuation of depreciation on the assets in Latam from mid-April through July 2007. • Supplemental information regarding Companyoperated restaurants We continually review our restaurant ownership mix with a goal of improving local relevance, profits and returns.

In most cases, franchising is the best way to achieve these goals, but as previously stated, Company-operated restaurants are also important to our success. We report results for Company-operated restaurants based on their sales, less costs directly incurred by that business including occupancy costs. We report the results for franchised restaurants based on franchised revenues, less associated occupancy costs. For this reason and because we manage our business based on geographic segments and not on the basis of our ownership structure, we do not specifically allocate selling, general ; administrative expenses and other operating (income) expenses to Company-operated or franchised restaurants.

Other operating items that relate to the Company-operated restaurants generally include gains/losses on sales of restaurant businesses and write-offs of equipment and leasehold improvements. We believe the following information about Companyoperated restaurants in our most significant markets provides an additional perspective on this business. Management responsible for our Company-operated restaurants in these markets analyzes the Company-operated business on this basis to assess its performance. Management of the Company also considers this information when evaluating restaurant ownership mix, subject to other relevant considerations. The following tables seek to illustrate the two components of our Company-operated margins.

The first of these relates exclusively to restaurant operations, which we refer to as “Store operating margin. ” The second relates to the value of our Brand and the real estate interest we retain for which we charge rent and royalties. We refer to this component as “Brand/real estate margin. ” Both Company-operated and conventional franchised restaurants are charged rent and royalties, although rent and royalties for Company-operated restaurants are eliminated in consolidation. Rent and royalties for both restaurant ownership types are based on a percentage of sales, and the actual rent percentage varies depending on the level of McDonald’s investment in the restaurant.

Royalty rates may also vary by market. As shown in the following tables, in disaggregating the components of our Company-operated margins, certain costs with respect to Company-operated restaurants are reflected in Brand/real estate margin. Those costs consist of rent payable by McDonald’s to third parties on leased sites and depreciation for buildings and leasehold improvements and constitute a portion of occupancy ; other operating expenses recorded in the Consolidated statement of income. Store operating margins reflect rent and royalty expenses, and those amounts are accounted for as income in calculating Brand/real estate margin. McDonald’s Corporation Annual Report 2009 17

While we believe that the following information provides a perspective in evaluating our Company-operated business, it is not intended as a measure of our operating performance or as an alternative to operating income or restaurant margins as reported by the Company in accordance with accounting principles generally accepted in the U. S. In particular, as noted previously, we do not allocate selling, general ; administrative expenses to our Company-operated business. However, we believe that a range of $40,000 to $50,000 per restaurant, on average, is a typical range of costs to support this business in the U. S. The actual costs in markets outside the U.

S. will vary depending on local circumstances and the organizational structure of the market. These costs reflect the indirect services we believe are necessary to provide the appropriate support of the restaurant. U. S. Dollars in millions Europe 2009 1,578 $4,295 $ 832 $ 832 65 70 (634) $ 333 $ 634 (65) (70) $ 499 2008 1,782 $4,636 $ 856 $ 856 74 70 (684) $ 316 $ 684 (74) (70) $ 540 2007 2,090 $4,682 $ 876 $ 876 82 78 (691) $ 345 $ 691 (82) (78) $ 531 2009 2,001 $ 6,721 $ 1,240 $ 1,240 222 100 (1,306) $ 256 $ 1,306 (222) (100) $ 984 2008 2,024 $ 7,424 $ 1,340 $ 1,340 254 110 (1,435) 269 2007 2,177 $ 6,817 $ 1,205 $ 1,205 248 107 (1,294) 266

As reported Number of Company-operated restaurants at year end Sales by Company-operated restaurants Company-operated margin Store operating margin Company-operated margin Plus: Outside rent expense(1) Depreciation – buildings ; leasehold improvements(1) Less: Rent ; royalties(2) Store operating margin Brand/real estate margin Rent ; royalties(2) Less: Outside rent expense(1) Depreciation – buildings ; leasehold improvements(1) Brand/real estate margin $ $ $ 1,435 (254) (110) $ 1,071 $ 1,294 (248) (107) $ 939 (1) Represents certain costs recorded as occupancy ; other operating expenses in the Consolidated statement of income – rent payable by McDonald’s to third parties on leased sites and depreciation for buildings and leasehold improvements. This adjustment is made to reflect these occupancy costs in Brand/real estate margin. The relative percentage of sites that are owned versus leased varies by country. (2) Reflects average Company–operated rent and royalties (as a percentage of 2009 sales: U. S. – 14. 8% and Europe – 19. 4%).

This adjustment is made to reflect expense in Store operating margin and income in Brand/real estate margin. Countries within Europe have varying economic profiles and a wide range of rent and royalty rates as a percentage of sales. SELLING, GENERAL ; ADMINISTRATIVE EXPENSES Consolidated selling, general ; administrative expenses decreased 5% (2% in constant currencies) in 2009 and were flat (decreased 1% in constant currencies) in 2008. In 2008, expenses included costs related to the Beijing Summer Olympics and the Company’s biennial Worldwide Owner/Operator Convention. The 2008 constant currency change benefited by 3 percentage points due to the 2007 Latam transaction.

Selling, general ; administrative expenses Increase/(decrease) excluding currency translation Amount Dollars in millions Increase/(decrease) U. S. Europe APMEA Other Countries ; Corporate(1) Total 2009 $ 751 655 276 552 $2,234 2008 $ 745 714 300 596 $2,355 2007 $ 744 689 276 658 $2,367 2009 1% (8) (8) (7) (5)% 2008 —% 4 9 (9) —% 2009 1% — (5) (7) (2)% 2008 —% 1 8 (9) (1)% (1) Included in Other Countries ; Corporate are home office support costs in areas such as facilities, finance, human resources, information technology, legal, marketing, restaurant operations, supply chain and training. Selling, general ; administrative expenses as a percent of revenues were 9. % in 2009 compared with 10. 0% in 2008 and 10. 4% in 2007. Selling, general ; administrative expenses as a percent of Systemwide sales were 3. 1% in 2009 compared with 3. 3% in 2008 and 3. 7% in 2007. Management believes that analyzing selling, general ; administrative expenses as a percent of Systemwide sales, as well as revenues, is meaningful because these costs are incurred to support Systemwide restaurants. 18 McDonald’s Corporation Annual Report 2009 IMPAIRMENT AND OTHER CHARGES (CREDITS), NET On a pretax basis, the Company recorded impairment and other charges (credits), net of ($61) million in 2009, $6 million in 2008 and $1. 7 billion in 2007.

Management does not include these items when reviewing business performance trends because we do not believe these items are indicative of expected ongoing results. Impairment and other charges (credits), net In millions, except per share data Europe APMEA Other Countries ; Corporate Total After tax(1) Income from continuing operations per common share – diluted (1) Certain items were not tax affected. 2009 $ 4 — (65) $ (61) $ (91) $(. 08) 2008 $ 6 $ 2007 (11) $ 6 $ 4 $. 01 1,681 $1,670 $1,606 $ 1. 32 • Gains on sales of restaurant businesses Gains on sales of restaurant businesses include gains from sales of Company-operated restaurants as well as gains from exercises of purchase options by franchisees with business acilities lease arrangements (arrangements where the Company leases the businesses, including equipment, to franchisees who generally have options to purchase the businesses). The Company’s purchases and sales of businesses with its franchisees are aimed at achieving an optimal ownership mix in each market. Resulting gains or losses are recorded in operating income because the transactions are a recurring part of our business. The Company realized higher gains on sales of restaurant businesses in 2009 and 2008 compared with 2007 primarily as a result of selling more Company-operated restaurants in connection with the refranchising strategy in the Company’s major markets. Equity in earnings of unconsolidated affiliates Unconsolidated affiliates and partnerships are businesses in which the Company actively participates but does not control. The Company records equity in earnings from these entities representing McDonald’s share of results. For foreign affiliated markets – primarily Japan – results are reported after interest expense and income taxes. McDonald’s share of results for partnerships in certain consolidated markets such as the U. S. are reported before income taxes. These partnership restaurants are operated under conventional franchise arrangements and, therefore, are classified as conventional franchised restaurants. Results in 2009 and 2008 reflected improved results from our Japanese affiliate. 2009 results also benefited from the stronger Japanese Yen. Asset dispositions and other expense Asset dispositions and other expense consists of gains or losses on excess property and other asset dispositions, provisions for store closings, uncollectible receivables and other miscellaneous income and expenses. Asset dispositions in 2009 and 2008 reflected lower losses on restaurant closings and property disposals compared with 2007. In 2009, the Company recorded pretax income of $65 million related primarily to the resolution of certain liabilities retained in connection with the 2007 Latam transaction. The Company also recognized a tax benefit in 2009 in connection with this income, mainly related to the release of a tax valuation allowance. In 2007, the Company recorded $1. billion of pretax impairment charges related to the Company’s sale of its Latam businesses to a developmental licensee organization. OTHER OPERATING (INCOME) EXPENSE, NET Other operating (income) expense, net In millions 2009 $(113) (168) 59 $(222) 2008 $(126) (111) 72 $(165) 2007 $ (89) (116) 194 $ (11) Gains on sales of restaurant businesses Equity in earnings of unconsolidated affiliates Asset dispositions and other expense Total McDonald’s Corporation Annual Report 2009 19 OPERATING INCOME Operating income Increase excluding currency translation Amount Dollars in millions Increase/(decrease) U. S. Europe APMEA Other Countries ; Corporate Total Latam transaction Total excluding Latam transaction* nm Not meaningful. * 009 $3,232 2,588 989 32 $6,841 $6,841 2008 $3,060 2,608 819 (44) $6,443 $6,443 2007 $ 2,842 2,125 616 (1,704) $ 3,879 (1,641) $ 5,520 2009 6% (1) 21 nm 6% 6% 2008 8% 23 33 97 66% 17% 2009 6% 8 23 nm 10% 10% 2008 8% 17 28 97 62% 14% Results for 2007 included the impact of the Latam transaction in Other Countries ; Corporate. This impact reflects an impairment charge of $1,665 million, partly offset by a benefit of $24 million due to eliminating depreciation on the assets in Latam in mid-April 2007. In order to provide management’s view of the underlying business performance, results are also shown excluding the impact of the Latam transaction.

Results for 2009 included $65 million of income in Other Countries ; Corporate primarily related to the resolution of certain liabilities retained in connection with the 2007 Latam transaction. This benefit positively impacted the growth in total operating income by 1 percentage point. In the U. S. , 2009 and 2008 results increased primarily due to higher franchised margin dollars. In Europe, results for 2009 and 2008 were driven by strong performance in France, the U. K. and Russia. Positive results in Germany and most other markets also contributed to the operating income increase in 2008. In APMEA, results for 2009 were driven primarily by strong results in Australia and expansion in China. Results for 2008 were driven by strong results in Australia and China, and positive performance in most other markets. Combined operating margin Combined operating margin is defined as operating income as a percent of total revenues. Combined operating margin for 2009, 2008 and 2007 was 30. 1%, 27. 4% and 17. 0%, respectively. Impairment and other charges negatively impacted the 2007 combined operating margin by 7. 4 percentage points. INTEREST EXPENSE relates to net gains or losses on certain hedges that reduce the exposure to variability on certain intercompany foreign currency cash flow streams. Other expense primarily consists of gains or losses on early extinguishment of debt, amortization of debt issuance costs and other nonoperating income and expenses.

Interest income decreased for 2009 primarily due to lower average interest rates, while 2008 decreased primarily due to lower average interest rates and average cash balances. GAIN ON SALE OF INVESTMENT In 2009, the Company sold its minority ownership interest in Redbox to Coinstar, Inc. , the majority owner, for total consideration of $140 million. As a result of the transaction, the Company recognized a nonoperating pretax gain of $95 million (after tax–$59 million or $0. 05 per share). In 2008, the Company sold its minority ownership interest in U. K. -based Pret A Manger. In connection with the sale, the Company received cash proceeds of $229 million and recognized a nonoperating pretax gain of $160 million (after tax–$109 million or $0. 09 per share).

PROVISION FOR INCOME TAXES Interest expense for 2009 decreased primarily due to lower average interest rates, and to a lesser extent, weaker foreign currencies, partly offset by higher average debt levels. Interest expense for 2008 increased primarily due to higher average debt levels, and to a lesser extent, higher average interest rates. NONOPERATING (INCOME) EXPENSE, NET In 2009, 2008 and 2007, the reported effective income tax rates were 29. 8%, 30. 0% and 34. 6%, respectively. In 2009, the effective income tax rate benefited by 0. 7 percentage points primarily due to the resolution of certain liabilities retained in connection with the 2007 Latam transaction.

In 2007, the effective income tax rate was impacted by about 4 percentage points as a result of the following items: • A negative impact due to a minimal tax benefit of $62 million related to the Latam impairment charge of $1,641 million. This benefit was minimal due to the Company’s inability to utilize most of the capital losses generated by this transaction in 2007. • A positive impact due to a benefit of $316 million resulting from the completion of an IRS examination, partly offset by $28 million of expense related to the impact of a tax law change in Canada. Consolidated net deferred tax liabilities included tax assets, net of valuation allowance, of $1. 4 billion in both 2009 and 2008. Nonoperating (income) expense, net

In millions Interest income Translation and hedging activity Other expense Total 2009 $(19) (32) 27 $(24) 2008 $(85) (5) 12 $(78) 2007 $(124) 1 20 $(103) Interest income consists primarily of interest earned on shortterm cash investments. Translation and hedging activity primarily 20 McDonald’s Corporation Annual Report 2009 Substantially all of the net tax assets arose in the U. S. and other profitable markets. DISCONTINUED OPERATIONS Over the last several years, the Company has continued to focus its management and financial resources on the McDonald’s restaurant business as it believes the opportunities for long-term growth remain significant.

Accordingly, during third quarter 2007, the Company sold its investment in Boston Market. As a result of the disposal, Boston Market’s results of operations and transaction gain are reflected as discontinued operations. In connection with the sale, the Company received proceeds of approximately $250 million and recorded a gain of $69 million after tax. In addition, Boston Market’s net loss for 2007 was $9 million. ACCOUNTING CHANGES as issued, were effective January 1, 2008. However, in February 2008, the FASB deferred the effective date for one year for certain non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (i. e. at least annually). The Company adopted the required provisions related to debt and derivatives as of January 1, 2008 and adopted the remaining required provisions for non-financial assets and liabilities as of January 1, 2009. The effect of adoption was not significant in either period. • Subsequent events In May 2009, the FASB issued guidance on subsequent events, codified in the Subsequent Events Topic of the FASB ASC. This guidance sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements.

The guidance also indicates the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, as well as the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. The Company adopted this guidance beginning in the second quarter 2009. The adoption had no impact on our consolidated financial statements, besides the additional disclosure. • Variable interest entities and consolidation In June 2009, the FASB issued amendments to the guidance on variable interest entities and consolidation, codified primarily in the Consolidation Topic of the FASB ASC. This guidance modifies the method for determining whether an entity is a variable interest entity as well as the methods permitted for determining the primary beneficiary of a variable interest entity.

In addition, this guidance requires ongoing reassessments of whether a company is the primary beneficiary of a variable interest entity and enhanced disclosures related to a company’s involvement with a variable interest entity. This guidance was effective beginning January 1, 2010, and we do not expect the adoption to have a significant impact on our consolidated financial statements. • Sabbatical leave In 2006, the Financial Accounting Standards Board (FASB) issued guidance on accounting for sabbatical leave, codified in the Compensation – General Topic of the FASB Accounting Standards Codification (ASC). Under this guidance, compensation costs associated with a sabbatical should be accrued over the requisite service period, assuming certain conditions are met.

The Company adopted the guidance effective January 1, 2007, as required and accordingly, recorded a $36 million cumulative adjustment, net of tax, to decrease the January 1, 2007 balance of retained earnings. The annual impact to earnings is not significant. • Income tax uncertainties In 2006, the FASB issued guidance on accounting for uncertainty in income taxes, codified primarily in the Income Taxes Topic of the FASB ASC. This guidance clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. The guidance also covers derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company adopted the guidance effective January 1, 2007, as required.

As a result of the implementation, the Company recorded a $20 million cumulative adjustment to increase the January 1, 2007 balance of retained earnings. The guidance requires that a liability associated with an unrecognized tax benefit be classified as a long-term liability except for the amount for which cash payment is anticipated within one year. Upon adoption of the guidance, $339 million of tax liabilities, net of deposits, were reclassified from current to long-term and included in other long-term liabilities. • Fair value measurements In 2006, the FASB issued guidance on fair value measurements, codified primarily in the Fair Value Measurements and Disclosures Topic of the FASB ASC.

This guidance defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. This guidance does not require any new fair value measurements; rather, it applies to other accounting pronouncements that require or permit fair value measurements. The provisions of the guidance, Cash Flows The Company generates significant cash from its operations and has substantial credit availability and capacity to fund operating and discretionary spending such as capital expenditures, debt repayments, dividends and share repurchases. Cash provided by operations totaled $5. 8 billion and $5. billion in 2009 and 2008, respectively, and exceeded capital expenditures by $3. 8 billion in both years. In 2009, cash provided by operations decreased $166 million or 3% compared with 2008 despite increased operating results, primarily due to higher income tax payments, higher noncash income items and the receipt of $143 million in 2008 related to the completion of an IRS examination. In 2008, cash provided by operations increased $1. 0 billion or 21% compared with 2007 primarily due to increased operating results and changes in working capital, partly due to lower income tax payments and the receipt of $143 million related to the IRS examination.

McDonald’s Corporation Annual Report 2009 21 Cash used for investing activities totaled $1. 7 billion in 2009, an increase of $31 million compared with 2008. This reflects lower proceeds from sales of investments, restaurant businesses and property, offset by lower capital expenditures, primarily in the U. S. Cash used for investing activities totaled $1. 6 billion in 2008, an increase of $475 million compared with 2007. Investing activities in 2008 reflected lower proceeds from sales of investments and higher capital expenditures, partly offset by higher proceeds from the sales of restaurant businesses and property and lower expenditures on purchases of restaurant businesses.

Cash used for financing activities totaled $4. 4 billion in 2009, an increase of $307 million compared with 2008, primarily due to lower net debt issuances, an increase in the common stock dividend and lower proceeds from stock option exercises, partly offset by lower treasury stock purchases. Cash used for financing activities totaled $4. 1 billion in 2008, an increase of $118 million compared with 2007, which reflected lower proceeds from stock option exercises, mostly offset by higher net debt issuances. As a result of the above activity, the Company’s cash and equivalents balance decreased $267 million in 2009 to $1. 8 billion, compared with an increase of $82 million in 2008.

In addition to cash and equivalents on hand and cash provided by operations, the Company can meet short-term funding needs through its continued access to commercial paper borrowings and line of credit agreements. RESTAURANT DEVELOPMENT AND CAPITAL EXPENDITURES including reinvestment initiatives such as reimaging in many markets around the world and, to a lesser extent in 2009, the Combined Beverage Business in the U. S. Capital expenditures invested in major markets, excluding Japan, represented 70% to 75% of the total in 2009, 2008 and 2007. Japan is accounted for under the equity method, and accordingly its capital expenditures are not included in consolidated amounts. Capital expenditures In millions

New restaurants Existing restaurants Other(1) Total capital expenditures Total assets $ 2009 809 1,070 73 $ 2008 897 1,152 87 $ 2007 687 1,158 102 $ 1,952 $30,225 $ 2,136 $28,462 $ 1,947 $29,392 (1) Primarily corporate equipment and other office related expenditures. In 2009, the Company opened 824 traditional restaurants and 44 satellite restaurants (small, limited-menu restaurants for which the land and building are generally leased), and closed 215 traditional restaurants and 142 satellite restaurants. In 2008, the Company opened 918 traditional restaurants and 77 satellite restaurants and closed 209 traditional restaurants and 196 satellite restaurants. The majority of restaurant penings and closings occurred in the major markets in both years. The Company closes restaurants for a variety of reasons, such as existing sales and profit performance or loss of real estate tenure. Systemwide restaurants at year end(1) U. S. Europe APMEA Other Countries ; Corporate Total 2009 13,980 6,785 8,488 3,225 32,478 2008 13,918 6,628 8,255 3,166 31,967 2007 13,862 6,480 7,938 3,097 31,377 New restaurant investments in all years were concentrated in markets with acceptable returns or opportunities for long-term growth. Average development costs vary widely by market depending on the types of restaurants built and the real estate and construction costs within each market.

These costs, which include land, buildings and equipment, are managed through the use of optimally sized restaurants, construction and design efficiencies and leveraging best practices. Although the Company is not responsible for all costs for every restaurant opened, total development costs (consisting of land, buildings and equipment) for new traditional McDonald’s restaurants in the U. S. averaged approximately $2. 7 million in 2009. The Company owned approximately 45% of the land and about 70% of the buildings for restaurants in its consolidated markets at year-end 2009 and 2008. SHARE REPURCHASES AND DIVIDENDS In 2009, the Company returned $5. 1 billion to shareholders through a combination of shares repurchased and dividends paid, bringing the three-year total to $16. billion under the Company’s $15 billion to $17 billion cash returned to shareholders target for 2007 through 2009. Shares repurchased and dividends In millions, except per share data (1) Includes satellite units at December 31, 2009, 2008 and 2007 as follows: U. S. – 1,155, 1,169, 1,233; Europe–241, 226, 214; APMEA (primarily Japan)–1,263, 1,379, 1,454; Other Countries ; Corporate–464, 447, 439. Approximately 65% of Company-operated restaurants and about 80% of franchised restaurants were located in the major markets at the end of 2009. Franchisees operated 81% of the restaurants at year-end 2009. Capital expenditures decreased $184 million or 9% in 2009 primarily due to fewer estaurant openings, lower reinvestment in existing restaurants in the U. S. and the impact of foreign currency translation. Capital expenditures increased $189 million or 10% in 2008 primarily due to higher investment in new restaurants in Europe and APMEA. In both years, capital expenditures reflected the Company’s commitment to grow sales at existing restaurants, Number of shares repurchased Shares outstanding at year end Dividends declared per share Dollar amount of shares repurchased Dividends paid Total returned to shareholders 2009 50. 3 1,077 $ 2. 05 $2,854 2,235 $5,089 2008 69. 7 1,115 $1. 625 $3,981 1,823 $5,804 2007 77. 1 1,165 $ 1. 50 $3,949 1,766 $5,715

In September 2007, the Company’s Board of Directors approved a $10 billion share repurchase program with no specified expiration date. In September 2009, the Company’s Board of Directors terminated the then-existing share repurchase program and replaced it with a new share repurchase program that authorizes the purchase of up to $10 billion of the Company’s 22 McDonald’s Corporation Annual Report 2009 outstanding common stock with no specified expiration date. In 2009, approximately 50 million shares were repurchased for $2. 9 billion, of which 8 million shares or $0. 5 billion were purchased under the new program. The Company reduced its shares outstanding at year end by over 3% compared with 2008, net of stock option exercises.

The Company has paid dividends on its common stock for 34 consecutive years and has increased the dividend amount every year. The 2009 full year dividend of $2. 05 per share reflects the quarterly dividend paid for each of the first three quarters of $0. 50 per share, with an increase to $0. 55 per share paid in the fourth quarter. This 10% increase in the quarterly dividend equates to a $2. 20 per share annual dividend rate and reflects the Company’s confidence in the ongoing strength and reliability of its cash flow. As in the past, future dividend amounts will be considered after reviewing profitability expectations and financing needs, and will be declared at the discretion of the Company’s Board of Directors.

Operating income, as reported, does not include interest income; however, cash balances are included in average assets. The inclusion of cash balances in average assets reduced return on average assets by 2. 0 percentage points, 1. 9 percentage points and 1. 3 percentage points in 2009, 2008 and 2007, respectively. FINANCING AND MARKET RISK The Company generally borrows on a long-term basis and is exposed to the impact of interest rate changes and foreign currency fluctuations. Debt obligations at December 31, 2009 totaled $10. 6 billion, compared with $10. 2 billion at December 31, 2008. The net increase in 2009 was primarily due to net issuances of $219 million and changes in exchange rates on foreign currency denominated debt of $128 million.

Debt highlights(1) 2009 Fixed-rate debt as a percent of total debt(2,3) Weighted-average annual interest rate of total debt(3) Foreign currency-denominated debt as a percent of total debt(2) Total debt as a percent of total capitalization (total debt and total shareholders’ equity)(2) Cash provided by operations as a percent of total debt(2) 68% 4. 5 43 2008 72% 5. 0 45 2007 58% 4. 7 66 Financial Position and Capital Resources TOTAL ASSETS AND RETURNS Total assets increased $1. 8 billion or 6% in 2009. Excluding the effect of changes in foreign currency exchange rates, total assets increased $677 million in 2009. Over 70% of total assets were in major markets at year-end 2009. Net property and equipment increased $1. 3 billion in 2009 and represented over 70% of total assets at year end. Excluding the effect of changes in foreign currency exchange rates, net property and equipment increased $476 million primarily due to capital expenditures, partly offset

IncometaxintheUnitedStates,

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GenerallyAcceptedAccountingPrinciplesAnnual Report 2009 2009 Highlights: Comparable Sales Growth 3. 8% Earnings Per Share Growth 9% Total Cash Returned to Shareholders 2007–2009 $ 16. 6 Billion To Our Valued Shareholders: To state the obvious, 2009 was a tumultuous year economically. Despite this tough environment, McDonald’s delivered another exceptional year of growth, posting strong sales and increased market share around the world. In 2009, global comparable sales increased 3. 8 percent, fueled by solid gains in the United States (+2. 6 percent), Europe (+5.  percent), Asia/Pacific, Middle East and Africa (+3. 4 percent), Latin America (+5. 3 percent) and Canada (+5. 8 percent). Earnings per share for the year increased 9 percent to $4. 11 (13 percent in constant currencies), while consolidated operating income increased 6 percent (10 percent in constant currencies). We also returned $5. 1 billion to shareholders through share repurchases and dividends paid, bringing our three-year cash return total to $16. 6 billion—notably at the high end of our stated target of $15 to $17 billion for the years 2007 through 2009.

Concerning McDonald’s performance, there are three milestones that I want to recognize: First, our 2009 comparable sales increase marked the sixth consecutive year of positive sales in every geographic segment of our business. Second, our increasingly relevant menu options, combined with clear competitive advantages in convenience and value, enabled us to serve 60 million customers per day last year. This is up 2 million from the prior year and a remarkable 14 million more per day compared to 2002.

Third, as a result of these sustained operating results, McDonald’s total stock return for the three-year period ending in 2009 was ranked number one among the 30 blue-chip companies that comprise the Dow Jones Industrial Average. These singular achievements relate directly to our historic decision in 2003 to reinvent McDonald’s by becoming “better, not just bigger. ” I say historic because we could not have made a more wise decision for our System than to implement our Plan to Win and refocus our efforts on restaurant execution—with the goal of improving the overall experience for our customers.

There is nothing profound about our Plan to Win. It essentially identifies the five core drivers of our business—people, products, place, price and promotion—and aligns our industry-leading owner/operators, world-class suppliers and talented, experienced employees around initiatives that drive results. Jim Skinner Vice Chairman and CEO Operating Income (In billions) * Includes $1. 7 billion of charges related to the Latin America developmental license transaction. 3-year Compound Annual Total Return (2007–2009) 1 McDonald’s Corporation Annual Report 2009

As we survey the business and competitive landscape today, it’s clear our investment in the Plan to Win has paid off. We are operating from a position of strength and continue to become more relevant in the lives of our customers. It’s also remarkable how our Company culture has evolved since we initiated our Plan to Win. Today, we are aligned throughout the System. We have a leadership culture that embraces change and rejects complacency. We are continually focused on what’s working and then leveraging our scale around the world for the overall good of our customers and our System.

For example, our intense effort on restaurant reimaging, which initially excited customers in Europe, is now a foundational element of each Area of the World business plan. Similarly, our successful value menu, pioneered so well in the United States, now appears on McDonald’s menu boards throughout the world. From restaurant operations to marketing … from consumer insights to menu management … in virtually every aspect of our business … we are continually improving and will never be satisfied. We truly are “better, not just bigger. Looking ahead, we see tremendous opportunity for brand McDonald’s, an opportunity to further differentiate our brand and truly distance ourselves from the rest of the industry. We bring to the table what no one else can—a scale advantage in voice, convenience and cost; a brand advantage in predictable value, family fun and familiar taste. We also have a balance sheet and cash flows that are strong and support our ability to continue investing in our business. We’re determined to build on our competitive advantages, investing in our brand to energize future performance.

We will continue to pursue opportunities to extend our relevance with a particular emphasis on three key areas: service enhancements, restaurant reimaging and menu innovation. With service, we will leverage technology to make it easier for managers and crew to quickly and accurately serve the customer. To enhance brand perception and drive higher sales and returns, we’re accelerating our interior and exterior reimaging efforts around the world. And we will innovate at every tier of our menu to sustain our momentum and create excitement for our customers.

This is just one more step on our journey to modernize our brand and improve customer relevance. 80 Consecutive months of global comparable sales increases through December 2009 million Customers served on average every day 60 2 McDonald’s Corporation Annual Report 2009 In addition to our customer-focused strategies, our success is the direct result of our people—our owner/operators, suppliers and Company employees. The best plans are only as good as the people who execute them. That’s why our efforts around talent management and leadership development are so important.

Our collaborative management approach has resulted in the strongest global leadership team in McDonald’s history. Because of the constant cross-fertilization of ideas and innovations, our leaders are better able to assume new challenges and responsibilities on behalf of the Company. This was most recently demonstrated in the election of Don Thompson as President and Chief Operating Officer. In his previous role as President of McDonald’s USA, he worked side by side with his counterparts on the global leadership team and became familiar with their challenges and successes.

Don has hit the ground running in his new role and I’m confident he will add extraordinary value as we work to further differentiate brand McDonald’s. Clearly, we have a strong and deep bench of talent; people who are ready to step in and step up to every challenge and opportunity. They can be found at every level of our global System … in our restaurants, among the ranks of our outstanding franchisees and suppliers as well as inside our Company. Collectively, they personify an evolving leadership approach that continues to elevate our brand and drive our growth.

As McDonald’s Chief Executive Officer, I am delighted to provide you these highlights. I take considerable pride in our people and performance. We’re determined to keep stretching our business, increasing traffic, and going to where our customers are headed. And we will continue to work hard to deliver sustainable business results for the long-term benefit of our shareholders. Thank you for your investment. Sincerely, Combined Operating Margin (Operating income as a percent of total revenues) * Includes 7. 4 percentage point negative impact related to the Latin America developmental license transaction.

Cash Returned to Shareholders* (In billions) * Via dividends and share repurchases. Earnings Per Share * Includes $1. 32 of charges related to the Latin America developmental license transaction. Jim Skinner Vice Chairman and CEO 3 McDonald’s Corporation Annual Report 2009 Dear Fellow Shareholders: Your Board of Directors is pleased to report that McDonald’s Corporation continued to perform well in 2009, despite a difficult economic environment around the world. In a year when sales in the Informal Eating Out segment declined, McDonald’s continued to execute our Plan to Win … and sales increased.

We believe that McDonald’s performance under these circumstances is due in large part to the commitment and experience of your senior management team, led by Jim Skinner, Vice Chairman and CEO. Jim is a strong leader and a tireless advocate for McDonald’s customers and for our shareholders. McDonald’s is well positioned to elevate our industry leadership. Management’s ongoing focus on enhancing long-term profitable growth, giving constant attention to talent management and leadership development, and continuing to provide relevant offerings and support balanced lifestyles all contribute to the Company’s continued success.

And while we cannot control outside economic conditions, we can—and do—control how we manage our future and achieve our goals. Your Board of Directors is mindful of our obligation to serve as representatives for you, our shareholders. We pay special attention to our responsibility to keep your interests in mind as we review the Company’s performance and plans. We believe McDonald’s continues to operate under a clear strategic business vision for the decade ahead, and that our people work diligently and enthusiastically executing our plans.

Finally, the Board is also responsible for promoting strong corporate governance principles and effective management oversight. Our team of directors, who bring a range of independent and experienced voices to our deliberations, is diligent in executing these responsibilities. And as always, we remain united in our commitment to deliver shareholder value. We are honored to serve you, and believe that McDonald’s best days lie ahead. Very truly yours, Andy McKenna Chairman Andy McKenna Chairman 4 McDonald’s Corporation Annual Report 2009 2009 Financial Report 2009 Financial Report 8 9 28 29 30 31 32 45 46 47 48 49 50 52 6-year Summary Stock Performance Graph Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Statement of Income Consolidated Balance Sheet Consolidated Statement of Cash Flows Consolidated Statement of Shareholders’ Equity Notes to Consolidated Financial Statements Quarterly Results (Unaudited) Management’s Assessment of Internal Control over Financial Reporting Report of Independent Registered Public Accounting Firm Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting Executive Management ; Business Unit Officers Board of Directors Investor Information 6 McDonald’s Corporation Annual Report 2009 6-Year Summary Dollars in millions, except per share data

Company-operated sales Franchised revenues Total revenues Operating income Income from continuing operations Net income Cash provided by operations Cash used for investing activities Capital expenditures Cash used for (provided by) financing activities Treasury stock repurchased Common stock cash dividends Financial position at year end: Total assets Total debt Total shareholders’ equity Shares outstanding in millions Per common share: Income from continuing operations–diluted Net income–diluted Dividends declared Market price at year end Company-operated restaurants Franchised restaurants Total Systemwide restaurants Franchised sales(11) 2009 $15,459 $ 7,286 $22,745 $ 6,841(1) $ 4,551(1,2) $ 4,551(1,2) $ 5,751 $ 1,655 $ 1,952 $ 4,421 $ 2,854 $ 2,235 $30,225 $10,578 $14,034 1,077 $ 4. 11(1,2) $ 4. 11(1,2) $ 2. 05 $ 62. 44 6,262 26,216 32,478 $56,928 2008 2007 2006 2005 2004 6,561 16,611 6,961 6,176 23,522 22,787 6,443 3,879(4) (3) 4,313 2,335(4,5) (3) 4,313 2,395(4,5,6) 5,917 4,876 1,625 1,150 2,136 1,947 4,115 3,996 3,981 3,949 1,823 1,766 28,462 10,218 13,383 1,115 29,392 9,301 15,280 1,165 15,402 14,018 5,493 5,099 20,895 19,117 4,433(7) 3,984 2,866(7) 2,578(9) (7,8) 3,544 2,602(9) 4,341 4,337 1,274 1,818 1,742 1,607 5,460 (442) 3,719 1,228 1,217 842 28,974 8,408 15,458 1,204 29,989 10,137 15,146 1,263 13,055 4,834 17,889 3,554(10) 2,287(10) 2,279(10) 3,904 1,383 1,419 1,634 605 695 27,838 9,220 14,201 1,270 1. 80(10) 1. 79(10) . 55 32. 06 8,179 22,317 30,496 37,052 3. 76(3) 1. 93(4,5) (3) 3. 76 1. 98(4,5,6) 1. 63 1. 50 62. 19 58. 91 6,502 6,906 25,465 24,471 31,967 31,377 54,132 46,943 2. 29(7) 2. 02(9) (7,8) 2. 83 2. 04(9) 1. 00 . 67 44. 33 33. 2 8,166 8,173 22,880 22,593 31,046 30,766 41,380 38,913 (1) Includes net pretax income of $65. 2 million ($87. 0 million after tax or $0. 08 per share) primarily related to the resolution of certain liabilities retained in connection with the 2007 Latin America developmental license transaction. (2) Includes income of $58. 8 million ($0. 06 per share-basic, $0. 05 per share-diluted) due to the sale of the Company’s minority ownership interest in Redbox Automated Retail, LLC. (3) Includes income of $109. 0 million ($0. 09 per share) due to the sale of the Company’s minority ownership interest in U. K. – based Pret A Manger. (4) Includes pretax operating charges of $1. billion ($1. 32 per share) related to impairment and other charges primarily as a result of the Company’s sale of its businesses in 18 Latin American and Caribbean markets to a developmental licensee (see Latam transaction note to the consolidated financial statements for further details). (5) Includes a tax benefit of $316. 4 million ($0. 26 per share) resulting from the completion of an Internal Revenue Service (IRS) examination of the Company’s 2003-2004 U. S. federal tax returns. (6) Includes income of $60. 1 million ($0. 05 per share) related to discontinued operations primarily from the sale of the Company’s investment in Boston Market. 7) Includes pretax operating charges of $134 million ($98 million after tax or $0. 08 per share) related to impairment and other charges. (8) Includes income of $678 million ($0. 54 per share) related to discontinued operations primarily resulting from the disposal of our investment in Chipotle. (9) Includes a net tax benefit of $73 million ($0. 05 per share) comprised of $179 million ($0. 14 per share) of income tax benefit resulting from the completion of an IRS examination of the Company’s 2000-2002 U. S. tax returns, partly offset by $106 million ($0. 09 per share) of incremental tax expense resulting from the decision to repatriate certain foreign earnings under the Homeland Investment Act (HIA). 10) Includes pretax operating charges of $130 million related to impairment and $121 million ($12 million related to 2004 and $109 million related to prior years) for a correction in the Company’s lease accounting practices and policies, as well as a nonoperating gain of $49 million related to the sale of the Company’s interest in a U. S. real estate partnership, for a total pretax expense of $202 million ($148 million after tax or $0. 12 per share). (11) While franchised sales are not recorded as revenues by the Company, management believes they are important in understanding the Company’s financial performance because these sales are the basis on which the Company calculates and records franchised revenues and are indicative of the financial health of the franchisee base. McDonald’s Corporation Annual Report 2009 7 Stock performance graph At least annually, we consider which companies comprise a readily identifiable investment peer group.

McDonald’s is included in published restaurant indices; however, unlike most other companies included in these indices, which have no or limited international operations, McDonald’s does business in more than 100 countries and a substantial portion of our revenues and income is generated outside the U. S. In addition, because of our size, McDonald’s inclusion in those indices tends to skew the results. Therefore, we believe that such a comparison is not meaningful. Our market capitalization, trading volume and importance in an industry that is vital to the U. S. economy have resulted in McDonald’s inclusion in the Dow Jones Industrial Average (DJIA) since 1985. Like McDonald’s, many DJIA companies generate mean- ingful revenues and income outside the U. S. and some manage global brands.

Thus, we believe that the use of the DJIA companies as the group for comparison purposes is appropriate. The following performance graph shows McDonald’s cumulative total shareholder returns (i. e. , price appreciation and reinvestment of dividends) relative to the Standard ; Poor’s 500 Stock Index (S;P 500 Index) and to the DJIA companies for the five-year period ended December 31, 2009. The graph assumes that the value of an investment in McDonald’s common stock, the S;P 500 Index and the DJIA companies (including McDonald’s) was $100 at December 31, 2004. For the DJIA companies, returns are weighted for market capitalization as of the beginning of each period indicated.

These returns may vary from those of the Dow Jones Industrial Average Index, which is not weighted by market capitalization, and may be composed of different companies during the period under consideration. COMPARISON OF CUMULATIVE FIVE YEAR TOTAL RETURN $250 $200 $150 $100 $50 $0 Dec ’04 100 100 100 ’05 107 105 102 ’06 144 121 121 ’07 197 128 132 ’08 214 81 90 ’09 222 102 110 McDonald’s Corporation S&P 500 Index Dow Jones Industrials Source: Capital IQ, a Standard & Poor’s business 8 McDonald’s Corporation Annual Report 2009 Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview DESCRIPTION OF THE BUSINESS The Company franchises and operates McDonald’s restaurants.

Of the 32,478 restaurants in 117 countries at year-end 2009, 26,216 were operated by franchisees (including 19,020 operated by conventional franchisees, 3,160 operated by developmental licensees and 4,036 operated by foreign affiliated markets (affiliates)—primarily in Japan) and 6,262 were operated by the Company. Under our conventional franchise arrangement, franchisees provide a portion of the capital required by initially investing in the equipment, signs, seating and decor of their restaurant businesses, and by reinvesting in the business over time. The Company owns the land and building or secures long-term leases for both Company-operated and conventional franchised restaurant sites.

This maintains long-term occupancy rights, helps control related costs and assists in alignment with franchisees. In certain circumstances, the Company participates in reinvestment for conventional franchised restaurants. Under our developmental license arrangement, licensees provide capital for the entire business, including the real estate interest, and the Company has no capital invested. In addition, the Company has an equity investment in a limited number of affiliates that invest in real estate and operate or franchise restaurants within a market. We view ourselves primarily as a franchisor and believe franchising is important to delivering great, locally-relevant customer experiences and driving profitability.

However, directly operating restaurants is paramount to being a credible franchisor and is essential to providing Company personnel with restaurant operations experience. In our Company-operated restaurants, and in collaboration with franchisees, we further develop and refine operating standards, marketing concepts and product and pricing strategies, so that only those that we believe are most beneficial are introduced Systemwide. We continually review our mix of Company-operated and franchised (conventional franchised, developmental licensed and affiliated) restaurants to help maximize overall performance. The Company’s revenues consist of sales by Companyoperated restaurants and fees from restaurants operated by franchisees.

Revenues from conventional franchised restaurants include rent and royalties based on a percent of sales along with minimum rent payments, and initial fees. Revenues from restaurants licensed to affiliates and developmental licensees include a royalty based on a percent of sales, and may include initial fees. Fees vary by type of site, amount of Company investment, if any, and local business conditions. These fees, along with occupancy and operating rights, are stipulated in franchise/license agreements that generally have 20-year terms. The business is managed as distinct geographic segments. Significant reportable segments include the United States (U. S. ), Europe, and Asia/Pacific, Middle East and Africa (APMEA).

In addition, throughout this report we present “Other Countries & Corporate” that includes operations in Canada and Latin America, as well as Corporate activities. The U. S. , Europe and APMEA segments account for 35%, 41% and 19% of total revenues, respectively. France, Germany and the United Kingdom (U. K. ), collectively, account for approximately 55% of Europe’s revenues; and Australia, China and Japan (a 50%-owned affiliate accounted for under the equity method), collectively, account for over 50% of APMEA’s revenues. These six markets along with the U. S. and Canada are referred to as “major markets” throughout this report and comprise over 70% of total revenues.

The Company continues to focus its management and financial resources on the McDonald’s restaurant business as we believe opportunities remain for long-term growth. Accordingly, in 2009, the Company sold its minority ownership interest in Redbox Automated Retail, LLC (Redbox) for total consideration of $140 million. In 2008, the Company sold its minority ownership interest in U. K. -based Pret A Manger for cash proceeds of $229 million. In connection with both sales, the Company recognized nonoperating gains. During 2007, the Company sold its investment in Boston Market. As a result of the disposal, Boston Market’s results of operations and transaction gain are reflected as discontinued operations.

As of December 31, 2009, the Company had disposed of all non-McDonald’s restaurant businesses. In analyzing business trends, management considers a variety of performance and financial measures, including comparable sales and comparable guest count growth, Systemwide sales growth, restaurant margins and returns. • Constant currency results exclude the effects of foreign currency translation and are calculated by translating current year results at prior year average exchange rates. Management reviews and analyzes business results in constant currencies and bases certain incentive compensation plans on these results because they believe this better represents the Company’s underlying business trends. Comparable sales and comparable guest counts are key performance indicators used within the retail industry and are indicative of acceptance of the Company’s initiatives as well as local economic and consumer trends. Increases or decreases in comparable sales and comparable guest counts represent the percent change in sales and transactions, respectively, from the same period in the prior year for all restaurants in operation at least thirteen months, including those temporarily closed. Some of the reasons restaurants may be temporarily closed include reimaging or remodeling, rebuilding, road construction and natural disasters. Comparable sales exclude the impact of currency translation.

McDonald’s reports on a calendar basis and therefore the comparability of the same month, quarter and year with the corresponding period of the prior year will be impacted by the mix of days. The number of weekdays and weekend days in a given timeframe can have a positive or negative impact on comparable sales and guest counts. The Company refers to these impacts as calendar shift/trading day adjustments. In addition, the timing of holidays can impact comparable sales and guest counts. These impacts vary geographically due to consumer spending patterns and have the greatest effect on monthly comparable sales and guest counts while the annual impacts are typically minimal. In 2008, there was an incremental full day of sales and guest counts due to leap year. Systemwide sales include sales at all restaurants, whether operated by the Company or by franchisees. While franchised sales are not recorded as revenues by the Company, management believes the information is important in understanding the Company’s financial performance because these sales are the McDonald’s Corporation Annual Report 2009 9 basis on which the Company calculates and records franchised revenues and are indicative of the financial health of the franchisee base. • Return on incremental invested capital (ROIIC) is a measure reviewed by management over one-year and three-year time periods to evaluate the overall profitability of the business units, the effectiveness of capital deployed and the future allocation of capital.

The return is calculated by dividing the change in operating income plus depreciation and amortization (numerator) by the adjusted cash used for investing activities (denominator), primarily capital expenditures. The calculation assumes a constant average foreign exchange rate over the periods included in the calculation. STRATEGIC DIRECTION AND FINANCIAL PERFORMANCE The strength of the alignment between the Company, its franchisees and suppliers (collectively referred to as the System) has been key to McDonald’s success over the years. This business model enables McDonald’s to consistently deliver locally-relevant restaurant experiences to customers and be an integral part of the communities we serve. In addition, it facilitates our ability to identify, implement and scale innovative ideas that meet customers’ changing needs and preferences.

McDonald’s customer-focused Plan to Win—which is centered around being better, not just bigger—provides a common framework for our global business yet allows for local adaptation. Through the execution of multiple initiatives surrounding the five key drivers of exceptional customer experiences—People, Products, Place, Price and Promotion—we have enhanced the restaurant experience for customers worldwide and grown sales and customer visits in each of the last six years. This Plan, coupled with financial discipline, has delivered strong results for shareholders. We have exceeded our long-term, constant currency financial targets of average annual Systemwide sales growth of 3% o 5%; average annual operating income growth of 6% to 7%; and annual returns on incremental invested capital in the high teens every year since the Plan’s implementation in 2003, after adjusting 2007 for the Latin America developmental license transaction. Given the size and scope of our global business, we believe these financial targets are realistic and sustainable, while keeping us focused on making the best decisions for the longterm benefit of shareholders. In 2009, we continued to elevate the customer experience by remaining focused on the Company’s key global success factors of branded affordability, menu variety and beverage choice, convenience and daypart expansion, ongoing restaurant reinvestment and operations excellence.

Locally-relevant initiatives around these factors successfully resonated with consumers driving increases in sales, customer visits and market share in many countries despite challenging global economies and a contracting informal eating out market. As a result, each reportable segment contributed to 2009 global comparable sales and guest counts, which increased 3. 8% and 1. 4%, respectively. In the U. S. , we grew sales and market share with comparable sales up for the 7th consecutive year, rising 2. 6% in 2009. This performance was the result of a continued focus on classic menu favorites such as the Big Mac and Quarter Pounder, increased emphasis on everyday affordability, and the national marketing launch of the new McCafe premium coffees and premium Angus Third Pounder. Complementing these efforts were our strategies 10 McDonald’s Corporation Annual Report 2009 elated to convenient locations, extended hours, efficient drivethru service and value-oriented local beverage promotions. In conjunction with the introduction of the McCafe premium coffees, reinvestment was needed in many restaurants to accommodate the new equipment required to prepare these beverages as well as facilitate the national introduction of smoothies and frappes in mid-2010. In most cases, this reinvestment involved expanding and optimizing the efficiency of the drive-thru booth, enabling us to better serve even more customers faster. In Europe, comparable sales rose 5. 2%, marking the 6th consecutive year of comparable sales increases.

This performance reflected Europe’s strategic priorities to upgrade the customer and employee experience, enhance local relevance, and build brand transparency. Initiatives surrounding these priorities encompassed: leveraging our tiered menu featuring locally relevant selections of premium, classic core and everyday affordable menu offerings as well as dessert and limited-time food promotions; and reimaging nearly 900 restaurants including adding about 290 McCafes—an upscale area with coffeehousestyle ambiance inside an existing McDonald’s restaurant. In addition, we addressed growing interest in portable snack offerings with platforms such as the Little Tasters in the U. K. , launched breakfast in Germany and increased our convenience with extended hours.

In order to support greater menu variety, we completed the roll-out of a new more efficient kitchen operating system in substantially all of our European restaurants. Finally, we enhanced customer trust in our brand through communications that emphasized the quality and origin of McDonald’s food and our sustainable business practices. In APMEA, we continued to execute our four growth platforms of breakfast, convenience, core menu and value. Comparable sales rose 3. 4% primarily due to the ongoing momentum of our business in Australia where multiple initiatives surrounding menu variety including the launch of the premium Angus burger, greater convenience and reimaging further strengthened our brand relevance.

In addition, across the segment, we enhanced our convenience by increasing the number of restaurants open 24-hours to over 4,600, expanding delivery service to more than 1,300 locations including about 300 in China, and enhancing drive-thru efficiency. We sustained the momentum of our breakfast business, currently in about 75% of our restaurants, by increasing customer awareness and visit frequency with the launch of premium roast coffee in key markets like Japan and China and promoting it through successful sampling programs. We continued to appeal to customers with branded affordability menus, especially our value lunch platforms, and highlighted classic menu favorites like the Quarter Pounder.

Our customer-centered strategies seek to optimize price, product mix and promotion as a means to drive sales and profits. This approach is complemented by a focus on driving operating efficiencies and effectively managing restaurant-level costs by leveraging our scale, supply chain infrastructure and risk management practices. Our ability to successfully execute our strategies in every area of the world contributed to improved profitability as measured by combined operating margin of 30. 1% in 2009, an improvement of 2. 7 percentage points over 2008. Strong global performance positively impacted cash from operations, which totaled $5. 8 billion in 2009.

Our substantial cash flow, strong credit rating and continued access to credit provide us significant flexibility to fund capital expenditures as well as return cash to shareholders. About $2. 0 billion of cash from operations was invested in our business primarily to open 868 restaurants (511 net, after 357 closings) and reimage about 1,850 existing locations. After these capital expenditures, we returned our free cash flow to shareholders through dividends and share repurchases. In 2009, we returned $5. 1 billion consisting of $2. 2 billion in dividends and $2. 9 billion in share repurchases. This brought the total return to shareholders to $16. billion under our $15 billion to $17 billion target for 2007 through 2009. Cash from operations continues to benefit from our evolution toward a more heavily franchised business model as the rent and royalty income received from owner/operators is a very stable revenue stream that has relatively low costs, and is less capitalintensive. In addition, we believe locally-owned and operated restaurants help us maximize brand performance and are at the core of our competitive advantage, making McDonald’s not just a global brand but also a locally-relevant one. To that end, for 2008 and 2009 combined, we refranchised about 1,100 restaurants, increasing the percent of restaurants franchised worldwide to 81%.

Refranchising impacts our consolidated financial statements as follows: • Consolidated revenues are initially reduced because we collect rent and royalty as a percent of sales from a refranchised restaurant instead of 100% of its sales. • Company-operated margin dollars decline while franchised margin dollars increase. • Margin percentages are affected depending on the sales and cost structures of the restaurants refranchised. • Other operating (income) expense fluctuates as we recognize gains and/or losses resulting from sales of restaurants. • Combined operating margin percent improves. • Return on average assets increases primarily due to a decrease in average asset balances. HIGHLIGHTS FROM THE YEAR INCLUDED: • Comparable sales grew 3. % and guest counts rose 1. 4%, building on 2008 increases of 6. 9% and 3. 1%, respectively. • Growth in combined operating margin of 2. 7 percentage points from 27. 4% in 2008 to 30. 1% in 2009. • Operating income increased 6% (10% in constant currencies). • Net income per share was $4. 11, an increase of 9% (13% in constant currencies). • Cash provided by operations totaled $5. 8 billion. • The Company increased the quarterly cash dividend per share 10% to $0. 55 for the fourth quarter–bringing the current annual dividend rate to $2. 20 per share. • One-year ROIIC was 38. 0% and three-year ROIIC was 42. 9% for the period ended December 31, 2009. OUTLOOK FOR 2010

We will continue to drive success in 2010 and beyond by remaining focused on our “better, not just bigger” strategy and the key drivers of exceptional customer experiences—People, Products, Place, Price and Promotion. Our global System is energized by our ongoing momentum, strong competitive position and growth opportunities. We intend to further differentiate our brand, increase customer visits and grow market share by pursuing initiatives in three key areas: service enhancement, restaurant reimaging and menu innovation. These efforts will include leveraging technology to make it easier for restaurant staff to quickly and accurately serve customers, accelerating our interior and exterior reimaging efforts and innovating at every tier of our menu to deliver great taste and value to customers.

As we execute along these priorities and remain disciplined in operations and financial management, we expect to increase McDonald’s brand relevance, widen our competitive lead and, in turn, grow sales, profits and returns. As we do so, we are confident we can meet or exceed the long-term constant currency financial targets previously discussed despite expectations for a continued challenging global economic environment in 2010. In the U. S. , our strategies include strengthening our core menu and value offerings, aggressively pursuing new growth opportunities in chicken, breakfast, beverages and snacking options, and elevating the brand experience.

Our initiatives include highlighting the enduring appeal of core menu classics such as the Big Mac, emphasizing the value our menu offers all-day-long including the new breakfast value menu, and encouraging the trial of new products with the Mac Snack Wrap and—by mid-year—frappes and smoothies. In addition, our plans to elevate the brand experience encompass updating our technology with a new point of sale system, enhancing restaurant manager and crew retention and productivity, and initiating a multi-year program to contemporize the interiors and exteriors of our restaurants through reimaging, completing about 500 in 2010. These efforts combined with the convenience of our locations, optimized drive-thru service, free wireless service and longer operating hours will further reinforce McDonald’s position as an easy, enjoyable eating-out experience.

Our plans for Europe are focused on building market share as we continue to execute along Europe’s three key priorities. This includes upgrading our restaurant ambiance by reimaging approximately 1,000 restaurants, primarily in France and the U. K. , as we make progress toward our goal to reimage more than 85% of our restaurants by the end of 2011. In addition, we expect to leverage technologies such as self-order kiosks, hand-held order devices and drive-thru customer order displays to enhance the customer experience and help speed service. We will further enhance our local relevance by complementing our tiered-menu with limited-time food events as well as new snack and dessert options.

Finally, we will remain approachable and accessible as we continue to educate consumers about the quality and origin of our food and communicate our sustainable business practices. In APMEA, we will execute initiatives that best support our goal to be customers’ first choice for eating out: convenience, core menu, branded affordability, improved operations and reimaging. Our convenience initiatives include leveraging the success of 24-hour or extended operating hours, expanding delivery service and building drive-thru traffic. At the same time, we will continue to elevate the role of our classic core and breakfast menus, complementing both with locally-relevant food news.

We will maximize the impact of our everyday affordability platforms with mid-tier and value lunch programs and intensify our focus on operations to drive efficiencies. In addition, we will accelerate our reimaging efforts using a set of standard interior and exterior designs. Finally, given its size and long-term McDonald’s Corporation Annual Report 2009 11 potential, we will continue to aggressively open new restaurants in China with a goal of opening about 600 restaurants over the next three years. We will continue to evaluate opportunities to optimize our mix of Company-operated and franchised restaurants and expect to refranchise restaurants when and where appropriate.

As previously discussed, our evolution toward a more heavily franchised, less capital-intensive business model has favorable implications for the strength and stability of our cash flow, the amount of capital we invest and long-term returns. As a result, we expect free cash flow—cash from operations less capital expenditures—will continue to grow in the future. We remain committed to returning all this cash to shareholders via dividends and share repurchases over the long term. We will remain disciplined financially as we seek to maximize the impact of all of our spending from selling, general & administrative expenses to capital expenditures. In making capital allocation decisions, our goal is to elevate the McDonald’s experience to drive sustainable growth in sales and market share while earning strong returns. To that end, about half of the $2. billion of planned 2010 capital expenditures will be invested to reimage existing restaurants with the other half primarily used to build new locations. McDonald’s does not provide specific guidance on net income per share. The following information is provided to assist in analyzing the Company’s results: • Changes in Systemwide sales are driven by comparable sales and net restaurant unit expansion. The Company expects net restaurant additions to add nearly 2 percentage points to 2010 Systemwide sales growth (in constant currencies), most of which will be due to the 609 net traditional restaurants added in 2009. • The Company does not generally provide specific guidance on changes in comparable sales.

However, as a perspective, assuming no change in cost structure, a 1 percentage point increase in comparable sales for either the U. S. or Europe would increase annual net income per share by about 3 cents. • With about 75% of McDonald’s grocery bill comprised of 10 different commodities, a basket of goods approach is the most comprehensive way to look at the Company’s commodity costs. For the full year 2010, the total basket of goods cost is expected to be relatively flat in the U. S. and Europe. Some volatility may be experienced between quarters in the normal course of business, with more favorable comparisons in the first half of the year. • The Company expects full-year 2010 selling, general & administrative expenses to be relatively flat, in constant currencies, lthough fluctuations will be experienced between quarters due to certain items in 2010 such as the Vancouver Winter Olympics and the biennial Worldwide Owner/Operator Convention in April. • Based on current interest and foreign currency exchange rates, the Company expects interest expense in 2010 to increase slightly compared with 2009. • A significant part of the Company’s operating income is generated outside the U. S. , and about 45% of its total debt is denominated in foreign currencies. Accordingly, earnings are affected by changes in foreign currency exchange rates, particularly the Euro, British Pound, Australian Dollar and Canadian Dollar.

Collectively, these currencies represent approximately 70% of the Company’s operating income outside the U. S. If all four of these currencies moved by 10% in the same direction compared with 2009, the Company’s annual net income per share would change by about 17 to 19 cents. At current foreign currency rates, the Company expects foreign currency translation to positively impact full year 2010 revenues and net income per share, with most of the benefit occurring in the first half of the year. • The Company expects the effective income tax rate for the fullyear 2010 to be approximately 29% to 31%. Some volatility may be experienced between the quarters resulting in a quarterly tax rate that is outside the annual range. McDonald’s Japan (a 50%-owned affiliate) announced plans to close approximately 430 restaurants over the next 12-18 months in conjunction with the strategic review of the market’s real estate portfolio. These actions are designed to enhance the customer experience, overall profitability and returns of the market. As a result of these closures, McDonald’s Corporation expects to record after tax impairment charges totaling approximately $40 million to $50 million, primarily in the first half of the year. • The Company expects capital expenditures for 2010 to be approximately $2. 4 billion. About half of this amount will be reinvested in existing restaurants, including the reimaging of over 2,000 locations worldwide.

The rest will primarily be used to open about 1,000 restaurants (975 traditional and 25 satellites). These restaurant numbers include new unit openings (about 350 restaurants) in affiliated and developmental licensed markets, such as Japan and Latin America, where the Company does not fund any capital expenditures. The Company expects net additions of about 325 restaurants (475 net traditional additions and 150 net satellite closings), which reflect the McDonald’s Japan closings. 12 McDonald’s Corporation Annual Report 2009 Consolidated Operating Results Operating results 2009 Dollars in millions, except per share data Amount Increase/ (decrease) Amount 2008 Increase/ (decrease) 2007 Amount

Revenues Sales by Company-operated restaurants Revenues from franchised restaurants Total revenues Operating costs and expenses Company-operated restaurant expenses Franchised restaurants—occupancy expenses Selling, general & administrative expenses Impairment and other charges (credits), net Other operating (income) expense, net Total operating costs and expenses Operating income Interest expense Nonoperating (income) expense, net Gain on sale of investment Income from continuing operations before provision for income taxes Provision for income taxes Income from continuing operations Income from discontinued operations (net of taxes of $35) Net income Income per common share—diluted Continuing operations Discontinued operations Net income Weighted-average common shares outstanding— diluted nm Not meaningful. $ 15,459 7,286 22,745 12,651 1,302 2,234 (61) (222) 15,904 6,841 473 (24) (95) 6,487 1,936 4,551 $ 4,551 $ $ 4. 11 4. 11 (7)% 5 (3) (7) 6 (5) nm (35) (7) 6 (9) 69 41 5 5 6 6% 9% 9% $ 16,561 6,961 23,522 13,653 1,230 2,355 6 (165) 17,079 6,443 523 (78) (160) 6,158 1,845 4,313 $ 4,313 $ $ 3. 76 3. 76 1,146. 0 % 13 3 (1) 8 — nm nm (10) 66 27 25 nm 72 49 85 80% 95% 90% $ 16,611 6,176 22,787 13,742 1,140 2,367 1,670 (11) 18,908 3,879 410 (103) 3,572 1,237 2,335 60 $ 2,395 $ $ 1. 93 0. 05 1. 98 1,211. 8 1,107. 4 In August 2007, the Company completed the sale of its businesses in Brazil, Argentina, Mexico, Puerto Rico, Venezuela and 13 other countries in Latin America and the Caribbean, which totaled 1,571 restaurants, to a developmental licensee organization. The Company refers to these markets as “Latam. ” As a result of the Latam transaction, the Company receives royalties in these markets instead of a combination of Company-operated sales and franchised rents and royalties.

Based on approval by the Company’s Board of Directors on April 17, 2007, the Company concluded Latam was “held for sale” as of that date in accordance with guidance on the impairment or disposal of long-lived assets. As a result, the Company recorded an impairment charge of $1. 7 billion in 2007, substantially all of which was noncash. The charge included $896 million for the difference between the net book value of the Latam business and approximately $675 million in cash proceeds received. This loss in value was primarily due to a historically difficult economic environment coupled with volatility experienced in many of the markets included in this transaction. The charges also included historical foreign currency translation losses of $769 million recorded in shareholders’ equity.

The Company recorded a tax benefit of $62 million in 2007 in connection with this transaction. As a result of meeting the “held for sale” criteria, the Company ceased recording depreciation expense with respect to Latam effective April 17, 2007. In connection with the sale, the Company agreed to indemnify the buyers for certain tax and other claims, certain of which are reflected as liabilities on McDonald’s Consolidated balance sheet, totaling $97 million at December 31, 2009 and $142 million at December 31, 2008. The change in the balance was primarily a result of the resolution of certain of these liabilities as well as the impact of foreign currency translation.

The Company mitigates the currency impact to income of these foreign currency denominated liabilities through the use of forward foreign exchange agreements. The buyers of the Company’s operations in Latam entered into a 20-year master franchise agreement that requires the buyers, among other obligations to (i) pay monthly royalties commencing at a rate of approximately 5% of gross sales of the restaurants in these markets, substantially consistent with market rates for similar license arrangements; (ii) commit to adding approximately 150 new McDonald’s restaurants by the end of 2010 and pay an initial fee for each new restaurant opened; and (iii) commit to specified annual capital expenditures for existing restaurants. McDonald’s Corporation Annual Report 2009 13

In addition to the consolidated operating results shown on the previous page, consolidated results for 2007 and adjusted growth rates for 2008 are presented in the following table excluding the impact of the Latam transaction. These results include the effect of foreign currency translation further discussed in the section titled Impact of foreign currency translation on reported results. While the Company has converted certain other markets to a developmental license arrangement, management believes the Latam transaction and the associated charge are not indicative of ongoing operations due to the size and scope of the transaction. Management believes that the adjusted operating results better reflect the underlying business trends relevant to the periods presented. Dollars in millions, except per share data

Operating income Income from continuing operations Income from discontinued operations Net income Income per common share – diluted Continuing operations(2,3) Discontinued operations Net income(2,3) nm Not meaningful. 2009 $6,841 4,551 4,551 4. 11 4. 11 2008 $6,443 4,313 4,313 3. 76 3. 76 2007(1) $3,879 2,335 60 2,395 1. 93 0. 05 1. 98 Latam Transaction(1) 2007 Excluding Latam Transaction 2009 % Inc 2008 Adjusted % Inc $(1,641) (1,579) (1,579) (1. 30) (1. 30) $5,520 3,914 60 3,974 3. 23 0. 05 3. 28 6 6 6 9 9 17 10 9 16 15 (1) The results for the full year 2007 included impairment and other charges of $1,665 million, partly offset by a benefit of $24 million due to eliminating depreciation on the assets in Latam in mid-April 2007, and a tax benefit of $62 million. 2) The following items impact the comparison of growth in diluted income per share from continuing operations and diluted net income per share for the year ended December 31, 2009 compared with 2008. On a net basis, these items positively impact the comparison by 1 percentage point: 2009 • $0. 08 per share after tax income primarily due to the resolution of certain liabilities retained in connection with the 2007 Latam transaction. • $0. 05 per share after tax gain on the sale of the Company’s minority ownership interest in Redbox. 2008 • $0. 09 per share after tax gain on the sale of the Company’s minority ownership interest in Pret A Manger. 3) The following items impact the comparison of adjusted growth in diluted income per share from continuing operations and diluted net income per share for the year ended December 31, 2008 compared with 2007. On a net basis, these items negatively impact the comparison by 7 and 6 percentage points, respectively: 2008 • $0. 09 per share after tax gain on the sale of the Company’s minority ownership interest in Pret A Manger. 2007 • $0. 26 per share of income tax benefit resulting from the completion of an Internal Revenue Service (IRS) examination of the Company’s 2003-2004 U. S. federal income tax returns; partly offset by • $0. 02 per share of income tax expense related to the impact of a tax law change in Canada. NET INCOME AND DILUTED NET INCOME PER COMMON SHARE

In 2009, net income and diluted net income per common share were $4. 6 billion and $4. 11. Results benefited by after tax income of $87 million or $0. 08 per share primarily due to the resolution of certain liabilities retained in connection with the 2007 Latam transaction. Results also benefited by an after tax gain of $59 million or $0. 05 per share due to the sale of the Company’s minority ownership interest in Redbox. Results were negatively impacted by $0. 15 per share due to the effect of foreign currency translation. In 2008, net income and diluted net income per common share were $4. 3 billion and $3. 76. Results benefited by a $109 million or $0. 9 per share after tax gain on the sale of the Company’s minority ownership interest in Pret A Manger. Results also benefited by $0. 09 per share due to the effect of foreign currency translation. In 2007, net income and diluted net income per common share were $2. 4 billion and $1. 98. Income from continuing operations was $2. 3 billion or $1. 93 per share, which included $1. 6 billion or $1. 30 per share of net expense related to the Latam transaction. This reflects an impairment charge of $1. 32 per share, partly offset by a $0. 02 per share benefit due to eliminating depreciation on the assets in Latam in mid-April 2007 in accordance with accounting rules.

In addition, 2007 results included a net tax benefit of $288 million or $0. 24 per 14 McDonald’s Corporation Annual Report 2009 share resulting from the completion of an IRS examination of the Company’s 2003-2004 U. S. federal income tax returns, partly offset by the impact of a tax law change in Canada. Income from discontinued operations was $60 million or $0. 05 per share. The Company repurchased 50. 3 million shares of its stock for $2. 9 billion in 2009 and 69. 7 million shares for $4. 0 billion in 2008, driving reductions of over 3% and 4% of total shares outstanding, respectively, net of stock option exercises. IMPACT OF FOREIGN CURRENCY TRANSLATION ON REPORTED RESULTS

While changing foreign currencies affect reported results, McDonald’s mitigates exposures, where practical, by financing in local currencies, hedging certain foreign-denominated cash flows, and purchasing goods and services in local currencies. In 2009, foreign currency translation had a negative impact on consolidated operating results, primarily driven by the Euro, British Pound, Russian Ruble, Australian Dollar and Canadian Dollar. In 2008, foreign currency translation had a positive impact on consolidated operating results, driven by the stronger Euro and most other currencies, partly offset by the weaker British Pound. In 2007, foreign currency translation had a positive impact on consolidated operating results, primarily driven by the Euro, British Pound, Australian Dollar and Canadian Dollar. Impact of foreign currency translation on reported results

Reported amount In millions, except per share data Currency translation benefit/(cost) Revenues Company-operated margins Franchised margins Selling, general & administrative expenses Operating income Income from continuing operations Net income Income from continuing operations per common share—diluted Net income per common share—diluted REVENUES 2009 $22,745 2,807 5,985 2,234 6,841 4,551 4,551 4. 11 4. 11 2008 $23,522 2,908 5,731 2,355 6,443 4,313 4,313 3. 76 3. 76 2007 $22,787 2,869 5,036 2,367 3,879 2,335 2,395 1. 93 1. 98 2009 $(1,340) (178) (176) 75 (273) (164) (164) (. 15) (. 15) 2008 $441 63 120 (21) 163 103 103 . 09 . 09 2007 $988 129 179 (73) 230 138 138 . 12 . 12

The Company’s revenues consist of sales by Company-operated restaurants and fees from restaurants operated by franchisees. Revenues from conventional franchised restaurants include rent and royalties based on a percent of sales along with minimum rent payments, and initial fees. Revenues from franchised restaurants that are licensed to affiliates and developmental licensees include a royalty based on a percent of sales, and generally include initial fees. The Company continues to optimize its restaurant ownership mix, cash flow and returns through its refranchising strategy. For the full years 2008 and 2009 combined, the Company refranchised about 1,100 restaurants, primarily in its major markets.

The shift to a greater percentage of franchised restaurants negatively impacts consolidated revenues as Company-operated sales shift to franchised sales, where the Company receives rent and/or royalties based on a percent of sales. Revenues In 2009, constant currency revenue growth was driven by positive comparable sales and expansion, partly offset by the impact of the refranchising strategy in certain of the Company’s major markets. As a result of the refranchising strategy, franchised restaurants represent 81%, 80% and 78% of Systemwide restaurants at December 31, 2009, 2008 and 2007, respectively. In 2008, constant currency revenue growth was driven by positive comparable sales, partly offset by the refranchising strategy and the impact of the Latam transaction. Upon completion of the Latam transaction in August 2007, he Company receives royalties based on a percent of sales in these markets instead of a combination of Company-operated sales and franchised rents and royalties. Amount Dollars in millions Increase/(decrease) Increase/(decrease) excluding currency translation 2009 $ 4,295 6,721 3,714 729 $15,459 $ 3,649 2,553 623 461 $ 7,286 $ 7,944 9,274 4,337 1,190 $22,745 2008 $ 4,636 7,424 3,660 841 $16,561 $ 3,442 2,499 571 449 $ 6,961 $ 8,078 9,923 4,231 1,290 $23,522 2007 $ 4,682 6,817 3,134 1,978 $16,611 $ 3,224 2,109 465 378 $ 6,176 $ 7,906 8,926 3,599 2,356 $22,787 2009 (7)% (9) 1 (13) (7)% 6% 2 9 3 5% (2)% (7) 3 (8) (3)% 2008 (1)% 9 17 (57) —% 7% 18 23 19 13 % 2% 11 18 (45) 3% 009 (7)% 3 5 (7) —% 6% 10 12 9 8% (2)% 5 6 (2) 2% 2008 (1)% 6 14 (58) (2)% 7% 13 20 17 10 % 2% 7 15 (46) 1% Company-operated sales: U. S. Europe APMEA Other Countries & Corporate Total Franchised revenues: U. S. Europe APMEA Other Countries & Corporate Total Total revenues: U. S. Europe APMEA Other Countries & Corporate Total McDonald’s Corporation Annual Report 2009 15 In the U. S. , revenues in 2009 and 2008 were positively impacted by the ongoing appeal of our iconic core products and the success of new products, as well as continued focus on everyday value and convenience. In addition, our market-leading breakfast business contributed to revenue growth in 2008.

New products introduced in 2009 included McCafe premium coffees and the Angus Third Pounder, while new products introduced in 2008 included Southern Style Chicken products, Iced Coffee and Sweet Tea. The refranchising strategy negatively impacted revenue growth in both years. Europe’s constant currency increases in revenues in 2009 and 2008 were primarily driven by comparable sales increases in the U. K. , France and Russia (which is entirely Companyoperated) as well as expansion in Russia. In both years, these increases were partly offset by the impact of the refranchising strategy, primarily in the U. K. and Germany. In APMEA, the constant currency increase in revenues in 2009 was primarily driven by comparable sales increases in Australia and most other Asian markets, partly offset by negative comparable sales in China.

The 2008 increase was primarily driven by strong comparable sales in Australia and China, as well as positive comparable sales throughout the segment. In addition, expansion in China contributed to the increases in both years. In Other Countries & Corporate, Company-operated sales declined in 2008 while franchised revenues increased primarily as a result of the Latam transaction in August 2007. Revenues in both years were negatively impacted by the refranchising strategy in Canada. The following tables present Systemwide sales and comparable sales increases/(decreases): Systemwide sales increases/(decreases) Excluding currency translation $695 million or 14% (11% in constant currencies) in 2008.

The refranchising strategy contributed to the growth in franchised margin dollars in both 2009 and 2008 and the August 2007 Latam transaction contributed to the growth in 2008. Franchised margins In millions U. S. Europe APMEA Other Countries & Corporate Total Percent of revenues 2009 $3,031 1,998 559 397 $5,985 2008 $2,867 1,965 511 388 $5,731 2007 $2,669 1,648 410 309 $5,036 U. S. Europe APMEA Other Countries & Corporate Total 83. 1% 78. 3 89. 6 86. 1 82. 1% 83. 3% 78. 6 89. 6 86. 4 82. 3% 82. 8% 78. 1 88. 3 81. 7 81. 5% U. S. Europe APMEA Other Countries & Corporate Total 2009 3% (2) 8 — 2% 2008 5% 15 19 16 11% 2009 3% 7 7 7 6% 2008 5% 10 12 14 9% Comparable sales increases U. S. Europe APMEA Other Countries & Corporate Total

RESTAURANT MARGINS 2009 2. 6% 5. 2 3. 4 5. 5 3. 8% 2008 4. 0% 8. 5 9. 0 13. 0 6. 9% 2007 4. 5% 7. 6 10. 6 10. 8 6. 8% In the U. S. , the franchised margin percent decrease in 2009 was due to additional depreciation primarily related to the Company’s investment in the beverage initiative, partly offset by positive comparable sales. The 2008 increase was primarily driven by positive comparable sales, partly offset by the refranchising strategy. Europe’s franchised margin percent decreased in 2009 as positive comparable sales were offset by higher occupancy expenses, the refranchising strategy and the cost of strategic brand and sales building initiatives.

The 2008 increase was primarily due to strong comparable sales in most markets, partly offset by the impact of the refranchising strategy, higher rent expense and the cost of strategic brand and sales building initiatives. In APMEA, the franchised margin percent increase in 2008 was primarily driven by positive comparable sales. In Other Countries & Corporate, the franchised margin percent increased in 2008 as a result of the 2007 Latam transaction. The franchised margin percent in APMEA and, beginning in 2008, Other Countries & Corporate is higher relative to the U. S. and Europe due to a larger proportion of developmental licensed and/or affiliated restaurants where the Company receives royalty income with no corresponding occupancy costs. Company-operated margins Company-operated margin dollars represent sales by Companyoperated restaurants less the operating costs of these restaurants. Company-operated margin dollars decreased $101 million or 3% (increased 3% in constant currencies) in 2009 and increased $39 million or 1% (decreased 1% in constant currencies) in 2008. After the Latam transaction in August 2007, there are no Company-operated restaurants remaining in Latin America. Company-operated margin dollars were negatively impacted by this transaction in 2008 and 2007 and by the refranchising strategy in 2009 and 2008. The refranchising strategy had a positive impact on the margin percent in 2009 and 2008, primarily in the U. S. and Europe. Franchised margins Franchised margin dollars represent revenues from franchised restaurants less the Company’s occupancy costs (rent and depreciation) associated with those sites. Franchised margin dollars represented nearly 70% of the combined restaurant margins in 2009 and about 65% of the combined restaurant margins in 2008 and 2007. Franchised margin dollars increased $254 million or 4% (7% in constant currencies) in 2009 and 16 McDonald’s Corporation Annual Report 2009 Company-operated margins In millions U. S. Europe APMEA Other Countries & Corporate Total Percent of sales 2009 $ 832 1,240 624 111 $2,807 2008 $ 856 1,340 584 128 $2,908 2007 $ 876 1,205 471 317 $2,869 U. S. Europe APMEA Other Countries & Corporate Total 19. % 18. 4 16. 8 15. 2 18. 2% 18. 5% 18. 0 15. 9 15. 3 17. 6% 18. 7% 17. 7 15. 0 16. 1 17. 3% In the U. S. , the Company-operated margin percent increased in 2009 due to positive comparable sales and the impact of the refranchising strategy, partly offset by additional depreciation related to the beverage initiative and higher commodity costs. The margin percent decreased in 2008 due to cost pressures including higher commodity and labor costs, partly offset by positive comparable sales. Europe’s Company-operated margin percent increased in 2009 and 2008 primarily due to positive comparable sales, partly offset by higher commodity and labor costs.

In 2009, local inflation and the impact of weaker currencies on the cost of certain imported products drove higher costs, primarily in Russia, and negatively impacted the Company-operated margin percent. In APMEA, the Company-operated margin percent in 2009 and 2008 increased due to positive comparable sales, partly offset by higher labor costs. The margin percent in 2008 was also negatively impacted by higher commodity costs. In Other Countries & Corporate, the Company-operated margin in 2007 benefited by about 100 basis points related to the discontinuation of depreciation on the assets in Latam from mid-April through July 2007. • Supplemental information regarding Companyoperated restaurants We continually review our restaurant ownership mix with a goal of improving local relevance, profits and returns.

In most cases, franchising is the best way to achieve these goals, but as previously stated, Company-operated restaurants are also important to our success. We report results for Company-operated restaurants based on their sales, less costs directly incurred by that business including occupancy costs. We report the results for franchised restaurants based on franchised revenues, less associated occupancy costs. For this reason and because we manage our business based on geographic segments and not on the basis of our ownership structure, we do not specifically allocate selling, general & administrative expenses and other operating (income) expenses to Company-operated or franchised restaurants.

Other operating items that relate to the Company-operated restaurants generally include gains/losses on sales of restaurant businesses and write-offs of equipment and leasehold improvements. We believe the following information about Companyoperated restaurants in our most significant markets provides an additional perspective on this business. Management responsible for our Company-operated restaurants in these markets analyzes the Company-operated business on this basis to assess its performance. Management of the Company also considers this information when evaluating restaurant ownership mix, subject to other relevant considerations. The following tables seek to illustrate the two components of our Company-operated margins.

The first of these relates exclusively to restaurant operations, which we refer to as “Store operating margin. ” The second relates to the value of our Brand and the real estate interest we retain for which we charge rent and royalties. We refer to this component as “Brand/real estate margin. ” Both Company-operated and conventional franchised restaurants are charged rent and royalties, although rent and royalties for Company-operated restaurants are eliminated in consolidation. Rent and royalties for both restaurant ownership types are based on a percentage of sales, and the actual rent percentage varies depending on the level of McDonald’s investment in the restaurant.

Royalty rates may also vary by market. As shown in the following tables, in disaggregating the components of our Company-operated margins, certain costs with respect to Company-operated restaurants are reflected in Brand/real estate margin. Those costs consist of rent payable by McDonald’s to third parties on leased sites and depreciation for buildings and leasehold improvements and constitute a portion of occupancy & other operating expenses recorded in the Consolidated statement of income. Store operating margins reflect rent and royalty expenses, and those amounts are accounted for as income in calculating Brand/real estate margin. McDonald’s Corporation Annual Report 2009 17

While we believe that the following information provides a perspective in evaluating our Company-operated business, it is not intended as a measure of our operating performance or as an alternative to operating income or restaurant margins as reported by the Company in accordance with accounting principles generally accepted in the U. S. In particular, as noted previously, we do not allocate selling, general & administrative expenses to our Company-operated business. However, we believe that a range of $40,000 to $50,000 per restaurant, on average, is a typical range of costs to support this business in the U. S. The actual costs in markets outside the U.

S. will vary depending on local circumstances and the organizational structure of the market. These costs reflect the indirect services we believe are necessary to provide the appropriate support of the restaurant. U. S. Dollars in millions Europe 2009 1,578 $4,295 $ 832 $ 832 65 70 (634) $ 333 $ 634 (65) (70) $ 499 2008 1,782 $4,636 $ 856 $ 856 74 70 (684) $ 316 $ 684 (74) (70) $ 540 2007 2,090 $4,682 $ 876 $ 876 82 78 (691) $ 345 $ 691 (82) (78) $ 531 2009 2,001 $ 6,721 $ 1,240 $ 1,240 222 100 (1,306) $ 256 $ 1,306 (222) (100) $ 984 2008 2,024 $ 7,424 $ 1,340 $ 1,340 254 110 (1,435) 269 2007 2,177 $ 6,817 $ 1,205 $ 1,205 248 107 (1,294) 266

As reported Number of Company-operated restaurants at year end Sales by Company-operated restaurants Company-operated margin Store operating margin Company-operated margin Plus: Outside rent expense(1) Depreciation – buildings & leasehold improvements(1) Less: Rent & royalties(2) Store operating margin Brand/real estate margin Rent & royalties(2) Less: Outside rent expense(1) Depreciation – buildings & leasehold improvements(1) Brand/real estate margin $ $ $ 1,435 (254) (110) $ 1,071 $ 1,294 (248) (107) $ 939 (1) Represents certain costs recorded as occupancy & other operating expenses in the Consolidated statement of income – rent payable by McDonald’s to third parties on leased sites and depreciation for buildings and leasehold improvements. This adjustment is made to reflect these occupancy costs in Brand/real estate margin. The relative percentage of sites that are owned versus leased varies by country. (2) Reflects average Company–operated rent and royalties (as a percentage of 2009 sales: U. S. – 14. 8% and Europe – 19. 4%).

This adjustment is made to reflect expense in Store operating margin and income in Brand/real estate margin. Countries within Europe have varying economic profiles and a wide range of rent and royalty rates as a percentage of sales. SELLING, GENERAL & ADMINISTRATIVE EXPENSES Consolidated selling, general & administrative expenses decreased 5% (2% in constant currencies) in 2009 and were flat (decreased 1% in constant currencies) in 2008. In 2008, expenses included costs related to the Beijing Summer Olympics and the Company’s biennial Worldwide Owner/Operator Convention. The 2008 constant currency change benefited by 3 percentage points due to the 2007 Latam transaction.

Selling, general & administrative expenses Increase/(decrease) excluding currency translation Amount Dollars in millions Increase/(decrease) U. S. Europe APMEA Other Countries & Corporate(1) Total 2009 $ 751 655 276 552 $2,234 2008 $ 745 714 300 596 $2,355 2007 $ 744 689 276 658 $2,367 2009 1% (8) (8) (7) (5)% 2008 —% 4 9 (9) —% 2009 1% — (5) (7) (2)% 2008 —% 1 8 (9) (1)% (1) Included in Other Countries & Corporate are home office support costs in areas such as facilities, finance, human resources, information technology, legal, marketing, restaurant operations, supply chain and training. Selling, general & administrative expenses as a percent of revenues were 9. % in 2009 compared with 10. 0% in 2008 and 10. 4% in 2007. Selling, general & administrative expenses as a percent of Systemwide sales were 3. 1% in 2009 compared with 3. 3% in 2008 and 3. 7% in 2007. Management believes that analyzing selling, general & administrative expenses as a percent of Systemwide sales, as well as revenues, is meaningful because these costs are incurred to support Systemwide restaurants. 18 McDonald’s Corporation Annual Report 2009 IMPAIRMENT AND OTHER CHARGES (CREDITS), NET On a pretax basis, the Company recorded impairment and other charges (credits), net of ($61) million in 2009, $6 million in 2008 and $1. 7 billion in 2007.

Management does not include these items when reviewing business performance trends because we do not believe these items are indicative of expected ongoing results. Impairment and other charges (credits), net In millions, except per share data Europe APMEA Other Countries & Corporate Total After tax(1) Income from continuing operations per common share – diluted (1) Certain items were not tax affected. 2009 $ 4 — (65) $ (61) $ (91) $(. 08) 2008 $ 6 $ 2007 (11) $ 6 $ 4 $. 01 1,681 $1,670 $1,606 $ 1. 32 • Gains on sales of restaurant businesses Gains on sales of restaurant businesses include gains from sales of Company-operated restaurants as well as gains from exercises of purchase options by franchisees with business acilities lease arrangements (arrangements where the Company leases the businesses, including equipment, to franchisees who generally have options to purchase the businesses). The Company’s purchases and sales of businesses with its franchisees are aimed at achieving an optimal ownership mix in each market. Resulting gains or losses are recorded in operating income because the transactions are a recurring part of our business. The Company realized higher gains on sales of restaurant businesses in 2009 and 2008 compared with 2007 primarily as a result of selling more Company-operated restaurants in connection with the refranchising strategy in the Company’s major markets. Equity in earnings of unconsolidated affiliates Unconsolidated affiliates and partnerships are businesses in which the Company actively participates but does not control. The Company records equity in earnings from these entities representing McDonald’s share of results. For foreign affiliated markets – primarily Japan – results are reported after interest expense and income taxes. McDonald’s share of results for partnerships in certain consolidated markets such as the U. S. are reported before income taxes. These partnership restaurants are operated under conventional franchise arrangements and, therefore, are classified as conventional franchised restaurants. Results in 2009 and 2008 reflected improved results from our Japanese affiliate. 2009 results also benefited from the stronger Japanese Yen. Asset dispositions and other expense Asset dispositions and other expense consists of gains or losses on excess property and other asset dispositions, provisions for store closings, uncollectible receivables and other miscellaneous income and expenses. Asset dispositions in 2009 and 2008 reflected lower losses on restaurant closings and property disposals compared with 2007. In 2009, the Company recorded pretax income of $65 million related primarily to the resolution of certain liabilities retained in connection with the 2007 Latam transaction. The Company also recognized a tax benefit in 2009 in connection with this income, mainly related to the release of a tax valuation allowance. In 2007, the Company recorded $1. billion of pretax impairment charges related to the Company’s sale of its Latam businesses to a developmental licensee organization. OTHER OPERATING (INCOME) EXPENSE, NET Other operating (income) expense, net In millions 2009 $(113) (168) 59 $(222) 2008 $(126) (111) 72 $(165) 2007 $ (89) (116) 194 $ (11) Gains on sales of restaurant businesses Equity in earnings of unconsolidated affiliates Asset dispositions and other expense Total McDonald’s Corporation Annual Report 2009 19 OPERATING INCOME Operating income Increase excluding currency translation Amount Dollars in millions Increase/(decrease) U. S. Europe APMEA Other Countries & Corporate Total Latam transaction Total excluding Latam transaction* nm Not meaningful. * 009 $3,232 2,588 989 32 $6,841 $6,841 2008 $3,060 2,608 819 (44) $6,443 $6,443 2007 $ 2,842 2,125 616 (1,704) $ 3,879 (1,641) $ 5,520 2009 6% (1) 21 nm 6% 6% 2008 8% 23 33 97 66% 17% 2009 6% 8 23 nm 10% 10% 2008 8% 17 28 97 62% 14% Results for 2007 included the impact of the Latam transaction in Other Countries & Corporate. This impact reflects an impairment charge of $1,665 million, partly offset by a benefit of $24 million due to eliminating depreciation on the assets in Latam in mid-April 2007. In order to provide management’s view of the underlying business performance, results are also shown excluding the impact of the Latam transaction.

Results for 2009 included $65 million of income in Other Countries & Corporate primarily related to the resolution of certain liabilities retained in connection with the 2007 Latam transaction. This benefit positively impacted the growth in total operating income by 1 percentage point. In the U. S. , 2009 and 2008 results increased primarily due to higher franchised margin dollars. In Europe, results for 2009 and 2008 were driven by strong performance in France, the U. K. and Russia. Positive results in Germany and most other markets also contributed to the operating income increase in 2008. In APMEA, results for 2009 were driven primarily by strong results in Australia and expansion in China. Results for 2008 were driven by strong results in Australia and China, and positive performance in most other markets. Combined operating margin Combined operating margin is defined as operating income as a percent of total revenues. Combined operating margin for 2009, 2008 and 2007 was 30. 1%, 27. 4% and 17. 0%, respectively. Impairment and other charges negatively impacted the 2007 combined operating margin by 7. 4 percentage points. INTEREST EXPENSE relates to net gains or losses on certain hedges that reduce the exposure to variability on certain intercompany foreign currency cash flow streams. Other expense primarily consists of gains or losses on early extinguishment of debt, amortization of debt issuance costs and other nonoperating income and expenses.

Interest income decreased for 2009 primarily due to lower average interest rates, while 2008 decreased primarily due to lower average interest rates and average cash balances. GAIN ON SALE OF INVESTMENT In 2009, the Company sold its minority ownership interest in Redbox to Coinstar, Inc. , the majority owner, for total consideration of $140 million. As a result of the transaction, the Company recognized a nonoperating pretax gain of $95 million (after tax–$59 million or $0. 05 per share). In 2008, the Company sold its minority ownership interest in U. K. -based Pret A Manger. In connection with the sale, the Company received cash proceeds of $229 million and recognized a nonoperating pretax gain of $160 million (after tax–$109 million or $0. 09 per share).

PROVISION FOR INCOME TAXES Interest expense for 2009 decreased primarily due to lower average interest rates, and to a lesser extent, weaker foreign currencies, partly offset by higher average debt levels. Interest expense for 2008 increased primarily due to higher average debt levels, and to a lesser extent, higher average interest rates. NONOPERATING (INCOME) EXPENSE, NET In 2009, 2008 and 2007, the reported effective income tax rates were 29. 8%, 30. 0% and 34. 6%, respectively. In 2009, the effective income tax rate benefited by 0. 7 percentage points primarily due to the resolution of certain liabilities retained in connection with the 2007 Latam transaction.

In 2007, the effective income tax rate was impacted by about 4 percentage points as a result of the following items: • A negative impact due to a minimal tax benefit of $62 million related to the Latam impairment charge of $1,641 million. This benefit was minimal due to the Company’s inability to utilize most of the capital losses generated by this transaction in 2007. • A positive impact due to a benefit of $316 million resulting from the completion of an IRS examination, partly offset by $28 million of expense related to the impact of a tax law change in Canada. Consolidated net deferred tax liabilities included tax assets, net of valuation allowance, of $1. 4 billion in both 2009 and 2008. Nonoperating (income) expense, net

In millions Interest income Translation and hedging activity Other expense Total 2009 $(19) (32) 27 $(24) 2008 $(85) (5) 12 $(78) 2007 $(124) 1 20 $(103) Interest income consists primarily of interest earned on shortterm cash investments. Translation and hedging activity primarily 20 McDonald’s Corporation Annual Report 2009 Substantially all of the net tax assets arose in the U. S. and other profitable markets. DISCONTINUED OPERATIONS Over the last several years, the Company has continued to focus its management and financial resources on the McDonald’s restaurant business as it believes the opportunities for long-term growth remain significant.

Accordingly, during third quarter 2007, the Company sold its investment in Boston Market. As a result of the disposal, Boston Market’s results of operations and transaction gain are reflected as discontinued operations. In connection with the sale, the Company received proceeds of approximately $250 million and recorded a gain of $69 million after tax. In addition, Boston Market’s net loss for 2007 was $9 million. ACCOUNTING CHANGES as issued, were effective January 1, 2008. However, in February 2008, the FASB deferred the effective date for one year for certain non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (i. e. at least annually). The Company adopted the required provisions related to debt and derivatives as of January 1, 2008 and adopted the remaining required provisions for non-financial assets and liabilities as of January 1, 2009. The effect of adoption was not significant in either period. • Subsequent events In May 2009, the FASB issued guidance on subsequent events, codified in the Subsequent Events Topic of the FASB ASC. This guidance sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements.

The guidance also indicates the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, as well as the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. The Company adopted this guidance beginning in the second quarter 2009. The adoption had no impact on our consolidated financial statements, besides the additional disclosure. • Variable interest entities and consolidation In June 2009, the FASB issued amendments to the guidance on variable interest entities and consolidation, codified primarily in the Consolidation Topic of the FASB ASC. This guidance modifies the method for determining whether an entity is a variable interest entity as well as the methods permitted for determining the primary beneficiary of a variable interest entity.

In addition, this guidance requires ongoing reassessments of whether a company is the primary beneficiary of a variable interest entity and enhanced disclosures related to a company’s involvement with a variable interest entity. This guidance was effective beginning January 1, 2010, and we do not expect the adoption to have a significant impact on our consolidated financial statements. • Sabbatical leave In 2006, the Financial Accounting Standards Board (FASB) issued guidance on accounting for sabbatical leave, codified in the Compensation – General Topic of the FASB Accounting Standards Codification (ASC). Under this guidance, compensation costs associated with a sabbatical should be accrued over the requisite service period, assuming certain conditions are met.

The Company adopted the guidance effective January 1, 2007, as required and accordingly, recorded a $36 million cumulative adjustment, net of tax, to decrease the January 1, 2007 balance of retained earnings. The annual impact to earnings is not significant. • Income tax uncertainties In 2006, the FASB issued guidance on accounting for uncertainty in income taxes, codified primarily in the Income Taxes Topic of the FASB ASC. This guidance clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. The guidance also covers derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company adopted the guidance effective January 1, 2007, as required.

As a result of the implementation, the Company recorded a $20 million cumulative adjustment to increase the January 1, 2007 balance of retained earnings. The guidance requires that a liability associated with an unrecognized tax benefit be classified as a long-term liability except for the amount for which cash payment is anticipated within one year. Upon adoption of the guidance, $339 million of tax liabilities, net of deposits, were reclassified from current to long-term and included in other long-term liabilities. • Fair value measurements In 2006, the FASB issued guidance on fair value measurements, codified primarily in the Fair Value Measurements and Disclosures Topic of the FASB ASC.

This guidance defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. This guidance does not require any new fair value measurements; rather, it applies to other accounting pronouncements that require or permit fair value measurements. The provisions of the guidance, Cash Flows The Company generates significant cash from its operations and has substantial credit availability and capacity to fund operating and discretionary spending such as capital expenditures, debt repayments, dividends and share repurchases. Cash provided by operations totaled $5. 8 billion and $5. billion in 2009 and 2008, respectively, and exceeded capital expenditures by $3. 8 billion in both years. In 2009, cash provided by operations decreased $166 million or 3% compared with 2008 despite increased operating results, primarily due to higher income tax payments, higher noncash income items and the receipt of $143 million in 2008 related to the completion of an IRS examination. In 2008, cash provided by operations increased $1. 0 billion or 21% compared with 2007 primarily due to increased operating results and changes in working capital, partly due to lower income tax payments and the receipt of $143 million related to the IRS examination.

McDonald’s Corporation Annual Report 2009 21 Cash used for investing activities totaled $1. 7 billion in 2009, an increase of $31 million compared with 2008. This reflects lower proceeds from sales of investments, restaurant businesses and property, offset by lower capital expenditures, primarily in the U. S. Cash used for investing activities totaled $1. 6 billion in 2008, an increase of $475 million compared with 2007. Investing activities in 2008 reflected lower proceeds from sales of investments and higher capital expenditures, partly offset by higher proceeds from the sales of restaurant businesses and property and lower expenditures on purchases of restaurant businesses.

Cash used for financing activities totaled $4. 4 billion in 2009, an increase of $307 million compared with 2008, primarily due to lower net debt issuances, an increase in the common stock dividend and lower proceeds from stock option exercises, partly offset by lower treasury stock purchases. Cash used for financing activities totaled $4. 1 billion in 2008, an increase of $118 million compared with 2007, which reflected lower proceeds from stock option exercises, mostly offset by higher net debt issuances. As a result of the above activity, the Company’s cash and equivalents balance decreased $267 million in 2009 to $1. 8 billion, compared with an increase of $82 million in 2008.

In addition to cash and equivalents on hand and cash provided by operations, the Company can meet short-term funding needs through its continued access to commercial paper borrowings and line of credit agreements. RESTAURANT DEVELOPMENT AND CAPITAL EXPENDITURES including reinvestment initiatives such as reimaging in many markets around the world and, to a lesser extent in 2009, the Combined Beverage Business in the U. S. Capital expenditures invested in major markets, excluding Japan, represented 70% to 75% of the total in 2009, 2008 and 2007. Japan is accounted for under the equity method, and accordingly its capital expenditures are not included in consolidated amounts. Capital expenditures In millions

New restaurants Existing restaurants Other(1) Total capital expenditures Total assets $ 2009 809 1,070 73 $ 2008 897 1,152 87 $ 2007 687 1,158 102 $ 1,952 $30,225 $ 2,136 $28,462 $ 1,947 $29,392 (1) Primarily corporate equipment and other office related expenditures. In 2009, the Company opened 824 traditional restaurants and 44 satellite restaurants (small, limited-menu restaurants for which the land and building are generally leased), and closed 215 traditional restaurants and 142 satellite restaurants. In 2008, the Company opened 918 traditional restaurants and 77 satellite restaurants and closed 209 traditional restaurants and 196 satellite restaurants. The majority of restaurant penings and closings occurred in the major markets in both years. The Company closes restaurants for a variety of reasons, such as existing sales and profit performance or loss of real estate tenure. Systemwide restaurants at year end(1) U. S. Europe APMEA Other Countries & Corporate Total 2009 13,980 6,785 8,488 3,225 32,478 2008 13,918 6,628 8,255 3,166 31,967 2007 13,862 6,480 7,938 3,097 31,377 New restaurant investments in all years were concentrated in markets with acceptable returns or opportunities for long-term growth. Average development costs vary widely by market depending on the types of restaurants built and the real estate and construction costs within each market.

These costs, which include land, buildings and equipment, are managed through the use of optimally sized restaurants, construction and design efficiencies and leveraging best practices. Although the Company is not responsible for all costs for every restaurant opened, total development costs (consisting of land, buildings and equipment) for new traditional McDonald’s restaurants in the U. S. averaged approximately $2. 7 million in 2009. The Company owned approximately 45% of the land and about 70% of the buildings for restaurants in its consolidated markets at year-end 2009 and 2008. SHARE REPURCHASES AND DIVIDENDS In 2009, the Company returned $5. 1 billion to shareholders through a combination of shares repurchased and dividends paid, bringing the three-year total to $16. billion under the Company’s $15 billion to $17 billion cash returned to shareholders target for 2007 through 2009. Shares repurchased and dividends In millions, except per share data (1) Includes satellite units at December 31, 2009, 2008 and 2007 as follows: U. S. – 1,155, 1,169, 1,233; Europe–241, 226, 214; APMEA (primarily Japan)–1,263, 1,379, 1,454; Other Countries & Corporate–464, 447, 439. Approximately 65% of Company-operated restaurants and about 80% of franchised restaurants were located in the major markets at the end of 2009. Franchisees operated 81% of the restaurants at year-end 2009. Capital expenditures decreased $184 million or 9% in 2009 primarily due to fewer estaurant openings, lower reinvestment in existing restaurants in the U. S. and the impact of foreign currency translation. Capital expenditures increased $189 million or 10% in 2008 primarily due to higher investment in new restaurants in Europe and APMEA. In both years, capital expenditures reflected the Company’s commitment to grow sales at existing restaurants, Number of shares repurchased Shares outstanding at year end Dividends declared per share Dollar amount of shares repurchased Dividends paid Total returned to shareholders 2009 50. 3 1,077 $ 2. 05 $2,854 2,235 $5,089 2008 69. 7 1,115 $1. 625 $3,981 1,823 $5,804 2007 77. 1 1,165 $ 1. 50 $3,949 1,766 $5,715

In September 2007, the Company’s Board of Directors approved a $10 billion share repurchase program with no specified expiration date. In September 2009, the Company’s Board of Directors terminated the then-existing share repurchase program and replaced it with a new share repurchase program that authorizes the purchase of up to $10 billion of the Company’s 22 McDonald’s Corporation Annual Report 2009 outstanding common stock with no specified expiration date. In 2009, approximately 50 million shares were repurchased for $2. 9 billion, of which 8 million shares or $0. 5 billion were purchased under the new program. The Company reduced its shares outstanding at year end by over 3% compared with 2008, net of stock option exercises.

The Company has paid dividends on its common stock for 34 consecutive years and has increased the dividend amount every year. The 2009 full year dividend of $2. 05 per share reflects the quarterly dividend paid for each of the first three quarters of $0. 50 per share, with an increase to $0. 55 per share paid in the fourth quarter. This 10% increase in the quarterly dividend equates to a $2. 20 per share annual dividend rate and reflects the Company’s confidence in the ongoing strength and reliability of its cash flow. As in the past, future dividend amounts will be considered after reviewing profitability expectations and financing needs, and will be declared at the discretion of the Company’s Board of Directors.

Operating income, as reported, does not include interest income; however, cash balances are included in average assets. The inclusion of cash balances in average assets reduced return on average assets by 2. 0 percentage points, 1. 9 percentage points and 1. 3 percentage points in 2009, 2008 and 2007, respectively. FINANCING AND MARKET RISK The Company generally borrows on a long-term basis and is exposed to the impact of interest rate changes and foreign currency fluctuations. Debt obligations at December 31, 2009 totaled $10. 6 billion, compared with $10. 2 billion at December 31, 2008. The net increase in 2009 was primarily due to net issuances of $219 million and changes in exchange rates on foreign currency denominated debt of $128 million.

Debt highlights(1) 2009 Fixed-rate debt as a percent of total debt(2,3) Weighted-average annual interest rate of total debt(3) Foreign currency-denominated debt as a percent of total debt(2) Total debt as a percent of total capitalization (total debt and total shareholders’ equity)(2) Cash provided by operations as a percent of total debt(2) 68% 4. 5 43 2008 72% 5. 0 45 2007 58% 4. 7 66 Financial Position and Capital Resources TOTAL ASSETS AND RETURNS Total assets increased $1. 8 billion or 6% in 2009. Excluding the effect of changes in foreign currency exchange rates, total assets increased $677 million in 2009. Over 70% of total assets were in major markets at year-end 2009. Net property and equipment increased $1. 3 billion in 2009 and represented over 70% of total assets at year end. Excluding the effect of changes in foreign currency exchange rates, net property and equipment increased $476 million primarily due to capital expenditures, partly offset