YUM! BRANDS 2015 ANNUAL REPORT 01 DEAR STAKEHOLDERS, 2015 was a landmark year for Yum! Brands. Late in the year we announced our intention to spin-off our China business into an independent, publicly-traded company. Our decision to create two powerful, independent, focused growth companies is a classic example of one plus one being greater than two. Yum! China will be China’s largest independent restaurant company, with no meaningful external debt. New Yum! will be a global, diversified, franchise company with an optimized capital structure. The separation of these two distinctly different businesses will give shareholders the best of both worlds. Yum! China will be a focused China investment with strong national appeal and major growth potential and will target annual ongoing EPS growth of approximately 15%. This company will have tremendous new-unit potential in China’s growing consumer economy and inherent value from improving unit economics. Yum! China will also have a self-sufficient business model, funding all of its capital needs, while having the potential for stock buybacks in year one. New Yum! will be an even more highly franchised company with three leading global brands, leadership in emerging markets, clear average-unit volume and new- unit growth opportunities, less volatile cash and earnings 15 streams, and high shareholder cash returns. New Yum! will % target approximately 15% annual ongoing shareholder ANNUAL ONGOING return, defined as EPS growth plus dividend yield. EPS GROWTH IN CHINA In addition, we intend to return approximately $6.2 billion in capital to our shareholders prior to the completion of the spin-off. This is an incremental return of capital beyond our regularly planned dividend. CONTENTS Needless to say, 2016 will be a transformational year for 02 DEAR STAKEHOLDERS Yum! as we complete this spin-off. The fundamental goal of Yum!, however, is unchanged. We are 100% 04 CHINA DIVISION dedicated to building and strengthening KFC, Pizza Hut and Taco Bell all around the world as strong KFC DIVISION brands are critical to delivering sustained growth 06 and creating long-term shareholder value. 07 PIZZA HUT DIVISION 08 TACO BELL DIVISION $6.2 BILLION 09 HUGE HEART OF INCREMENTAL CAPITAL RETURN PRIOR TO CHINA BUSINESS SPIN-OFF COMPLETION 10 CONCLUSION Please see our Safe Harbor Statement in the back following the Form 10-K. 02 In 2015 EPS excluding Special Items grew to $3.18 per share, or 3%, despite a 7% decline in the first half of the year. With restaurants in over 130 countries and territories we have foreign exchange exposure from the impact of translating our foreign profits from local currencies into U.S. dollars. In 2015 we had six percentage points of foreign currency headwinds. Excluding these currency headwinds full-year EPS grew 9% despite lower than expected sales in our China division. While 2015 EPS was below our initial expectations, I was pleased with the sales momentum we generated across the majority of Yum! in the fourth quarter and look CHIEF EXECUTIVE OFFICER GREG CREED YUM! BRANDS, INC. forward to building on this in 2016. YUM! CHINA NEW YUM! FOCUSED CHINA INVESTMENT FOCUSED, HIGH MARGIN, ONE PLUS GLOBAL FRANCHISE COMPANY STRONG NATIONAL APPEAL ONE IS GREATER MAJOR GLOBAL GROWTH MAJOR GROWTH POTENTIAL THAN TWO TARGET APPROXIMATELY TARGET APPROXIMATELY 15% 15% ANNUAL ONGOING ANNUAL ONGOING EPS GROWTH SHAREHOLDER RETURN For the full year our brand divisions collectively grew operating profit 8% in constant currency, which is in-line with our ongoing growth model target. This was led by 12% operating profit growth at Taco Bell – a remarkable result given the significant investments we made in the fourth quarter to position the brand for continued momentum and category leadership for years to come. Operating profit grew 8% in constant currency in China, with impressive cost management partially offsetting weaker than originally anticipated sales results. In 2015 worldwide system sales grew 5% in constant currency, which included increases of 8% at Taco Bell, 7% at KFC, 2% at Pizza Hut and 2% in China. Same-store sales growth was positive across all three of our brand divisions, with Taco Bell at 5%, KFC at 3% and Pizza Hut at 1%. China’s same-store sales declined 4% in 2015 but we have plans to return both KFC China and Pizza Hut Casual Dining to positive growth in 2016. We opened 2,365 new restaurants globally in 2015. This year we expect to open nearly 2,400 new restaurants, which means we’re opening over 6 new restaurants a day, laying the groundwork for future growth. Given the plans we have laid out for each of the divisions, we’re confident in our ability to deliver 10% operating profit growth in constant currency in 2016, which includes the benefit of a 53rd operating week for part of our brand divisions. 03 In China we opened 743 new restaurants in 2015. Our disciplined approach to development balances our continued, strong belief in China’s long-term growth potential and strong cash paybacks on new restaurants with current market realities. In 2016 we plan to open 600 more restaurants in China. This reflects the opportunities we see across our brands to enter new trade zones and expand our presence in existing ones. Our net-new unit growth in 2016 will be similar to 2015 as we expect fewer closures this year. We expect 2016 to be another year of sequential 743 operating profit improvement with NEW RESTAURANT growth of 10%. OPENINGS IN 2015 KFC CHINA KFC, which represents about 75% of China’s operating profit, grew same-store sales 6% in the fourth quarter, continuing the sequential improvement we saw throughout the year. While same-store sales declined 4% for the year, total system sales in constant currency were even as we added 175 net-new units, surpassing the 5,000 unit mark. KFC has more than twice the number of restaurants of our nearest Western QSR competitor and is in about five times more cities. This beloved brand reported restaurant-level margins of 16%, a full percentage point higher than 2014, despite a decline in same-store sales. These fundamentals demonstrate our progress in productivity initiatives and the tremendous operating leverage the brand should realize as sales continue to improve. We know we still have work to do at KFC and I’m thrilled the KFC BOX MEAL China team is applying global best practices, fresh thinking and new insights to revitalize the brand and achieve traction with consumers. Early test results of proven, global, sales-driving tactics are encouraging and the implementation of these programs should drive transactions and benefit the division later this year. One example is box meals, which have proven successful globally and which we expect to be similarly well received in China. I can assure you we are taking the right steps to grow this business – and the momentum we are seeing makes me confident we will. 04 PIZZA HUT CASUAL DINING CHINA NET-NEW PIZZA HUT CASUAL Pizza Hut Casual Dining, which represents about DINING UNITS IN 2015 25% of China’s operating profit, is the Western Casual 259 Dining category leader with nearly 1,600 restaurants in over 400 cities. This is a lead of around 6:1 over our nearest Western Casual Dining competitor. In 2015 system sales in constant currency grew 10% as we added 259 net-new units, but same-store sales declined 5%. The macroeconomic environment and volatile stock market impacted the casual dining segment and we know we must generate more exciting news and value to counter this headwind. We’ll be more focused on value going forward with workday lunch specials and value pizzas – as well as other initiatives to drive traffic. We have our work cut out for us here, but the China team has a number of strategies and concepts in test that we expect to improve results. We know there PIZZA HUT CASUAL is substantial runway for DINING’S LEAD IN new units and same-store 6:1 sales growth for China’s RESTAURANT COUNT OVER NEAREST leading Western Casual WESTERN CASUAL DINING COMPETITOR Dining brand. 05 NEARLY 15,000 RESTAURANTS WORLDWIDE KFC is a franchise-led, emerging-market powerhouse. MELBOURNE, AUSTRALIA With nearly 15,000 restaurants in 120 countries and territories, the brand generated $16 billion in annual system sales and has grown operating profit over the last three years at a 9% compound annual growth rate in constant currency. I’m thrilled to see KFC’s “Always Original” positioning gaining momentum and being adopted globally, which I believe will lend further strength to the brand. Franchisees opened 85% of our 705 new international restaurants in 2015. Total system sales grew 11% in emerging markets for the year, with particular strength in Russia and Central and Eastern Europe. In fact, Russia has generated system-sales growth of at least 40% in each of the last four years. We have tremendous potential in emerging markets, where we have a significant lead over the competition. I’m also encouraged by our recent performance in developed markets, such as Australia, the U.S., and Japan. International developed markets’ system sales grew 6% in 2015 and U.S. system sales grew 2%. These results reinforce my confidence in the brand’s ability to drive sales going forward. We have an unbelievable ability to generate meaningful growth in mature markets, where we have a long established presence. We are taking our global brand identity and unifying that with local cultural insights to expand and grow our business all around the world. We are 100% focused on our real, authentic and freshly prepared food and merging that with value and innovation to drive results.