heightened focus on operations, more disciplined measurements and a new marketing

direction. Results also reflected improvements in the US economy in 2003 and restaurant

expansions.

The increase in US sales reflects the success of management’s decision to swift

from its “dollar menu” strategy which concentrated on an intense price competition with

its competitors to its new “Plan to win” strategy which is aiming to current customers

visits and increase the company’s customer base through operations excellence that

focuses on service, value, menu and restaurant ambiance. McDonald’s menu (combined

with the overall economic recovery) was the primary factor in the company’s revenue

growth last year. The company attempted to meet the growing consumer interest in the

premium and wholesome food market by introducing in many countries new products

including premium salads and Salads Plus menu, Chicken McNuggets made with white

meat, Fish McDippers, Chicken Selects and new breakfast offerings like the McGriddles

breakfast sandwiches. The company plans continue to attract and retain customers

worldwide by complementing its core menu with new relevant sandwich, salad and

beverage choices. Restaurant ambiance is also of great significance for the company. The

company began the reimaging of many of its restaurants in several of its more established

markets. As a result, 2005 capital expenditures are expected to be about $1.7 billion,

reflecting higher reinvestment in existing restaurants.

European Sales

In Europe, full year sales in this segment totaled $6,737 million, an increase of

15% against the previous year’s revenues that were $5,875 million. Europe’s revenues

reflected strong performance in Russia driven by expansion and positive comparable

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