Board of Directors Senior Officers David C. Novak 59 David C. Novak 59 Chairman, Chief Executive Officer and President, Chairman, Chief Executive Officer and President, Yum! Brands, Inc. Yum! Brands, Inc. Jing-Shyh S. (“Sam”) Su 59 Jing-Shyh S. (“Sam”) Su 59 Vice Chairman, Yum! Brands, Inc. Vice Chairman, Yum! Brands, Inc. Financial Highlights Chairman and Chief Executive Officer, Chairman and Chief Executive Officer, Yum! Restaurants China Yum! Restaurants China (In millions, except for per share amounts) Year-end 2011 2010 % B/(W) change David W. Dorman 58 Scott O. Bergren 65 Company sales $ 10,893 $ 9,783 11 Non-Executive Chairman, Chief Executive Officer, Pizza Hut U.S. and CVS Caremark Corporation Franchise and license fees and income 1,733 1,560 11 Yum! Chief Innovation Officer, Yum! Brands, Inc. Total revenues $ 12,626 $ 11,343 11 Massimo Ferragamo 54 Jonathan D. Blum 53 Operating Profit $ 1,815 $ 1,769 3 Chairman, Ferragamo USA, Inc., Senior Vice President, Chief Public Affairs and a subsidiary of Salvatore Ferragamo Italia Net Income – Yum! Brands, Inc. $ 1,319 $ 1,158 14 Global Nutrition Officer, Yum! Brands, Inc. (a) Diluted Earnings Per Common Share before Special Items $ 2.87 $ 2.53 14 Mirian M. Graddick-Weir 57 Anne P. Byerlein 53 Special Items Earnings Per Common Share (a) (0.13) (0.15) NM Executive Vice President Human Resources Chief People Officer, Yum! Brands, Inc. Merck & Co., Inc. Reported Diluted Earnings Per Common Share $ 2.74 $ 2.38 15 Christian L. Campbell 61 Cash Flows Provided by Operating Activities $ 2,170 $ 1,968 10 J. David Grissom 73 Senior Vice President, General Counsel, Secretary and Chairman, Mayfair Capital, Inc. and (a) See page 23 of our 2011 Form 10-K for further discussion of Special Items. Chief Franchise Policy Officer, Yum! Brands, Inc. Chairman, The Glenview Trust Company Richard T. Carucci 54 Bonnie G. Hill 70 Chief Financial Officer, Yum! Brands, Inc. President, B. Hill Enterprises, LLC Niren Chaudhary 49 Robert Holland, Jr. 71 President, Yum! Restaurants India Contents Managing Director and Advisory Board Member, Essex Lake Group, P.C. Greg Creed 54 Dear Partners.....................................................................................1 Chief Executive Officer, Taco Bell China and A Whole Lot More .......................................................2–5 Kenneth Langone 76 Founder, Chairman, Chief Executive Officer Improving US Brand Positions .................................................... 6-7 John Cywinski 49 and President, Invemed Associates, LLC Core Strategies ...................................................................................... 8 President, KFC U.S. Business Model...................................................................................... 9 Jonathan S. Linen 68 Roger Eaton 51 Taking People With You ..................................................................... 10 Advisor to Chairman, American Express Company Yum! Chief Operations Officer, Yum! Brands, Inc. Thomas C. Nelson 49 Larry Gathof 50 Chairman, Chief Executive Officer and President, Vice President and Treasurer, Yum! Brands, Inc. ABOUT THE PAPER USED FOR THIS REPORT National Gypsum Company Patrick Grismer 50 Thomas M. Ryan 59 Chief Planning and Control Officer and The inks used in the printing of this report contain an average of 25% - 35% vegetable oils from plant Former Chairman and CEO, derivatives, a renewable resource. They replace petroleum based inks as an effort to also reduce Senior Vice President, Yum! Brands, Inc. volatile organic compounds (VOCs). CVS Caremark Corporation The cover and first 14 pages of this report were printed using FSC-certified paper made with 50% Timothy P. Jerzyk 58 recycled content including 24% post-consumer waste. Robert D. Walter 66 Senior Vice President, Investor Relations Founder and Retired Chairman/CEO, Yum! Brands, Inc. Cardinal Health, Inc. Muktesh (“Micky”) Pant 57 Chief Executive Officer, Yum! Restaurants International David E. Russell 42 Vice President and Corporate Controller, www.yum.com/annualreport Yum! Brands, Inc. Dear Partners, 14% EPS Growth* I am pleased to report we delivered 14% EPS growth in 2011, excluding special items, marking the 10th consecutive year we achieved at least 13% and exceeded our annual target of at least 10%. +7% We once again demonstrated an ability to deliver strong results even in the System Sales Growth** face of a challenging economic and macroeconomic environment. This is backed up by the fact we grew system sales 7%, prior to foreign currency translation and proved to be one of the leading retail developers +1,561 of units outside the U.S., as we opened 1,561 new units, the eleventh New Units Opened straight year we’ve opened more than 1,000 new units. We generated $1.3 billion of net income and over $2 billion in cash from operations. Our share price jumped 20% for the full year, on top of 40% in $1.3 billion 2010. We take special pride that over the long term our five year average Net Income annual return, including stock appreciation and dividend reinvestment, is 17% versus a flat S&P average. Our strong cash flow generation, combined with our disciplined approach +14% Increased Dividend to deploying capital, allowed us to increase our dividend 14%, to an annual rate of $1.14 per share. Every year in December we host our Investor and Analyst Day in New $1.14 York. This meeting gives us the opportunity to “go public” with our goals Annual Dividend and commitments as well as showcase our management talent from Per Share Rate around the world. The theme of our 2011 meeting was “On the Ground Floor of Global Growth: China and a Whole Lot More.” No statement could better describe Yum! Brands. We, of course, highlighted our 10-year track record, but even more importantly, the future growth prospects of our company. The facts are we have a portfolio of brands with leadership positions in China and other emerging markets, with a long runway for growth. We have an asset base of over 37,000 restaurants and we continue to make progress leveraging these assets further by building sales layers and expanding dayparts. Additionally, we invested over $900 million in 2011 in the future growth of our business and returned cash to shareholders through share buy backs and a meaningful and growing dividend. All of this adds up to a growing confidence in our business model. As a matter of fact, we’re confident the best is yet to come as we pursue our objective to be the defining global company that feeds the world. Let me highlight how some of Yum!’s unique strengths position our company for future growth. David C. Novak Chairman & Chief Executive Officer, Yum! Brands, Inc. *Excluding special items **Prior to foreign currency translation 1 2 Over half our operating profit is now generated in China and the First, our lead- 72 other emerging countries in which we operate throughout the world. Yum!’s strongest businesses are located where the highest ership position growth is expected to occur in the years ahead. This is a very powerful combination. in China and We view China as the best restaurant growth opportunity of the 21st century. Our brands further strengthened their category-leading other emerging positions with a record 656 new restaurants and extraordinary same store sales growth of 19% this past year. KFC now has 3,701 markets: restaurants in over 700 cities throughout the country, and continues to expand into new cities as well as increase its penetration levels in existing markets. Pizza Hut Casual Dining now has 626 units and is successfully expanding in lower-tier cities. Its strategy to offer tremendous variety, everyday value and refresh 25% of its menu twice per year has consistently driven sales and profit growth. It’s important to note that China new unit returns are the best in our business, with cash paybacks within 3 years. The macroeconomic environment continues to 656 work in our favor in China. Rising incomes are New restaurants in China in 2011. making our brands even more affordable for an increasing number of people. In fact, the consuming class is expected to double over the next 10 years, going from 300 million to at least 600 million people, as significant urbanization continues. With this tailwind, our new-unit development pace should continue at a high rate, and same store sales should continue to grow. 135 Our strategy in China is to have leading brands in every significant Pizza Hut Home Service stores category. KFC is the clear leader in western quick service restaurants. in China. Pizza Hut is far-and-away the western casual dining leader. We’re developing Pizza Hut Home Service to capture the growing off- premises market and now have 135 units. We’re also building East Dawning to be the premier mainstream Chinese food quick service restaurant concept. And I’m pleased to say on February 1, 2012, we acquired Little Sheep, a leading casual-dining concept in China, with approximately 450 system restaurants. This acquisition advances our strategy to have leading brands in every significant category in China. We are looking We’re building East Dawning to be forward to strengthening Little Sheep’s operational model and the premier mainstream Chinese increasing its market leadership position. We’re very excited about food quick service restaurant. the long-term potential of this brand and will make the necessary investments required to ensure its success. 3 Given our past strategic investments, as I mentioned earlier, we not only have the China opportunity, we have a whole lot more. A case in point is we have made incredible progress in India, opening 101 new restaurants in 2011. Ten years ago, we were essentially just beginning with KFC in India, and now it’s our second leading country for new unit development. In fact, we’re so excited about our prospects in India, and its impact on the future growth of Yum!, that we’re going to break it out as a separate division for 2012 reporting directly to me.