Serving the World Yum! Brands

Serving the World Yum! Brands 2008 Corporate Responsibility Report Who We Are We at Yum! Brands are pleased to bring you our first Corporate Responsibility (CR) Report. At Yum! CR is our commitment to people, the environment, and society as a whole. Based in Louisville, Kentucky, Yum! Brands, Inc. is the world’s largest restaurant company, with nearly 36,000 restaurants in more than 110 countries and territories. We’re proud of our consistent record of success: 15 percent Earnings Per Share (EPS) growth last year, the sixth consecutive year in which we exceeded our annual EPS target of at least 10 percent growth; three percent same-store-sales growth worldwide; record cash from operations of over $1.5 billion; and nearly $1.7 billion returned to our shareholders, an all-time high for us. We’re equally proud of the unique culture we’ve built, one that’s filled with energy, opportunity, and fun. We believe in our people, trust in their positive intentions, encourage ideas from everyone, and have actively developed a workforce that is diverse in style and background. Yum! is a place where anyone can, and does, make a difference. Our commitment to our associates goes beyond just growing their professional skills. For many of our team members, working in one of our restaurants is often their first job. So we strive to develop their life skills – foundational abilities such as teamwork, responsibility, problem solving, positive energy, and a relentless drive to serve and satisfy customers – so they can grow to their full capability, be successful in whatever they do, and achieve their dreams. This commitment to people extends to the communities we serve across the world. CR is central to our ability to succeed in the marketplace and to be positive, responsible corporate citizens. Because we’re the largest restaurant company in the world and we’re passionate about helping people better themselves and their communities, we’re determined to address three critical challenges: The health and nutritional needs of our consumers; Feeding the world’s hungry; and Understanding and respecting the sensitive environmental and agricultural resources on which our business depends. In this report, you’ll learn how we are proactively and systematically addressing our Corporate Responsibility today and in the future.

Table of Contents We have organized this report to focus on the following areas

2 From the CEO 8 History and Culture 10 Our CR Methodology

12 Corporate Governance and Ethics Our commitment to operate at the highest standards of ethics

6 1 Public Policy and Government Affairs Our commitment to use our political influence transparently and appropriately

0 2 Associates Our commitment to develop our people and our culture to produce greatness

0 3 Health and Nutrition Our commitment to play a role in the health and wellness of our consumers

38 Environment Our commitment to reduce our impacts on the environment

6 4 Supply Chain Our commitment to the safety, security and sustainability of our products in our supply chain

8 5 Community Our commitment to support the communities in which we live and work

64 The Future Letter from Chief Public Affairs Officer

Letter from the Chairman and Chief Executive Officer Going for Greatness by Serving the World

Dear Stakeholders,

At Yum! Brands, we take very seriously our responsibility to our associates, our customers and the communities in which we do business. We aspire to be the best in the world at building great brands and running great restaurants. And we’re committed to making a positive difference by Serving the World. I’m proud to share with you Yum! Brands’ first Corporate Responsibility Report. Since our founding in 1997, we’ve had a real passion to create greatness – to build a company that could truly earn the right to be called great. The road map we established was the Yum! Dynasty Growth Model, because like all dynasties, we wanted to be admired for our results year after year. And we have made a David C. Novak, tremendous amount of progress. Our vision for Yum! Brands is to be The Defining Chairman and Chief Executive Officer, Global Company That Feeds The World. Yum! Brands, Inc. Our view is that the dynamic nature of societal and environmental changes – some predictable, some not – requires us to anticipate, understand and respond meaningfully. And that makes us stronger and better as a company, and as a responsible citizen of the world community. We are passionate about and focused on providing: Customers with delicious, relevant and safe food choices; Associates with meaningful and productive careers, training, and development opportunities; Franchisees with the opportunity to own and operate their own successful businesses; and Support to the global society with our time, talent and resources through community outreach programs and our global movement to end world hunger – World Hunger Relief. I feel we are uniquely positioned and well prepared to take on the responsibility that comes with leadership. We have the influence, know-how, resources, and global presence needed to serve the world. And we continue to build and strengthen relationships with individuals and organizations worldwide that have knowledge, respect and networks to help us lead the effort. This report is our first attempt to share publicly with our stakeholders – our associates, franchisees, customers, investors and those otherwise interested in the future of our business – our commitment to Serving the World. It’s the start of an ongoing, Our view is that the dynamic nature of exciting journey we look forward to sharing societal and environmental changes – with you. some predictable, some not – requires Yum! to you, us to anticipate, understand and respond meaningfully. David C. Novak Chairman and Chief Executive Officer

2 Going for Greatness by Serving the World

3 Yum! Brands – More Than 110 Countries and Territories Around the World

Serving the World Yum! Brands is the world’s largest restaurant company with nearly 36,000 restaurants in over 110 countries and territories and more than 1.4 million associates. Our global business consists of three segments, or reporting groups – the United States, the International Division (known as Yum! Restaurants International or YRI), and the China Division (known as Yum! China Division or Yum! Restaurants China). YRI is segmented into 14 business units, including: Asia; Canada; Caribbean and Latin America; Europe; France; Germany/Netherlands; India, Yum! Brands Korea; Mexico; Middle East, North Africa, Pakistan and Turkey; Global Presence South Africa; South Pacific; United Kingdom – KFC; and United Kingdom – Pizza Hut. Yum! China includes mainland China, Thailand and KFC Taiwan.

4 Yum! Brands – More Than 110 Countries and Territories Around the World Yum! Locations Yum! Locations

United States International Division China Division KFC – 5,358 KFC – 2,244 KFC – 2,592 Pizza Hut – 7,515 Pizza Hut – 1,148 Pizza Hut – 480 Taco Bell – 5,580 Taco Bell – 65 Taco Bell – 2 Long John Silver’s – 1,081 Long John Silver’s – 35 Total Number of Units 3,086* A&W – 371 A&W – 250 * includes 12 East Dawning units Total Number of Units 19,905 Total Number of Units 12,354 All restaurant counts are as of December 29, 2007

5 Yum! Brands Business Model

Brand Brand Overview

KFC Corporation, based in Louisville, Kentucky, is one of the few brands in America that can boast about having a rich, 55-year history of success and innovation. In fact, KFC is the world’s most popular chicken restaurant chain, specializing in Original Recipe®, Extra Crispy™, Colonel’s Crispy Strips® and Honey BBQ Wings®, with home-style sides and freshly made chicken sandwiches. Since its founding by Colonel Harland Sanders in 1952, KFC has been serving customers delicious, already prepared complete family meals at affordable prices. There are over 14,000 KFC outlets in 105 countries and territories around the world.

Pizza Hut, Inc., based in Dallas, Texas, is the world’s largest pizza restaurant company, specializing in Pan Pizza, Thin ‘N Crispy® Pizza, Hand-Tossed Style Pizza and Stuffed Crust Pizza. With more than 7,500 restaurants in the United States and over 5,300 restaurants in 97 countries and territories around the world, Pizza Hut is known as America’s Favorite Pizza. And soon the company will be America’s Favorite Chicken Wing and America’s Favorite Pasta providers. WingStreet, a subsidiary of Yum! Brands, Inc. and the largest delivery wing chain with more than 1,000 locations, is constantly expanding its presence within Pizza Hut restaurants across the U.S. with its delicious wings and blue-ribbon winning sauces. In addition, Pizza Hut has created a whole new Quick Service Restaurant (QSR) category – restaurant-quality Home Meal Replacement pasta – with the launch of Tuscani Pasta earlier this year.

Taco Bell Corp., based in Irvine, California, is the nation’s leading Mexican-style QSR chain serving tacos, burritos, signature quesadillas, Border Bowls®, nachos and other specialty items. Today, Taco Bell serves more than 35 million consumers each week in more than 5,500 restaurants in the U.S. Since its founding by Glen Bell in 1962, the company’s countless innovations have changed the very nature of the QSR industry. From revolutionizing new kitchen preparation systems and supply chain management processes to establishing its Value Leadership, Taco Bell has kept alive Glen’s pioneering spirit. “Think Outside the Bun®” is more than a company tagline; it’s a way of life at Taco Bell.

Long John Silver’s, Inc., based in Louisville, Kentucky, is the world’s most popular QSR seafood chain, specializing in delicious, signature batter-dipped fish, chicken, shrimp and hushpuppies. Since 1969, the company has been bringing families together with traditional seafood items, new products such as Buttered Lobster Bites, and Freshside Grille offerings, which include Pacific Grilled Salmon, Grilled Tilapia, and Shrimp Scampi. Today, there are more than 1,100 Long John Silver’s® restaurants worldwide, and over 400 additional points of distribution in multibrand restaurants.

A&W® All American Food®, based in Louisville, Kentucky, is the longest- running QSR franchise chain in America, serving hometown favorites to friends and families for over 90 years. Since 1919, A&W All-American Food has offered its iconic, frosty mug root beer float with All-American pure- beef hamburgers and hot dogs. There are approximately 400 A&W All- American Food outlets in the U.S., more than 240 in 11 other countries, and 640 additional points of distribution in multibrand restaurants.

6 Business Model

Sales (2007) (in billions) Restaurant Locations (2007) Units (2007)

US US Company sales $ 1.2 Company 971 Franchisee sales(a) 4.1 2,592 China Franchisee(b) 4,387 International International 5,358 US Company sales $ 1.3 Company 750 Franchisee sales(a) 6.7 Franchisee(b) 6,192 6,942 China International China Company sales $ 1.7 Company 1,618 Franchisee sales(a) 1.1 Franchisee(b) 974

US US Company 1,292 Company sales $ 1.3 480 China Franchisee sales(a) 4.1 Franchisee(b) 6,223 International 7,515 US International Company sales $ 1.2 Company 891 Franchisee sales(a) 3.0 Franchisee(b) 3,991 4,882 China International China Company sales $ 0.4 Company 455 Franchisee sales(a) – Franchisee(b) 25

US US Company sales $ 1.7 2 China Company 1,301 (a) Franchisee(b) 4,279 Franchisee sales 4.4 238 International International International Company sales $ – Company 1 (a) Franchisee(b) 237 Franchisee sales 0.2 5,580 US China China Company sales $ – Company 2 Franchisee sales(a) – Franchisee(b) –

US US Company 328 Company sales $ 0.3 38 (a) (b) Franchisee sales 0.5 International Franchisee 753 International International Company sales $ – 1,081 US Company – Franchisee sales(a) – Franchisee(b) 38 China China Company sales $ – Company – Franchisee sales(a) – Franchisee(b) –

US US Company sales $ – Company 4 Franchisee sales(a) 0.2 Franchisee(b) 367 254 International International International Company sales $ – Company – (b) Franchisee sales(a) 0.1 371 US Franchisee 254 China China Company sales $ – Company – Franchisee sales(a) – Franchisee(b) –

(a) Franchisee sales represents the combined estimated sales of unconsolidated affiliate and franchise and license restaurants. Franchisee sales, which are not included in our Company sales, generate franchise and license fees (typically at rates between 4% and 6%) that are included in our revenues. (b) Franchisee represents the combined units of unconsolidated affiliates and franchise and license restaurants. As of December 29, 2007 7 Our History and Culture In October 1997, Yum! Brands was spun off from PepsiCo as Tricon Global Restaurants, Inc. At that moment we established a singular goal from which we’ve never wavered: To be the best in the world at building great brands and running great restaurants.

8 Our History and Culture Over the past 11 years, our success one we call the Yum! Dynasty Growth has been driven by our focus on Model, because dynasties endure and building leading brands in China lead through the generations. in every significant category; We believe that our customers’ driving aggressive, international experience will never exceed that of expansion and building strong brands our team members. For that reason, everywhere; dramatically improving our Dynasty Model starts with our U.S. brand positions, consistency and people. We know that people don’t returns; driving industry-leading, just play a role in our success – they long-term shareholder and franchisee are the reason for our success. value; and building a unique, fun Our corporate values – what we culture led by people who love call our How We Win Together the restaurant business. Along the Principles – are built around a “People way, we also broadened our focus Capability First” philosophy and lay beyond our restaurants to important the groundwork for the way we team emerging issues of our global society together every day. such as our impact on people, communities and the environment. These Principles and our Dynasty Growth Model help guide and drive From the very beginning, we had a our CR work as well. passion to create a company that would truly be great and lasting. We turned our passion into a roadmap,

9 Our CR Methodology Our approach to CR is dynamic, global in focus, yet always rooted in a People-First philosophy. We have worked diligently to understand the many CR opportunities we have worldwide, and to develop a strategy and structure to address challenges and serve the world.

10 Our Methodology CR Strategy. Our ability to make a positive difference in the lives of Key Stakeholders in the Yum! Family people throughout the world is Many of the important decisions and actions related to CR are made and taken virtually unlimited, and it starts with by our key stakeholders, outside of the immediate control of the company, a clear focus and commitment to but within our system. Our franchisees are our most important partners in the getting better. We have chosen to implementation of practices regarding associates, sourcing and community impact. leverage our clear strengths: our expertise – we like to call it know- Our existing structure for engaging this important group includes: how – and our people. Unified Foodservice Purchasing Co-op (UFPC) Board of Directors We believe that our strongest impact Brand Franchise Associations/Board of Directors and contribution to sustainability Over the past 11 years we have built strong relationships with franchise owners lies in the critical parts of our and leaders, who inform and challenge us. We are now expanding the team of business – feeding people, health stakeholders to include those with important perspectives in the areas related to and nutrition, the environment, our most important CR impacts and we intend to share our progress with these community development, diversity key stakeholders: improvements, animal welfare and our supply chain. These Hunger Relief Community Development are the areas in which we are Health and Nutrition Diversity Outreach concentrating our efforts. We are The Environment and Improvements also driving stakeholder engagement, (e.g., energy use, climate impact, Animal Welfare systematically involving key internal waste and packaging) and external stakeholders to support Supply Chain Innovation and execute our CR initiatives. Our and Management next step is to put a more methodical process in place to engage a wider range of stakeholders as we measure and execute our CR plans. adaptation to fit diverse cultural contexts and needs. About This Report We will direct our tactical efforts To define the scope of our first We engaged a number of internal in four ways: raising awareness of Corporate Responsibility (CR) report, and external stakeholders along the key challenges; formal programs we examined the key areas of impact way and now plan to put a more and initiatives to address pressing of our global business operations and systematic process in place to engage where we have the strongest ability to issues; encouraging and supporting additional stakeholders as we manage play a role. volunteerism: and leading fundraising CR’s impact and opportunities. efforts wherever needed. Establishing this structure is an Our objectives for this Report, which Structure. We’ve built an integrated, important first step. We will continue can be found at www.yum.com/ executive-level structure and process to refine it, as well as the ways in responsibility/ are fourfold: to assess, guide and oversee our which we measure progress against 1. To publicly reinforce our global worldwide CR activities. This ensures our objectives, to enhance our CR commitment to Corporate consistency in global CR standards capabilities and effectiveness. Responsibility; and activities while allowing for local 2. To report on our performance to date; CSR Organizational Structure 3. To identify our future CR direction and goals; and

Chairman and 4. To engage in constructive dialogue Board of Chief Executive with our stakeholders. Directors Officer Our company has a large global footprint thatChief continues Public to grow. We are excitedAffairs about Officer our business Division Chief Operating Chief Financial Chief Public Chief People Chief Legal and Development Officer Affairs Officer Presidents Officer Officer opportunities as we expand. At Officer the same time we understand that we have a duty to improve society and a responsibility to be a good Brand Division Senior Director Government Community Community System environmental steward. Public Affairs Corporate Social Affairs Affairs Diversity Communications Responsibility Through this report we will engage internal and external stakeholders for their perspectives on our CR efforts Environmental CSR and impact. These discussions will help Leadership Council Consultants shape our actions and communications.

11 the ing Wo rv rl e d

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Yum! Brands, Inc. 1441 Gardiner Lane Louisville, KY 40213 www.yum.com Corporate Governance and Ethics

The business and affairs of Yum! Brands are managed under the direction of the Board of Directors. The Board believes that good corporate governance and high ethical standards are critical factors in achieving business success and in fulfilling the Board’s responsibilities to shareholders.

12 The Board recognizes that its practices Compensation and Nominating and Corporate Governance and Ethics align management and shareholder Governance Committees conduct interests: Board composition, similar self evaluations on an independence, and diversity; corporate annual basis. governance principles; executive compensation; ethics and compliance, Board Diversity and a worldwide code of conduct. A diverse range of experiences and perspectives among our directors Board Composition ensures the success of the Board & Independence in overseeing our complex, varied Our Board of Directors is led by Yum! businesses. It also enhances long-term Brands CEO and Chairman, David shareholder value. Novak. Among the 13 directors on the Board, 10 are independent directors When recruiting new directors, (based on New York Stock Exchange we look for leaders from different rules for director independence). The backgrounds that combine a three non-independent directors are broad spectrum of experience and David Novak, CEO and Chairman; expertise with a reputation for Jing-Shyh S. (Sam) Su, President of integrity. For complete selection Yum! Brands China Division; and criteria and policies, please see our Jackie Trujillo, Chairman Emeritus of Corporate Governance Principles at the Board of Harman Management www.yum.com/governance/principles.asp. Corporation, one of KFC’s largest franchisees. We’re proud of the diversity of our Board. As of this writing, two women To view detailed profiles of our (Bonnie G. Hill and Jackie Trujillo) directors, please visit our website at and three minorities (Ms. Hill, Robert www.yum.com/investors/bod.asp. Holland, Jr. and Jing-Shyh S. (Sam) Su) The Board of Directors has established serve on our Board of Directors. four committees. Ms. Hill is President of B. Hill Enterprises Audit Committee LLC, a consulting company. She was first elected to our Board in 2003. Compensation Committee Mr. Holland has maintained a Nominating and Governance consulting practice for strategic Committee development assistance to senior Executive/Finance Committee management of Fortune 500 companies since 2001. From 2005 to Only independent directors serve 2007, he was a member of Cordova, on the Audit, Compensation, and Nominating and Governance Smart and Williams, LLC, an investment Committees in accordance with our fund manager, and a limited partner of Corporate Governance Principles. The Williams Capital Partners Advisors, LP, Executive/Finance Committee includes a private equity investment firm. He CEO and Chairman David Novak, along was first elected to our Board in 1997. with independent directors J. David Mr. Su, a Taiwanese national and Grissom and Kenneth G. Langone. Chinese citizen, serves as Vice Chairman of the Board and is To ensure continued strong performance, the Board has instituted President of Yum! Brands China an annual, self-evaluation process led Division. He was first elected to our by the Nominating and Governance Board in 2008. The balance of our Committee. This assessment focuses Board includes David W. Dorman, on the Board’s contribution to the Massimo Ferragamo, J. David Grissom, Company and emphasizes those Kenneth G. Langone, Jonathan S. Linen, areas in which a better contribution Thomas C. Nelson, David C. Novak, could be made. In addition, our Audit, Thomas M. Ryan, and Robert D. Walter.

13 Corporate Governance annually in our proxy statement which Principles can be found at www.yum.com/ Adopted in 2001 and amended in 2007 investors/proxy.asp. and 2008, our Corporate Governance Executive Compensation Principles of the Board of Directors, Yum! Brands’ executive compensation along with the Company’s articles and programs, overseen by the bylaws, committee charters and the Compensation Committee of the Worldwide Code of Conduct, provide Board (www.yum.com/governance/ the framework for Yum! Brands, Inc. committee.asp), are designed to governance. The Principles set out attract and retain highly qualified guidelines to inform all aspects of leaders through competitive Board operations, including: compensation and benefit programs, Board Membership and Director to reward our associates for personal Qualifications contributions that grow the business, Director Independence and to maximize shareholder returns through pay-for-performance Board Performance and programs. Reviewed annually by the Compensation Committee, the program’s intent is to: Board Conduct Reward performance and avoid Board Committees entitlement; Role of the Chairman Pay our Restaurant General The Principles included a ”majority Managers and executives like voting” policy requiring any director owners; who received a greater number of Design pay programs at all levels votes “withheld” from his or her that align team and individual election than votes “for” his or her performance, customer satisfaction election to promptly tender his or her and shareholder return; and resignation from the Board. Emphasize long-term incentive The Board reviews the Principles compensation. and other aspects of governance annually or more often, if necessary. To strengthen the alignment between The full text of the Corporate management and shareholder Governance Principles can be found at interests, the Compensation www.yum.com/governance/principles. Committee has adopted formal asp. These Principles are discussed stock-ownership guidelines, which

14 set minimum expectations for To ensure compliance, we have Corporate Governance and Ethics executive and senior management developed a comprehensive program ownership of Yum! stock. We have based on regular self-certification created an ownership culture in which and continuing compliance training. our officers, executives and senior Our Board of Directors and our most managers hold Yum! stock well in senior Company associates are also excess of the guidelines. required to complete a conflict of A table detailing total compensation interest questionnaire annually and and stock-based awards paid, earned certify in writing that they have read or awarded for fiscal year 2007 to and understand the Code of Conduct. our CEO and four other most highly compensated executive officers can be We also know that, in any found in our 2007 Proxy Statement at organization, raising an ethics www.yum.com/investors/proxy.asp. concern – especially about a Ethics & Compliance superior – can be difficult. So we have set up a system for associates to raise Yum! Brands’ success is built on the integrity and high ethical standards concerns through a safe, anonymous of our associates. Our ethics and process. Using independent third compliance program, based on our parties, The Network, Inc., Deloitte Worldwide Code of Conduct, ensures Consulting, LLP and Employee the highest ethical standards in all of Relations Strategies, Inc., we have our operations around the globe. opened local ethics hotlines in the Worldwide Code of Conduct U.S. and 19 countries that comprise Yum!’s Worldwide Code of Conduct, our major markets. Our associates adopted in 1997, is more than a can use these hotlines 24 hours-a- document – it is the foundation for day to anonymously raise a concern the way we conduct ourselves and do about possible Code violations or business throughout the world. It calls other ethical conflicts not covered for the highest standards of ethical by the Code. After a call, the behavior from our Board members and independent third party relays the one million-plus associates, and covers information to our management to a variety of critical issues, including: investigate the concern. Product Quality and Food Safety The Audit Committee of our Board Relationship with Franchisees has established additional procedures for complaints and concerns of Employee Relations associates regarding accounting Relationships with Customers, and auditing matters, including Suppliers and Competitors the confidential or anonymous Gifts and Entertainment submission of such complaints or Safety and Environmental Protection concerns. More details on these procedures can be found at www. Political and Community Activities yum.com/governance/complaint.asp. and Contributions Substance Abuse Conflicts of Interest Looking to Bribery and Corruption the Future Insider Trading and Proprietary Information We continually seek to strengthen our ethics program. We began Accounts, Record Keeping and using electronic compliance training Disclosure of Financial Information methods for all of our associates The Code is published in English, working above the restaurant level Spanish, Chinese and Korean. It in 2007, and we will add new, related can be found at www.yum.com/ courses on an ongoing basis. governance/conduct.asp.

15 Public Policy and Government Affairs

We operate in a complex and dynamic public policy environment. To influence this environment, we conduct direct and indirect advocacy efforts with policymakers at national, state and local levels, both in the United States as well as in our international markets. We participate in many other ways, including through an associate Political Action Committee, and via our membership in several international, national and regional restaurant and retail associations. 16 Public Policy and Government Affairs Key Areas of Importance encouraging them to adopt balanced, Our goal is to educate legislators and healthy lifestyles. We support policies policymakers about our business and that limit restrictions on consumer the issues that are important to us choice and we work with governments, and our franchisees. In pursuit of an industry associations, and others to environment where our restaurants, promote an environment that fosters franchisees, associates, and the freedom of choice and innovation. communities we serve can thrive, we focus our public policy efforts We have partnered with the U.S. and governmental partnerships government and dozens of leading on associate benefits, health and U.S. food corporations on an initiative – nutrition, tax policy, and trade policy. the United States Department of Agriculture (USDA) MyPyramid Associate Benefits Corporate Challenge – to help stem the Our associates are our company’s tide of increasing weight and obesity most important resource. And in among America’s young people. As the highly competitive environment a charter member of the Corporate in which we operate, we know Challenge, we have committed to that our success depends on our incorporating MyPyramid educational ability to attract and retain a information in our in-restaurant diverse, empowered workforce. We marketing materials. support public policies that foster a business climate that is conducive to Our U.S. divisions of KFC, Taco Bell, continuing our employment practices. Pizza Hut, Long John Silver’s and A&W will become the first national We participate in the U.S. Department restaurant chains to begin voluntarily of Labor’s Work Opportunity Tax placing individual serving size calorie Credit (WOTC) program. We hire and information on their respective menu train workers who are economically boards in company-owned restaurants and physically disadvantaged, and nationwide by January 1, 2011. we receive a tax credit for doing Franchisees are encouraged to provide so. We use the program to provide the same information on their menu thousands of first-time jobs to boards. We are also calling on the U.S. individuals around the country, Congress to enact federal pre-emptive many of whom were previously on legislation that would create uniform public assistance. Through the WOTC menu board guidelines for all who sell program, we are able to provide prepared food, providing a consistent valuable job training and skills to help way to educate the public about the them become productive members of nutritional value of the food they eat. the workforce. We have consistently advocated in Washington to have the Tax Policy WOTC program made a permanent We work to maintain tax policies at part of the U.S. tax code, and to the international, federal and state simplify it to make it more user- levels that foster competitiveness, friendly for small employers such as productivity and fairness, while our franchisees. ensuring an appropriate tax level for the corporation. Health and Nutrition We have implemented a set of global Trade Policy nutrition guidelines that defines our We support trade policies, including proactive efforts to improve the bilateral and multilateral trade nutrition profile of the foods we offer, agreements, which allow for the while continuing to provide great free movement of commodities taste, value, and convenience across among international markets to our markets. We are also committed provide access to the highest quality to educating our consumers and ingredients at the lowest price. 17 Our Associates’ Voice – Contributions from the PAC during the The Yum! Brands Good 2006 election cycle totaled $67,250 in support of the U.S. Presidential Government Fund elections and other races. The PAC is We established an associate Political projected to spend the same amount Action Committee (PAC) that supports or slightly less during the 2008 candidates for political office in the election cycle. U.S. whose positions align with our In addition to an annual audit by business strategies. The PAC is non- Comerica Bank, our PAC is audited partisan and supports candidates regularly by our internal audit team from both major political parties. and is in compliance with all U.S. Our associate PAC is dedicated to the federal and state regulations. Our election of pro-business candidates annual PAC report is provided to at the federal, state, and local levels donors and interested parties at of government. We follow the www.fec.gov/finance/disclosure/ general guidelines of supporting srssea.shtml. the preservation and growth of the Trade associations enable us to join private enterprise system; electing together with other companies in our candidates on a non-partisan basis, industry to address common interests using business-related issues as the and issues. The associations act as a key benchmark; and emphasizing public advocate with the press and political races in areas where our elected officials, develop research associates live and work. on relevant issues, and coordinate In 2006, the PAC doubled its joint efforts to address issues and contributions to $67,250.00 due to opportunities within the restaurant, the fact that it was an election year. retail and food industries.

18 Public Policy and Government Affairs Our Memberships Our primary method of engagement in the public policy arena is through our membership in many U.S. and international trade associations, including:

European Modern Restaurant NFI National Fisheries Institute Association (EMRA) (NFI) Food Processors Association/ World Federation of Grocery Manufacturers Advertisers (WFA) Association (FPA/GMA) Various U.S. state retail and Food Packaging Association (FPA) restaurant associations International Franchise China Chain Stores and Franchise Association (IFA) Association (Yum! China) National Council of Chain China Cuisine Association Restaurants (NCCR) (Yum! China) National Restaurant Association China Association of Enterprises (NRA) with Foreign Investment (Yum! China)

Looking to the Future We will continue to engage in an ethical and legal manner with government officials in the U.S. and all other locations in which we do business. We will continue to participate in governmental programs that benefit our associates, franchisees and our customers, and look forward to having the breadth and depth of positive impact only a company with our size and influence can have.

19 Our Associates Our How We Win Together Principles (HWWT2) guide all aspects of our associates’ daily work lives, professional and personal development and customer interactions. “Believe in All People” is the first of our HWWT2 principles because we believe everyone has the potential to make a difference.

20 Our Associates We know our greatest competitive restaurants achieved an: strengths are our culture and our 80 percent internal promotion rate for more than 1.4 million associates in Restaurant General Managers (RGMs), our restaurants and our Restaurant and an Support Centers worldwide. We also recognize that for many of them, 87 percent internal promotion rate for working in one of our restaurants is Shift Managers. often their first job. This puts us in a unique position to help our people start Developing Our Talent their careers and develop their skills. Within the Yum! System We take this responsibility seriously. Our diversified, decentralized operations We are dedicated to teaching our in over 110 countries and territories front-line team members the life skills demand an approach to developing they need to be successful in whatever talent that is customized and highly they do – from getting to work on interactive. We strive to create programs time, teamwork and accountability to across the world that unlock individual listening to our customers, and learning talent and foster both business and how to resolve issues and recover when personal growth. mistakes are made. Yum! University (YU) is a worldwide Our business is diverse and complex. learning and development platform that Over 80 percent of our restaurants offers courses and workshops designed are owned by franchisees or licensees. to teach the skills and behaviors that In our company-owned restaurants continue to build the capability of and Restaurant Support Centers, we above-restaurant leaders – franchise and directly employ only about 25 percent company, field and RSC-based – around of the total number of Yum! associates. the world. Our classrooms are a forum For that reason, we cannot oversee where we can build new skills, share best associate practices in all of our nearly practices, develop relationships, and 36,000 restaurants. We do, however, provide guidelines, coaching and learn together in a “one system” way – training to encourage our franchisees across all brands and geographies. and licensees to implement and Our curriculum is centered on three core manage best practices in accordance categories: with our corporate goals and objectives. 1. Functional Excellence; The strength of our culture and 2. Leadership and Management commitment to associate growth is measured regularly. For example, Excellence; and in 2008 our U.S. company-owned 3. Personal Excellence.

At Yum! we believe that our culture is our biggest competitive advantage. We have built a people- focused culture that is second-to-none, where everyone makes a difference, and everyone at every level has the responsibility of ‘walking the talk’ of our How We Win Together leadership principles. Each of us takes accountability for making a positive difference in our business and work environment. When we do the right things, the right things happen.

Anne Byerlein Yum! Chief People Officer 21 Within each of these areas of Training Our Associates to be excellence, we have developed skill- Customer Maniacs building workshops and programs that We invest in delivering superior customer are adaptable to local needs. service and satisfaction, which we refer to Yum! University offers Automated as Customer Mania, in all our restaurants. Degree Planning (AutoDP) as part of We train our more than 1.4 million our ongoing commitment to building company and franchise associates around people capability and executing our the globe to become Customer Maniacs, education and training solutions. empowered to do whatever they can This service enables our associates to serve and satisfy our customers. This and franchisees to apply for college makes business sense and helps our credit for attending select Yum! associates to build relevant business and The single most customer-interaction skills. training programs and YU courses. important thing we The AutoDP service is provided by the Our focus on Customer Mania starts with can do every day Virtual Counseling Center (VCC), an our hiring philosophy – to take what independent company that has been our company stands for and use that is hire, retain and authorized by Yum! to assist corporate, to find the kind of people who have a franchise and joint-venture associates strong chance of being happy, productive develop the right by guiding them to accredited degree and successful working here. Because people, with diverse programs delivered at a distance. we have a consistent set of values, a Through the VCC staff, they can create well-defined and unique culture, and a backgrounds and individualized degree plans from clear mission for our business, we have styles, who have the colleges and universities offering cost- the understanding and tools to make effective programs of study which this philosophy work well. We call this maximize the application of all credit “Smart with Heart,” and we use it to hire ability and attitude for every position within our system – previously earned. to be Customer hourly team members in our restaurants We want to make education and career and accountants alike. Some of the Maniacs. development accessible to as many of underlying principles of Smart with Heart our associates as possible. In the U.S., include hiring people who: David Novak, we provide salaried associates with Can inspire rather than manage; Chairman and CEO tuition reimbursement for qualified of Yum! Brands undergraduate and graduate courses Are engaged rather than compliant; taken toward a job-related degree Will enable their teams rather than program at any accredited college or muscle them; university, up to a maximum of $4,000 Are connected rather than indifferent; per calendar year for certain graduate and and undergraduate courses. We also award over $500,000 in scholarships View Customer Mania as a passion, annually through our Andy Pearson not a chore. Scholarship Program, established in Leadership Development memory of our founding Chairman. Since implementing the program in focused on “Achieving 2003, we have awarded over 1,000 Breakthrough Results” scholarships to associates and their A new, high-impact leadership and legal dependents. action-planning training program – Achieving Breakthrough Results (ABR) Sixty-three percent of annual – is being offered by Yum! University. scholarships given to our associates or The objective of ABR is to provide the children of associates through the fund personal training and tools for individuals goes to students of color; 36 percent to raise the bar on their performance goes to female students. and achieve breakthrough results in As we continue to grow and drive and outside the workplace. The new international expansion, learning and program was introduced to our senior mastering a second language can offer leadership in late 2007. We are now in more opportunity globally. Full- and the process of rolling out the program to part-time associates receive up to all our franchisees and associates across $1,000 reimbursement for job-related the world, including Restaurant General language training or English as a Managers (RGMs), by 2009. Second Language classes, books, In ABR we begin by asking ourselves, or materials. “What can I do now to get breakthrough 22 results in my piece of Yum!?” This In France, team members receive Our Associates determined attitude, which we call 24 hours per year in training, while “intentionality,” drives step-change managers participate in 150 hours of thinking. We imagine how big training per year. something can be and work “future- Career Development back”: setting a vision for success, We offer a Career Development Program then working backward to develop the for all associates in which participants strategies and actions to achieve it, and get a deeper insight into their career always doing so with positive energy goals, develop their “personal brand,” and personal accountability. and learn how to relate their values and goals to the organization. Timing After completing the initial workshop, is key to making this intensive program associates and franchisees are provided effective. It is delivered during our with four weeks of targeted coaching mid-year process, when all above- to help “make it stick” – integrating the restaurant associates have individual concepts, tools and skills they learned development and career discussions into their day-to-day behavior. with their supervisors. These discussions start with a 360-degree feedback survey The program has been very well and culminate in an individualized received. We will continue to reinforce development and career plan. Offering the tools and behaviors of ABR so it the Career Development Program at becomes our way of doing business, and the same time enhances the quality and sets us up to win in our second decade depth of the planning process. as a company. Coaching and Mentoring Training results We have formal and informal mentoring We seek to maximize training and programs across Yum! Two years ago we development opportunities for our initiated Mentorlink, an online tool that associates wherever we operate. We’ve uses personality profiles, career goals made significant progress across our and professional experience to bring our global markets, for example: associates into a mentoring relationship to build professional and personal skills. In China, 98 percent of our more than To date, over 400 associates have taken 3,300 associates in the Restaurant advantage of this program and our goal Support Center participated in our is to make this available to all associates internal training program in 2007. In around the world. total, 3,230 associates received 26,300 In China, we have developed a hours of corporate training, an average mentoring program that enables our of eight hours per associate. senior associates to guide, coach and support high-potential associates in In Australia, our training program order to develop and retain them. qualifies Yum! as a Registered Training As a result, our operations staff in China, Organization. This certification which represents about 90 percent of recognizes our high training standards our entire China-based team, has been and allows us to assess associate entirely developed and promoted skills and competencies in line with from within. the government’s TAFE (Technical and Further Education College) standards. Associates who participate By the end of 2008, the concepts and tools are awarded with TAFE Certificates and Diplomas. The number of hours underlying the ABR approach are indistinguishable an associate spends training each from the everyday language and behavior of Yum! year depends on his or her role and experience, ranging from two to Managers. Everyone is speaking the language, 25 percent of his or her time. using the tools, and achieving breakthrough In Mexico, our associates participate in 65 – 130 hours of training per results in every part of Yum!. year, depending on their roles Tim Galbraith, Yum! VP of People Development and positions. on ABR Vision 23 Investing in Learning At the restaurant-associate level, the Technologies programs are available to our full-and part-time associates. As our associates Over the next few years, we expect to grow with the company – from significantly reduce the paper-intensive team member to restaurant general training system currently used in manager – so do their rewards. Our our restaurants. We are rolling out franchise owners develop and execute technology-based, distance-learning their own associate-rewards programs. methods such as self-paced online instruction and virtual classroom Our compensation rewards include sessions, as well as social networks that competitive base pay, short-term will enable more informal learning and bonuses to recognize immediate results sharing of best practices. In addition, and long-term incentives to build wealth we plan to eliminate our paper-based and retention. For example, in the U.S. standards manuals (as large as 3,100 and in some of our larger international pages per restaurant) as all of our markets such as Australia, our restaurant brand restaurants come online. We managers receive YUMBUCKS stock are implementing these learning appreciation rights, which allow them technologies into our restaurants across to share in the financial success of the our entire global restaurant system company. Grants are given to new between now and 2012. restaurant leaders on an annual basis to demonstrate our commitment to Providing Total Rewards to them as well as to existing leaders Yum! Associates in recognition of achieving positive We provide a comprehensive, total- restaurant performance. By making each rewards package that helps us attract, restaurant manager an owner of the retain and reward talented Customer company, we offer them a stake in the Maniacs all around the world. Our company’s overall results, as well as his programs are designed to: or her own restaurant’s performance. Reward individuals and our teams for Our benefits packages are designed driving great business results; with the understanding that each of our associates is an individual with different Support our associates in caring for needs and goals. Frequently offered their health and preparing for their benefit programs include: future; and A variety of healthcare programs that Provide opportunities for personal allows the associate to choose the and professional growth and option that best fits his or her needs; development. Life insurance designed to protect our associates and their families in the event of an unexpected loss; Retirement benefits designed to allow our associates the opportunity to provide for their future financial security; Education benefits such as language reimbursement and scholarships to deliver on the promise of building people capability; Assistance programs to help support our associates in managing the demands of their daily work and home life; and Discounts for child care and auto purchases, using the company’s buying power on behalf of associates. We believe that we provide a rewarding workplace and working conditions, and that our compensation policies compare favorably with those of our principal competitors. The majority

24 Our Associates of our restaurant associates are paid The senior leadership teams from on an hourly basis and work on a each brand and international division part-time basis. In support of this, conduct regular roundtables, many of our benefits for entry-level team meetings, focus groups and associates are available within 60 days conference calls. Chairman and CEO of employment without requiring a David Novak has quarterly “Talk to certain number of hours worked. We do David” conference calls that any have some variations in our benefits and global associate or franchisee can compensation packages depending on call into, toll free, for updates about the nature of the associate’s employment. our business, to ask questions or provide feedback and ideas. David For more information about the also has a global internal blog where range of compensation and benefits he shares his personal thoughts on available to our associates, please visit the business and seeks ideas and www.yumsuccess.com/benefits.html. thoughts from others on the team on How We Engage a frequent basis. With our Associates We also want to learn as much as we can from our associates about what Everyone in our Restaurant Support we are doing well and where there is Centers and restaurants is committed room to improve. We have a People to sharing information about our Development team that regularly business with one another. Our goal is surveys associates to get formalized to make our big company feel small. feedback on such things as associate We actively encourage open dialogue satisfaction, benefits, operations across the whole organization. We procedures, and process improvements. place an intentional focus on face-to- These surveys are conducted via phone, face communication, especially in our intranet and focus groups. In addition restaurants. Our corporate operational to these ongoing surveys, two formal and management teams seek continuous surveys exist. feedback from our restaurant owners. 1. The Founders Survey is conducted Finally, we ensure open dialogue once a year and is distributed to all between our senior leadership team of our associates worldwide. The and all associates through multiple survey measures their satisfaction communication channels. A few of the in areas such as communication and ways in which we achieve this level of accessibility of senior leadership, work/ engagement includes: life balance, personal and professional Operations teams spend a considerable development opportunities, amount of time in our restaurants: a compensation and benefits, and minimum of 80 percent of their time overall job satisfaction. The 2007 is spent in the restaurants, not in an results confirm that our associates office. This means that each member of are generally proud to be employed the Operations team talks monthly to by us and feel their work contributes associates about their work, lives and to the overall success of our business. the business. Responses also indicate that we can make improvements in terms of The Yum! and Brand/International compensation and benefits. While we Executive Teams also spend significant rank well in wages and benefits on amounts of time in the restaurants an industry average, we continue to observing and speaking directly with work with our leaders to ensure that customers about their perspectives. we are rewarding and recognizing our They have roundtables with the associates appropriately, especially our Restaurant General Managers to talk top-performers. about our business and get their ideas 2. A weekly CHAMPS (Cleanliness. about how to make it better. These Hospitality. Accuracy. Maintenance. discussions often lead to improvements Product Quality. Speed of Service) in associate programs and operations survey is used by restaurant teams procedures, as well as new product to gauge associate satisfaction with innovations. They also listen in on toll- operations procedures, working free customer calls to keep their fingers conditions, support provided by on the pulse of what our customers our Restaurant Support Centers and are saying. general feedback. 25 Our commitment to consistent, open recognition awards, which has resulted and accessible communications allows in such highly prestigious honors as the us to keep each and every one of our “Big Cheese” hat recognition at Pizza Hut, associates informed of, and engaged in, the “Warp Speed” award at KFC, “Sauce our business. Packet” at Taco Bell, and the “Big Leap Recognize! Recognize! Award” at Yum! Restaurants International. Recognize! Each year, the top-performing Recognition is an integral part of our Restaurant General Managers (RGMs), culture and linked to the values of our Above-Restaurant Leaders and organization – we celebrate things big Franchisees at each brand are invited and small. In fact, “We love celebrating to join Senior Leadership for premier the achievement of others and have recognition and rewards celebrations. lots of fun doing it!” is one of our How In our restaurants, recognition cards are We Win Together principles. It’s also the displayed on special boards, and team foremost reason our culture is brimming members proudly wear recognition with positive energy, teamwork, stickers and pins along with their name dedication and fun. badges and uniforms. In each Restaurant Support Center, the recognition cards Chairman and CEO David Novak are displayed everywhere for all to see – personally models a recognition culture office hallways, offices, bulletin boards, in a light-hearted way with his own conference rooms, and even in our “Walk “Yum! Award” — a set of chomping dentures with legs given to all those who of Leaders” tunnel at our Louisville RSC. “walk the talk” of leadership. All leaders Recognition has become such an in the company have their own personal essential part of our culture that

Recognition is very important at Yum! Brands and many leaders and associates give recognition awards including the “Community Mania Award”, the “Warp Speed Award”, the “Sauce Packet Award”, and Chairman and CEO David Novak’s chomping dentures with legs “Yum! Award” for walking the talk.

26 Our Associates At Yum! Brands we believe in giving back to the communities in which we operate. And I was truly inspired when I recently heard about an initiative in this regard by our franchisee, Devyani International. They’ve opened a Kentucky Fried Chicken restaurant in Kolkata that is run by speech and hearing impaired employees. So, I went to see the restaurant and I was struck by what I saw. I was struck by the fact that we don’t really announce that this restaurant is different in any way; by the fact that the standards of the restaurant were second to none; and the sheer joy and pride on the faces of the employees there at the opportunity of working at our restaurants. Niren Chaudhary Managing Director, Yum! Restaurants India The franchisee, Virag Joshi, President and CEO of Devyani International, Ltd. embarked on a journey to give back to the community of New Empire, Kolkata and employ a group of approximately 40 speech- and hearing-impaired associates in 2007 as part of the restaurant team. The management team spent almost six months refining the restaurant training materials and programs to engage the associates in executing world-class customer service at the restaurant. Devyani International plans to take this program across the Yum! India restaurant system leveraging the success of the program in the initial restaurant and the passion and pride of all associates involved in this initiative. associates receive training and a Guide to In our company-owned operations in Recognition as part of their orientation. the U.S. for example, about 30 percent Feedback on giving recognition is also of our associates are Caucasian and included as part of our 360-degree peer- the remaining 70 percent are Hispanic, review process. African American and/or Asian. Minorities and women made up 64 Our people-first, recognition-driven percent of our external management culture has been benchmarked by other hires and 41 percent of internal organizations and widely praised by management hires (promotions) in 2007. business leaders, authors and lecturers. Numerous companies have worked with We are also increasing the our Culture Team to share best practices representation of African Americans, surrounding recognizing and rewarding Hispanics and women among our key great performance and great associates. talent/decision makers, and growing In addition, Ken Blanchard, the largest- the pipeline of diversity in our mid-level selling business author in the world manager ranks. (“One Minute Manager”, “Raving Fans”, All of our brands have leadership etc.) wrote a book about our journey initiatives focused on high-potential to build a distinctive culture entitled, diversity talent, and all leaders serve “Customer Mania: It’s Never Too Late To as mentors. In addition, last year each Build A Customer-Focused Company.” of the brand presidents went into their communities to provide business- Diversity at Yum! growth coaching for local networks of For us, diversity is not a target – minority businesses. it’s a way of life and a way of doing Making progress in diversity is a business. Everyone can and does make business priority and the work a difference in our organization. One of of everyone in our system. This our HWWT2 principles – Believe in All commitment is reflected in David People – underscores the importance Novak’s annual goals, or “Blue Chips.” of actively seeking diversity in others; We also have a dedicated Global believing everyone has the potential to Diversity and Inclusion Officer who make a difference; and coaching and guides our strategy and a number supporting every individual to grow to of initiatives that enhance our their full capacity. This adds perspective inclusive workplace. and depth to everything we do. We’ve also found that a diverse team makes for Attracting Diverse Talent better problem solvers, services all our In the U.S., we partner with a wide customers more effectively, and creates range of colleges and institutions to a richer culture for all of us to enjoy. attract the best talent to our workplace,

27 including the National Hispanic and LaRaza, the Association of Small Business Black MBA Associations. We also train Development Centers, and the US our managers in the leadership skills Pan-Asian American Chamber needed to foster an inclusive work of Commerce, that provides a one- environment that is built on everyone’s stop point of access for minority contributions. In addition, our prospects who are exploring workforce sourcing objectives remain franchise opportunities. Breakdown of grounded in hiring the right people – We continue to strengthen our Our Associates those who reflect our customer base and the communities in which we relationship with these and other operate – for the right jobs. minority organizations, and we plan China Yum! to sponsor an NAACP executive- (Company Owned) Corporate U.S Supplier and Franchisee level leadership forum in 2008 to 9% Diversity Initiative in the U.S further recruit qualified minority 18% We are extremely proud of the progress franchise candidates. we have made, and continue to make, Engaging Our 34% in promoting supplier diversity in the Partners in Diversity 39% U.S. Led by our Unified FoodService Purchasing Co-op (UFPC) partners We are among the first and largest and our Support Educate Encourage supporters of the Women’s Foodservice Forum (WFF), the Multicultural Yum! Restaurants Yum! Franchisee/ Diversity (SEED) Team, our associate International (YRI) Licensee U.S network focuses on building the Foodservice and Hospitality Alliance impact of minority- and women- (MFHA) and other organizations that owned enterprises in vital areas of support the personal and professional our business. In 2006, we asked our growth of our diverse, emerging key suppliers to track and report their leaders. We were the sole sponsor of purchasing from minority-owned the Women’s Foodservice Forum/Gallup businesses. This resulted in an increase research on creating organizations in our supplier diversity awareness and where women thrive. In addition, we output to more than eight percent of developed a unique retention and career our overall purchasing expenditures. development program as part of the Today we are on track to meet our 2005 Multicultural Foodservice and goal of directing 10 percent of our Hospitality Alliance Symposium. purchasing expenditures to minority- Last year, our minority and women’s or women-owned businesses by the affinity groups continued to play a year 2010. key role in driving our culture by We continue to increase our efforts in providing networking, mentoring, the recruitment of minority franchisees. educational workshops and leadership We are playing a leadership role in development opportunities across our the development and launch of the system and the communities in which International Franchise Association’s we do business. MinorityFran Program. MinorityFran is an initiative in partnership with Recognition for Diversity community leaders such as the National We are routinely recognized for the Urban League, National Council of diversity of our workplace:

Diversity, inclusion and engagement are simply part of our core values at Yum!. ‘Believe In All People’ means tapping into the diverse skills, cultures, perspectives and experiences of each of our associates to drive great marketplace performance. Our strategic diversity and inclusion vision is to grow leadership, franchisee and supplier pipelines that increasingly reflect our diverse customer and investor base.

Terrian Barnes Yum! Global Diversity and Inclusion Officer

28 One of Fortune magazine’s “Top 50 Our Associates Employers for Minorities” and “Top 50 Lost Time Injury Rate Employers for Women”; In the U.S., our performance in Health and Safety outranks the industry average. Between 2004 and 2006, our U.S. company-operated restaurants had Black Enterprise magazine’s “Top 40 a lower associate lost-time injury rate when compared to the industry average. Best Companies for Diversity” for the past four years; and 2004 2005 2006 2007 Hispanic magazine’s “Corporate 100 Industry Average* 1.00 .90 1.00 N.A. Companies Providing Opportunities for Yum! Brands, Inc. .97 .83 .80 .66 Hispanics” and “Top 50 Corporations for Supplier Diversity” Difference 3% better 8% better 20% better * U.S. Bureau of Labor Statistics, Feb 8, 2008, “Food and Drinking Places”, Associate Rights and Private industry, Number of cases with days away from work per 200,000 hours Responsibilities All our associates have the right to work standardized, injury-frequency tracking in a fair and safe environment. Our mechanism in our larger business units, Worldwide Code of Conduct holds all of namely the U.K., Australia, Mexico us accountable for ensuring that we treat and China. Accurately measuring and our colleagues with respect and fairness, understanding injury occurrences will allowing them to be recognized and highlight the best safety and security rewarded based on their performance. practices in our system, which we For more information or to view the can then share with all associates Worldwide Code of Conduct, please visit and franchisees. Currently we are www.yum.com/governance/conduct.asp. consolidating our global data for initial analysis. Our associates and franchisees are expected to comply with all applicable We also have a number of programs local labor laws regarding wages and in place to continuously improve our working hours in every country in health and safety program, which which we operate. There is no place includes safety reviews in all U.S. in our organization for any type of company restaurants. Members of our harassment or discrimination because senior leadership team are also provided The Future – of age, gender, race, religion, national with safety and performance data origin, sexual orientation, or physical each period, 13 times per year, for U.S. What Next? company operations. abilities. The Network, our confidential Our approach to building a talented, integrity helpline, is available to all Safety Targets diverse workforce is built on our associates to raise questions or concerns Our goal is to continue to reduce the major business principles. These 24 hours a day. number of accidents and injuries in our principles emphasize the importance Ensuring a Safe restaurants across the world. Some of of investing in associate recruitment Working Environment our major markets have succeeded in and advancement, both for individual significantly reducing injury frequency development and for our overall The safety of our associates is deeply rates. In the U.S. the injury frequency success as a business. embedded in our primary business rates in our company-owned restaurants objectives and in the activities of our have declined by over 48 percent in the As a global company with a diverse global operations. Health and Safety is last 10 years. In Australia, the rate for lost and ever-changing workforce, we face managed across all our strategic business time at work due to injuries improved by significant challenges. For example, units – the U.S., YRI, Yum! China and 50 percent in 2007. our rapid growth in emerging amongst our franchise owners. In the In markets where we have seen an markets like India and Russia requires U.S., three Directors of Loss Prevention us to adapt our policies to these have annual performance goals heavily increase in the number of work-related accidents and injuries, we are working markets, and to learn from our weighted on safety in company- new partners. Building a diverse owned restaurants. Our China and YRI to implement programs that will address the areas of concern. For example, in foundation at all of our brands gives businesses have similar safety goals. South Korea the rate of lost time at work us a competitive edge and helps In addition, franchisees and licensees due to injuries increased slightly from us operate as a local business in are provided with safety and security 0.4 percent in 2005 and 2006 to 0.6 standards as well as training set forth in international markets. percent in 2007. While this rate remains our operational policies and procedures. Part of our growth strategy will be low, we are taking appropriate measures Although all our operations around to reduce these rates in the future. These to ensure that our leadership team, the world are compliant with local measures include increased health and company workforce and culture are regulations regarding safety and injury safety training and the implementation as diverse as our customers around tracking, a significant goal for our of specific programs to address the areas the world. international operations is to develop a of concern.

29 Keep it Balanced – Nutrition and Health for our Consumers

We are focused on improving the nutritional attributes of our menu, promoting physical activity programs and always providing great tasting food. The global debate regarding health and nutrition and the role of quick service restaurants has highlighted many challenges. We are committed to being a productive part of this debate and to helping identify solutions.

30 Health and Nutrition 31 informed choices about their their about choices informed incorporate and diets balanced lifestyle. healthy a into exercise offering and developing in proactive consumers our for options nutritious country. every in brand every across the nutrition profile of our high high our of profile nutrition the always while content, food quality and value taste, great providing convenience. be can that brands our of each at diet. balanced sensibly a partof support and nutrition product our programs. exercise W W of a variety of foods from the the from foods of variety a of as such groups food recognized vegetables, grains/rice/cereals, fruits, fats, and meat/beans, dairy, sweets. from calories optional W W W W make to consumers want e more even become will e improve proactively to strive will e options menu of variety a offer e about consumers educate will e consists diet balanced a believe e We always listen to the voice of of voice the to listen always We us telling is it and consumer, the and choice greater want customers we So serve. we food the in variety choices menu our expanded have where and, restaurants our of all in our of some adapted appropriate, different the to offerings menu serve. we cultures Our Menu – more choice choice more – Menu Our consumers our for M.D., M.P.H.,H. Carmona, F.A.C.S., (Retired) Richard States. United the of General Surgeon 17th the I congratulate KFC on its decision to switch to a zero trans fat fat trans zero a to switch to decision its on KFC congratulate I for risk the increase to shown been has fat Trans oil. cooking their reduce can people that is news good The disease. heart physical and choices food good through disease heart for threat changes significant making is KFC that pleased I’m activity. menu providing by choices healthier make Americans help to other encourage I and fat, trans of grams zero with options lead. its follow to companies W society to society from vary food local in differences on based culture. and preferences habits eating that recognize e Global Nutrition Guidelines Nutrition Global nutritional global established have We businesses. our all for guidelines We believe we can have the greatest greatest the have can we believe We and health our advancing in impact our throughout platform nutrition action- with industry the and system change. oriented cross- internal an formed We led Force, Task Nutrition functional The Officer. Affairs Public Chief our by Food Chief the of comprised is group brand, each Officerfrom Innovation including executives Yum! senior and Chief the Officer, Operating Chief the President Vice the and Counsel Legal Assurance. Quality of with charged is Force Task The our coordinating and developing including policy, nutrition overall nutrition global our of development and disclosure nutritional guidelines, alternative and guidelines, marketing Force Task The development. product regulatory trends, consumer monitors scientific relevant developments, our with consults and research, outside as well as nutritionist internal that ensure to experts nutritional sound are policies nutritional our trends current with consistent and science. and Nutrition Task Force Task Nutrition Today we offer a much broader choice for the billions of customers that selection of foods to meet customer visit us each year. needs and to ensure that we Here’s a taste of some of the options continue to be the restaurants of our restaurants provide for consumers.

Taco Bell In the U.S., Taco Bell’s Fresco Menu has nine items with nine grams of fat or less. Taco Bell® Fresco Menu items cut the fat, not the flavor, so they have the same great Taco Bell taste including grilled, marinated all-white-meat chicken, Carne Asada Steak and seasoned beef – with fewer calories and less fat. For example, a Fresco Ranchero Chicken Soft Taco contains 170 calories and four total fat grams versus 270 calories and 14 total fat grams for the regular menu item. Fresco Menu items replace cheese and sauce ingredients with daily-prepared fresh Fresco Menu Items Fiesta Salsa, a zesty yet mild mix of chopped tomatoes, onions and cilantro, which contains only five calories and zero fat grams.

Pizza Hut With more than 30,000 different topping combinations, pizza at Pizza Hut can be customized for individual preference, taste and lifestyle. For example, ordering a Thin ‘N Crispy® Pizza with half the amount of cheese, extra sauce and choosing toppings that are lower in fat (lean meats such as chicken or ham and vegetable toppings), consumers can enjoy a great tasting pizza with 25% less fat than the regular Thin ‘N Crispy® Pizzas. In some restaurants, this can be found on the menu as Fit ’N Delicious The Fit ‘N Delicious Pizza™. Pizza Pizza Hut will also be launching The Natural™ pizza nationally beginning in December. This pizza has a multigrain crust made with five different whole grains, natural Old World sauce and all natural whole milk mozzarella. In addition, Pizza Hut offers a variety of all natural toppings, including pepperoni made without added nitrite and nitrates, naturally-preserved Italian Sausage, fire-roasted red peppers, sliced Roma tomatoes marinated in a garlic-basil vinaigrette, as well as 100% beef with no fillers.

KFC Consumers can create a variety of meals with reduced-fat content from KFC’s U.S. menu by removing the skin and breading on KFC’s Original Recipe® chicken breast (2g of fat) and choosing two home-style sides, such as the 5.5 inch corn on the cob (1g of fat), mashed potatoes and gravy (4g of fat), green beans (1.5g of fat) or BBQ Baked Beans (1.5g of fat). Consumers can also select the Honey BBQ KFC® Snacker (3g fat) or the Honey BBQ Sandwich (4g fat), where available, with a side of long-grain rice (1g fat) and a side of southern-style green beans. Select U.S. cities also now offer Kentucky Grilled Chicken, which has significantly fewer ® Kentucky calories, fat and sodium than KFC’s Original Recipe Chicken. The grilled chicken has been Grilled Chicken in test for about two-and-a-half years and is expected to be launched nationally in 2009.

Long John Silver’s Consumers can enjoy a variety of great tasting meals with reduced-fat content from Long John Silver’s new Freshside Grille menu, recently introduced in the U.S. Freshside Grille focuses on non-fried entrees of less than ten grams of fat and zero grams trans fat. For example, the Grilled Tilapia & Shrimp Scampi entrees have only 115 calories and less than five grams of fat per serving. A serving of the Grilled Pacific Salmon entree has 150 calories and five grams of fat per serving. The new vegetable medley is also low in calories (60) and fat (2g) and a good source of dietary fiber (4g). Grilled Salmon Long John Silver’s offers consumers a serving of corn on the cob without oil (3g of fat). All items are cooked using half the energy of traditional frying.

A&W All American Food In the U.S., A&W offers customers a grilled chicken sandwich made with all-white breast meat containing less than 138 calories and 3.1g of fat. A&W Root Beer® is made with pure cane sugar and is caffeine-free. Grilled Chicken Sandwich 32 Health and Nutrition 33 their own nutrition white papers in in papers white nutrition own their also has China in team 2009. The Nutrition and Health a developed consisting Committee, Advisory health public leading of panel a of analyze to specialists, nutrition and and food in research and trends team The science. nutritional product on advice expert provides making brands, our to development of goal our life to bring can we sure of value nutritional the improving compromising without products our value. economic or taste Spice Up Your Plate – – Plate Your Up Spice Our in Choices Local Markets International to society from vary habits Eating local in differences on based society are We culture. and preferences food customers our serving to committed accordance in food tasting great within and preferences those with In cultures. those of context the international expanding rapidly our food our adapting are we markets, For tastes. and standards local to are we where India in example, fastest-growing and largest the created have we company, restaurant tastes local to appeal that menus and Tandoori Hut’s Pizza as such vegetarian KFC’s and Pizzas, Masala Yum! in brands our Overall, products. than more YRIaverage and China every introductions new-product 20 local on based are which year, feedback. consumer paper regarding nutrition and and nutrition regarding paper topics. ingredient-formulation other develop to intend U.S.brands All Y we have steadily increased the the increased steadily have we since choices menu of number a formed we when mid-1990s, the team development and research choices food local understand to Because formulation. product and than more learned, we what of options vegetable different 30 China our in served been have 2001–exactly from restaurants us tell consumers Chinese our what prefer. they I white a published has China um! market, growth largest our China, n In mainland China we offer more more offer we China mainland In balanced nutritionally relevant, locally other any in than items menu 2003, KFC In market. international vegetables seasonal introduced China was corn fresh while salad, corn and soups Winter 2001. before launched and egg regular the complement now of line entire an and soup; vegetable These foods. roasted healthy delicious, Burger Leg Chicken Roasted include international and local of variety a in and Orleans New (Golden, styles Orleans, (New Wings Roasted Cumin); local and Cumin); and Tea-Flavor twist KFC distinctive, a with favorites Gulao Roll, Chicken Peking Old as such Chicken and Pork Gulao Roll, Chicken also We Roll. Pork Kimchi and Roll, menu breakfast Western-style a offer congees. of Yum! China Yum! Improving the Formulation/ Nutritional Value of Our Products International markets are also committed to minimize or eliminate Improving nutritional values while artificial trans fatty acids in all maintaining the great taste of our food restaurants, company or franchised. is important to us. We plan to improve Over 80% of international restaurants the formulation of our products by: have already achieved zero grams C onverting to zero grams trans trans fatty acid status for frying oils. fats per serving (see call out, Plans are in place to convert the page 35). Health authorities remaining restaurants over the worldwide recommend that next three years as supply logistics consumption of trans fats be reduced can be achieved. to trace amounts. We have been proactively reducing artificial trans In addition to frying oils, Pizza fats in our products. After more than Hut, along with our other brands, two years of extensive testing, KFC, has been reformulating various Taco Bell and WingStreet converted all ingredients to remove or minimize U.S. restaurants to a zero grams trans partially hydrogenated vegetable fats per serving cooking oil in April oil in everything from seasonings sauces to doughs and salad bar 2007, among the very first chains to and items. Over 60 ingredients have been do so. In Canada, KFC and Taco Bell reformulated at Pizza Hut alone. restaurants switched to a zero grams trans fat oil in January 2007.

MENU BOARD LABELING IN THE UNITED STATES In September, 2008, Yum! Brands All calorie information will be based uniform guidelines for menu board became the first company to announce on individual serving sizes and will be labeling with calorie information. it will begin voluntarily placing product phased onto menu boards beginning The Center for Science in the Public calorie information on menu boards in 2008 with completion by January 1, Interest (CSPI) and the Department in company-owned restaurants in 2011. In addition, Yum! Brands has of Nutrition at Harvard University’s the United States. Franchisees are called for federal legislation using School of Public Health praised Yum! encouraged to provide the same the recently enacted legislation in Brands for adding calorie counts to its information on their menu boards. California as a model to establish menu boards.

Yum! Brands’ groundbreaking announcement that it will add calorie counts to its menu boards at KFC, Pizza Hut and Taco Bell is fabulous news for health conscious consumers. Yum! is leaping ahead of all its competitors by providing the one piece of nutrition information that consumers most want. We applaud this move and encourage other major chains to follow this bold example. Yum! has gone an important step further voicing its support for legislation that would require restaurants to list calories on menus and menu boards. Michael Jacobson, Executive Director, Center for Science in the Public Interest,

This announcement that calories will be displayed on menu boards deserves loud applause. Yum! Brands call for national legislation to create uniform menu board guidelines on nutrition is greatly appreciated. It is exactly the kind of industry leadership we need. Walter Willett, Chair of the Department of Nutrition Harvard University’s School of Public Health

34 Health and Nutrition 35 The Transition to Zero Zero to Transition The Serving Per Fat Trans Grams Taco KFC, at Oil Cooking and Silver’s John Long Bell, Restaurants WingStreet and years two nearly KFC took It included which testing, extensive trans grams zero 25 over evaluating that one finding before oils, fat appearance and taste maintained quantities the in available is and April By demand. meet to needed the in restaurant KFC every 2007, grams zero using began States United Pizza oil. cooking soybean fat trans KFC the used brand WingStreet Hut’s zero same the introduce to research restaurants their in oil fat trans grams 2007. April in using is restaurant Bell Taco Every serving per fat trans grams zero reformulated and oil canola million 16 remove to ingredients Long year. per fat trans of pounds introducing be also will Silver’s John its to oil cooking fat trans gram zero future. near the in system pizza. In In pizza. ™ (see call out, page page out, call (see in company-owned restaurants restaurants company-owned in the U.S., Pizza Hut has eliminated eliminated has Hut U.S., Pizza the vegetable hydrogenated partially is and ingredients pizza from oils overall the reducing toward working yet items menu of content sodium for demands consumer satisfying still products. tasting great product including the upcoming upcoming the including product Natural The of launch Pizza Hut, Long John Silver’s and and Silver’s John Long Hut, Pizza first the become to intend A&W begin to chains restaurant national calorie product placing voluntarily respective their on information boards menu be will Franchisees nationwide. same the provide to encouraged boards. menu their on information based be will information Calorie was and sizes serving individual on beginning boards menu onto phased by completed be will 2008 in and calling also are We 2011. 1, January establish to legislation federal for board menu for guidelines uniform information. calorie with labeling O 34) Bell, Taco KFC, of U.S. ur divisions Keep it Balanced – Communication Communication – Balanced it Keep Consumers Our With provide to us on rely consumers Our our about information truthful clear, informed make them help to food consumers our want also We choices. lifestyle, balanced active, an enjoy to to important is it believe we because activity daily with diet sensible a mix fun. little a and commitments these share We ways, many in consumers our with U.S. restaurants our in including Balanced” it “Keep our through and www.keepitbalanced.com. website: U.S. – the outside countries Several Australia, U.K., the France, including – China and Germany Netherlands, the their via information nutrition provide communications. other and websites committed are we forward, Going international our with working to information this provide to franchisees and worldwide restaurants our of all in websites. our of all on our inform U.S., we the In choices their about customers ways. of number a in KFC, –

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Sodium is a vital vital a is Sodium Pi wholesome more for demands of variety a testing by products offerings product and ingredient wholesomeness the improve that overall the of content nutritional and I cream, sour fat reduced to move to by fat total decrease will which for year per pounds million six system. the I Freeze Frutista introduced newly emerging the meet to beverages all such, As consumers. its of needs without made are beverages the of only use and syrup corn fructose high and strawberries real sugar, cane pure flavors. and colors natural Pizza Hut, and Taco Bell Taco and Hut, Pizza content sodium the reduce to hard our In formulations. product their in sodium restaurants, international KFC priority. key a also is reduction amount the reduced has UK the in In year. per tons 85 over by salt of stages early the in are we Australia, with products of testing consumer of South In content. sodium reduced are restaurants Hut Pizza our Korea, of level salt the reduce to working introduction the through pizza the percent (25 cheese sodium lower of (40percent pepperoni sodium), lower (40 toppings meat and sodium) lower Canada, In sodium). lower percent in engaged are Hut Pizza and KFC surrounding research consumer reduction. sodium C food. our in sodium ingredient of the human diet, but but diet, human the of ingredient health to lead could it of much too disease. heart as such problems major a remains reduction Sodium in industry food the to challenge salt as formulation, and taste of terms in compound important vitally a is have we that recognize We cooking. to responsibility a and opportunity an their of aware consumers our make with food offer to and intake, sodium content. sodium lower U.S. the in brands leading Our consumer to responding is Hut zza plans domestic Bell 2008, n Taco its formulated Bell U.S., Taco the n of level the reducing onsistently Other Ingredient Ingredient Other Improvements The American Heart Association believes that trans fat contributes to heart disease risk and recommends that Americans reduce trans fat in their diets. That’s why we’re pleased to know that KFC is making the switch to zero trans fat, giving Americans even more choice for great tasting food with zero trans fat. We hope other restaurant and food companies follow this important lead.

Robert Eckel, President, American Heart Association

Each brand’s nutrition products on television programs website lists ingredients specifically aimed at children under for each of its permanent menu 12 years old. items, nutritional values of average portions for all food items, and Healthy Lifestyles – potential food allergens and Increasing Physical Activity sensitivities. Customers can also Regular exercise is an important part use the nutrition calculator found of a healthy lifestyle. We provide on each site to customize an order information and tips on how to and learn about the nutrition increase physical activity as part of information of their orders. daily life on our brand websites and on our Keep It Balanced website, and All brands make nutrition through our engagements in the brochures readily available to communities we serve. consumers in their restaurants with information on ingredients We intend to launch exercise programs and menu options that can fit into across the globe to help educate a balanced diet. Alternatively, this consumers about the importance information is available on trayliners of “energy in and energy out.” Our in some restaurants. goal is to increase understanding and awareness of the importance of As part of a broader Health and incorporating activity in our customers’ Wellness effort across the lifestyles. For example, we are looking United States, Yum! has made to implement national exercise a decision not to advertise its programs for consumers online and with nationally renowned University Yum! China is deeply engaged in children’s activity programs, developed of Louisville men’s basketball Coach by Yum! China leaders and operated by restaurant associates Rick Pitino in an effort to educate consumers about maintaining a TeH h aPPY Camp – Designed to teach children the benefits of exercise and balanced lifestyle. healthy foods, more than 1.2 million children attend Happy Camp every year. They learn important concepts such as “Breakfast is the most important meal of Obesity rates have increased and we the day,” “The secrets of fruit,” “Milk is healthy food,” and more. are determined to take a leadership role by implementing programs that Dancing At the Restaurants – Restaurant Associates lead children in dance stimulate youth to boost their activity activities in each restaurant three to four times a week. levels. In 2004, KFC in China launched School Programs: a national youth three-on-three In collaboration with an educational organization consists of the following: basketball tournament, the largest corporate-sponsored sports program in T he Happy Classroom/ Chicky Educational Course – A community program Chinese history. The program started aimed at enriching primary school students’ extra-curricular activities. The with 48,000 participants representing program includes education on nurturing good eating and exercising habits 640 restaurants from 172 cities. Today among children and other topics important to this age group. In 2008, this this program, in its fifth season, is program has been rolled out in 40 cities across China. now the world’s largest grassroots C hicky Sports Game – Started in Shanghai in 2003, the program is designed to basketball program anywhere. help children develop exercise habits and adopt a healthy lifestyle. Since 2003, 1.2 million students in 2400 schools in five cities have participated in the program.

36 Health and Nutrition 37 We applaud the decision made today by by today made decision the applaud We physical exercise plan for our associates; and and associates; our for plan exercise physical Nutrition Task Force for public policy. public for Force Task Nutrition global advocacy coalition that includes stakeholders, third-party advocates, advocates, third-party stakeholders, includes that coalition advocacy global lear positions on Menu Labeling, Kids Advertising, Kids Meal Standards and and Standards Meal Kids Advertising, Kids Labeling, Menu on positions lear A A and industry competitors; industry and A Product Package Labeling; Package Product C 2. 3. 4. Where Do We Go From Here? From Go We Do Where healthier provide oil, cooking our replace to steps significant taken have We also that lifestyle balanced a live to customers our encourage and options menu activity. physical regular incorporates food our of formulation the improve to continue will we term near the In which in ways the about associates and customers our educating while products lifestyles. healthier living while choices menu delicious many our enjoy can they to responsibility our it’s believe we system, our of reach and capacity the Given plan We issue. obesity global the addressing in role leadership long-term a take actions: these include may that Action of Plan a develop to 1. Kentucky Fried Chicken and Pizza Hut to to Hut Pizza and Chicken Fried Kentucky customers and associates their of health the put their all in policies smoke-free institute and first bounds no knows Smoke nationwide. restaurants hazard. health known a is smoke secondhand and smoke- support Americans of majority vast The feelings, those mirrors decision This policies. free lives. save certainly most will and Carolyn D. Runowicz, MD, MD, Runowicz, D. Carolyn 2005 Society, Cancer American President-elect, include networking, relationship relationship networking, include topics relevant on education building, activity, physical nutrition, from an and obesity, and metabolism AHA to input provide to opportunity positions. and statements regarding American the of members are We Exhibitor Association’s Dietetic was Council The Council. Advisory exhibiting ADA’s represent to created share to advisers as act companies, management with information and procedures, and rules regarding industry on updated ADA keep to issues. and trends Addressing the world’s obesity obesity world’s the Addressing cannot We daunting. is challenge our enroll to need We alone. it do true drive to effort the in partners citizens’ as well as change, lasting and and academicians, organizations, the with deal who specialists an of impacts negative potential diet. unbalanced the in participant active an are We Sodium the and Committee Obesity Food International the of Force Task as (IFIC), well as Council Information deeply IFIC is Directors. of Board its and policy of levels all in involved presence Our activity. legislative the to perspective industry an brings gives also It process. making decision us helps that information to access us well as company-specific formulate that strategies coalition-oriented as and consumer on based are research. scientific Heart American the partin take We Nutrition Industry Association a (INAP). is INAP Panel Advisory American the between partnership Nutrition (AHA) Association Heart leaders, industry food and Committee sharing for platform a providing cooperative planning and information diet/nutrition of areas the in programs The disease. cardiovascular and and industry together brings panel exchange to representatives science interest mutual of areas in information benefits Other nutrition. to pertaining Listening to our Partners Partners our to Listening In 1994, our U.S. Taco Bell restaurants restaurants Bell U.S. Taco 1994, our In KFC, domestic Our “smoke-free”. went A&W and Silver’s John Long Hut, Pizza in smoke-free became Restaurants smoke- are also 2005.restaurants Our international the of many in free operate. we which in markets Providing a Smoke-Free Smoke-Free a Providing our for Environment Associates and Customers With more than 1,900 leagues, that’s that’s 1,900leagues, than more With cities. 400 across plus 24,000 teams and growth this with thrilled are We event the replicating to forward look internationally. Environment We care about the impact of our global environmental footprint and we believe it is our responsibility to understand and minimize the impacts of our business on the environment.

38 Our challenges include: Innovating With Environment Energy usage in our restaurants the Environmental Waste management Leadership Council Packaging The ELC is a catalyst for change in our global infrastructure, building Sustainable building design consistency among business We are proactively exploring the units and coordinating efforts for ways in which we can reduce our maximum effectiveness. It is chaired impact on the environment without by our Senior Director of Global compromising operational standards Engineering, with strategic oversight or shareholder value. Over the past by our Senior Director of Corporate two years, our U.S. company-owned Social Responsibility. The Council restaurants aggressively worked to has executive sponsorship by our reduce our energy consumption. We Chief Public Affairs Officer and Chief achieved total annualized savings Operating Officer. of 60,000 metric tons of CO , about 2 We have defined seven areas of 18 percent above our goal of 51,000 strategic focus for the Company and metric tons. The savings – equivalent the ELC has established sub-teams for to 10,700 cars being taken off the road each. Led by experts from our U.S., or eliminating the energy use of 4,400 YRI and China operations as well as households – benefited shareholders Unified Foodservice Purchasing Co-op as well because we saved $17 million (UFPC), these seven are: in energy costs. 1. Energy – Including Efficiency, In 2006, we took this commitment Reduction and Procurement; to a new level when we established the Environmental Leadership 2. Waste; Council (ELC), our leadership team 3. Packaging; for great environmental stewardship. 4. Building Environmental The ELC helps set environmental Sustainability Team (BEST); leadership strategies for Yum! and identifies beneficial environmental 5. Equipment/Back Of House (our opportunities, then designs, tests and kitchens and other non-customer deploys programs to deliver on them. areas of the restaurant); Our system is focused on finding ways 6. Restaurant Education/ in which we can reduce our worldwide Communication; environmental impact, including: 7. Monitoring and Reporting. Equipment retrofits and energy 1. Energy Efficiency efficient innovations; and Reduction Better energy management We believe energy reduction is systems; the number one area of greatest Behavioral changes related to use environmental opportunity and of energy, waste management in highest cost benefit. Our top priority our restaurants including the spent in the coming years is to reduce our grease from our fryers, and water energy usage by 12 percent by 2010 in reduction; U.S. company-owned restaurants, and by 10 percent by 2012 in YRI company- Recycling paper and other owned restaurants. restaurant packaging; Our dedication to green development Material selection and use in our is evidenced by our constant pursuit building design and retrofits. of innovative, effective strategies and solutions to reduce our global footprint. Only if the project, and the savings it achieves, meets our high standards do we incorporate it into our operations. Projects we are working on include:

39 Lighting Air Conditioning Electricity – U.S. The linear fluorescent bulbs used For all new restaurants or for kWh/Restaurant/Year (‘000s)* in most U.S. KFC and Taco Bell replacements in existing restaurants restaurants have been converted in the U.S., we use high-efficiency air 339 345 335 (+2%) (-3%) 351 359 359 to more efficient models, which has conditioners. (0%)(+2%) resulted in a carbon reduction of All new air conditioning units use almost 2.4 metric tons per restaurant programmable thermostats to per year. Pizza Hut restaurants will finish conversion by the end of 2008. optimize comfort and minimize energy use. In addition, over 1,500 In all new U.S. restaurants, compact- thermostats, each saving over 4,500 fluorescent lamps (CFLs) are used kWh per year, have been installed in wherever feasible. We expect to save existing company-owned restaurants 0.21 metric tons of carbon per year in the U.S. This delivers a reduction of for every incandescent lamp replaced ‘05 ‘06 ‘07 ‘05 ‘06 ‘07 4,100 metric tons of carbon. with a CFL. We are currently evaluating We regularly evaluate new lighting devices that increase the efficiency technologies such as light-emitting of air conditioning evaporators diode (LED) to understand their 180 190 189 potential application in our restaurants and refrigeration systems in our (-1%)(+6%) U.S. restaurants. Based upon our 207 204 202 and impact on the environment. (-1%)(-1%) estimations, we anticipate a reduction The majority of our new and in 2008 of over 15,000 metric tons of existing U.S. restaurants use Energy carbon emissions per year due to our Management Systems (EMS) to installation of these devices. efficiently control the operating hours of inside and outside lights. Motion We are pursuing additional energy sensors are used in most of the and cost saving opportunities restrooms and we are evaluating their through the use of more efficient use in walk-in coolers to control the kitchen equipment as detailed in ‘05 ‘06 ‘07 ‘05 ‘06 ‘07 operation of the lights. the Equipment/Back of House section on page 44. Energy Reduction Efforts Around the World * Company-owned restaurants We continuously look for ways to further reduce our energy use in all of our markets. We have markets leading the way in our system in this All new U.S. restaurants area including: feature compact fluorescent lamps (CFLs) where feasible as Australia shown in this KFC restaurant. We have completed a comprehensive measurement of our energy and water usage at three typical KFC restaurants to establish a baseline to determine average usage and prioritize areas for further reductions. We have also been testing the use of natural gas open fryers in place of electric fryers. Natural gas produces 75 percent less greenhouse gas than the fossil fuels burned to generate most of Australia’s electricity. All of our buildings have been fully insulated, and all glassed areas are now shaded to reduce solar heat gain and lessen the need for air conditioning.

40 Environment Mexico In pursuit of this, we have met with Start-up protocols for equipment various renewable energy marketing and lights have been put in place to companies and governmental reduce voltage peaks. agencies in the U.S. We view these We have introduced high pressure partnerships as an opportunity gas systems to improve burning to learn from experts, as well as efficiency, which further reduces to participate in an increasingly energy consumption. important conversation. We offer continuous training to We are also proud of our current our distributors’ delivery drivers achievements in the UK, where on energy saving open/close our Pizza Hut restaurants already procedures, during loading and purchase 16 percent of their electricity unloading, in both trailers and from renewable energy sources, restaurant freezers and refrigerators. and where 39 percent of our KFC restaurants’ electricity is derived from We have implemented an alternative energy. We look forward to air conditioning management exploring energy sourcing possibilities program to reduce our such as these in many more regions electricity consumption. around the globe. U.K. KFC 2. Waste Management In 2006 we engaged the Carbon Reducing the amount of waste from Trust, a governmental body that restaurant operations is one of our assists companies in managing major environmental challenges. their carbon emissions. A baseline Our waste reduction efforts take assessment was completed in 2007 into account both restaurant level and a plan was established to reduce operations as well as waste at our emissions by 10 percent by 2012. Natural Gas – U.S. Restaurant Support Centers (RSCs). Therms/Restaurant/Year* We are currently testing multiple While each of these areas of operation 7,826 7,623 7,787 energy conservation technologies. have different primary waste streams, (-2%) (+2%) 9,397 9,061 9,197 (-4%) (+2%) Low energy internal light fittings our Waste Management Program and LED signage are now being enables us to increase recycling and installed in all new and remodeled renewable efforts and reduce solid restaurants. waste volume across our system. Waste oil is now being recycled In our RSCs, these efforts are focused into biodiesel. on recycling office paper, glass and plastic. To encourage RSC associates’ A cardboard recycling system is in understanding of and commitment pilot test, as well as an in-restaurant, to this effort, we have established an ‘05 ‘06 ‘07 ‘05 ‘06 ‘07 consumed meals packaging test to internal recycling website where we reduce waste. answer questions, offer advice, and In addition to the markets noted take suggestions from our associates above we are also measuring our on how we can do better. energy consumption in Germany 7,413 7,298 7,694 In our restaurants, our waste (-2%) (+5%) and the Netherlands so we can 7,635 7,755 8,198 programs are focused on exploring (+2%) (+6%) better understand our environmental how to both reduce and exploit our impacts in those markets. waste streams. Restaurant waste falls Energy-Procurement Team into several main categories: food, An average Yum! restaurant emits spent cooking oil, grease traps and over 200 metric tons of CO2 annually packaging. We currently recycle at from energy use. We are committed 62 percent of our U.S. restaurants, to exploring the options available to and expect to recycle at all other us to reduce our emissions. Our U.S. restaurants where possible. We are energy procurement team, led by our also exploring grease trap and ‘05 ‘06 ‘07 ‘05 ‘06 ‘07 energy purchasers at UFPC, is working spent fryer grease recycling, as to identify and potentially procure well as back-of-house food waste renewable energy resources in order recycling opportunities at various to reduce our reliance on fossil fuels. U.S. restaurant locations. * Company-owned restaurants

41 Spent Oil Conversion to Biodiesel more readily recycled and packaging One area we are particularly design options and biodegradable excited about is the conversion of materials to improve recyclability. waste cooking oil to biodiesel. Our Our U.S. brands use napkins made restaurants consume significant Trash - U.S. from 100 percent recycled content, amounts of cooking oil. For example, Cubic Yards/Restaurant/Year* have molded fiber drink cup carriers the average KFC produces about that are 100 percent recycled content 500 pounds of spent cooking oil per 1,071 1,062 1,060 849 851 858 (-1%) (0%) and use trayliners with 40 percent (0%) (+1%) month. Currently, our restaurants recycled content. work with waste haulers or others in their communities who may benefit In 2008, Taco Bell in the U.S. reduced from the spent grease for feedstock, the material used in its packaging glycerin, or other products, including by redesigning 2 sizes of plastic cups biodiesel. and 7 different paper wraps and Because the grease is also a good eliminating trayliners. In 2008, the source for biofuel (see U.K. case company will reduce paper usage by 3.2 million pounds and plastic by 4.6 ‘05 ‘06 ‘07 ‘05 ‘06 ‘07 study), we are working on broad scale programs to convert our grease million pounds. into alternative fuels. We will update Pizza Hut recently launched a pizza you on the progress of this initiative box with 75 percent recycled content. in our next CR report. One of our WingStreet has completely converted franchisees is already making the best from foam packaging to corrugated 850 840 876 663 646 645 (-1%) (+4%) of this opportunity – Sol Yoshida’s packaging that contains up to 45% (-3%) (0%) KFC in Nagano City, Japan is the first recycled material in each clamshell. biodiesel-powered restaurant in the In April 2008, KFC introduced in some world, acquiring significant amounts U.S. regions a reformulated “bucket,” of energy from its own purified waste oil. He is a pioneer in this area – he with 10 percent post-consumer began converting spent grease to recycled content in the container’s biodiesel more than ten years ago. bottom and launched nationwide corrugated bucket lids with 10 percent In China, all spent grease is provided ‘05 ‘06 ‘07 ‘05 ‘06 ‘07 post-consumer recycled content. to local government authorized Other KFC “Reduce-Reuse-Recycle” recycling facilities. items include: paper carryout bags 3. Packaging (35 percent recycled content), plated meal lids (15 percent recycled content) * Company-owned restaurants Our ability to serve food quickly and conveniently is dependent upon our and the potato wedge container (40 use of disposable packaging and we percent recycled content). strive to ensure that all our meals are We are working to minimize the delivered to customers in safe and impact of manufacturing our convenient packaging. Throughout packaging while maximizing its the quick service restaurant industry, recyclability. We will continue to work the way in which we package within packaging content regulations food has been consistent with the to ensure customer and food safety, standardized packaging available in and to retain functionality. Though the industry. We continue to review limited availability of suitable recycled our packaging as new biodegradable fiber restricts our access to the and compostable materials supply of these materials in some become available. geographical areas, we will do our Our philosophy is simple: Reduce- best to innovate sustainable practices Reuse-Recycle in existing and new into all of our wrappers, napkins, and packaging whenever possible. containers worldwide. We are working with our suppliers and Packaging Around the World UFPC to increase recycled content Our efforts in packaging reduction in our packaging. We consistently around the world include the explore packaging materials that are following examples:

42 In Australia, we have begun a closed first green building and its first effort Environment loop recycling test, with plans to to pursue certification under the expand the test to our restaurants United States Green Building Council’s in most metropolitan areas. In this LEED (Leadership in Energy and market, 100 percent of all pizza Environmental Design) program. Recycling - U.S. With the assistance of some of boxes and 30 percent of KFC boxes Cubic Yards/Restaurant/Year* come from recycled fiberboard. In the leading sustainability and addition, 100 percent of waste oil is restaurant experts, our team has 377 351 357 306 298 309 (-1%) (+2%) recycled. carefully studied the environmental (-1%) (+4%) performance of the existing multi- In Mexico, 50 percent of our Pizza brand KFC-Taco Bell restaurant Hut pizza boxes and 30 percent design and through the application of our KFC boxes are made from of an integrated approach, a green recycled carton material. transformation has occurred. In Pizza Hut South Korea, Highlights of the resulting design can 100 percent of outer material in be categorized by four key aspects: Pizza Hut pizza delivery boxes is 1. Reducing Carbon Footprint ‘05 ‘06 ‘07 ‘05 ‘06 ‘07 made of recycled paper. Use of solar energy to preheat In China, KFC consumable plastic fresh air coming into the building and paper packaging materials to avoid using natural gas meet all current state and national More energy efficient kitchen regulations regarding specifications 170 175 187 and building equipment 200 210 221 (+2%) (+7%) and raw material content. (+2%) (+5%) Purchased renewable 4. Sustainable Building Design energy credits Our Building Environmental 2. Water Conservation and Quality Sustainability Team (BEST) is Harvested rainwater for irrigation committed to learning how we and indigenous plantings to can build the most efficient, reduce use of potable water environmentally sustainable quick- Fixtures with lower water service restaurants in the world. We consumption rates have started by “getting greener” at ‘05 ‘06 ‘07 ‘05 ‘06 ‘07 existing restaurants with innovations Rain garden and filters to such as high efficiency heating and improve storm water quality cooling systems, ice machines, fryers, 3. Sensible Building Materials and and cool roofs. We are continuing Resources Use to make these improvements while Building materials with recycled * Company-owned restaurants exploring possibilities for a green content “Restaurant of the Future.” Sustainably harvested wood E3 Project – Energy, (FSC [Forest Stewardship Environment and Economics Council] certified) In Northampton, Massachusetts, an Composting and recycling ambitious building exploration is of waste including enhanced underway. Yum! is constructing its cooking oil reclamation

UK Biodiesel Case Study Each year KFC U.K. purchases used oil from restaurants, refine approximately 11.8 million liters it into biodiesel and use the of low trans fat vegetable oil for biodiesel to power 3663’s delivery use in its restaurants. After use, vehicles. This closed loop system approximately 7,702,667 liters of will generate the fuel for deliveries used cooking oil remains. KFC to all restaurants in the U.K., U.K. has recently entered into capitalizing on a waste stream and a nationwide contract with its eliminating the delivery vehicle logistics provider, 3663, to collect reliance on fossil fuels.

43 4. Lighting Efficiency 2. Water: Install rain water collection Use of sunlight to reduce the need tanks for use on gardens and in for artificial lighting restrooms; install dual flush toilets; LED lighting technology for and place flow restrictors on all parking lots, general lighting, our faucets. and signage 3. Recycling: Continue to reduce our This restaurant (E3.1) is the first of a reliance on plastics by switching series of building projects under our to paper bags; partner with a local E3 Initiative. Together they are the providers to recycle 85 percent of primary exploration vehicle to test and all waste from our restaurants; and evaluate green building methodologies achieve an 85 percent recycling for BEST. Each will require monitoring target by using closed loop over time as we continue to learn about waste recycling. the environmental performance of Our Restaurant of the Future project our restaurants and opportunities for goes far beyond incorporating improvement. E3 is integrally joined environmental considerations in the with the greening of our existing building and systems management. buildings, planned prototypes, and It is an integrated approach, taking eventual development of restaurants into consideration all aspects around of the future. Becoming green is not an design, menu innovation to expand event, but a process. There are many and provide healthier options, team reasons for innovating in this area – engagement through our E-team and environmental stewardship, customer information technology, systems and well being, associate engagement, service innovation. By integrating and cost savings. This is a substantial these multiple touch points in challenge, but well worth the benefits our overall concept for the next- to our customers, associates, and generation restaurant, we seek to shareholders. approach sustainable development Delivering Sustainable as an integral part of our business Growth Through Next- strategy. What we learn in the test Generation Restaurants market will enable us to replicate these green restaurants in other In Australia, we are embarking on locations throughout the world. one of our most progressive pilots – building KFC’s next generation, energy 5. Equipment / E-3 Project – Energy, Environment and Economics. Rendering of the KFC-Taco Bell restaurant project efficient restaurants. These restaurants Back-Of-House Team underway in Massachusetts, U.S. will be designed to use less energy and Our Back-of-House Team is working water to reduce their carbon footprint. to improve restaurant equipment Fifteen will be built in our test market design and sourcing to ensure that in Newcastle. we are maximizing both energy and We conducted research with cost savings in our restaurants. Some our consumers and learned that examples of where we are looking environmental responsibility is a key to make these changes are in our driver for current and future dining ice makers, exhaust fans, fryers, and decisions. As a result, we set targets in ovens. Recent kitchen equipment three areas for the pilot restaurants: improvements include: 1. Energy: Upgrade our energy Taco Bell in the U.S. recently management system to balance introduced a new “Grilled restaurant load and reduce usage; to Order” system that saves install refrigeration efficiency over 30,000 kWh per year per technology on refrigeration and restaurant and conserves about air conditioning to reduce energy 300 million gallons of water per usage by 15 percent; and measure year systemwide. our carbon footprint by gathering Pizza Hut in the U.S. is information from all restaurants on installing the latest high their full energy consumption at the efficiency Energy Star fryers macro level over time. in all new and existing U.S. WingStreet restaurants.

44 Environment Pizza Hut in the U.S. is utilizing participated in a week-long program a new pizza oven with an EMS surrounding Earth Day. Associates CO2 – U.S. that reduces gas usage up to received daily emails with knowledge Metric Tons/Restaurant/Year* 15 percent. When combined building information including details 238 240 235 with an oven ventilation hood, about how one can make changes in (+1%) (-2%) 253 256 256 energy consumption is reduced the office and at home surrounding (+1%) (0%) by more than 400 metric tons recycling, energy use and water per year. use. Lunch-and-Learn sessions were KFC in the U.S. has recently offered and a “Talk Green” conference developed a new oven that call was conducted with ELC has the highest energy members, who talked about current efficiency of any available on global “green” activities and took the market today. questions from associates. All U.S. restaurants use 7. Monitoring and ‘05 ‘06 ‘07 ‘05 ‘06 ‘07 Energy Star appliances where Reporting Team feasible and high efficiency We believe that we need to measure water heaters. our impacts before we can take 6. Restaurant action. Over the past two years, 143 149 150 our Monitoring and Reporting (+4%) (+1%) Education Team 160 159 160 Team performed an initial review (-1%) (+1%) Our overall environmental of our most significant impacts in management strategy is guided our U.S. operations – energy use by the ELC and its teams, per transaction, greenhouse gas but implementation requires emissions, percent of recycled content engagement with our restaurant in packaging, cubic yards of trash and managers, franchisees, and recycling, pounds of spent grease, Restaurant Support Center associates. gallons of water, and renewable Our Restaurant Education Team energy credits. communicates best practices across ‘05 ‘06 ‘07 ‘05 ‘06 ‘07 our system for new equipment Engaging Our Partners news and operating procedure We regularly collaborate with our improvements; identifies recycling franchisees, UFPC, our suppliers programs and opportunities; and consultants to help us better * Company-owned restaurants and encourages effective water manage our environmental management and waste reduction. programs and responsibilities. In 2008 at our U.S. Restaurant Support Centers, our associates

The Future - Our Challenge, Our Advantage Our focus thus far has been centered primarily on electrical energy conservation because it represents the greatest amount of energy

consumed in our restaurants and our largest source of CO2 emissions. We recognize the need to broaden our scope to include rigorous measurements and reductions in our natural gas, solid waste, and oil impacts. Plans are being developed to evaluate conservation opportunities in these areas in 2009. We are also committed to exploring our use and disposal of water, and how we can reduce both our consumption and our water based effluents. Climate change is one of the most important issues now facing the world, and we are aware of the urgency for action. We feel that we have only just begun to unleash the potential of our business to make a positive impact on the environment. We’re moving forward and aggressively working to determine the fastest way to accomplish our goals.

45 Supply Chain We are committed to providing our customers with safe, delicious meals and operating restaurants that meet the highest food safety standards. This commitment is at the heart of our operations and our supply chain management, and is evident in every aspect of our business – from raw material procurement, including livestock and produce, to our restaurant food preparation and delivery. 46 We operate in a complex global Qualifying Our Suppliers Supply Chain business environment. We seek to Our suppliers are selected, assessed incorporate social and environmental and rewarded through the Supplier principles in our sourcing and Tracking and Recognition (STAR) manufacturing practices within the system. It is a rigorous, industry- context of the varying government, recognized audit system that sets consumer, regulatory and and monitors standards for all of infrastructure dynamics that exist our brands’ key suppliers. All of around the world. our restaurants, regardless of their ownership structure or location, Food Safety and Quality must adhere to our strict food Food safety is the top priority at quality and safety standards. The Yum!. We actively work with our guidelines are translated to local suppliers to raise industry standards market requirements and regulations because we insist that our products where appropriate and without are safe and of superior quality. compromising the standards. Our supplier approval system is In selecting a supplier we look for rigorous. Suppliers have stated that key performance indicators around our approval process is one of the pest control, sanitation, operations most thorough and challenging and facility management, good systems they have experienced. manufacturing practices and product protection, recovery and food We are proud of that. security. In addition to measuring Characteristics of Our and testing food safety and security Global Food Sourcing practices, we look for outstanding Unified Foodservice Purchasing performance in quality control, not just of our product formulations, but Co-op, LLC (UFPC) manages the in suppliers’ management processes supply chain for all corporate and as well. most franchise-owned restaurants in the United States, including A&W Our suppliers are classified by food All-American Food, KFC, Long John safety risk from one to four; Class One Silver’s, Pizza Hut and Taco Bell is highest risk and Class Four is lowest. restaurants. UFPC negotiates volume The categories are determined by a purchases of equipment, food, combination of scientific validation of risk and our experience with packaging, and other supplies from the product. manufacturers and suppliers for our system. Yum!’s Global Monitoring Yum! China System – Supplier Tracking The Yum! China Division operates And Recognition (STAR) its own independent supply chain Our STAR supply chain monitoring system, working with 500 suppliers to systems incorporate supplier provide Yum! China restaurants with compliance in the areas of food safety goods and services. and quality. STAR-certified third party auditors conduct our supplier Yum! Restaurants International (YRI) audits. Each brand’s quality assurance In our global Yum! Restaurants team is responsible for managing International (YRI) markets we have our suppliers’ food safety and quality approximately 1,400 suppliers, assurance monitoring in our supply including U.S.-based suppliers that chain, at our processing facilities, and export to many countries. in our restaurants worldwide.

47 The frequency of audits is determined quality using either the global STAR by the size, risk factors related to the system or the “Precheck” system, products and manufacturing process, which is used only for new suppliers and strategic importance of the that provide products with limited supplier. Our most strategic suppliers time offerings. The STAR audit is are audited every year (Class One conducted annually for China’s through Three) and other suppliers Class One through Three suppliers, are monitored with frequency and every two years for Class relative to the size and degree of Four suppliers. risk associated with the product. Once qualified and engaged in active Continuously Improving sourcing contracts, suppliers are Our Audit Results subject to regular audits. Where issues arise, our internal auditors immediately respond and, While we operate and manage a along with the Quality Assurance global compliance system for all Team, work with the supplier to our suppliers, each international create an action plan to materially region sets its own targets and improve over a specified period of implementation goals in line with time. If a supplier fails an audit, the local conditions and criteria and brand Product Manager or Technical Yum! quality assurance standards. In Manager decides the course of action emerging markets such as India and to remedy the failure. For our first-tier Russia, we are adapting the global suppliers we work with the supplier supply chain monitoring system to on a continuous improvement local legislation while maintaining our program that is developed and high standards. measured for that specific facility. Due to the varying dynamics in our global supply chain, a Managing Food Safety Risks complete rollout of the supply chain in Our Supply Chain monitoring system will take longer Food Standards Council in these markets than in the U.S. Nothing is more important to us Until recently, most information on than protecting our consumers and monitoring performance has been our valuable brand reputation by managed and owned by the brands preventing health risks from arising and licensees. Our goal is to have a in our restaurants. Our primary web-based monitoring system fully objective is to keep our customers functional for the entire Yum! system safe. The nature of our business by mid-2009. demands that we are constantly aware of, and respond to, potential Results for Our Quality System health and safety issues related to the and Food Safety Audits food we serve. We currently monitor all of our In order to maintain a rigorous and suppliers in the U.S. using the STAR consistent focus on the dynamic system at about 1,200 supplier challenges in this area, we created locations in total. The number is the Food Standards Council in 2005. smaller for YRI markets. We currently The council works to continuously conduct at minimum STAR Food improve our food safety practices Safety Audits at approximately 85 and minimize the risk of future percent of our Class I and II suppliers safety issues from ingredients or in the YRI System. We look to increase the operation of our restaurants. this number as we introduce our Key areas of corporate oversight are global supply chain monitoring food safety, nutrition and regulatory program to all suppliers in our system compliance. The council also throughout 2008 and 2009. identifies internal and external global In China, all of our suppliers are resources to review our Supply and monitored for food safety and Restaurant Food Safety Standards, 48 Supply Chain ensure compliance and share best response workflow to ensure practices. Yum!’s Vice President of correct action and rapid Global Quality Assurance heads up communication when significant the council. Executive sponsors are threats are identified. the Chief Legal Officer, the Chief Avian Influenza Response Operating Officer and the Chief According to the World Health Public Affairs Officer. Each brand has a representative on the council, its Organization, CDC, U.S.D.A. and Chief Food Innovation Officer. U.S. Health and Human Services, properly cooked chicken is safe to Food-borne diseases can pose a eat. Nevertheless, we have taken significant risk to our supply chain added precautions with a rapid and and in our restaurants. There active response plan in the event unfortunately have been a limited that an external disease threatens number of instances where food- to enter our food supply. In 2005, related health issues have arisen in we developed an aggressive global our supply chain or our restaurants. plan after several outbreaks of Avian We have acted immediately and decisively, and equally important, we Influenza(see call out, page 50) have implemented a strategic, long- impacted our supply chain. term approach that will help us to Our successful response proved to prevent and manage these issues in be a model of success and has been the future. lauded by the industry and global Emerging Issues Program food regulators. We now have the Our global Emerging Issues Program processes and tools in place to make (EIP) is a new accountability every effort to prevent the disease framework to help protect us from entering our supply chain, from the negative impacts of to work with our poultry supply rising food issues. The program chain partners to adhere to stricter helps us anticipate local, regional guidelines, and to make sure the and global emerging issues, and disease does not manifest itself in work in partnership with our Crisis our restaurants. Some of our Management Program if an issue measures include: becomes an actual threat. Strict guidelines for raising, EIP is implemented by the Emerging handling and processing of poultry Issues Council. The council is before it enters our supply chain. comprised of leaders who are One hundred percent of the poultry responsible for making sure that we we purchase in China and in the are aware of, and able to respond U.S. is “under cover”, which means to, any potential food safety risk related to food borne disease it is not in contact with migratory and illness, regulatory issue, or birds, thus minimizing the risk health and nutrition concerns of infection. such as allergens. The council has All U.S. suppliers have biosecurity interconnected Food Safety and measures in place; all are required Regulatory Affairs teams in the U.S., to test their flocks and comply with YRI, and Yum! China. The council all federal and state regulations. is led and overseen by a steering committee of senior executives from Routine quality and food safety our Quality Assurance, Legal, Public audits of all U.S. suppliers. We Affairs and Health and Nutrition are also progressively working to functions. Members of the council are implement these audits with more responsible for day-to-day monitoring of our suppliers around the globe to of issues and reporting potential ensure that soon 100 percent of our threats back to the council. Members suppliers in our global markets will have been trained on a robust be audited. 49 Avian Influenza Case Study In the autumn of 2004 we, along with team, we developed stringent ‘”Farm Seeing the threat of AI as a non- the rest of the world, confronted the to Table” safeguards and an aggressive competitive issue that required strong threat of highly pathogenic Avian global plan for addressing AI in our collaboration, we sponsored an AI Influenza (AI). As the world’s largest supply chain. We immediately held a summit for the restaurant industry, chicken restaurant company, we have supplier summit and mandated that and asked the U.S. National Restaurant a global responsibility and duty to this plan be implemented by all of our Association to convene it. Through be fully prepared for any eventuality. poultry suppliers. We also engaged this process, we created relationships We immediately sprang into action, with many governmental and global with global AI experts who we rolling out educational and response health organizations – including can now turn to at any moment programs throughout our system the World Health Organization, the and beyond. should the issue arise again. We also U.S. Centers for Disease Control and developed our own internal expertise. Prevention, the U.S. Department of We created a global AI Booster Team, We consider our response to AI an Agriculture, and the U.S. Health and consisting of a cross-functional example of our ability to successfully leadership team including quality Human Services Department. All of engage our global system in the face assurance leaders from each of our this was accomplished before the of threats to our business. brands, our communications team, U.S. government had formalized a and all our poultry suppliers. With this response plan.

All poultry suppliers that process to help minimize the chances that our poultry for our system do so under produce could be contaminated. Our strict sanitary guidelines that ensure activities since early 2007 include: safety and quality, including strict Field inspections of our produce temperature controls. suppliers that focus on water Maintaining strict hygiene and testing for E. coli; cooking standards in our restaurants Pre-planting inspections to help We have also created a Global Food ensure that only low-risk fields Safety Task Force, led by members are used; of our senior executive team, with Pre-harvest testing for E. coli responsibility for addressing key food safety issues in our supply chain and and Salmonella pathogens of restaurants. The primary goal of the produce, including iceberg lettuce, task force is to drive improvements cilantro, romaine lettuce, cabbage and to prevent reoccurrences of food and tomatoes; safety incidents. The task force initiates Collaboration with the U.S. Centers programs to seek and promote best for Disease Control and Prevention practices in managing food related and the U.S. Food and Drug health issues and works in conjunction Administration to proactively share with the Food Standards Council. information on the issue; E. coli Response Training programs to certify In the winter of 2006, our Taco Bell supplier staff and third-party restaurant chain removed lettuce from auditors on criteria for pre- its 5,800 U.S. restaurants after several planting and pre-harvesting people became ill. Epidemiological risk assessments; data from the U.S. Centers for Disease Control and Prevention suggested Sponsorship of a summit with key that lettuce supplied to us may growers, suppliers and users to gain have been contaminated with the alignment on produce safety; and E. coli bacterium. Multiple joint-produce safety In response, our Global Food Safety meetings on testing and best Task Force worked with our suppliers practices with industry leaders, and launched a new safety program including other major quick- purely focused on fresh produce. service restaurants, retailers We now take an active leadership role and distributors. 50 Supply Chain Responsible Sourcing stun methodology and technique Even prior to the formation of Yum!, are constantly being reevaluated. our brands have focused on optimizing Our suppliers are also an integral our agriculture supply chain. Along part of this collaborative study the way we have become more aware and evaluation. of, and attentive to, our social and The Council was also instrumental in environmental impact. We have been developing the Guiding Principles for responsive to these issues as they our Animal Welfare Program. These arise, yet we cannot always control Principles, which apply to all Yum! or avoid them at every stage of the poultry suppliers across the U.S., supply chain. We work closely with focus on: food processors and, where possible, Animal treatment; with those who raise the livestock and grow our produce to work in Partnership with industry experts; environmentally responsible ways. Ongoing training and education; We have made great progress in a Performance quantification and number of areas where we feel we supplier improvement; can have the greatest and most Pest Management Case Study Communication with industry significant impact. Our key programs In 2007, one of our franchise leaders; and in responsible sourcing are aimed at: restaurants in New York City became Improving animal welfare; Funding of research. the focus of a highly publicized infestation as a result of after-hours Sustainable seafood sourcing; and External Consultation construction on the building. While our standards for animal welfare Labor practices in our supply chain. The infestation, and the attendant are high, we always seek knowledge sensationalized publicity, was Animal Welfare from external sources to improve our unacceptable and embarrassing. As a major purchaser of food products, practices where appropriate. In the Our response was immediate and Yum! has the opportunity and U.S., KFC has enlisted the assistance intense; we: responsibility to influence the way of the American Association of Avian Retained a world-renowned pest animals supplied to us are treated. Pathologists (AAAP) in an effort to expert to review our pest control We take that responsibility very clarify and further define poultry programs and standards; seriously and monitor our suppliers welfare criteria, policy and audit Defined and implemented best-in- on an ongoing basis to determine points. Yum! serves on two AAAP class pest management guidelines whether our suppliers are using Welfare subcommittees, exploring and vendor pest management humane procedures for caring for and questions concerning poultry welfare. specifications; handling animals they supply to us. We were also a prominent player Pest-proofed all company As a consequence, it is our goal to only in the joint effort conducted by the restaurants; deal with suppliers who promise to National Council of Chain Restaurants maintain our standards and share our and the Food Marketing Institute to Identified qualified pest control providers to provide pest control commitment to animal welfare. develop comprehensive guidelines for services to all restaurants, Animal Welfare in the all species of farm animals. We also company-owned and franchised; United States have a veterinarian on staff in the U.S. who provides oversight on animal Closed the restaurant under KFC Animal Welfare Advisory Council construction; and welfare practices. We have a track record of leadership Retrained restaurant teams in animal welfare. Our U.S. animal Supplier Audits on proper pest management welfare leadership program began Our goal is to work with suppliers procedures. with the formation of KFC’s Animal who maintain our high standards Welfare Advisory Council. The Council, and share our commitment to animal which also provides advice to our welfare. We monitor our suppliers other brands, helps us to continuously on a continuous basis through research new methods for both audits to determine whether they welfare advancement and viability are using procedures that ensure that will ultimately determine the respectful caring for, and handling of, adoption of improved practices. animals they supply to us. Audits are For example, through The Council, conducted at two levels: 51 Farm level – In the U.S., KFC For more information on our animal manages a farm-level audit welfare programs, please visit program for the breeding, hatching www.kfc.com/about/animalwelfare_ and raising of poultry. The program principles.asp. exceeds the standards set by the Academic Development U.S. Chicken Council and the Food Our influence has contributed to Marketing Institute. Beginning in increased interest in welfare training 2005, all of our suppliers completed and curricula at U.S. universities. farm-level audits. This marked For example, KFC has been invited the beginning of a continuous, to participate in both extension and bi-annual audit program for all undergraduate curriculum design supplier locations in the U.S. based for animal welfare modules at two on standards developed by leading leading Poultry Science Land Grant animal welfare experts at the institutions. direction of the National Council of Chain Restaurants and the Food Animal Welfare in the Marketing Institute. United Kingdom Processing level – In 2000, KFC Our YRI markets operate under adopted specific, comprehensive international guidelines that are welfare performance standards for similar to U.S. guidelines and allow processing chickens and audits its for local customization by our global suppliers against those standards. markets. The implementation and The processing guidelines and auditing of these guidelines is the audits are designed to monitor responsibility of each of our brands in and manage each step of the these markets. process to determine whether the In the U.K., KFC has developed our birds supplied to us are handled most comprehensive monitoring humanely and their suffering program in accordance with is minimized. KFC audits its more stringent and specific local suppliers for compliance, with non- regulations and requirements. The compliance potentially resulting U.K. has been at the forefront of in termination of the supplier’s the development of animal welfare contract. We have engaged the legislation in the European Union Professional Animal Auditors and is an example of how we can Certification Organization (PAACO) successfully engage with stakeholders to enhance our auditing standards on sensitive issues such as this. systemwide in our processing facilities. It is our goal to conduct Collaboration on Animal Welfare 100-percent external PAACO audits Issues in the U.K. of our poultry processing facilities in In the U.K. we have made the U.S. in 2008. considerable progress over the last 10 years in establishing and improving our animal welfare standards. The U.K. has a long history of animal welfare regulation and regulation in There is a positive dynamic with a free the U.K. is generally stricter than EU exchange of ideas and views among the regulations. We actively engage in open dialogue Animal Welfare Advisory Council members in with our suppliers in the animal an effort to enhance the welfare of poultry. welfare process, and we conduct audits on the entire chicken supply Dr. Paul B. Siegel, PhD chain, starting where the eggs are University Distinguished Professor Emeritus, laid. Every 15 months we conduct Department of Animal and Poultry Sciences, Virginia Polytechnic seven different audits with a total Institute and State University, Member of KFC AWAC of 15 suppliers, each with their own facilities. Every year we bring 52 Yum! China Food Safety White Paper Supply Chain The Yum! China Food Safety White Chapter III described Yum! China’s (7) Establish collaborative analyses Paper was written by the Yum! Complete Management System of its efforts with Shanghai Food and Drug China’s Food Safety Office and Quality Food Supply Chain, and introduces Institute of Control, and conduct Assurance team and published our STAR system (Supplier Tracking random testing on all raw materials; in March, 2008. The document and Recognition). (8) Collect new information and trends was drafted with the advice and Chapter IV detailed the Yum! China’s on food safety and address potential suggestions of Yum! China’s Food Food Safety Policies. All our policies risks; Safety advisors and other food safety are based on the risk assessment (9) Establish and develop a relationship professionals in China. The report theory, HACCP system (Hazard with the government, societies and focused on the analysis of the food Analysis Critical Control Point) associations to engage in ongoing safety situation in China and detailed and traceability system. These key discussions; Yum! China’s measures and programs measures are: (10) Actively participate in the to improve food safety practices and (1) Enhance the food safety leading formulation and revision of the our commitment to our consumers. group and establish a Food Safety Chinese food regulations/standards; The white paper received positive Office not in existence in other (11) Establish and operate a Food Safety feedback from both media and Yum! markets; Expert Advisory Committee; and the government which has been (2) Enhance and improve food safety (12) Compile and issue Yum! China’s encouraging companies to raise their assurance system; White Paper on Food Safety Policy. food safety standards. (3) Establish and improve all Chapter V described Yum! China’s Summary of the Food Safety specifications of raw materials and measures to handle several ‘hot topics’ White Paper: products; on food safety, including food-borne Chapter I includes a brief introduction (4) Strictly control the entering disease, acrylamide, trans fatty acid, to Yum! Brands Inc., Yum! China conditions of suppliers, and residue of pesticides, residue of veterinary drugs, and GMO foods. Division, highlighting the rapid growth enhance the audit and training of of the China business, and the active suppliers; Conclusions: This white paper is expected to raise the awareness and commitment to contributing back to (5) Establish Yum! China’s logistics understanding of common food safety Chinese society. system, and improve facilities and problems, and give our consumers the enhance the facility management Chapter II focused on the Present assurance along with our commitment programs; Situation of Food Safety, including that we will keep the safest food the rapid growth of the Chinese food (6) Establish a strict food safety supply and products in China. It is also industry, and some serious problems management system for intended to improve the overall food on food quality and safety in China. restaurants and our home service; safety of our suppliers. our core suppliers together to 2) its organizational approach seeks review standards and to recognize industry engagement. suppliers which have performed Our initial steps to reach out to a well in responsible animal welfare wider community of experts have management. We believe it is vital to been successful. Going forward, our maintain relationships that are built collaboration with CIWF is focused on trust and active engagement, on ongoing dialogue about our especially in times when suppliers are challenges in meeting some of the worried about potential inflationary high standards of CIWF. We will also pressures on food prices and the leverage other industry partners’ effect on their businesses. relationships at our supplier facilities In June 2007 we set up our first to create more effective and long- meeting with Compassion in term change and improvement in World Farming (CIWF) to explore animal welfare practices. collaborative opportunities. Our decision to work with CIWF was based on two considerations: 1) it is a global organization based in the U.K.; and

53 Managing Animal Welfare in policies and guidelines to local Our Other Global Markets needs and regulations. We also plan We are also making significant global coordination of knowledge advances in animal welfare programs sharing and guidance on animal and practices in other markets. welfare issues through our Animal For example: Welfare Advisory Council and other stakeholder initiatives and platforms In Mexico, we implemented an animal welfare audit program with around the world. our chicken suppliers and, going Sustainable Seafood forward, we plan to audit chicken suppliers once per year. Sourcing Seafood is one of our key food In South Africa, we are conducting product categories, especially for a set of pilot animal welfare audits based on the U.K. model, and our our Long John Silver’s brand in the goal is to design a plan to introduce U.S. and to a lesser extent, KFC. Our a program nationally. impact and influence in this area are significant. Our commitments and In Australia, we support the Animal Welfare Standards of the Australia approach in advancing sustainable Chicken Meat Federation. seafood sourcing practices have been developed over a long period of time Our long term goal is to consolidate our animal welfare practices across and demonstrate the importance the globe to establish a baseline of this issue to our business, our for animal welfare, while allowing fisheries, and the broader community our global markets to adapt their of stakeholders.

After occasional interactions with KFC representatives beginning in 2001, my activity as an advisor to the KFC animal welfare program started seriously when Yum! formed its KFC Animal Welfare Advisory Council (AWAC) in 2003. The Council is comprised of scientific experts such as myself, representatives of poultry companies that supply product to KFC, and personnel from various sectors of the Yum!/KFC organizations. At first, Yum! needed to learn a lot about poultry production and about the chicken because it had never dealt with live production before. Since 2003, the AWAC has expanded the scientific disciplines represented by its expert advisors to include animal behavior, breeding and genetics, avian physiology, and veterinary medicine. Many of the poultry company representatives on the Council have also had advanced training in relevant disciplines such as poultry nutrition and veterinary medicine. Yum! took another important step by hiring a KFC Manager of Poultry Health and Welfare to coordinate the activities of the Council and implement KFC’s animal welfare program. The reason I have been willing to serve on the AWAC is that I am convinced that KFC is committed to achieving feasible, knowledge-based, animal welfare advances in the care and management of the poultry flocks from which its products are sourced. The AWAC seeks to advise KFC on animal welfare-related matters in a way that reflects the consensus of society regarding the ethics of farm-animal care. It does not embrace the extreme views of animal activists; nor does it consider the status quo an option. I have always been impressed by the candor, knowledge and understanding of my fellow AWAC members. The AWAC has helped KFC define its animal welfare audit program and to engage its suppliers to effect meaningful improvements in poultry welfare. I am confident that this process will continue.

Dr. Bruce Webster, University of Georgia, Member KFC Animal Welfare Advisory Council

54 Supply Chain Over a decade ago we came to the for hoki and South Africa for hake. realization that, in order to ensure a These three fisheries have been lasting and diverse supply chain for certified as sustainable by the seafood, we needed to make certain largest independent, credible non- that our seafood sourcing practices governmental organization engaged are sustainable. We carefully selected in sustainable certification for wild fisheries and aquaculture operations fisheries. The New Zealand hoki in the world that are considered to fishery was certified as sustainable in be sustainable. We made a conscious 2001, the South African hake fishery effort to source our seafood from in 2004 and the Bering Sea/Aleutian fisheries that work to protect our Island pollock fishery in 2005. Since valuable seafood resources. November, 2004, 100 percent of battered whitefish has been sourced Our sourcing strategy is rooted in a from the Eastern Bering Sea Alaska philosophy that fisheries need careful pollock fishery. maintenance and preservation in order to sustain over time. To that When sourcing from regions outside end, in the early 1990s we began of the U.S. we try to ensure that the engaging experts from the fisheries seafood is produced to recognized where we source. For example, standards as well. Shrimp, the we have been actively engaged second greatest volume of seafood with the North Pacific Fishery sourced for Long John Silver’s, is Management Council (NPFMC), which produced primarily by plants in is responsible for managing the China and Ecuador. All but one of the ground fish resources off Alaska. We plants that supply battered shrimp photo courtesy At-sea Processors Association also work with the At-Sea Processors to Long John Silver’s have attained Association (APA). The APA’s mission certification by an independent is to work with fishery managers, entity, and the other is in the scientists, environmentalists and process and likely to be certified members of the fishing industry to by late 2008-early 2009. All shrimp ensure the continued health and used in Long John Silver’s popcorn sustainability of the North Pacific shrimp comes from a plant that ground fish resources. has been certified. In addition, our purchasing co-op in the U.S. spends What makes us unique in our a considerable amount of time approach is that we actively engage looking at the best possible source with the biologists that manage the for shrimp from overseas markets. fisheries from which we source. We vigorously seek relationships with Responsible Labor Practices those parties who, like us, have a In Our Supply Chain vested interest in protecting the Our Supplier Code of Conduct sets valuable seafood resources. Finally, forth our expectations and minimum we obtain our seafood as close to the standards for all suppliers and source as possible. We buy our fish subcontractors in our U.S. market. directly from the fisheries rather than The code addresses working hours through intermediaries. and conditions, non-discrimination, Moving away from potentially child labor, and forced or indentured unsustainable fisheries made labor. We require suppliers to common business sense to us. conduct audits and inspections to Since 1993, long before the issue verify compliance with the code. of sustainable fisheries became In addition, we reserve the right to popular, more than 99 percent of conduct unannounced audits and the whitefish purchased by Long inspections of supplier facilities. John Silver’s and the UFPC for the Violations lead to disciplinary action, battered fish program has been including termination of the supplier from three sources: Eastern Bering relationship for repeated violations Sea for Alaska pollock, New Zealand or noncompliance. In 2008 we are 55 The robust and healthy Alaska pollock fishery, one of the world’s largest, is recognized internationally for being well managed and sustainable. Long John Silver’s commitment to sourcing whitefish exclusively from this sustainable fishery demonstrates its commitment to the environment. Long John Silver’s has gone well beyond sustainable sourcing, however. The company is unique among major whitefish buyers for its active participation over the past two decades in the public fishery management process, promoting conservative harvest quotas and a forward-looking management regime that has benefited fishermen and consumers.

Jim Gilmore a representative of the At-Sea Processors Association

collecting information from our U.S. In May 2007, we announced that we suppliers on implementation of the would extend the agreement to all supplier code of conduct. We intend of our brands. As of April 2007, we to conduct a similar assessment in our owned five of the six fast-food chains other international markets (YRI). that were supporting the CIW. The supplier code of conduct Manufacturing For is listed on our website at Yum!’s Kids Meals www.yum.com/responsibility/ Kids Meals are not a major focus suppliercode.asp. for Yum! and represent a miniscule Tomato Suppliers in the U.S. percent of our business. We insist on only using toys that have been Another example of our engagement fully tested and meet regulatory with our stakeholders was our standards for safety in our Kids response to concerns regarding the Meals. We have implemented a working conditions on tomato farms global monitoring program for our in Florida. In March 2005, Taco Bell suppliers of toys used in Kids Meals, reached an agreement with the that is managed by a dedicated Yum! Coalition of Immokalee Workers resource and monitored by external (CIW), an organization that represents STAR-certified monitoring firms. The farm workers in Florida. Under the program is based on zero-tolerance agreement, Yum! Brands pledged safety requirements that cover all to work with CIW to improve wages facets of the process that present risk. and working conditions on Florida’s Initiated in 1999, the program meets tomato farms. Specifically, we agreed or exceeds all regulatory standards to to subsidize a penny-per-pound “pass ensure the safety of those consumers through” arrangement for tomato purchasing these products. farmers. Under this arrangement, We employ three separate audits Taco Bell restaurants would require to ensure safety, product quality its tomato suppliers to increase and social compliance, all conducted compensation to farm workers by a by pre-approved, third-party penny per pound of tomatoes picked. monitoring firms:

56 Supply Chain 1. A facility audit that measures Genetically Modified Foods adherence to pest control, Perceptions of the risks and benefits sanitation, operations and of Genetically Modified Foods (GMOs) facility management, good vary from market to market around manufacturing practices, product the globe and we strictly follow all protection, product recovery and government regulations wherever food security. we operate. In North America, GMOs 2. An in-process audit that measures are generally accepted, whereas in adherence to the production Europe consumers are more resistant quality assurance plan on a to GMOs. Where resistance to GMOs program-by-program basis. exists, Yum! Restaurants International requires all its suppliers to provide 3. A Code of Conduct monitoring non-GMO ingredients. For example: program comprised of social compliance criteria that relate to In the U.K., the Netherlands, worker health and safety, along Germany and Australia, we do not with other working conditions in source from suppliers who use the factory. GMOs or growth hormones in chicken. As a high-risk category of business, all suppliers in this category are In China, we follow Chinese monitored, and we have not regulations regarding GMO encountered any serious incidents ingredients and require statements to date. from suppliers regarding their GMO content. In South Africa, no GMOs or growth hormones are used by any of our suppliers.

The Future of our Supply Chain We are dedicated to increasing our efforts in responsible supply chain practices. We have made considerable progress in a number of key areas that are a priority for us, given the nature of our global food business and position in the food-value chain. Our goal in the coming years is to standardize our global guidelines in food safety and animal welfare across our entire system. We will begin by convening a task force of key leaders in our sourcing system to identify the most important issues, then develop an action plan to cascade consistent standards worldwide. We will also increase transparency of our labor code of conduct guidelines to our suppliers, and stimulate them to proactively implement and monitor the code. We recognize that our decentralized business model, with predominantly franchised restaurants in over 110 countries and territories as well as manufacturing and processing plants in even more countries, will require a customized approach in our international markets. We seek to build a globally consistent and rigorous program that will reflect our rapid international growth, with a keen eye on emerging markets. We will work collaboratively with our suppliers, business partners and local stakeholders to ensure that we adapt our business and social requirements to local markets.

57 Community Engagement – Our Values and Commitments

We believe in giving back to the communities in which we work and live, making a positive difference in the lives of our customers and associates and their families. We provide financial support to charities across the world, and our more than 1.4 million associates systemwide, as well as our franchisees, give to their local communities everyday – through meals, monetary donations and personal time. We know that as individuals and as a system we can make this world a better place.

58 As a global food company, we Community believe that we can make the greatest contribution and impact by making food accessible to the less fortunate in the world. We are in the business of feeding people – whether it’s the six billion customers who visit our restaurants each year or those we feed through community hunger relief initiatives. We also give back with programs that focus on college scholarships, reading incentives and mentoring at-risk teens. Business Week named Yum! one of the magazine’s “Top 15 Most Generous In-Kind Givers” for 2006 and 2007. Our Community Programs and Philanthropic Focus Yum! Brands Foundation Yum! associates in Louisville, Kentucky, volunteer at the Dare To Care Food Bank, sorting The Yum! Brands Foundation non-perishable food items to later be distributed to area hunger relief agencies. supports charities working in the areas of hunger relief, youth, education, and the arts through annual unrestricted and restricted grants. The Foundation Matching Dare to Care Food Bank, Louisville’s Gift Program in the U.S. supports largest hunger relief organization. Investment In and encourages associates to Recently in recognition of World Our Communities contribute financially to non-profit Hunger Relief, our associates We also invest in the diversity of our organizations in their communities volunteered at the Dare to Care communities via our philanthropic by matching dollar-for-dollar gifts Food Bank to pack a record-breaking programs. We have giving by associates to qualified non- 60,000 pounds of food to meet the partnerships with the following: profit groups, up to $10,000 per demand for food for children when associate per year. The Foundation school is out and they are not able to American Indian College Fund Board Support Program encourages receive subsidized breakfast or lunch. League of United Latin American associates to engage in their Our support has enabled Dare to Citizens communities by providing financial Care to expand the number of Kids support to non-profit organizations MultiCultural Foodservice and Cafés, after-school programs that with boards on which our associates Hospitality Alliance provide a nutritious meal to children actively serve. in the local community along with NAACP Dare to Care Food Bank adult-supervised activities including National Council of LaRaza We are a global company with homework clubs. This brings the far-reaching community programs, total number of meals served to National Urban League but we remain dedicated to solving at-risk youth in Louisville to nearly Organization of Chinese Americans issues at home as well. In Louisville, 100,000 annually. It has also allowed Women’s Foodservice Forum Kentucky, home of Yum! and our for the creation of the “Patrol U.S. KFC Restaurant Support Center, Against Hunger” program, a unique See our complete list of sponsored one in five children is at risk of going partnership with the Louisville national community organizations to bed hungry each night. Since Metro Police Department that (U.S.) at: www.yum.com/ 2002, Yum! and its associates have provides food to housebound elderly. responsibility/div_community.asp. committed over $7 million to end The program is the first of its kind in hunger in the Kentucky/Indiana area the nation and is considered a model through our partnership with the for other communities.

59 YUMeals the largest donor to the Boys & Girls We’re also addressing hunger across Club, giving over $22 million for teen the U.S. through our YUMeals programming. The partnership has program. Since its launch over a also created 2,000 TEENSupreme® decade ago, YUMeals has become Centers, which provide safe, positive the largest prepared-food donation environments for at-risk teenagers. program in the world. Through Taco Bell has also launched the YUMeals, in 2007 we donated nearly Teen Hero Awards with MTV in 11 million pounds of wholesome 2008, recognizing 39 teens for their food, with a fair market value of outstanding community service work $45 million, to needy families and with $225,000 in grants. children. Since creation of the KFC Colonel’s Scholars program, we’ve donated over 105 KFC’s Colonel’s Scholars Foundation million pounds of food, with a value is empowering students to improve of $403 million, to those at risk their lives with scholarship resources of hunger. The food is distributed to attend an accredited college within through a network of over 3,000 their state of residence. KFC Colonel’s hunger relief organizations in Scholars enables high school students hundreds of communities across the with entrepreneurial drive, strong U.S. We are exploring initiating this perseverance and demonstrated program in other countries in 2008 financial need to pursue up to four and 2009. years of study at an accredited Taco Bell Foundation for Teens institution in the state they reside. The Taco Bell Foundation for Teens is The scholarship provides funding for committed to helping teens become tuition, fees, books and room and successful and productive leaders board, up to $5,000 per year. Since in their communities. In 1995, the the program started in 2006, the Foundation partnered with the Foundation has awarded scholarships Boys & Girls Clubs of America on to 200 students. teen-focused initiatives designed to Pizza Hut BOOK IT!® Program build self esteem, leadership skills Since 1985, Pizza Hut has been and values. Since the establishment making reading fun for more than 22 of this partnership, Taco Bell, its million children per year through the franchisees and customers have been BOOK IT! Reading Incentive Program. The Pizza Hut BOOK IT! Program has become the largest reading- motivation program in the U.S., with currently active participation in more than 900,000 classrooms. Pizza Hut has invested nearly one-half billion David Novak (above) and dollars in it, and has awarded more members of his executive than 183 million Personal Pan Pizzas team (right) host a special to students who have met their lunchtime Kids Café monthly BOOK IT! reading goals. event at Neighborhood House in Louisville, Kentucky.

60 Community World Hunger Relief – From Hunger to Hope As we approached our 10th The funds raised for the WFP were the following emergency operations: anniversary in 2007, we decided to given by us as unrestricted donations Myanmar: 6673 metric tons of rice align our system around a large scale with the caveat that WFP use the were purchased to feed 750,000 crisis that we are well positioned to funds toward “greatest needs” survivors of Cyclone Nargis; address – hunger relief. We developed around the globe, allowing WFP the an annual initiative that we call “World flexibility to get food and resources Bolivia: 100,000 people affected by Hunger Relief,” leveraging the power where they are most needed. We also floods were fed and a pipeline break in of our global restaurant system to covered the funding of WFP’s not- the project was closed; address hunger through awareness, for-profit, industry-low administrative Somalia: 1.2 million people imperiled volunteerism and fundraising. fees (approximately seven percent) by civil conflict were given 685,000 In October 2007, our associates, associated with the program with a fortified corn-soya blend rations; franchisees, and suppliers in 100+ gift from the Yum! Foundation. This Pakistan: 132,000 flood victims were countries joined forces to bring ensured that all funds donated by provided fortified corn-soya blend awareness and action to this global consumers went directly to hunger rations; crisis. It became the world’s largest relief actions around the globe. private sector hunger relief effort in Peru: 7,500 survivors of a devastating history, and we plan to repeat it every The Impact earthquake were given rice; and year from this point forward. The impact of the dollars contributed from World Hunger Relief was Bangladesh: 209,000 wheat soya Here’s what we accomplished. astounding. blend rations were delivered to victims Saved 1.6 million people from of Cyclone Sidr. starvation. School Feeding. Over 41,000 children were fed more than 8.2 million meals World Hunger Relief is our annual Drove awareness of the hunger issue at school for one year in the following global initiative to fight hunger. By among 1.5 billion people around the countries: Guatemala, El Salvador, engaging our system, our associates, globe, reaching 95 percent of the Rwanda, Lesotho, India. Sri Lanka, and our customers in the movement, world’s countries through online, Indonesia. In Ethiopia, WFP’s school we know we’re helping move people broadcast and viral marketing feeding program was able to remain from hunger to hope. We look forward campaigns. operational for an additional year, to sharing future growth of the program and the life-saving work the Enlisted one million of our associates, making a life saving difference to WFP is able to do because of it. franchisees and their families who 438,000 primary school-age children. volunteered approximately four According to the WFP, without our More about World Hunger Relief million hours – valued at $75 million intervention this program would have can be found on our website at in donated time – to aid hunger been shut down. www.fromhungertohope.com. relief efforts in communities Emergency Relief. World Hunger Relief worldwide, making this the world’s and the Yum! Brands’ donation aided in largest volunteer effort in support Photo Credit – WFP/Julia Stewart of hunger relief. Raised more than $16 million for hunger relief agencies around the globe. The primary beneficiary of these funds was the United Nations World Food Programme (WFP), the world’s leading humanitarian agency feeding more than 80 million people, including nearly 60 million children, in the world’s least developed nations. Other hunger relief organizations also received funds in countries where the WFP has no structured organizations. Donated the equivalent of $187 million through marketing awareness efforts, volunteerism, cash and food contributions.

61 Charitable Contributions facilities. YRI Australia is directly Around the World involved in several fundraising Our impact stretches far beyond the initiatives throughout the year U.S. We are deeply committed to that include suppliers, franchisees, making positive changes in all the customers and associates. In 2002, countries in which we operate. YRI Australia was recognized by the Foundation for achieving the $1 Here are just a few examples: million fundraising milestone in its 10- Giving Metrics – China year association. To date, YRI Australia Yum! Foundation (U.S.) KFC China and the China Youth has raised more than $7 million for Development Foundation (CYDF) Total 2007 giving: $ 4,835,000 medical research. established The KFC China First Light Total Arts: $ 184,000 Foundation in 2002 to help students Reach is an organization targeted at reducing youth suicide by providing Total Community: $ 2,381,550 in need. This scholarship fund is the first of its kind in the country and peer-group support and teaching life Total Higher Education: $ 80,000 introduces recipient students to skills to teenagers. In the past four Total Lower Education: $ 229,000 three aspects of “help” – receiving years, KFC Victoria has supported Reach with fundraising activities, Total Health: $ 138,155 help via the scholarship money and opportunities, engaging in self- including encouraging associates to Total Diversity: $ 340,250 help via work-study employment volunteer to help run and facilitate O ver 25 percent of Yum!’s U.S. annual many of the specific youth-orientated opportunities with Yum!, and helping corporate giving goes to support programs. others in social service. The project predominantly minority communities. has been funded for 10 years with Additional Market Initiatives 6 3 percent of annual scholarships given an investment of $4.7 million US We support many other worthy to Yum! associates or children of dollars. It will provide financial aid to causes financially and through associates through the Andy Pearson students at approximately 40 colleges associate volunteerism all around Memorial Scholarship Fund goes to and universities in 15 cities including the globe. For example, KFC and students of color; 36 percent goes to Tianjin, Guangzhou, Shenzhen, Pizza Hut Thailand are building new female students. Chengdu and Wuhan, at an average elementary schools in impoverished Total Dare to Care: $ 1,000,000 of $620 US dollars per year per villages across the Kingdom. [Note: All contributions to Dare to Care student. To date, an equivalent of In South Africa, we financially support Food Bank are distributed through Metro 2,820 (annualized) students have United Way of Louisville. Total yearly the SOS Children’s Villages, which received this scholarship. contribution to Dare to Care is $1 million runs home-based villages for children when totaled with associate contributions.] Yum! Restaurants from disadvantaged communities. In 2007 we donated Rand 1,365,674.00. Total Associate International Giving Match: $ 843,467 UK In South Korea, the “Pizza Hut Korea ChildLine, the official charity of KFC YUMeals Sharing Love Trailer” program has U.K., is a free, 24-hour help-line for Donations in 2007: been feeding 50 to 100 children and children and young people in the U.K. disabled people per month since May 3,271 participating restaurants who are in trouble or danger. Trained 2004. The program is run out of a • 10,057,289 pounds of food donated volunteer counselors comfort, advise large mobile kitchen that tours, on and protect children and young • $45.4 million, value of food donated average, four times per month and people who feel they have nowhere brings food and games to people Total YUMeals 2003-2007: 51,455,266 lbs. else to turn. throughout South Korea. The trailer is Total YUMeals prior Australia staffed by Pizza Hut associates. to 2003: 49,349,964 lbs. YRI Australia’s two major community Disaster Relief activities are The Millennium Total YUMeals since On May 12, 2008, a 7.9 magnitude start in 1992: 100,805,230 lbs. Foundation and Reach. earthquake struck the Sichuan The Millennium Foundation raises Province of China. Officials estimate funds in support of critical medical the number of dead at around research at one of Australia’s largest 60,000 and over 100,000 injured. teaching hospitals and research Over 70 Yum! China restaurants were

62 Community affected, most of which closed in the Associate Volunteering aftermath of the earthquake, but have Our associates are champions for our now begun to reopen to serve our customers and for the communities customers a warm meal and offer a in which they live. We support our friendly and inviting safe haven in the associates’ volunteer efforts, and stressful environment. associates are encouraged to work The Yum! Foundation and the Yum! with their supervisors on volunteer China Division have donated $2.3 opportunities. million US dollars to the “Yum! Family Outstanding associate volunteers Fund” to help assist our teammates are recognized with our Community in China who were affected by this Mania Award, presented to select disaster. We want to help them rebuild U.S. associates for their outstanding their lives as quickly as possible with commitment of time to a local non- money for food, shelter and clothing. profit. Each May and October, one In May 2008, we contributed or two associates are recognized at $450,000 to the Cyclone Nargis relief the All Team Meeting in Louisville. A group of kids enjoy a hot and delicious As part of the Award, we sponsor a KFC meal at a Louisville-based Kids Café. efforts in Myanmar through our 30-second commercial spot on a TV The Yum! Brands Foundation supports partnership with the United Nations numerous Kids Café locations in Louisville station local to the associate which World Food Programme. and Southern Indiana, providing meals to features the associate and the agency over 100,000 children each year. In addition, in 2005, our associates for which the associate volunteers. and franchisees donated nearly $6 We also present a $10,000 check million to aid victims of the Southeast to the non-profit in support of Asia tsunami, the Pakistan earthquake the associate’s dedication and and Hurricane Katrina in the U.S. commitment to the organization.

The Future of Giving at Yum! We believe that giving back and making a difference in the lives of the less fortunate is our privilege and our responsibility. The charitable spirit and culture of Yum! directs our efforts around the globe. World Hunger Relief is our signature global program to address hunger and hopelessness. Our partnership with the U.N. World Food Programme has succeeded in ways we never imagined possible. Through it we have gone beyond making a contribution to relieving hunger and we have built momentum for ongoing volunteerism and community engagement globally by giving our associates the tools, opportunities and encouragement to place themselves at the heart of pressing societal issues. It is not an easy task to rally our 1.4 million associates across the world around a single cause. Our work in 2007 was a great start, but more can and must be done. We have set a goal for 2008 of 100 percent systemwide participation, 5 million volunteer hours and a minimum $1,000 USD raised by every company and franchise restaurant in our system. In addition, we’ve taken our program to an even higher level by engaging in and making a global commitment at the Clinton Global Initiative held in late September, 2008 in New York City. Yum! Brands committed to raising and donating $80 million in cash over five years to help the WFP and other hunger relief agencies provide 200 million meals to school children in the areas of greatest need around the globe. We will look to this flagship program as a best practice and example for our future global initiatives.

63 Letter from the Chief Public Affairs Officer

Dear Stakeholders,

Thank you for your interest in our first Corporate Responsibility Report. We hope you find it informative and useful. In the spirit of transparency, we attempted to provide you with an overview of the many areas in which we are practicing social responsibility and Serving the World. I recognize that our accomplishments will exceed some people’s expectations, while at the same time, may fall short of others. We are proud of the CR progress we have made in our first eleven years as a public company. By anyone’s measure, our impact on world hunger, through our partnership with the United Nations World Food Programme and other hunger relief agencies, is something we believe is both a privilege, and a responsibility. We plan to expand our movement year over year to help wipe out hunger in impoverished parts of the world where they’ve never even heard of our restaurant brands. We have a longstanding commitment to give back to the communities in which we operate, too, and believe strongly in nourishing the minds, bodies and spirits of those less fortunate. We believe our community support, with hunger relief as our primary cause, is and Jonathan Blum will increasingly become a hallmark of our great company. At the same time, we Senior Vice President, fully recognize our responsibility to be stewards of the environment, through energy Chief Public Affairs Officer, savings, use of recycled materials and innovative ways to preserve our planet. Yum! Brands, Inc. Equally important is our commitment to health and nutrition. In early 2007, both KFC and Taco Bell in the U.S. were pioneers in switching to cooking oils with zero grams trans fat per serving. Each of the company’s brands around the globe already offer “Better For You” options, and are looking at ways to reduce sodium and make continuous improvements to the nutritional profile of their products. This year, we were proud to announce that we will be the first in the U.S. to voluntarily place calories on the menu boards of our company-owned restaurants, and will encourage our franchisees to do the same. This will be completed by January 1, 2011. At the same time, we will continue to make full nutritional information about our products available on our websites and in restaurant brochures. We plan to expand Additionally in the United States, the Company will launch on-line exercise programs to help educate consumers about maintaining a balanced lifestyle, and voluntarily our movement year agreed to eliminate advertising on television programs specifically aimed at children over year to help under 12 years old. In China, our team has created the world's largest 3-on-3 basketball tournament, with 24,000 teams participating in 400 plus cities. We are wipe out hunger exploring similar exercise program opportunities in other countries. in impoverished All food can be part of a healthy diet, if eaten sensibly and balanced with exercise. It’s all about energy in – energy out, and a matter of personal accountability and parts of the world common sense. We are committed to continue to offer Better For You options, educate consumers about the foods they eat, and promote exercise so they can where they’ve never maintain a balanced lifestyle. even heard of our We expect to publish a Corporate Responsibility Report every other year so you can measure the progress we are making on a number of fronts. While we may not be restaurant brands. perfect in all that we do, we have set our sights on nothing short of excellence. We have a long way to go, but we’re proud of all the work we’ve accomplished thus far and hope you will feel free to share your ideas, thoughts and perspectives with us so that we may continue to get better and better at corporate responsibility.

Thank you again for your interest in our Corporate Social Responsibility.

Best regards,

Jonathan Blum Senior Vice President, Chief Public Affairs Officer 64 The Future

Board of Directors Senior Officers David C. Novak David C. Novak Chairman, Chief Executive Officer Chairman, Chief Executive Officer and President, and President Yum! Brands, Inc. Graham D. Allan Samuel Su President, Yum! Restaurants International Vice Chairman, Scott O. Bergren President, Yum! Restaurants China President and Chief Concept Officer, David W. Dorman Pizza Hut Senior Advisor and Managing Director, Jonathan D. Blum Warburg Pincus, LLC Senior Vice President, Massimo Ferragamo Chief Public Affairs Officer Chairman, Ferragamo USA, Inc., Emil J. Brolick a subsidiary of Salvatore Ferragamo Italia Chief Operating and Development Officer J. David Grissom Harvey Brownlee, Jr. Chairman, Mayfair Capital, Inc. and Chief Operating Officer, KFC, U.S.A. Chairman, The Glenview Trust Company Ben Butler Bonnie G. Hill President, Long John Silver’s/A&W President, B. Hill Enterprises, LLC Anne P. Byerlein Robert Holland, Jr. Chief People Officer Consultant Christian L. Campbell Kenneth Langone Senior Vice President, General Counsel, Founder, Chairman, Chief Executive Officer Secretary and Chief Franchise Policy Officer and President, Invemed Associates, LLC Richard T. Carucci Chief Financial Officer Jonathan S. Linen Advisor to Chairman, Greg Creed American Express Company President and Chief Concept Officer, Taco Bell Thomas C. Nelson Chairman, Chief Executive Officer Roger Eaton and President, President and Chief Concept Officer, National Gypsum Company KFC Thomas M. Ryan Timothy P. Jerzyk Chairman, Chief Executive Officer and Senior Vice President, Investor Relations President of CVS Caremark Corporation and Treasurer and CVS Pharmacy, Inc. Ted F. Knopf Jackie Trujillo Senior Vice President, Finance and Chairman Emeritus, Corporate Controller Harman Management Corporation Patrick C. Murtha Robert D. Walter Chief Operating Officer, Pizza Hut, U.S.A. Founder and Executive Director Rob Savage Cardinal Health, Inc. Chief Operating Officer, Taco Bell, U.S.A. Samuel Su Vice Chairman, President, Yum! Restaurants China

65 Trademarks Yum! Brands’ Corporate Responsibility Report contains many of the valuable trademarks owned and used by Yum! Brands and subsidiaries and affiliates in the United States and worldwide.

Verification Yum! Brands Corporate Responsibility Report contains information about pertinent aspects of our business related to our products, our associates, the environment, our relationship with suppliers and communities we serve. Forward-looking statements included in the report reflect management’s expectations regarding future events and future performance. Yum! continues to launch new initiatives and make changes to our business. These developments, together with the uncertainties inherent in forward-looking statements, mean that programs and results may differ from those described when the report was first issued.

Contact Information: Acknowledgments: FrC o oRPORATE CSR Consultants: BSR Responsibility Inquiries: San Francisco, CA Karen Sherman Design: Black & White, Inc. Senior Director, Corporate Social Louisville, KY Responsibility 502-874-2311 Printing: Welch Printing Company Louisville, KY For Shareholder Inquiries: Tim Jerzyk Senior Vice President, Investor Relations and Treasurer 502-874-2543 For Government Affairs Inquiries: Paul Carothers Vice President, Government Affairs 502-874-8552 For Yum! Public Relations Inquiries: Amy Sherwood Vice President, Public Relations 502-874-8200

66 We welcome your feedback on our progress and ways to improve future reports. Please visit our online survey at www.yum.com/responsibility/. Your feedback is greatly appreciated.

[email protected] or Corporate Social Responsibility Department Yum! Brands, Inc. 1441 Gardiner Lane Louisville, KY 40213 USA

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