GREG BRUNO, LISANDRO TSAI, DREW OSIKA, MEILING LIUPresented: November 11, 2010

MCDONALDS CORP.

HISTORY OF HOLDING

• Bought 200 shares of MCD on March 3rd, 2009 @ $52.44

• As of November 10th, 2010, MCD trades @ $79.50 for an unrealized gain of 51.6%

• Currently paying $2.44 annual dividend/share• 3% yield

• $15,900 total value represents 4.8% of portfolio’s holdings

COMPANY OVERVIEW

• Market leader in the global fast food industry

• Offers core menu with some geographic variations

• 32,478 restaurants in 117 countries (as of Dec. 31, 2009)

• Serves 58 million customers daily and employs 385,000

BUSINESS MODEL

• Franchise/Company-owned store mix• Franchise generates consistent rent and

royalties at high margins• Company-owned generates full revenues but for

lower margins with unpredictable costs

• Supplies food and materials to restaurants through approved 3rd party operators

STRATEGY

• “Plan to win” (November 2004)• Renewed focus on people, products, place, price and

promotion• 5-year NI growth of 75% (2005-09) vs. 14% (2000-05).1

• Refranchise restaurants to stabilize cash flows and increase margins

• Ongoing initiatives2

• Service enhancement• Restaurant reimaging• Menu innovation• Grow aggressively in China

1. http://www.wikinvest.com/stock/McDonald%27s_%28MCD%29/Data/Net_Income_To_Common

2. McDonald’s Corporation 10-K Statement for FY2009, Page 12.

REVENUE SHARE BY REGION

MAIN COMPETITORS

• Yum Brands, Inc. (YUM)• Wendy’s Arby’s Group Inc. (WEN)• Burger King Corporation• Doctor's Associates Inc. • Starbucks Corporation

INDUSTRY OVERVIEW

• Fast Food Restaurant Industry• Slow growth in the United States: 0.5% from 2005-2010

and 2.5% from 2010-2015• Consumers are choosing to buy lower-priced fast food

items, cutting into revenue growth• Consumers are more health conscious• Domestic market saturation, oversees expansion• Low concentration• High competition

INDUSTRY OVERVIEW

Market Share in the US by Revenue

MANAGEMENT ASSESSMENT

• Exceeded or met targets for:• Long-term, constant currency financial targets of average annual

Systemwide sales growth of 3% to 5%• Average annual operating income growth of 6% to 7%• Returned $16.6bn to shareholders under their $17 – $19bn target

for 2007 through 2009

• Management is placing much of their future growth in APMEA region

Source: McDonald’s 2009 10-K, http://www.sec.gov/Archives/edgar/data/63908/000119312510042025/d10k.htm#toc84160_8

ISSUES OF CONCERN

• Rising food prices

• Rising labor costs• Currency Wars

• Earnings are affected by changes in particularly Euro, British Pound, Australian Dollar and Canadian Dollar.

• Collectively these currencies represent approximately 70% of company’s operating income outside of US.

Source: McDonald’s 2009 10-K, http://www.sec.gov/Archives/edgar/data/63908/000119312510042025/d10k.htm#toc84160_8

PERFORMANCE AND FINANCIAL MEASURES

Source: McDonald’s 2009 10-K, http://www.sec.gov/Archives/edgar/data/63908/000119312510042025/d10k.htm#toc84160_8

PERFORMANCE AND FINANCIAL MEASURES

Source: McDonald’s 2009 10-K, http://www.sec.gov/Archives/edgar/data/63908/000119312510042025/d10k.htm#toc84160_8

DUPONT ANALYSIS

2004 2005 2006 2007 2008 2009

ROE 16.04% 17.18% 22.93% 15.67% 32.23% 32.43%

PUBLIC COMPARABLESComparables                

11/7/2010     Enterprise

Value   Market Cap      Ticker Company Name EBITDA EBIT Sales (mil's $) P/E P/BV P/S

MCD McDonald's Corp. 10.8x 12.6x 3.9x 83,781 20.0x 6.4x 3.6x

SBUX Starbucks Corp. 11.6x 16.3x 2.1x 22,847 27.5x 6.5x 2.2x

YUM Yum! Brands, Inc. 10.8x 14.1x 2.4x 24,052 23.5x 15.4x 2.2x

DPZ Domino's Pizza, Inc. 9.2x 10.5x 1.5x 910 17.9x NM 0.6x

PZZA Papa John's International Inc. 6.0x 8.2x 0.6x 660 13.2x 3.4x 0.6x

JACK Jack in the Box Inc. 7.1x 12.6x 0.7x 1,294 18.6x 2.3x 0.6x

DRI Darden Restaurants, Inc. 8.4x 12.1x 1.1x 6,670 19.0x 3.6x 0.9x

SONC Sonic Corp.   8.7x 13.0x 2.0x 581 18.5x 26.0x 1.0x

McDonald's Corp.   Min 13.2x 2.3x 0.6x

Normalized EPS 4.02 Mean 19.7x 9.5x 1.2x

BV per share 12.34 Median 18.6x 5.0x 0.9x

Revenue   23834 Max 27.5x 26.0x 2.2x

Shares Outstanding 1057 Min $ $ 53.04 $ 28.37 $ 13.01

Revenue per share 22.56 Mean $ $ 79.41 $ 117.72 $ 26.31

Median $ $ 74.94 $ 62.22 $ 21.07

max $ $ 110.72 $ 320.61 $ 50.39

max - min $ 57.68 $ 292.24 $ 37.38

DISCOUNT RATE

Discount Rate

Cost of Equity 7.39%

Cost of Debt (Mid Investment Grade)

5.29%

WACC 6.01%

Historic ROE (2004-2009) 15.00%

Discount Rate 10.00%

• Discount Rate at lower end of acceptable range• Low yield environment • McDonalds transitioning to a higher margin business model• McDonalds management committed to returning value to shareholders.

DISCOUNTED CASH FLOW ANALYSIS

Year 2010 2011 2012 2013 2014 2015 Terminal

FCF 3,308.72 3,961.46 4,558.34 4,927.38 5,764.26 5,705.12 98888.74

Discount Rate 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%

Present Value 3008 3274 3425 3365 3579 3220 55820.12

               

Sum of PV: $75,692           

# Shares 1058           

$ Per Share $71.53           

+10% $78.68

-10% $64.37

SENSITIVITY ANALYSIS

WEIGHTED VALUATION

Method Weight Valuation

DCF Valuation 50% $71.53

P/E Multiple 25% $77.17

P/BV Multiple 25% $89.97

Weighted Valuation (per share): $77.55

-10% $69.79

Valuation $77.55

10% $85.30

RECOMMENDATION

• Hold our current position of 200 shares