®

Page 1

5.5% 2.23

Return on Invested Capital (ROIC)

$3.27

$0.89

Our Risk/Reward Rating system identifies disconnects between the market's expectations for future cash flows and current cash flows.

5.8% 1.3

Growth Appreciation Period (yrs)

01/06/2011

ValuationQuality of EarningsOverall Risk/Reward

Rating

Figure 1 summarizes the five factors that drive our OverallRisk/Reward Rating for SBUX. Each factor offers insights into theprofitability and valuation of SBUX.

This report provides a detailed explanation of each diagnosticcriterion and each rating for SBUX. Appendix 1 offers an explanationof how our Risk/Reward Rating system works.

$-0.83

SBUX's positive and rising economic EPS are balanced by a fairlyrich stock valuation, which results in a Risk/Reward Rating ofNeutral.

> 50

3 > 10

0 > 3

20 > 50

10 > 20

$0.72

Closing Stock Price as of 01/05/2011: $32.35

14.5%

> 3.5 or -1 > 0

2.4 > 3.5 or < -1

1.6 > 2.4

1.1 > 1.6

0 > 1.1

S&P 500

Important Disclosure Information is contained on the last (two) page(s) of this report. The recipient of this report is directed to read these disclosures.

Russell 2000

20 years

We deliver the whole truth by incorporating critical data from the Financial Footnotes and MD&A that other firms miss.

Economic vs Reported EPS

Actual Values

1.3

Neutral Risk/Reward Rating

17.4%

Rising EP means that economic EPS are positive, the company'sROIC is greater than WACC, and ROIC is rising.

The biggest adjustment that lowers economic EPS and is notcaptured in Reported EPS is Reported Net Assets.

Click here and enter a ticker to buy more of our reports.

vs.

vs.

vs.

Source: New Constructs, LLC

Rising EP

Misleading Trend

False Positive

Neutral EP

Positive EP

Starbucks Corp (SBUX)

3.3%

Trust

Performance

More Reports

38 years

Top Quintile

2nd Quintile

3rd Quintile

4th Quintile

Bottom Quintile

$0.80

Price-to-EBV Ratio

<-5%

3%<10%

>10%

-5%<-1%

-1%<3%

SBUX has an Overall Risk/Reward Rating of Neutral because upsidepotential for this stock is fairly balanced with downside risk.

$1.24

FCF Yield

Very Dangerous

Attractive

Very Attractive

Dangerous

Neutral

The value and success of our ratings are unrivaled. Click here for proof.

Figure 1: New Constructs' Risk/Reward Rating

1.5% 56 years

VALUATION REPORT

®

Page 2: Economic vs Reported Earnings

Economic vs Reported Earnings

Economic earnings are almost always meaningfully different than GAAP earnings. We believe economic earnings provide a truer measure of profitability and shareholder value creation than offered by GAAP earnings. Investors should beware investing in companies that report profits meaningfully different than their economic earnings.

- Employee Stock Options - Pension Over/Under Funding - Excess Cash - Restructuring charges - Pooling Goodwill - Minority Interests

- Off-Balance-Sheet Financing - LIFO Reserve - Unrealized Gains/Losses - Goodwill Amortization - Unconsolidated Subsidiaries - Capitalized Expenses

01/06/2011

Figure 2 highlights the differences between the reported and economic earnings forSBUX. Rising EP means the company earned a ROIC greater than its WACC during thelast Fiscal Year.

Economic earnings and return on capital metrics are significantly more accurate when as-reported financial statements have been adjusted to reverse accounting distortions. The majority of the data required to reverse accounting distortions is available only in the Notes to the Financial Statements, which we analyze rigorously. Our core competency is gathering and analyzing all relevant financial data (from Financial Statements and the Notes) so that we can deliver earnings analyses that best represent the true profitability of businesses. See Figure 3 for a list of the adjustments we make to a company's reported GAAP profits in order to reverse accounting distortions and arrive at a better measure of a firm's profits.

Why Economic Earnings Matter

During the last Fiscal Year, the biggest driver of the difference between reported andeconomic EPS is Reported Net Assets. See Appendix 2 for a line item by line itemreconciliation of Net Income to Economic Earnings.

Source: New Constructs, LLC

Source: New Constructs, LLC

Starbucks Corp (SBUX)

New Constructs rectifies accounting distortions in GAAP financial statements.

Figure 2: Economic Earnings Per Share vs Reported EPS

VALUATION REPORT

Figure 3: Accounting Issues that Distort GAAP

®

Page 3: Economic vs Reported Earnings

01/06/2011

How We Measure Economic Earnings

The metrics we use to measure the economic performance of companies are Economic Earnings Margin and Economic Earnings. The Economic Earnings Margin for a company equals its Return on Invested Capital (ROIC) minus its Weighted-Average Cost of Capital (WACC). The Economic Earnings of a company equal its Economic Earnings Margin multiplied by its Invested Capital. Economic Earnings per Share equal Economic Earnings divided by Basic Shares Outstanding. ROIC equals Net Operating Profit After Tax (NOPAT) divided by Invested Capital. We believe our measures of economic performance are substantially more accurate than accounting metrics because we make adjustments for all the issues listed in Figure 3. Appendix 3 provides a line item by line item reconciliation of Net Income to Economic Earnings.

Figure 4 compares SBUX's Return on Invested Capital (ROIC) to its Weighted-AverageCost of Capital (WACC). This company's ROIC during its last fiscal year ranks in the 2ndQuintile.

Source: New Constructs, LLC

Starbucks Corp (SBUX)

Figure 4: Return on Invested Capital vs Weighted Average Cost of Capital

VALUATION REPORT

®

Page 4: Free Cash Flow Yield

Figure 5: Free Cash Flow Yield

01/06/2011

Free Cash Flow Yield

Figure 5 shows SBUX's FCF Yield over the past several years. SBUX's current FCFYield is 5.5%.

Free Cash Flow Yield equals unlevered FCF divided by enterprise value. The level ofFCF does not always reflect the health of a business or its prospects. For example, alarge amount of FCF can be a sign that a company has limited investment opportunitiesand, hence, limited growth prospects. On the other hand, negative FCF can be anattractive indication that a company has more investment opportunities than it can fundwith cash from operations. Zero FCF could mean that the company generates justenough cash to internally fund its growth opportunities.

Rigorous back-testing shows that stocks with a Free Cash Flow Yield of at least 10% significantly out-performed both the S&P 500 and a survivor-bias-adjusted index. For more detail on Free Cash Flow Yield and our backtesting, see our report "Cash Is King," which was published November 30th, 2004. Using Free-Cash-Flow Yields to pick stocks is not a new strategy. However, our strategy yields superior results because we use a better measure of Free Cash Flow (FCF), in our opinion. In the same way our economic EPS are better measures of profitability than reported EPS, our measure of FCF is better than traditional accounting-based FCF. We measure Free Cash Flow by subtracting the change in Invested Capital from NOPAT.

Starbucks Corp (SBUX)

Source: New Constructs, LLC. Note: Dot on the line(s) in the chart marks the current value(s).

VALUATION REPORT

®

Page 5: Price-to-EBV Per Share

01/06/2011

Price-to-EBV Per Share

Figure 6: Economic Book Value Per Share vs Market Price

Figure 6 shows the differences between the stock market price and Economic BookValue (EBV) per share of SBUX. These differences reflect the portion of the stock pricethat is entirely dependent on future cash flow growth.

When stock prices are much higher than EBVs, the market predicts the economicprofitability (as distinct from accounting profitability) of the company will meaningfullyincrease. When stock prices are much lower than EBVs, the market predicts theeconomic profitability of the company will meaningfully decrease. If the stock price equalsthe EBV, the market predicts the company's economic profitability will not change.

Starbucks Corp (SBUX)

EBV measures the no-growth value of the company based on the current economic cash flows generated by the business. It is also known as the "pre-strategy value" of the company because it ignores the value attributable to future cash flows, which are, in theory, what business strategies should aim to improve. The Formula for EBV is: (NOPAT / WACC) + Excess Cash + Unconsolidated Subsidiary Assets + Net Assets from Discontinued Operations - Debt (incl. Operating Leases) - Value of Outstanding Stock Options - Preferred Capital - Minority Interests. EBV per share equals EBV divided by shares outstanding.

The lower the stock price is versus EBV, the lower the potential risk of investing in the stock. The higher the stock price is versus EBV, the greater the potential risk of investing in the stock.

Source: New Constructs, LLC. Note: Dot on the line(s) in the chart marks the current value(s).

VALUATION REPORT

®

Page 6: Qualifying Market Expectations

GAP measures the number of years implied by the stock price over which the companymust maintain an edge over its current and future competitors. Specifically, GAPmeasures the number of years a company will earn returns on invested capital greaterthan its cost of capital on new investments. The law of competition dictates that acompany can only grow its economic earnings for the finite period over which it canmaintain a competitive advantage.

Historically, SBUX has generated a Revenue CAGR of 8.3%, 1.6%, and 9.5% andEconomic Earnings Margins of 3.0%, 3.4%, and 7.1% over the past 5, 3 and 1 year(s).

Market Expectations

$32.35

The Market-implied GAP of the S&P 500 is 20 years. For the Russell 1000, it is 23years. SBUX has a GAP of 38 years, which is much greater than the indices. Basedon this criterion, SBUX has a much lesser chance of seeing price appreciationversus versus the indices.

However, our Overall Rating is Neutral. Other criteria (per pages above) in ourrating system also indicate that SBUX is not an Attractive investment.

$34.05

01/06/2011

We believe this stock has a Neutral Risk/Reward Rating because its valuation impliesreasonable future financial performance as compared to historical financial performance.

Historical Performance

The market expects SBUX to achieve a Revenue CAGR of 6.5% and Economic EarningsMargins of 7.4% for 38 years.

Performance Hurdles

1.6%

$14.96

Revenue CAGR

3.0%

$25.94

9.5%

based on current price

Growth Appreciation Period

Quantifying Market Expectations

GAP analysis comes from our dynamic discounted cash flow model, a multi-stage DCF model that values companies across multiple forecast horizons. Each forecast horizon (i.e., Growth AppreciationPeriod - GAP), assumes the company cannot grow profits beyond the GAP period. Our model exclusively uses no-growth terminal value assumptions for calculating the value of the stock for each GAP. The forecast drivers for our DCF model are: (1) Revenue Growth; (2) NOPBT Margin, (i.e. EBIT Margin with Adjustments*), (3) Cash Tax Rate, (4) Incremental Net Working and Fixed Capital needs. See Appendix 8 for the forecasts that drive our DCF model for this company.

Figure 7 compares the future performance required to justify the company's stock marketprice to its historical performance. Specifically, Figure 7 shows: to justify the currentstock price of $32.35, SBUX must grow revenues at 6.5% and maintain a 7.4% EconomicEarnings Margin for 38 years.

7.1%

Stock Price

Starbucks Corp (SBUX)

Default

38 years

6.5%

7.4%

Stock prices reflect the market’s expectations for the present value of future cash promised to the owner.

Comparing the required future performance to historical performance positions investors to asses the feasibility of market expectations and valuations.

See Appendix 8 for the specific estimates used in this company's valuation model.

Appendix 2 details each Adjustment made to this company's reported financial results.

8.3%

Avg Economic Earnings Margin

Figure 7: Future Performance Required to Justify Valuation

Source: New Constructs, LLC Note: The Default Scenario is Based on the forecast set by the New Constructs analytical team, this scenario represents a likely financial performance path the company may follow to justify the current market price. Subscribers to our services may create alternate forecast scenarios based on their own estimates.

Last FY5 Yr

3.4%

3Yr

- --

VALUATION REPORT

®

Page 7: Qualifying Market Expectations

The Return On Invested Capital minus the weighted-average cost of capital.

Number of years the company can earn a positive Economic Earnings Margin on incremental investments, i.e. the number of years it can create economic value.

01/06/2011

3. Growth Appreciation Period

2. "How profitable will the company be?"

Compounded over the indicated time frame.

2. Economic Earnings Margin

An alternative way to conceptualize the three value drivers is:

1. "How fast will the company grow?"

3. "For how many years will the company grow economic earnings or create incremental value?"

Our Company Models value stocks based on the present value of expected free cash flows, with that free cash flow measured according to our economic (as distinct from conventional accounting) methodology. Website subscribers forecast economic free cash flow by assigning estimates to three value drivers:

Starbucks Corp (SBUX)

1. Revenue Growth

VALUATION REPORT

®

Page 8: New Constructs' Risk/Reward Rating

All criteria are equal-weighted in the average calculation except 2yr FCF Yield is excluded.

-1% < 3%

2nd Quintile

Ranks stocks based on their Market-Implied Growth Appreciation Period. Values based on Latest Closing Stock price and Default Forecast Scenario.

Overall Risk/Reward Rating

Neutral EP

Ranks stocks based on their Free Cash Flow Yield. Values based on Latest Closing Stock price and Latest Fiscal Year.

Very Dangerous = negative and declining Economic Earnings despite positive and rising Reported Earnings

Very Dangerous = in the bottom 20% of all companies

Attractive = in the top 40% of all companies

Top Quintile

Attractive = Economic Earnings are positive

01/06/2011

Return on Invested Capital (ROIC)

All criteria are equal-weighted in the average calculation except 2yr FCF Yield is excluded.

Very Attractive = greater than or equal to 0 years but less than 3

Very Dangerous = greater than or equal to 3.5 or less than 0 but greater than -1

All criteria are equal-weighted in the average calculation.

Very Attractive = Economic Earnings are positive and rising

> 10%

Growth Appreciation Period (yrs)

Ranks stocks based on their ROIC. Values based on Latest Fiscal Year.

10 > 20

Attractive = greater than or equal to 3 years but less than 10

3rd Quintile

The Overall Risk/Reward Rating provides a final rating based on the equal-weighted average rating of each criterion.

FCF Yield

Our Risk/Reward Rating (Figure 1) system grades every stock under our coverage according to what we believe are the 5 most important criteria for assessing the risk versus reward of a stock. Each grade reflects the balance of potential risk and reward of buying that stock. Our Risk/Reward analysis results in the 5 ratings described below. Most Attractive corresponds to a "Buy" rating, Most Dangerous corresponds to a "Sell" rating, and everything in-between corresponds to a "Hold" rating.

Ranks stocks based on their Price-to-Economic Book Value Ratio. Values based on Latest Closing Stock price and Latest Fiscal Year.

Attractive = greater than or equal to 1.1 but less than 1.6

-5% < -1%

Ranks stocks based on how their Economic Earnings compare their Reported Earnings. Values based on Latest Fiscal Year.

3% < 10%

Economic vs Reported EPS

0 > 1.1

Attractive = more than +3% but less than or equal to +10%

3 > 10

Neutral = greater than or equal to 1.6 but less than 2.4

Very Dangerous = less than or equal to -5%

Attractive

> 3.5 or -1 > 0

Misleading Trend

Very Dangerous = greater than or equal to 50 years

< -5%

2.4 > 3.5 or < -1

All criteria are equal-weighted in the average calculation.

Rising EP

Positive EP

Neutral

Dangerous = in the bottom 40% of all companies

Dangerous = greater than or equal to 20 years but less than 50

0 > 3

Very Attractive = more than +10%

Starbucks Corp (SBUX)

Neutral = Negative Economic and Reported Earnings

Price-to-EBV Ratio

1.6 > 2.4

Very Attractive

Very Dangerous

Neutral = in the middle 20% of all companies

1.1 > 1.6

All criteria are equal-weighted in the average calculation.

Dangerous = greater than or equal to 2.4 but less than 3.5 and less than or equal to -1

False Positive

Neutral = more than -1% but less than or equal to +3%

Dangerous = same as above except Reported EPS are not positive or are not rising

> 50

Very Attractive = in the top 20% of all companies

Dangerous = more than -5% but less than or equal to -1%

Bottom Quintile

4th Quintile

Neutral = greater than or equal to 10 years but less than 20

VALUATION REPORT

20 > 50

Dangerous

Appendix 1: Explanation of New Constructs' Stock Ratings Scale

Very Attractive = greater than or equal to 0 but less than 1.1

®

Page 9: Economic Adjustments Summary

After-tax Charge, net

Unconsolidated Subsidiary Assets (non-operating)

Appendix 2: Economic Adjustments Summary

$0.00($4.40) ($3.00)

$108.12

$0.00

$88.62

$681.35

$3,893.77

Invested Capital

$25.50

$4,414.42

01/06/2011

($84.20)

$8,291.50

Off-Balance-Sheet Operating Leases

($0.00)

($1,139.53)

$0.00

$945.60

$0.00

Total Reserves

($0.00)

($0.00)$3,108.89

$3,899.34

$0.00

($43.04)

($0.00)

Cumulative Asset Write-Offs After Tax

$21.10

$315.50

$8,980.60

ESO Expense (Employee Stock Options)

Accumulated Unrecorded Goodwill$3,652.64

$390.80

$0.00

$0.00$0.00

$17.21

$155.48

$0.00

$117.26

$0.00

$7,672.93($65.40)

$160.42

$0.00$303.85

$10.50

$4,268.24

$0.00

$0.00

Net Non-Operating Expense

2009

($57.20)

20102007 20082006

($0.00)

Non-Operating Taxes

$71.99

$0.00

$8,104.07

$0.00$672.64

$88.62

$789.81

($54.62)$457.64 $503.50

Accumulated Goodwill Amortization

$3,194.08

Net Assets from Discontinued Operations

($66.32)

$88.62

($0.00)

Excess Cash

$88.54($37.27)

Reported Net Assets

$0.00

$0.00

$88.62

Values in millions except per share amounts

Implied Interest for PV of Operating Leases

$4.40

($0.00)

$0.00

Goodwill Amortization$10.60

($0.00)

Deferred Tax Liability$14.90

($48.40)

($180.90)

($0.00)

$1,113.28

($0.00)

$88.62

$564.26

$4,606.80

$18.10

Accumulated OCI (Other Comprehensive Income)

$0.00

Starbucks Corp (SBUX)

($287.67)

($0.00)

$0.00$0.00

($13.52)

$753.16

$0.00

$0.00

Invested Capital Adjustments - Impact Analysis

($70.07)$2.70

($207.15)

$4,196.60

NOPAT (Net Operating Profit After Tax)

$146.23

$2.20

($0.00)

NOPAT Adjustments - Impact Analysis

Change in Total Reserves

$6,352.62

($0.00)

($0.00)

$3,996.00

GAAP Net Income

($0.00)

($0.00)

$699.88

VALUATION REPORT

®

(0.0%)

(0.0)

108.1

After-tax Charge, net

(0.0)

(315.7)

Economic Earnings per Share

(0.4%)

0.0% 0.0%

(0.0%)

(1.3)

(6.4)(0.1%)

0.0

0.2%

Economic Earnings

0.0

0.8%

0.1%

$0.00

(343.4)

(2.9%)

Deferred Tax Liability Capital Charge

$681.35

0.0

0.0

Invested Capital

(3.2%)

(0.3%)

(280.8)

(0.0%)

0.0

1.0%

01/06/2011

(2.9%)

155.5

0.0%

(0.0%)

$8,291.50

(1.7)

10.6

(6.6)

$0.00

$945.60

$0.14

0.0%

(1.9%)

0.0%

(5.8)

$581.36

(288.4)

(0.0%)

(32.8)

(2.7%)

(0.0%)

$0.53

$0.22

(0.0%)

(180.9)

$315.50

Capital Charge for Unconsolidated Subsidiary Assets (non-operating)

$8,980.60

4.0

ESO Expense (Employee Stock Options)

0.0

(0.0)

(6.6)

(3.0)

$600.98

0.0%

(0.0%)

(0.0%)

$390.80

0.0%

(0.1%)

$17.21

NOPAT = Net Income with Adjustments as per below

$510.41

$7,672.93

(0.8)

0.0%

(0.1%)

(0.0%)

0.0%

Net Non-Operating Expense

541.2

2009 20102007 20082006

As a % of Revenue

As a % of Revenue

As a % of Revenue

As a % of Revenue

As a % of Revenue

As a % of Revenue

As a % of Revenue

As a % of Revenue

As a % of Revenue

As a % of Revenue

As a % of Revenue

As a % of Revenue

As a % of Revenue

As a % of Revenue

As a % of Revenue

As a % of Revenue

As a % of Revenue

As a % of Revenue

(0.0%)

WACC * Invested Capital is the charge for capital deducted from NOPAT

Non-Operating Taxes

$0.00

Asset Write-Offs After Tax Capital Charge

(0.0)

(0.0)

Capital Charge for Net Assets from Discontinued Operations

$8,104.07

0.2%

(0.0%)

0.0%

$672.64

$789.81

(66.3)

(0.0)

Invested Capital * WACC

(0.0%)

(3.4%)

85.0(3.3%)

(0.4%)

0.0

(0.0%) (0.0%)

171.8

2.2

(0.0)

(2.0%)

0.0

0.0

3.2

(249.8)

$572.03

0.0%

1.7%

0.0%

Accumulated OCI Capital Charge

Values in millions except per share amounts

(2.5%)

$0.74

176.5

Implied Interest for PV of Operating Leases

0.0%(0.0)0.0%

0.0%

(3.1%)

Goodwill Amortization

0.0%

(0.0)

0.0%

0.0

(0.0)

(0.0)

(0.7%)

(286.7)

2.1%

(0.1%)

170.9

Page 10: Reconciling Net Income to Economic Earnings

(279.3)

$0.24

(0.0)

146.2

0.0%

(207.1)

4.4

Total Reserves Capital Charge (1.1)

0.0%

$1,113.28

$1.27

(0.0)

(0.0)

(4.4)

1.0

(0.0%)

(0.0%)

$0.73

$564.26

(0.0%)

1.4%

0.0

117.3

(0.0)

0.0%

(0.0%)

Starbucks Corp (SBUX)

Capital Charge for Reported Net Assets

0.0%

(0.0%)

Off-Balance-Sheet Operating Leases Capital Charge

$0.90

0.0%

(3.2%)

0.0

4.3

0.0

$613.35

(0.9%)

(5.9)

(0.0%)

$0.43

(43.0)

$753.16

0.0%

(295.4)

0.0%

Basic EPS

Capital Charge for Excess Cash

(0.0%)

0.0%

(272.3)

$2.70

(0.0%)

(70.1)

(7.1)

(0.0%)

(0.0)

$0.23

NOPAT (Net Operating Profit After Tax)

3.0

6.8

(256.6)

(0.0)

(0.1%)

0.0%

(0.0%)

0.1%

Accumulated Goodwill Amortization Capital Charge

(6.5)

(1.5)

(0.0)

(0.0)

(0.1%)

0.0%

Appendix 3: Reconciling Net Income to Economic Earnings

(37.5)

0.0

Economic Earnings = NOPAT minus Capital Charge

(0.0)

0.0

(0.1%)

1.2%

Change in Total Reserves

(0.0%)

0.0

$6,352.62

20.6

Unrecorded Goodwill Capital Charge

GAAP Net Income

4.7(0.2%)

$699.88

(0.0%)

VALUATION REPORT

(20.3)

(2.8%)

Capital Charge = WACC * Invested Capital as detailed below

0.0%

98.9

160.4

®

148.1

$3,999.12

3,510.00.0

387.2

Other Compensation

$10,707.40

510.4

0.0

$9,383.10

0.0

$3,178.79

0.0

$10,383.00

Other Income

0.0Cost of Sales

Total Operating Expense

$3,999.12

$9,411.50

01/06/2011

0.0

0.0

Operating Revenue

$489.25

0.0

0.0

0.0

$108.01 $113.60

534.7Depreciation and Amortization

Net Interest Income

$4,608.15

0.0

0.0Goodwill Amortization

0.0

93.9

$10,707.40

0.0

0.0

$4,324.90$5,737.70

3,689.5

57.5%

Research and Development Expense

$10,383.00

$0.00

3,844.6

0.0

Gross Margin

$4,324.90

$0.00

Total Operating Revenue

4,075.2

0.0

0.00.0

2009 20102007 20082006

0.00.0

55.8%

0.0

467.2

55.3% 58.4%

0.0

0.0

Gross Profit

0.0

$473.02

0.0

Losses from Discontinued Operations (operating)

0.0

0.0

0.0

$8,465.56

$569.50

0.0

0.0

Income from Unconsolidated Subsidiaries (operating)

$456.00

Operating Revenue

0.0

Stock Compensation

108.0

Energy Operating Expense

0.0

0.0

0.0

Interest Expense (operating)

Values in millions except per share amounts

0.0

0.00.0

0.0

Other Operating Expense

$4,458.60

$148.10

$7,786.94

$6,986.93

Page: 11 NOPAT (Net Operating Profit After Tax)

Total Cost of Sales $3,178.79

121.9

0.0

$93.94

$9,725.80

Operating Other Real Estate Owned Expense

0.0

0.0

Operating Expenses and Adjustments

0.0

Appendix 4: Net Operating Profit After Tax (NOPAT) - Operating Approach

0.0

$0.00

Starbucks Corp (SBUX)

0.0

$4,645.30

Operating Income

Credit Loss Provision

549.3

Income from Discontinued Operations (operating)

0.0

0.0

0.0

Total Operating Income

0.0

0.0

0.0

Losses from Unconsolidated Subsidiaries (operating)

0.0

$9,411.50

$121.90

0.0

0.0

113.6$0.00

$5,412.37

$9,774.60

0.0

$6,248.80

0.0

0.0

0.0

0.0

$7,786.94

0.0

$9,774.60

$5,449.70

0.0

0.0

$453.000.0

0.0

2,947.9

Income from Unconsolidated Subsidiaries After-tax (operating)

Selling, General, and Administrative

$0.00

$4,645.30

0.0

$9,002.10

VALUATION REPORT

$4,458.60

59.2%

®

(0.0)

108.1Capitalized Items Net Adjustment

33.8%

Non-operating Expenses Included in Total Operating Expenses(123.4)

(0.0)

0.0

0.0%

$1,539.90

$6,967.30

$349.30

0.0%

$681.35

$9,315.60

01/06/2011

0.0%

155.5

$1,539.90

(95.2)

10.6

13.2%

$160.42

(26.0)

32.3%

$8,906.900.0%

ESO Expense (Employee Stock Options)

0.0

(3.0)

Cash Tax Rate 36.8%

$1,645.02

$1,645.02

$1,076.19

$1,076.19

$117.26

2009 20102007 20082006

$8,439.53ESO Expense as a % of Revenue

$789.81

Taxes and Adjustments

Adjusted Total Operating Expenses

$1,239.86

$1,239.86

$894.20

(0.0)

$1,079.98

2.2

36.4%

$989.60

11.3%

$913.57

$394.84

Implied Interest for PV of Operating Leases

(0.0)

Goodwill Amortization

$108.12

31.6%

(0.0)

$531.74

Page: 12 NOPAT (Net Operating Profit After Tax)

146.24.4

NOPBT Margin

$1,113.28

Cash Operating Taxes

15.4%

(4.4)

10.1%

117.3

EBIT

Starbucks Corp (SBUX)

$146.23

$1,051.03

$1,051.03

$9,602.40

0.0EBITA

$1,102.46

$1,102.46

$753.16

$913.57

(0.0) (0.0)

$155.48

(19.6)

(0.0)

NOPAT (Net Operating Profit After Tax)

$989.60

(67.5)

(0.0)

$351.15

13.8%NOPBT (Net Operating Profit Before Tax)

NOPBT (Net Operating Profit Before Tax)

$450.05

0.0

Change in Total Reserves$894.20

0.0$1,079.98

$699.88

(0.0)

0.0%

VALUATION REPORT

Asset Write-Offs Included in Total Operating Expenses

Net Operating Profit After-Tax (NOPAT) - Operating Approach (continued)

160.4

®

$438.69 $666.10

0.0

0.0

0.0

5.0%

0.0

$1,674.90

169.2

Loan Loss Reserves

Long-Term Investments (non-operating)

0.0

19.9

0.0

0.0

Restricted Cash

01/06/2011

692.8

$1,879.60

0.0

Allowance for Doubtful Accounts

156.5

$0.00

0.0

$473.54

Separate Accounts

$0.00

$1,475.99

0.0

225.2

302.7

389.3

Required Cash as % of Revenue

LIFO Reserves

129.5

45.4

5.0%

110.3

25.5

0.0

$0.00

0.0

2009 20102007 20082006

Total Cash and Investments

Appendix 5: Invested Capital - Operating Approach

0.0

Other Investment Securities (operating)

$1,743.27

0.0

$0.00

Inventory Reserves

0.0

286.6

0.0

0.0

126.9

14.9

$453.64

543.3

$776.40

$1,879.53

$484.09

Excess Cash

Values in millions except per share amounts

0.0

0.0

488.7

Accounts Receivable

0.0

5.0%

224.3

$1,449.70

Page 13: Invested Capital

234.2

0.0

10.5 18.1

5.0%

Current Assets / Investment Assets

0.0

287.7

Other Current or Investment Assets

535.4

147.2

0.0

0.0

Starbucks Corp (SBUX)

329.5

1,139.5

Net Loans

0.00.0

0.0

$1,860.17

0.0

$428.40

Inventory

13.5

$0.00

0.0

148.8

664.9

0.0

287.9

470.6

691.7

84.2

Required Cash

304.2

636.2

106.1

Total Current Assets (adjusted)

88.8

5.0%

428.4

0.0

0.0

Cash and Equivalents (non-operating)

Current Deferred Taxes

$322.30

VALUATION REPORT

0.0

0.0

271.0

21.1

Cash and Equivalents (operating)

0.0

0.0

®

219.4

Net Working Capital

$7,805.34

42.0

$2,536.40

261.1

$298.73

0.0

88.6

Invested Capital

0.0

$7,591.86

0.0

0.0

Unconsolidated Subsidiary Assets (operating)

01/06/2011

457.6

$1,580.80

$8,291.50

0.0

$1,444.54

Off-Balance-Sheet Operating Leases

0.0

(37.3)

267.9

$282.60

186.9

1,082.4

$6,111.49

0.0

Net Goodwill

88.6

0.0

Current Liabilities / Investment Liabilities

$1,234.86

0.0

38.0

259.1266.5

88.6

3,108.9

Cumulative Asset Write-Offs After Tax

296.9

0.0

Other NIBCL or Investment Liabilities

$8,980.60

Accumulated Unrecorded Goodwill 88.6

0.0

0.0

0.0

Other Intangibles, net

$1,779.10

$7,672.93

$241.13

0.0

0.0

$324.90

Current Deferred Revenue

925.0

0.0

$267.10

Investment Liabilities - Debt

70.8

161.5

$2,287.90

2009 20102007 20082006

0.0

0.0

$8,104.07

Discontinued Operations (operating)

88.6

$390.84

$8,577.00

68.2

0.0 0.0

262.4

Accumulated Goodwill Amortization

253.8

662.0

0.0

0.0

$2,416.50

234.5

0.0

(65.4)

0.0

(48.4)

$298.72

215.6

$403.60

414.1

0.0

72.0

PPE (Property, Plant, and Equipment)

231.9

(57.2)

0.0

4,268.2

(54.6)

Page 14: Invested Capital

0.0

Accrued Restructuring Charges

303.9

0.0

0.0

$1,476.00

308.1

Total Adjusted Fixed Assets

0.0

$2,890.43

$7,992.77

$340.94

66.6

Accumulated OCI (Other Comprehensive Income)

$81.07

Other Real Estate Owned

0.0

Starbucks Corp (SBUX)

Deferred Income Taxes

88.5

205.0

0.0

0.0

782.7

Invested Capital - Operating Approach (continued)

Separate Accounts

0.0

Accounts Payable

0.0

4,414.4

NIBCL (Non-Interest-Bearing Current Liabilities)

388.7

0.0

Fixed Assets

0.0

756.8

346.5Other Fixed Assets

368.4

0.0

503.5

0.0

313.2

0.0

Restricted Cash

3,652.6

0.0

0.0

$2,956.40

$6,352.62

0.0

Deferred Tax Assets

VALUATION REPORT

0.0

3,893.8

0.0

®

Preferred Capital

8.50%

33.75%

Adjusted Total Debt

0.998.50%

Cost of Preferred Capital

0.0

$26,086.1878.03%

01/06/2011

1.01%

Weighted Cost of Equity Capital

12.75%

7.60%

Cost of Debt Capital

Equity Per Total Adjusted Capital

7.40%

32.27%

17.94%

2.96%

1.13%

0.0

7.38%

0.99 0.99

0.00%

$19,643.798.45%

0.99 0.99

34.16%0.43%

4.76%

4.76%

0.99

Cash Tax Rate

4,202.0

Cost of Equity

36.76%

$0.00

0.00%0.00%6.69%

2009 20102007 20082006

8.50%

0.0

8.45%

3.99%

3.99%

14.95%

4.72%

4.72%

$19,224.13

6.92%

8.50%

0.66%

5.56%

Expected Market Return

0.70%

3.74%

6.60%

8.44%

Weighted Cost of Debt After TaxDebt Per Total Adjusted Capital

3.40%

5.16%36.43%

5.27%

0.53%

Debt Spread Adjusted

3.31%

0.0

Values in millions except per share amounts

6.47%

5,677.7

8.45%

7.17%

31.56%1.17%

3.78%

Page 15: WACC (Weighted Average Cost of Capital)

4.51%

0.0

Cost of Debt After Tax

3.36%

3.36%

2.86%

65.84% 85.05%

21.97%

82.06%

Starbucks Corp (SBUX)

Appendix 6: WACC (Weighted Average Cost of Capital)

0.00%

$0.00

7.17%

8.44%

3.01%

Equity Risk Premium

Cost of Equity Capital according to the Capital Asset Pricing Model (CAPM)

4,215.6

1.01%

3.21%

3.21%

0.00%Cost of Preferred Capital

Risk-Free Rate (10-yr Treasury)

Risk-Free Rate (10-yr Treasury)

$0.00 $0.00

3.23%

3.23%1.01%

0.00%

5.29%8.50%

1.01%

$0.00

3,811.6

76.73%

5,529.4

7.46%

$14,648.42

Current

$10,943.24

5.14%

0.80%

$23,974.58

4,443.3

87.25%

32.27%3.64%

0.0

Market Value of Basic Equity

$0.00Preferred Dividends

23.27%

8.44%

VALUATION REPORT

8.50%

WACC (Weighted Average Cost of Capital)

Beta Adjusted

8.03%

®

$0.52

Stock Price (closing)

1.40

0.0

2.23

Preferred Capital

12.8%

Unconsolidated Subsidiary Assets (non-operating)

971.3

Components of Economic Book Value

Economic Earnings per Share

18.3

Adjusted Total Debt

Value of Outstanding ESO After Tax

0.0

(13.9%)

476.1

1.5%

$554.80

18.4%

$75.30

Economic Earnings

$32.35

FCF as a % of Invested Capital

20.96

$34.05

Appendix 7: Key Economic Metrics Summary

Minority Interests

$681.35

17.27

$3,770.69

(42.6%)

0.07.6

$69.79

$1.02140.1%

(12.2%)

01/06/2011

Unlevered NOPAT Per Share

$5,887.56

10.4%

0.0

9.1%

7.1%

$945.60

574.4

14.5%

$0.14

4.21

7.60%

29.4%

Price to Unlevered NOPAT per Share

25.3%

7.40%

7.40%

23.2%

$0.00

80.7%

2.1%

$4,667.72

0.0

38.29

(8.0%)

$0.53

$0.22

4.86

$315.50

26.14

0.0

$1,111.03

FCF (Free Cash Flow) ($511.25)

24.87

7.7%

Economic Book Value (EBV)

$6.33

Economic Earnings (EE) and Free Cash Flow (FCF)

ROIC derived from prime components (NOPAT Margins * Invested Capital Turns)

$390.80

1.21

0.8%

136.2%

$1,629.695.5%

15.64

6.69%

6.69%

8.83

Invested Capital Turns

$5,529.38

541.2

$0.00

2009

2009

2010

2010

2007

2007

2008

2008

2006

2006

0.00.0

$0.96

444.6

(51.3%)

$1.50

$14.96

$4,443.27

$0.43

17.6%

30.00

$0.87

0.0

0.1%

0.0

6.7%

37.85

0.0

Economic Book Value (EBV) Per Share $4.92

0.1%

(9.2%)

$672.64

1.23

$789.81

72.0%

$14.50

PEBV (Price to Economic Book Value) per Share

47.83

0.0

NOPAT Margin

Economic Earnings Margin (ROIC - WACC)

2.49

$6.23

(1.2%)

($77.56)

$0.00

171.8

(1.7%)

$25.94

$4,202.04

21.58

Pensions Net Funded Status

Excess Cash

22.7%

$0.00

Diluted GAAP EPS

$73.42

0.0

Values in millions except per share amounts

6.92

$26.20

($1,149.07)

17.3

$0.74

176.5

8.7%

0.0

$10,743.64

$72.90

2.1%

17.4%

10.7%

19.45

170.9

Page 16: Key Economic Metrics Summary

Unlevered NOPAT Per Share Growth

$0.24

20.1%

Incremental Return on Capital

0.0

0.0

12.7%

9.5%

Return on Invested Capital (ROIC)

287.7

Price to Accounting Book Value

Change in Economic Earnings

$1,113.28

$1.27Diluted GAAP EPS Growth

$3,811.61

212.6%

1,139.5

$1.24

$0.73

16.7%

0.0

Change in ROIC

$564.26

12.11

$0.89

5.39

Basic EPS Growth

128.4

$0.00

$4,215.62

20.1%

Starbucks Corp (SBUX)

14.4%FCF as a % of Total Revenue

1,139.5

787.8

$0.90

7.17%

7.17%

7.6

20.5%

22.7%

$0.00

Economic Earnings per Share Growth

7.7%

5.2%

46.7%

P/E (Price/Earnings Multiple)

$11,288.31

$0.43

$1.05

13.5

$753.16

2.36

1.1%

Basic EPS

$5.52

(51.9%)

$4,633.98

$108.38

(6.6%)

10.7

84.2

$19.83

($357.14)$0.23

NOPAT (Net Operating Profit After Tax)

1.70

11.2

7.46%

7.46%

8.4%

25.7%

Current

$15.23

0.0

ROIC (Return On Invested Capital)

$1,544.41

Return on Equity

$7.97

4.45

Net Income Change

$0.71

$369.44

21.8%

0.0

Adjusted Net Assets from Discontinued Operations

1.16

37.8%

GAAP Net Income

(4.6%)

2.7%

9.3%

$10.78

$5,677.72

$699.88

Economic Book Value (EBV)

6.6%

35.17

VALUATION REPORT

7.8%

WACC (Weighted Average Cost of Capital)

WACC (Weighted Average Cost of Capital)

6.73

1.14

8.03%

8.03%

(41.1%)

98.9

®

EY 26

DCF Forecast Drivers

50.0%

6.5%

13.1%13.1% 13.1%

50.0%

5.2%

Net Working Capital Delta as % of Revenue Delta

32.3%

01/06/2011

6.5%

86.9%

Historical

6.0%

32.3%

10.3%

13.2%

36.8%

EY 4

50.0%

(2.7%)

20.9% (5.9%)

60.1%

32.3%

Total Operating Revenue Growth

13.1%

50.0%

2.5%

13.1%

32.3%

2.5%

EY 3

2009 20102007 20082006

32.3%

50.0%50.0%

2.5%

22.3%

13.1%

3.5% 2.5% 2.5%

32.3%31.6%

11.3%

(22.9%)

EY 1

36.4%

(23.3%)

Values in millions except per share amounts

9.5%

32.3%

EY 51

6.5%6.5%

32.3%

Page 17: DCF Forecast Drivers Summary

10.8%

50.0%

17.2%

NOPBT Margin6.5%

15.4%

EY 2

10.1%

50.0%

2.5%

Starbucks Corp (SBUX)

32.3%

50.0%

EY 11

115.8%

EY 6

13.1%

126.8%

13.1%

Fixed Adjusted Assets Delta as % of Revenue Delta

Appendix 8: DCF Forecast Drivers Summary

6.5%

33.8%

6.3%

2.5%

EY 21

2.5% 2.5%

13.8% 13.1%

2.5%

32.3%

13.1%

VALUATION REPORT

6.5%

Cash Tax Rate

EY 16

50.0%

32.3%

®

01/06/2011

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VALUATION REPORT

®

01/06/2011

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Page 19: Legal Disclaimers Starbucks Corp (SBUX)

DISCLOSURES

DISCLAIMERS

VALUATION REPORT