Yum! Brands Annual Report 2013

FY2013 Annual Report · Yum! Brands

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the pOwer OF

4,800,000,000 transactions
1,900,000,000 dollars in franchise fees
1,500,000 associates
40,000 restaurants
1,952 new international restaurants
128 countries
3 powerful brands

On the GrOund FlOOr OF GlObal GrOwth

Yum! Brands 2013 Customer Mania Report

Financial Highlights

(In millions, except for per share amounts)
Year-end

Company sales

Franchise and license fees and income

Total revenues

Operating Profit

Net Income – Yum! Brands, Inc.

Diluted Earnings Per Common Share before Special Items (a)

Special Items Earnings Per Common Share (a)

Reported Diluted Earnings Per Common Share

Cash Flows Provided by Operating Activities

(a) See CR 23 of our 2013 Form 10-K for further discussion of Special Items.

2013

$ 11,184

1,900

$ 13,084

1,798

1,091

2.97

(0.61)

2.36

2,139

2012

% B/(W) change

11,833

1,800

$ 13,633

$ 2,294

1,597

3.25

0.13

3.38

$ 2,294

(5)

(4)

(22)

(32)

(9)

(30)

(7)

Contents

Dear Partners..................................................................................... 1

China ............................................................................................... 2–6

India ..................................................................................................7

Yum! Restaurants International ..................................................... 8-9

U.S. .....................................................................................................10-11

Summary ...........................................................................................12-13

Company with a Huge Heart .............................................................14

Yum! Future Back Vision .....................................................................15

Yum! Dynasty Growth Model ............................................................16

About the pAper used for this report

The inks used in the printing of this report contain an average of 25% - 35% vegetable oils from plant
derivatives, a renewable resource. They replace petroleum based inks as an effort to also reduce
volatile organic compounds (VOCs).

The cover and first 16 pages of this report were printed using FSC-certified paper made with 50%
recycled content including 24% post-consumer waste.

www.yum.com/annualreport

Amounts set forth on the prior page are system-wide numbers, which include company and franchisee transactions, restaurants and associates.

Dear Partners,

2013 was clearly a challenging year, as full-year EPS declined 9% to
$2.97 per share, excluding special items. While these results were
driven by the underperformance of our KFC China business, the rest
of Yum! delivered essentially on-target results.

If you’ve followed us over the years, you know one of the things
we’re most proud of as a company is our ability to drive what we call
dynasty-like performance, which is generating at least 10% growth
in earnings per share year after year. As you know, when a company
does that, its’ stock price takes care of itself. And we achieved at
least 13% EPS growth, excluding special items, for 11 consecutive
years until 2013.

Though our 2013 results were well below our own high standards for
performance, we used the year as an opportunity – I’d say imperative
– to take a step back, re-evaluate and strengthen all aspects of the
business so that we come out stronger and better prepared to win
going forward, not just in China but all around the world.

I’d go as far to say that we did some of our very best
work in 2013 readying for the future. I want to highlight
the work we did last year to set us up for a strong
bounce-back year in 2014, and re-establish our track
record of consistent double-digit EPS growth in the
years ahead.

Let me start with our decision to reorganize the business. As of
January 1, 2014, we combined our Yum! Restaurants International
and U.S. divisions into three global brand divisions: KFC, Pizza Hut
and Taco Bell. China and India will remain separate divisions given
their strategic importance and tremendous growth potential.

Going forward, our three new divisions will define and drive the
strategic positioning and operating models for KFC, Pizza Hut and
Taco Bell, and will work closely with our China and India teams to
ensure tight integration on brand initiatives. We believe having 100%
focused brand teams will enable us to more aggressively accelerate
growth in a way that generates higher returns and enhances
shareholder value. We also believe know how sharing will be more
powerful by bringing the U.S. and international businesses together.

david C. Novak
Chairman & Chief Executive Officer,
Yum! Brands, Inc.

FOREIGN BRAND IN CHINA #1KFC*CHINA

Let me now address KFC China, which was obviously our biggest
challenge last year. Specifically, we are in the process of overcoming two
issues that significantly impacted KFC sales in 2013: negative publicity
from the poultry supply incident in late December 2012 and subsequent
news of Avian Flu. Here are some of the major actions we took in 2013 to
strengthen our KFC business in China.

First, in an effort to build and reinforce positive consumer perceptions
around the safety of our food, our ongoing “Operation Thunder”
initiatives strengthened our poultry supply chain. I assure you, we are
always in the process of improving our supply chain. We also introduced
a powerful quality assurance campaign called “I Commit.”

As a result, we are happy to see significant
progress in rebuilding trust at KFC, with our
key brand attribute scores now nearly back
to where they were in 2012.

While we experienced significant sales deleverage at KFC, the China
team deserves a lot of credit for doing an excellent job managing
costs. We sharpened our ability in the areas of sales forecasting, labor
scheduling and how best to optimize service levels with fewer labor
hours. This capability will help us drive profitability going forward.

Now, as I’ve always said, the bedrock of our success in China has been
our outstanding restaurant operations, which are getting stronger and
stronger. In 2013, we hired over 8,000 new management recruits into
our Whampoa Management Training Academy because we’ll be opening
thousands of new restaurants in the years ahead. Nearly 100% of our
restaurant managers have a college degree, and about 50% of our
restaurant team members are university students.

With world-class operations as our foundation, we opened 428 new
KFCs this past year and now have almost 4,600 KFCs in over 900 cities
in China…that’s more than twice the size of our nearest competitor.
KFC also has the largest home delivery business in China, with 70% of
our orders being placed online. As a testament to our success, we were
named the #1 foreign brand in China in a 2013 report published by the
BBC. There’s no doubt KFC has been, and continues to be, a power brand.

*2013 Report published by the BBC.

4,600

KfCs iN over 900
Cities iN ChiNA

8,000

w
e
n

MANAGeMeNt
reCruits

FOREIGN BRAND IN CHINAOur focus now is to bring more innovation and energetic news to our
customers. In fact, we have an aggressive and comprehensive plan to
restage the KFC brand in the second quarter, which includes breakthrough
innovations in our products, menu management, marketing calendar,
advertising and the digital customer experience. Overall at KFC China, we
know we still have work to do but we’re confident we are making progress
rebuilding trust with consumers and improving same-store sales.

PIZZA HUT CASUAL DINING CHINA

For Pizza Hut Casual Dining, 2013 was a strong year as we grew same-store
sales by 4% and opened 247 new restaurants, surpassing the 1,000 unit
milestone. With over 1,000 units in 277 cities, we are clearly the number
one western casual dining chain, with a 6:1 lead over our nearest competitor.

Pizza Hut Casual Dining is arguably one of the greatest success stories
in our industry. In the last three years, we have more than doubled our
store count, grown average unit volumes by 30% and achieved home-run
economics with restaurant margins above 20%.

Pizza Hut Casual Dining goes well beyond pizza as almost two-thirds
of sales are non-pizza items. We also continue to leverage our assets
throughout the day and have expanded our breakfast offering into over
120 restaurants. This is a huge opportunity for us as our long-term goal is
to create and own the midscale casual dining breakfast occasion in China
on a scale that matches what exists in the U.S. today. In fact, we will be
expanding breakfast into an additional 200 units in 2014.

All this is leading to an amazingly
strong economic model that
generates two-year cash paybacks
on new unit openings, so it’s full
speed ahead for our Pizza Hut
Casual Dining new unit development
and expanding into lower-tier cities.

30%

AverAGe uNit
voLuMe GroWth

PIZZA HUT HOME SERVICE CHINA

Now, the other thing that’s exciting about China is our Pizza Hut Home
Service business, or home delivery. Pizza Hut Home Service now has over
200 units in 25 cities and is the only “All Meal” replacement delivery brand
in China. Forty percent of our menu consists of Chinese food. So not only
are we delivering pizza, but we’re also delivering a full array of Chinese
menu options. We now have a proven economic model which positions
us to begin to scale this brand rapidly across the country.

1,000

piZZA hut
CAsuAL diNiNG
uNits iN
277 Cities

6:1 LEAD OVER NEARESTCASUAL DINING COMPETITOR }EAST DAWNING AND LITTLE SHEEP

Along with Pizza Hut Home Service, we have two
other emerging Chinese food concepts in China
that give us the confidence we will eventually
become a dominant player in the massive Chinese
food category. We are developing our own Chinese
fast food concept, East Dawning, and are now
testing it in lower-tier cities. Admittedly, this is
taking longer than we expected, but we believe our
persistence will pay off.

The same could be said for Little Sheep, the concept
we acquired in 2012 because it is the leader in the
extremely popular hot pot category. While we’ve
had some major setbacks and are working hard
to improve the concept, we remain optimistic this
brand will become a significant growth driver down
the road.

NEW UNITS IN CHINA

Of course, the biggest opportunity we have
in China is to penetrate the country with
new restaurants. Looking at China’s new unit
development in total, we strengthened our
category-leading positions with 740 new
restaurants in 2013, exceeding our target of at
least 700 new units for the year. Going forward,
we expect another strong year of development in

2014 with plans to open at least 700 new units
as we continue to deploy capital into these high-
return investments.

740

NeW restAurANts
iN ChiNA iN 2013

Remember, Yum! currently has four restaurants
per million people in China, where the consuming
class is expected to grow from 300 million people
just a couple of years ago to over 600 million by
2020. This compares to nearly 60 restaurants per
million people in the U.S., where the consuming
class is over 300 million people today. Clearly,
we’re on the ground floor of global growth.

Make no mistake, we wouldn’t
trade our position in China with
any other restaurant company
in what remains the #1 retail
opportunity in the world.

INDIA

In India, we’ve made the strategic decision to invest ahead of the
growth curve to best position KFC, Pizza Hut and Taco Bell to
expand even more rapidly as the country develops. This year we
opened 157 new units, including Yum!’s 40,000th restaurant in
Goa, and expect to open an additional 150 new units in 2014.
And while our 2013 results haven’t been as strong as we’d like,
we’re investing in the future of a country that has well over a
billion people and is forecasted to have the largest consuming
class in the world by 2030.

Yum!’s 40,000th
restaurant opened
in Goa in 2013

INVESTING IN THE FUTUREMongolia

Ukraine

Indonesia

Vietnam

Russia

Malaysia

Brazil

LONG RUNWAY FOR GROWTHYUM! RESTAURANTS
INTERNATIONAL

At Yum! Restaurants International, the business delivered another solid
year of profit growth led by high-growth emerging markets in regions like
Russia, Southeast Asia, Africa and Latin America.

Yum! is the clear restaurant leader
in emerging markets, and we continued
to build upon this position in 2013.

In fact, we entered four new emerging market countries this past year:
Tanzania, Ukraine, Argentina and even Mongolia. And with each new
restaurant opening, people lined up out the door to experience our
brands. It’s clear our brands are loved around the world.

Having said this, given the economic and political volatility in some
emerging countries, we know there will be ups and downs. We remain
extremely bullish on our long-term prospects in emerging markets as
the consuming class rapidly expands. Remember, emerging market
economies are expected to grow at almost three times the rate of
developed market economies for the foreseeable future. So Yum!’s
strongest businesses are located where the highest growth in the world
is expected to occur. This bodes well for Yum! Brands.

Importantly, the bulk of our emerging markets’ business will continue to
be capitalized by franchisees. We now have about 1,000 international
franchisees who are passionate about our brands. As evidence, YRI
opened a record 1,055 new restaurants last year, 936 of which were
developed by franchisees. Looking ahead, our international franchisee
development pipeline is robust as we expect to open at least 1,000 new
international units in 2014 outside of China and India. This franchise-led
growth is great news for our shareholders as the capital-free franchise
business is about as high a return business as you can possibly have.

We’ve also made targeted investments in emerging markets to accelerate
growth. We acquired about 100 restaurants from a franchisee in Turkey
and expect to increase our pace of development in this country going
forward. We opened our first company-operated Pizza Hut in Russia, and
look to do the same in South Africa. We also opened a company-operated
KFC in Brazil. While it’s still early, we believe these types of investments
set us up to achieve higher growth and higher returns in the years ahead.

1,055

NeW restAurANts
iN 2013

4 new

eMerGiNG MArKets
eNtered iN 2013

LIVE MásU.S.

Our U.S. business is on a path for consistent growth, led by Taco Bell, which
represents approximately two-thirds of our U.S. profits. Taco Bell delivered
another solid year in 2013 with the fourth-quarter representing the eighth
consecutive quarter of same-store sales growth.

I’m extremely proud of Taco Bell CEO Greg Creed and his team for being
named Advertising Age’s Marketer of the Year in recognition of our Live
Más campaign. More importantly, Taco Bell was the only restaurant
company to receive top tier rankings from QSR Magazine’s independent
customer survey on three key operational measures: speed, accuracy and
hospitality. Greg has done a sensational job leading the way.

We expect some truly innovative products to wow customers in 2014, but
the big news for Taco Bell will be the national launch of breakfast. We have
three terrific destination breakfast products at incredible price points.

Our economic model at Taco Bell remains strong with restaurant level
margins over 19%. With the strength of these unit economics, we are
seeing an acceleration of new unit development, with 86 net-new units in
2013 and an even better development pipeline heading into 2014. We’re
confident in our ability to achieve our goal of going from about 5,300 Taco
Bell restaurants to at least 8,000 in the U.S.

The combination of innovation and strong operational capability gives us
confidence Taco Bell will eventually become our third global brand.

At Pizza Hut, we are pleased we opened 116 net new units this year,
our third consecutive year of positive net-unit growth. However, we
significantly lagged our competitors in same-store sales as we simply
weren’t competitive enough on value. We are aligning with our franchisees
to tackle this issue and bring even more innovation to the marketplace. In
2014, we expect to fare much better with competitive value and our plan
to nationally advertise WingStreet for the first time, featuring our award-
winning kitchen fried wings and eventually chicken strip meals.

KFC also under-performed in the U.S. in 2013, but we have
exciting new product innovations and more compelling value
planned to improve our performance in the growing chicken
category.

We clearly have some catch-up work to do in the U.S. versus
the competition for both Pizza Hut and KFC, and intend to
make significant progress in 2014. All in all, the momentum at
Taco Bell, net new unit openings, and the fact our refranchising
program has been largely completed, puts us on a path for
consistent growth in the U.S.

NeW iNterNAtioNAL
uNits iN 2013

LIVE MásSo to sum things up, we’re uniquely positioned for a strong bounce-back year in
2014, primarily driven by our expected same-store sales recovery at KFC in China. This sales
recovery, our new unit development and the actions we’ve taken to strengthen our global
business give us confidence in our ability to deliver at least 20% EPS growth in 2014.

Importantly, we believe we’re stronger and better positioned than ever
to deliver on the three things that drive shareholder value in retail:

DRIVING NEW UNIT DEVELOPMENT

Our new unit opportunity in China and other emerging markets remains the best in
retail and our opportunity to expand is huge. We have three iconic brands consumers
love and more than 40,000 restaurants in 128 countries and territories. We’re
especially strong in high-growth emerging markets with more than 14,000 units and
more than 50% of our operating profit in 2013 coming from the emerging world.

While we have 58 restaurants per million people in the U.S. today, we have only 2
restaurants per million in the emerging markets. That is a long runway for growth and
gives us tremendous confidence in our ability to continue our aggressive expansion for
years to come.

GROWING SAME-STORE SALES

Our more than 40,000 restaurants have significant capacity to drive even higher
same-store sales growth and profitability around the world. We’re growing our brands
with a powerful combination of innovative new sales layers, expanded day parts, menu
variety, strong value offers and by opening new channels with digital. Harnessing the
power of digital technology, we’re expanding the use of online and mobile ordering
platforms across our Pizza Hut and KFC delivery businesses worldwide. We’re also on
track to launch a new mobile ordering app for our Taco Bell U.S. business in 2014.

GENERATING HIGH RETURNS

Finally, our returns on invested capital have consistently been among the best in
the retail industry. Our growth is franchise-led, with franchisees investing virtually
all the capital to own and operate what is now 78% of our restaurants. In 2013, this
model generated nearly $2 billion in franchise fees, which combined with the profit
from our company-operated restaurants, enabled us to invest over $1 billion in capital
expenditures for the future growth of the business. And for the ninth consecutive
year, we increased our dividend payment by at least 10% while returning almost $1.4
billion in cash to shareholders in the form of dividends and share repurchases. It takes
a company with considerable economic strength and growth potential to do that,
particularly in a down year.

Today I couldn’t be more confident in the power of Yum! as we pursue our objective to become the defining
global company that feeds the world. As we move forward in our new brand-focused structure, we have
evolved our Dynasty Growth Model to reflect the three strategies that will drive even faster global growth and
long-term, sustainable results.

Build powerful brands through superior marketing, breakthrough innovation and
compelling value—with a foundation built on winning food and world-class operations

Drive aggressive unit expansion everywhere, especially in emerging markets — and by
building leading brands in every significant category in China and India

Create industry leading returns through franchising and disciplined use of capital —
maximizing long-term shareholder value

$185
million
in cash and
food donations
in the last
7 years

740
million
meals to those
in need

Finally, I want you to know how incredibly proud I am of the many ways
we stepped up to show that we are a Company with a Huge Heart.
Leading the world’s largest private sector hunger relief effort, we’ve set
the bar high year after year in support of World Hunger Relief. Nearly
one billion people go to bed hungry every night and our relief efforts are
more important than ever. 2013 was our strongest campaign on record
with $37 million in cash and food donations! In the last seven years,
our efforts have resulted in more than $185 million in cash and food
donations resulting in 740 million meals going to those in need. While
there is certainly reason to pause and celebrate this great achievement,
we know that there is much more we can do in the fight to end hunger.
Hunger is the world’s most solvable problem and together we can make
a difference. I am deeply grateful for committed employees, franchisees
and customers who have joined our movement to save lives and truly
change the world by serving others.

After reading this Annual Report, I hope you recognize the power of Yum!
and agree the best is yet to come. I want to thank all our team members,
restaurant general managers, franchisees, community partners and
restaurant support leaders who are putting our customers front and
center in everything they do. I’m so privileged to be able to work with such
smart people who have such heart. It’s their collective talent and people
capability that make this company special and it has never been better
than it is today.

That’s why there’s no doubt in my mind that 2014 will
be a strong bounce-back year as we continue to build
the defining global company that feeds the world.

Yum! to You!

David C. Novak
Chairman & Chief Executive Officer
Yum! Brands, Inc.

COMPANY WITH A HUGE HEARTfuture back
vision
the deﬁning global company
that feeds the world

famous recognition culture where everyone counts
Drive HWWT2 leadership principles every day!
Make it a magnet for the best talent

Be an “ABR black belt”…Be a “Know How junkie”

dynamic, vibrant brands everywhere with
one system operational excellence as our foundation
Make Customer Mania come alive for every customer in

every restaurant
Build dynasties in every country
Always connect with customers, always reach, always lead

a company with a huge heart
Open doors and grow each other

Truly care about the world…and save lives with the

World Food Programme

dynasty

growth model

our future back vision

Be the Defining Global Company That Feeds the World.

our goal

Be the Best in the World at Building Global Restaurant Brands!

our passion

Customer Mania... with our customers
front and center in everything we do

our formula
for success

People Capability First… satisfied
customers and profitability follow

how we lead with ABR and TPWY

Step Change Thinkers
Know How Builders
Action Drivers
People Growers

how we grow

Build Powerful Brands
Through Superior Marketing,
Breakthrough Innovation
and Compelling Value

Drive Aggressive Unit
Expansion Everywhere,
Especially in Emerging
Markets

Create Industry
Leading Returns Through
Franchising and Disciplined
Use of Capital

With a Foundation Built on
Winning Food and World
Class Operations

Build Leading Brands in
Every Significant Category
in China and India

Maximize Long-Term
Shareholder Value

how we win together

Believe in All People
Be Restaurant and Customer Maniacs…NOW!
Recognize! Recognize! Recognize!

Go for Breakthrough
Build Know How
Take the Hill Teamwork

...as one system

YUM! Brands, Inc.
1441 Gardiner Lane
Louisville, Kentucky 40213

March 21, 2014

Dear Fellow Shareholders:

On behalf of your Board of Directors, we are pleased to invite you to attend the 2014 Annual Meeting of Shareholders of
YUM! Brands, Inc. The Annual Meeting will be held Thursday, May 1, 2014, at 9:00 a.m., local time, in the YUM! Conference
Center at 1900 Colonel Sanders Lane in Louisville, Kentucky.

Once again, we encourage you to take advantage of the Securities and Exchange Commission rule allowing companies to
furnish proxy materials to their shareholders over the Internet. We believe that this e-proxy process expedites shareholders’
receipt of proxy materials, lowers the costs of delivery and helps reduce the Company’s environmental impact.

Your vote is important. We encourage you to vote promptly whether or not you plan to attend the meeting. You may vote
your shares via a toll-free telephone number or over the Internet. If you received a paper copy of the proxy card by mail,
you may sign, date and mail the proxy card in the envelope provided. Instructions regarding the three methods of voting
are contained on the notice or proxy card.

If you plan to attend the meeting, please bring your notice, admission ticket from your proxy card or proof of your ownership
of YUM common stock as of March 3, 2014 as well as a valid picture identification. Whether or not you attend the meeting,
we encourage you to consider the matters presented in the proxy statement and vote as soon as possible.

Sincerely,

David C. Novak
Chairman of the Board and
Chief Executive Officer

Important Notice Regarding the Availability of Proxy Materials for the Shareholders Meeting to Be Held on
May 1, 2014—this notice and the proxy statement are available at www.yum.com/investors/investor_materials.asp.
The Annual Report on Form 10-K is available at www.yum.com/annualreport.

YUM! Brands, Inc.
1441 Gardiner Lane
Louisville, Kentucky 40213

Notice of Annual Meeting
of Shareholders

Thursday, May 1, 2014
9:00 a.m.
YUM! Conference Center, 1900 Colonel Sanders Lane, Louisville, Kentucky 40213

ITEMS OF BUSINESS:

(1) To elect eleven (11) directors to serve until the 2015 Annual Meeting of Shareholders and until their

respective successors are duly elected and qualified.

(2) To ratify the selection of KPMG LLP as our independent auditors for the fiscal year ending

December 27, 2014.

(3) To consider and hold an advisory vote on executive compensation.
(4) To consider and vote on re-approval of the performance measures available under the YUM! Brands,

Inc. Executive Incentive Compensation Plan for 162(m) purposes.

(5) To transact such other business as may properly come before the meeting.

WHO CAN VOTE:

You can vote if you were a shareholder of record as of the close of business on March 3, 2014.

ANNUAL REPORT:
A copy of our 2013 Annual Report on Form 10-K is included with this proxy statement.

WEBSITE:

You may also read the Company’s Annual Report and this Notice and proxy statement on our website at
www.yum.com/annualreport and www.yum.com/investors/investor_materials.asp.

DATE OF MAILING:

This Notice, the proxy statement and the form of proxy are first being mailed to shareholders on or about
March 21, 2014.

By Order of the Board of Directors

Christian L. Campbell
Secretary

YOUR VOTE IS IMPORTANT

Under securities exchange rules, brokers cannot vote on your behalf for the election of directors or on executive
compensation related matters without your instructions. Whether or not you plan to attend the Annual Meeting,
please provide your proxy by following the instructions on your Notice or proxy card. On or about March 21, 2014, we
mailed to our shareholders a Notice containing instructions on how to access the proxy statement and our Annual Report
and vote online. If you received a Notice by mail, you will not receive a printed copy of the proxy materials in the mail,
unless you request a copy. Instead, you should follow the instructions included in the Notice on how to access and review
the proxy statement and Annual Report. The Notice also instructs you on how you may submit your vote by proxy over the
Internet. If you received the proxy statement and Annual Report in the mail, please submit your proxy by marking,
dating and signing the proxy card included and returning it promptly in the envelope enclosed. If you are able to attend
the Annual Meeting and wish to vote your shares personally, you may do so at any time before the proxy is exercised.

Table of Contents

PROXY STATEMENT

QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING

GOVERNANCE OF THE COMPANY

MATTERS REQUIRING SHAREHOLDER ACTION

ITEM 1
ITEM 2
ITEM 3
ITEM 4

Election of Directors (Item 1 on the Proxy Card) ������������������������������������������������������������������������������������������������������������������������������������������������������������������������14
Ratification of Independent Auditors (Item 2 on the Proxy Card) �����������������������������������������������������������������������������������������������������������������������19
Advisory Vote On Executive Compensation (Item 3 on the Proxy Card) �������������������������������������������������������������������������������������������������20
Re-Approval of YUM! Brands, Inc� Executive Incentive Compensation Plan Performance Measures
(Item 4 on the Proxy Card) ����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������22

STOCK OWNERSHIP INFORMATION

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE AND LEGAL PROCEEDINGS 27

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis ����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������28
Summary Compensation Table ������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������44
All Other Compensation Table ����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������46
Grants of Plan-Based Awards ����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������47
Outstanding Equity Awards at Year-End ����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������48
Option Exercises and Stock Vested �����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������50
Pension Benefits ��������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������51
Nonqualified Deferred Compensation �����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������53
Potential Payments Upon Termination or Change in Control ���������������������������������������������������������������������������������������������������������������������������������������������������������������������������������56

DIRECTOR COMPENSATION

EQUITY COMPENSATION PLAN INFORMATION

AUDIT COMMITTEE REPORT

ADDITIONAL INFORMATION

APPENDIX A

YUM! BRANDS, INC. EXECUTIVE INCENTIVE COMPENSATION PLAN

A-1

YUM! Brands, Inc.
1441 Gardiner Lane
Louisville, Kentucky 40213

PROXY STATEMENT

For Annual Meeting of Shareholders To Be Held On

May 1, 2014

The Board of Directors (the “Board of Directors” or the “Board”) of YUM! Brands, Inc., a North Carolina corporation (“YUM”
or the “Company”), solicits the enclosed proxy for use at the Annual Meeting of Shareholders of the Company to be held
at 9:00 a.m. (Eastern Daylight Saving Time), on Thursday, May 1, 2014, in the YUM! Conference Center, at 1900 Colonel
Sanders Lane, Louisville, Kentucky. This proxy statement contains information about the matters to be voted on at the
Annual Meeting and the voting process, as well as information about our directors and most highly paid executive officers.

QUESTIONS AND ANSWERS ABOUT THE MEETING
AND VOTING

What is the purpose of the Annual Meeting?

At our Annual Meeting, shareholders will vote on several important Company matters. In addition, our management will report
on the Company’s performance over the last fiscal year and, following the meeting, respond to questions from shareholders.

Why am I receiving these materials?

You received these materials because our Board of Directors is soliciting your proxy to vote your shares at the Annual
Meeting. As a shareholder, you are invited to attend the Annual Meeting and are entitled to vote on the items of business
described in this proxy statement.

Why did I receive a one-page Notice in the mail regarding the Internet availability
of proxy materials this year instead of a full set of proxy materials?

As permitted by Securities and Exchange Commission
(“SEC”) rules, we are making this proxy statement and our
Annual Report available to our shareholders electronically
via the Internet. On or about March 21, 2014, we mailed to
our shareholders a Notice containing instructions on how
to access this proxy statement and our Annual Report and
vote online. If you received a Notice by mail you will not
receive a printed copy of the proxy materials in the mail,
unless you request a copy. The Notice instructs you on
how to access and review all of the important information

contained in the proxy statement and Annual Report. The
Notice also instructs you on how you may submit your proxy
over the Internet. If you received a Notice by mail and would
like to receive a printed copy of our proxy materials, you
should follow the instructions for requesting such materials
contained on the Notice.

We encourage you to take advantage of the availability
of the proxy materials on the Internet in order to help
lower the costs of delivery and reduce the Company’s
environmental impact.

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementQUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING

Who may attend the Annual Meeting?

The Annual Meeting is open to all shareholders of record as of close of business on March 3, 2014, or their duly appointed
proxies. Seating is limited and admission is on a first-come, first-served basis.

What do I need to bring to attend the Annual Meeting?

You will need a valid picture identification and either an
admission ticket or proof of ownership of YUM’s common
stock to enter the Annual Meeting. If you are a registered
owner, your Notice will be your admission ticket. If you
received the proxy statement and Annual Report by mail,
you will find an admission ticket attached to the proxy card
sent to you. If you plan to attend the Annual Meeting, please
so indicate when you vote and bring the ticket with you to
the Annual Meeting. If your shares are held in the name of
a bank or broker, you will need to bring your legal proxy
from your bank or broker and your admission ticket. If you
do not bring your admission ticket, you will need proof of
ownership to be admitted to the Annual Meeting. A recent
brokerage statement or letter from a bank or broker is an
example of proof of ownership. If you arrive at the Annual

May shareholders ask questions?

Meeting without an admission ticket, we will admit you only
if we are able to verify that you are a YUM shareholder.
Your admittance to the Annual Meeting will depend upon
availability of seating. All shareholders will be required to
present valid picture identification prior to admittance. IF
YOU DO NOT HAVE A VALID PICTURE IDENTIFICATION
AND EITHER AN ADMISSION TICKET OR PROOF THAT
YOU OWN YUM COMMON STOCK, YOU MAY NOT BE
ADMITTED INTO THE ANNUAL MEETING.

Please note that computers, cameras, sound or video
recording equipment, cellular and smart phones, tablets
and other similar devices, large bags, briefcases and
packages will not be allowed in the meeting room.

Yes. Representatives of the Company will answer shareholders’ questions of general interest following the Annual Meeting.
In order to give a greater number of shareholders an opportunity to ask questions, individuals or groups will be allowed
to ask only one question and no repetitive or follow-up questions will be permitted.

Who may vote?

You may vote if you owned YUM common stock as of the close of business on the record date, March 3, 2014. Each
share of YUM common stock is entitled to one vote. As of March 3, 2014, YUM had 441,940,908 shares of common
stock outstanding.

What am I voting on?

You will be voting on the following four (4) items of business at the Annual Meeting:

•• The election of eleven (11) directors to serve until the next
Annual Meeting of Shareholders and until their respective
successors are duly elected and qualified;

•• The ratification of the selection of KPMG LLP as
our independent auditors for the fiscal year ending
December 27, 2014;

•• An advisory vote on executive compensation; and
•• The re-approval of the performance measures available
under the YUM! Brands, Inc. Executive Incentive
Compensation Plan for 162(m) purposes.

We will also consider other business that properly comes
before the meeting.

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementQUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING

How does the Board of Directors recommend that I vote?

Our Board of Directors recommends that you vote your shares:

•• FOR each of the nominees named in this proxy statement

•• FOR the proposal regarding an advisory vote on executive

for election to the Board;

compensation; and

•• FOR the ratification of the selection of KPMG LLP as our

independent auditors;

•• FOR the proposal to re-approve the performance measures
of the YUM! Brands, Inc. Executive Incentive Compensation
Plan for 162(m) purposes.

How do I vote before the Annual Meeting?

There are three ways to vote before the meeting:

•• By Internet — If you have Internet access, we encourage
you to vote on www.proxyvote.com by following instructions
on the Notice or proxy card;

•• By telephone — by making a toll-free telephone call
from the U.S. or Canada to 1(800) 690-6903 (if you have
any questions about how to vote over the phone, call
1(888) 298-6986); or

•• By mail — If you received your proxy materials by mail,
you can vote by completing, signing and returning the
enclosed proxy card in the postage-paid envelope provided.

If you are a participant in the Direct Stock Purchase Plan,
the administrator of this program, as the shareholder of
record, may only vote the shares for which it has received
directions to vote from you.

If you are a participant in the YUM! Brands 401(k) Plan
(“401(k) Plan”), the trustee of the 401(k) Plan will only vote the
shares for which it has received directions to vote from you.

Proxies submitted through the Internet or by telephone as
described above must be received by 11:59 p.m., Eastern

Can I vote at the Annual Meeting?

Daylight Saving Time, on April 30, 2014. Proxies submitted
by mail must be received prior to the meeting. Directions
submitted by 401(k) Plan participants must be received by
12:00 p.m., Eastern Daylight Saving Time, on April 29, 2014.

Also, if you hold your shares in the name of a bank or
broker, your ability to vote by telephone or the Internet
depends on their voting processes. Please follow the
directions on your notice carefully. A number of brokerage
firms and banks participate in a program provided through
Broadridge Financial Solutions, Inc. (“Broadridge”) that offers
telephone and Internet voting options. If your shares are held
in an account with a brokerage firm or bank participating
in the Broadridge program, you may vote those shares
telephonically by calling the telephone number shown on
the voting instruction form received from your brokerage
firm or bank, or through the Internet at Broadridge’s voting
website (www.proxyvote.com). Votes submitted through the
Internet or by telephone through the Broadridge program
must be received by 11:59 p.m., Eastern Daylight Saving
Time, on April 30, 2014.

Shares registered directly in your name as the shareholder
of record may be voted in person at the Annual Meeting.
Shares held in street name may be voted in person only if
you obtain a legal proxy from the broker or nominee that
holds your shares giving you the right to vote the shares.

Even if you plan to attend the Annual Meeting, we encourage
you to vote your shares by proxy. You may still vote your
shares in person at the meeting even if you have previously
voted by proxy.

Can I change my mind after I vote?

You may change your vote at any time before the polls close at the Annual Meeting. You may do this by:

•• Signing another proxy card with a later date and returning

•• Giving written notice to the Secretary of the Company

it to us prior to the Annual Meeting;

•• Voting again by telephone or through the Internet prior to 11:59
p.m., Eastern Daylight Saving Time, on April 30, 2014;

prior to the Annual Meeting; or

•• Voting again at the Annual Meeting.

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementQUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING

Your attendance at the Annual Meeting will not have the
effect of revoking a proxy unless you notify our Corporate

Secretary in writing before the polls close that you wish to
revoke a previous proxy.

Who will count the votes?

Representatives of American Stock Transfer and Trust Company, LLC will count the votes and will serve as the independent
inspector of election.

What if I return my proxy card but do not provide voting instructions?

If you vote by proxy card, your shares will be voted as you
instruct by the individuals named on the proxy card. If you sign
and return a proxy card but do not specify how your shares are
to be voted, the persons named as proxies on the proxy card
will vote your shares in accordance with the recommendations
of the Board. These recommendations are:

•• FOR the election of the eleven (11) nominees for director

named in this proxy statement (Item 1);

•• FOR the ratification of the selection of KPMG LLP as our
independent auditors for the fiscal year 2014 (Item 2);
•• FOR the proposal regarding an advisory vote on executive

compensation (Item 3); and

•• FOR the proposal to re-approve the performance measures
available under the YUM! Brands, Inc. Executive Incentive
Compensation Plan for 162(m) purposes (Item 4).

What does it mean if I receive more than one proxy card?

It means that you have multiple accounts with brokers and/or our transfer agent. Please vote all of these shares. We
recommend that you contact your broker and/or our transfer agent to consolidate as many accounts as possible under
the same name and address. Our transfer agent is American Stock Transfer and Trust Company, LLC, which may be
reached at 1(888) 439-4986.

Will my shares be voted if I do not provide my proxy?

Your shares may be voted if they are held in the name of a
brokerage firm, even if you do not provide the brokerage firm
with voting instructions. Brokerage firms have the authority
under the New York Stock Exchange rules to vote shares
for which their customers do not provide voting instructions
on certain “routine” matters.

The proposal to ratify the selection of KPMG LLP as our
independent auditors for fiscal year 2014 is considered a
routine matter for which brokerage firms may vote shares

for which they have not received voting instructions. The
other proposals to be voted on at our Annual Meeting are
not considered “routine” under applicable rules. When a
proposal is not a routine matter and the brokerage firm has
not received voting instructions from the beneficial owner
of the shares with respect to that proposal, the brokerage
firm cannot vote the shares on that proposal. This is called
a “broker non-vote.”

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementQUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING

How many votes must be present to hold the Annual Meeting?

Your shares are counted as present at the Annual Meeting
if you attend the Annual Meeting in person or if you properly
return a proxy by Internet, telephone or mail. In order for us
to conduct our Annual Meeting, a majority of the outstanding
shares of YUM common stock, as of March 3, 2014, must

be present in person or represented by proxy at the Annual
Meeting. This is referred to as a quorum. Abstentions and
broker non-votes will be counted for purposes of establishing
a quorum at the Annual Meeting.

How many votes are needed to elect directors?

You may vote “FOR” each nominee or “AGAINST” each
nominee, or “ABSTAIN” from voting on one or more nominees.
Unless you mark “AGAINST” or “ABSTAIN” with respect to
a particular nominee or nominees or for all nominees, your
proxy will be voted “FOR” each of the director nominees
named in this proxy statement. In an uncontested election,
a nominee will be elected as a director if the number of

“FOR” votes exceeds the number of “AGAINST” votes.
Abstentions will be counted as present but not voted. Full
details of the Company’s majority voting policy are set out
in our Corporate Governance Principles at www.yum.com/
investors/governance/principles.asp and at page 9 under
“What other significant Board practices does the Company
have?—Majority Voting Policy.”

How many votes are needed to approve the other proposals?

The other proposals must receive the “FOR” vote of a majority
of the shares, present in person or represented by proxy,
and entitled to vote at the Annual Meeting. For each of these
items, you may vote “FOR”, “AGAINST” or “ABSTAIN.”
Abstentions will be counted as shares present and entitled
to vote at the Annual Meeting. Accordingly, abstentions will

have the same effect as a vote “AGAINST” the proposals.
Broker non-votes will not be counted as shares present
and entitled to vote with respect to the particular matter on
which the broker has not voted. Thus, broker non-votes will
not affect the outcome of any of these proposals.

When will the Company announce the voting results?

The Company will announce the voting results of the Annual Meeting on a Current Report on Form 8-K filed within four
business days of the Annual Meeting.

What if other matters are presented for consideration at the Annual Meeting?

As of the date of this proxy statement, our management
knows of no matters that will be presented for consideration
at the Annual Meeting other than those matters discussed
in this proxy statement. If any other matters properly come
before the Annual Meeting and call for a vote of shareholders,

validly executed proxies in the enclosed form returned to
us will be voted in accordance with the recommendation
of the Board of Directors or, in the absence of such a
recommendation, in accordance with the judgment of the
proxy holders.

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementGOVERNANCE OF THE COMPANY

The business and affairs of YUM are managed under the direction of the Board of Directors. The Board believes that
good corporate governance is a critical factor in achieving business success and in fulfilling the Board’s responsibilities to
shareholders. The Board believes that its practices align management and shareholder interests.

The corporate governance section of the Company website makes available the Company’s corporate governance materials,
including the Corporate Governance Principles (the “Principles”), the Company’s Articles of Incorporation and By-Laws, the
charters for each Board committee, the Company’s Worldwide Code of Conduct, the Company’s Political Contributions
and U.S. Government Advocacy Policy, and information about how to report concerns about the Company. To access
these documents on the Company’s website, www.yum.com, click on “Investors” and then “Corporate Governance”.

Highlights of our corporate governance practices are described below.

Governance Highlights

Corporate Governance

• 11 Director Nominees

• 8 Independent Director Nominees

• Directors with experience,

qualifications and skills across
a wide range of public and private
companies

• Board Access to Senior Management

and Independent Advisors

• Independent Lead Director

• Independent Board Committees

• Executive Sessions of Independent

Directors at every regular Board and
Committee meeting

• Risk Oversight by Board and its

Committees

• Annual Board and Committee Self-

Evaluations

• All Directors Attended at least 75% of

Meetings Held

• YUM’s Worldwide Code of Conduct

• Political Contributions and U.S.
Government Advocacy Policy

• Audit Committee Complaint Procedures
Policy regarding Accounting Matters

Compensation

• Executive Compensation is
Highly Performance Based
to Align with Shareholder
Interests and Promote
Company Business Strategy

• At Risk Pay Tied to

Performance

• Strong Stock Ownership

Guidelines

• No Employment Agreements

or Guaranteed Bonuses

• Compensation Recovery

Policy - “Clawback”
Provisions apply to Equity
and Bonus Awards

• Double trigger vesting upon
Change in Control for new
option and SAR awards

• No excise tax gross ups

Shareholder Rights

• Annual Election of Directors

• Majority Voting of Directors

• Shareholder Communication
Process for communicating
with Board

• Active Shareholder

Engagement

What is the composition of the Board of Directors
and how often are members elected?

Our Board of Directors presently consists of 12 directors whose terms expire at this Annual Meeting. Mr. Grissom will be
retiring and is not standing for re-election at the Annual Meeting.

As discussed in more detail later in this section, the Board has determined that 8 of the 11 current directors standing for
re-election are independent under the rules of the New York Stock Exchange (“NYSE”).

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementGOVERNANCE OF THE COMPANY

How often did the Board meet in fiscal 2013?

The Board of Directors met 7 times during fiscal 2013. Each director attended at least 75% of the meetings of the Board
and the committees of which he or she was a member and that were held during the period he or she served as a director.

What is the Board’s policy regarding director attendance
at the Annual Meeting of Shareholders?

The Board of Director’s policy is that all directors should attend the Annual Meeting and 11 of the Company’s 12 current
directors attended the 2013 Annual Meeting.

How does the Board select nominees for the Board?

The Nominating and Governance Committee considers
candidates for Board membership suggested by its members
and other Board members, as well as management and
shareholders. The Committee’s charter provides that it
may retain a third-party executive search firm to identify
candidates from time to time.

In accordance with the Principles, our Board seeks members
from diverse professional backgrounds who combine a broad
spectrum of experience and expertise with a reputation for
integrity. Directors should have experience in positions with
a high degree of responsibility, be leaders in the companies
or institutions with which they are affiliated and are selected
based upon contributions they can make to the Board
and management. The Committee’s assessment of a
proposed candidate will include a review of the person’s
judgment, experience, independence, understanding of the
Company’s business or other related industries and such
other factors as the Nominating and Governance Committee
determines are relevant in light of the needs of the Board of
Directors. The Committee believes that its nominees should
reflect a diversity of experience, gender, race, ethnicity and
age. The Board does not have a specific policy regarding
director diversity. The Committee also considers such other
relevant factors as it deems appropriate, including the current
composition of the Board, the balance of management
and independent directors, the need for Audit Committee

What is the Board’s leadership structure?

expertise and the evaluations of other prospective nominees,
if any. In connection with this evaluation, it is expected that
each Committee member will interview the prospective
nominee in person or by telephone before the prospective
nominee is presented to the full Board for consideration.
After completing this evaluation and interview process, the
Committee will make a recommendation to the full Board
as to the person(s) who should be nominated by the Board,
and the Board determines the nominee(s) after considering
the recommendation and report of the Committee.

We believe that each of our directors has met the guidelines
set forth in the Governance Principles. As noted in the
director biographies that follow this section, our directors
have experience, qualifications and skills across a wide
range of public and private companies, possessing a broad
spectrum of experience both individually and collectively.

For a shareholder to submit a candidate for consideration by
the Nominating and Governance Committee, a shareholder
must notify YUM’s Corporate Secretary. To make a director
nomination at the 2015 Annual Meeting, a shareholder must
notify YUM’s Secretary no later than January 31, 2015.
Notices should be sent to: Corporate Secretary, YUM!
Brands, Inc., 1441 Gardiner Lane, Louisville, Kentucky 40213.
The nomination must contain the information described
on page 65.

The Company’s Principles provide that the CEO may also
serve as Chairman of the Board, and our CEO, David Novak,
serves as Chairman of the Board of the Company. The Board
believes that combining these positions serves the best
interests of the Company at this time. The Board believes
that by serving as both Chairman and CEO, Mr. Novak is
positioned to use his in-depth knowledge of our industry,

our global business and its challenges as well as our key
constituents including employees, franchisees and business
partners to provide the Board with the leadership needed
to set Board agendas, strategic focus and direction for the
Company. Mr. Novak’s combined role as Chairman and CEO
also ensures that the Company presents its message and
strategy to shareholders, employees, customers, franchisees

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementGOVERNANCE OF THE COMPANY

and business partners with a unified voice. Combining the
Chairman and CEO roles fosters clear accountability, effective
decision-making, and alignment on corporate strategy.

The Nominating and Governance Committee reviews the
Board’s leadership structure annually together with an
evaluation of the performance and effectiveness of the
Board of Directors. In August 2012, the Board created a new
position of lead director, after its annual review which included
engaging in dialogue and receiving input from a number of
major shareholders. The lead director position is structured
so that one independent Board member is empowered with

sufficient authority to ensure independent oversight of the
Company and its management. The lead director position
has no term limit and is subject only to annual approval by
the independent members of the Board. In August 2012,
the Board’s independent directors appointed Thomas Ryan
to serve as the lead director, and have concluded that Mr.
Ryan, who also chairs the Nominating and Governance
Committee, has provided effective oversight in this role.
In addition, to assure effective independent oversight, the
Board has adopted a number of governance practices
discussed below.

What are the Company’s governance policies and ethical guidelines?

•• Board Committee Charters. The Audit, Management
Planning and Development and Nominating and
Governance Committees of the YUM Board of Directors
operate pursuant to written charters. These charters were
approved by the Board of Directors and reflect certain
best practices in corporate governance, as well as comply
with the Sarbanes-Oxley Act of 2002 and the rules issued
thereunder, including the requirements of the NYSE.
Each charter is available on the Company’s website at
www.yum.com/investors/governance/charters.asp.

•• Corporate Governance Principles. The Board of
Directors has documented its corporate governance
guidelines in the YUM! Brands, Inc. Corporate Governance
Principles. These guidelines as amended are available
on the Company’s website at www.yum.com/investors/
governance/principles.asp.

•• Code of Ethics. YUM’s Worldwide Code of Conduct was
adopted to emphasize the Company’s commitment to

the highest standards of business conduct. The Code
of Conduct also sets forth information and procedures
for employees to report ethical or accounting concerns,
misconduct or violations of the Code in a confidential
manner. The Code of Conduct applies to the Board of
Directors and all employees of the Company, including
the principal executive officer, the principal financial officer
and the principal accounting officer. Our directors and the
senior-most employees in the Company are required to
regularly complete a conflicts of interest questionnaire
and certify in writing that they have read and understand
the Code of Conduct. The Code of Conduct is available
on the Company’s website at www.yum.com/investors/
governance/conduct.asp. The Company intends to post
amendments to or waivers from its Code (to the extent
applicable to the Board of Directors or executive officers)
on this website.

What other significant Board practices does the Company have?

•• Private Executive Sessions. Our non-management
directors meet in executive session at each regular Board
meeting. The executive sessions are attended only by the
non-management directors and are presided over by the
lead director. Our independent directors meet in executive
session at least once per year.

•• Role of Lead Director. Our corporate governance guidelines
require the election, by the independent directors, of a
lead director. The lead director position is structured so
that one independent Board member is empowered with
sufficient authority to ensure independent oversight of the
Company and its management. The lead director position
has no term limit and is subject only to annual approval
by the independent members of the Board. Based upon
the recommendation of the Nominating and Governance

Committee, the Board has determined that the lead director
is responsible for:

(a) Presiding at all executive sessions of the Board
and any other meeting of the Board at which the
Chairman is not present, and advising the Chairman
and CEO of any decisions reached or suggestions
made at any executive session,

(b) Approving in advance agendas and schedules for
Board meetings and the information that is provided
to directors,

(d) Serving as a liaison between the Chairman and

the independent directors, and

(e) Calling special meetings of the independent

directors.

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementGOVERNANCE OF THE COMPANY

•• Advance Materials. Information and data important to
the directors’ understanding of the business or matters to
be considered at a Board or Board Committee meeting
are, to the extent practical, distributed to the directors
sufficiently in advance of the meeting to allow careful
review prior to the meeting.

•• Board and Committees’ Evaluations. The Board
has an annual self-evaluation process that is led by the
Nominating and Governance Committee. This assessment
focuses on the Board’s contribution to the Company and
emphasizes those areas in which the Board believes a
better contribution could be made. In addition, the Audit,
Management Planning and Development and Nominating
and Governance Committees also each conduct similar
annual self-evaluations.

•• Majority Voting Policy. Our Articles of Incorporation
require majority voting for the election of directors in
uncontested elections. This means that director nominees
in an uncontested election for directors must receive a
number of votes “for” his or her election in excess of the
number of votes “against.” The Company’s Corporate
Governance Principles further provide that any incumbent
director who does not receive a majority of “for” votes will
promptly tender to the Board his or her resignation from
the Board. The resignation will specify that it is effective
upon the Board’s acceptance of the resignation. The Board
will, through a process managed by the Nominating and
Governance Committee and excluding the nominee in
question, accept or reject the resignation within 90 days
after the Board receives the resignation. If the Board rejects
the resignation, the reason for the Board’s decision will
be publicly disclosed.

What access do the Board and Board committees have to management
and to outside advisors?

•• Access to Management and Employees. Directors
have full and unrestricted access to the management and
employees of the Company. Additionally, key members of
management attend Board meetings to present information
about the results, plans and operations of the business
within their areas of responsibility.

What is the Board’s role in risk oversight?

The Board maintains overall responsibility for overseeing
the Company’s risk management. In furtherance of its
responsibility, the Board has delegated specific risk-
related responsibilities to the Audit Committee and to the
Management Planning and Development Committee. The
Audit Committee engages in substantive discussions of
risk management at its regular committee meetings held
during the year. At these meetings, it receives functional
risk review reports covering significant areas of risk from
senior managers responsible for these functional areas,
as well as receiving reports from the Company’s Chief
Auditor. Our Chief Auditor reports directly to the Chair of the

•• Access to Outside Advisors. The Board and its
committees may retain counsel or consultants without
obtaining the approval of any officer of the Company
in advance or otherwise. The Audit Committee has the
sole authority to retain and terminate the independent
auditor. The Nominating and Governance Committee
has the sole authority to retain search firms to be used to
identify director candidates. The Management Planning
and Development Committee has the sole authority to
retain compensation consultants for advice on executive
compensation matters.

Audit Committee and our Chief Financial Officer. The Audit
Committee also receives reports at each meeting regarding
legal and regulatory risks from management. The Audit
Committee provides a summary to the full Board at each
regular Board meeting of the risk area reviewed together
with any other risk related subjects discussed at the Audit
Committee meeting. In addition, our Management Planning
and Development Committee considers the risks that may
be implicated by our compensation programs through a
risk assessment conducted by management and reports
its conclusions to the full Board.

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementGOVERNANCE OF THE COMPANY

Has the Company conducted a risk assessment of its compensation policies
and practices?

As stated in the Compensation Discussion and Analysis at
page 29, the philosophy of our compensation programs is to
reward performance by designing pay programs that incorporate
team and individual performance, customer satisfaction and
shareholder return; emphasize long-term incentives; drive
ownership mentality; and require executives to personally
invest in Company stock.

In 2014, the Management Planning and Development Committee
of the Board of Directors (“Committee”) oversaw the performance
of a risk assessment of our compensation programs for all
employees to determine whether they encourage unnecessary
or excessive risk taking. In conducting this review, each of
our compensation practices and programs was reviewed
against the key risks facing the Company in the conduct of its
business. Based on this review, the Committee concluded that
our compensation policies and practices do not encourage our
employees to take unnecessary or excessive risks.

As part of this assessment, the Committee concluded that
the following policies and practices of the Company’s cash
and equity incentive programs serve to reduce the likelihood
of excessive risk taking:

•• The annual incentive target setting process is closely linked
to the annual financial planning process and supports the
Company’s overall strategic plan.

•• Compensation performance measures are set for each
division, are transparent and are tied to multiple measurable
factors, none of which exceeds a 50% weighting. The
measures are both apparent to shareholders and drivers
of their returns.

•• Strong stock ownership guidelines are enforced for

approximately 600 senior employees.

•• We have implemented a compensation recovery or

“clawback” policy.

•• Capital allocation process is driven by strategic objectives,
aligned with division annual operating plans and requires
capital expenditure approval, ensuring alignment with
development and return requirements.

•• The performance which determines employee rewards is
closely monitored by and certified to the Audit Committee
and the full Board.

•• Our compensation system is balanced, rewarding both

short term and long term performance.

•• Long-term Company performance is emphasized. The
majority of incentive compensation for the top level
employees is associated with the long term performance
of the Company.

How does the Board determine which directors are considered independent?

The Company’s Principles, adopted by the Board, require
that we meet the listing standards of the NYSE. The full text
of the Principles can be found on the Company’s website
(www.yum.com/investors/governance/principles.asp).

Pursuant to the Principles, the Board undertook its annual
review of director independence. During this review, the
Board considered transactions and relationships between
each director or any member of his or her immediate family
and the Company and its subsidiaries and affiliates. As
provided in the Principles, the purpose of this review was
to determine whether any such relationships or transactions
were inconsistent with a determination that the director is
independent.

As a result of this review, the Board affirmatively determined
that all of the directors are independent of the Company and
its management under NYSE rules, with the exception of
David C. Novak, Jing-Shyh S. Su and Michael J. Cavanagh.
Mr. Novak and Mr. Su are not considered independent
directors because of their employment by the Company.
Under NYSE rules, Mr. Cavanagh is not considered
independent until May 2015 because Mr. Novak formerly
served on the Compensation Committee of JPMorgan
Chase & Co., where Mr. Cavanagh is an executive officer.

In determining that the other directors did not have a material
relationship with the Company, the Board determined that
Messrs. Dorman, Ferragamo, Grissom, Linen, Nelson, Ryan
and Walter and Mses. Graddick-Weir and Hill had no other
relationship with the Company other than their relationship
as a director.

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementGOVERNANCE OF THE COMPANY

How do shareholders communicate with the Board?

Shareholders and other parties interested in communicating
directly with individual directors, the non-management
directors as a group or the entire Board may do so by
writing to the Nominating and Governance Committee,
c/o Corporate Secretary, YUM! Brands, Inc., 1441 Gardiner
Lane, Louisville, Kentucky 40213. The Nominating and
Governance Committee of the Board has approved a
process for handling letters received by the Company
and addressed to individual directors, non-management
members of the Board or the Board. Under that process,
the Corporate Secretary of the Company reviews all such
correspondence and regularly forwards to a designated
individual member of the Nominating and Governance
Committee copies of all such correspondence (although
we do not forward commercial correspondence and
correspondence duplicative in nature; however, we will retain
duplicate correspondence and all duplicate correspondence

will be available for directors’ review upon their request) and
a summary of all such correspondence. The designated
director of the Nominating and Governance Committee
will forward correspondence directed to individual directors
as he or she deems appropriate. Directors may at any
time review a log of all correspondence received by the
Company that is addressed to members of the Board
and request copies of any such correspondence. Written
correspondence from shareholders relating to accounting,
internal controls or auditing matters are immediately brought
to the attention of the Company’s Audit Committee Chair and
to the internal audit department and handled in accordance
with procedures established by the Audit Committee with
respect to such matters (described below). Correspondence
from shareholders relating to Management Planning and
Development Committee matters are referred to the Chair
of the Management Planning and Development Committee.

What are the Company’s policies on reporting of concerns regarding accounting?

The Audit Committee has established policies on reporting
concerns regarding accounting and other matters in addition
to our policy on communicating with our non-management
directors. Any person, whether or not an employee, who
has a concern about the conduct of the Company or
any of our people, with respect to accounting, internal
accounting controls or auditing matters, may, in a confidential
or anonymous manner, communicate that concern to
our General Counsel, Christian Campbell. If any person
believes that he or she should communicate with our Audit
Committee Chair, Thomas C. Nelson, he or she may do
so by writing him at c/o YUM! Brands, Inc., 1441 Gardiner

Lane, Louisville, KY 40213. In addition, a person who
has such a concern about the conduct of the Company
or any of our employees may discuss that concern on a
confidential or anonymous basis by contacting The Network
at 1 (800) 241-5689. The Network is our designated external
contact for these issues and is authorized to contact the
appropriate members of management and/or the Board
of Directors with respect to all concerns it receives. The
full text of our Policy on Reporting of Concerns Regarding
Accounting and Other Matters is available on our website
at www.yum.com/investors/governance/complaint.asp.

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementGOVERNANCE OF THE COMPANY

What are the Committees of the Board?

The Board of Directors has standing Audit, Management Planning and Development, Nominating and Governance and
Executive/Finance Committees.

Number of Meetings
in Fiscal 2013
9

Name of Committee
and Members
Audit:

Thomas C. Nelson, Chair
Mirian M. Graddick-Weir
J. David Grissom
Bonnie G. Hill
Jonathan S. Linen

Functions of the Committee
•• Possesses sole authority regarding the selection and retention of independent auditors
•• Reviews and has oversight over the Company’s internal audit function
•• Reviews and approves the cost and scope of audit and non-audit services

provided by the independent auditors

•• Reviews the independence, qualification and performance of the independent auditors
•• Reviews the adequacy of the Company’s internal systems of accounting and

financial control

•• Reviews the annual audited financial statements and results of the audit with

management and the independent auditors

•• Reviews the Company’s accounting and financial reporting principles and

practices including any significant changes

•• Advises the Board with respect to Company policies and procedures regarding
compliance with applicable laws and regulations and the Company’s Worldwide
Code of Conduct and Policy on Conflicts of Interest

•• Discusses with management the Company’s policies with respect to risk
assessment and risk management. Further detail about the role of the Audit
Committee in risk assessment and risk management is included in the section
entitled “What is the Board’s role in risk oversight?” set forth on page 9.

The Board of Directors has determined that all of the members of the Audit Committee are independent within the
meaning of applicable SEC regulations and the listing standards of the NYSE and that Mr. Nelson, the chair of the
Committee, is qualified as an audit committee financial expert within the meaning of SEC regulations. The Board has
also determined that Mr. Nelson has accounting and related financial management expertise within the meaning of the
listing standards of the NYSE and that each member is financially literate within the meaning of the listing standards of
the NYSE.
Management Planning
and Development:

•• Oversees the Company’s executive compensation plans and programs and

reviews and recommends changes to these plans and programs

Robert D. Walter, Chair
David W. Dorman
Massimo Ferragamo
Thomas M. Ryan

•• Monitors the performance of the chief executive officer and other senior

executives in light of corporate goals set by the Committee

•• Reviews and approves the compensation of the chief executive officer and other

senior executive officers

•• Reviews management succession planning

The Board has determined that all of the members of the Management Planning and Development Committee are
independent within the meaning of the listing standards of the NYSE.

Nominating and
Governance:

Thomas M. Ryan, Chair
David W. Dorman
Massimo Ferragamo
Robert D. Walter

•• Identifies and proposes to the Board suitable candidates for Board membership
•• Advises the Board on matters of corporate governance
•• Reviews and reassesses from time to time the adequacy of the Company’s

Corporate Governance Principles

•• Receives comments from all directors and reports annually to the Board with

assessment of the Board’s performance

•• Prepares and supervises the Board’s annual review of director independence

The Board has determined that all of the members of the Nominating and Governance Committee are independent
within the meaning of the listing standards of the NYSE.

Executive/Finance:

David C. Novak, Chair
Thomas C. Nelson
Thomas M. Ryan
Robert D. Walter

•• Exercises all of the powers of the Board in the management of the business and
affairs of the Company consistent with applicable law while the Board is not in
session

—

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementGOVERNANCE OF THE COMPANY

How are directors compensated?

Employee Directors. Employee directors do not receive additional compensation for serving on the Board of Directors.

Non-Employee Directors Annual Compensation. The annual compensation for each director who is not an employee of
YUM is discussed under “Director Compensation” beginning on page 59.

What are the Company’s policies and procedures with respect
to related person transactions?

The Board of Directors has adopted policies and procedures
for the review of related person transactions. Under these
policies and procedures, the Nominating and Governance
Committee reviews related person transactions in which
we are or will be a participant to determine if they are in
the best interests of our shareholders and the Company.
Transactions, arrangements, or relationships or any series of
similar transactions, arrangements or relationships in which
a related person had or will have a material interest and that
exceed $100,000 are subject to the Committee’s review. Any
member of the Nominating and Governance Committee who
is a related person with respect to a transaction under review
may not participate in the deliberation or vote respecting
approval or ratification of the transaction.

Related persons are directors, director nominees, executive
officers, holders of 5% or more of our voting stock and their

immediate family members. Immediate family members
are spouses, parents, stepparents, children, stepchildren,
siblings, daughters-in-law, sons-in-law and any person,
other than a tenant or domestic employee, who resides in
the household of a director, director nominee, executive
officer or holder of 5% or more of our voting stock.

After its review, the Nominating and Governance Committee
may approve or ratify the transaction. The policies and
procedures provide that certain transactions are deemed to
be pre-approved even if they will exceed $100,000. These
transactions include employment of executive officers, director
compensation, and transactions with other companies if
the aggregate amount of the transaction does not exceed
the greater of $1 million or 2% of that company’s total
revenues and the related person is not an executive officer
of the other company.

Does the Company require stock ownership by directors?

Yes, the Company requires stock ownership by directors.
The Board of Directors expects non-management directors
to hold a meaningful number of shares of Company common
stock and expects non-management directors to retain
shares acquired as compensation as a director until at
least 12 months following their departure from the Board.

YUM directors receive a significant portion of their annual
compensation in stock. The Company believes that the
emphasis on the equity component of director compensation
serves to further align the interests of directors with those
of our shareholders.

How much YUM stock do the directors own?

Stock ownership information for each director nominee is shown in the table on page 26.

Does the Company have stock ownership guidelines for executives and senior
management?

The Management Planning and Development Committee
has adopted formal stock ownership guidelines that set
minimum expectations for executive and senior management
ownership. These guidelines are discussed on page 41.

The Company has maintained an ownership culture among
its executive and senior managers since its formation.
Substantially all executive officers and members of senior
management, hold stock well in excess of the guidelines.

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementMATTERS REQUIRING SHAREHOLDER ACTION

ITEM 1 Election of Directors

(Item 1 on the Proxy Card)

Who are this year’s nominees?

The eleven (11) nominees recommended by the Nominating
and Governance Committee of the Board of Directors
for election this year to hold office until the 2015 Annual
Meeting and until their respective successors are elected
and qualified are provided below. The biographies of each
of the nominees below contains information regarding
the person’s service as a director, business experience,
director positions held currently or at any time during the
last five years, information regarding involvement in certain
legal or administrative proceedings, if applicable, and the
experiences, qualifications, attributes or skills that caused
the Nominating and Governance Committee and the Board
to determine that the person should serve as a director for
the Company. In addition to the information presented below
regarding each nominee’s specific experience, qualifications,

attributes and skills that led our Board to the conclusion that
he or she should serve as a director, we also believe that
all of our director nominees have a reputation for integrity,
honesty and adherence to high ethical standards. They
each have demonstrated business acumen and an ability
to exercise sound judgment, as well as a commitment
of service to YUM and our Board. Finally, we value their
significant experience on other public company boards of
directors and board committees.

There are no family relationships among any of the directors
and executive officers of the Company. See “What are the
Company’s policies and procedures with respect to related
person transactions?” at page 13. Director ages are as of
the date of this proxy statement.

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementMichael J. Cavanagh

Age 48
Director since 2012
Co-Chief Executive Officer,
Corporate & Investment Bank,
JPMorgan Chase & Co.

Michael J. Cavanagh is Co-Chief Executive
Officer of the Corporate & Investment Bank of JPMorgan
Chase & Co., a position he has held since 2012.
Mr. Cavanagh is also a member of JPMorgan Chase &
Co.’s Operating Committee. From 2010 to 2012, he was
the Chief Executive Officer of JPMorgan Chase & Co.’s
Treasury & Securities Services business, one of the world’s
largest cash management providers and a leading global
custodian. From 2004 to 2010, Mr. Cavanagh was Chief
Financial Officer of JPMorgan Chase & Co.
Specific qualifications, experience, skills and expertise:
•• Operating and management experience, including as
executive vice president and chief financial officer of a
financial services and retail banking firm
•• Expertise in finance and strategic planning

David W. Dorman

Age 60
Director since 2005
Non-Executive Chairman,
CVS Caremark Corporation and
Founding Partner, Centerview Capital

David W. Dorman is the Non-Executive Chairman of
the Board of CVS Caremark Corporation, a pharmacy
healthcare provider. He has held this position since May
2011. He is also a Founding Partner of Centerview Capital,
a private investment firm, since July 2013. Until May 2011,
he was the Non-Executive Chairman of Motorola Solutions,
Inc. (formerly known as Motorola Inc.), a leading provider
of business and mission critical communication products
and services for enterprise and government customers.
He served as Non-Executive Chairman of the Board of
Motorola, Inc. from May 2008 until the separation of its
mobile devices and home businesses in January 2011.
From October 2006 to May 2008, he was Senior Advisor
and Managing Director to Warburg Pincus, a global
private equity firm. From November 2005 until January
2006, he was President of AT&T Inc., a company that
provides Internet and transaction-based voice and data
services (formerly known as SBC Communications). He
was Chairman of the Board and Chief Executive Officer
of the company previously known as AT&T Corp. from
November 2002 until November 2005. Prior to this, he
was President of AT&T Corp. from 2000 to 2002 and the
Chief Executive Officer of Concert, a former global venture
created by AT&T Corp. and British Telecommunications plc,

ITEM 1 ELECTION OF DIRECTORS

from 1999 to 2000. Mr. Dorman serves on the board of
Motorola Solutions, Inc. and Georgia Tech Foundation. He
served as a director of AT&T Corp. from 2002 to 2006.
Specific qualifications, experience, skills and expertise:
•• Operating and management experience, including as
chief executive officer of global telecommunications-
related businesses

•• Expertise in finance, strategic planning and public company

executive compensation

•• Public company directorship and committee experience
•• Independent of Company

Massimo Ferragamo

Age 56
Director since 1997
Chairman, Ferragamo USA, Inc.

Massimo Ferragamo is Chairman of
Ferragamo USA, Inc., a subsidiary of
Salvatore Ferragamo Italia, which controls
sales and distribution of Ferragamo products in North
America. Mr. Ferragamo has held this position since 1985.
Mr. Ferragamo served as a director of Birks & Mayors, Inc.
from 2005 until 2007.
Specific qualifications, experience, skills and expertise:
•• Operating and management experience, including as
chairman of international sales and distribution business
•• Expertise in branding, marketing, sales and international

business development

•• Public company directorship and committee experience
•• Independent of Company

Mirian M. Graddick-Weir

Age 59
Director Since 2012
Executive Vice President,
Human Resources, Merck & Co., Inc.

Mirian M. Graddick-Weir serves as Executive
Vice President of Human Resources for Merck
& Co., Inc., a pharmaceutical company. She has held this
position since 2008. From 2006 until 2008, she was Senior
Vice President of Human Resources of Merck & Co., Inc.
Prior to this position, she served as Executive Vice President
of Human Resources and Employee Communications of
AT&T Corp from 2004 to 2006. Ms. Graddick-Weir served
as the Executive Vice President of Human Resources of
AT&T Corp. from 1999 to 2004. Ms. Graddick-Weir held
various executive positions throughout her career with
AT&T, which began in 1981. Ms. Graddick-Weir served as
a director of Harleysville Group Inc. from 2000 until 2012.

YUM! BRANDS, INC. - 2014 Proxy StatementProxy Statement

ITEM 1 ELECTION OF DIRECTORS

Specific qualifications, experience, skills and expertise:
•• Management experience, including as executive vice
president of human resources for a pharmaceutical
company and a global communications services provider
•• Expertise in global human resources, corporate governance

and public company compensation

•• Public company directorship and committee experience
•• Financially literate
•• Independent of Company

Bonnie G. Hill

Age 72
Director since 2003
President, B. Hill Enterprises, LLC

Bonnie G. Hill is President of B. Hill
Enterprises, LLC, a consulting company.
She has held this position since 2001. She
is also co-founder of Icon Blue, Inc., a brand marketing
company. She served as President and Chief Executive
Officer of Times Mirror Foundation, a charitable foundation
affiliated with the Tribune Company from 1997 to 2001 and
Senior Vice President, Communications and Public Affairs,
of the Los Angeles Times from 1998 to 2001. From 1992
to 1996, she served as Dean of the McIntire School of
Commerce at the University of Virginia. Ms. Hill currently
serves as a director of AK Steel Holding Corporation, The
Home Depot, Inc., California Water Service Group and
The Rand Corporation. She serves as the Lead Director
of The Home Depot, Inc. She also served on the boards
of Hershey Foods Corporation from 1993 to 2007 and
Albertson’s, Inc. from 2002 to 2006.
Specific qualifications, experience, skills and expertise:
•• Operating and management experience, including as
president of a consulting firm and as dean of the school
of commerce at a large public university

•• Expertise in corporate governance, succession planning

and public company compensation

•• Public company directorship and committee experience
•• Financially literate
•• Independent of Company

Jonathan S. Linen

Age 70
Director since 2005
Advisor to the Chairman,
American Express Company

Jonathan S. Linen has been an advisor to the
Chairman of American Express Company, a
diversified worldwide travel and financial services company,
since January 2006. From August 1993 until December 2005,
he served as Vice Chairman of American Express Company.
From 1992 to 1993, Mr. Linen served as President and
Chief Operating Officer of American Express Travel Related
Services Company, Inc. From 1989 to 1992, Mr. Linen
served as President and Chief Executive Officer of Shearson
Lehman Brothers. Mr. Linen is a director of Modern Bank,
N.A. and The Intercontinental Hotels Group.
Specific qualifications, experience, skills and expertise:
•• Operating and management experience, including as
president and chief executive officer of global travel-related
services company

•• Expertise in finance, marketing and international business

development

•• Public company directorship and committee experience
•• Independent of Company

Thomas C. Nelson

Age 51
Director since 2006
Chairman, Chief Executive Officer and
President, National Gypsum Company

Thomas C. Nelson has served as the
President and Chief Executive Officer of
National Gypsum Company, a building products manufacturer,
since 1999 and was elected Chairman of the Board in January
2005. From 1995 to 1999, Mr. Nelson served as the Vice
Chairman and Chief Financial Officer of National Gypsum
Company. He is also a General Partner of Wakefield Group,
a North Carolina based venture capital firm. Mr. Nelson
previously worked for Morgan Stanley & Co. and in the
United States Defense Department as Assistant to the
Secretary and was a White House Fellow. He serves as
a Director of Carolinas Healthcare System and as Lead
Director of Belk, Inc.
Specific qualifications, experience, skills and expertise:
•• Operational and management experience, including as
president and chief executive officer of a building products
manufacturer

•• Senior government experience as Assistant to the Secretary
of the United States Defense Department and as a White
House Fellow

•• Expertise in finance, strategic planning, business

development and retail business

YUM! BRANDS, INC. - 2014 Proxy StatementProxy Statement

•• Public company directorship and committee experience
•• Independent of Company

David C. Novak

Age 61
Director since 1997
Chairman and Chief Executive Officer,
YUM! Brands, Inc.

David C. Novak has been Chairman of the
Board since 2001, and Chief Executive Officer
of YUM since 2000. He served as President of YUM from
October 1997 to April 2012. Mr. Novak previously served
as Group President and Chief Executive Officer, KFC and
Pizza Hut from August 1996 to July 1997, at which time he
became acting Vice Chairman of YUM. Mr. Novak served
as a director of Bank One Corporation from 2001 until its
merger with JPMorgan Chase & Co. in 2004. He continued
serving as a director of JPMorgan Chase & Co. from 2004
to 2012.
Specific qualifications, experience, skills and expertise:
•• Operating and management experience, including as
chairman and chief executive officer of the Company
•• Expertise in strategic planning, global branding, franchising,

and corporate leadership

•• Public company directorship and committee experience

Thomas M. Ryan

Age 61
Director since 2002
Former Chairman and CEO, CVS
Caremark Corporation

Thomas M. Ryan is the former Chairman and
Chief Executive Officer of the Board of CVS
Caremark Corporation, a pharmacy healthcare provider. He
served as Chairman from April 1999 to May 2011. He was
Chief Executive Officer of CVS Caremark Corporation from
May 1998 to February 2011 and also served as President
from May 1998 to May 2010. Mr. Ryan serves on the boards
of Five Below, Inc. and Vantiv, Inc. and is an Operating
Partner of Advent International. Mr. Ryan was a director of
Reebok International Ltd. from 1998 to 2005 and Bank of
America Corporation from 2004 to 2010.
Specific qualifications, experience, skills and expertise:
•• Operating and management experience, including as chief
executive officer of global pharmacy healthcare business
•• Expertise in finance, strategic planning and public company

executive compensation

•• Public company directorship and committee experience
•• Independent of Company

ITEM 1 ELECTION OF DIRECTORS

Jing-Shyh S. Su

Age 61
Director since 2008
Vice Chairman, YUM! Brands, Inc.,
Chairman and Chief Executive Officer
of YUM’s China Division

Jing-Shyh S. Su has been Vice Chairman
of the Board since 2008. He is also Chairman and
Chief Executive Officer of YUM’s China Division, a position
he has held since May 2010. From 1997 to May 2010,
he was President of YUM’s China Division. Prior to this
position, he was the Vice President of North Asia for both
KFC and Pizza Hut.
Specific qualifications, experience, skills and expertise:
•• Operating and management experience, including as

president of the Company’s China Division

•• Expertise in marketing and brand development
•• Expertise in strategic planning and international business

development

Robert D. Walter

Age 68
Director since 2008
Founder and Retired Chairman/CEO
Cardinal Health, Inc.

Robert D. Walter is the founder of Cardinal
Health, Inc., a company that provides
products and services supporting the health care industry.
Mr. Walter retired from Cardinal Health in June 2008. Prior to
his retirement from Cardinal Health, he served as Executive
Director from November 2007 to June 2008. From April 2006
to November 2007, he served as Executive Chairman of
the Board of Cardinal Health. From 1979 to April 2006, he
served as Chairman and Chief Executive Officer of Cardinal
Health. Mr. Walter serves as a director of American Express
Company and Nordstrom, Inc. From 2000 to 2007, he
was a director of CBS Corporation and its predecessor,
Viacom, Inc.
Specific qualifications, experience, skills and expertise:
•• Operating and management experience, including as
chief executive officer, of global healthcare and service
provider business

•• Expertise in finance, business development, business
integrations, financial reporting, compliance and controls
•• Public company directorship and committee experience
•• Independent of Company

YUM! BRANDS, INC. - 2014 Proxy StatementProxy Statement

ITEM 1 ELECTION OF DIRECTORS

If elected, we expect that all of the aforementioned nominees will serve as directors and hold office until the 2015 Annual
Meeting of Shareholders and until their respective successors have been elected and qualified. Based on the recommendation
of the Nominating and Governance Committee, all of the aforementioned nominees are standing for re-election.

What is the recommendation of the Board of Directors?

The Board of Directors recommends that you vote FOR the election of these nominees.

What if a nominee is unwilling or unable to serve?

That is not expected to occur. If it does, proxies may be voted for a substitute nominated by the Board of Directors.

What vote is required to elect directors?

A nominee will be elected as a director if the number of
“FOR” votes exceeds the number of “AGAINST” votes with
respect to his or her election.

Our policy regarding the election of directors can be found
in our Corporate Governance Principles at www.yum.com/
investors/governance/principles.asp and at page 9 under
“What other significant Board practices does the Company
have?—Majority Voting Policy.”

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementITEM 2 Ratification of Independent Auditors
(Item 2 on the Proxy Card)

What am I voting on?

A proposal to ratify the selection of KPMG LLP (“KPMG”) as our independent auditors for fiscal year 2014. The Audit
Committee of the Board of Directors has selected KPMG to audit our consolidated financial statements. During fiscal 2013,
KPMG served as our independent auditors and also provided other audit-related and non-audit services.

Will a representative of KPMG be present at the meeting?

Representatives of KPMG will be present at the Annual Meeting and will have the opportunity to make a statement if they
desire and will be available to respond to appropriate questions from shareholders.

What vote is required to approve this proposal?

Approval of this proposal requires the affirmative vote of a majority of the shares present in person or represented by proxy
and entitled to vote at the Annual Meeting. If the selection of KPMG is not ratified, the Audit Committee will reconsider
the selection of independent auditors.

What is the recommendation of the Board of Directors?

The Board of Directors recommends that you vote FOR approval of this proposal.

What were KPMG’s fees for audit and other services for fiscal years 2013 and 2012?

The following table presents fees for professional services rendered by KPMG for the audit of the Company’s annual
financial statements for 2013 and 2012, and fees billed for audit-related services, tax services and all other services
rendered by KPMG for 2013 and 2012.

Audit fees(1)
Audit-related fees(2)
Audit and audit-related fees
Tax fees(3)
All other fees(4)
TOTAL FEES

2013

6,330,000 $
360,000
6,690,000
980,000
—
7,670,000 $

2012
5,680,000
1,180,000
6,860,000
790,000
40,000
7,690,000

(1) Audit fees include fees for the audit of the annual consolidated financial statements, reviews of the interim condensed consolidated financial statements
included in the Company’s quarterly reports, audits of the effectiveness of the Company’s internal controls over financial reporting, statutory audits and
services rendered in connection with the Company’s securities offerings.

(2) Audit-related fees include audits of financial statements of certain employee benefit plans, agreed upon procedures and other attestations. Audit-related fees

in 2012 also included due diligence assistance.

(3) Tax fees consist principally of fees for international tax compliance, VAT services and tax audit assistance.
(4) All other fees consist of fees for advisory services related to the Company’s expansion in an international market.

YUM! BRANDS, INC. - 2014 Proxy StatementProxy Statement

ITEM 3 ADVISORY VOTE ON EXECUTIVE COMPENSATION

What is the Company’s policy regarding the approval of audit
and non-audit services?

The Audit Committee has implemented a policy for the
pre-approval of all audit and permitted non-audit services,
including tax services, proposed to be provided to the
Company by its independent auditors. Under the policy,
the Audit Committee may approve engagements on a
case-by-case basis or pre-approve engagements pursuant
to the Audit Committee’s pre-approval policy. The Audit
Committee may delegate pre-approval authority to one
of its independent members, and has currently delegated
pre-approval authority up to certain amounts to its Chair.

Pre-approvals for services are granted at the January Audit
Committee meeting each year. In considering pre-approvals,
the Audit Committee reviews a description of the scope of
services falling within pre-designated services and imposes
specific budgetary guidelines. Pre-approvals of designated

services are generally effective for the succeeding 12 months.
Any incremental audit or permitted non-audit services which
are expected to exceed the relevant budgetary guideline
must be pre-approved.

The Corporate Controller monitors services provided by
the independent auditors and overall compliance with
the pre-approval policy. The Corporate Controller reports
periodically to the Audit Committee about the status of
outstanding engagements, including actual services
provided and associated fees, and must promptly report
any non-compliance with the pre-approval policy to the
Chair of the Audit Committee.

The complete policy is available on the Company’s website at
www.yum.com/investors/governance/media/gov_auditpolicy.pdf.

ITEM 3 Advisory Vote On Executive Compensation

(Item 3 on the Proxy Card)

What am I voting on?

In accordance with SEC rules, we are asking shareholders
to approve, on a non-binding basis, the compensation of the
Company’s named executive officers (“NEOs”) as disclosed
in this proxy statement.

We urge shareholders to read the Compensation Discussion
and Analysis beginning at page 28, the compensation tables
beginning at page 44 and the narrative discussion following
the compensation tables.

Our Performance-Based Executive Compensation Program Attracts and Retains Strong
Leaders and Closely Aligns with Our Shareholders’ Interests

Our performance-based executive compensation program
is designed to attract, reward and retain the talented leaders
necessary for our Company to succeed in the highly
competitive market for talent, while maximizing shareholder
returns. This approach has made our management team a
key driver in the Company’s strong performance over both
the long and short term. We believe that our compensation
program has attracted and retained strong leaders, and is
closely aligned with the interests of our shareholders.

The Compensation Discussion and Analysis section of this
proxy statement, beginning on page 28 discusses in detail
how our compensation policies and procedures operate
and are designed to meet our compensation goals and
how we make our compensation decisions.

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementITEM 3 ADVISORY VOTE ON EXECUTIVE COMPENSATION

We Made Changes to Our Executive Compensation Program for 2013
After Considering Your Feedback

As described in the Compensation Discussion and Analysis,
our Management Planning and Development Committee
(the “Committee”) considered the feedback of many of our
major institutional shareholders, and during 2013 implemented
several significant changes, described below, in our executive
compensation program. Specifically, changes made by the
Committee included the following:

•• Updated the Company’s Executive Peer Group to
better align the size of the peer group companies
with YUM.

•• Re-designed 2013-2015 Performance Share Plan -
Re-designed 2013-2015 Performance Share Plan to
measure relative total shareholder return vs. the S&P 500.
•• Increased Use of Performance Share Units in CEO’s
Long Term Incentive (“LTI”) Program - Changed the
CEO’s LTI compensation mix from 90% SARs and 10%
PSUs to 75% SARs and 25% PSUs.

•• Eliminated CEO’s Accruals under Company’s Pension
Equalization Plan - Replaced our CEO’s nonqualified
pension benefits under the Pension Equalization Plan
(“PEP”) with a benefit in the Leadership Retirement Plan.
As a result of this change, Mr. Novak will receive a long-
term benefit that is similar to what he would have received

under PEP, assuming historically normal interest rates,
without the fluctuation from interest rate volatility that is
inherent in the PEP.

•• Eliminated Excise Tax Gross-Ups - Eliminated excise
tax gross-ups upon a change in control for current and
future Change in Control Severance Agreements with
executives, including the NEOs.

•• Implemented “Double Trigger” Vesting upon a Change
in Control - Implemented double trigger vesting upon
a change in control of the Company for equity awards
made in 2013 and beyond.

We believe these changes further align our executive
compensation program with best practices, enhance
shareholder value, and enable us to better achieve our business
goals.

Accordingly, we ask our shareholders to vote in favor of the
following resolution at the Annual Meeting:

RESOLVED, that the shareholders approve, on an advisory
basis, the compensation awarded to our NEOs, as disclosed
pursuant to SEC rules, including the Compensation
Discussion and Analysis, the compensation tables and
related materials included in this proxy statement.

What vote is required to approve this proposal?

Approval of this proposal requires the affirmative vote of
a majority of shares present in person or represented by
proxy and entitled to vote at the Annual Meeting. While
this vote is advisory and non-binding on the Company,
the Board of Directors and the Committee will review the
voting results and consider shareholder concerns in their

continuing evaluation of the Company’s compensation
program. Unless the Board of Directors modifies its policy
on the frequency of this advisory vote, the next advisory
vote on executive compensation will be held at the 2015
Annual Meeting of Shareholders.

What is the recommendation of the Board of Directors?

The Board of Directors recommends that you vote FOR approval of this proposal.

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementITEM 4 Re-Approval of YUM! Brands, Inc. Executive

Incentive Compensation Plan Performance
Measures (Item 4 on the Proxy Card)

What am I voting on?

A proposal to re-approve the material terms of the performance
measures available under the YUM! Brands, Inc. Executive
Incentive Compensation Plan (“Incentive Plan”), as required
by the performance-based compensation rules under

Section 162(m) of the Internal Revenue Code (“Section
162(m)”). The Incentive Plan was previously approved by
shareholders on May 21, 2009 and has not been amended
since the last approval.

Why am I voting on this?

In order for the Company to continue to make awards under
the Incentive Plan that will qualify as “performance-based
compensation” that is exempt from the $1 million deduction
limit (as described below) imposed by Section 162(m), the
Incentive Plan (and in particular, the material terms thereof,
including the employees who are eligible to receive Awards

under the Incentive Plan, the performance measures on
which performance goals may be based and the individual
dollar limitations on payments in any calendar year) must be
approved by the Company’s shareholders. Approval of the
Incentive Plan will constitute approval of the material terms.

What are the material terms that must be approved?

A summary of the most significant provisions of the Incentive
Plan is set forth below and is qualified in its entirety by
reference to the Incentive Plan, set forth in Appendix A hereto.
If the Incentive Plan is not so approved, incentive payments
under the Incentive Plan will not qualify as “performance-
based compensation”.

Purpose. The purpose of the Incentive Plan is to promote the
interests of the Company and its shareholders by (i) motivating
executives, by means of performance-related incentives, to
achieve financial goals; (ii) attracting and retaining executives
of outstanding ability; (iii) strengthening the Company’s
capability to develop, maintain and direct a competent
executive staff; (iv) providing annual incentive compensation
opportunities which are competitive with those of other major
corporations; and (v) enabling executives to participate in
the growth and financial success of the Company.

Eligibility and Grant of Awards. Under the Incentive Plan,
the Committee (defined below) may grant cash incentives
(“Awards”) to Executive Officers or other members of senior
management of the Company (“Eligible Employees”). The
recipient of an Award (a “Participant”) will become entitled
to a cash payment if certain performance goals (described
below) for the Performance Period, as established by the
Committee, are satisfied. The amount of the cash payment

is to be based on the extent to which the performance
goals are achieved. At the time an Award is granted to a
Participant, the Committee will establish, with respect to the
Award, (i) a target amount, expressed as a percentage of
the Participant’s base salary for such Performance Period;
(ii) the performance goal(s) for the Performance Period with
respect to the Award, which goals will be based on one
or more of the performance measures described below);
(iii) the maximum payments to be made with respect to
various levels of achievement of the performance goal(s)
for the Performance Period; and (iv) whether the Award is
intended to satisfy the requirements for performance-based
compensation (as described below).

Performance Measures. Awards under the Plan may be
based on one or more of the following performance measures:
cash flow, earnings per share, return on operating assets,
return on equity, operating profit, net income, revenue growth,
Company or system sales, shareholder return, gross margin
management, market share improvement, market value added,
restaurant development, customer satisfaction, economic
value added, operating income, earnings before interest
and taxes, earnings before interest, taxes, depreciation and
amortization, return on invested capital and operating income
margin percentage. Such goals may be particular to a line of

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementITEM 4 RE-APPROVAL OF YUM! BRANDS, INC. EXECUTIVE INCENTIVE COMPENSATION PLAN PERFORMANCE MEASURES

business, subsidiary, or other unit or may be based on the
Company or franchise system generally. These measures
may be particular to a line of business, a subsidiary of the
Company, or other units or may be based on the Company
or franchise system generally.

Performance-Based Compensation. A federal income
tax deduction will generally be unavailable for annual
compensation in excess of $1 million paid to the chief
executive officer and any of the three next most highly
compensated officers (other than the chief financial officer)
of a public corporation. However, amounts that constitute
“performance-based compensation” are not counted toward
the $1 million limit. The Committee may designate any
Award under the Plan as intended to be “performance-
based compensation.”

If an Award is designated as performance-based
compensation, the Committee must certify that the
performance goal(s) and other material terms of the Award
have been attained before the Award can be paid. The
Committee may adjust the amount of a Participant’s Award
for individual performance on the basis of such quantitative
and qualitative performance measures and evaluations as
it deems appropriate and may make such adjustments as
it deems appropriate in the case of any Participant whose
position with the Company has changed during the applicable
performance period. The Committee will have the discretion
to adjust performance goals and the methodology used to
measure the determination of the degree of attainment of
such goals; provided, however, that, to the extent required
by the requirements applicable to performance-based
compensation, a performance-based Award may not be
adjusted in a manner that increases the value of such Award.

The maximum payment of an Award that is intended to
be performance-based compensation will not exceed
$10,000,000 in any calendar year.

Payments. A Participant’s eligibility for payment with respect
to an Award for a Performance Period will be determined
by the Committee. Payments will be made in cash and,
unless otherwise provided by the Committee, will be paid
no later than March 15th of the calendar year following the
calendar year in which the applicable performance period
ends. If a Participant’s termination of employment occurs
prior to the end of a performance period, any Award made to
the Participant for that performance period will be forfeited;
provided, however, that special rules, including special
payment timing rules, apply in the case of termination on
account of death or disability and special calculation rules
apply in the event the date of termination occurs on account
of the Participant’s normal retirement.

Withholding Taxes. The Company will have the right to
deduct from all payments under the Incentive Plan any taxes
required to be withheld with respect to such payments.

Change in Control. In the event of a change in control of
the Company (as defined in the YUM! Brands, Inc. Long
Term Incentive Plan (the “LTIP”), the Performance Period will
be deemed to have concluded on the date of the change
of control and, within 10 business days thereafter, each
Participant will receive a pro rata amount (based on the
number of days in such Performance Period elapsed through
the date of the change of control) equal to the greater of the
Participant’s target amount or the amount the Participant
would have earned for the Performance Period assuming
continued achievement of the relevant performance goals
at the rate achieved as of the date of the change of control.
Any former Participant in the Plan who was granted an Award
for the period in which a change in control of the Company
occurs and whose employment with the Company was
involuntarily terminated (other than for cause) during a period
that a Potential Change in Control (as defined in the LTIP) is
in effect and within one year preceding the occurrence of
a change in control will be paid the amount of such annual
incentive award as if the Company had fully achieved the
applicable performance target(s) for the Performance Period
in which the change in control occurs, which amount will be
paid to the former Participant 10 business days following
the occurrence of the applicable change in control.

Return of Overpayments. The Incentive Plan provides
that if an amount paid is based on attainment of a level
of objective performance goals that was overstated as a
result of misconduct (defined in the Incentive Plan) by an
employee of the Company or a subsidiary of the Company,
with the result that the payment of the Award was larger
than it should have been, the Participant (whether or not
employed) whose misconduct caused the inaccuracy will
be required to repay the excess. In addition, the Committee
may require an active or former Participant (regardless of
whether then employed) to repay the excess previously
received by that Participant if the Committee concludes
that the repayment is necessary to prevent the Participant
from unfairly benefiting from the inaccuracy; provided,
however, that (a) this repayment obligation will apply to an
active or former Participant only if the Committee reasonably
determines that, prior to the time the amount was paid
(or, if payment of the amount is electively deferred by the
Participant, at the time the amount would have been paid
in the absence of the deferral), such Participant knew or
should have known that the amount was greater than it
should have been by reason of the inaccuracy, and (b) the
amount to be repaid by the Participant may not be greater
than the excess of (i) the amount paid to the Participant over
(ii) the amount that would have been paid to a Participant in
the absence of the inaccuracy (taking into account, at the
discretion of the Committee, only the inaccuracy of which
the Participant knew or should have known, and which
the Participant knew or should have known was caused
by misconduct).

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementITEM 4 RE-APPROVAL OF YUM! BRANDS, INC. EXECUTIVE INCENTIVE COMPENSATION PLAN PERFORMANCE MEASURES

Instead of (or in addition to) requiring repayment, the
Committee may adjust a Participant’s future compensation
and the Company and/or a subsidiary of the Company will
be entitled to set-off against the amount of any such gain
any amount owed to the Participant by the Company and/
or subsidiary. In any event, the repayment provisions of the
Incentive Plan will not apply to any reductions in Awards
made after a change in control of the Company to the extent
that the Award was granted before a change in control.

Administration. The Incentive Plan is administered by a
committee (the “Committee”) selected by the Board and
consisting solely of two or more non-employee members
of the Board. Subject to the terms of the Incentive Plan, the
Committee will have the authority and discretion to select
from among the Eligible Employees those persons who will
receive Awards, to determine the time or times of payment
with respect to the Awards, to establish the terms, conditions,
performance goals, restrictions, and other provisions of
such Awards, and to cancel or suspend Awards. The
Committee will have the authority and discretion to interpret
the Incentive Plan, to establish, amend, and rescind any rules
and regulations relating to the Incentive Plan, to determine

the terms and provisions of any Award made pursuant to
the Incentive Plan, and to make all other determinations that
may be necessary or advisable for the administration of the
Incentive Plan. Any interpretation of the Incentive Plan by the
Committee and any decision made by it under the Incentive
Plan is final and binding on all persons. The Committee may
allocate all or any portion of its responsibilities and powers
to any one or more of its members and may delegate all or
any part of its responsibilities and powers to any person or
persons selected by it. Until action to the contrary is taken
by the Committee, the Committee’s authority with respect
to matters concerning Participants below the Executive
Officer level is delegated to the Chief Executive Officer or
the Chief People Officer of the Company.

Amendment or Termination. The Board may, at any
time, amend or terminate the Incentive Plan, provided
that no amendment or termination may, in the absence
of consent to the change by the affected Participant,
adversely affect the rights of any Participant or beneficiary
under any Award granted under the Incentive Plan prior
to the date such amendment is adopted by the Board.

What vote is required to approve this proposal?

Approval of this proposal requires the affirmative vote of a majority of the shares present in person or represented by proxy
and entitled to vote at the Annual Meeting.

What is the recommendation of the Board of Directors?

The Board of Directors recommends that you vote FOR approval of this proposal.

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementSTOCK OWNERSHIP INFORMATION

Who are our largest shareholders?

As of January 31, 2014, the Company did not know of any shareholder that was the owner of more than 5% of YUM
common stock.

How much YUM common stock is owned by our directors and executive officers?

This table shows the beneficial ownership of YUM common
stock as of December 31, 2013 by

•• each of our directors,
•• each of the executive officers named in the Summary

Compensation Table on page 44, and

•• all directors and executive officers as a group.
Unless we note otherwise, each of the following persons and
their family members have sole voting and investment power
with respect to the shares of common stock beneficially
owned by him or her. None of the persons in this table holds
in excess of one percent of the outstanding YUM common
stock. Directors and executive officers as a group beneficially
own approximately 2%. Our internal stock ownership
guidelines call for the Chairman to own 336,000 shares
of YUM common stock or stock equivalents. Guidelines

for our other NEOs call for them to own 50,000 shares of
YUM common stock or stock equivalents within five years
following their appointment to their current position.

The table shows the number of shares of common stock
and common stock equivalents beneficially owned as
of December 31, 2013. Included are shares that could
have been acquired within 60 days of December 31, 2013
through the exercise of stock options, stock appreciation
rights (“SARs”) or distributions from the Company’s deferred
compensation plans, together with additional underlying
stock units as described in footnote (4) to the table. Under
SEC rules, beneficial ownership includes any shares as to
which the individual has either sole or shared voting power
or investment power and also any shares that the individual
has the right to acquire within 60 days through the exercise
of any stock option or other right.

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementSTOCK OWNERSHIP INFORMATION

Beneficial Ownership

Number
of Shares
Beneficially
Owned(1)
328,127
0
54,541
53,429
0

Name
David C. Novak
Michael J. Cavanagh
David W. Dorman
Massimo Ferragamo
Mirian M. Graddick-Weir
J. David Grissom
Bonnie G. Hill
Jonathan S. Linen
Thomas C. Nelson
Thomas M. Ryan
Robert D. Walter
Patrick Grismer
Jing-Shyh S. Su
Greg Creed
Muktesh Pant
All Directors and Executive Officers
as a Group (22 persons)
10,585,778
(1) Shares owned outright. These amounts include the following shares held pursuant to YUM’s 401(k) Plan as to which each named person has sole voting

Total
4,486,495
5,119
70,831
139,767
7,886
121,157
49,916
69,231
47,663
85,502
136,606
147,962
1,878,751
407,897
504,523

118,872(5)
3,024
14,438(6)
8,288
31,357(7)

18,887(8)
369,229(9)
29,371
15,402

5,620,909

8,446,001

2,139,777

1,523,302

1,301,790

108,301

Deferral
Plans Stock
Units(3)
1,334,279
0
0
43,130
0
2,055
11,961
0
0
4,842
0
0
0
1,004
0

Total
Beneficial
Ownership
3,407,038
100
65,577
107,595
565
121,157
33,833
35,950
14,249
55,047
115,588
122,718
1,634,253
327,500
415,065

Additional
Underlying
Stock
Units(4)
1,079,457
5,019
5,254
32,172
7,321
0
16,083
33,281
33,414
30,455
21,018
25,244
244,498
80,397
89,458

Options/
SARS
Exercisable
within 60
Days(2)
1,744,632
100
11,036
11,036
565
230
18,848
21,512
5,961
18,848
7,287
103,831
1,265,024
297,125
399,663

power:
• Mr. Novak, 32,463 shares
• Mr. Grismer, 7,287 shares
• Mr. Pant, 2,259 shares
• all executive officers as a group, 44,636 shares

(2) The amounts shown include beneficial ownership of shares that may be acquired within 60 days pursuant to stock options and SARs awarded under our
employee or director incentive compensation plans. For stock options, we report shares equal to the number of options exercisable within 60 days. For SARs
we report the shares that would be delivered upon exercise (which is equal to the number of SARs multiplied by the difference between the fair market value
of our common stock at year-end and the exercise price divided by the fair market value of the stock).

(3) These amounts reflect units denominated as common stock equivalents held in deferred compensation accounts for each of the named persons under our
Director Deferred Compensation Plan or our Executive Income Deferral Program. Amounts payable under these plans will be paid in shares of YUM common
stock at termination of directorship/employment or within 60 days if so elected.

(4) Amounts include units denominated as common stock equivalents held in deferred compensation accounts which become payable in shares of YUM common
stock at a time (a) other than at termination of employment or (b) after March 1, 2014. For Mr. Novak, those amounts also include vested restricted stock
units. For Mr. Su, amounts also include restricted stock units awarded in 2010 that will vest in 2015.

(5) This amount includes 26,000 shares held in trusts.
(6) This amount includes 10,000 shares held in a trust.
(7) These shares are held in a trust.
(8) This amount includes 11,600 shares held in trusts.
(9) This amount includes 278,361 shares held indirectly.

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementSECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE AND LEGAL
PROCEEDINGS

Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires our directors, executive officers and
persons who own more than 10% of the outstanding shares
of YUM common stock to file with the SEC reports of their
ownership and changes in their ownership of YUM common
stock. Directors, executive officers and greater-than-ten
percent shareholders are also required to furnish YUM with
copies of all ownership reports they file with the SEC. To
our knowledge, based solely on a review of the copies of
such reports furnished to YUM and representations that no
other reports were required, all of our directors and executive
officers complied with all Section 16(a) filing requirements
during fiscal 2013, except that the Form 4 filed on May 25,
2013 by Mr. Walter reported five late transactions.

In 2013, three shareholder derivative actions were filed (one
on May 9, 2013 in Jefferson Circuit Court, Commonwealth of
Kentucky, and one on each of May 21, 2013 and December
9, 2013 in the U.S. District Court for the Western District of
Kentucky) against certain current and former officers and
directors of the Company. Generally, the matters assert claims
of breach of fiduciary duty, waste of corporate assets and
unjust enrichment in connection with an alleged failure to
implement proper controls in the Company’s purchases of
poultry from suppliers to the Company’s China operations

and with an alleged scheme to mislead investors about the
Company’s growth prospects in China. The two actions in
the U.S. District Court for the Western District of Kentucky
have been consolidated. By agreement of the parties both
the consolidated federal court actions and the state court
action have been temporarily stayed pending the outcome
of a motion to dismiss a related securities class action suit
against the Company and certain executive officers. The
derivative actions and the securities class action suit are
more fully described in the Company’s Annual Report on
Form 10-K for the year ended December 28, 2013 in Part 1,
Item 3, Legal Proceedings and Note 19, Contingencies, to
the Consolidated Financial Statements included in Part II,
Item 8, and in previous SEC filings.

Pursuant to North Carolina law, our Restated Articles of
Incorporation and indemnification agreements with our
Directors, the Company shall indemnify and may advance
and/or reimburse certain expenses of our current and former
officers and directors incurred in connection with defending
these actions. Each of the current and former officers and
directors is required to provide an undertaking to repay
such expenses if it is ultimately determined that he or she
is not entitled to indemnification.

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementEXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Introduction

This Compensation Discussion and Analysis (“CD&A”) describes our executive compensation philosophy and program, the
decisions the Management Planning and Development Committee (the “Committee”) has made under this program and factors
considered in making those decisions. This CD&A focuses on the compensation of the following Named Executive Officers
(“NEOs”) for 2013:

Name
David C. Novak
Patrick J. Grismer
Jing-Shyh S. Su

Greg Creed
Muktesh Pant
(1) Title as of 12/31/13

Title(1)
Chairman of the Board and Chief Executive Officer of YUM
Chief Financial Officer of YUM
Vice Chairman of the Board of YUM and Chairman and Chief Executive Officer of
YUM Restaurants China
Chief Executive Officer of Taco Bell
Chief Executive Officer of Yum Restaurants International

We will first provide a brief executive overview. We will then discuss and analyze the following topics:

•• Chief Executive Officer Pay
•• How Compensation Decisions Are Made

•• Elements of Executive Compensation Program
•• Compensation Policies & Practices

Executive Overview

The power of YUM persists even during what was undoubtedly
a difficult year. Our EPS decline of 9%(1) and worldwide operating
profit decline of 10%(2) was disappointing and below our
expectations. Yet, despite our challenges, in 2013 we continued
to provide value to our shareholders with an increase of 16% in
total shareholder return. We maintain a long-term view of our
business, making decisions that put us in a position of strength.
And in 2013, YUM delivered some major accomplishments
through our global portfolio of leading brands including:

•• Opening 1,952 new restaurants outside of the U.S. with
82% of this development occurring in high growth emerging
markets.

•• Growing worldwide system sales by 2%, prior to foreign
currency translation, including 5% growth at Yum!
Restaurants International (YRI) and 1% growth in the U.S.
System; system sales declined 4% in China.

•• Growing operating profit by 10%(2) at YRI, driven by same-
store sales growth and net new unit development, and
3% in the U.S, with Taco Bell U.S. leading the way by
delivering restaurant level margins of 19%.

(1) Prior to Special Items
(2) Prior to foreign currency translations

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementEXECUTIVE COMPENSATION

YUM’s Compensation Philosophy

Our compensation program is designed to support our long-
term growth model, while holding our executives accountable
to achieve key annual results year over year.

YUM’s compensation philosophy for the NEOs is reviewed
annually by the Committee, and has the following key objectives:

•• Reward performance – The majority of NEO pay is
performance based and therefore at-risk. We design pay
programs that incorporate team and individual performance,
customer satisfaction and shareholder return.

•• Emphasize long-term incentive compensation – Our
belief is simple, if we create value for shareholders, then
we share a portion of that value with those responsible
for the results. We believe that all of our long-term incentive
compensation is performance based. Stock Appreciation
Rights (“SARs”) reward for value creation which over time

is a function of our results and the favorable expectations
of our shareholders. Performance Share Unit (“PSU”)
awards reward for superior relative performance as
compared to the S&P 500. Both vehicles encourage
executives to grow the value of the Company with a
long-term perspective in mind.

•• Drive ownership mentality – We require executives to
personally invest in the Company’s success by owning
Company stock.

•• Retain and reward the best talent to achieve superior
shareholder results – To be consistently better than our
competitors, we need to recruit and retain superior talent
who are able to drive superior results. We have structured
our compensation programs to motivate and reward these
results.

Relationship Between Company Pay and Performance

To focus on both the short and long-term success of the
Company, our NEOs’ compensation includes a significant portion,
approximately 80%, that is “at-risk”, where the compensation
paid is determined based on the achievement of specified
results. If short-term and long-term financial and operational

goals are not achieved, then performance-related compensation
will decrease. If goals are exceeded, then performance-related
compensation will increase. As demonstrated below, our target
pay mix for NEOs emphasizes our commitment to “at-risk” pay
in order to tie pay to performance.

CEO TARGET PAY MIX—2013

ALL OTHER NEO TARGET PAY MIX—2013

11%

70%

19%

25%

At-Risk

50%

At-Risk

Base Salary

Annual Bonus

Long-Term Equity Incentive

Base Salary

Annual Bonus

Long-Term Equity Incentive

Based on the Company’s 2013 performance, compensation
fell considerably versus the prior year, specifically:

•• Cash compensation (base salary and annual bonus)
decreased by 60% for the Chief Executive Officer (“CEO”)
and 33% for the other NEOs.

•• Direct compensation (base salary, annual bonus and
long-term equity incentive) decreased by 26% for the
CEO and 19% for the other NEOs.

•• A reduction in annual bonus contributed significantly to
the year over year decline in direct compensation, as
bonus payouts reflected our failure to achieve key
performance metrics in 2013. Annual bonus decreased
by 80% for the CEO and 51% for the other NEOs combined
year over year.

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementEXECUTIVE COMPENSATION

As indicated below, three out of the five NEOs had below target bonus payouts in 2013 as they did not achieve target performance
levels.

NEO TARGET BONUS VS. ACTUAL(1)

)

(

a
u
t
c
A

300

250

200

150

100

273%

216%

202%

198%

161%

105%

Target
Bonus

41%

43%

49%

NOVAK

GRISMER

CREED

PANT

2012

2013

(1) Bonus payout as percentage of target

Long-term incentive payouts also decreased under our Performance Share Plan. 2011 PSU awards were not paid out to
our NEOs since the earnings per share average during the 2011-2013 performance cycle did not reach the required
minimum average growth threshold of seven percent.

These results reflect our commitment to pay-for-performance.

2013 Compensation Changes

As discussed in last year’s CD&A, as a result of our 2012
shareholder vote and feedback, the following changes were
made to our compensation program for 2013:

•• Updated the Company’s Executive Peer Group to better
align the size of the peer group companies with YUM.
•• Eliminated use of similar metrics in short-term incentive
(“STI”) and long-term incentive (“LTI”) programs by re-
designing our 2013-2015 performance share plan to
measure relative total shareholder return vs. the S&P 500.
•• Increased use of performance shares in our LTI program
by changing the CEO’s mix from 90% SARs and 10%
PSUs to 75% SARs and 25% PSUs.

•• Replaced our CEO’s nonqualified pension benefits under
the Pension Equalization Plan (“PEP”) with a benefit in
the Leadership Retirement Plan (“LRP”). As a result of
this change, Mr. Novak will receive a long-term benefit
that is similar to what he would have received under PEP,
assuming historically normal interest rates, without the
fluctuation from interest rate volatility that is inherent in
the PEP.

•• Consistent with the dominant governance model, eliminated
excise tax gross-ups upon a change in control for current
and future agreements and implemented double trigger
vesting upon a change in control of the Company for
equity awards made in 2013 and beyond.

Executive Compensation Governance Practices

We employ key compensation governance practices that provide a foundation for our pay for performance program.

We Do

✓
✓
✓
✓

Executive Stock Ownership Guidelines
Compensation recovery (i.e., “clawback”)
Limited future severance agreements
Double trigger vesting of equity awards upon change in control

We Don’t Do
Employment agreements
Re-pricing of SARs or stock options
Excise tax gross-ups upon change in control
Hedging or pledging of Company stock

✗
✗
✗
✗

The philosophies, actions and practices described above reinforce our longstanding commitment to an executive
compensation program that emphasizes performance and shareholder alignment.

YUM! BRANDS, INC. - 2014 Proxy StatementProxy Statement

EXECUTIVE COMPENSATION

Chief Executive Officer Pay

Our compensation program is designed to support our
long-term Company growth model, while holding our
executives accountable to achieve key annual results year
over year. As discussed on page 29, our CEO’s pay is tied
to performance, as 89% of Mr. Novak’s 2013 target pay

is at-risk. As demonstrated below, our Company has
continued to experience growth under the leadership and
strategic vision of Mr. Novak since he was named CEO in
2000. Mr. Novak is compensated in accordance with this
long-term perspective.

YUM’S LONG-TERM GROWTH UNDER MR. NOVAK’S LEADERSHIP

485%
Market Capitalization Growth

Build powerful brands
• KFC is #1 brand in China;
• Pizza Hut China Casual Dining is #1
western casual dining chain with a
6:1 advantage;

• Taco Bell named marketer of the year

in the U.S.

Drive aggressive expansion
• Increased global restaurant counts by
33% to over 40,000(1) in 128 countries,
giving us almost a 2:1 advantage in
emerging markets

Create industry leading returns
• Achieved 13 year 855% total
shareholder return

$5.7b
market capitalization

$33.7b
market capitalization

2000

2013

(1) Restaurant count includes licensed units

Every January the Committee makes decisions about the CEO’s target compensation based on performance and market
competitiveness. For 2013, the Committee determined that our CEO’s target cash compensation, consisting of base
salary and target bonus, was competitive compared to our Executive Peer Group and did not increase these elements.
In regards to actual cash compensation for 2013, our CEO’s pay decreased by 60% compared to the prior year, largely
due to an 80% decline in annual bonus. His annual bonus reflects below target performance. As demonstrated at page 32,
our CEO’s cash compensation correlates with earnings per share growth, which is our primary business performance
metric.

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementEXECUTIVE COMPENSATION

CEO CASH COMPENSATION(1) VS. EPS

Cash
Compensation
in $

8 000 000

6 000 000

4 000 000

2 000 000

2009

EPS
in $

2013

2010
Base Salary

2011

2012
Annual Bonus
EPS

(1) Represents our CEO’s base salary and annual bonus for each year

The Committee slightly increased Mr. Novak’s target direct compensation in early 2013, as it increased his LTI award to
reflect the strong results delivered in 2012. Mr. Novak’s actual direct compensation, comprised of base salary, bonus paid
and annual long-term incentive award value has remained relatively flat from 2010-2012 but decreased by 26% in 2013
as a result of his reduced annual bonus. Although not included in the calculation of 2013 compensation, our CEO’s 2011
PSU award was not paid out since the average earnings per share during the 2011-2013 performance cycle did not reach
the required minimum average growth threshold of seven percent. Consequently, Mr. Novak realized no value for the
award which had a grant date value of $773,000 and was included in the calculation of his actual direct compensation in
2011 (shown below). The CEO’s SARs continue to only provide value if shareholders receive value through stock price
appreciation. As demonstrated below, our CEO’s direct compensation, like cash compensation, tracks earnings per share.

CEO DIRECT COMPENSATION(1) VS. EPS

Direct
Compensation
in $

15 000 000

10 000 000

5 000 000

EPS
in $

2009

2010

2011

2012

2013

Base Salary

Annual Bonus

Long-Term Equity Incentive

EPS

(1) Represents our CEO’s base salary, annual bonus, and long-term equity incentive for each year

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementEXECUTIVE COMPENSATION

How Compensation Decisions Are Made

Shareholder Outreach, Engagement and 2013 Vote on NEO Compensation

At our 2013 Annual Meeting of Shareholders, 96% of votes
cast on our annual advisory vote on NEO compensation were
in favor of our NEOs’ compensation program, as disclosed
in our 2013 proxy statement. These results represented an
overwhelming majority support and, while we did not make any
changes to our compensation program as a result of this vote,
we continued our extensive shareholder outreach program to
better understand our investors’ opinions on our compensation
practices and have the opportunity to answer their questions.
Over the past two years, members of our management team
from compensation, investor relations and legal were directly
involved in key engagement efforts that served to reinforce our
open door policy, which included:

•• Outreach calls to our top 100 shareholders
•• Actively offering meetings to the top 25 shareholders,
representing ownership of approximately 48% of YUM
shares

•• Dialogue with two proxy advisory firms
•• Investor road shows and conferences
•• Presenting shareholder feedback to the Committee
Our annual engagement efforts have enabled us to meet
with many of our shareholders. The Company and the
Committee appreciate the feedback from our shareholders
and the proxy advisory firms. The Committee considers the
feedback, among other factors discussed in this CD&A, in
making its compensation decisions. Shareholder feedback
has influenced several of our compensation design changes,
including the five compensation changes adopted prior to
the 2013 Annual Meeting of Shareholders, as previously
discussed on page 30. The Committee did not make any
changes to our executive compensation program and
policies as a result of the vote on the 2013 proposal to
approve our NEOs’ compensation.

Role of the Committee and Chief Executive Officer

In January of each year, the Committee reviews the
performance and total compensation package of our CEO
and the other NEOs. The Committee reviews and establishes
each NEO’s total target and actual compensation for the
current year which includes base salary, annual bonus
opportunities and long-term incentive awards. The
Committee’s total compensation decisions impacting our
CEO are also reviewed and ratified by the independent
members of the Board.

In making these compensation decisions, the Committee
relies on the CEO’s in-depth review of the performance of
the other NEOs as well as competitive market information.
Compensation decisions are ultimately made by the
Committee using its judgment, focusing primarily on each
NEO’s performance against his or her financial and strategic
objectives, qualitative factors and the Company’s overall
performance. In making its decisions, the Committee also
considers the total compensation of each NEO and retains
discretion to make compensation decisions that are reflective
of overall business performance.

Role of the Independent Consultant

The Committee’s charter states the Committee may retain
outside compensation consultants, lawyers or other advisors.
The Committee retains an independent consultant, Meridian
Compensation Partners, LLC (“Meridian”), to advise it on
certain compensation matters. The Committee has instructed
Meridian that:

•• it is to act independently of management and at the

direction of the Committee;

•• its ongoing engagement will be determined by the

Committee;

•• it is to provide compensation comparisons based on
information that is derived from comparable businesses
of a similar size to the Company for the NEOs; and

•• it is to assist the Committee in its determination of the
annual compensation package for our CEO and other
NEOs.

The Company considered the following factors, among
others, in determining that Meridian meets the criteria to
serve as the Committee’s independent compensation
consultant:

•• it is to inform the Committee of relevant trends and

•• Meridian did not provide any services to the Company

regulatory developments;

unrelated to executive compensation.

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementEXECUTIVE COMPENSATION

•• Meridian has no business or personal relationship with

any member of the Committee or management.

•• Meridian’s partners and employees who provide services
to the Committee are prohibited from owning YUM stock
per Meridian’s firm policy.

Comparator Compensation Data

One of the factors our Committee uses in setting executive
compensation is an evaluation of how our target and actual
compensation levels compare to those of similarly situated
executives at companies that comprise our executive peer
group (“Executive Peer Group”). The Executive Peer Group
used for executive benchmarking for all NEOs is made up
of retail, hospitality, food, specialty eatery, and nondurable
consumer goods companies and quick service restaurants,

Executive Peer Group

as these represent the sectors with which the Company is
most likely to compete for executive talent. Companies
from these sectors must also be reflective of the overall
market characteristics of our executive talent market, relative
leadership position in their sector, size as measured by
revenues, complexity of their business, and in some cases
global reach.

The Committee established the current Executive Peer Group for all NEOs at the end of 2012 for pay actions in 2013,
which includes:

AutoZone Inc.
Avon Products Inc.
Campbell Soup Company
Colgate Palmolive Company
Darden Restaurants Inc.
Gap Inc.
General Mills Inc.

J. C. Penney Company Inc.
Kellogg Company
Kimberly-Clark Corporation
Kohl’s Corporation
Macy’s Inc.
Marriott International
McDonald’s Corporation

Nike Inc.
OfficeMax Inc.
Staples Inc.
Starbucks Corporation
Unilever USA

For 2013, the Committee removed Coca-Cola, PepsiCo
and Kraft from the Executive Peer Group in order to better
align the size of the peer group companies with YUM. At the
time the benchmarking analysis was prepared, the Executive
Peer Group’s median revenues were $15.6 billion and market
capitalization was $12.7 billion, while YUM’s were $18.6 billion
(calculated as described below) and $27.2 billion respectively.

For companies with significant franchise operations, measuring
size can be complex. There are added complexities and
responsibilities for managing the relationships, arrangements,
and overall scope of the franchising enterprise, in particular,

managing product introductions, marketing, driving new unit
development, and driving customer satisfaction and overall
operations improvements across the entire franchise system.
Accordingly, in calibrating size-adjusted market values, our
philosophy is to add 25% ($7.7 billion in 2011) of franchisee
and licensee sales ($30.6 billion in 2011) to the Company’s
sales ($10.9 billion in 2011) to establish an appropriate
revenue benchmark. The reason for this approach is based
on our belief that the correct calibration of complexity and
responsibility lies between corporate-reported revenues and
system wide revenues.

Competitive Positioning

Meridian provided the Executive Peer Group compensation
data to the Committee and it was used as a frame of
reference for establishing compensation targets for base
salary, annual bonus and long-term incentives for all of the
NEOs at the beginning of 2013. However, this data is not
the only factor considered for our NEOs’ compensation,
and it does not supplant the analyses of the individual
performance of all of the NEOs. Because the comparative
compensation information is one of several factors used in
the setting of executive compensation, the Committee
applies discretion in determining the nature and extent of
its use.

For the CEO, the Company generally attempts to target
pay at the 75th percentile of the market, specifically, 75th
percentile total cash and total direct compensation. The
Company has a philosophy for its NEOs (other than for the
CEO) to target the third quartile for base salary, 75th percentile
for target bonus and 50th percentile for long-term incentives.
For bonus, we use the average of the last three year’s actual
bonus paid rather than target bonus when benchmarking
for all NEOs. When benchmarking and making decisions
about the CEO’s SARs and options, we use a grant date
fair value based on the full 10-year term rather than the
expected term of all SARs and options granted by the

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementEXECUTIVE COMPENSATION

Company. This methodology is a more appropriate method
to determine the award amount as it better reflects the
actual historical holding pattern for SARs granted to our
CEO. Our CEO receives fewer shares under this practice
than if we used the expected term of all SARs granted by
the Company.

Our CEO’s and all other NEO’s target total direct
compensation was above the 75th percentile of our Executive
Peer Group for 2013. It is important to emphasize that this
is the competitive positioning of our compensation
opportunities. Realized pay is driven substantially by Company
performance, as discussed on page 30.

Elements of Executive Compensation Program

Our annual executive compensation program has three primary pay components: Base salary, annual performance-based
cash bonuses and long-term equity performance-based incentives. We also offer retirement and additional benefits.

Element
Base salary

Annual Performance-Based Cash
Bonuses
Long-Term Equity Performance-Based
Incentives
Retirement and Additional Benefits

Objective
Attract and retain high-caliber talent and provide a fixed level of cash
compensation.
Motivate high performance and reward short-term Company, team
and individual performance.
Align the interests of executives with shareholders and emphasize
long-term results.
Provide for long-term retirement income and basic health and welfare
coverage.

Form
Cash

Cash

SAR & PSU

Various

Details on each program element follow.

Base Salary

We provide base salary to compensate our NEOs for their primary roles and responsibilities and to provide a stable level
of annual compensation. A NEO’s actual salary varies based on the role, level of his responsibility, experience, individual
performance, future potential and market value. Specific salary increases take into account these factors. In addition,
salary increases may be warranted based on a promotion or change in the responsibilities of the NEO. The Committee
reviews the NEOs’ salary and performance annually.

Based on the Committee’s review, the following actions were taken regarding base salary for 2013:

NEO
Novak

Grismer

Su
Creed
Pant

2013 Base Salary

Action

$ 1,450,000 No increase

Reason
No increase since existing total cash compensation is slightly above our
target philosophy

650,000 18% increase Based on recent move to CFO position; adjustment aligned his base

$ 1,100,000 No increase
750,000 No increase
$
750,000 No increase
$

salary with our target philosophy
No increase since existing base salary is above our target philosophy
No increase since existing base salary is above our target philosophy
No increase since existing base salary is slightly above our target philosophy

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementEXECUTIVE COMPENSATION

Annual Performance-Based Cash Bonuses

Our performance-based annual bonus program, the Yum Leaders’ Bonus Program, is a cash-based plan. The principal
purpose of the Yum Leaders’ Bonus Program is to motivate and reward team and individual performance that drives
shareholder value.

The formula for calculating the performance-based annual bonus under the Yum Leaders’ Bonus Program is:

Base Salary

Annual Target Bonus
Percentage

Team Performance
(0 – 200%)

Individual Performance
(0 – 150%)

Bonus Payout
(0 – 300%)

Bonus Targets

Based on the Committee’s review, the following actions were taken regarding bonus targets for 2013:

NEO
Novak

Grismer

Creed

Pant

2013 Bonus Target
Percentage
160%

100%

115%

100%

Action
No change

Increase
from 75%
No change

No change

Reason
No increase since total target cash compensation is at our
target philosophy
Based on recent move to CFO position; adjustment aligned his
bonus target with our target philosophy
No increase since existing annual incentive target opportunity is
above our target philosophy
No increase since existing annual incentive target opportunity
is slightly above our target philosophy
No increase since existing annual incentive target opportunity is
at our target philosophy

Team Performance

The Committee established team performance measures,
targets and weighting in January 2013 based on
recommendations from management. The objectives were
also reviewed by the Board to ensure the goals support
the Company’s overall strategic objectives.

The performance targets were developed through the
Company’s annual financial planning process, which takes
into account division growth strategies, historical performance,
and the expected future operating environment. These
projections include profit growth to achieve our EPS growth
target.

When setting targets for each specific team performance
measure, the Company takes into account overall business
goals and structures the target to motivate achievement of
desired performance consistent with our EPS growth
commitment to shareholders.

A leverage formula for each team performance measure
magnifies the potential impact that performance above or

below the performance target will have on the calculation
of annual bonus. This leverage increases the payouts when
targets are exceeded and reduces payouts when performance
is below target. There is a threshold level of performance
for all measures that must be met in order for any bonus
to be paid. Additionally, all measures have a cap on the
level of performance over which no additional bonus will
be paid regardless of performance above the cap.

The performance targets are comparable to those we
disclose to our investors and, when determined to be
appropriate by our Committee, may be slightly above or
below disclosed guidance. Division targets may be adjusted
during the year when doing so is consistent with the
objectives and intent at the time the targets were originally
set. In 2013, some division operating profit growth targets
were adjusted to reflect certain Company-approved
investments and restaurant divestitures not reflective of
annual operating performance. These adjustments had no
material impact on our NEOs’ compensation.

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementEXECUTIVE COMPENSATION

Detailed Breakdown of 2013 Team Performance

The team performance targets, actual results, weights and overall performance for each measure for our NEOs are outlined
below.

TEAM PERFORMANCE

Creed

Measures
NEO
Novak, Grismer Weighted Average Divisions’ Team Factors(1)
Earnings Per Share Growth
(excluding special items)
FINAL YUM TEAM FACTOR
Operating Profit Growth(2)
System Sales Growth
System Gross New Builds
System Customer Satisfaction
Total Weighted Team Performance -
China Division
FINAL CHINA TEAM FACTOR(3)
Operating Profit Growth(5)
System Same-Store Sales Growth
Restaurant Margin
System Customer Satisfaction
Total Weighted Team Performance -
Taco Bell
Final Taco Bell Team Factor(3)
FINAL TACO BELL TEAM FACTOR WITH
CHAIRMAN’S INCENTIVE POINTS(4)
Operating Profit Growth(2)(6)
System Sales Growth
System Net Builds
System Customer Satisfaction
Total Weighted Team Performance –
YRI Division
FINAL YRI TEAM FACTOR(3)

Pant

Earned
Award as %

Target

Actual

of Target Weighting

10%

(9)%

12%
15%
650
100

(26)%
(4)%
740
172

6%
3%
18%
Blended

8%
3%
19%
Blended

10%
6%
500
Blended

9%
5%
604
Blended

89
0

0
0
200
172

147
85
200
171

72
71
200
130

50%
50%

50%
20%
20%
10%

40%
20%
20%
20%

50%
15%
20%
15%

Final Team
Performance
45
0

45
0
0
40
17

57
54
59
17
40
34

150
124
139

36
11
40
19

106
91
(1) Weighted average based on each Division’s contribution to overall segment operating profit of YUM in 2013, not including the 15 Chairman’s Incentive Points

given to Taco Bell.

(2) Excludes the impact of foreign exchange.
(3) Final team factor reflects 75% division and 25% YUM weighting.
(4) Taco Bell received 15 additional discretionary points for being named marketer of the year, sharing know how, highest overall operating results in the

Company, and external recognition of operations measures.

(5) Actual operating profit growth target was adjusted for the impact of refranchising in 2012 and 2013.
(6) Actual operating profit growth target was adjusted for the impact of certain non-recurring costs within our Pizza Hut U.K. market in 2012.

YUM! BRANDS, INC. - 2014 Proxy StatementProxy Statement

EXECUTIVE COMPENSATION

Individual Performance

Our Board, under the leadership of the Committee Chair,
approved Mr. Novak’s written goals at the beginning of the
year and conducted a mid-year and year-end evaluation of
his performance. These evaluations included a review of
his leadership pertaining to the achievement of his written
goals that included business results, leadership in the
development and implementation of Company strategies,
and development of Company culture and talent.

The Committee determined that Mr. Novak’s overall
performance for 2013 was below target, as Yum’s financial
results were below target, and awarded him an individual
performance factor of 90. This individual performance factor,
combined with YUM’s team factor of 45, resulted in him
receiving 41% of his target bonus. This determination was
based on the Committee’s assessment of Mr. Novak’s
performance against his written goals including (without
assigning a weight to any particular item):

•• Not achieving EPS growth target of 10%; EPS declined

by 9%(1);

•• System same-store sales were flat or declined in every

division except Taco Bell and YRI;

•• YRI opened a record 1,055 new restaurants last year and

China exceeded their development plan;

•• Grew operating profit by 10%(2) at YRI, driven by same-
store sales growth and net new unit development, and
3% in the U.S, with Taco Bell U.S. leading the way with
restaurant level margins of 19%;

•• Development of strong leaders and fostering the customer-

focused employee culture in the Company; and

•• His continued commitment to corporate social responsibility
through the World Food Programme and other hunger-
related organizations.

Individual performance of the NEOs (other than the CEO)
is based upon the Committee’s subjective assessment of
each NEO’s performance for the year, including consideration
of specific objective individual performance goals set at the
beginning of the year. The CEO provides the Committee
with his evaluation of each of the NEO’s performance and
recommends an individual performance rating to the
Committee.

For Mr. Grismer, the Committee determined his performance
as the Chief Financial Officer was below target and approved
a 95 individual performance factor. This was based upon
below target Company financial performance. The Committee
also determined that Mr. Grismer positively impacted the
Company’s long-term opportunities by driving Company-
wide strategic growth priorities and division initiatives.
Mr. Grismer’s individual performance factor, combined with
a team factor of 45, resulted in him receiving 43% of his
target bonus.

For Mr. Su, the Committee determined his overall individual
performance for 2013 was below target and approved a
90 individual performance factor. This was based upon the
China Division not achieving operating profit or system sales
growth targets. The Committee also determined China
Division’s productivity improvement and new store builds
were important achievements in 2013 that will aid future
performance. Mr. Su’s individual performance factor,
combined with a team factor of 54, resulted in him receiving
49% of his target bonus.

For Mr. Creed, the Committee determined his overall individual
performance for 2013 was significantly above target and
approved a 145 individual performance factor. This
determination was based upon his overall leadership of
Taco Bell: exceeding operating profit, restaurant development
and restaurant margin plans, driving product innovation
and promoting brand differentiation through a focus on
digital media. Mr. Creed’s individual performance factor,
combined with a team factor of 139, resulted in him receiving
202% of his target bonus.

For Mr. Pant, the Committee determined his overall individual
performance for 2013 was on target and approved a
115 individual performance factor. This was based upon
YRI significantly exceeding its development and customer
satisfaction targets, essentially meeting its operating profit
target, while achieving near-plan system sales growth.
Mr. Pant’s individual performance factor, combined with a
team factor of 91, resulted in him receiving 105% of his
target bonus.

(1) Prior to Special Items
(2) Prior to foreign currency translations

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementEXECUTIVE COMPENSATION

Summary of Earned Annual Incentives for 2013

The table below summarizes how the formula was applied and the actual amounts earned for 2013 performance.

NEO
Novak
Grismer
Su
Creed
Pant

Base Salary
Year End 2013
1,450,000
$
650,000
$
1,100,000
$
750,000
$
750,000
$

X
X
X
X
X

Annual
Target Bonus
Percentage

160%
100%
115%
100%
100%

Team

Performance
45%
45%
54%
139%
91%

X
X
X
X
X

Individual
Performance
X
X
X
X
X

90% =
95% =
90% =
145% =
115% =

Bonus Paid
for 2013 Performance
939,600
277,875
614,790
1,511,625
784,875

$
$
$
$
$

Long-Term Equity Performance-Based Incentives

We provide performance-based long-term equity compensation to our NEOs to encourage long-term decision making
that creates shareholder value. To that end, we use vehicles that motivate and balance the tradeoffs between short-term
and long-term performance. Performance-based long-term equity compensation also serves as a retention tool.

Our NEOs are awarded long-term incentives annually based on the Committee’s subjective assessment of the following
items for each NEO (without assigning weight to any particular item):

•• Prior year individual and team performance
•• Expected contribution in future years

•• Consideration of the market value of the executive’s role
compared with similar roles in our Executive Peer Group

•• Achievement of stock ownership guidelines

Stock Appreciation Rights/Stock Options

In general, our SARs have ten-year terms and vest 25% per
year over four years. Each stock option and SAR award was
granted with an exercise price based on the closing market
price of the underlying YUM common stock on the date of
grant.

Each year, the Committee reviews the mix of long-term
incentives to determine if it is appropriate to continue
predominantly using stock options and SARs as the long-term

Performance Share Plan

incentive vehicle. The Committee continues to choose stock
options and SARs because they emphasize the Company’s
focus on long-term growth and they reward employees only
if YUM’s stock price increases. For each NEO, the breakdown
between SARs/stock option award and PSU award values
can be found under the Summary Compensation Table,
page 44 at columns d and e.

The Committee changed the design of the PSU awards granted in 2013, as discussed at page 30. The PSU awards
granted in 2013 can be earned based on 3-year average TSR relative to the companies in the S&P 500. The target,
threshold and maximum shares that may be paid out under these awards for each NEO are described at page 47.
The target grant value for the CEO is 25% of his total LTI award value and for the other NEOs is 20% of their total
LTI award value.

For the performance period covering 2013-2015 calendar years, each NEO will earn a percentage of their target PSU
award based on the achieved TSR percentile ranking as set forth in the chart below:

TSR Percentile Ranking
Payout as % of Target

<40%
0%

40%
50%

50%
100%

70%
150%

90%
200%

Dividend equivalents will accrue during the performance
period and will be distributed as incremental shares but only
in the same proportion and at the same time as the original
awards are earned. If no awards are earned, no dividend
equivalents will be paid. The awards are eligible for deferral under

the Company’s Executive Income Deferral Program. As discussed
on page 32, PSU awards that were granted in 2011 were
not paid out since YUM’s average earnings per share during
the 2011-2013 performance cycle did not reach the required
minimum average growth threshold of seven percent.

YUM! BRANDS, INC. - 2014 Proxy StatementProxy Statement
EXECUTIVE COMPENSATION

2013 Long-term Incentive Awards

Based on the Committee’s assessment as described above, the Committee set the following 2013 values for long-term
incentive awards, including SAR and PSU awards, for each NEO:

NEO
Novak

Grismer
Su

2013
Grant Value
$

6,825,000(1)

Reason
Awarded above target philosophy based on strong 2012 performance and his sustained
long-term results in role

$
$

1,225,000(1)(2) Awarded below target philosophy based on partial year in CFO role
2,100,000(1)

Creed
Pant
(1) 2013 grant values are rounded to the nearest $25,000 to reflect the Committee approved valuation figures.
(2) Mr. Grismer’s 2013 grant value excludes his 2013 Chairman’s Award of $675,000 (rounded to the nearest $25,000 to reflect the Committee-approved

Awarded above our target philosophy based on delivering sustained long-term results and
importance of his leadership in running the China Division
Awarded above target philosophy based on his sustained long-term results in role
Awarded above target philosophy based on his sustained long-term results in role

1,525,000(1)
1,525,000(1)

$
$

valuation figures), which was awarded based on his recent promotion to the CFO role.

Retirement and Additional Benefits

Retirement Benefits

We offer several types of competitive retirement benefits.

The YUM! Brands Retirement Plan (“Retirement Plan”) is a
broad-based qualified plan designed to provide a retirement
income based on years of service with the Company and
average annual earnings. Mr. Novak is the only NEO who
actively participates in the Retirement Plan. Mr. Creed is
not an active participant in the Retirement Plan; however,
he maintains a balance in the Retirement Plan from the
two years (2002 and 2003) that he was a participant.

The PEP is offered to employees at all levels who meet the
eligibility requirements, and is a “restoration plan” intended
to restore benefits otherwise lost under the qualified plan
due to various governmental limits. This plan is based on
the same underlying formula as the Retirement Plan. None
of our NEOs participate in the PEP, as Mr. Novak ceased
participating in the PEP in 2012.

For executives hired or re-hired after September 30, 2001,
the Company implemented the LRP. This is an unfunded,
unsecured account-based retirement plan which allocates
a percentage of pay to an account payable to the executive
following the later to occur of the executive’s separation of
employment from the Company or attainment of age 55.
As discussed in the Summary Compensation Table at
footnote 5, beginning in 2013, Mr. Novak started receiving
an allocation to his LRP account equal to 9.5% of his base
salary and target bonus and will receive an annual earnings

credit on his account balance equal to 120% of the applicable
federal rate. For 2013, Mr. Grismer and Mr. Pant were also
eligible for the LRP. Under the LRP, they receive an annual
allocation to their accounts equal to a percentage of their
base salary and target bonus (9.5% for Mr. Grismer and
20% for Mr. Pant) and an annual earnings credit of 5%.

The Company provides retirement benefits for certain
international employees through the YUM! Brands
International Retirement Plan (“YIRP”) and the Third Country
National Plan (“TCN”). The YIRP is an unfunded, non-qualified
plan that provides benefits similar to, and pursuant to the
same terms and conditions as, the Retirement Plan without
regard to Internal Revenue Service limitations on amounts
of includible compensation and maximum benefits. The
TCN is an unfunded, unsecured account-based retirement
plan that provides an annual contribution floor of 7.5% of
salary and target bonus and an annual earnings credit of
5% on the balance. The Company can add an additional
7.5%, for a maximum total contribution of 15% annually.
Mr. Su is the only NEO who participates in the YIRP.
Mr. Creed is the only NEO who participates in the TCN.
Under this plan, he receives an annual contribution equal
to 15% of his base salary and target bonus and an annual
earnings credit of 5%.

Benefits payable under these plans are described in more
detail beginning on page 51.

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementEXECUTIVE COMPENSATION

Medical, Dental, Life Insurance and Disability Coverage

We also provide other benefits such as medical, dental, life
insurance and disability coverage to each NEO through
benefit plans, which are also provided to all eligible U.S.-
based salaried employees. Eligible employees can purchase

additional life, dependent life and accidental death and
dismemberment coverage as part of their employee benefits
package. Our broad-based employee disability plan limits
the annual benefit coverage to $300,000.

Perquisites

Mr. Novak is required to use the Company aircraft for personal
as well as business travel pursuant to the Company’s executive
security program established by the Board of Directors. The
Board’s security program also covers Mrs. Novak when
she accompanies Mr. Novak. The Board has considered
past instances of potential safety concerns for the CEO and
Mrs. Novak and consequently decided to require Mr. Novak to
use the corporate aircraft for personal travel. We do not provide
tax gross-ups on the personal use of the Company aircraft.

The Company pays for the cost of the transmission of home
security information from Mr. Novak’s home to our security
department.

Mr. Su receives perquisites related to his overseas assignment
which were part of his original compensation package and

ratified by the Committee. The Committee reviewed these
benefits during 2013 and has elected to continue to provide
them noting that this practice is consistent with how we treat
other executives on foreign assignment. Mr. Su’s agreement
stipulates that the following will be provided:

•• Housing, commodities and utilities allowances
•• Tax preparation services
•• Tax equalization to Hong Kong with respect to income
attributable to certain stock option and SAR exercises
and to distributions of deferred income

Upon retirement from the Company, Mr. Su will be required
to reimburse the Company for the tax reimbursements for
certain stock option and SAR exercises, if any, made within
six months of his retirement.

Compensation Policies & Practices

YUM’s Executive Stock Ownership Guidelines

The Committee has established stock ownership guidelines
for our top 600 employees, including the NEOs. If a NEO
or other executive does not meet his or her ownership
guidelines, he or she is not eligible for a long-term equity

incentive award. In 2013, all NEOs and all other employees
subject to guidelines met or exceeded their ownership
guidelines.

Ownership Guidelines
336,000

Value of Shares(2) Multiple of Salary
NEO
143
$
Novak
5
$
Grismer
30
$
Su
11
$
Creed
Pant
11
$
(1) Calculated as of December 31, 2013 and represents shares owned outright and vested RSUs granted to Mr. Novak in 2008 and all RSUs awarded under the

Shares Owned(1)
2,741,863
44,131
430,437
110,772
104,860

207,312,261
3,336,745
32,545,342
8,375,471
7,928,465

30,000(3)
50,000
50,000
50,000

Company’s Executive Income Deferral Program.

(2) Based on YUM closing stock price of $75.61 as of December 31, 2013.
(3) Mr. Grismer’s ownership guidelines will increase by 10,000 shares each of the next two years until 50,000 shares are reached.

Payments Upon Termination of Employment

The Company does not have agreements with its executives
concerning payments upon termination of employment
except in the case of a change in control of the Company.
The Committee believes these are appropriate agreements

for retaining NEOs and other executive officers to preserve
shareholder value in case of a potential change in control.
The Committee periodically reviews these agreements and
other aspects of the Company’s change in control program.

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementEXECUTIVE COMPENSATION

The Company’s change in control agreements, in general,
entitle NEOs terminated other than for cause within two
years of the change in control, to receive a benefit of two
times salary and bonus. The terms of these change in
control agreements are described beginning on page 57.

outstanding awards will fully and immediately vest if the
executive is employed on the date of a change in control
of the Company and is involuntarily terminated (other than
by the Company for cause) on or within two years following
the change in control (“double trigger” vesting).

In 2013, the Company eliminated tax gross-ups for
executives, including the NEOs, for any excise tax due
under Section 4999 of the Internal Revenue Code and
implemented a “best net after-tax” approach to address
any potential excise tax imposed on executives. If any excise
tax is due, the Company will not make a gross-up payment,
but instead will reduce payments to an executive if the
reduction will provide the NEO the best net after-tax result.
If full payment to a NEO will result in the best net after-tax
result, the full amount will be paid, but the NEO will be solely
responsible for any potential excise tax payment. Also,
effective for equity awards made in 2013 and beyond,

In case of retirement, the Company provides pension and
life insurance benefits, the continued ability to exercise
vested SARs and stock options and the ability to vest in
performance share awards on a pro-rata basis.

With respect to consideration of how these benefits fit into
the overall compensation policy, the change-in-control
benefits are reviewed from time to time by the Committee
for competitiveness. The Committee believes the benefits
provided in case of a change in control are appropriate,
support shareholder interests and are consistent with the
policy of attracting and retaining highly qualified employees.

YUM’s Stock Option and SAR Granting Practices

Historically, we have awarded non-qualified stock option
and SAR grants annually at the Committee’s January meeting.
This meeting date is set by the Board of Directors more
than six months prior to the actual meeting. The Committee
sets the annual grant date as the second business day after
our fourth quarter earnings release. The exercise price of
awards granted under our LTIP is set as the closing price
on the date of grants. We make grants at the same time
other elements of annual compensation are determined so
that we can consider all elements of compensation in making
the grants. We do not backdate or make grants retroactively.
In addition, we do not time such grants in coordination with
our possession or release of material, non-public or other
information.

Grants may also be made on other dates the Board of
Directors meets. These grants generally are Chairman’s

Limits on Future Severance Agreement Policy

Awards, which are made in recognition of superlative
performance and extraordinary impact on business results.

Management recommends the awards be made pursuant
to our Long Term Incentive Plan to the Committee, however,
the Committee determines whether and to whom it will
issue grants and determines the amount of the grant. The
Board of Directors has delegated to Mr. Novak and Anne
Byerlein, our Chief People Officer, the ability to make grants
to employees who are not executive officers and whose
grant is less than approximately 13,000 options or SARs
annually. In the case of these grants, the Committee sets
all the terms of each award, except the actual number of
SARs or options, which is determined by Mr. Novak and
Ms. Byerlein pursuant to guidelines approved by the
Committee in January of each year.

The Committee has adopted a policy to limit future severance
agreements with NEOs or our other executives. The policy
requires the Company to seek shareholder approval for future
severance payments to a NEO if such payments would
exceed 2.99 times the sum of (a) the NEO’s annual base
salary as in effect immediately prior to termination of
employment; and (b) the highest annual bonus awarded to
the NEO by the Company in any of the Company’s three full

fiscal years immediately preceding the fiscal year in which
termination of employment occurs or, if higher, the executive’s
target bonus. Certain types of payments are excluded from
this policy, such as amounts payable under arrangements
that apply to classes of employees other than the NEOs or
that predate the implementation of the policy, as well as any
payment the Committee determines is a reasonable settlement
of a claim that could be made by the NEO.

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementEXECUTIVE COMPENSATION

of inaccurate metrics in the calculation of incentive
compensation. Under this policy, when the Board determines
in its sole discretion that recovery of compensation is
appropriate, the Company could require repayment of all
or a portion of any bonus, incentive payment, equity-based
award or other compensation, to the fullest extent permitted
by law.

Compensation Recovery Policy

The Committee has adopted a Compensation Recovery
Policy (i.e., “clawback”) for stock awards and annual bonuses
awarded after 2008. Pursuant to this policy, executive
officers (including the NEOs) may be required to return
compensation paid based on financial results that were
later restated. This policy applies only if the executive officers
engaged in knowing misconduct that contributed to the
need for a material restatement, or contributed to the use

Hedging and Pledging of Company Stock

Under our Code of Conduct, no employee or director is
permitted to engage in securities transactions that would
allow them either to insulate themselves from, or profit from,
a decline in the Company stock price. Similarly, no employee
or director may enter into hedging transactions in the

Company’s stock. Such transactions include (without
limitation) short sales as well as any hedging transactions
in derivative securities (e.g. puts, calls, swaps, or collars)
or other speculative transactions related to YUM’s stock.
Pledging of Company stock is also prohibited.

Deductibility of Executive Compensation

The provisions of Section 162(m) of the Internal Revenue
Code limit the tax deduction for compensation in excess
of $1 million dollars paid to certain NEOs. Performance-
based compensation is excluded from the limit, however,
so long as it meets certain requirements. The Committee
intends that the annual bonus, stock option, SAR, RSU
and PSU awards satisfy the requirements for exemption
under Internal Revenue Code Section 162(m).

For 2013, the annual salary paid to Mr. Novak exceeded
$1 million. The Committee sets Mr. Novak’s salary as
described under “Base Salary” above. The other NEOs
were in each case paid salaries of $1 million or less, except
for Mr. Su whose salary exceeded $1 million;·however, the
Committee noted that Mr. Su’s compensation is not subject
to United States tax rules and, therefore, the one million dollar
limitation does not apply in his case. The 2013 annual
bonuses were all paid pursuant to our annual bonus program
and, therefore, we expect will be deductible, except in one
case described below. For 2013, the Committee set the

maximum individual award opportunity between $1 million
and $10 million based on the Company’s 2013 EPS growth
(adjusted to exclude special items believed to be distortive
of consolidated results on a year-over-year basis-these are
the same items excluded in the Company’s annual earnings
releases). Based on the Company’s EPS decline of 9%, the
maximum 2013 award opportunity for each executive officer
was $1 million. The Committee then exercised its negative
discretion in determining actual incentive awards based on
team performance and individual performance measures
as described above. Except for Mr. Creed, the 2013 annual
bonus awarded to the other NEOs was less than $1 million.
The Committee elected to pay Mr. Creed a bonus exceeding
$1 million based on strong performance in leading Taco
Bell (see page 38 for a discussion of Mr. Creed’s performance.)

Due to the Company’s focus on performance-based
compensation plans, we expect most compensation paid
to the NEOs to continue to qualify as tax deductible.

Management Planning and Development Committee Report

The Management Planning and Development Committee
of the Board of Directors reports that it has reviewed and
discussed with management the section of this proxy
statement headed “Compensation Discussion and Analysis”
and, on the basis of that review and discussion, recommended
to the Board that the section be incorporated by reference
into the Company’s Annual Report on Form 10-K and
included in this proxy statement.

THE MANAGEMENT PLANNING AND DEVELOPMENT COMMITTEE

Robert D. Walter, Chair
David W. Dorman
Massimo Ferragamo
Thomas M. Ryan

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementExEcutivE compEnsation

The following tables provide information on the compensation of the Named Executive Officers (“NEOs”) for our 2013
fiscal year. The Company’s NEOs are our Chief Executive Officer, Chief Financial Officer and our three other most highly
compensated officers for our 2013 fiscal year determined in accordance with SEC rules.

summary compensation table

Year
(b)

Salary
($)(1)
(c)
2013 1,450,000
2012 1,450,000
2011 1,474,038

Bonus
($)

Stock
Awards
($)(2)
(d)
— 1,568,655
— 773,022
— 773,024

Option/
SAR
Awards
($)(3)
(e)
5,255,519
5,625,960
5,807,028

Non-Equity
Incentive Plan
Compensation
($)(4)
(f)
939,600
4,584,320
4,541,400

Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)(5)
(g)
17,351
1,345,665
7,507,185

All Other
Compensation
($)(6)
(h)

Total
($)
(i)
776,268 10,007,393
389,388 14,168,355
309,177 20,411,852

2013
2012

638,462
500,308

— 114,098
— 1,014,347

1,765,138
493,551

277,875
—

3,977
6,115

179,480 2,979,030
104,652 2,118,973

2013 1,100,000
2012 1,088,462
2011 1,007,692

— 342,294
— 385,029
— 324,986

1,765,123
2,467,739
1,668,280

614,790
2,039,813
3,105,000

727,430
5,537,865
4,556,233

5,768,264 10,317,901
5,042,547 16,561,455
1,842,530 12,504,721

Name and
Principal Position
(a)
David c. novak

Chairman and Chief
Executive Officer
of YUM

patrick J. Grismer
Chief Financial
Officer of YUM(7)
Jing-shyh s. su

Vice Chairman of the
Board of YUM
Chairman and
Chief Executive
Officer of YUM
Restaurants China

Greg creed

2013

750,000

— 203,735

1,323,839

1,511,625

7,348

238,737 4,035,284

Chief Executive
Officer of Taco Bell(8)

muktesh pant

Chief Executive
Officer of Yum!
Restaurants
International(9)

2013
2012
2011

750,000
750,000
644,231

— 203,735
— 250,027
— 169,986

1,323,839
1,727,413
2,418,782

784,875
1,620,000
1,110,038

15,640
25,225
14,005

309,198 3,387,287
313,092 4,685,757
308,786 4,665,828

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementExEcutivE compEnsation

(1) The amounts reflect compensation for 53 weeks in 2011 compared to 52 weeks in fiscal 2013 and 2012 due to timing of fiscal period end. Amounts shown are
not reduced to reflect the NEOs’ elections, if any, to defer receipt of salary into the Executive Income Deferral (“EID”) Program or into the Company’s 401(k) Plan.
(2) Amounts shown in column (d) represent the grant date fair values for performance share units (PSUs) granted in 2013, 2012 and 2011 and, for Mr. Grismer,
restricted stock units (RSUs) granted in 2012. Further information regarding the 2013 awards is included in the “Grants of Plan-Based Awards” and “Outstanding
Equity Awards at Year-End” tables later in this proxy statement. The grant date fair value of the PSUs reflected in this column is the target payout based on the
probable outcome of the performance condition, determined as of the grant date. The maximum potential values of the PSUs is 200% of target. For 2013, Mr.
Novak’s PSU maximum value at grant date fair value would be $3,137,310; Mr. Grismer’s PSU maximum value would be $228,196; Mr. Su’s PSU maximum value
would be $684,588; Mr. Creed’s PSU maximum value would be $407,470; and Mr. Pant’s PSU maximum value would be $407,470. In 2012, Mr. Grismer did not
receive a PSU award since he became a NEO after PSU awards were granted for that year. Mr. Grismer was instead permitted to defer his annual incentive award
into RSUs under the Company’s EID Program. Under the EID Program (which is described in more detail beginning on page 53), an executive may defer his or her
annual incentive award and invest that deferral into stock units, RSUs, or other investment alternatives offered under the EID Program. An executive who elects
to defer his or her annual incentive award into RSUs receives additional RSUs equal to 33% of the RSUs acquired with the deferral of the annual incentive award
(“matching contribution”). As a result, for 2012, the amount in that column represents the deferral of 100% of Mr. Grismer’s annual incentive award ($760,760),
plus his matching contribution ($253,587).

(3) The amounts shown in column (e) represent the grant date fair values of the stock options and stock appreciation rights (SARs) awarded in 2013, 2012 and 2011,
respectively. For a discussion of the assumptions and methodologies used to value the awards reported in column (d) and column (e), please see the discussion of
stock awards and option awards contained in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2013 Annual Report in Notes to Consolidated
Financial Statements at Note 15, “Share-based and Deferred Compensation Plans.” For Mr. Grismer, this column also includes his 2013 Chairman’s Award with a
grant date fair value of $661,927. See the Grants of Plan-Based Awards table for details.

(4) Except as provided below and in footnote (2) above, amounts in column (f) reflect the annual incentive awards earned for the 2013, 2012 and 2011 fiscal year
performance periods, which were awarded by our Management Planning and Development Committee (“Committee”) in January 2014, January 2013 and January
2012, respectively, under the Yum Leaders’ Bonus Program, which is described further in our Compensation Discussion and Analysis (“CD&A”) beginning at page 28
under the heading “Annual Performance-Based Cash Bonuses”. Pursuant to SEC rules, annual incentives deferred into RSUs under the EID Program and subject
to a risk of forfeiture are reported in column (d). If the deferral or a portion of the deferral is not subject to a risk of forfeiture, it is reported in column (f). In 2012,
Mr. Grismer elected to defer 100% of his annual incentive ($760,760) into RSUs resulting in nothing to report for him in column (f) for that year.

(5) The amount listed under “Change In Pension Value”, column (g) for Mr. Novak, reflects the aggregate increase in actuarial present value of his accrued benefit
under the YUM! Brands Retirement Plan (“Retirement Plan”) during the 2013 fiscal year (using interest rate and mortality assumptions consistent with those used
in the Company’s financial statements). As discussed in the CD&A, effective January 1, 2012, the Committee discontinued Mr. Novak’s accruing nonqualified
pension benefits under the YUM! Brands, Inc. Pension Equalization Plan (“PEP”) and, effective January 1, 2013, replaced his PEP benefit with a pension account
determined under the Leadership Retirement Plan (“LRP”). The amount transferred to his LRP-based pension account effective January 1, 2013 was $27,600,000
(representing his December 31, 2012 estimated lump amount under PEP). Mr. Novak now receives a market rate of interest on his LRP account plus an annual
benefit allocation equal to 9.5% of his salary plus target bonus.
For Mr. Su, amounts in column (g) reflect the aggregate increase in actuarial present value of age 62 accrued benefits under the Yum International Retirement Plan
(“YIRP”) during the 2013 fiscal year. See the Pension Benefits Table at page 51 for a detailed discussion of the Company’s pension benefits. Mr. Grismer and Mr.
Pant were hired after September 30, 2001, and were ineligible for the Company’s Retirement Plan. Mr. Creed is not an active participant in the Retirement Plan but
holds a balance under the Retirement Plan from the two years (2002 and 2003) during which he was a participant. His benefit under the Retirement Plan reflects
an aggregate decrease in the actuarial present value ($13,181), which in accordance with SEC rules is not reflected in the Summary Compensation Table.
For Messrs. Grismer, Creed and Pant, amounts in column (g) also represent the above market earnings as established pursuant to SEC rules which have accrued
under each of their accounts under the LRP for Messrs. Grismer and Pant and the Third Country National Plan (“TCN”) for Mr. Creed, which is described in more
detail beginning at page 53 under the heading “Nonqualified Deferred Compensation”.

(6) Amounts in column (h) are explained in the All Other Compensation Table and footnotes to that table, which follows.
(7) Mr. Grismer became a NEO in May 2012. No amounts are reported for Mr. Grismer for 2011 since he was not a NEO for that year.
(8) No amounts are reported for Mr. Creed for 2011 and 2012 since he was not a NEO for those years.
(9) As of January 2014, Mr. Pant’s title is Chief Executive Officer of KFC.

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementExEcutivE compEnsation

all other compensation table

The following table contains a breakdown of the compensation and benefits included under All Other Compensation in
the Summary Compensation Table above for 2013.

Perquisites and
other personal
benefits
($)(1)
(b)
388,203
—
221,139
—
—

Total
Name
($)
(g)
(a)
776,268
Novak
179,480
Grismer
5,768,264
Su
238,737
Creed
Pant
309,198
(1) Amounts in this column include for Mr. Novak: incremental cost for the personal use of Company aircraft ($388,203)—we calculate the incremental cost to
the Company of any personal use of Company aircraft based on the cost of fuel, trip-related maintenance, crew travel, on board catering, landing and license
fees, “dead head” costs of flying planes to and from locations for personal use, and contract labor; and for Mr. Su: expatriate spendables/housing allowance
($221,139).

Other
($)(5)
(f)
3,119
—
14,883
4,539
—

Tax
Reimbursements
($)(2)
(c)
—
51,144
5,511,651
—
—

LRP/TCN
Contributions
($)(4)
(e)
358,150
123,500
—
225,000
300,000

Insurance
premiums
($)(3)
(d)
26,796
4,836
20,591
9,198
9,198

(2) Amounts in this column reflect payments to the executive of tax reimbursements. For Mr. Su, as explained at page 41, this amount represents the Company-
provided tax reimbursement for China income taxes incurred on deferred income distributions and stock option exercises which exceed the marginal Hong
Kong tax rate and a tax equalization settlement amount related to income for 2012. For Mr. Grismer, this amount represents the adjustment and equalization
of foreign tax payments incurred with respect to income recognized in 2013 that was attributable to a previous international assignment.

(3) These amounts reflect the income each executive was deemed to receive from IRS tables related to Company-provided life insurance in excess of $50,000.

The Company provides every salaried employee with life insurance coverage up to one times the employee’s salary plus target bonus.

(4) For Messrs. Novak, Grismer and Pant, this column represents Company annual allocations to the LRP, an unfunded, unsecured account based retirement

plan. For Mr. Creed, this column represents the Company’s annual allocation to the TCN, an unfunded, unsecured account based retirement plan.

(5) This column reports the total amount of other benefits provided, none of which individually exceeded the greater of $25,000 or 10% of the total amount of
these benefits and the perquisites and other personal benefits shown in column (b) for each NEO. These other benefits include: home security expense, home
leave expenses, club dues, personal use of Company aircraft and tax preparation assistance.

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementExEcutivE compEnsation

Grants of plan-Based awards

The following table provides information on stock options, SARs, RSUs and PSUs granted for 2013 to each of the
Company’s NEOs. The full grant date fair value of these awards is shown in the Summary Compensation Table at page 44.

Estimated Possible Payouts
Under Non-Equity Incentive
Plan Awards(1)

Estimated Future Payouts
Under Equity Incentive Plan
Awards(2)

Threshold
($)
(c)

Maximum
Target
($)
($)
(d)
(e)
0 2,320,000 6,960,000

Threshold
(#)
(f)

Target
(#)
(g)

Maximum
(#)
(h)

All Other Option
Awards; Number
of Securities
Underlying
Options
(#)(3)
(i)

Exercise or
Base Price
of Option/
SAR
Awards
($/Sh)(4)
(j)

Grant
Date Fair
Value($)(5)
(k)

650,000 1,950,000

— 30,590

61,180

0 1,265,000 3,795,000

750,000 2,250,000

— 2,225

4,450

— 6,675

13,350

— 3,973

7,946

360,956

75,770
45,462

121,231

90,923

62.93 5,255,519
1,568,655

62.93 1,103,211
661,927
62.93
114,098

62.93 1,765,123
342,294

62.93 1,323,839
203,735

Name
(a)
Novak

Grant
Date
(b)
2/6/2013
2/6/2013
2/6/2013
Grismer 2/6/2013
2/6/2013
2/6/2013
2/6/2013
2/6/2013
2/6/2013
2/6/2013
2/6/2013
2/6/2013
2/6/2013
2/6/2013
2/6/2013
2/6/2013

Creed

Pant

7,946

90,923

— 3,973

62.93 1,323,839
203,735
(1) Amounts in columns (c), (d) and (e) provide the minimum amount, target amount and maximum amounts payable as annual incentive compensation under
the Yum Leaders’ Bonus Program based on the Company’s performance and on each executive’s individual performance during 2013. The actual amount of
annual incentive compensation awarded for 2013 are shown in column (f) of the Summary Compensation Table on page 44. The performance measurements,
performance targets, and target bonus percentages are described in the CD&A beginning on page 28 under the discussion of annual incentive compensation.
(2) Reflects grants of PSU awards subject to performance-based vesting conditions under the LTIP in 2013. The PSU awards vest on December 31, 2015 and
PSU award payouts are subject to the Company’s achievement of specified relative total shareholder return (“TSR”) rankings against its peer group (which is
the S&P 500) during the performance period ending on December 31, 2015. The performance target for all the PSU awards granted to the NEOs in 2013 is
a 50% TSR percentile ranking for the Company, determined by comparing the Company’s relative TSR ranking against its peer group as measured at the end
of the performance period. If the 50% TSR percentile ranking target is achieved, 100% of the PSU award will pay out in shares of Company stock, subject to
executive’s election to defer PSU awards into the EID Program. If less than 40% TSR percentile ranking is achieved, there will be no payout. If the Company’s
TSR percentile ranking is 90% or higher, PSU awards pay out at the maximum, which is 200% of target. The terms of the PSU awards provide that in case of
a change in control during the first year of the award shares will be distributed assuming target performance was achieved subject to reduction to reflect the
portion of the performance period following the change in control. In case of a change in control after the first year of the award, shares will be distributed
assuming performance at the greater of target level or projected level at the time of the change in control subject to reduction to reflect the portion of the
performance period following the change in control.

(3) Amounts in this column reflect the number of 2013 SARs and stock options granted to executives during the Company’s 2013 fiscal year. SARs allow the
grantee to receive the number of shares of YUM common stock that is equal in value to the appreciation in YUM common stock with respect to the number
of SARs granted from the date of grant to the date of exercise. For each executive, the grants were made February 6, 2013. SARs/stock options become
exercisable in equal installments on the first, second, third and fourth anniversaries of the grant date; except, however, 45,462 SARs granted to Mr. Grismer
become exercisable on the fifth anniversary of the grant date. The terms of each SAR/stock option grant provide that, in case of a change in control if an
executive is employed on the date of a change in control and is involuntarily terminated on or within two years following the change in control (other than by
the Company for cause) then all outstanding awards become exercisable immediately.
Participants who have attained age 55 with 10 years of service who terminate employment may exercise SARs/stock options that were vested on their date
of termination through the expiration date of the SAR/stock option (generally, the tenth anniversary following the SARs/stock options grant date). Vested SARs/
stock options of grantees who die may also be exercised by the grantee’s beneficiary through the expiration date of the vested SARs/stock options and the
grantee’s unvested SARs/stock options expire on the grantee’s date of death. If a grantee’s employment is terminated due to gross misconduct, the entire
award is forfeited. For other employment terminations, all vested or previously exercisable SARs/stock options as of the last day of employment must be
exercised within 90 days following termination of employment.

(4) The exercise price of the SARs/stock options granted in 2013 equals the closing price of YUM common stock on the grant date, February 6, 2013.
(5) Amounts in this column reflect the full grant date fair value of the PSU awards shown in column (g) and the SARs/stock options shown in column (i). These
amounts reflect the amounts to be recognized by the Company as accounting expense and do not correspond to the actual value that will be recognized by
the NEOs. The grant date fair value is the amount that the Company is expensing in its financial statements over the award’s vesting schedule. For PSU awards
granted prior to 2013, fair value was calculated using the closing price of the Company’s common stock on the date of grant. In 2013, the Company granted PSU
awards with market-based conditions valued using a Monte Carlo simulation. For SARs/stock options, fair value of $14.56 was calculated using the Black-Scholes
value on the February 6, 2013 grant date. For additional information regarding valuation assumptions of SARs/stock options, see the discussion of stock awards
and option awards contained in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2013 Annual Report in Notes to Consolidated Financial
Statements at Note 15, “Share-based and Deferred Compensation Plans.” There can be no assurance that the SARs/stock options will ever be exercised or PSU
awards paid out (in which case no value will be realized by the executive) or that the value upon exercise or payout will equal the grant date fair value.

YUM! BRANDS, INC. - 2014 Proxy StatementProxy Statement

ExEcutivE compEnsation

outstanding Equity awards at Year-End

The following table shows the number of shares covered by exercisable and unexercisable stock options, SARs, and
unvested RSUs and PSUs held by the Company’s NEOs on December 31, 2013.

Equity
incentive
plan awards:
Number of
unearned
shares, units
or other rights
that have not
vested
(#)(4)
(h)

Equity incentive
plan awards:
market or
payout value
of unearned
shares, units
or other rights
that have not
vested
($)(3)
(i)

Option/SAR Awards(1)

Stock Awards

Number
of Shares
or Units
of Stock
That
Have Not
Vested
(#)(2)
(f)

Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)(3)
(g)

Number of
Securities
Underlying
Unexercised
Options/SARs
(#)

Option/
SAR
Exercise
Price
($)
(d)

Option/
SAR
Expiration
Unexercisable
Date
(c)
(e)
$24.47 1/26/2016
—
— $29.61 1/19/2017
— $37.30 1/24/2018
— $29.29 2/5/2019
$32.98 2/5/2020
$49.30 2/4/2021
$64.44 2/8/2022
$62.93 2/6/2023

155,982(i)
248,127(ii)
282,996(iii)
360,956(iv)

— $24.47 1/26/2016
— $29.61 1/19/2017
— $33.20 5/17/2017
— $37.30 1/24/2018
— $29.29 2/5/2019
— $33.21 5/21/2019
$32.98 2/5/2020
$32.98 2/5/2020
$49.30 2/4/2021
$64.44 2/8/2022
$62.93 2/6/2023
$62.93 2/6/2023

8,606(i)
43,030(v)
12,220(ii)
24,827(iii)
75,770(iv)
45,462(vi)

— $22.53 1/28/2015
— $24.47 1/26/2016
— $29.61 1/19/2017
— $37.30 1/24/2018
— $37.30 1/24/2018
— $29.29 2/5/2019
$32.98 2/5/2020
$49.30 2/4/2021
$64.44 2/8/2022
$62.93 2/6/2023

43,030(i)
71,284(ii)
124,132(iii)
121,231(iv)

—

85,172

6,439,855

25,244 1,908,699

4,450

336,465

183,290 13,858,557

25,300

1,912,933

Number of
Securities
Underlying
Unexercised
Options/
SARs (#)
Exercisable
(b)
517,978
490,960
428,339
575,102
467,943
248,127
94,332
—

Name Grant Date
(a)
Novak

1/26/2006
1/19/2007
1/24/2008
2/5/2009
2/5/2010
2/4/2011
2/8/2012
2/6/2013

Grismer

1/26/2006
1/19/2007
5/17/2007
1/24/2008
2/5/2009
5/21/2009
2/5/2010
2/5/2010
2/4/2011
2/8/2012
2/6/2013
2/6/2013

1/28/2005
1/26/2006
1/19/2007
1/24/2008
1/24/2008
2/5/2009
2/5/2010
2/4/2011
2/8/2012
2/6/2013

16,630
19,938
16,262
20,079
33,830
15,853
25,818
—
12,220
8,275
—
—

130,078
124,316
132,918
107,085
267,712
202,977
129,088
71,283
41,377
—

YUM! BRANDS, INC. - 2014 Proxy StatementProxy Statement

Option/SAR Awards(1)

Stock Awards

Number of
Securities
Underlying
Unexercised
Options/
SARs (#)
Exercisable
(b)
107,085
169,148
129,088
61,100
20,688
—

Name Grant Date
(a)
Creed

1/24/2008
2/5/2009
2/5/2010
2/4/2011
2/8/2012
2/6/2013

Number of
Securities
Underlying
Unexercised
Options/SARs
(#)

Option/
SAR
Option/
Exercise
SAR
Price
Expiration
Unexercisable
($)
Date
(c)
(e)
(d)
— $37.30 1/24/2018
— $29.29 2/5/2019
$32.98 2/5/2020
$49.30 2/4/2021
$64.44 2/8/2022
$62.93 2/6/2023

43,030(i)
61,100(ii)
62,067(iii)
90,923(iv)

Number
of Shares
or Units
of Stock
That
Have Not
Vested
(#)(2)
(f)

Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)(3)
(g)

ExEcutivE compEnsation

Equity
incentive
plan awards:
Number of
unearned
shares, units
or other rights
that have not
vested
(#)(4)
(h)

Equity incentive
plan awards:
market or
payout value
of unearned
shares, units
or other rights
that have not
vested
($)(3)
(i)

—

15,396

1,164,092

Pant

7/21/2005
1/26/2006
1/26/2006
1/19/2007
1/24/2008
1/24/2008
2/5/2009
2/5/2010
2/4/2011
11/18/2011
2/8/2012
2/6/2013

25,731
41,440
49,726
49,844
133,856
53,543
135,318
86,058
50,916
—
28,964
—

— $26.53 7/21/2015
— $24.47 1/26/2016
— $24.47 1/26/2016
— $29.61 1/19/2017
— $37.30 1/24/2018
— $37.30 1/24/2018
— $29.29 2/5/2019
$32.98 2/5/2020
$49.30 2/4/2021
$53.84 11/18/2021
$64.44
2/8/2022
$62.93 2/6/2023

28,687(i)
50,917(ii)
94,949(vii)
86,892(iii)
90,923(iv)

—

1,187,531
(1) Except as follows, all options and SARs listed above vest at a rate of 25% per year over the first four years of the ten-year option term. For Mr. Grismer, the grants
listed as expiring on May 17, 2017 and May 21, 2019 were each granted with 100% vesting after four years. Certain grants expiring for Mr. Grismer on February 5,
2020 (43,030 SARs) and February 6, 2023 (45,462 SARs), for Mr. Su on January 24, 2018 (267,712 options), and for Mr. Pant on January 24, 2018 (133,856
SARs) and November 18, 2021 (94,949 SARs), were each granted with 100% vesting after five years.
The actual vesting dates for unexercisable award grants are as follows:
(i) All the unexercisable shares will vest on February 5, 2014.
(ii) One-half of the unexercisable grant will vest on each of February 4, 2014 and 2015.
(iii) One-third of the unexercisable grant will vest on each of February 8, 2014, 2015 and 2016.
(iv) One-fourth of the unexercisable grant will vest on each of February 6, 2014, 2015, 2016 and 2017.
(v) All unexercisable grants will vest on February 5, 2015.
(vi) All unexercisable grants will vest on February 6, 2018.
(vii) All unexercisable grants will vest on November 18, 2016.

15,706

(2) Amounts in this column represent RSUs that have not vested. For Mr. Su, the 183,290 RSUs represent a 2010 retention award (including accrued dividends)
that vests after five years. For Mr. Grismer, this amount represents deferrals of his 2011 and 2012 bonuses into the EID Program’s Matching Stock Fund.
(3) The market value of these awards are calculated by multiplying the number of shares covered by the award by $75.61, the closing price of YUM stock on the

NYSE on December 31, 2013.

(4) The awards reflected in this column are unvested performance-based PSU awards with three-year performance periods that are scheduled to vest on
December 27, 2014 or December 31, 2015 if the performance targets are met. In accordance with SEC rules, the PSU awards are reported at their maximum
payout value.

YUM! BRANDS, INC. - 2014 Proxy StatementProxy Statement

ExEcutivE compEnsation

option Exercises and stock vested

The table below shows the number of shares of YUM common stock acquired during 2013 upon exercise of stock option
and SAR awards and vesting of stock awards in the form of RSUs and PSUs, each including accumulated dividends and
before payment of applicable withholding taxes and broker commissions. For 2013, no RSUs became vested and 2011
PSU awards for the 2011-2013 performance cycle were not paid out since the average earnings per share during the
performance cycle did not reach the required minimum average growth threshold of seven percent. Therefore, there is
nothing to report for the NEOs in columns (d) and (e).

Option/SAR Awards

Number
of Shares
Acquired on
Exercise
(#)
(b)
334,272
32,503
175,228
189,901
12,865

Value
Realized on
Exercise
($)
(c)
17,315,657
1,543,414
9,417,664
13,122,211
629,923

Stock Awards
Number
of Shares
Acquired on
Vesting
(#)
(d)
—
—
—
—
—

Value
realized on
Vesting
($)
(e)
—
—
—
—
—

Name
(a)
Novak
Grismer
Su
Creed
Pant

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementExEcutivE compEnsation

pension Benefits

The table below shows the present value of accumulated
benefits payable to each of the NEOs, including the number
of years of service credited to each NEO, under the YUM!
Brands Retirement Plan (“Retirement Plan”), the YUM!

Brands, Inc. Pension Equalization Plan (“PEP”), and the YUM!
Brands International Retirement Plan (“YIRP”) determined
using interest rate and mortality rate assumptions consistent
with those used in the Company’s financial statements.

2013 FiscaL YEaR pEnsion BEnEFits taBLE

Name
(a)
Novak(i)

Payments During
Last Fiscal Year
($)
(e)
—
—
—
Grismer(ii)
—
Su
—
Creed(iii)
Pant(ii)
—
(i) Mr. Novak no longer receives benefits under the PEP. The Management Planning and Development Committee discontinued Mr. Novak’s accruing pension
benefits under the PEP effective January 1, 2012 and replaced this benefit, effective January 1, 2013, with a benefit determined under the Leadership
Retirement Plan (“LRP”), an unfunded, unsecured, deferred account-based retirement plan. See footnote (5) to the Summary Compensation Table at page 44
for more detail. No other NEOs participate in this plan.

Plan Name
(b)
Retirement Plan(1)
Pension Equalization Plan(2)
—
International Retirement Plan(3)
Retirement Plan(1)
—

Present Value of
Accumulated Benefit(4)
($)
(d)
1,395,996
—
—
18,503,747
125,882
—

Number of Years of
Credited Service
(#)
(c)
27
—
—
24
2
—

(ii) Mr. Grismer and Mr. Pant are not accruing a benefit under these plans because each was hired after September 30, 2001 and are therefore ineligible for

these benefits. Mr. Grismer and Mr. Pant participate in the LRP.

(iii) Mr. Creed is not an active participant in the Retirement Plan but maintains a balance in the Retirement Plan for the two years (2002 and 2003) during
which he was a participant in the plan. As discussed at page 40, Mr. Creed participates in the Third Country National plan, an unfunded, unsecured deferred
account-based retirement plan.

(1) Yum! Brands Retirement plan

The Retirement Plan provides an integrated program of
retirement benefits for salaried employees who were hired
by the Company prior to October 1, 2001. The Retirement
Plan replaces the same level of pre-retirement pensionable
earnings for all similarly situated participants. The Retirement
Plan is a tax qualified plan, and it is designed to provide the
maximum possible portion of this integrated benefit on a
tax qualified and funded basis.

Benefit Formula

Benefits under the Retirement Plan are based on a participant’s
final average earnings (subject to the limits under Internal
Revenue Code Section 401(a)(17)) and service under the
plan. Upon termination of employment, a participant’s normal
retirement benefit from the plan is equal to

A. 3% of Final Average Earnings times Projected

Service up to 10 years of service, plus

B. 1% of Final Average Earnings times Projected
Service in excess of 10 years of service, minus

.43% of Final Average Earnings up to Social Security
covered compensation multiplied by Projected
Service up to 35 years of service

the result of which is multiplied by a fraction, the numerator
of which is actual service as of date of termination, and the
denominator of which is the participant’s Projected Service.

Projected Service is the service that the participant would
have earned if he had remained employed with the Company
until his normal retirement age (generally age 65).

If a participant leaves employment after becoming eligible
for early or normal retirement, benefits are calculated using
the formula above except that actual service attained at the
participant’s retirement date is used in place of Projected
Service.

Final Average Earnings

A participant’s final average earnings is determined based on
his highest five consecutive years of pensionable earnings.
Pensionable earnings is the sum of the participant’s base
pay and annual incentive compensation from the Company,
including amounts under the Yum Leaders’ Bonus Program.
In general, base pay includes salary, vacation pay, sick pay
and short term disability payments. Extraordinary bonuses and
lump sum payments made in connection with a participant’s
termination of employment are not included.

Vesting

A participant receives a year of vesting service for each
year of employment with the Company. A participant is 0%
vested until he has been credited with at least five years of
vesting service. Upon attaining five years of vesting service,
a participant becomes 100% vested. All NEOs eligible for
the Retirement Plan or YIRP are 100% vested.

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementExEcutivE compEnsation

Normal Retirement Eligibility

A participant is eligible for normal retirement following the
later of age 65 or 5 years of vesting service.

Early Retirement Eligibility and Reductions

A participant is eligible for early retirement upon reaching
age 55 with 10 years of vesting service. A participant who has

met the requirements for early retirement and who elects to
begin receiving payments from the plan prior to age 62 will
receive a reduction of 1/12 of 4% for each month benefits
begin before age 62. Benefits are unreduced at age 62.

The table below shows when each of the NEOs became eligible for early retirement and the estimated lump sum value of
the benefit each participant would receive from YUM plans (both qualified and non-qualified) if he retired from the Company
on December 31, 2013 and received a lump sum payment.

Name
David C. Novak
Jing-Shyh S. Su
Greg Creed
(1) The Retirement Plan
(2) The YIRP

Earliest Retirement
Date
November 1, 2007
May 1, 2007
August 1, 2012

Estimated Lump
Sum from a
Qualified Plan(1)
1,433,263
—
166,010

Estimated Lump
Sum from a Non-
Qualified Plan(2)
—
18,691,094
—

Total Estimated
Lump Sum
1,433,263
18,691,094
166,010

The estimated lump sum values in the table above are calculated assuming no increase in the participant’s Final Average
Earnings. The lump sums are estimated using the mortality table and interest rate assumptions in the Retirement Plan. Actual
lump sums may be higher or lower depending on the mortality table and interest rate in effect at the time of distribution and the
participant’s Final Average Earnings at his date of retirement.

Lump Sum Availability

Lump sum payments are available to participants who meet
the requirements for early or normal retirement. Participants
who leave the Company prior to meeting the requirements
for Early or Normal Retirement must take their benefits in
the form of a monthly annuity and no lump sum is available.
When a lump sum is paid from the plan, it is calculated based
on actuarial assumptions for lump sums required by Internal
Revenue Code Section 417(e)(3).

(2) Yum! Brands, inc. pension Equalization plan

The PEP is an unfunded, non-qualified plan that complements
the Retirement Plan by providing benefits that federal tax
law bars providing under the Retirement Plan. Benefits are
generally determined and payable under the same terms
and conditions as the Retirement Plan (except as noted
below) without regard to federal tax limitations on amounts
of includible compensation and maximum benefits. Benefits
paid are reduced by the value of benefits payable under
the Retirement Plan.

Participants who earned at least $75,000 during calendar
year 1989 are eligible to receive benefits calculated under
the Retirement Plan’s pre-1989 formula, if this calculation
results in a larger benefit from the PEP. This formula is similar
to the formula described above under the Retirement Plan
except that part C of the formula is calculated as follows:

C. 12/3% of an estimated primary Social Security amount
multiplied by Projected Service up to 30 years

Retirement distributions are always paid in the form of a
lump sum. In the case of a participant whose benefits are

payable based on the pre-1989 formula, the lump sum value
is calculated as the actuarial equivalent to the participant’s
50% Joint and Survivor Annuity with no reduction for survivor
coverage. In all other cases, lump sums are calculated as
the actuarial equivalent of the participant’s life only annuity.
Participants who terminate employment prior to meeting
eligibility for early or normal retirement must take their benefits
from this plan in the form of a monthly annuity.

(3) Yum! Brands international Retirement plan

The YIRP is an unfunded, non-qualified defined benefit
plan that covers certain international employees who are
designated by the Company as third country nationals. Mr.
Su is eligible for benefits under this plan. The YIRP provides
a retirement benefit similar to the Retirement Plan except
that part C of the formula is calculated as the sum of:

a) Company financed State benefits or Social Security

benefits if paid periodically

b) The actuarial equivalent of all State paid or mandated

lump sum benefits financed by the Company

c) Any other Company financed benefits that are
attributable to periods of pensionable service and
that are derived from a plan maintained or contributed
to by the Company or one or more of the group of
corporations that is controlled by the Company.

Benefits are payable under the same terms and conditions
as the Retirement Plan without regard to Internal Revenue
Service limitations on amounts of includible compensation
and maximum benefits.

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementExEcutivE compEnsation

(4) present value of accumulated Benefits

For all plans, the Present Value of Accumulated Benefits
(determined as of December 31, 2013) is calculated assuming
that each participant is eligible to receive an unreduced benefit
payable in the form of a single lump sum at age 62. This is

consistent with the methodologies used in financial accounting
calculations. In addition, the economic assumptions for
the lump sum interest rate, post retirement mortality, and
discount rate are also consistent with those used in financial
accounting calculations at each measurement date.

nonqualified Deferred compensation

Amounts reflected in the Nonqualified Deferred Compensation
table below are provided for under the Company’s Executive
Income Deferral (“EID”) Program, Leadership Retirement
Plan (“LRP”) and Third Country National Plan (“TCN”). These
plans are unfunded, unsecured deferred, account-based
compensation plans. For each calendar year, participants
are permitted under the EID Program to defer up to 85%
of their base pay and up to 100% of their annual incentive
award. As discussed beginning at page 40, Messrs. Novak,
Grismer and Pant are eligible to participate in the LRP. The
LRP provides an annual allocation to the accounts of Messrs.
Novak and Grismer equal to 9.5% of each of his salary
plus target bonus and to Mr. Pant’s account equal to 20%
of his salary plus target bonus. As discussed beginning at
page 40, Mr. Creed is eligible to participate in the TCN. The
TCN provides for an annual allocation to Mr. Creed’s account
equal to 15% of his salary plus target bonus.

EiD program

Deferred Investments under the EID Program. Amounts deferred
under the EID Program may be invested in the following phantom
investment alternatives (12 month investment returns are shown
in parentheses):

•• YUM! Stock Fund (16.26%*)
•• YUM! Matching Stock Fund (16.26%*)
•• S&P 500 Index Fund (32.32%)
•• Bond Market Index Fund (-2.12%)
•• Stable Value Fund (1.58%)

All of the phantom investment alternatives offered under the
EID Program are designed to match the performance of actual
investments; that is, they provide market rate returns and do
not provide for preferential earnings. The S&P 500 index fund,
bond market index fund and stable value fund are designed
to track the investment return of like-named funds offered
under the Company’s 401(k) Plan. The YUM! Stock Fund
and YUM! Matching Stock Fund track the investment return
of the Company’s common stock. Participants may transfer
funds between the investment alternatives on a quarterly basis
except (1) funds invested in the YUM! Stock Fund or YUM!
Matching Stock Fund may not be transferred once invested

* Assumes dividends are not reinvested.

in these funds and (2) a participant may only elect to invest
into the YUM! Matching Stock Fund at the time the annual
incentive deferral election is made. In the case of the Matching
Stock Fund, participants who defer their annual incentive into
this fund acquire additional phantom shares (called restricted
stock units (“RSUs”)) equal to 33% of the RSUs received with
respect to the deferral of their annual incentive into the YUM!
Matching Stock Fund (the additional RSUs are referred to
as “matching contributions”). The RSUs attributable to the
matching contributions are allocated on the same day the
RSUs attributable to the annual incentive are allocated, which
is the same day we make our annual stock appreciation right
grants. Amounts attributable to the matching contribution
under the YUM! Matching Stock Fund are reflected in column
(c) below as contributions by the Company (and represent
amounts actually credited to the NEO’s account during 2013).
Beginning with their 2009 annual incentive award, NEOs are
no longer eligible to participate in the Matching Stock Fund.

RSUs attributable to annual incentive deferrals into the YUM!
Matching Stock Fund and matching contributions vest on
the second anniversary of the grant (or upon a change of
control of the Company, if earlier) and are payable as shares
of YUM common stock pursuant to the participant’s deferral
election. Unvested RSUs held in a participant’s YUM! Matching
Stock Fund account are forfeited if the participant voluntarily
terminates employment with the Company within two years
of the deferral date. If a participant terminates employment
involuntarily, the portion of the account attributable to the
matching contributions is forfeited and the participant will
receive an amount equal to the amount of the original amount
deferred. If a participant dies or becomes disabled during
the restricted period, the participant fully vests in the RSUs.
Dividend equivalents are accrued during the restricted period
but are only paid if the RSUs vest. RSUs held by a participant
who has attained age 65 with five years of service vest
immediately. In the case of a participant who has attained age
55 with 10 years of service, RSUs attributable to pre-2009
bonus deferrals into the YUM! Matching Stock Fund vest
immediately and RSUs attributable to the matching contribution
vest on a pro rata basis during the period beginning on the
date of grant and ending on the first anniversary of the grant
and are fully vested on the first anniversary.

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementExEcutivE compEnsation

Distributions under EID Program. When participants elect
to defer amounts into the EID Program, they also select
when the amounts ultimately will be distributed to them.
Distributions may either be made in a specific year—whether
or not employment has then ended—or at a time that
begins at or after the executive’s retirement, separation or
termination of employment.

Distributions can be made in a lump sum or up to 20 annual
installments. Initial deferrals are subject to a minimum two year
deferral. In general, with respect to amounts deferred after
2005 or not fully vested as of January 1, 2005, participants
may change their distribution schedule, provided the new
elections satisfy the requirements of Section 409A of the
Internal Revenue Code. In general, Section 409A requires that:

•• Distribution schedules cannot be accelerated (other than

for a hardship)

•• To delay a previously scheduled distribution,

•–A participant must make an election at least one year
before the distribution otherwise would be made, and
•–The new distribution cannot begin earlier than five years
after it would have begun without the election to re-defer.

With respect to amounts deferred prior to 2005, to delay a
distribution the new distribution cannot begin until two years
after it would have begun without the election to re-defer.

Investments in the YUM! Stock Fund and YUM! Matching
Stock Fund are only distributed in shares of Company stock.

LRp

LRP Account Returns. The LRP provides an annual earnings
credit to each participant’s account based on the value of
participant’s account at the end of each year. Under the
LRP, Mr. Novak receives an annual earnings credit equal
to 120% of the applicable federal interest rate. Mr. Grismer

and Mr. Pant each receive an annual earnings credit equal
to 5%. The Company’s contribution (“Employer Credit”)
for 2013 is equal to 9.5% of salary plus target bonus for
Mr. Novak and Mr. Grismer and 20% for Mr. Pant.

Distributions under LRP. Under the LRP, participants age 55
or older with a balance of $15,000 or more, are entitled to a
lump sum distribution of their account balance in the quarter
following their separation of employment. Participants under
age 55 who separate from the Company will receive interest
annually and their account balance will be distributed in the
quarter following their 55th birthday. The benefit is monitored
each quarter to determine if any distribution provisions apply.

tcn

TCN Account Returns. The TCN provides an annual earnings
credit to each to each participant’s account based on the
value of participant’s account at the end of each year. Under
the TCN, Mr. Creed receives an annual earnings credit equal
to 5%. For Mr. Creed, the Employer Credit for 2013 is equal
to 15% of his salary plus target bonus.

Distributions under TCN. Under the TCN, participants age
55 or older with a balance of $15,000 or more, are entitled
to a lump sum distribution of their account balance in the
quarter following their separation of employment. Participants
under age 55 who separate employment with the Company
will receive interest annually and their account balance will
be distributed in the quarter following their 55th birthday.
The benefit is monitored each quarter to determine if any
distribution provisions apply.

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementExEcutivE compEnsation

Aggregate
Balance at
Last FYE
($)(5)
Name
(f)
(a)
475,401 231,226,476
Novak
2,478,162
Grismer
8,516,801
Su
8,141,880
Creed
Pant
9,202,644
(1) Amounts in column (b) reflect amounts that were also reported as compensation in our Summary Compensation Table filed last year or, would have been

Executive
Contributions
in Last FY
($)(1)
(b)
7,315,445
760,760
3,183,968
1,282,223
—

Registrant
Contributions
in Last FY
($)(2)
(c)
27,958,150
377,087
—
225,000
300,000

Aggregate
Earnings in
Last FY
($)(3)
(d)
26,608,702
337,781
891,966
978,829
1,031,605

Aggregate
Withdrawals/
Distributions
($)(4)
(e)

5,513
3,206,011
419,171
11,672

reported as compensation in our Summary Compensation Table last year if the executive were a NEO.

(2) Amounts in column (c) reflect Company contributions for EID Program matching contribution, LRP and/or TCN allocation as follows: Mr. Grismer, $253,587
EID matching contribution and $123,500 LRP allocation; Mr. Creed, $225,000 TCN allocation; and Mr. Pant, $300,000 LRP allocation. For Mr. Novak, the
amount in this column represents the beginning balance in his LRP account as a result of the transfer of his benefit out of the PEP effective January 1, 2013
($27,600,000) and his LRP allocation ($358,150). See footnote 5 of the Summary Compensation Table for more detail.

(3) Amounts in column (d) reflect earnings during the last fiscal year on deferred amounts. All earnings are based on the investment alternatives offered under
the EID Program or the earnings credit provided under the LRP or the TCN described in the narrative above this table. The EID Program earnings are market
based returns and, therefore, are not reported in the Summary Compensation Table. For Messrs. Grismer and Pant, of their earnings reflected in this column,
$3,977 and $15,640 respectively were deemed above market earnings accruing to each of their accounts under the LRP. For Mr. Creed, of his earnings
reflected in this column, $7,348 were deemed above market earnings accruing to his account under the TCN. Mr. Novak receives a market rate of interest on
his account under the LRP. For above market earnings on nonqualified deferred compensation, see the “Change in Pension Value and Nonqualified Deferred
Compensation Earnings” column of the Summary Compensation Table.

(4) All amounts shown in column (e) were distributed in accordance with the executive’s deferral election, except in the case of the following amounts distributed
to pay payroll taxes due upon their account balance under the EID Program, LRP or TCN for 2013. For Messrs. Novak and Creed, their distributions reflected
in this column also include immaterial tax adjustments for the payout of 2009 and 2010 PSU awards ($55,883 and $11,135 respectively).

Novak
Grismer
Creed
Pant

249,030
5,513
10,708
11,672

(5) Amounts reflected in column (f) are the year-end balances for each executive under the EID Program, TCN and the LRP. As required under SEC rules, below
is the portion of the year-end balance for each executive which has previously been reported as compensation to the executive in the Company’s Summary
Compensation Table for 2013 and prior years or would have been reported as compensation if the executive had been a Named Executive Officer in those
previous years.

Novak
Grismer
Su
Creed
Pant

86,280,385
2,096,682
7,536,875
3,916,822
4,640,205

The difference between these amounts and the amount of the year-end balance for each executive represents the total
aggregate earnings accumulated under the program with respect to that compensation.

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementExEcutivE compEnsation

potential payments upon termination or change in control

The information below describes and quantifies certain
compensation that would become payable under existing plans
and arrangements if the NEO’s employment had terminated
on December 31, 2013, given the NEO’s compensation and
service levels as of such date and, if applicable, based on the
Company’s closing stock price on that date. These benefits
are in addition to benefits available generally to salaried
employees, such as distributions under the Company’s
401(k) Plan, retiree medical benefits, disability benefits and
accrued vacation pay.

Due to the number of factors that affect the nature and amount
of any benefits provided upon the events discussed below,
any actual amounts paid or distributed may be different.
Factors that could affect these amounts include the timing
during the year of any such event, the Company’s stock price
and the executive’s age.

Stock Options and SAR Awards. If one or more NEOs terminated
employment for any reason other than retirement, death,
disability or following a change in control as of December 31,
2013, they could exercise the stock options and SARs that were
exercisable on that date as shown at the Outstanding Equity
Awards at Year-End table on page 48, otherwise all options
and SARs, pursuant to their terms, would have been forfeited
and cancelled after that date. If the NEO had retired, died or
become disabled as of December 31, 2013, exercisable stock
options and SARs would remain exercisable through the term
of the award. Except in the case of a change in control, no
stock options or SARs become exercisable on an accelerated
basis. Benefits a NEO may receive on a change of control are
discussed below.

Deferred Compensation. As described in more detail beginning
at page 53, the Named Executive Officers participate in the
EID Program, which permits the deferral of salary and annual
incentive compensation. The last column of the Nonqualified
Deferred Compensation Table on page 55 includes each NEO’s
aggregate balance at December 31, 2013. The NEOs are
entitled to receive their vested amount under the EID Program
in case of voluntary termination of employment. In the case
of involuntary termination of employment, they are entitled to
receive their vested benefit and the amount of the unvested
benefit that corresponds to their deferral. In the case of death,
disability or retirement after age 65, they or their beneficiaries
are entitled to their entire account balance as shown in the
last column of the Nonqualified Deferred Compensation table
on page 55.

$7,288,324. If Mr. Grismer had left voluntarily, he would have
received no payout since this deferral was subject to vesting
provisions which lapse in February 2014. As discussed at
page 55, these amounts reflect bonuses previously deferred
by the executive and appreciation on these deferred amounts
(see page 53 for discussion of investment alternatives available
under the EID). In Mr. Novak’s case, over 80% of his balance
is invested in Company RSUs, which he will receive in the
form of Company stock following his retirement. The other
NEOs’ EID balances are invested primarily in RSUs. Thus,
Mr. Novak and the other NEOs’ EID account balances represent
deferred bonuses (earned in prior years) and appreciation
of their accounts based primarily on the performance of the
Company’s stock.

Leadership Retirement Plan. Under the LRP, participants
age 55 are entitled to a lump sum distribution of their
account balance following their termination of employment.
Participants under age 55 who terminate with more than
five years of service will receive their account balance at
their 55th birthday. In case of termination of employment
as of December 31, 2013, Mr. Novak would have received
$29,043,612. Mr. Grismer would receive $615,165 when he
attains age 55 and Mr. Pant would have received $1,914,320.

Third Country National Plan. Under the TCN, participants
age 55 or older are entitled to a lump sum distribution of their
account balance in the quarter following their termination
of employment. Participants under age 55 who terminate
will receive interest annually and their account balance will
be distributed in the quarter following their 55th birthday.
In case of termination of employment as of December 31,
2013, Mr. Creed would have received $978,179.

Performance Share Unit Awards. If one or more NEOs
terminated employment for any reason other than retirement
or death or following a change in control and prior to
achievement of the performance criteria and vesting period,
then the award would be cancelled and forfeited. If the NEO
had retired, or died as of December 31, 2013, the PSU
award would be paid out based on actual performance
for the performance period, subject to a pro rata reduction
reflecting the portion of the performance period not worked
by the NEO. If any of these terminations had occurred on
December 31, 2013, Messrs. Novak, Grismer, Su, Creed
and Pant would have been entitled to $1,407,154, $56,910,
$481,902, $295,614 and $303,686, respectively, assuming
target performance.

In the case of an involuntary termination of employment
as of December 31, 2013, each NEO would receive the
following: Mr. Novak $202,182,864; Mr. Grismer $1,201,850;
Mr. Su $8,516,801; Mr. Creed $7,163,701; and Mr. Pant

Pension Benefits. The Pension Benefits Table on page 51
describes the general terms of each pension plan in which
the NEOs participate, the years of credited service and
the present value of the annuity payable to each NEO

YUM! BRANDS, INC. - 2014 Proxy StatementProxy Statementassuming termination of employment as of December 31,
2013. The table on page 52 provides the present value of
the lump sum benefit payable to each NEO when they attain
eligibility for Early Retirement (i.e., age 55 with 10 years of
service) under the plans.

Life Insurance Benefits. For a description of the supplemental
life insurance plans that provide coverage to the NEOs, see
the All Other Compensation Table on page 46. If the NEOs
had died on December 31, 2013, the survivors of Messrs.
Novak, Grismer, Su, Creed and Pant would have received
Company-paid life insurance of $3,360,000; $1,300,000;
$2,365,000; $1,500,000; and $1,500,000, respectively,
under this arrangement. Executives and all other salaried
employees can purchase additional life insurance benefits
up to a maximum combined company paid and additional
life insurance of $3.5 million. This additional benefit is not
paid or subsidized by the Company and, therefore, is not
shown here.

Change in Control. Change in control severance agreements
are in effect between YUM and certain key executives
(including Messrs. Novak, Grismer, Su, Creed and Pant).
These agreements are general obligations of YUM, and
provide, generally, that if, within two years subsequent to a
change in control of YUM, the employment of the executive is
terminated (other than for cause, or for other limited reasons
specified in the change in control severance agreements)
or the executive terminates employment for Good Reason
(defined in the change in control severance agreements to
include a diminution of duties and responsibilities or benefits),
the executive will be entitled to receive the following:

•• a proportionate annual incentive assuming achievement
of target performance goals under the bonus plan or,
if higher, assuming continued achievement of actual
Company performance until date of termination,

•• a severance payment equal to two times the sum of the
executive’s base salary and the target bonus or, if higher,
the actual bonus for the year preceding the change in
control of the Company, and

•• outplacement services for up to one year following

termination.

In March 2013, the Company eliminated excise tax gross-
ups and implemented a best net after-tax method. See the
Company’s CD&A on page 42 for more detail.

The change in control severance agreements have a three-year
term and are automatically renewable each January 1 for
another three-year term. An executive whose employment
is not terminated within two years of a change in control will
not be entitled to receive any severance payments under the
change in control severance agreements.

ExEcutivE compEnsation

Generally, pursuant to the agreements, a change in control is
deemed to occur:

(i)

if any person acquires 20% or more of the Company’s voting
securities (other than securities acquired directly from the
Company or its affiliates);

(ii)

if a majority of the Directors as of the date of the agreement
are replaced other than in specific circumstances; or

(iii) upon the consummation of a merger of the Company or
any subsidiary of the Company other than (a) a merger
where the Company’s Directors immediately before the
change in control constitute a majority of the directors
of the resulting organization, or (b) a merger effected
to implement a recapitalization of the Company in
which no person is or becomes the beneficial owner
of securities of the Company representing 20% or
more of the combined voting power of the Company’s
then-outstanding securities.

In addition to the payments described above, upon a
change in control:

•• All stock options and SARs held by the executive will
automatically vest and become exercisable, except that
for all stock options and SARs granted beginning in
2013, outstanding awards will fully and immediately vest
following a change in control if the executive is employed
on the date of the change in control of the Company and
is involuntarily terminated (other than by the Company
for cause) on or within two years following the change in
control. See Company’s CD&A on page 42 for more detail.
•• All RSUs under the Company’s EID Program held by the

executive will automatically vest.

•• All PSU awards under the Company’s Performance Share
Plan awarded in the year in which the change in control
occurs will be paid out at target assuming a target level
performance had been achieved for the entire performance
period, subject to a pro rata reduction to reflect the portion
of the performance period after the change in control. All
PSUs awarded for performance periods that begin before
the year in which the change in control occurs will be paid
out assuming performance achieved for the performance
period was at the greater of target level performance or
projected level of performance at the time of the change in
control, subject to pro rata reduction to reflect the portion
of the performance period after the change in control,
except that for PSU awards granted beginning in 2013,
executives must be employed with the Company on the
date of the change in control and involuntarily terminated
upon or following the change in control and during the
performance period. See Company’s CD&A on page 42
for more detail.

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementExEcutivE compEnsation

If a change in control and each NEO’s involuntary termination had occurred as of December 31, 2013, the following payments
or other benefits would have been made or become available.

Severance Payment
Annual Incentive
Accelerated Vesting of Stock Options and
SARs
Accelerated Vesting of RSUs
Acceleration of PSU Performance/Vesting
Outplacement
TOTAL

Novak
$

$ 12,068,640 $

939,600

20,915,721
—
1,407,154
25,000
35,356,115

Grismer
$
2,821,520
277,875

4,337,290
1,946,760
56,910
25,000
9,465,355

Su
$

Creed
$

6,279,625 $
614,790

5,595,000 $
1,511,625

6,633,614
13,858,633
481,902
25,000
27,893,564

5,288,102
—
295,614
25,000
12,715,341

Pant
$
4,740,000
784,875

6,753,080
—
303,686
25,000
12,606,641

If a change in control without an involuntary termination had occurred as of December 31, 2013, the following benefits would
have become available.

Accelerated Vesting of Stock Options and SARs $ 16,338,799 $
Accelerated Vesting of RSUs
Acceleration of PSU Performance/Vesting
TOTAL

—
624,743
16,963,542

Novak
$

Grismer
$
2,800,068
1,946,760
—
4,746,828

Su
$

Creed
$

5,096,405 $

4,135,198 $

13,858,633
311,173
19,266,211

—
193,995
4,329,193

Pant
$
5,600,176
—
202,067
5,802,243

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementDiREctoR compEnsation

As described more fully below, this table summarizes compensation paid to each non-employee director during 2013.

Option/SAR
Awards
($)(2)(3)
Name
(d)
(a)
35,412
Cavanagh, Michael
35,412
Dorman, David
35,412
Ferragamo, Massimo
35,412
Graddick-Weir, Mirian
35,412
Grissom, David
35,412
Hill, Bonnie
35,412
Linen, Jonathan
35,412
Nelson, Thomas
35,412
Ryan, Thomas
Walter, Robert
35,412
(1) Amounts in column (c) represent the grant date fair value for annual stock retainer awards granted to directors in 2013.
(2) Amounts in column (d) represent the grant date fair value for annual SARs granted in fiscal 2013. These amounts do not reflect amounts paid to or realized by
the director for fiscal 2013. For a discussion of the assumptions used to value the awards, see the discussion of stock awards and option awards contained
in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2013 Annual Report in Notes to Consolidated Financial Statements at Note 15,
“Share-based and Deferred Compensation Plans.”

Fees Earned or
Paid in Cash
($)
(b)
—
—
—
—
—
85,000
—
—
—
—

All Other
Compensation
($)(4)
(e)
—
10,000
—
—
—
9,000
10,000
20,000
—
10,000

Stock
Awards
($)(1)
(c)
170,000
170,000
170,000
170,000
170,000
85,000
170,000
190,000
195,000
185,000

Total
($)
(f)
205,412
215,412
205,412
205,412
205,412
214,412
215,412
245,412
230,412
230,412

(3) At December 31, 2013, the aggregate number of options and SARs awards outstanding for each non-management director was:

Name
Cavanagh, Michael
Dorman, David
Ferragamo, Massimo
Graddick-Weir, Mirian
Grissom, David
Hill, Bonnie
Linen, Jonathan
Nelson, Thomas
Ryan, Thomas
Walter, Robert
Mr. Novak’s and Mr. Su’s outstanding awards are set forth on page 48.
(4) Represents amount of matching charitable contributions made on behalf of the director under the Company’s matching gift program and/or the amount

Options
—
—
—
—
—
7,812
10,476
—
7,812
—

SARs
4,135
26,033
26,033
6,274
4,354
26,033
26,033
17,616
26,033
19,600

charitable contribution made in the director’s name.

The Company uses a combination of cash and stock-
based incentive compensation to attract and retain qualified
candidates to serve on the Board. In setting director
compensation, the Company considers the significant
amount of time that directors expend in fulfilling their duties
to the Company as well as the skill level required by the
Company of members of the Board.

Employee Directors. Employee directors do not receive
additional compensation for serving on the Board of Directors.

Non-Employee Directors Annual Compensation. Each
director who is not an employee of YUM receives an annual
stock grant retainer with a fair market value of $170,000 and
an annual grant of vested SARs with respect to $150,000
worth of YUM common stock (“face value”) with an exercise

price equal to the fair market value of Company stock on
the date of grant. Directors may request to receive up to
one-half of their stock retainer in cash. The request must
be submitted to the Chair of the Management Planning and
Development Committee. For 2013, Bonnie Hill requested
and received approval by the Committee Chair for a cash
payment equal to one-half of her stock retainer. Directors
may also defer payment of their retainers pursuant to
the Directors Deferred Compensation Plan. Deferrals are
invested in phantom Company stock and paid out in shares
of Company stock. Deferrals may not be made for less
than two years. In recognition of their added duties, the
Lead Director of the Board (Mr. Ryan in 2013) receives
an additional $25,000 stock retainer annually, the Chair
of the Audit Committee (Mr. Nelson in 2013) receives an

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementEQuitY compEnsation pLan inFoRmation

additional $20,000 stock retainer annually and the Chair of
the Management Planning and Development Committee
(Mr. Walter in 2013) receives an additional $15,000 stock
retainer annually.

Initial Stock Grant upon Joining Board. Non-employee
directors also receive a one-time stock grant with a fair
market value of $25,000 on the date of grant upon joining
the Board, distribution of which is deferred until termination
from the Board.

Stock Ownership Requirements. Similar to executive officers,
directors are subject to share ownership requirements. The
directors’ requirements provide that directors will not sell any
of the Company’s common stock received as compensation
for service on the Board until the director has ceased being
a member of the Board for one year (sales are permitted
to cover income taxes attributable to any stock retainer
payment or exercise of a stock option or SAR).

Matching Gifts. To further YUM’s support for charities,
non-employee directors are able to participate in the
YUM! Brands, Inc. Matching Gifts Program on the same
terms as YUM’s employees. Under this program, the
YUM! Brands Foundation will match up to $10,000 a year
in contributions by the director to a charitable institution
approved by the YUM! Brands Foundation. At its discretion,
the Foundation may match director contributions exceeding
$10,000. Mr. Nelson made a contribution in 2012 that
was not matched until January 2013 and a contribution in
2013 that was matched in that year for a total of $20,000
of matched contributions.

Insurance. We also pay the premiums on directors’ and
officers’ liability and business travel accident insurance
policies. The annual cost of this coverage was approximately
$2 million. This is not included in the tables above as it is
not considered compensation to the directors.

EQuitY compEnsation pLan inFoRmation

The following table summarizes, as of December 31, 2013, the equity compensation plans under which we may issue
shares of stock to our directors, officers and employees under the 1999 Long Term Incentive Plan (“1999 Plan”), the
1997 Long Term Incentive Plan (the “1997 Plan”), SharePower Plan and Restaurant General Manager Stock Option Plan
(“RGM Plan”).

Plan Category

Number of
Securities To
be Issued Upon
Exercise of
Outstanding
Options, Warrants
and Rights
(a)

Weighted-
Average
Exercise Price
of Outstanding
Options,
Warrants and
Rights
(b)
41.50(2)

Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans (Excluding
Securities Reflected in
Column (a))
(c)

Equity compensation plans approved by security holders
Equity compensation plans not approved by security
403,780
holders(4)
19,322,416(1)
TOTAL
(1) Includes 5,532,948 shares issuable in respect of RSUs, performance units and deferred units.
(2) Weighted average exercise price of outstanding options and SARs only.
(3) Includes 4,059,652 shares available for issuance of awards of stock units, restricted stock, restricted stock units and performance share unit awards under the

7,677,520
15,796,823(3)

48.76(2)
41.77(2)

18,918,636(1)

8,119,303(3)

1999 Plan.

(4) Awards are made under the RGM Plan.

What are the key features of the 1999 plan?

The 1999 Plan provides for the issuance of up to 70,600,000
shares of stock as non-qualified stock options, incentive
stock options, SARs, restricted stock, restricted stock
units, performance shares or performance units. Only our

employees and directors are eligible to receive awards under
the 1999 Plan. The purpose of the 1999 Plan is to motivate
participants to achieve long range goals, attract and retain
eligible employees, provide incentives competitive with other

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementEQuitY compEnsation pLan inFoRmation

similar companies and align the interest of employees and
directors with those of our shareholders. The 1999 Plan is
administered by the Management Planning and Development
Committee of the Board of Directors (the “Committee”). The
exercise price of a stock option grant or SAR under the
1999 Plan may not be less than the average market price
of our stock on the date of grant for years prior to 2008
or the closing price of our stock on the date of the grant

beginning in 2008, and no options or SARs may have a
term of more than ten years. The options and SARs that
are currently outstanding under the 1999 Plan generally
vest over a one to four year period and expire ten years
from the date of the grant. Our shareholders approved the
1999 Plan in May 1999, and the plan as amended in 2003
and again in 2008. The performance measures of the 1999
Plan were re-approved by our shareholders in May 2013.

What are the key features of the 1997 plan?

The 1997 Plan provides for the issuance of up to 90,000,000
shares of stock. Effective January 1, 2002, only restricted
shares could be issued under this plan. This plan is utilized
with respect to payouts on shares from our deferral plans

and was originally approved by PepsiCo, Inc. as the sole
shareholder of the Company in 1997, prior to the spin-off
of the Company from PepsiCo, Inc. on October 6, 1997.

What are the key features of the sharepower plan?

The SharePower Plan provides for the issuance of up to
28,000,000 shares of stock. The SharePower Plan allows
us to award non-qualified stock options, SARs, restricted
stock and restricted stock units. Employees, other than
executive officers, are eligible to receive awards under the
SharePower Plan. The SharePower Plan is administered
by the Committee. The exercise price of a stock option
or SAR grant under the SharePower Plan may not be less

than the closing price of our stock on the date of the grant
and no option or SAR may have a term of more than ten
years. The options that are currently outstanding under
the SharePower Plan generally vest over a one to four year
period beginning on the date of grant. The SharePower
Plan was originally approved by PepsiCo, Inc. as the sole
shareholder of the Company in 1997, prior to the spin-off
of the Company from PepsiCo, Inc. on October 6, 1997.

What are the key features of the RGm plan?

The RGM Plan provides for the issuance of up to 30,000,000
shares of common stock at a price equal to or greater than
the closing price of our stock on the date of grant. The RGM
Plan allows us to award non-qualified stock options, SARs,
restricted stock and RSUs. Employees, other than executive
officers, are eligible to receive awards under the RGM Plan.
The purpose of the RGM Plan is (i) to give restaurant general
managers (“RGMs”) the opportunity to become owners of
stock, (ii) to align the interests of RGMs with those of YUM’s
other shareholders, (iii) to emphasize that the RGM is YUM’s
#1 leader, and (iv) to reward the performance of RGMs. In
addition, the Plan provides incentives to Area Coaches,

Franchise Business Leaders and other supervisory field
operation positions that support RGMs and have profit and
loss responsibilities within a defined region or area. While
all non-executive officer employees are eligible to receive
awards under the RGM plan, all awards granted have been
to RGMs or their direct supervisors in the field. Grants to
RGMs generally have four year vesting and expire after ten
years. The RGM Plan is administered by the Committee,
and the Committee has delegated its responsibilities to the
Chief People Officer of the Company. The Board of Directors
approved the RGM Plan on January 20, 1998.

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementauDit committEE REpoRt

Who serves on the audit committee of the Board of Directors?

The members of the Audit Committee are Mirian Graddick-
Weir, J. David Grissom, Bonnie Hill, Jonathan S. Linen and
Thomas C. Nelson, Chair.

the Committee, is qualified as an audit committee financial
expert within the meaning of SEC regulations. The Board
has also determined that Mr. Nelson has accounting and
related financial management expertise within the meaning
of the listing standards of the NYSE and that each member
is financially literate within the meaning of the NYSE listing
standards.

What document governs the activities of the audit committee?

The Audit Committee operates under a written charter
adopted by the Board of Directors. The Committee’s
responsibilities are set forth in this charter, which was
amended and restated effective November 22, 2013. The
charter is reviewed by management at least annually, and

any recommended changes are presented to the Audit
Committee for review and approval. The charter is available
on our Web site at www.yum.com/investors/governance/
charters.asp.

What are the responsibilities of the audit committee?

The Audit Committee assists the Board in fulfilling its
responsibilities for general oversight of the integrity of
the Company’s financial statements, the adequacy of the
Company’s system of internal controls and procedures
and disclosure controls and procedures, the Company’s
risk management, the Company’s compliance with legal
and regulatory requirements, the independent auditors’
qualifications and independence and the performance of
the Company’s internal audit function and independent
auditors. The Committee has sole authority over the selection
of the Company’s independent auditors and manages the
Company’s relationship with its independent auditors (who
report directly to the Committee). The Committee has the
authority to obtain advice and assistance from outside legal,
accounting or other advisors as the Committee deems
necessary to carry out its duties and receive appropriate
funding, as determined by the Committee, from the Company
for such advice and assistance.

The Committee met 9 times during 2013. The Committee
schedules its meetings with a view to ensuring that it devotes
appropriate attention to all of its tasks. The Committee’s
meetings generally include private sessions with the
Company’s independent auditors and with the Company’s
internal auditors, in each case without the presence of the
Company’s management, as well as executive sessions

consisting of only Committee members. In addition to the
scheduled meetings, senior management confers with
the Committee or its Chair from time to time, as senior
management deems advisable or appropriate, in connection
with issues or concerns that arise throughout the year.

Management is responsible for the Company’s financial
reporting process, including its system of internal control
over financial reporting, and for the preparation of
consolidated financial statements in accordance with
accounting principles generally accepted in the U.S. The
Company’s independent auditors are responsible for
auditing those financial statements in accordance with
professional standards and expressing an opinion as to
their material conformity with U.S. generally accepted
accounting principles and for auditing the effectiveness
of the Company’s internal control over financial reporting.
The Committee’s responsibility is to monitor and review
the Company’s financial reporting process and discuss
management’s report on the Company’s internal control
over financial reporting. It is not the Committee’s duty or
responsibility to conduct audits or accounting reviews or
procedures. The Committee has relied, without independent
verification, on management’s representations that the
financial statements have been prepared with integrity and
objectivity and in conformity with accounting principles

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementauDit committEE REpoRt

generally accepted in the U.S. and that the Company’s
internal control over financial reporting is effective. The
Committee has also relied, without independent verification,

on the opinion of the independent auditors included in their
report regarding the Company’s financial statements and
effectiveness of internal control over financial reporting.

What matters have members of the audit committee discussed with management
and the independent auditors?

As part of its oversight of the Company’s financial statements,
the Committee reviews and discusses with both management
and the Company’s independent auditors all annual and
quarterly financial statements prior to their issuance. During
2013, management advised the Committee that each set
of financial statements reviewed had been prepared in
accordance with accounting principles generally accepted
in the U.S., and reviewed significant accounting and
disclosure issues with the Committee. These reviews included
discussions with the independent auditors of matters required
to be discussed pursuant to Public Company Accounting
Oversight Board (“PCAOB”) Auditing Standard No. 16
(Communication with Audit Committees), including the quality
(not merely the acceptability) of the Company’s accounting
principles, the reasonableness of significant judgments,
the clarity of disclosures in the financial statements and
disclosures related to critical accounting practices. The
Committee has also discussed with KPMG LLP matters
relating to its independence, including a review of audit and
non-audit fees and the written disclosures and letter received
from KPMG LLP required by applicable requirements of

the PCAOB regarding KPMG LLP’s communications with
the Committee concerning independence. The Committee
also considered whether non-audit services provided by the
independent auditors are compatible with the independent
auditors’ independence. The Committee also received
regular updates, and written summaries as required by the
PCAOB rules (for tax and other services), on the amount
of fees and scope of audit, audit-related, tax and other
services provided.

In addition, the Committee reviewed key initiatives and
programs aimed at strengthening the effectiveness of the
Company’s internal and disclosure control structure. As part of
this process, the Committee continued to monitor the scope
and adequacy of the Company’s internal auditing program,
reviewing staffing levels and steps taken to implement
recommended improvements in internal procedures and
controls. The Committee also reviews and discusses legal
and compliance matters with management, and, as necessary
or advisable, the Company’s independent auditors.

Has the audit committee made a recommendation regarding the audited financial
statements for fiscal 2013?

Based on the Committee’s discussions with management
and the independent auditors and the Committee’s review
of the representations of management and the report of the
independent auditors to the Board of Directors, and subject
to the limitations on the Committee’s role and responsibilities

referred to above and in the Audit Committee Charter, the
Committee recommended to the Board of Directors that
it include the audited consolidated financial statements in
the Company’s Annual Report on Form 10-K for the fiscal
year ended December 28, 2013 for filing with the SEC.

Who prepared this report?

This report has been furnished by the members of the Audit Committee:

Thomas C. Nelson, Chairperson
Mirian M. Graddick-Weir
J. David Grissom

Bonnie G. Hill
Jonathan S. Linen

YUM! BRANDS, INC. - 2014 Proxy StatementProxy Statement
aDDitionaL inFoRmation

Who pays the expenses incurred in connection with the solicitation of proxies?

Expenses in connection with the solicitation of proxies will
be paid by us. Proxies are being solicited principally by
mail, by telephone and through the Internet. In addition, our
directors, officers and regular employees, without additional

compensation, may solicit proxies personally, by e-mail,
telephone, fax or special letter. We will reimburse brokerage
firms and others for their expenses in forwarding proxy
materials to the beneficial owners of our shares.

How may i elect to receive shareholder materials electronically and discontinue my
receipt of paper copies?

YUM shareholders with shares registered directly in their
name who received shareholder materials in the mail may
elect to receive future annual reports and proxy statements
from us and to vote their shares through the Internet instead
of receiving copies through the mail. We are offering this
service to provide shareholders with added convenience,
to reduce our environmental impact and to reduce Annual
Report printing and mailing costs.

To take advantage of this option, shareholders must
subscribe to one of the various commercial services that
offer access to the Internet. Costs normally associated with
electronic access, such as usage and telephone charges,
will be borne by the shareholder.

To elect this option, go to www.amstock.com, click on
Shareholder Account Access, log in and locate the option
to receive Company mailing via e-mail. Shareholders who
elect this option will be notified by mail how to access the
proxy materials and how to vote their shares on the Internet
or by phone.

If you consent to receive future proxy materials electronically,
your consent will remain in effect unless it is withdrawn by
writing our Transfer Agent, American Stock Transfer and Trust
Company, LLC, 59 Maiden Lane, New York, NY 10038 or by
logging onto our Transfer Agent’s website at www.amstock.com
and following the applicable instructions. Also, while this
consent is in effect, if you decide you would like to receive a
hard copy of the proxy materials, you may call, write or e-mail
American Stock Transfer and Trust Company, LLC.

i share an address with another shareholder and we received only one paper copy
of the proxy materials. How may i obtain an additional copy of the proxy materials?

The Company has adopted a procedure called
“householding” which has been approved by the SEC. The
Company and some brokers household proxy materials,
delivering a single Notice and, if applicable, this proxy
statement and Annual Report, to multiple shareholders
sharing an address unless contrary instructions have been
received from the affected shareholders or they participate
in electronic delivery of proxy materials. Shareholders who
participate in householding will continue to access and
receive separate proxy cards. This process will help reduce
our printing and postage fees, as well as save natural

resources. If at any time you no longer wish to participate
in householding and would prefer to receive a separate
proxy statement, or if you are receiving multiple copies of
the proxy statement and wish to receive only one, please
notify your broker if your shares are held in a brokerage
account or us if you hold registered shares. You can notify
us by sending a written request to YUM! Brands, Inc.,
Investor Relations, 1441 Gardiner Lane, Louisville, KY 40213
or by calling Investor Relations at 1 (888) 298-6986 or by
sending an e-mail to yum.investor@yum.com.

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementaDDitionaL inFoRmation

may i propose actions for consideration at next year’s annual meeting
of shareholders or nominate individuals to serve as directors?

Under the rules of the SEC, if a shareholder wants us to
include a proposal in our proxy statement and proxy card for
presentation at our 2015 Annual Meeting of Shareholders, the
proposal must be received by us at our principal executive
offices at YUM! Brands, Inc., 1441 Gardiner Lane, Louisville,
Kentucky 40213 by November 22, 2014. The proposal
should be sent to the attention of the Corporate Secretary.

following the earlier of the date of mailing of the notice
of the meeting or the public disclosure of the date of the
meeting. Our Annual Meeting of Shareholders is generally
held on the third Thursday of May. Assuming that our 2015
Annual Meeting is held on schedule, we must receive notice
of your intention to introduce a nomination or other item of
business at that meeting by January 31, 2015.

Under our bylaws, certain procedures are provided that a
shareholder must follow to nominate persons for election as
directors or to introduce an item of business at an Annual
Meeting of Shareholders that is not included in our proxy
statement. These procedures provide that nominations
for director nominees and/or an item of business to be
introduced at an Annual Meeting of Shareholders must
be submitted in writing to our Corporate Secretary at our
principal executive offices and you must include information
set forth in our bylaws. We must receive the notice of your
intention to introduce a nomination or to propose an item
of business at our 2015 Annual Meeting no later than the
date specified in our bylaws. If the 2015 Annual Meeting is
not held within 30 days before or after the anniversary of
the date of this year’s Annual Meeting, then the nomination
or item of business must be received by the tenth day

The Board is not aware of any matters that are expected
to come before the 2014 Annual Meeting other than those
referred to in this proxy statement. If any other matter should
come before the Annual Meeting, the individuals named on
the form of proxy intend to vote the proxies in accordance
with their best judgment.

The chairman of the Annual Meeting may refuse to allow
the transaction of any business, or to acknowledge the
nomination of any person, not made in compliance with
the foregoing procedures.

Bylaw Provisions. You may contact YUM’s Corporate
Secretary at the address mentioned above for a copy of
the relevant bylaw provisions regarding the requirements
for making shareholder proposals and nominating director
candidates.

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementAppendix A YUM! Brands, Inc.
Executive Incentive
Compensation Plan

Section 1 General

1.1 Purpose. The purpose of the Yum! Brands, Inc.
Executive Incentive Plan (the “Plan”) is to promote
the interests of Yum! Brands, Inc. (the “Company” or
“Yum”) and its shareholders by (i) motivating executives,
by means of performance-related incentives, to
achieve financial goals; (ii) attracting and retaining
executives of outstanding ability; (iii) strengthening the
Company’s capability to develop, maintain and direct a
competent executive staff; (iv) providing annual incentive
compensation opportunities which are competitive with
those of other major corporations; and (v) enabling
executives to participate in the growth and financial
success of the Company.

Section 2 Awards

2.1 Grant of Awards.

(a) For any Performance Period, the Committee shall
determine and designate those Eligible Employees
(if any) who shall be granted Awards for the period,
and shall establish, with respect to each Award, (i)
a Target Amount, expressed as a percentage of the
recipient’s base salary for such Performance Period;
(ii) the performance goal(s) for the Performance Period
with respect to the Award; (iii) the payments to be
earned with respect to various levels of achievement
of the performance goal(s) for the Performance Period;
and (iv) whether the Award is intended to satisfy the
requirements for Performance-Based Compensation. For
any Performance Period for which Awards are granted,
the Committee shall create the Award Schedule, and
the determinations required for Awards intended to
be Performance-Compensation shall be made at the
time necessary to comply with such requirements.
The grant of an Award to any Eligible Employee for
any Performance Period shall not bestow upon such
Eligible Employee the right to receive an Award for any
other Performance Period.

(b) The performance goal(s) to be established with respect
to the grant of any Awards shall be based upon on

1.2 Participation. Subject to the terms and conditions of
the Plan, the Committee shall determine and designate,
from time to time, from among the Eligible Employees,
those persons who will be granted one or more Awards
under the Plan, and thereby become “Participants” in
the Plan.

1.3 Definitions. Capitalized terms in the Plan shall be
defined as set forth in the Plan (including the definition
provisions of Section 7 of the Plan).

any one or more of the following measures: cash flow,
earnings per share, return on operating assets, return
on equity, operating profit, net income, revenue growth,
Company or system sales, shareholder return, gross
margin management, market share improvement,
market value added, restaurant development, customer
satisfaction, economic value added, operating income,
earnings before interest and taxes, earnings before
interest, taxes, depreciation and amortization, return
on invested capital and operating income margin
percentage. Such goals may be particular to a line of
business, Subsidiary, or other unit or may be based
on the Company or franchise system generally.

2.2 Determination of Award Amount. Payment with respect
to Awards for each Participant for a Performance Period
shall be determined in accordance with the Award
Schedule established by the Committee, subject to
the following:

(a) Prior to the payment with respect to any Award
designated as intended to satisfy the requirements
for Performance-Based Compensation, the Committee
shall certify the attainment of the performance goal(s)
and any other material terms.

A-1

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementAPPenDix

(b) In the sole discretion of the Committee, the Award for
each Participant may be limited to the Participant’s
Target Amount multiplied by the percent attainment
(determined in accordance with the applicable Award
Schedule), subject to the following:

(i) Subject to Section 3 and the provisions of this
subsection 2.2, the Committee may adjust such
Award for individual performance on the basis
of such quantitative and qualitative performance
measures and evaluations as it deems appropriate.
The Committee may make such adjustments as it
deems appropriate in the case of any Participant
whose position with the Company has changed
during the applicable Performance Period.

(ii) The Committee shall have the discretion to adjust
performance goals and the methodology used
to measure the determination of the degree of
attainment of such goals; provided, however, that, to
the extent required by the requirements applicable
to Performance-Based Compensation, any Award
designated as intended to satisfy the requirements
for Performance-Based Compensation may not be
adjusted under this paragraph (b) or otherwise in
a manner that increases the value of such Award.
Except as otherwise provided by the Committee,
the Committee shall retain the discretion to adjust
such Awards in a manner that does not increase
such Awards.

(c) Notwithstanding any other provision of the Plan, in no
event will a Participant become eligible for payment for an
Award for any calendar year in excess of $10,000,000.

(d) No segregation of any moneys or the creation of any
trust or the making of any special deposit shall be
required in connection with any Awards made or to
be made under the Plan.

2.3 Payment of Awards. Subject to Sections 2.5 and 3, the
amount earned with respect to any Award shall be paid
in cash at such time as is determined by the Committee;
provided, however, that unless otherwise provided by
the Committee, such payment shall be made no later
than the fifteenth day of the third month of the calendar
year following the calendar year in which the applicable
Performance Period ends. If a Participant to whom
an Award has been made dies prior to the payment
of the Award, such payment shall be delivered to the
Participant’s legal representative or to such other person
or persons as shall be determined by the Committee.
The Company shall have the right to deduct from all
amounts payable under the Plan any taxes required
by law to be withheld with respect thereto; provided,

however, that to the extent provided by the Committee,
any payment under the Plan may be deferred and to
the extent deferred, may be credited with an interest
or earnings factor as determined by the Committee.

2.4 Return of Overpayments. If the amount paid with
respect to an Award granted after December 31,
2008 is based on the attainment of a level of objective
performance goals that is later determined to have been
inaccurate, such inaccuracy was caused by misconduct
by an employee of the Company or a Subsidiary, and
as a result the amount paid with respect to the Award
is greater than it should have been, then:

(1) The Participant (regardless of whether then employed)
whose misconduct caused the inaccuracy will be
required to repay the excess.

(2) The Committee administering the Plan may require
an active or former Participant (regardless of whether
then employed) to repay the excess previously received
by that Participant if the Committee concludes that
the repayment is necessary to prevent the Participant
from unfairly benefiting from the inaccuracy. However,
repayment under this paragraph (2) shall apply to an
active or former Participant only if the Committee
reasonably determines that, prior to the time the amount
was paid (or, if payment of the amount is electively
deferred by the Participant, at the time the amount
would have been paid in the absence of the deferral),
such Participant knew or should have known that
the amount was greater than it should have been
by reason of the inaccuracy. Further, the amount to
be repaid by the Participant may not be greater than
the excess of (i) the amount paid to the Participant
over (ii) the amount that would have been paid to a
Participant in the absence of the inaccuracy, provided
that, in determining the amount under this clause (ii), the
Committee may take into account only the inaccuracy
of which the Participant knew or should have known,
and which the Participant knew or should have known
was caused by misconduct.

Instead of (or in addition to) requiring repayment, the
Committee may adjust a Participant’s future compensation
and the Company and/or Subsidiary shall be entitled to set-
off against the amount of any such gain any amount owed
to the Participant by the Company and/or Subsidiary. For
this purpose, the term “misconduct” means fraudulent or
illegal conduct or omission that is knowing or intentional.
However, the foregoing provisions of this subsection 2.4
shall not apply to any reductions in Awards made after a
Change in Control (as defined in the Yum! Brands, Inc.
Long Term Incentive Plan) to the extent that Awards were
granted before a Change in Control.

A-2

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementAPPenDix

2.5 Termination of employment. Except to the extent
otherwise provided by the Committee, if a Participant’s
Date of Termination with respect to any Award occurs
prior to the last day of the Performance Period for the
Award, then, except in the case of death, disability or
normal retirement (determined in accordance with the
qualified retirement plans of the Company) or except
as provided in Section 3, the Participant shall forfeit
the Award. Except to the extent otherwise provided by
the Committee, if a Participant’s Date of Termination
due to the death or disability occurs prior to the last
day of the Performance Period for the Award, then the
amount earned with respect to any such Award for the
applicable Performance Period shall be determined by

the Committee in its sole discretion and shall be paid
in cash as soon as administratively possible following
such Date of Termination; provided, however, that
such payment shall be made no later than the fifteenth
day of the third month of the calendar year following
the calendar year in which the Date of Termination
occurs. Except to the extent otherwise provided by
the Committee, if a Participant’s Date of Termination
due to the retirement of the Participant occurs prior to
the last day of the Performance Period for the Award,
then the amount earned with respect to any such
Award for the applicable Performance Period shall be
determined in accordance with Section 2.2 and paid
out at the time specified in Section 2.3.

Section 3 Change in Control Benefits on Change in Control

Except to the extent otherwise provided by the Committee,
within ten (10) business days following the occurrence of
a Change in Control (as defined in the Yum! Brands, Inc.
Long Term Incentive Plan), each individual who has been
granted an Award pursuant to the Plan shall be paid an
amount equal to (I) to the greater of (A) the Participant’s
target award for the period in which the Change in Control
occurs and (B) the award the Participant would have earned
for such period, assuming continued achievement of the
relevant performance goals at the rate achieved as of the
date of the Change in Control, multiplied by (II) a fraction the
numerator of which is the number of days in the Performance
Period which have elapsed as of the Change in Control,
and the denominator of which is the number of days in the

Performance Period. Any former Participant in the Plan
who was granted an Award pursuant to the Plan for the
period in which the Change in Control occurs and whose
employment with the Company was involuntarily terminated
(other than for cause) during a Potential Change in Control
(as defined in the Yum! Brands, Inc. Long Term Incentive
Plan) and within one year preceding the occurrence of a
Change in Control shall likewise be paid the amount of
such annual incentive award as if Yum had fully achieved
the applicable performance target(s) for the Performance
Period in which the Change in Control occurs paid within
ten (10) business days following the occurrence of the
applicable Change in Control.

Section 4 Miscellaneous

4.1. Transferability. Any payment to which a Participant may
be entitled under the Plan shall be free from the control
or interference of any creditor of such Participant and
shall not be subject to attachment or susceptible of
anticipation or alienation. The interest of a Participant
shall not be transferable except by will or the laws of
descent and distribution.

4.2. no Right To Participate; employment. Neither the
adoption of the Plan nor any action of the Committee
shall be deemed to give any Eligible Employee any
right to be designated as a Participant under the Plan.
Further, nothing contained in the Plan, nor any action
by the Committee or any other person hereunder, shall
be deemed to confer upon any Eligible Employee any

right of continued employment with the Company or any
Subsidiary or Affiliate or to limit or diminish in any way
the right of the Company or any Subsidiary or Affiliate
to terminate his or her employment at any time with or
without cause.

4.3. nonexclusivity of the Plan. This Plan is not intended
to and shall not preclude the Board from adopting,
continuing, amending or terminating such additional
compensation arrangements as it deems desirable for
Participants under this Plan, including, without limitation,
any thrift, savings, investment, stock purchase, stock
option, profit sharing, pension, retirement, insurance
or other incentive plan.

A-3

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementAPPenDix

Section 5 Committee

5.1. Administration. The authority to control and manage the
operation and administration of the Plan shall be vested
in a committee (the “Committee”) in accordance with
this subsection 5.1. The Committee shall be selected
by the Board, and shall consist solely of two or more
non-employee members of the Board.

5.2. Powers of Committee. The Committee’s administration

of the Plan shall be subject to the following:

(a) Subject to the provisions of the Plan, the Committee will
have the authority and discretion to select from among
the Eligible Employees those persons who shall receive
Awards, to determine the time or times of payment with
respect to the Awards, to establish the terms, conditions,
performance goals, restrictions, and other provisions of
such Awards, and (subject to the restrictions imposed
by Section 6) to cancel or suspend Awards.

(b) The Committee will have the authority and discretion to
interpret the Plan, to establish, amend, and rescind any
rules and regulations relating to the Plan, to determine
the terms and provisions of any Award made pursuant
to the Plan, and to make all other determinations that
may be necessary or advisable for the administration
of the Plan.

(c) Any interpretation of the Plan by the Committee and any
decision made by it under the Plan is final and binding
on all persons.

(d)

In controlling and managing the operation and
administration of the Plan, the Committee shall take
action in a manner that conforms to the articles and
by-laws of the Company, and applicable state corporate
law.

Section 6 Amendment and Termination

5.3. Delegation by Committee. Except to the extent
prohibited by applicable law and except as may
otherwise be required for Awards intended to be
Performance-Based Compensation, the Committee
may allocate all or any portion of its responsibilities
and powers to any one or more of its members and
may delegate all or any part of its responsibilities and
powers to any person or persons selected by it. Any
such allocation or delegation may be revoked by the
Committee at any time. Until action to the contrary is
taken by the Board or Committee, the Committee’s
authority with respect to matters concerning Participants
below the Partners Council or Executive Officer level is
delegated to the Chief Executive Officer and the Chief
People Officer of the Company.

5.4. information to be Furnished to Committee.The
Company, the Subsidiaries, and the Affiliates shall
furnish the Committee with such data and information
as it determines may be required for it to discharge its
duties. The records of the Company, the Subsidiaries,
and the Affiliates as to an employee’s or Participant’s
employment, termination of employment, leave of
absence, reemployment and compensation shall be
conclusive on all persons unless determined to be
incorrect. Participants and other persons entitled to
benefits under the Plan must furnish the Committee
such evidence, data or information as the Committee
considers desirable to carry out the terms of the Plan.

The Board may, at any time, amend or terminate the Plan,
provided that no amendment or termination may, in the absence
of written consent to the change by the affected Participant
(or, if the Participant is not then living, the affected beneficiary),

adversely affect the rights of any Participant or beneficiary
under any Award granted under the Plan prior to the date
such amendment is adopted by the Board.

Section 7 Defined Terms

In addition to the other definitions contained herein, the
following definitions shall apply for purposes of the Plan:

(a) “Affiliate” means any corporation or other entity which
is not a Subsidiary but as to which the Company
possesses a direct or indirect ownership interest and
has power to exercise management control.

(b) “Award” with respect to a Performance Period means
a right to receive cash payments that are contingent
on the achievement of performance goals determined
in accordance with Section 2.

A-4

YUM! BRANDS, INC. - 2014 Proxy StatementProxy Statementthe performance goals and the amounts (or the formula
for determining the amounts) of any payments earned
pursuant to the Awards granted for that period.

(d) “Beneficial Owner” shall have the meaning set forth
in Rule 13d-3 under the Exchange Act of 1934, as
amended from time to time, except that a Person
shall not be deemed to be the Beneficial Owner of any
securities which are properly filed on a Form 13-G.

(i)

(j)

(e)

“Board” means the Board of Directors of the Company.

(k)

(f) A Participant’s “Date of Termination” with respect to any
Award shall be the first day occurring on or after the
Grant Date for the Award on which the Participant is
not employed by the Company, any Subsidiary, or any
Affiliate, regardless of the reason for the termination of
employment; provided that a termination of employment
shall not be deemed to occur by reason of a transfer of
the Participant between the Company and a Subsidiary
or an Affiliate, between a Subsidiary and an Affiliate,
or between two Subsidiaries or Affiliates; and further
provided that the Participant’s employment shall not
be considered terminated while the Participant is on a
leave of absence from the Company, a Subsidiary, or an
Affiliate approved by the Participant’s employer. If, as
a result of a sale or other transaction, the Participant’s
employer ceases to be a Subsidiary or Affiliate (and
the Participant’s employer is or becomes an entity that
is separate from the Company), and the Participant
is not, at the end of the 30-day period following the
transaction, employed by the Company or an entity that
is then a Subsidiary or Affiliate, then the occurrence of
such transaction shall be treated as the Participant’s
Date of Termination caused by the Participant being
discharged by the employer.

(g) “Eligible Employee” means Executive Officers or other
members of senior management of the Company.

(h) “Grant Date” with respect to any Award for any Participant
means the date on which the Award is granted to the
Participant in accordance with subsection 2.1.

APPenDix

“Participant” means an Eligible Employee who is selected
by the Committee to receive one or more Awards under
the Plan.

“Performance-Based Compensation” means amounts
satisfying the applicable requirements imposed by
section 162(m) of the Internal Revenue Code of 1986,
as amended, and the regulations thereunder, with respect
to that term.

“Performance Period” with respect to any Award means
the period over which achievement of performance goals
is to be measured, as established by the Committee at
or prior to the Grant Date of the Award.

“Person” shall have the meaning given in Section 3(a)(9)
of the Exchange Act of 1934, as amended, as modified
and used in Section 13(d) and 14(d) thereof, except that
such term shall not include (i) the Company or any of its
Affiliates, (ii) a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or any
of its Subsidiaries, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, or
(iv) a corporation owned, directly or indirectly, by the
shareholders of the Company in substantially the same
proportions as their ownership of stock of the Company.

(l)

(m) “Subsidiary” means any corporation partnership, joint
venture or other entity during any period in which at
least a fifty percent voting or profits interest is owned,
directly or indirectly, by the Company (or by any entity
that is a successor to the Company), and any other
business venture designated by the Committee in which
the Company (or any entity that is a successor to the
Company) has a significant interest, as determined in
the discretion of the Committee.

(n)

“Target Amount” means the percentage of a Participant’s
base salary for a Performance Period as established by
the Committee pursuant to subsection 2.1.

A-5

YUM! BRANDS, INC. - 2014 Proxy StatementProxy StatementUNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

for the fiscal year ended December 28, 2013
OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

for the transition period from ______________ to ______________

Commission file number 1-13163

YUM! BRANDS, INC.

(Exact name of Registrant as specified in its charter)

NORTH CAROLINA
(State or other jurisdiction of incorporation or organization)
1441 Gardiner Lane, Louisville, Kentucky
(Address of principal executive offices)

13-3951308
(I.R.S. Employer Identification No.)
40213
(Zip Code)

(502) 874-8300
(Registrant’s telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each class
Common Stock, no par value

Name of Each Exchange on Which Registered
New York Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE

Indicate by check mark

YES

•• if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

•• if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
•• whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
•• whether the registrant has submitted electronically and posted on its corporate Website, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during
the preceding 12 months (or for such shorter period that the registrant was required to submit and post
such files).

•• if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

•• whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions

of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

•• whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

The aggregate market value of the voting stock (which consists solely of shares of Common Stock) held by non-affiliates of the registrant
as of June 15, 2013 computed by reference to the closing price of the registrant’s Common Stock on the New York Stock Exchange
Composite Tape on such date was approximately $31,700,000,000. All executive officers and directors of the registrant have been
deemed, solely for the purpose of the foregoing calculation, to be “affiliates” of the registrant. The number of shares outstanding of the
registrant’s Common Stock as of February 11, 2014 was 442,931,286 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive proxy statement furnished to shareholders of the registrant in connection with the annual meeting of shareholders
to be held on May 1, 2014 are incorporated by reference into Part III.

Table of Contents

PART I

Business ...................................................................................................................................3
ITEM 1
Risk Factors ..............................................................................................................................6
ITEM 1A
ITEM 1B Unresolved Staff Comments .....................................................................................................9
Properties ................................................................................................................................10
ITEM 2
Legal Proceedings ..................................................................................................................10
ITEM 3
Mine Safety Disclosures .........................................................................................................11
ITEM 4

PART II

ITEM 5

ITEM 6
ITEM 7

Market for the Registrant’s Common Stock, Related Stockholder
Matters and Issuer Purchases of Equity Securities ................................................................12
Selected Financial Data ..........................................................................................................14
Management’s Discussion and Analysis of Financial
Condition and Results of Operations ......................................................................................15
ITEM 7A Quantitative and Qualitative Disclosures About Market Risk .................................................35
Financial Statements and Supplementary Data .....................................................................36
ITEM 8
Changes In and Disagreements with Accountants on Accounting
ITEM 9
and Financial Disclosure .........................................................................................................72
ITEM 9A Controls and Procedures ........................................................................................................72
ITEM 9B Other Information ....................................................................................................................72

PART III

ITEM 10
ITEM 11
ITEM 12

ITEM 13
ITEM 14

PART IV

Directors, Executive Officers and Corporate Governance......................................................73
Executive Compensation ........................................................................................................73
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters ...............................................................................................................73
Certain Relationships and Related Transactions, and Director Independence ......................73
Principal Accountant Fees and Services ................................................................................73

ITEM 15

Exhibits and Financial Statement Schedules..........................................................................74

Forward-Looking Statements

In this Form 10-K, as well as in other written reports and oral statements that we make from time to time, we present “forward-looking statements”
within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
We intend such forward-looking statements to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, and we
are including this statement for purposes of complying with those safe harbor provisions.

Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. These statements often include words
such as “may,” “will,” “estimate,” “intend,” “seek,” “expect,” “project,” “anticipate,” “believe,” “plan” or other similar terminology. These forward-looking
statements are based on current expectations and assumptions and upon data available at the time of the statements and are neither predictions nor
guarantees of future events or circumstances. The forward-looking statements are subject to risks and uncertainties, which may cause actual results
to differ materially from those projected. Factors that could cause our actual results to differ materially from our expectations and forward-looking
statements include (i) the risks and uncertainties described in the Risk Factors included in Part I, Item 1A of this Form 10-K and (ii) the factors described
in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Part II, Item 7 of this Form 10-K. You should not
place undue reliance on forward-looking statements, which speak only as of the date hereof. In making these statements, we are not undertaking to
address or update any of our forward-looking statements set forth herein in future filings or communications regarding our business results.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-KPart I
Item 1 Business

PART I

ItEM 1 Business

YUM! Brands, Inc. (referred to herein as “YUM”, the “Registrant” or the
“Company”), was incorporated under the laws of the state of North
Carolina in 1997. The principal executive offices of YUM are located at
1441 Gardiner Lane, Louisville, Kentucky 40213, and the telephone number
at that location is (502) 874-8300. Our website address is http://yum.com.

YUM, together with its subsidiaries, is referred to in this Form 10-K annual
report (“Form 10-K”) as the Company. The terms “we,” “us” and “our”
are also used in the Form 10-K to refer to the Company. Throughout this
Form 10-K, the terms “restaurants,” “stores” and “units” are used
interchangeably. While YUM! Brands, Inc., referred to as the Company,
does not directly own or operate any restaurants, throughout this document
we may refer to restaurants as being Company-owned.

Financial Information about Operating Segments

As of and through December 28, 2013, YUM consisted of six operating
segments: YUM Restaurants China (“China” or “China Division”), YUM
Restaurants International (“YRI” or “International Division”), Taco Bell U.S.,
KFC U.S., Pizza Hut U.S. and YUM Restaurants India (“India” or “India
Division”). The China Division includes mainland China, and the India
Division includes India, Bangladesh, Mauritius, Nepal and Sri Lanka. YRI
includes the remainder of our international operations.

For financial reporting purposes, management considers the three U.S.
operating segments to be similar and, therefore, has aggregated them into
a single reportable operating segment (“U.S.”). In 2012, our India Division
began being reported as a standalone reporting segment separate from YRI
as a result of changes to our management reporting structure. While our
consolidated results are not impacted, our historical segment information
has been restated to be consistent with the current period presentation. In
December 2011, the Company sold the Long John Silver’s (“LJS”) and A&W
All-American Food Restaurants (“A&W”) brands to key franchisee leaders

and strategic investors in separate transactions. Financial information prior
to these transactions reflects our ownership of these brands.

Operating segment information for the years ended December 28, 2013,
December 29, 2012 and December 31, 2011 for the Company is included
in Management’s Discussion and Analysis of Financial Condition and
Results of Operations (“MD&A”) in Part II, Item 7, pages 15 through 35
and in the related Consolidated Financial Statements in Part II, Item 8,
pages 36 through 71.

In the first quarter of 2014, we will combine our YRI and U.S. businesses
and begin reporting segment information for three global divisions: KFC,
Pizza Hut and Taco Bell. China and India will remain separate reporting
segments due to their strategic importance and growth potential. This
new structure is designed to drive greater global brand focus, enabling
us to more effectively share know-how and accelerate growth. While our
consolidated results will not be impacted, we will restate our historical
segment information during 2014 for consistent presentation.

Narrative Description of Business

General

YUM has over 40,000 restaurants in more than 125 countries and territories.
Primarily through the three concepts of KFC, Pizza Hut and Taco Bell (the
“Concepts”), the Company develops, operates, franchises and licenses a
worldwide system of restaurants which prepare, package and sell a menu
of competitively priced food items. Units are operated by a Concept or
by independent franchisees or licensees under the terms of franchise or
license agreements. Franchisees can range in size from individuals owning
just one restaurant to large publicly traded companies.

The China Division, based in Shanghai, China, comprises approximately
6,200 system restaurants, primarily Company-owned KFCs and Pizza
Huts. In 2013, the China Division recorded revenues of approximately
$6.9 billion and Operating Profit of $777 million. On February 1, 2012, we

acquired a controlling interest in Little Sheep Group Limited (“Little Sheep”),
a casual dining concept headquartered in Inner Mongolia, China. See Note 4
for details. The Company also owns non-controlling interests in Chinese
entities who operate in a manner similar to KFC franchisees and a meat
processing entity that supplies lamb primarily to our recently acquired Little
Sheep business. YRI, based in Plano, Texas, comprises approximately
15,200 system restaurants, primarily franchised KFCs and Pizza Huts,
operating in over 120 countries outside the U.S., China and India. In
2013 YRI recorded revenues of approximately $3.1 billion and Operating
Profit of $760 million. We have approximately 18,100 system restaurants,
primarily franchised restaurants, in the U.S. and recorded revenues of
approximately $3.0 billion and Operating Profit of $684 million in 2013.
The India Division, based in Delhi, India comprises approximately 700
system restaurants. In 2013, India recorded revenues of approximately
$125 million and an Operating Loss of $15 million.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-KPart I
Item 1 Business

restaurant Concepts

taco Bell

Most restaurants in each Concept offer consumers the ability to dine in and/or
carry out food. In addition, Taco Bell and KFC offer a drive-thru option in many
stores. Pizza Hut offers a drive-thru option on a much more limited basis. Pizza
Hut and KFC, on a more limited basis primarily in China, offer delivery service.

Each Concept has proprietary menu items and emphasizes the preparation of food
with high quality ingredients, as well as unique recipes and special seasonings
to provide appealing, tasty, convenient and attractive food at competitive prices.

The franchise programs of the Company are designed to promote consistency
and quality, and the Company is selective in granting franchises. Under
standard franchise agreements, franchisees supply capital – initially by paying
a franchise fee to YUM, purchasing or leasing the land, building, equipment,
signs, seating, inventories and supplies and, over the longer term, by reinvesting
in the business. Franchisees contribute to the Company’s revenues on an
ongoing basis through the payment of royalties based on a percentage of sales.

The Company believes that it is important to maintain strong and open
relationships with its franchisees and their representatives. To this end, the
Company invests a significant amount of time working with the franchisee
community and their representative organizations on key aspects of the
business, including products, equipment, operational improvements and
standards and management techniques.

Following is a brief description of each Concept:

KFC

•• KFC was founded in Corbin, Kentucky by Colonel Harland D. Sanders,
an early developer of the quick service food business and a pioneer of
the restaurant franchise concept. The Colonel perfected his secret blend
of 11 herbs and spices for Kentucky Fried Chicken in 1939 and signed
up his first franchisee in 1952.

•• KFC operates in 118 countries and territories throughout the world. As
of year end 2013, KFC had 4,563 units in China, 9,460 units in YRI,
4,491 units in the U.S. and 361 units in India. Approximately 78 percent
of the China units, 11 percent of the YRI units, 5 percent of the U.S. units
and 47 percent of the India units are Company-owned.

•• KFC restaurants across the world offer fried and non-fried chicken products
such as sandwiches, chicken strips, chicken-on-the-bone and other
chicken products marketed under a variety of names. KFC restaurants
also offer a variety of entrees and side items suited to local preferences
and tastes. Restaurant decor throughout the world is characterized by
the image of the Colonel.

Pizza Hut

•• The first Pizza Hut restaurant was opened in 1958 in Wichita, Kansas,
and within a year, the first franchise unit was opened. Today, Pizza Hut
is the largest restaurant chain in the world specializing in the sale of
ready-to-eat pizza products.

•• Pizza Hut operates in 91 countries and territories throughout the world.
As of year end 2013, Pizza Hut had 1,264 units in China, 5,490 units in
YRI, 7,846 units in the U.S. and 367 units in India. Nearly 100 percent of
the China units and approximately 4 percent of the YRI units, 6 percent
of the U.S. units and 5 percent of the India units are Company-owned.

•• Pizza Hut operates in the delivery, carryout and casual dining segments
around the world. Outside of the U.S., Pizza Hut often uses unique
branding to differentiate these segments.

•• Pizza Hut features a variety of pizzas which are marketed under varying
names. Each of these pizzas is offered with a variety of different toppings
suited to local preferences and tastes. Many Pizza Huts also offer pasta
and chicken wings, including over 4,800 stores offering wings under
the brand WingStreet, primarily in the U.S. Outside the U.S., Pizza Hut
casual dining restaurants offer a variety of core menu products other than
pizza, which are typically suited to local preferences and tastes. Pizza
Hut units feature a distinctive red roof logo on their signage.

•• The first Taco Bell restaurant was opened in 1962 by Glen Bell in Downey,

California, and in 1964, the first Taco Bell franchise was sold.

•• Taco Bell operates in 21 countries and territories throughout the world. As
of year end 2013, there were 5,769 Taco Bell units in the U.S., 279 units in
YRI and 5 units in India. Approximately 15 percent of the U.S. units, none
of the YRI units and 100 percent of the India units are Company-owned.

•• Taco Bell specializes in Mexican-style food products, including various
types of tacos, burritos, quesadillas, salads, nachos and other related
items. Taco Bell units feature a distinctive bell logo on their signage.

restaurant Operations

Through its Concepts, YUM develops, operates, franchises and licenses
a worldwide system of both traditional and non-traditional Quick Service
Restaurants (“QSR”). Traditional units feature dine-in, carryout and, in
some instances, drive-thru or delivery services. Non-traditional units,
which are typically licensed outlets, include express units and kiosks
which have a more limited menu, usually lower sales volumes and operate
in non-traditional locations like malls, airports, gasoline service stations,
train stations, subways, convenience stores, stadiums, amusement parks
and colleges, where a full-scale traditional outlet would not be practical
or efficient.

Restaurant management structure varies by Concept and unit size. Generally,
each Concept-owned restaurant is led by a restaurant general manager
(“RGM”), together with one or more assistant managers, depending on
the operating complexity and sales volume of the restaurant. Most of
the employees work on a part-time basis. Each Concept issues detailed
manuals, which may then be customized to meet local regulations and
customs. These manuals set forth standards and requirements for all
aspects of restaurant operations, including food safety and quality, food
handling and product preparation procedures, equipment maintenance,
facility standards and accounting control procedures. The restaurant
management teams are responsible for the day-to-day operation of each
unit and for ensuring compliance with operating standards. CHAMPS –
which stands for Cleanliness, Hospitality, Accuracy, Maintenance, Product
Quality and Speed of Service – is our proprietary systemwide program
for training, measuring and rewarding employee performance against
key customer measures. CHAMPS is intended to align the operating
processes of our entire system around one core set of standards. RGMs’
efforts, including CHAMPS performance measures, are monitored by Area
Coaches. Area Coaches typically work with approximately six to twelve
restaurants. Various senior operators visit Concept-owned restaurants
from time to time to promote adherence to system standards and mentor
restaurant team members.

Supply and Distribution

The Company’s Concepts, including Concept units operated by its
franchisees, are substantial purchasers of a number of food and paper
products, equipment and other restaurant supplies. The principal items
purchased include chicken, cheese, beef and pork products, paper and
packaging materials. The Company has not experienced any significant
continuous shortages of supplies, and alternative sources for most of
these products are generally available. Prices paid for these supplies
fluctuate. When prices increase, the Concepts may attempt to pass on
such increases to their customers, although there is no assurance that
this can be done practically.

China Division In China, we work with approximately 650 independent
suppliers, mostly China-based, providing a wide range of products. We own
most of the distribution system which includes approximately 20 logistics
centers. We also own a non-controlling interest in a meat processing
facility in Inner Mongolia that supplies meat to our Little Sheep business.

U.S. Division The Company, along with the representatives of the Company’s
KFC, Pizza Hut and Taco Bell franchisee groups, are members in the

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-KRestaurant Supply Chain Solutions, LLC (“RSCS”), formerly known as
the Unified Foodservice Purchasing Co-op, LLC, which is responsible for
purchasing certain restaurant products and equipment in the U.S. The core
mission of the RSCS is to provide the lowest possible sustainable store-
delivered prices for restaurant products and equipment. This arrangement
combines the purchasing power of the Company-owned and franchisee
restaurants in the U.S. which the Company believes leverages the system’s
scale to drive cost savings and effectiveness in the purchasing function.
The Company also believes that the RSCS fosters closer alignment of
interests and a stronger relationship with its franchisee community.

Most food products, paper and packaging supplies, and equipment used
in restaurant operations are distributed to individual restaurant units by
third-party distribution companies. McLane Company, Inc. (“McLane”) is
the exclusive distributor for the majority of items used in Company-owned
restaurants and for a substantial number of franchisee and licensee stores.
The Company entered into an agreement with McLane effective January 1,
2011 relating to distribution to Company-owned restaurants. This agreement
extends through December 31, 2016 and generally restricts Company-
owned restaurants from using alternative distributors for most products.

International and India Divisions Outside China and the U.S., we and our
franchisees use decentralized sourcing and distribution systems involving
many different global, regional, and local suppliers and distributors. In
our YRI markets and India Division, we have approximately 3,000 and
150 suppliers, respectively, including U.S.-based suppliers that export
to many countries.

trademarks and Patents

The Company and its Concepts own numerous registered trademarks and
service marks. The Company believes that many of these marks, including its
Kentucky Fried Chicken®, KFC®, Pizza Hut® and Taco Bell® marks, have
significant value and are materially important to its business. The Company’s
policy is to pursue registration of its important marks whenever feasible and
to oppose vigorously any infringement of its marks.

The use of these marks by franchisees and licensees has been authorized
in our franchise and license agreements. Under current law and with proper
use, the Company’s rights in its marks can generally last indefinitely. The
Company also has certain patents on restaurant equipment which, while
valuable, are not material to its business.

Working Capital

Information about the Company’s working capital is included in MD&A in
Part II, Item 7, pages 15 through 35 and the Consolidated Statements of
Cash Flows in Part II, Item 8, page 40.

Seasonal Operations

The Company does not consider its operations to be seasonal to any
material degree.

Competition

The retail food industry, in which our Concepts compete, is made up of
supermarkets, supercenters, warehouse stores, convenience stores,
coffee shops, snack bars, delicatessens and restaurants (including the
QSR segment), and is intensely competitive with respect to food quality,
price, service, convenience, location and concept. The industry is often
affected by changes in consumer tastes; national, regional or local economic
conditions; currency fluctuations; demographic trends; traffic patterns;
the type, number and location of competing food retailers and products;
and disposable purchasing power. Each of the Concepts competes with
international, national and regional restaurant chains as well as locally-
owned restaurants, not only for customers, but also for management
and hourly personnel, suitable real estate sites and qualified franchisees.

Part I
Item 1 Business

Given the various types and vast number of competitors, our Concepts
do not constitute a significant portion of the retail food industry in terms
of number of system units or system sales, either on a worldwide or
individual country basis.

research and Development (“r&D”)

The Company operates R&D facilities in Shanghai, China (China Division);
Plano, Texas (Pizza Hut U.S. and YRI); Irvine, California (Taco Bell); Louisville,
Kentucky (KFC U.S.) and several other locations outside the U.S. The
Company expensed $31 million, $30 million and $34 million in 2013, 2012
and 2011, respectively, for R&D activities. From time to time, independent
suppliers also conduct research and development activities for the benefit
of the YUM system.

Environmental Matters

The Company is not aware of any federal, state or local environmental laws
or regulations that will materially affect its earnings or competitive position,
or result in material capital expenditures. However, the Company cannot
predict the effect on its operations of possible future environmental legislation
or regulations. During 2013, there were no material capital expenditures
for environmental control facilities and no such material expenditures are
anticipated.

Government regulation

U.S. Division. The Company and its U.S. Division are subject to various
federal, state and local laws affecting its business. Each of the Concepts’
restaurants in the U.S. must comply with licensing and regulation by a
number of governmental authorities, which include health, sanitation,
safety, fire and zoning agencies in the state and/or municipality in which
the restaurant is located. In addition, each Concept must comply with
various state and federal laws that regulate the franchisor/franchisee
relationship. To date, the Company has not been materially adversely
affected by such licensing and regulation or by any difficulty, delay or
failure to obtain required licenses or approvals.

The Company and each Concept are also subject to federal and state laws
governing such matters as immigration, employment and pay practices,
overtime, tip credits and working conditions. The bulk of the Concepts’
employees are paid on an hourly basis. The Company has not been
materially adversely affected by such laws to date.

The Company and each Concept are also subject to federal and state
child labor laws which, among other things, prohibit the use of certain
“hazardous equipment” by employees younger than 18 years of age. The
Company has not been materially adversely affected by such laws to date.

The Company and each Concept are also subject to laws relating to
information security, privacy, cashless payments, consumer credit, protection
and fraud. The Company has not been materially adversely affected by
such laws to date.

The Company and each Concept are also subject to laws relating to
nutritional content, nutritional labeling, product safety and menu labeling. The
Company has not been materially adversely affected by such laws to date.

The Company and each Concept, as applicable, continue to monitor their
facilities for compliance with the Americans with Disabilities Act (“ADA”)
in order to conform to its requirements. Under the ADA, the Company
or the relevant Concept could be required to expend funds to modify its
restaurants to better provide service to, or make reasonable accommodation
for the employment of, disabled persons. The Company has not been
materially adversely affected by such laws to date.

International, China and India Divisions. The Company’s restaurants outside
the U.S. are subject to national and local laws and regulations which are
similar to those affecting U.S. restaurants, including laws and regulations
concerning information security, labor, health, sanitation and safety.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-KPart I
Item 1A Risk Factors

The restaurants outside the U.S. are also subject to tariffs and regulations
on imported commodities and equipment and laws regulating foreign
investment. International compliance with environmental requirements has
not had a material adverse effect on the Company’s results of operations,
capital expenditures or competitive position.

The Company is also subject to anti-bribery and anti-corruption laws and
regulations, which are the focus of increasing enforcement around the world.

See Item 1A “Risk Factors” below for a discussion of risks relating to
federal, state, local and international regulation of our business.

Employees

As of year end 2013, the Company and its Concepts employed approximately
539,000 persons, approximately 86 percent of whom were part-time. The
Company believes that it provides working conditions and compensation
that compare favorably with those of its principal competitors. The majority
of employees are paid on an hourly basis. Some employees are subject to
labor council relationships that vary due to the diverse cultures in which
the Company operates. The Company and its Concepts consider their
employee relations to be good.

Financial Information about Geographic areas

Financial information about our significant geographic areas (China Division, International Division, the U.S. and India) is incorporated herein by reference
from Selected Financial Data in Part II, Item 6, pages 14 and 15; MD&A in Part II, Item 7, pages 15 through 35; and in the related Consolidated Financial
Statements in Part II, Item 8, pages 36 through 71.

available Information

The Company makes available through the Investor Relations section of its
internet website at http://yum.com its annual report on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K and amendments
to those reports filed or furnished pursuant to Section 13(a) or 15(d) of
the Exchange Act, as soon as reasonably practicable after electronically
filing such material with the Securities and Exchange Commission (“SEC”)
at http://www.sec.gov. These reports may also be obtained by visiting
the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC
20549 or by calling the SEC at 1 (800) SEC-0330.

Our Corporate Governance Principles and our Code of Conduct are
also located within the Investor Relations section of the Company’s
website. The reference to the Company’s website address does not
constitute incorporation by reference of the information contained on
the website and should not be considered part of this document. These
documents, as well as our SEC filings, are available in print free of charge
to any shareholder who requests a copy from our Investor Relations
Department.

ItEM 1a risk Factors

You should carefully review the risks described below as they identify
important factors that could cause our actual results to differ materially
from our forward-looking statements and historical trends.

Our significant China operations subject us to
risks that could negatively affect our business.

Food safety and food-borne illness concerns
may have an adverse effect on our business.

Food-borne illnesses, such as E. coli, hepatitis A, trichinosis or salmonella,
and food safety issues, such as food tampering, contamination or
adulteration, have occurred in the past and could occur in the future. Any
report or publicity linking us or one of our Concept restaurants, including
restaurants operated by our Concepts’ franchisees, to instances of food-
borne illness or food safety issues could adversely affect our Concepts’
brands and reputations as well as our revenues and profits and possibly
lead to litigation. If a customer of our Concepts becomes ill from food-borne
illnesses or as a result of food safety issues, restaurants in our system may
be temporarily closed, which would decrease our revenues. In addition,
instances or allegations of food-borne illness or food safety issues, real or
perceived, involving our restaurants, restaurants of competitors, suppliers
or distributors (regardless of whether we use or have used those suppliers
or distributors), or otherwise involving the types of food served at our
restaurants, could result in negative publicity that could adversely affect
our sales. The occurrence of food-borne illnesses or food safety issues
could also adversely affect the price and availability of affected ingredients,
which could result in disruptions in our supply chain and/or lower margins
for us and our Concepts’ franchisees.

A significant and growing portion of our restaurants are located, and our
revenues and profits originate, in China. As a consequence, our financial
results are increasingly dependent on our results in China, and our business
is increasingly exposed to risks there. These risks include changes in
economic conditions (including consumer spending, unemployment levels
and wage and commodity inflation), income and non-income based tax
rates and laws and consumer preferences, as well as changes in the
regulatory environment and increased competition. In addition, our results
of operations in China and the value of our Chinese assets are affected by
fluctuations in currency exchange rates, which may adversely affect reported
earnings. There can be no assurance as to the future effect of any such
changes on our results of operations, financial condition or cash flows.

In addition, any significant or prolonged deterioration in U.S.-China
relations could adversely affect our China business. Certain risks and
uncertainties of doing business in China are solely within the control of
the Chinese government, and Chinese law regulates the scope of our
foreign investments and business conducted within China. There are
also uncertainties regarding the interpretation and application of laws and
regulations and the enforceability of intellectual property and contract rights
in China. If we were unable to enforce our intellectual property or contract
rights in China, our business would be adversely impacted.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-KPart I
Item 1A Risk Factors

Health concerns arising from outbreaks of
viruses or other diseases may have an adverse
effect on our business.

Shortages or interruptions in the availability and
delivery of food and other supplies may increase
costs or reduce revenues.

Outbreaks of avian flu occur from time to time around the world, including
in China where a significant portion of our profits and revenues originate. It
is possible that outbreaks in China and elsewhere could reach pandemic
levels. Public concern over avian flu generally may cause fear about the
consumption of chicken, eggs and other products derived from poultry,
which could cause customers to consume less poultry and related products.
This would likely result in lower revenues and profits. Avian flu outbreaks
could also adversely affect the price and availability of poultry, which could
negatively impact our profit margins and revenues. Widespread outbreaks
could also affect our ability to attract and retain employees.

Furthermore, other viruses such as H1N1 or “swine flu” may be transmitted
through human contact, and the risk of contracting viruses could cause
employees or guests to avoid gathering in public places, which could
adversely affect restaurant guest traffic or the ability to adequately staff
restaurants. We could also be adversely affected if jurisdictions in which we
have restaurants impose mandatory closures, seek voluntary closures or
impose restrictions on operations of restaurants. Even if such measures are
not implemented and a virus or other disease does not spread significantly,
the perceived risk of infection or health risk may affect our business.

Our foreign operations subject us to risks that
could negatively affect our business.

A significant portion of our Concepts’ restaurants are operated in countries
and territories outside of the U.S., and we intend to continue expansion
of our international operations. As a result, our business is increasingly
exposed to risks inherent in foreign operations. These risks, which can
vary substantially by country, include political instability, corruption,
social and ethnic unrest, changes in economic conditions (including
consumer spending, unemployment levels and wage and commodity
inflation), the regulatory environment, income and non-income based
tax rates and laws and consumer preferences as well as changes in the
laws and policies that govern foreign investment in countries where our
restaurants are operated.

In addition, our results of operations and the value of our foreign assets are
affected by fluctuations in currency exchange rates, which may adversely
affect reported earnings. More specifically, an increase in the value of the
U.S. Dollar relative to other currencies, such as the Australian Dollar, the
British Pound, the Canadian Dollar and the Euro, as well as currencies in
certain emerging markets, could have an adverse effect on our reported
earnings. There can be no assurance as to the future effect of any such
changes on our results of operations, financial condition or cash flows.

Failure to protect the integrity and security
of personal information of our customers
and employees could result in substantial
costs, expose us to litigation and damage our
reputation.

We receive and maintain certain personal information about our customers
and employees. The use of this information is regulated by applicable law,
as well as by certain third-party contracts. If our security and information
systems are compromised or our employees, franchisees or vendors
fail to comply with these laws and regulations and this information is
obtained by unauthorized persons or used inappropriately, it could result
in liabilities and penalties and could damage our reputation, cause us
to incur substantial costs and result in a loss of customer confidence,
which could adversely affect our restaurant operations and results of
operations and financial condition. Additionally, we could be subject to
litigation, government enforcement actions and private litigation as a
result of any such failure.

The products sold by our Concepts and their franchisees are sourced
from a wide variety of domestic and international suppliers. We are also
dependent upon third parties to make frequent deliveries of food products
and supplies that meet our specifications at competitive prices. Shortages
or interruptions in the supply of food items and other supplies to our
restaurants could adversely affect the availability, quality and cost of items we
buy and the operations of our restaurants. Such shortages or disruptions
could be caused by inclement weather, natural disasters such as floods,
drought and hurricanes, increased demand, problems in production or
distribution, the inability of our vendors to obtain credit, political instability
in the countries in which foreign suppliers and distributors are located, the
financial instability of suppliers and distributors, suppliers’ or distributors’
failure to meet our standards, product quality issues, inflation, other factors
relating to the suppliers and distributors and the countries in which they
are located, food safety warnings or advisories or the prospect of such
pronouncements or other conditions beyond our control. A shortage or
interruption in the availability of certain food products or supplies could
increase costs and limit the availability of products critical to restaurant
operations, which in turn could lead to restaurant closures and/or a decrease
in sales. In addition, failure by a principal distributor for our Concepts and/
or our Concepts’ franchisees to meet its service requirements could lead
to a disruption of service or supply until a new distributor is engaged, and
any disruption could have an adverse effect on our business.

We may not attain our target development goals,
and aggressive development could cannibalize
existing sales.

Our growth strategy depends in large part on our ability to increase our net
restaurant count in markets outside the U.S., especially China and other
emerging markets. The successful development of new units will depend
in large part on our ability and the ability of our Concepts’ franchisees to
open new restaurants and to operate these restaurants on a profitable
basis. We cannot guarantee that we, or our Concepts’ franchisees, will
be able to achieve our expansion goals or that new restaurants will be
operated profitably. Further, there is no assurance that any new restaurant
will produce operating results similar to those of our existing restaurants.
Other risks which could impact our ability to increase our net restaurant
count include prevailing economic conditions and our, or our Concepts’
franchisees’ ability to obtain suitable restaurant locations, negotiate
acceptable lease or purchase terms for the locations, obtain required
permits and approvals in a timely manner, hire and train qualified personnel
and meet construction schedules.

Expansion into target markets could also be affected by our Concepts’
franchisees’ ability to obtain financing to construct and open new restaurants.
If it becomes more difficult or more expensive for our Concepts’ franchisees
to obtain financing to develop new restaurants, the expected growth of
our system could slow and our future revenues and operating cash flows
could be adversely impacted.

In addition, the new restaurants could impact the sales of our existing
restaurants nearby. There can be no assurance that sales cannibalization
will not occur or become more significant in the future as we increase our
presence in existing markets.

Changes in commodity and other operating
costs could adversely affect our results of
operations.

Any increase in certain commodity prices, such as food, supply and
energy costs, could adversely affect our operating results. Because our
Concepts and their franchisees provide competitively priced food, our

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-KPart I
Item 1A Risk Factors

ability to pass along commodity price increases to our customers is limited.
Significant increases in gasoline prices could also result in a decrease of
customer traffic at our restaurants or the imposition of fuel surcharges by
our distributors, each of which could adversely affect our profit margins.
Our operating expenses also include employee wages and benefits
and insurance costs (including workers’ compensation, general liability,
property and health) which may increase over time. Any such increase
could adversely affect our profit margins.

Our operating results are closely tied to the
success of our Concepts’ franchisees.

A significant portion of our restaurants are operated by franchisees from
whom we derive a significant portion of our revenues in the form of royalty
payments. As a result, the success of our business depends in part upon
the operational and financial success of our Concepts’ franchisees. We have
limited control over how our Concepts’ franchisees’ businesses are run,
and the inability of our Concepts’ franchisees to operate successfully could
adversely affect our operating results through decreased royalty payments.

If franchisees incur too much debt or if economic or sales trends deteriorate
such that they are unable to operate profitably or repay existing debt, it
could result in financial distress, including insolvency or bankruptcy. If a
significant franchisee or a significant number of our Concepts’ franchisees
become financially distressed, our operating results could be impacted
through reduced or delayed royalty payments or increased rent obligations
for leased properties on which we are contingently liable.

Our success depends substantially on the value
and perception of our brands.

Our success depends in large part upon our ability to maintain and
enhance the value of our brands and our customers’ connection to our
brands. Brand value is based in part on consumer perceptions on a
variety of subjective qualities. Business incidents, whether isolated or
recurring and whether originating from us, our franchisees or suppliers,
can significantly reduce brand value and consumer trust, particularly if the
incidents receive considerable publicity or result in litigation. For example,
our brands could be damaged by claims or perceptions about the quality
or safety of our products or the quality of our suppliers, regardless of
whether such claims or perceptions are true. Any such incident could
cause a decline in consumer confidence in, or the perception of, our
Concepts and/or our products and decrease the value of our brands as
well as consumer demand for our products, which would likely result in
lower revenues and profits.

Our inability or failure to recognize, respond to
and effectively manage the accelerated impact
of social media could materially adversely impact
our business.

There has been a marked increase in the use of social media platforms,
including weblogs (blogs), social media websites, and other forms of
Internet-based communications which allow individuals access to a broad
audience of consumers and other interested persons. Many social media
platforms immediately publish the content their subscribers and participants
post, often without filters or checks on accuracy of the content posted.
Information posted on such platforms at any time may be adverse to our
interests and/or may be inaccurate. The dissemination of information online
could harm our business, prospects, financial condition, and results of
operations, regardless of the information’s accuracy. The harm may be
immediate without affording us an opportunity for redress or correction.

Other risks associated with the use of social media include improper
disclosure of proprietary information, negative comments about our
Concepts, exposure of personally identifiable information, fraud and

out-of-date information. The inappropriate use of social media by our
customers or employees could increase our costs, lead to litigation or
result in negative publicity that could damage our reputation.

A suspension of the Chinese affiliates of the “Big
Four” accounting firms may impact our ability
to access capital markets and could result in
other material adverse effects.

In January 2014, a U.S. administrative law court issued an initial ruling
to suspend Chinese affiliates of the global “Big Four” accounting firms,
including the Chinese affiliate of our independent auditor, from auditing
U.S.-listed companies for six months. While we believe the likelihood of
the suspension becoming effective is remote, it is difficult to determine
the potential consequences if the ruling is sustained. However, given the
significance of our China Division to our consolidated financial statements,
it is possible that we would be unable to include audited and/or reviewed
consolidated financial statements in the Quarterly Reports on Form 10-Q
and Annual Reports on Form 10-K that we are required to file with the
SEC. As a result, we could be unable to file our reports in a timely manner
or such filings would be considered deficient. Until such reviews or audits
are completed, our filings under the Exchange Act could continue to be
deficient or untimely, and our ability to access the capital markets could
be significantly limited. These issues could render us temporarily ineligible
for use of both shelf registration and “short-form” registration that allows
us to incorporate our prior filings by reference. Our inability to satisfy our
reporting obligations as a public company may lead the New York Stock
Exchange to commence delisting procedures with respect to our common
shares. In addition, the failure to deliver audited financial statements could
also constitute an event of default under our Credit Facility. Moreover, any
negative news about the proceedings against the “Big Four” audit firms
could erode investor confidence in financial statements relating to our
Chinese operations.

We could be party to litigation that could
adversely affect us by increasing our expenses
or subjecting us to significant monetary
damages and other remedies.

From time to time we are involved in a number of legal proceedings, which
include consumer, employment, tort, patent, securities, derivative and other
litigation (see the discussion of Legal Proceedings in Note 19 to the consolidated
financial statements included in Item 8 of this Report). We are currently a
defendant in cases containing class action allegations in which the plaintiffs
have brought claims under federal and state wage and hour, disability and other
laws. We are also currently a defendant in securities and derivative lawsuits
alleging inadequate disclosures in violation of federal securities laws. Plaintiffs
in these types of lawsuits often seek recovery of very large or indeterminate
amounts, and the magnitude of the potential loss relating to such lawsuits
may not be accurately estimated. Regardless of whether any claims against
us are valid, or whether we are ultimately held liable, such litigation may be
expensive to defend and may divert resources away from our operations and
negatively impact reported earnings. With respect to insured claims, a judgment
for monetary damages in excess of any insurance coverage could adversely
affect our financial condition or results of operations. Any adverse publicity
resulting from these allegations may also adversely affect our reputation, which
in turn could adversely affect our results.

In addition, the restaurant industry has been subject to claims that relate to
the nutritional content of food products, as well as claims that the menus and
practices of restaurant chains have led to the obesity of some customers. We
may also be subject to this type of claim in the future and, even if we are not,
publicity about these matters (particularly directed at the quick service and
fast-casual segments of the industry) may harm our reputation and adversely
affect our results.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-KChanges in, or noncompliance with,
governmental regulations may adversely affect
our business operations, growth prospects or
financial condition.

Our Concepts and their franchisees are subject to numerous laws and
regulations around the world. These laws change regularly and are
increasingly complex. For example, we are subject to:

•• The Americans with Disabilities Act in the U.S. and similar state laws that
give civil rights protections to individuals with disabilities in the context
of employment, public accommodations and other areas.

•• The U.S. Fair Labor Standards Act, which governs matters such as
minimum wages, overtime and other working conditions, family leave
mandates and a variety of similar state laws that govern these and other
employment law matters.

•• Anti-bribery and corruption laws and regulations, such as the Foreign
Corrupt Practices Act, the UK Bribery Act and similar laws, which are
the subject of increasing scrutiny and enforcement around the world.

•• New or changing laws and regulations in government-mandated health
care benefits such as the Patient Protection and Affordable Care Act.

•• New or changing laws and regulations relating to nutritional content,

nutritional labeling, product safety and menu labeling.

•• New or changing laws relating to state and local licensing.

•• New or changing laws and regulations relating to health, sanitation, food,

workplace safety and fire safety and prevention.

•• New or changing laws and regulations relating to union organizing rights

and activities.

•• New or changing laws relating to information security, privacy, cashless

payments and consumer credit, protection and fraud.

•• New or changing environmental regulations.

•• New or changing federal and state immigration laws and regulations

in the U.S.

Compliance with new or existing laws and regulations could impact our
operations. In addition, the compliance costs associated with these laws and
regulations could be substantial. Any failure or alleged failure to comply with
these laws or regulations could adversely affect our reputation, international
expansion efforts, growth prospects and financial condition or result in,
among other things, litigation, revocation of required licenses, governmental
investigations or proceedings, administrative enforcement actions, fines
and civil and criminal liability. Publicity relating to any such noncompliance
could also harm our reputation and adversely affect our revenues.

Tax matters, including changes in tax rates,
disagreements with taxing authorities and
imposition of new taxes could impact our results
of operations and financial condition.

A significant percentage of our profits are earned outside the U.S. and
taxed at lower rates than the U.S. statutory rates. Historically, the cash
we generate outside the U.S. has principally been used to fund our

Part I
Item 1B Unresolved Staff Comments

international development. However, if the cash generated by our U.S.
business is not sufficient to meet our need for cash in the U.S., we may
need to repatriate a greater portion of our international earnings to the
U.S. in the future. We are required to record U.S. income tax expense
in our financial statements at the point in time when our management
determines that such funds are not permanently invested outside the U.S.
This could cause our worldwide effective tax rate to increase materially.

We are subject to income taxes as well as non-income based taxes,
such as payroll, sales, use, value-added, net worth, property, withholding
and franchise taxes in both the U.S. and various foreign jurisdictions.
We are also subject to regular reviews, examinations and audits by the
Internal Revenue Service and other taxing authorities with respect to such
income and non-income based taxes inside and outside of the U.S. If
the IRS or another taxing authority disagrees with our tax positions, we
could face additional tax liability, including interest and penalties. Payment
of such additional amounts upon final settlement or adjudication of any
disputes could have a material impact on our results of operations and
financial position.

In addition, we are directly and indirectly affected by new tax legislation
and regulation and the interpretation of tax laws and regulations worldwide.
Changes in such legislation, regulation or interpretation could increase our
taxes and have an adverse effect on our operating results and financial
condition.

Our business may be adversely impacted by
general economic conditions.

Our results of operations are dependent upon discretionary spending by
consumers, which may be affected by general economic conditions globally
or in one or more of the markets we serve. Some of the factors that impact
discretionary consumer spending include unemployment, disposable income
and consumer confidence. These and other macroeconomic factors could
have an adverse effect on our sales, profitability or development plans,
which could harm our financial condition and operating results.

The retail food industry in which we operate is
highly competitive.

The retail food industry in which we operate is highly competitive with
respect to price and quality of food products, new product development,
advertising levels and promotional initiatives, customer service, reputation,
restaurant location, and attractiveness and maintenance of properties. If
consumer or dietary preferences change, or our restaurants are unable
to compete successfully with other retail food outlets in new and existing
markets, our business could be adversely affected. We also face growing
competition as a result of convergence in grocery, deli and restaurant
services, including the offering by the grocery industry of convenient meals,
including pizzas and entrees with side dishes. In addition, in the retail
food industry, labor is a primary operating cost component. Competition
for qualified employees could also require us to pay higher wages to
attract a sufficient number of employees, which could adversely impact
our profit margins.

ItEM 1B Unresolved Staff Comments

The Company has received no written comments regarding its periodic or current reports from the staff of the Securities and Exchange Commission
that were issued 180 days or more preceding the end of its 2013 fiscal year and that remain unresolved.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-KPart I

ItEM 2 Properties

As of year end 2013, the Company’s Concepts owned approximately 850 units
and leased land, building or both for approximately 7,275 units worldwide.
These units are further detailed as follows:

•• The China Division leased land, building or both in approximately 5,000 units.

•• The International Division owned approximately 150 units and leased

land, building or both in approximately 1,175 units.

•• The U.S. Division owned approximately 675 units and leased land,

building or both in approximately 900 units.

•• The India Division leased land, building or both in approximately 200 units.

Company-owned restaurants in China are generally leased for initial terms
of 10 to 15 years and generally do not have renewal options. Historically,
the Company has either been able to renew its China Division leases or
enter into competitive leases at replacement sites without a significant
impact on our operations, cash flows or capital resources. Company-owned
restaurants in the U.S. with leases are generally leased for initial terms of
15 or 20 years and generally have renewal options; however, Pizza Hut
delivery/carryout units in the U.S. generally are leased for significantly
shorter initial terms with shorter renewal options. Company-owned

restaurants outside of China and the U.S. with leases have initial lease
terms and renewal options that vary by country. The Company currently
has approximately 825 units worldwide that it leases or subleases to
franchisees, principally in the U.S., U.K. and Mexico.

The China Division leases their corporate headquarters and research
facilities in Shanghai, China. The Pizza Hut U.S. and YRI corporate
headquarters and a research facility in Plano, Texas are owned by Pizza
Hut. Taco Bell leases its corporate headquarters and research facility in
Irvine, California. The KFC U.S. and YUM corporate headquarters and
a research facility in Louisville, Kentucky are owned by the Company. In
addition, YUM leases office facilities for the U.S. Division shared service
center in Louisville, Kentucky. YUM sub-leases a portion of its shared
service office facility in Louisville, Kentucky to a company that performs
certain of our information technology, accounting and payroll services.
Additional information about the Company’s properties is included in the
Consolidated Financial Statements in Part II, Item 8, pages 36 through 71.

The Company believes that its properties are generally in good operating
condition and are suitable for the purposes for which they are being used.

ItEM 3 Legal Proceedings

The Company is subject to various lawsuits covering a variety of allegations.
The Company believes that the ultimate liability, if any, in excess of amounts
already provided for these matters in the Consolidated Financial Statements,
is not likely to have a material adverse effect on the Company’s annual
results of operations, financial condition or cash flows. The following is a

brief description of the more significant of the categories of lawsuits and
other matters we face from time to time. Descriptions of specific claims
and contingencies appear in Note 19, Contingencies, to the Consolidated
Financial Statements included in Part II, Item 8, which Note is incorporated
by reference into this item.

Franchisees

A substantial number of the restaurants of each of the Concepts are franchised to independent businesses. In the course of the franchise relationship,
occasional disputes arise with franchisees relating to a broad range of subjects, including, without limitation, marketing, operational standards, quality,
service and cleanliness issues, grants, transfers or terminations of franchise rights, territorial disputes and delinquent payments.

Suppliers

The Company and its Concepts purchase food, paper, equipment and other restaurant supplies as well as certain services from numerous independent
suppliers throughout the world. Disputes arise from time-to-time with suppliers on a number of issues, including, but not limited to, general performance,
compliance with product specifications and terms of procurement and service requirements.

Employees

At any given time, the Company or its Concepts employ hundreds of thousands of persons, primarily in its restaurants. In addition, each year thousands of
persons seek employment with the Company and its Concepts. From time to time, disputes arise regarding employee hiring, compensation, termination
and promotion practices.

Like other retail employers, the Company and its Concepts have been faced with allegations of class-wide wage and hour, employee classification and
other labor law violations.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-KPart I
Item 4 mine Safety Disclosures

Customers

The Concepts’ restaurants serve a large and diverse cross-section of the public, and in the course of serving so many people, disputes arise regarding
products, service, accidents and other matters typical of large restaurant systems.

Intellectual Property

The Company has registered trademarks and service marks, many of which are of material importance to the Company’s business. From time to time,
the Company and its Concepts may become involved in litigation to defend and protect its use and ownership of its registered marks.

Shareholders

As a publicly-traded company, from time-to-time, disputes arise with our shareholders, including allegations that the Company breached federal securities
laws as a result of material misstatements or omissions. In addition, shareholders may bring claims derivatively on behalf of the Company against officers
and/or directors alleging claims such as breaches of fiduciary duties, waste of corporate assets or unjust enrichment.

ItEM 4 Mine Safety Disclosures

Not applicable

Executive Officers of the registrant

The executive officers of the Company as of February 18, 2014, and their
ages and current positions as of that date are as follows:

David C. Novak, 61, is Chairman of the Board and Chief Executive Officer
of YUM. He has served in this position since January 2001.

Jing-Shyh S. Su, 61, is Vice-Chairman of the Board of YUM and Chairman
and Chief Executive Officer of YUM Restaurants China. He has served
in this position since May 2010. He has served as Vice-Chairman of the
Board of YUM since March 2008, and he served as President of YUM
Restaurants China from 1997 to May 2010.

Scott O. Bergren, 67, is Chief Executive Officer of Pizza Hut and Chief
Innovation Officer of YUM. He has served as Chief Executive Officer of
Pizza Hut since January 2014 and as Chief Innovation Officer of YUM
since February 2011. Prior to these positions, Mr. Bergren served as Chief
Executive Officer of Pizza Hut U.S. from February 2011 to December
2013 and as President and Chief Concept Officer of Pizza Hut U.S. from
November 2006 to January 2011.

Jonathan D. Blum, 55, is Senior Vice President, Chief Public Affairs
Officer and Global Nutrition Officer of YUM. He has served as Senior
Vice President and Chief Public Affairs Officer since July 1997. In March
of 2012, his title and job responsibilities were expanded to include Global
Nutrition Officer.

anne P. Byerlein, 55, is Chief People Officer of YUM. She has served in
this position since December 2002.

Christian L. Campbell, 63, is Senior Vice President, General Counsel,
Secretary and Chief Franchise Policy Officer of YUM. He has served as
Senior Vice President, General Counsel and Secretary since September 1997
and Chief Franchise Policy Officer since January 2003.

richard t. Carucci, 56, is President of YUM. He has served in this position
since May 2012. Prior to this position, Mr. Carucci served as Chief Financial
Officer of YUM, a position he held beginning in March 2005. Mr. Carucci
will retire as President of YUM in March 2014.

Greg Creed, 56, is Chief Executive Officer of Taco Bell. He has served in
this position since February 2011. Prior to this position, Mr. Creed served
as President and Chief Concept Officer of Taco Bell, a position he held
beginning in December 2006.

roger Eaton, 53, is President of KFC and Chief Operations Officer of
YUM. He has served as President of KFC since January 2014 and as
Chief Operations Officer of YUM since November 2011. Prior to these
positions, Mr. Eaton served as Chief Executive Officer of KFC U.S. and
YUM Operational Excellence Officer from February 2011 to November
2011. He was President and Chief Concept Officer of KFC U.S. from
June 2008 to February 2011.

Patrick Grismer, 52, is Chief Financial Officer of YUM. He has served in this
position since May 2012. Prior to this position, Mr. Grismer served as Chief
Planning and Control Officer, a position he held beginning January 2011.
Mr. Grismer served in as Chief Financial Officer of YRI from June 2008
to January 2011.

Muktesh Pant, 59, is Chief Executive Officer of KFC. He has served in
this position since January 2014. Prior to this position he served as Chief
Executive Officer of YRI from December 2011 to December 2013. Mr.
Pant served as President of YRI from May 2010 to December 2011 and
as President of Global Brand Building for YUM from February 2009 to
December 2011. He served as the Chief Marketing Officer of YRI from
July 2005 to May 2010.

David E. russell, 44, is Vice President, Finance and Corporate Controller
of YUM. He has served in this position since December 2012. He has been
Vice President and Corporate Controller since February 2011. Effective
December 2012, his duties and title were expanded to include Vice
President, Finance. From November 2010 to February 2011, Mr. Russell
served as Vice President, Controller-Designate. From January 2008 to
November 2010, he served as Vice President and Assistant Controller.

Executive officers are elected by and serve at the discretion of the Board
of Directors.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-KPart II Part II
Item 5 market for the Registrant’s Common Stock, Related Stockholder matters and Issuer Purchases of equity Securities

PART II

ItEM 5 Market for the registrant’s Common Stock,

related Stockholder Matters and Issuer
Purchases of Equity Securities

The Company’s Common Stock trades under the symbol YUM and is listed on the New York Stock Exchange (“NYSE”). The following sets forth the
high and low NYSE composite closing sale prices by quarter for the Company’s Common Stock and dividends per common share.

Quarter
First
Second
Third
Fourth

2013

2012

High
70.20 $
73.52
74.82
78.30

High
70.72 $
73.93
67.53
74.47

Low
62.08 $
64.15
68.10
65.17

Low
58.57 $
62.86
61.95
63.88

Dividends
Declared

0.335 $
0.335
—
0.74

Dividends
Paid
0.335
0.335
0.335
0.37

Dividends
Declared

0.285 $
0.285
—
0.67

Dividends
Paid
0.285
0.285
0.285
0.335

In 2013, the Company declared two cash dividends of $0.335 per share and two cash dividends of $0.37 per share of Common Stock, one of which
had a distribution date of February 7, 2014. In 2012, the Company declared two cash dividends of $0.285 per share and two cash dividends of
$0.335 per share of Common Stock, one of which had a distribution date of February 1, 2013. The Company targets an annual dividend payout ratio
of 35% to 40% of net income.

As of February 11, 2014, there were 61,700 registered holders of record of the Company’s Common Stock.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

Part II Part II
Item 5 market for the Registrant’s Common Stock, Related Stockholder matters and Issuer Purchases of equity Securities

Issuer Purchases of Equity Securities

The following table provides information as of December 28, 2013 with respect to shares of Common Stock repurchased by the Company during the quarter
then ended:

Fiscal Periods
Period 10
9/8/13 – 10/5/13
Period 11
10/6/13 – 11/2/13
Period 12
11/3/13 – 11/30/13
Period 13
12/1/13 – 12/28/13
TOTAL

Total number
of shares
purchased
(thousands)

Average price
paid per share
—

— $

Total number of shares purchased as
part of publicly announced plans or
programs (thousands)
—

Approximate dollar value of shares
that may yet be purchased under
the plans or programs (millions)
463

2,967

66.59

387

73.36

467

3,821

73.47

68.11

2,967

387

467

3,821

266

987

953

On November 16, 2012, our Board of Directors authorized share repurchases
through May 2014 of up to $1 billion (excluding applicable transaction
fees) of our outstanding Common Stock. On November 22, 2013, our
Board of Directors authorized additional share repurchases through May

2015 of up to $750 million (excluding applicable transaction fees) of
our outstanding Common Stock. As of December 28, 2013, we have
remaining capacity to repurchase up to $953 million of Common Stock
under these authorizations.

Stock Performance Graph

This graph compares the cumulative total return of our Common Stock to the cumulative total return of the S&P 500 Stock Index and the S&P 500
Consumer Discretionary Sector, a peer group that includes YUM, for the period from December 26, 2008 to December 27, 2013, the last trading day
of our 2013 fiscal year. The graph assumes that the value of the investment in our Common Stock and each index was $100 at December 26, 2008
and that all dividends were reinvested.

In $

400

350

300

250

200

150

100

2008

YUM!

2009

2010

2011

2012

2013

S&P 500

S&P Consumer Discretionary

12/26/2008

12/24/2009

12/23/2010

12/30/2011

12/28/2012

YUM!
S&P 500
S&P Consumer
Discretionary

$
$

100 $
100 $

100 $

120 $
132 $

148 $

172 $
151 $

188 $

208 $
154 $

198 $

232 $
176 $

241 $

12/27/2013
271
235

349

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

Part II Part II

ItEM 6 Selected Financial Data

SELECtED FINaNCIaL Data

YUM! BraNDS, INC. aND SUBSIDIarIES

(in millions, except per share and unit amounts)
Summary of Operations
Revenues

Company sales
Franchise and license fees and income
Total

Closures and impairment income (expenses)(a)
Refranchising gain (loss)(b)
Operating Profit(c)
Interest expense, net(c)
Income before income taxes
Net Income – including noncontrolling interest
Net Income – YUM! Brands, Inc.
Basic earnings per common share
Diluted earnings per common share
Diluted earnings per common share before Special Items(c)
Cash Flow Data
Provided by operating activities
Capital spending, excluding acquisitions and investments
Proceeds from refranchising of restaurants
Repurchase shares of Common Stock
Dividends paid on Common Stock
Balance Sheet
Total assets
Long-term debt
Total debt
Other Data
Number of stores at year end

Company
Unconsolidated Affiliates
Franchisees
Licensees
System

China system sales growth(d)

Reported
Local currency(e)

YRI system sales growth(d)

Reported
Local currency(e)

India system sales growth(d)

Reported
Local currency(e)

U.S. same store sales growth(d)
Shares outstanding at year end
Cash dividends declared per Common Share
Market price per share at year end

2013

2012

Fiscal Year
2011

2010

2009

11,184
1,900
13,084
(331)
100
1,798
247
1,551
1,064
1,091
2.41
2.36
2.97

2,139
1,049
260
770
615

8,695
2,918
2,989

8,131
716
29,349
2,115
40,311

11,833
1,800
13,633
(37)
78
2,294
149
2,145
1,608
1,597
3.46
3.38
3.25

2,294
1,099
364
965
544

9,013
2,932
2,942

7,578
660
28,608
2,168
39,014

10,893
1,733
12,626
(135)
(72)
1,815
156
1,659
1,335
1,319
2.81
2.74
2.87

2,170
940
246
752
481

8,834
2,997
3,317

7,437
587
26,928
2,169
37,121

9,783
1,560
11,343
(47)
(63)
1,769
175
1,594
1,178
1,158
2.44
2.38
2.53

1,968
796
265
371
412

8,316
2,915
3,588

7,271
525
27,852
2,187
37,835

9,413
1,423
10,836
(103)
26
1,590
194
1,396
1,083
1,071
2.28
2.22
2.17

1,404
797
194
—
362

7,148
3,207
3,266

7,666
469
26,745
2,200
37,080

(1)%
(4)%

1%
5%

11%
20%
—%

23%
20%

2%
5%

13%
29%
5%

35%
29%

12%
7%

36%
35%
(1)%

18%
17%

9%
4%

43%
36%
1%

11%
10%

(4)%
5%

10%
24%
(5)%

443
1.41
73.87

$
$

451
1.24
64.72

$
$

460
1.07
59.01

$
$

469
0.92
49.66

$
$

469
0.80
35.38

$
$

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

Part II Part II
Item 7 management’s Discussion and Analysis of Financial Condition and Results of Operations

(a) Closures and impairment income (expense) includes $295 million of Little Sheep impairment losses in 2013, $80 million of net losses related to the LJS and A&W divestitures in 2011 and

$26 million and $12 million of goodwill impairment charges in 2009 recorded within our U.S. Division and Pizza Hut Korea business, respectively.

(b) See Note 4 for discussion of Refranchising Gain (Loss) for fiscal years 2013, 2012 and 2011. Fiscal year 2010 included a $52 million loss on the refranchising of our Mexico equity market.
In addition to the results provided in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) throughout this document, the Company has provided non-GAAP measurements
(c)
which present operating results on a basis before Special Items. The Company uses earnings before Special Items as a key performance measure of results of operations for the purpose of
evaluating performance internally. This non-GAAP measurement is not intended to replace the presentation of our financial results in accordance with GAAP. Rather, the Company believes
that the presentation of earnings before Special Items provides additional information to investors to facilitate the comparison of past and present operations, excluding items that the
Company does not believe are indicative of our ongoing operations due to their size and/or nature.
2013, 2012 and 2011 Special Items are described in further detail within our MD&A. Special Items in 2010 negatively impacted Operating Profit by $77 million, primarily due to $59 million
in refranchising losses for equity markets outside the U.S. and U.S. refranchising net losses of $18 million. Special Items in 2009 positively impacted Operating Profit by $18 million, primarily
due to a gain of $68 million upon our acquisition of additional ownership interest in, and consolidation of, the operating entity that owns KFCs in Shanghai China, U.S. refranchising net gains
of $34 million, offset by investments in our U.S. brands of $32 million, a U.S. goodwill impairment charge of $26 million and charges of $16 million relating to U.S. General and Administrative
(“G&A”) productivity initiatives and realignment of resources. These items above resulted in cumulative net tax benefits of $7 million and $5 million in 2010 and 2009, respectively.
(d) System sales growth includes the results of all restaurants regardless of ownership, including Company-owned, franchise, unconsolidated affiliate and license restaurants that operate
our concepts, except for non-Company-owned restaurants for which we do not receive a sales-based royalty. Sales of franchise, unconsolidated affiliate and license restaurants generate
franchise and license fees for the Company (typically at a rate of 4% to 6% of sales). Franchise, unconsolidated affiliate and license restaurant sales are not included in Company sales on the
Consolidated Statements of Income; however, the franchise and license fees are included in the Company’s revenues. We believe system sales growth is useful to investors as a significant
indicator of the overall strength of our business as it incorporates all of our revenue drivers, Company and franchise same-store sales as well as net unit development. Same-store sales
growth includes the estimated growth in sales of all restaurants that have been open and in the YUM system one year or more.

(e) Local currency represents the percentage change excluding the impact of foreign currency translation. These amounts are derived by translating current year results at prior year average
exchange rates. We believe the elimination of the foreign currency translation impact provides better year-to-year comparability without the distortion of foreign currency fluctuations.

Fiscal years 2013, 2012, 2010 and 2009 include 52 weeks and fiscal year 2011 includes 53 weeks. See Management’s Discussion and Analysis of
Financial Condition and Results of Operations (“MD&A”) for discussion of the impact of the 53rd week in fiscal year 2011.

The selected financial data should be read in conjunction with the Consolidated Financial Statements.

ItEM Part II7 Management’s Discussion and analysis

of Financial Condition and results
of Operations

Introduction and Overview

The following Management’s Discussion and Analysis (“MD&A”), should
be read in conjunction with the Consolidated Financial Statements on
pages 36 through 71 (“Financial Statements”) and the Forward-Looking
Statements on page 2 and the Risk Factors set forth in Item 1A. Throughout
the MD&A, YUM! Brands, Inc. (“YUM” or the “Company”) makes reference
to certain performance measures as described below.

•• The Company provides the percentage changes excluding the impact of
foreign currency translation (“FX” or “Forex”). These amounts are derived
by translating current year results at prior year average exchange rates.
We believe the elimination of the foreign currency translation impact
provides better year-to-year comparability without the distortion of
foreign currency fluctuations.

•• System sales growth includes the results of all restaurants regardless of
ownership, including Company-owned, franchise, unconsolidated affiliate
and license restaurants that operate our Concepts, except for non-
company-owned restaurants for which we do not receive a sales-based
royalty. Sales of franchise, unconsolidated affiliate and license restaurants
generate franchise and license fees for the Company (typically at a rate
of 4% to 6% of sales). Franchise, unconsolidated affiliate and license
restaurant sales are not included in Company sales on the Consolidated
Statements of Income; however, the franchise and license fees are
included in the Company’s revenues. We believe system sales growth
is useful to investors as a significant indicator of the overall strength of
our business as it incorporates all of our revenue drivers, Company and
franchise same-store sales as well as net unit development.

•• Same-store sales is the estimated growth in sales of all restaurants that
have been open and in the YUM system one year or more. The impact
of same-store sales growth on both our Company-owned store results
and Franchise and license fees and income is described elsewhere in
this MD&A.

•• Company restaurant profit is defined as Company sales less expenses
incurred directly by our Company restaurants in generating Company
sales. Company restaurant margin as a percentage of sales is defined
as Company restaurant profit divided by Company sales.

•• Operating margin is defined as Operating Profit divided by Total revenue.

All Note references herein refer to the Notes to the Financial Statements
on pages 43 through 71. Tabular amounts are displayed in millions of
U.S. dollars except per share and unit count amounts, or as otherwise
specifically identified. Percentages may not recompute due to rounding.

Description of Business

YUM has over 40,000 restaurants in more than 125 countries and territories
operating primarily under the KFC, Pizza Hut or Taco Bell brands, which are
the global leaders in the chicken, pizza and Mexican-style food categories,
respectively. Of the over 40,000 restaurants, 20% are operated by the
Company, 75% are operated by franchisees and unconsolidated affiliates
and 5% are operated by licensees.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K
Part II Part II
Item 7 management’s Discussion and Analysis of Financial Condition and Results of Operations

As of and through December 28, 2013, YUM’s business consists of
four reporting segments: YUM China (“China” or “China Division”), YUM
Restaurants International (“YRI” or “International Division”), United States
(“U.S.”) and YUM Restaurants India (“India” or “India Division”). The China
Division includes mainland China and the India Division includes India,
Bangladesh, Mauritius, Nepal and Sri Lanka. YRI includes the remainder
of our international operations. The China Division, YRI and Taco Bell
U.S. represent approximately 90% of the Company’s operating profits,
excluding Corporate and unallocated income and expenses.

In 2012, our India Division began being reported as a standalone reporting
segment separate from YRI as a result of changes to our management
reporting structure. While our consolidated results are not impacted, our
historical segment information has been restated to be consistent with
the current period presentation.

In December of 2011 we sold our Long John Silver’s (“LJS”) and A&W All
American Food Restaurants (“A&W”) brands to key franchise leaders and
strategic investors in separate transactions. The results for these businesses
through the sale dates are included in the Company’s results for 2011.

Strategies

The Company has historically focused on the following four key strategies:

Build Leading Brands in China in Every Significant Category Part II– The
Company has developed the KFC and Pizza Hut brands into the leading
quick service and casual dining restaurant brands, respectively, in mainland
China. Additionally, the Company owns and operates the distribution
system for its restaurants in China which we believe provides a significant
competitive advantage. Given this strong competitive position, a growing
economy and a population of 1.4 billion in mainland China, the Company is
rapidly adding KFC and Pizza Hut Casual Dining restaurants, beginning to
develop Pizza Hut Home Service (home delivery) and testing the additional
restaurant concept of East Dawning (Chinese food). Additionally, on
February 1, 2012 we acquired an additional 66% interest in Little Sheep
Group Ltd. (“Little Sheep”), a leading casual dining concept in China.
This acquisition brought our total ownership to approximately 93% of
the business. Our ongoing earnings growth model in China includes low
double-digit percentage unit growth, mid-single digit same-store sales
growth and moderate margin improvement, which we expect to drive
Operating Profit growth of 15%.

Drive aggressive International Expansion and Build Strong Brands
Everywhere – Outside the U.S. and China the Company and its franchisees
opened over 1,200 new restaurants in 2013, representing 14 straight years
of opening over 700 restaurants, and the Company is one of the leading
international retail developers in terms of units opened. The Company
expects to continue to experience strong growth by building out existing
markets and growing in new markets including India, France, Germany,
Russia and across Africa. The International Division’s Operating Profit has
experienced a 10-year compound annual growth rate of approximately
12%. Our ongoing earnings growth model for YRI includes Operating
Profit growth of 10% driven by 3-4% unit growth, system sales growth
of 6%, at least 2-3% same-store sales growth, margin improvement and
leverage of our G&A infrastructure.

Dramatically Improve U.S. Brand Positions, Consistency and
returns – The Company continues to focus on improving its U.S. position

through differentiated products and marketing and an improved customer
experience. The Company also strives to provide industry-leading new
product innovation which adds sales layers and expands day parts. We
continue to evaluate our returns and ownership positions with an earn-
the-right-to-own philosophy on Company-owned restaurants. Our ongoing
earnings growth model for the U.S. calls for Operating Profit growth of 5%
driven by same-store sales growth of at least 2%, margin improvement
and leverage of our G&A infrastructure.

Drive Industry-Leading, Long-term Shareholder and Franchisee Value –
The Company is focused on delivering high returns and returning substantial
cash flows to its shareholders via dividends and share repurchases. The
Company has one of the highest returns on invested capital in the QSR
industry. The Company’s dividend and share repurchase programs have
returned over $3.3 billion and $8.5 billion to shareholders, respectively,
since 2004. The Company targets an annual dividend payout ratio of
35% to 40% of net income and has increased the quarterly dividend at
a double-digit percentage rate each year since first initiating a dividend
in 2004. Shares are repurchased opportunistically as part of our regular
capital structure decisions.

Our ongoing earnings growth model, including the components above,
is expected to generate EPS growth of at least 10% annually. However,
due primarily to poor performance in our China Division, the Company’s
2013 EPS prior to Special Items declined 9%. Our 2014 EPS prior to
Special Items is expected to grow at least 20% due in large part to our
expectations that China Division Operating Profit for 2014 will grow at a
rate significantly above the ongoing growth rate of 15% indicated above.

2013 Highlights
•• KFC China sales and profits were significantly impacted by the effects
of the December 2012 poultry supply incident, as well as subsequent
news of avian flu.

•• Worldwide system sales grew 2%, prior to foreign currency translation,
including 5% growth at YRI and 1% growth in the U.S. System sales
declined 4% in China.

•• Same-store sales declined 13% in China. Same-store sales grew 1%

at YRI and were flat in the U.S.

•• Total international development was 1,952 new restaurants.

•• Worldwide restaurant margin declined 1.6 percentage points to 15.0%,
including a decline of 2.7 percentage points in China. Restaurant margin
was even at YRI and increased 0.6 percentage points in the U.S.

•• Worldwide operating profit declined 10%, prior to foreign currency
translation, including a decline of 26% in China. Operating profit grew
10% at YRI and 3% in the U.S.

•• Worldwide effective tax rate increased to 28.0% from 25.8%, driven
primarily by a tax reserve adjustment in the third quarter. The tax rate
increase negatively impacted 2013 EPS results by 3 percentage points.

•• A non-cash, Special Items net charge of $258 million related to the
write-down of Little Sheep intangible assets was recorded in the third
quarter. This charge impacted reported EPS by 16 percentage points
for the full year.

•• The Company repurchased $550 million of outstanding debt in the
fourth quarter and recorded a Special Items net charge of approximately
$75 million, primarily due to premiums paid related to this transaction. This
charge impacted reported EPS by 5 percentage points for the full year.

All preceding comparisons are versus the same period a year ago
and exclude the impact of Special Items unless otherwise noted. See
the Significant Known Events, Trends or Uncertainties Impacting or
Expected to Impact Comparisons of Reported or Future Results section
of this MD&A for a description of Special Items.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-KPart II Part II
Item 7 management’s Discussion and Analysis of Financial Condition and Results of Operations

results of Operations

Company sales
Franchise and license fees and income
TOTAL REVENUES
COMPANY RESTAURANT PROFIT
% OF COMPANY SALES
OPERATING PROFIT
Interest expense, net
Income tax provision
Net Income – including noncontrolling interests
Net Income (loss) – noncontrolling interests
NET INCOME – YUM! BRANDS, INC.
DILUTED EPS(a)
DILUTED EPS BEFORE SPECIAL ITEMS(a)
REPORTED EFFECTIVE TAX RATE
EFFECTIVE TAX RATE BEFORE SPECIAL ITEMS

(a) See Note 3 for the number of shares used in these calculations.

$
$

$
$
$

2013
11,184
1,900
13,084
1,683

15.0%

1,798
247
487
1,064
(27)
1,091
2.36
2.97
31.4%
28.0%

$
$

$
$
$

Amount

2012
11,833
1,800
13,633
1,981

16.7%

2,294
149
537
1,608
11
1,597
3.38
3.25
25.0%
25.8%

$
$

$
$
$

2011
10,893
1,733
12,626
1,753

16.1%

1,815
156
324
1,335
16
1,319
2.74
2.87
19.5%
24.2%

% B/(W)

2013
(5)
6
(4)
(15)
(1.7) ppts.
(22)
(66)
9
(34)
NM
(32)
(30)
(9)

2012
9
4
8
13
0.6 ppts.
26
5
(66)
20
35
21
23
13

Significant Known Events, trends or Uncertainties Impacting or Expected to Impact
Comparisons of reported or Future results

Special Items

In addition to the results provided in accordance with U.S. Generally
Accepted Accounting Principles (“GAAP”) above and throughout this
document, the Company has provided non-GAAP measurements which
present operating results in 2013, 2012 and 2011 on a basis before
Special Items.

The Company uses earnings before Special Items as a key performance
measure of results of operations for the purpose of evaluating performance
internally, and Special Items are not included in our China, YRI, U.S. or
India segment results. This non-GAAP measurement is not intended to
replace the presentation of our financial results in accordance with GAAP.
Rather, the Company believes that the presentation of earnings before
Special Items provides additional information to investors to facilitate the
comparison of past and present operations, excluding items in 2013,
2012 and 2011 that the Company does not believe are indicative of our
ongoing operations due to their size and/or nature.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

Part II Part II
Item 7 management’s Discussion and Analysis of Financial Condition and Results of Operations

The table below details items classified as Special Items.

Detail of Special Items
U.S. Refranchising gain (loss)
Pension settlement charges
Little Sheep impairment
Gain upon acquisition of Little Sheep
Losses associated with the refranchising of the Pizza Hut UK dine-in business
Losses and other costs relating to the LJS and A&W divestitures
Other Special Items Income (Expense)
Special Items Income (Expense) – Operating Profit
Losses related to the extinguishment of debt – Interest Expense, net
Special Items Income (Expense) before income taxes
Tax Benefit (Expense) on Special Items(a)
Special Items Income (Expense), net of tax – including noncontrolling interests
Special Items Income (Expense), net of tax – noncontrolling interests
Special Items Income (Expense), net of tax – YUM! Brands, Inc.
Average diluted shares outstanding
Special Items diluted EPS
reconciliation of Operating Profit Before Special Items
to reported Operating Profit
Operating Profit before Special Items
Special Items Income (Expense) – Operating Profit
REPORTED OPERATING PROFIT
reconciliation of EPS Before Special Items to reported EPS
Diluted EPS before Special Items
Special Items EPS
REPORTED EPS
reconciliation of Effective tax rate Before Special Items to reported
Effective tax rate
Effective Tax Rate before Special Items
Impact on Tax Rate as a result of Special Items(a)
REPORTED EFFECTIVE TAX RATE

2013

91
(10)
(295)
—
(1)
—
(7)
(222)
(118)
(340)
41
(299)
19
(280)
461
(0.61)

2,020
(222)
1,798

2.97
(0.61)
2.36

Year

2012

122
(84)
—
74
(70)
—
16
58
—
58
1
59
—
59
473
0.13

2,236
58
2,294

3.25
0.13
3.38

2011

(17)
—
—
—
(76)
(86)
(8)
(187)
—
(187)
123
(64)
—
(64)
481
(0.13)

2,002
(187)
1,815

2.87
(0.13)
2.74

28.0%
3.4%

31.4%

25.8%
(0.8)%
25.0%

24.2%
(4.7)%
19.5%

(a) The tax benefit (expense) was determined based upon the impact of the nature, as well as the jurisdiction of the respective individual components within Special Items.

U.S. refranchising gain (loss)

Little Sheep acquisition and Subsequent Impairment

In the years ended December 28, 2013 and December 29, 2012, we
recorded pre-tax refranchising gains of $91 million and $122 million,
respectively, in the U.S. primarily due to gains on sales of Taco Bell
restaurants. In the year ended December 31, 2011, we recorded pre-tax
losses of $17 million from refranchising in the U.S., which were primarily the
net result of gains from restaurants sold and non-cash impairment charges
related to our offers to refranchise restaurants in the U.S., principally a
substantial portion of our Company-owned KFC restaurants. Refranchising
gains and losses are more fully discussed in Note 4 and the Store Portfolio
Strategy Section of the MD&A.

Pension Settlement Charges

During the fourth quarter of 2012 and continuing through 2013, the Company
allowed certain former employees with deferred vested balances in our
U.S. pension plans an opportunity to voluntarily elect an early payout of
their pension benefits. The majority of these payouts were funded from
existing pension assets.

As a result of settlement payments from the programs discussed above
exceeding the sum of service and interest costs within these U.S. pension
plans in 2013 and 2012, pursuant to our accounting policy we recorded
pre-tax settlement charges of $10 million and $84 million for the years ended
December 28, 2013 and December 29, 2012, respectively, in General and
administrative expenses. See Note 14 for further discussion of our pension plans.

On February 1, 2012 we acquired an additional 66% interest in Little Sheep
Group Limited (“Little Sheep”) for $540 million, net of cash acquired of
$44 million, increasing our ownership to 93%. The acquisition was driven
by our strategy to build leading brands across China in every significant
category. Prior to our acquisition of this additional interest, our 27% interest
in Little Sheep was accounted for under the equity method of accounting. As
a result of the acquisition we obtained voting control of Little Sheep, and
thus we began consolidating Little Sheep upon acquisition. As required by
GAAP, we remeasured our previously held 27% ownership in Little Sheep,
which had a recorded value of $107 million at the date of acquisition, at
fair value based on Little Sheep’s traded share price immediately prior to
our offer to purchase the business and recognized a non-cash gain of
$74 million. This gain, which resulted in no related income tax expense,
was recorded in Other (income) expense on our Consolidated Statement
of Income in 2012.

Under the equity method of accounting, we previously reported our 27%
share of the net income of Little Sheep as Other (income) expense in
the Consolidated Statements of Income. Since the acquisition, we have
reported Little Sheep’s results of operations in the appropriate line items
of our Consolidated Statement of Income. We no longer report Other
(income) expense as we did under the equity method of accounting. Net
income attributable to our partner’s ownership percentage is recorded in
Net Income (loss) – noncontrolling interests. In 2012, the consolidation of
Little Sheep increased China Division Revenues by 4%, decreased China

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

Part II Part II
Item 7 management’s Discussion and Analysis of Financial Condition and Results of Operations

Restaurant Margin by 0.4 percentage points and did not have a significant
impact on China Division Operating Profit versus 2011.

The purchase price paid for the additional 66% interest and the resulting
purchase price allocation assumed same-store sales growth and new
unit development for the brand. As a result of consolidating Little Sheep,
the primary assets recorded in 2012 were an indefinite-lived Little Sheep
trademark and goodwill of approximately $400 million and $375 million,
respectively. The goodwill was assigned to the newly formed Little Sheep
reporting unit within our China Division.

Little Sheep’s sales were negatively impacted by a longer than expected
purchase approval and ownership transition phase. Our efforts to regain
sales momentum were significantly compromised in May 2013 due to
negative publicity regarding quality issues with unrelated hot pot concepts
in China, even though there was not an issue with the quality of Little
Sheep products.

While we remain confident in the long-term potential of Little Sheep,
the sustained declines in sales and profits that began in May 2013 and
continued through the third quarter, coupled with the anticipated time it will
now take for the business to recover, resulted in a determination during the
quarter ended September 7, 2013 that it was not more likely than not that
the Little Sheep trademark and reporting unit fair values were in excess of
their carrying values. Therefore, our Little Sheep trademark and goodwill
were tested for impairment in the quarter ended September 7, 2013, prior
to the annual impairment reviews performed in the fourth quarter of each
year in accordance with our accounting policy.

As a result of comparing the trademark’s fair value of $345 million to
its carrying value of $414 million, an impairment charge of $69 million
was recorded. Additionally, after determining the fair value of the Little
Sheep reporting unit was less than its carrying value, goodwill was
written down to $162 million, resulting in an impairment charge of
$222 million. The Company also evaluated other Little Sheep long-lived
assets for impairment and recorded a $4 million impairment charge related
to restaurant-level PP&E.

These non-cash impairment charges totalling $295 million were recorded
in Closures and impairment (income) expense on our Consolidated
Statement of Income. We recorded an $18 million tax benefit associated
with these impairments and allocated $19 million of the after-tax impairment
charges to Net Income (loss) - noncontrolling interests, which resulted in
a net impairment charge of $258 million allocated to Net Income - YUM!
Brands, Inc.

Losses associated With the refranchising of the Pizza
Hut UK Dine-in Business

During the fourth quarter of 2012, we refranchised our remaining
331 Company-owned Pizza Hut dine-in restaurants in the United Kingdom
(“UK”). The franchise agreement for these stores allows the franchisee
to pay continuing franchise fees in the initial years of the agreement at a
reduced rate. We agreed to allow the franchisee to pay these reduced fees
in part as consideration for their assumption of lease liabilities related to
underperforming stores that we anticipate they will close that were part of
the refranchising. We recognize the estimated value of terms in franchise
agreements entered into concurrently with a refranchising transaction that
are not consistent with market terms as part of the upfront refranchising
gain (loss). Accordingly, upon the closing of this refranchising in the
fourth quarter of 2012, we recognized a loss of $53 million representing
the estimated value of these reduced continuing fees. The associated
deferred credit is being amortized into YRI’s Franchise and license fees
and income through 2016. This upfront loss largely contributed to a
$70 million Refranchising loss we recognized in Special Items during
2012, net of income tax benefits of $9 million. During 2011, we recorded
a $76 million charge in Refranchising gain (loss) as a result of our decision
to refranchise or close all of the remaining Company-owned Pizza Hut UK
dine-in restaurants, primarily to write down these restaurants’ long-lived
assets to their then estimated fair value.

For the year ended December 28, 2013, the refranchising of the Pizza Hut
UK dine-in restaurants decreased Company sales by 18% and increased
Franchise and license fees and income and Operating Profit by 2% and
3%, respectively, for the YRI Division versus 2012.

Losses and Other Costs relating to the LJS and a&W
Divestitures

In 2011, we sold the Long John Silver’s and A&W All American Food
Restaurants brands to key franchise leaders and strategic investors in
separate transactions. We recognized $86 million of losses and other costs
primarily in Closures and impairment (income) expenses as a result of our
decision to sell these businesses. Additionally, we recognized $104 million
of tax benefits related to these divestitures. In 2012 as compared to 2011,
System sales and Franchise and license fees and income in the U.S. were
negatively impacted by 5% and 6%, respectively, due to these divestitures
while YRI’s system sales and Franchise and license fees and income
were both negatively impacted by 1%. While these divestitures negatively
impacted both the U.S. and YRI segments’ Operating Profit by 1% in
2012, the impact on our consolidated Operating Profit was not significant.

Other Special Items Income (Expense)

In connection with the aforementioned refranchising of stores in the U.S.,
we have taken several measures to transform our U.S. business, including
G&A productivity initiatives and realignment of resources (primarily severance
and early retirement costs). Other Special Items Income (Expense) in
2013 includes charges relating to these U.S. G&A productivity initiatives
and realignment of resources of $5 million as well as $2 million of costs
recorded in G&A that were part of the $120 million charge related to the
extinguishment of debt. Other Special Items Income (Expense) in 2012
includes the depreciation reduction from the Pizza Hut UK and KFC
U.S. restaurants impaired upon our decision or offer to refranchise that
remained Company stores for some or all of the periods presented of
$13 million and $3 million, respectively, gains from real estate sales related
to our previously refranchised Mexico business of $3 million and charges
relating to U.S. G&A productivity initiatives and realignment of resources
of $5 million. Other Special Items Income (Expense) in 2011 includes the
depreciation reduction from the Pizza Hut UK and KFC U.S. restaurants
impaired upon our decision or offer to refranchise that remained Company
stores for some or all of the periods presented of $3 million and $10 million,
respectively, and charges relating to U.S. G&A productivity initiatives and
realignment of resources of $21 million.

Losses related to the Extinguishment of Debt

During the fourth quarter of 2013, we completed a cash tender offer to
repurchase $550 million of our Senior Unsecured Notes due either March
2018 or November 2037. This transaction resulted in $120 million of losses
as a result of premiums paid and other costs, $118 million of which was
classified as Interest expense, net in our Consolidated Statement of Income.
The repurchase of the Senior Unsecured Notes was funded primarily
by proceeds of $599 million received from the issuance of new Senior
Unsecured Notes. See Note 10 for further discussion on the issuance of
Senior Unsecured Notes.

China Poultry Supply Incident and avian Flu

In late December 2012 our KFC China sales began to be negatively
impacted by intense media attention surrounding an investigation by
the Shanghai FDA (SFDA) into poultry supply management at our
China Division. In January 2013 the SFDA concluded its investigation
and released its recommendations to Yum! China. During 2013 our
team in China undertook a comprehensive review of our supply chain,
incorporated the SFDA’s recommendations and, as part of our commitment
to quality, took additional steps to further strengthen our overall poultry
supply chain practices, including increased testing of product received

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-KPart II Part II
Item 7 management’s Discussion and Analysis of Financial Condition and Results of Operations

from suppliers. As a result of increased product testing and additional
regulatory scrutiny, instances of supplier noncompliance are identified
from time to time, leading to related actions by us and regulatory
authorities, including the termination of certain suppliers in accordance
with our policies.

KFC China sales were further negatively impacted beginning in April of
2013 by the intense media surrounding avian flu in China. The combined
impacts of the media attention surrounding the SFDA investigation and
avian flu resulted in a 13% decline in China Division same-store sales
for the full year. Operating Profit for 2013 declined 26%, prior to foreign
currency translation, due primarily to sales de-leverage at KFC.

As the extensive publicity in 2013 around these two events subsided, KFC
China’s sales began to recover, and same-store sales improved in each
consecutive month during China Division’s fourth quarter. KFC China’s
fourth quarter same-store sales declined 4% compared to same store
sales declines of 15% for the full year.

Given the momentum of the KFC business and the continued strength of
Pizza Hut Casual Dining, China Division 2014 Operating Profit is expected
to return to 2012 levels of more than $1 billion.

In light of increased attention on food safety issues in China generally,
and on poultry supply in particular, as well as recent reports of avian flu in
China, further reports relating to either issue could have a material adverse
effect on our sales and results of operations for our China Division. See
Item IA “Risk Factors” on page 6 for a discussion of risks relating to food
safety and avian flu.

Extra Week in 2011

Our fiscal calendar results in a 53rd week every five or six years. Fiscal year
2011 included a 53rd week in the fourth quarter for all our U.S. businesses
and certain of our YRI businesses that report on a period, as opposed to
a monthly, basis. Our China and India Divisions report on a monthly basis
and thus did not have a 53rd week in 2011.

See the System Sales Growth section within our MD&A for further discussion on the impact of 53rd week in 2011 on system sales. The following table
summarizes the estimated impact of the 53rd week in 2011 on revenues and Operating Profit:

revenues
Company sales
Franchise and license fees
total revenues
Operating Profit
Franchise and license fees
Restaurant profit
General and administrative expenses
Operating Profit(a)

U.S.

YRI

Unallocated

Total

43
13
56

13
9
(4)
18

29
6
35

6
6
(4)
8

—
—
—

—
—
(1)
(1)

72
19
91

19
15
(9)
25

(a) The $25 million benefit was offset throughout 2011 by investments, including franchise development incentives, as well as higher-than-normal spending, such as restaurant closures in the

U.S. and YRI.

Store Portfolio Strategy

From time to time we sell Company restaurants to existing and new
franchisees where geographic synergies can be obtained or where
franchisees’ expertise can generally be leveraged to improve our overall
operating performance, while retaining Company ownership of strategic
U.S. and international markets in which we choose to continue investing
capital. We refranchised 214, 468 and 404 Company restaurants in the
U.S. in the years ended December 28, 2013, December 29, 2012 and
December 31, 2011, respectively. Additionally, in December 2012 we
refranchised 331 remaining Company-owned dine-in restaurants in the
Pizza Hut UK business.

The following table summarizes our worldwide refranchising activities,
including amounts characterized as Special Items:

Number of units refranchised
Refranchising proceeds, pre-tax $
Refranchising (gain) loss,
pre-tax

2013
286
260 $

2012
897
364 $

2011
529
246

(100) $

(78) $

Refranchisings reduce our reported revenues and restaurant profits and
increase the importance of system sales growth as a key performance
measure. Additionally, G&A expenses will decline and franchise and
license expense can increase over time as a result of these refranchising
activities. The timing of G&A declines will vary and often lag the actual

refranchising activities as the synergies are typically dependent upon
the size and geography of the respective deals. G&A expenses included
in the tables below reflect only direct G&A expenses that we no longer
incurred as a result of stores that were operated by us for all or a portion
of the respective previous year and were no longer operated by us as of
the last day of the respective current year.

The impact on Operating Profit arising from refranchising is the net of
(a) the estimated reductions in restaurant profit and G&A expenses and
(b) the increase in franchise fees and expenses from the restaurants that
have been refranchised. The tables presented below reflect the impacts
on Total revenues and on Operating Profit from stores that were operated
by us for all or some portion of the respective previous year and were no
longer operated by us as of the last day of the respective current year.
In these tables, Decreased Company sales and Decreased Restaurant
profit represents the amount of Company sales or restaurant profit earned
by the refranchised restaurants during the period we owned them in the
prior year but did not own them in the current year. Increased Franchise
and license fees and income represents the franchise and license fees
and rent income from the refranchised restaurants that were recorded by
the Company in the current year during periods in which the restaurants
were Company stores in the prior year. Increased Franchise and license
expenses represent primarily rent and depreciation where we continue
to own or lease the underlying property for the refranchised restaurants
that were recorded by the Company in the current year during periods in
which the restaurants were Company stores in the prior year.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

Part II Part II
Item 7 management’s Discussion and Analysis of Financial Condition and Results of Operations

The following table summarizes the impact of refranchising on Total revenues as described above:

Decreased Company sales
Increased Franchise and license fees
and income
DECREASE IN TOTAL REVENUES

China

(54) $

7
(47) $

China

(54) $

9
(45) $

YRI
(439 )

23
(416 )

YRI
(113) $

10
(103) $

The following table summarizes the impact of refranchising on Operating Profit as described above:

Decreased Restaurant profit
Increased Franchise and license fees
and income
Increased Franchise and license expenses
Decreased G&A
INCREASE (DECREASE) IN OPERATING
PROFIT

China

(6) $

7
(4)
—

YRI
(32) $

23
(3)
22

(3) $

(22) $

China

(8) $

9
(4)
—

YRI

(7) $

10
(4)
2

2012

U.S.
(46) $

43
(6)
12

(3) $

2013

2012

2013

U.S.
(481) $

32
(449) $

U.S.
(606) $

43
(563) $

U.S.
(59) $

32
(2)
7

India

— $

Worldwide
(974 )

—
— $

62
(912 )

India

— $

Worldwide
(773)

—
— $

62
(711)

India

— $

Worldwide
(97)

—
—
—

— $

62
(9)
29

(15)

India

— $

Worldwide
(61)

—
—
—

— $

62
(14)
14

Internal revenue Service Proposed
adjustments

On June 23, 2010, the Company received a Revenue Agent Report (RAR)
from the Internal Revenue Service (the “IRS”) relating to its examination of
our U.S. federal income tax returns for fiscal years 2004 through 2006.
The IRS has proposed an adjustment to increase the taxable value
of rights to intangibles used outside the U.S. that YUM transferred to
certain of its foreign subsidiaries. The proposed adjustment would result
in approximately $700 million of additional taxes plus net interest to date
of approximately $255 million for fiscal years 2004-2006. On January 9,
2013, the Company received an RAR from the IRS for fiscal years 2007
and 2008. As expected, the IRS proposed an adjustment similar to their
proposal for 2004-2006 that would result in approximately $270 million of
additional taxes plus net interest to date of approximately $40 million for
fiscal years 2007 and 2008. Furthermore, the Company expects the IRS
to make similar claims for years subsequent to fiscal 2008. The potential
additional taxes for 2009 through 2013, computed on a similar basis to
the 2004-2008 additional taxes, would be approximately $140 million plus
net interest to date of approximately $10 million.

For 2013, our effective tax rate, excluding Special Items, increased from
25.8% in 2012 to 28.0% primarily as a result of an incremental provision
recorded related to this matter. We believe we have properly reported our
taxable income and paid taxes consistent with all applicable laws and intend
to vigorously defend our position, including through litigation, if we are
unable to settle with the IRS through administrative proceedings. As the
final resolution of the proposed adjustments remains uncertain, there can
be no assurance that payments due upon final resolution of this issue will
not exceed our currently recorded reserve and such payments could have
a material adverse effect on our financial position. Additionally, if increases
to our reserves are deemed necessary due to future developments related
to this issue, such increases could have a material adverse effect on our
results of operations as they are recorded. The Company does not expect
resolution of this matter within twelve months and cannot predict with
certainty the timing of such resolution.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

Part II Part II
Item 7 management’s Discussion and Analysis of Financial Condition and Results of Operations

restaurant Unit activity

Franchisees
26,928
1,274
268
897
(756)
(3)
28,608
1,358
(138)
286
(773)
8
29,349

Company
7,437
989
204
(897)
(155)
—
7,578
940
138
(286)
(239)
—
8,131

Unconsolidated
Affiliates
587
82
—
—
(9)
—
660
66
—
—
(10)
—
716

Total Excluding
Licensees(a)
34,952
2,345
472
—
(920)
(3)
36,846
2,364
—
—
(1,022)
8
38,196

77%

21%

100%

Franchisees
201
25
273
53
(33)
519
10
(1)
28
(55)
501

Company
3,705
782
199
(53)
(86)
4,547
664
1
(28)
(158)
5,026

Unconsolidated
Affiliates
587
82
—
—
(9)
660
66
—
—
(10)
716

Total Excluding
Licensees(a)
4,493
889
472
—
(128)
5,726
740
—
—
(223)
6,243

81%

11%

100%

Franchisees
12,476
873
(2)
376
(400)
(1)
13,322
936
(112)
44
(408)
2
13,784

Company
1,511
76
2
(376)
(35)
—
1,178
119
112
(44)
(39)
—
1,326

91%

Unconsolidated
Affiliates
—
—
—
—
—
—
—
—
—
—
—
—
—
—%

Total Excluding
Licensees(a)
13,987
949
—
—
(435)
(1)
14,500
1,055
—
—
(447)
2
15,110

100%

Worldwide
Balance at end of 2011
New Builds
Acquisitions(b)
Refranchising
Closures
Other
Balance at end of 2012
New Builds
Acquisitions
Refranchising
Closures
Other
BALANCE AT END OF 2013
% of Total

China
Balance at end of 2011
New Builds
Acquisitions(b)
Refranchising
Closures
Balance at end of 2012
New Builds
Acquisitions
Refranchising
Closures
BALANCE AT END OF 2013
% of Total

YRI
Balance at end of 2011
New Builds
Acquisitions
Refranchising
Closures
Other
Balance at end of 2012
New Builds
Acquisitions
Refranchising
Closures
Other
BALANCE AT END OF 2013
% of Total

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-KPart II Part II
Item 7 management’s Discussion and Analysis of Financial Condition and Results of Operations

Franchisees

Company

Unconsolidated
Affiliates

Total Excluding
Licensees(a)

13,867
273
468
(312)
(2)
14,294

323
(19)
214
(296)
6
14,522

90%

2,139
96
(468)
(34)
—
1,733
89
19

(214)
(39)
—

1,588

10%

—
—
—
—
—
—
—
—
—
—
—
—
—%

16,006
369
—
(346)
(2)
16,027

412
—
—
(335)
6
16,110

100%

Franchisees

Company

384
103
(3)
(11)
473
89
(6)
(14)
542

74%

82
35
3
—
120
68
6
(3)

191

26%

Unconsolidated
Affiliates
—
—
—
—
—
—
—
—
—
—%

Total Excluding
Licensees(a)

466
138
—
(11)
593
157
—
(17)
733
100%

U.S.
Balance at end of 2011
New Builds
Refranchising
Closures
Other
Balance at end of 2012
New Builds
Acquisitions
Refranchising
Closures
Other
BALANCE AT END OF 2013
% of Total

India
Balance at end of 2011
New Builds
Acquisitions
Closures
Balance at end of 2012
New Builds
Acquisitions
Closures
BALANCE AT END OF 2013
% of Total

(a) The Worldwide, YRI and U.S. totals exclude 2,115, 119 and 1,996 licensed units, respectively, at December 28, 2013. While there are no licensed units in China, we have excluded from
the Worldwide and China totals 7 Company-owned units that are similar to licensed units. There are no licensed units in India. The units excluded offer limited menus and operate in non-
traditional locations like malls, airports, gasoline service stations, train stations, subways, convenience stores, stadiums and amusement parks where a full scale traditional outlet would not
be practical or efficient. As licensed units have lower average unit sales volumes than our traditional units and our current strategy does not place a significant emphasis on expanding our
licensed units, we do not believe that providing further detail of licensed unit activity provides significant or meaningful information at this time.
Includes 472 Little Sheep units acquired on February 1, 2012.

(b)

Multibrand restaurants are included in the totals above. Multibrand conversions increase the sales and points of distribution for the second brand added
to a restaurant but do not result in an additional unit count. Similarly, a new multibrand restaurant, while increasing sales and points of distribution for
two brands, results in just one additional unit count.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-KPart II Part II
Item 7 management’s Discussion and Analysis of Financial Condition and Results of Operations

System Sales Growth

The following tables detail the key drivers of system sales growth for each reportable segment by year. Net unit growth represents the net impact of
actual system sales growth due to new unit openings and historical system sales lost due to closures as well as any necessary rounding.

Same store sales growth (decline)
Net unit growth and other
Foreign currency translation
% CHANGE
% CHANGE, EXCLUDING FOREX

Same store sales growth (decline)
Net unit growth and other(b)
Foreign currency translation
53rd week in 2011
% CHANGE
% CHANGE, EXCLUDING FOREX
AND 53RD WEEK IN 2011

China

YRI

(13)%
9
3
(1)%
(4)%

1%
4
(4)
1%
5%

2013 vs. 2012

U.S.

—%
1
N/A

1%
1%

2012 vs. 2011

India(a)

—%
20
(9)
11%
20%

Worldwide
(2)%
4
(1)
1%
2%

China

YRI

U.S.

India

Worldwide

4%
16
3
N/A
23%

20%

3%
3
(3)
(1)
2%

5%
(5)
N/A
(1)
(1)%

—%

5%
24
(16)
N/A
13%

29%

4%
2
(1)
(1)
4%

(a) At the beginning of fiscal 2013, we eliminated the period lag that was previously used to facilitate the reporting of our India Division’s results. Accordingly, the India Division’s 2013 results include
the months of January through December 2013. Due to the immateriality of the India Division’s results we did not restate the prior year’s operating results for the elimination of this period lag.
Therefore, the 2012 results continue to include the months of December 2011 through November 2012. Additionally, the table above compares these months. If we had compared like months
in 2013 to 2012, India Division system sales, excluding the impact of foreign currency translation, would have been 2% higher and same-store sales would have been 1% lower versus what is
shown above, respectively for the year ended December 28, 2013.

(b) For the year ended December 29, 2012, system sales growth includes a 1% and 5% negative impact for YRI and the U.S., respectively, related to the LJS and A&W divestitures and a 3% positive

impact for China related to the acquisition of Little Sheep. Combined these items had a 2% net negative impact for Worldwide system sales for the year ended December 29, 2012.

Company-Operated Store results

The following tables detail the key drivers of the year-over-year changes of
Company sales and Restaurant profit for each reportable segment by year.

Store portfolio actions represent the net impact of new unit openings, acquisitions,
refranchisings and store closures on Company sales or Restaurant profit. The
impact of new unit openings and acquisitions represent the actual Company
sales or Restaurant profit for the periods the Company operated the restaurants
in the current year but did not operate them in the prior year. The impact of
refranchisings and store closures represent the actual Company sales or
Restaurant profit for the periods in the prior year while the Company operated
the restaurants but did not operate them in the current year.

The dollar changes in Company Restaurant profit by year were as follows:

The impact on Company sales within the Other column primarily represents
the impact of same-store sales. The impact on Cost of sales, Cost of labor
and Occupancy and other within the Other column represents the impact of
same-store sales, as well as the impact of changes in costs such as inflation/
deflation. The impact on costs from same-store sales varies to the extent
the same-store sales change is due to a change in pricing, the number of
transactions or sales mix.

China

Income/(Expense)
Company sales
Cost of sales
Cost of labor
Occupancy and other
RESTAURANT PROFIT
Restaurant margin

2012
6,797
(2,312)
(1,259)
(1,993)
1,233

18.1%

2013 vs. 2012

Store Portfolio
Actions

611 $
(190)
(129)
(211)
81

Other

(785) $
303
62
127
(293) $

FX
177 $
(59)
(34)
(55)
29

2013
6,800
(2,258)
(1,360)
(2,132)
1,050

15.4%

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

Part II Part II
Item 7 management’s Discussion and Analysis of Financial Condition and Results of Operations

Income/(Expense)
Company sales
Cost of sales
Cost of labor
Occupancy and other
RESTAURANT PROFIT
Restaurant margin

2011
5,487
(1,947)
(890)
(1,568)
1,082

19.7%

2012 vs. 2011

Store Portfolio
Actions

910 $
(318)
(207)
(336)
49

Other

249 $
3

(134)
(45)
73

FX
151 $
(50)
(28)
(44)
29

2012
6,797
(2,312)
(1,259)
(1,993)
1,233

18.1%

In 2013, the increase in China Company sales and Restaurant profit
associated with store portfolio actions was driven by new unit development
and the 2012 acquisition of Little Sheep, partially offset by restaurant closures.
Significant other factors impacting Company sales and/or Restaurant profit
were Company same-store sales declines of 12% and the impact of wage
rate inflation of 7%, partially offset by restaurant operating efficiencies.

In 2012, the increase in China Company sales associated with store portfolio
actions was primarily driven by new unit development and the acquisition
of Little Sheep, partially offset by restaurant closures. The increase in China
Restaurant profit associated with store portfolio actions was primarily
driven by new unit development, partially offset by restaurant closures.
Significant other factors impacting Company sales and/or Restaurant profit
were Company same-store sales growth of 4%, which was partially offset
by wage rate inflation of 10% and higher rent and utilities.

YrI

Income/(Expense)
Company sales
Cost of sales
Cost of labor
Occupancy and other
RESTAURANT PROFIT
Restaurant margin

2013 vs. 2012

Store Portfolio
Actions

(252) $
39
88
95
(30) $

Other

42 $
(15)
(2)
(24)
1

FX
(33) $
15
5
9
(4) $

2012
2,402
(787)
(599)
(705)
311
12.9%

Store Portfolio
Actions
100
(65)

(3)
(16)
16

2011
2,341
(743)
(608)
(700)
290
12.4%

2012 vs. 2011

Other

72 $
(18)
(15)
(18)
21

53rd Week
in 2011

(29) $
9
8
6
(6) $

FX
(82) $
30
19
23
(10) $

2013
2,159
(748)
(508)
(625)
278
12.9%

2012
2,402
(787)
(599)
(705)
311
12.9%

In 2013, the decrease in YRI Company sales and Restaurant profit
associated with store portfolio actions was driven by the refranchising of
our remaining Company-owned Pizza Hut dine-in restaurants in the UK in
the fourth quarter of 2012. Net new unit development and the acquisition of
106 stores in Turkey from a franchisee partially offset the decline in Company
sales related to refranchising. Significant other factors impacting Company
sales and/or Restaurant profit were Company same-store sales growth of
2%, partially offset by higher restaurant operating costs.

In 2012, the increase in YRI Company sales and Restaurant profit associated
with store portfolio actions was driven by the acquisition of restaurants in
South Africa in the fourth quarter of 2011 and net new unit development,
partially offset by refranchising. Significant other factors impacting Company
sales and/or Restaurant profit were Company same-store sales growth
of 3%, which was offset by the combination of higher labor costs and
commodity inflation.

U.S.

Income/(Expense)
Company sales
Cost of sales
Cost of labor
Occupancy and other
RESTAURANT PROFIT
Restaurant margin

2013 vs. 2012

Store Portfolio
Actions

Other

(431) $
130
131
119
(51) $

(3) $
(5)
5
(5)
(8) $

2012
2,550
(740)
(751)
(643)
416
16.3%

2013
2,116
(615)
(615)
(529)
357
16.9%

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

Part II Part II
Item 7 management’s Discussion and Analysis of Financial Condition and Results of Operations

Income/(Expense)
Company sales
Cost of sales
Cost of labor
Occupancy and other
RESTAURANT PROFIT
Restaurant margin

2012 vs. 2011

Store Portfolio
Actions

(535) $
177
165
164
(29) $

2011
3,000
(917)
(912)
(809)
362
12.1%

Other
128
(13)
(16)
(7)
92

53rd Week in
2011

(43) $
13
12
9
(9) $

2012
2,550
(740)
(751)
(643)
416
16.3%

In 2013, the decrease in U.S. Company sales and Restaurant profit
associated with store portfolio actions was driven by refranchising, partially
offset by net new unit development. Significant other factors impacting
Company sales and/or Restaurant profit were higher commodity costs
and promotional activities. Company same-store sales were flat in 2013.

In 2012, the decrease in U.S. Company sales and Restaurant profit
associated with store portfolio actions was primarily driven by refranchising.
Significant other factors impacting Company sales and/or Restaurant
profit were same-store sales growth of 5%, including the positive impact
of less discounting, combined with the positive impact of sales mix shifts
as well as supply chain efficiencies, partially offset by higher restaurant-
level incentive compensation costs.

Franchise and License Fees and Income

China
YRI
U.S.
India
WORLDWIDE

Amount

2013
105 $
940
837
18
1,900 $

2012
101 $
879
802
18
1,800 $

% Increase (Decrease)
2012
29
3
2
6
4

2013
4
7
4
—
6

2011
79
851
786
17
1,733

% Increase (Decrease)
excluding foreign
currency translation
2012
25
7
2
18
6

2013
2
10
4
8
7

% Increase (Decrease)
excluding foreign
currency translation
and 53rd week

2013
2
10
4
8
7

2012
25
8
4
18
7

China Franchise and license fees and income increased 2% in 2013,
excluding the impact of foreign currency translation. The increase was driven
by refranchising and franchise new unit development, partially offset by
franchise same-store sales declines. China Franchise and license fees and
income increased 25% in 2012, excluding the impact of foreign currency
translation. The increase was driven by refranchising, franchise new unit
development and franchise same-store sales growth.

YRI Franchise and license fees and income increased 10% in 2013, excluding
the impact of foreign currency translation. The increase was driven by
franchise net new unit development, franchise same-store sales growth and

refranchising. YRI Franchise and license fees and income increased 8% in
2012, excluding the impact of foreign currency translation and the 53rd week
in 2011. The increase was driven by franchise net new unit development
and franchise same-store sales growth.

U.S. Franchise and license fees and income increased 4% in 2013 driven
by refranchising. U.S. Franchise and license fees and income increased
4% in 2012, excluding the 53rd week in 2011. The increase was driven by
refranchising and franchise same-store sales growth, partially offset by the
LJS and A&W divestitures.

General and administrative Expenses

China
YRI
U.S.
India
Unallocated
WORLDWIDE

Amount

% Increase (Decrease)

2013
357 $
394
427
27
207
1,412 $

2012
334 $
414
467
24
271
1,510 $

2011
275
400
450
22
225
1,372

2013
7
(5)
(9)
14
(24)
(6)

2012
21
3
4
9
21
10

% Increase (Decrease)
excluding foreign
currency translation
2012
19
6
4
25
21
11

2013
5
(3)
(9)
25
(24)
(6)

% Increase (Decrease)
excluding foreign
currency translation
and 53rd week

2013
5
(3)
(9)
25
(24)
(6)

2012
19
7
5
25
22
11

China G&A expenses for 2013, excluding the impact of foreign currency
translation, increased due to higher headcount and wage inflation and
additional G&A as a result of consolidating Little Sheep beginning in the
second quarter of 2012, partially offset by lower incentive compensation
costs.

China G&A expenses for 2012, excluding the impact of foreign currency
translation, increased due to higher headcount and wage inflation and
additional G&A as a result of consolidating Little Sheep beginning in the
second quarter of 2012.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

Part II Part II
Item 7 management’s Discussion and Analysis of Financial Condition and Results of Operations

YRI G&A expenses for 2013, excluding the impact of foreign currency
translation, decreased due to the impact of refranchising our remaining
Company-owned Pizza Hut UK dine-in restaurants in the fourth quarter
of 2012, lapping certain prior year headquarter restructuring costs and
a pension curtailment gain in the first quarter of 2013 related to one of
our UK pension plans, partially offset by higher headcount in strategic
growth markets.

YRI G&A expenses for 2012, excluding the impact of foreign currency
translation, increased due to investments in strategic growth markets,
including the acquisition of restaurants in South Africa in 2011, and
increased compensation costs in the remaining markets.

U.S. G&A expenses for 2013 decreased due to lower incentive compensation
costs, lapping higher litigation costs recorded in 2012, our restaurant
refranchising initiatives and lower pension costs.

Franchise and License Expenses

U.S. G&A expenses for 2012 increased due to higher pension costs,
incentive compensation costs and litigation costs, partially offset by the
LJS and A&W divestitures and our restaurant refranchising initiatives.

Unallocated G&A expenses for 2013 decreased due to lower pension
costs, which includes lower settlement charges, and lower incentive
compensation costs, partially offset by higher legal and professional fees.

Unallocated G&A expenses for 2012 increased due to higher pension
costs, including a pension settlement charge of $87 million, partially offset
by lapping costs related to the actions taken as part of our U.S. business
transformation measures, lower litigation costs and costs related to the
LJS and A&W divestitures in 2011.

China
YRI
U.S.
India
Unallocated
WORLDWIDE

Amount

2013

2012

13 $
65
78
2
—
158 $

9 $
50
74
—
—
133 $

% Increase (Decrease)

2011
4
51
92
—
(2)
145

2013
41
29
6
NM
—
19

2012
NM
—
(20)
—
78
(8)

% Increase (Decrease)
excluding foreign
currency translation
2012
NM
4
(20)
—
78
(7)

2013
38
27
6
NM
—
19

% Increase (Decrease)
excluding foreign
currency translation
and 53rd week
2012
NM
4
(19)
—
78
(7)

2013
38
27
6
NM
—
19

China Franchise and license expenses for 2013 and 2012, excluding the
impact of foreign currency translation, increased due to higher franchise-
related rent expense and depreciation as a result of refranchising.

YRI Franchise and license expenses for 2013, excluding the impact of
foreign currency translation, increased due to costs associated with
our bi-annual franchise convention, higher marketing costs and higher
franchise-related rent expense and depreciation as a result of refranchising.

YRI Franchise and license expenses for 2012, excluding foreign currency
translation, were higher due to higher franchise rent expense and depreciation
as a result of refranchising, partially offset by lapping costs associated
with our bi-annual franchise convention.

Worldwide Other (Income) Expense

Equity income from investments in unconsolidated affiliates(a)
Gain upon acquisition of Little Sheep(b)
Foreign exchange net (gain) loss and other
OTHER (INCOME) EXPENSE

U.S. Franchise and license expenses for 2013 increased due to higher
franchise development incentives, lapping recoveries of past due receivables
in 2012 and higher franchise-related rent expense and depreciation as a
result of refranchising.

U.S. Franchise and license expenses for 2012 were positively impacted by
15% due to the LJS and A&W divestitures. The remaining decrease was
driven by lower franchise development incentives, partially offset by higher
franchise-related rent expense and depreciation as a result of refranchising.

2013

(26) $
—
10
(16) $

2012

(47) $
(74)
6
(115) $

2011
(47)
—
(6)
(53)

(a) Declines in the year ended December 28, 2013 are due to the impact of KFC sales declines in China on net income of our unconsolidated affiliates.
(b) See the Little Sheep Acquisition and Subsequent Impairment section of Note 4 for further discussion of the gain upon acquisition of Little Sheep.

Worldwide Closure and Impairment (Income) Expenses and refranchising (Gain) Loss

See the Store Portfolio Strategy section for more detail of our refranchising activity and Note 4 for a summary of the Closure and impairment (income)
expenses and Refranchising (gain) loss by reportable operating segment. See Significant Known Events, Trends or Uncertainties Impacting or Expected
to Impact Comparisons of Reported or Future Results and the Little Sheep Acquisition and Subsequent Impairment section of Note 4 for information
on Little Sheep Impairment.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

Part II Part II
Item 7 management’s Discussion and Analysis of Financial Condition and Results of Operations

Operating Profit

China
YRI
U.S.
India
Unallocated Occupancy and other
Unallocated and corporate expenses
Unallocated Closures and impairment expense
Unallocated Other income (expense)
Unallocated Refranchising gain (loss)
OPERATING PROFIT

2013
777
760
684
(15)
—
(207)
(295)
(6)
100
$ 1,798

Amount
2012
$ 1,015
715
666
(1)
16
(271)

—
76
78
$ 2,294

2011
908
673
589
—
14
(223)
(80)
6
(72)
$ 1,815

% B/(W)

2013

(23)
6
3
NM
NM
24
NM
NM
29
(22)

2012
12
6
13
NM
14
(22)
NM
NM
NM
26

% B/(W) excluding foreign
currency translation

2013

(26)
10
3
NM
NM
24
NM
NM
29
(22)

2012
9
10
13
NM
14
(22)
NM
NM
NM
26

China Operating margin
YRI Operating margin
U.S. Operating margin

11.3%
24.5%
23.2%

14.7%
21.8%
19.9%

16.3%
21.1%
15.5%

(3.4) ppts.
2.7 ppts.
3.3 ppts.

(1.6) ppts.
0.7 ppts.
4.4 ppts.

(3.5) ppts.
3.1 ppts.
N/A

(1.7) ppts.
0.7 ppts.
N/A

China Division Operating Profit decreased 26% in 2013, excluding the
impact of foreign currency, driven by same-store sales declines at KFC,
partially offset by the impact of new unit development and restaurant
operating efficiencies. See the China Poultry Supply Incident and Avian Flu
section for further details on KFC China’s 2013 same-store sales declines.

China Division Operating Profit increased 9% in 2012, excluding the
impact of foreign currency, driven by the impact of same-store sales
growth and new unit development, partially offset by higher restaurant
operating costs and higher G&A expenses. Leap year added an extra
day in the year ended December 29, 2012 and resulted in an additional
$5 million of Operating Profit. This was offset by deal costs related to the
acquisition of Little Sheep.

YRI Division Operating Profit increased 10% in 2013, excluding the
impact of foreign currency. The refranchising of our Pizza Hut UK dine-in
business in the fourth quarter of 2012 favorably impacted Operating Profit
by 3%, including lapping restaurant impairment charges recorded in the
fourth quarter of 2012. Excluding foreign currency and the Pizza Hut UK
refranchising, the increase was driven by the impact of same-store sales
growth and net new unit development, partially offset by higher restaurant
operating costs and higher franchise and license expenses.

YRI Division Operating Profit increased 10% in 2012, excluding the impact
of foreign currency, driven by the impact of same-store sales growth and

net new unit development, partially offset by higher restaurant operating
costs and higher G&A expenses.

U.S. Operating Profit increased 3% in 2013. Refranchising unfavorably
impacted Operating Profit by 3%. Excluding the unfavorable impact from
refranchising, the increase was driven by lower G&A expenses and net
new unit development.

U.S. Operating Profit increased 13% in 2012. The increase was driven by
the impact of same-store sales growth and net new unit development,
partially offset by higher G&A expenses.

Unallocated and corporate expenses in 2013, 2012 and 2011 are discussed
in the General and Administrative Expenses section of the MD&A.

Unallocated Closure and impairment expenses for 2013 represents an
impairment charge of $295 million related to Little Sheep. See the Little
Sheep Acquisition and Impairment section of Note 4.

Unallocated Closure and impairment expense in 2011 represents $80
million of losses related to the LJS and A&W divestitures.

Unallocated Other income (expense) in 2012 includes a non-cash gain of
$74 million related to our acquisition of Little Sheep. See Note 4.

Unallocated Refranchising gain (loss) in 2013, 2012 and 2011 is discussed
in Note 4.

Interest Expense, Net

Interest expense
Interest income
INTEREST EXPENSE, NET

2013
270 $
(23)
247

2012
169 $
(20)
149

2011
184
(28)
156

The increase in Interest expense, net for 2013 was primarily driven by $118 million of premiums paid and other costs related to the extinguishment of
debt, partially offset by lower average borrowings outstanding and lower interest rates versus 2012. See Losses Related to the Extinguishment of Debt
section of Note 4. Additionally, Interest income increased by $9 million due to recoveries of franchise notes.

The decrease in Interest expense, net for 2012 was primarily driven by lower average borrowings outstanding versus 2011.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

Part II Part II
Item 7 management’s Discussion and Analysis of Financial Condition and Results of Operations

Income taxes

The reconciliation of income taxes calculated at the U.S. federal tax statutory rate to our effective tax rate is set forth below:

2013

2012

2011

U.S. federal statutory rate
State income tax, net of federal tax benefit
Statutory rate differential attributable to foreign operations
Adjustments to reserves and prior years
Net benefit from LJS and A&W divestitures
Change in valuation allowances
Other, net
INCOME TAX PROVISION

543
3
(177)
49
—
23
46
487

35.0% $

0.2

(11.4)
3.1
—
1.5
3.0

31.4% $

751
4
(165)
(47)
—
14
(20)
537

35.0% $

0.2
(7.7)
(2.2)

—
0.6
(0.9)
25.0% $

580
2
(218)
24
(72)
22
(14)
324

35.0%
0.1

(13.1)

1.4
(4.3)
1.3
(0.9)
19.5%

Statutory rate differential attributable to foreign operations. This item includes
local taxes, withholding taxes, and shareholder-level taxes, net of foreign
tax credits. The favorable impact is primarily attributable to a majority of
our income being earned outside the U.S. where tax rates are generally
lower than the U.S. rate.

In 2012, this benefit was negatively impacted by the repatriation of
current year foreign earnings to the U.S. as we recognized additional tax
expense, resulting from the related effective tax rate being lower than the
U.S. federal statutory rate.

In 2011, this benefit was positively impacted by the repatriation of current
year foreign earnings as we recognized excess foreign tax credits, resulting
from the related effective tax rate being higher than the U.S. federal
statutory rate.

Adjustments to reserves and prior years. This item includes: (1) changes in
tax reserves, including interest thereon, established for potential exposure
we may incur if a taxing authority takes a position on a matter contrary to
our position; and (2) the effects of reconciling income tax amounts recorded
in our Consolidated Statements of Income to amounts reflected on our tax
returns, including any adjustments to the Consolidated Balance Sheets.
The impact of certain effects or changes may offset items reflected in the
‘Statutory rate differential attributable to foreign operations’ line.

In 2013, this item was negatively impacted by the provision recorded to
the continuing dispute with the IRS regarding the valuation of rights to
intangibles transferred to certain foreign subsidiaries. See Internal Revenue
Service Proposed Adjustments section of Note 17.

In 2012, this item was favorably impacted by the resolution of uncertain
tax positions in certain foreign jurisdictions.

Net benefit from LJS and A&W divestitures. This item includes a one-time
$117 million tax benefit, including approximately $8 million state benefit,
recognized on the LJS and A&W divestitures in 2011, partially offset by
$45 million of valuation allowance, including approximately $4 million state
expense related to capital loss carryforwards recognized as a result of
the divestitures. In addition, we recorded $32 million of tax benefits on
$86 million of pre-tax losses and other costs which resulted in $104 million
of total net tax benefits related to the divestitures.

Consolidated Cash Flows

Net cash provided by operating activities was $2,139 million in 2013
compared to $2,294 million in 2012. The decrease was primarily due to
lower Operating Profit before Special Items and higher income taxes paid.

In 2012, net cash provided by operating activities was $2,294 million
compared to $2,170 million in 2011. The increase was primarily driven
by higher Operating Profit before Special Items, partially offset by timing
of cash payments for operating expenses and higher income taxes paid.

Change in valuation allowances. This item relates to changes for deferred
tax assets generated or utilized during the current year and changes in
our judgment regarding the likelihood of using deferred tax assets that
existed at the beginning of the year. The impact of certain changes may
offset items reflected in the ‘Statutory rate differential attributable to foreign
operations’ line.

In 2013, $23 million of net tax expense was driven by $32 million for
valuation allowances recorded against deferred tax assets generated during
the current year, partially offset by a $9 million net tax benefit resulting
from a change in judgment regarding the future use of certain deferred
tax assets that existed at the beginning of the year.

In 2012, $14 million of net tax expense was driven by $16 million for
valuation allowances recorded against deferred tax assets generated during
the current year, partially offset by a $2 million net tax benefit resulting
from a change in judgment regarding the future use of certain deferred
tax assets that existed at the beginning of the year.

In 2011, $22 million of net tax expense was driven by $15 million for
valuation allowances recorded against deferred tax assets generated during
the current year and $7 million of tax expense resulting from a change in
judgment regarding the future use of certain foreign deferred tax assets that
existed at the beginning of the year. These amounts exclude $45 million
in valuation allowance additions related to capital losses recognized as a
result of the LJS and A&W divestitures, which are presented within ‘Net
Benefit from LJS and A&W divestitures’.

Other. This item primarily includes the impact of permanent differences
related to current year earnings as well as U.S. tax credits and deductions.

In 2013, this item was negatively impacted by the $222 million non-cash
impairment of Little Sheep goodwill, which resulted in no related tax benefit.

In 2012, this item was positively impacted by a one-time pre-tax gain
of $74 million, with no related income tax expense, recognized on our
acquisition of additional interest in, and consolidation of Little Sheep.

Net cash used in investing activities was $886 million in 2013 compared
to $1,005 million in 2012. The decrease was primarily driven by lapping
the acquisition of Little Sheep and release of related restricted cash. See
Little Sheep Acquisition and Subsequent Impairment section of Note 4.

In 2012, net cash used in investing activities was $1,005 million compared
to $1,006 million in 2011. The acquisition of Little Sheep, increased capital
spending in China and the lapping of proceeds from the 2011 divestitures
of LJS and A&W were offset by the release of restricted cash related to the
Little Sheep acquisition and higher proceeds from refranchising in 2012.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

Part II Part II
Item 7 management’s Discussion and Analysis of Financial Condition and Results of Operations

Net cash used in financing activities was $1,451 million in 2013
compared to $1,716 million in 2012. The decrease was primarily driven by
lower net debt payments and lower share repurchases in 2013, partially
offset by higher dividends paid on common stock and lower tax benefits
from share-based compensation.

In 2012, net cash used in financing activities was $1,716 million compared
to $1,413 million in 2011. The increase was driven by increased share
repurchases.

Consolidated Financial Condition

The changes in our Goodwill and Intangible assets, net are primarily the result of the partial impairment of Little Sheep’s goodwill and trademark. See
the Little Sheep Acquisition and Subsequent Impairment section of Note 4.

The changes in our Other liabilities and deferred credits and Accumulated other comprehensive income (loss) are primarily the result of actuarial gains
in our U.S. pension plans recognized in 2013. See Note 14.

Liquidity and Capital resources

Operating in the QSR industry allows us to generate substantial cash
flows from the operations of our Company-owned stores and from our
extensive franchise operations which require a limited YUM investment.
Net cash provided by operating activities has exceeded $1 billion in each
of the last twelve fiscal years, including over $2 billion in 2013, 2012 and
2011. We expect these levels of net cash provided by operating activities
to continue in the foreseeable future. However, unforeseen downturns in
our business could adversely impact our cash flows from operations from
the levels historically realized.

In the event our cash flows are negatively impacted by business downturns,
we believe we have the ability to temporarily reduce our discretionary
spending without significant impact to our long-term business prospects.
Our discretionary spending includes capital spending for new restaurants,
acquisitions of restaurants from franchisees, repurchases of shares of our
Common Stock and dividends paid to our shareholders. As of December 28,
2013 we had approximately $1.2 billion in unused capacity under our
revolving credit facility that expires in March 2017.

China and YRI represented approximately 70% of the Company’s segment
operating profit in 2013 and both generate a significant amount of positive cash
flows that we have historically used to fund our international development. To
the extent we have needed to repatriate international cash to fund our U.S.
discretionary cash spending, including share repurchases, dividends and
debt repayments, we have historically been able to do so in a tax-efficient
manner. If we experience an unforeseen decrease in our cash flows from
our U.S. business or are unable to refinance future U.S. debt maturities we
may be required to repatriate future international earnings at tax rates higher
than we have historically experienced.

We currently have investment-grade ratings from Standard & Poor’s Rating
Services (BBB) and Moody’s Investors Service (Baa3). While we do not
anticipate a downgrade in our credit rating, a downgrade would increase
the Company’s current borrowing costs and could impact the Company’s
ability to access the credit markets cost-effectively if necessary. Based on
the amount and composition of our debt at December 28, 2013, which
included no borrowings outstanding under our revolving credit facility, our
interest expense would not materially increase on a full-year basis should
we receive a one-level downgrade in our ratings.

Discretionary Spending

During 2013, we invested $1,049 million in capital spending, including
$568 million in China, $289 million in YRI, $161 million in the U.S. and
$31 million in India. For 2014, we estimate capital spending will be
approximately $1.2 billion.

During the year ended December 28, 2013 we repurchased shares for
$750 million, which excluded the effect of $20 million in shares repurchased
with trade dates prior to the 2012 fiscal year end but cash settlement dates

subsequent to the 2012 fiscal year. On November 16, 2012 our Board of
Directors authorized share repurchases through May 2014 of up to $1 billion
(excluding applicable transaction fees) of our outstanding Common Stock.
On November 22, 2013, our Board of Directors authorized additional share
repurchases through May 2015 of up to $750 million (excluding applicable
transaction fees) of our outstanding Common Stock. At December 28,
2013, we had remaining capacity to repurchase up to $953 million of
outstanding Common Stock (excluding applicable transaction fees) under
these authorizations. Shares are repurchased opportunistically as part of
our regular capital structure decisions.

During the year ended December 28, 2013, we paid cash dividends of
$615 million. Additionally, on November 22, 2013 our Board of Directors
approved cash dividends of $0.37 per share of Common Stock that were
distributed on February 7, 2014 to shareholders of record at the close of
business on January 17, 2014. The Company targets an ongoing annual
dividend payout ratio of 35% to 40% of net income.

Borrowing Capacity

Our primary bank credit agreement comprises a $1.3 billion syndicated
senior unsecured revolving credit facility (the “Credit Facility”) which matures
in March 2017 and includes 24 participating banks with commitments
ranging from $23 million to $115 million. We believe the syndication reduces
our dependency on any one bank.

Under the terms of the Credit Facility, we may borrow up to the maximum
borrowing limit, less outstanding letters of credit or banker’s acceptances,
where applicable. At December 28, 2013, our unused Credit Facility totaled
$1.2 billion net of outstanding letters of credit of $65 million. There were no
borrowings outstanding under the Credit Facility at December 28, 2013.
The interest rate for most borrowings under the Credit Facility ranges
from 1.0% to 1.75% over the “London Interbank Offered Rate” (“LIBOR”).
The exact spread over LIBOR under the Credit Facility depends upon our
performance against specified financial criteria. Interest on any outstanding
borrowings under the Credit Facility is payable at least quarterly.

The Credit Facility is unconditionally guaranteed by our principal domestic
subsidiaries. This agreement contains financial covenants relating to
maintenance of leverage and fixed-charge coverage ratios and also
contains affirmative and negative covenants including, among other things,
limitations on certain additional indebtedness and liens, and certain other
transactions specified in the agreement. Given the Company’s strong
balance sheet and cash flows we were able to comply with all debt
covenant requirements at December 28, 2013 with a considerable amount
of cushion. Additionally, the Credit Facility contains cross-default provisions
whereby our failure to make any payment on our indebtedness in a principal
amount in excess of $125 million, or the acceleration of the maturity of
any such indebtedness, will constitute a default under such agreement.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-KPart II Part II
Item 7 management’s Discussion and Analysis of Financial Condition and Results of Operations

The majority of our remaining long-term debt primarily comprises Senior
Unsecured Notes with varying maturity dates from 2014 through 2043
and interest rates ranging from 2.38% to 6.88%. The Senior Unsecured
Notes represent senior, unsecured obligations and rank equally in right
of payment with all of our existing and future unsecured unsubordinated
indebtedness. Amounts outstanding under Senior Unsecured Notes
were $2.8 billion at December 28, 2013. Our Senior Unsecured Notes
provide that the acceleration of the maturity of any of our indebtedness in
a principal amount in excess of $50 million will constitute a default under
the Senior Unsecured Notes if such acceleration is not annulled, or such
indebtedness is not discharged, within 30 days after notice.

During the fourth quarter of 2013, we issued $325 million aggregate principal
amount of 3.88% 10 year Senior Unsecured Notes and $275 million
aggregate principal amount of 5.35% 30 year Senior Unsecured Notes.
We used the proceeds from our issuances of these Senior Unsecured
Notes in part to repurchase certain of our Senior Unsecured Notes due
March 2018 and November 2037 with principal amounts of $275 million
each totaling $550 million. See Significant Known Events, Trends or
Uncertainties Impacting or Expected to Impact Comparisons of Reported
or Future Results and Note 10 for information on the Repurchase of those
Senior Unsecured Notes.

Contractual Obligations

In addition to any discretionary spending we may choose to make, our significant contractual obligations and payments as of December 28, 2013 included:

Long-term debt obligations(a)
Capital leases(b)
Operating leases(b)
Purchase obligations(c)
Deferred compensation and unfunded
benefit plans(d)
TOTAL CONTRACTUAL OBLIGATIONS

Total
4,300 $
276
5,697
784

Less than
1 Year

186 $
18
721
604

160
11,217 $

21
1,550 $

1-3 Years

3-5 Years

791 $
38
1,299
87

33
2,248 $

529 $
34
1,084
55

29
1,731 $

More than
5 Years
2,794
186
2,593
38

77
5,688

(a) Debt amounts include principal maturities and expected interest payments on a nominal basis. Debt amounts exclude a fair value adjustment of $14 million related to interest rate swaps

that hedge the fair value of a portion of our debt. See Note 10.

(b) These obligations, which are shown on a nominal basis, relate to nearly 7,300 restaurants. See Note 11.
(c) Purchase obligations include agreements to purchase goods or services that are enforceable and legally binding on us and that specify all significant terms, including: fixed or minimum
quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. We have excluded agreements that are cancelable without penalty.
Purchase obligations relate primarily to information technology, marketing, supply agreements, purchases of property, plant and equipment (“PP&E”) as well as consulting, maintenance and
other agreements.
Includes actuarially determined timing of payments from our most significant unfunded pension plan as well as scheduled payments from our deferred compensation plan. This table
excludes $113 million of future benefit payments for deferred compensation and other unfunded benefit plans to be paid upon separation of employee’s service or retirement from the
company, as we cannot reasonably estimate the dates of these future cash payments.

(d)

We have not included in the contractual obligations table approximately
$224 million of long-term liabilities for unrecognized tax benefits relating
to various tax positions we have taken. These liabilities may increase or
decrease over time as a result of tax examinations, and given the status
of the examinations, we cannot reliably estimate the period of any cash
settlement with the respective taxing authorities. These liabilities exclude
amounts that are temporary in nature and for which we anticipate that
over time there will be no net cash outflow.

We sponsor noncontributory defined benefit pension plans covering certain
salaried and hourly employees, the most significant of which are in the
U.S. and UK. The most significant of the U.S. plans, the YUM Retirement
Plan (the “Plan”), is funded while benefits from our other significant U.S.
plan are paid by the Company as incurred. Our funding policy for the Plan
is to contribute annually amounts that will at least equal the minimum
amounts required to comply with the Pension Protection Act of 2006.
However, additional voluntary contributions are made from time to time
to improve the Plan’s funded status. At December 28, 2013 the Plan was
in a net overfunded position of $10 million. The UK pension plans are in
a net overfunded position of $33 million at our 2013 measurement date.

Based on the current funding status of the Plan and our UK pension
plans, we currently estimate that we will not be required to make any
contributions in 2014. Investment performance and corporate bond rates
have a significant effect on our net funding position as they drive our asset
balances and discount rate assumption. Future changes in investment
performance and corporate bond rates could impact our funded status
and the timing and amounts of required contributions in 2014 and beyond.

Our post-retirement plan in the U.S. is not required to be funded in
advance, but is pay as you go. We made post-retirement benefit payments
of $7 million in 2013 and no future funding amounts are included in the
contractual obligations table. See Note 14 for further details about our
pension and post-retirement plans.

We have excluded from the contractual obligations table payments we
may make for exposures for which we are self-insured, including workers’
compensation, employment practices liability, general liability, automobile
liability, product liability and property losses (collectively “property and
casualty losses”) and employee healthcare and long-term disability claims.
The majority of our recorded liability for self-insured property and casualty
losses and employee healthcare and long-term disability claims represents
estimated reserves for incurred claims that have yet to be filed or settled.

Off-Balance Sheet arrangements

We have agreed to provide financial support, if required, to a variable
interest entity that operates a franchisee lending program used primarily to
assist franchisees in the development of new restaurants or the upgrade
of existing restaurants and, to a lesser extent, in connection with the
Company’s refranchising programs in the U.S. We have provided guarantees
of approximately $35 million in support of the franchisee loan program

at December 28, 2013. The total loans outstanding under the loan pool
were $38 million with an additional $42 million available for lending at
December 28, 2013.

Our unconsolidated affiliates had approximately $85 million and
$60 million of debt outstanding as of December 28, 2013 and December 29,
2012, respectively.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

Part II Part II
Item 7 management’s Discussion and Analysis of Financial Condition and Results of Operations

New accounting Pronouncements Not Yet adopted

In March 2013, the Financial Accounting Standards Board (“FASB”) issued
Accounting Standards Update (“ASU”) No. 2013-05, Foreign Currency
Matters, (Topic 830): Parent’s Accounting for the Cumulative Translation
Adjustment upon Derecognition of Certain Subsidiaries or Groups of
Assets within a Foreign Entity or of an Investment in a Foreign Entity
(ASU 2013-05), to resolve a diversity in accounting for the cumulative
translation adjustment of foreign currency upon derecognition of a foreign
subsidiary or group of assets. ASU 2013-05 requires the parent to apply
the guidance in Subtopic 830-30 to release any related cumulative
translation adjustment into net income when a reporting entity (parent)
ceases to have a controlling financial interest in a subsidiary or group
of assets within a foreign entity. Accordingly, the cumulative translation
adjustment should be released into net income only if the sale or transfer
results in the complete or substantially complete liquidation of the foreign
entity in which the subsidiary or group of assets had resided. Further, ASU
2013-05 clarified that the parent should apply the guidance in
Subtopic 810-10 if there is a sale of an investment in a foreign entity, including
both (1) events that result in the loss of a controlling financial interest in
a foreign entity and (2) events that result in an acquirer obtaining control

of an acquiree in which it held an equity interest immediately before the
acquisition date. Accordingly, the cumulative translation adjustment should
be released into net income upon the occurrence of those events. ASU
2013-05 is effective prospectively for the Company in our first quarter of
fiscal 2014. We do not believe the adoption of this standard will have a
significant impact on our consolidated financial statements.

In July 2013, the FASB issued ASU No. 2013-11, Presentation of an
Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a
Similar Tax Loss, or a Tax Credit Carryforward Exists (ASU 2013-11), to
require that in certain cases, an unrecognized tax benefit, or portion of an
unrecognized tax benefit, should be presented in the financial statements
as a reduction to a deferred tax asset for a net operating loss carryforward,
a similar tax loss, or a tax credit carryforward when such items exist in
the same taxing jurisdiction. ASU 2013-11 is effective for the Company
in our first quarter of fiscal 2014. The amendments should be applied
prospectively to all unrecognized tax benefits that exist at the effective
date, and retrospective application is permitted. We do not believe the
adoption of this standard will have a significant impact on our consolidated
financial statements.

Critical accounting Policies and Estimates

Our reported results are impacted by the application of certain accounting
policies that require us to make subjective or complex judgments. These
judgments involve estimations of the effect of matters that are inherently
uncertain and may significantly impact our quarterly or annual results of
operations or financial condition. Changes in the estimates and judgments
could significantly affect our results of operations, financial condition and
cash flows in future years. A description of what we consider to be our
most significant critical accounting policies follows.

Impairment or Disposal of Long-Lived assets

We review long-lived assets of restaurants (primarily PP&E and allocated
intangible assets subject to amortization) semi-annually for impairment, or
whenever events or changes in circumstances indicate that the carrying
amount of a restaurant may not be recoverable. We evaluate recoverability
based on the restaurant’s forecasted undiscounted cash flows, which
incorporate our best estimate of sales growth and margin improvement based
upon our plans for the unit and actual results at comparable restaurants.
For restaurant assets that are deemed to not be recoverable, we write
down the impaired restaurant to its estimated fair value. Key assumptions
in the determination of fair value are the future after-tax cash flows of the
restaurant, which are reduced by future royalties a franchisee would pay,
and a discount rate. The after-tax cash flows incorporate reasonable sales
growth and margin improvement assumptions that would be used by a
franchisee in the determination of a purchase price for the restaurant.
Estimates of future cash flows are highly subjective judgments and can be
significantly impacted by changes in the business or economic conditions.

We perform an impairment evaluation at a restaurant group level if it is more
likely than not that we will refranchise restaurants as a group. Expected
net sales proceeds are generally based on actual bids from the buyer,
if available, or anticipated bids given the discounted projected after-tax
cash flows for the group of restaurants. Historically, these anticipated bids
have been reasonably accurate estimations of the proceeds ultimately
received. The after-tax cash flows used in determining the anticipated bids
incorporate reasonable assumptions we believe a franchisee would make
such as sales growth and margin improvement as well as expectations as
to the useful lives of the restaurant assets, including a deduction for the
anticipated, future royalties we would receive under a franchise agreement
with terms substantially at market entered into simultaneously with the
refranchising transaction.

The discount rate used in the fair value calculations is our estimate of the
required rate of return that a franchisee would expect to receive when
purchasing a similar restaurant or groups of restaurants and the related
long-lived assets. The discount rate incorporates rates of returns for
historical refranchising market transactions and is commensurate with the
risks and uncertainty inherent in the forecasted cash flows.

We evaluate indefinite-lived intangible assets for impairment on an annual
basis or more often if an event occurs or circumstances change that indicates
impairment might exist. We perform our annual test for impairment of our
indefinite-lived intangible assets at the beginning of our fourth quarter.
We may elect to perform a qualitative assessment to determine whether
it is more likely than not that the fair value of an indefinite-lived intangible
asset is greater than its carrying value. If a qualitative assessment is not
performed, or if as a result of a qualitative assessment it is not more likely
than not that the fair value of an indefinite-lived intangible asset exceeds
its carrying value, then the asset’s fair value is compared to its carrying
value. Fair value is an estimate of the price a willing buyer would pay for
the intangible asset and is generally estimated by discounting the expected
future after-tax cash flows associated with the intangible asset.

Our most significant indefinite-lived intangible asset is our Little Sheep
trademark. We wrote down the Little Sheep trademark from $414 million
to $345 million as a result of an impairment charge of $69 million recorded
in the quarter ended September 7, 2013. See the Little Sheep Acquisition
and Subsequent Impairment section of Note 4 for details. No additional
indefinite-lived intangible asset impairment was recorded as a result of
our annual testing at the beginning of the fourth quarter.

The fair value of the Little Sheep trademark was based on the estimated
price a willing buyer would pay for the asset, and was determined using
a relief from royalty valuation approach that included future estimated
sales as a significant input. This fair value incorporated a discount rate of
13% as our estimate of the required rate of return that a third-party buyer
would expect to receive when purchasing the Little Sheep trademark.

While future business results are difficult to predict, we believe the decline in
Little Sheep same-store sales and profit that were deemed an impairment
indicator will be reversed over time and significant new unit development
will take place. The inputs used in determining the fair value of the Little
Sheep trademark assumed that the business will recover to pre-acquisition
average unit sales volumes and profit over the next three years. At such
pre-acquisition sales and profit levels, we believe that the Little Sheep

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-KPart II Part II
Item 7 management’s Discussion and Analysis of Financial Condition and Results of Operations

restaurant-level unit economics will support the new unit development
we assumed in the fair value estimation of the trademark. Long-term
average growth assumptions subsequent to this assumed recovery include
same-store sales growth of 4% and average annual net unit growth of
approximately 75 units.

See Note 2 for a further discussion of our policies regarding the impairment
or disposal of property, plant and equipment and intangible assets.

Impairment of Goodwill

We evaluate goodwill for impairment on an annual basis or more often if
an event occurs or circumstances change that indicates impairment might
exist. Goodwill is evaluated for impairment by determining whether the
fair value of our reporting units exceed their carrying values. Our reporting
units are our operating segments in the U.S., our YRI business units (which
are aligned based on geography) and individual brands in our India and
China Divisions. We may elect to perform a qualitative assessment for our
reporting units to determine whether it is more likely than not that the fair
value of the reporting unit is greater than its carrying value. If a qualitative
assessment is not performed, or if as a result of a qualitative assessment
it is not more likely than not that the fair value of a reporting unit exceeds
its carrying value, then the reporting unit’s fair value is compared to its
carrying value. Fair value is the price a willing buyer would pay for the
reporting unit, and is generally estimated using discounted expected
future after-tax cash flows from Company-owned restaurant operations
and franchise royalties.

Future cash flow estimates and the discount rate are the key assumptions
when estimating the fair value of a reporting unit. Future cash flows are
based on growth expectations relative to recent historical performance and
incorporate sales growth and margin improvement assumptions that we
believe a third-party buyer would assume when determining a purchase
price for the reporting unit. The sales growth and margin improvement
assumptions that factor into the discounted cash flows are highly correlated
as cash flow growth can be achieved through various interrelated strategies
such as product pricing and restaurant productivity initiatives. The discount
rate is our estimate of the required rate of return that a third-party buyer
would expect to receive when purchasing a business from us that constitutes
a reporting unit. We believe the discount rate is commensurate with the
risks and uncertainty inherent in the forecasted cash flows.

We perform our annual goodwill impairment review as of the beginning
of our fourth quarter. Other than the Little Sheep reporting unit discussed
below, the fair values of each of our other reporting units were substantially
in excess of their respective carrying values as of the 2013 goodwill
impairment testing date.

Our most significant goodwill balance is attributed to our Little Sheep
reporting unit. We wrote down Little Sheep’s goodwill from $384 million to
$162 million as a result of an impairment charge of $222 million recorded
in the quarter ended September 7, 2013. See the Little Sheep Acquisition
and Subsequent Impairment section of Note 4 for details on this impairment.
No additional impairment was recorded as a result of our annual impairment
review performed at the beginning of the fourth quarter of 2013. The fair
value of the Little Sheep reporting unit was based on the estimated price
a willing buyer would pay, and was determined using an income approach
with future cash flow estimates generated by the business as a significant
input. Future cash flow estimates are impacted by new unit development,
sales growth and margin improvement. This fair value incorporated a
discount rate of 13% as our estimate of the required rate of return that
a third-party buyer would expect to receive when purchasing the Little
Sheep reporting unit.

While future business results are difficult to predict, we believe the decline in
Little Sheep same-store sales and profits that were deemed an impairment
indicator will be reversed over time and significant new unit development
will take place. As such, the inputs used in determining the fair value of
the Little Sheep reporting unit assumed that the business will recover to
pre-acquisition average unit sales volumes and profit levels over the next

three years. At such pre-acquisition sales and profit levels, we believe
that the Little Sheep restaurant-level unit economics will support the new
unit development we assumed in the fair value estimation of the reporting
unit. Long-term average growth assumptions subsequent to this assumed
recovery include same-store sales growth of 4% and average annual net
unit growth of approximately 75 units.

When we refranchise restaurants, we include goodwill in the carrying
amount of the restaurants disposed of based on the relative fair values
of the portion of the reporting unit disposed of in the refranchising versus
the portion of the reporting unit that will be retained. The fair value of the
portion of the reporting unit disposed of in a refranchising is determined
by reference to the discounted value of the future cash flows expected
to be generated by the restaurant and retained by the franchisee, which
include a deduction for the anticipated, future royalties the franchisee will
pay us associated with the franchise agreement entered into simultaneously
with the refranchising transaction. Appropriate adjustments are made to
the fair value determinations if such franchise agreement is determined
to not be at prevailing market rates. When determining whether such
franchise agreement is at prevailing market rates our primary consideration
is consistency with the terms of our current franchise agreements both
within the country that the restaurants are being refranchised in and
around the world. The Company believes consistency in royalty rates
as a percentage of sales is appropriate as the Company and franchisee
share in the impact of near-term fluctuations in sales results with the
acknowledgment that over the long-term the royalty rate represents an
appropriate rate for both parties.

The discounted value of the future cash flows expected to be generated by
the restaurant and retained by the franchisee is reduced by future royalties the
franchisee will pay the Company. The Company thus considers the fair
value of future royalties to be received under the franchise agreement as
fair value retained in its determination of the goodwill to be written off when
refranchising. Others may consider the fair value of these future royalties
as fair value disposed of and thus would conclude that a larger percentage
of a reporting unit’s fair value is disposed of in a refranchising transaction.

During 2013, the Company’s most significant refranchising activity was
within our Taco Bell U.S. operating segment, where 178 restaurants were
refranchised (representing 17% of beginning-of-year company units) and
$4 million in goodwill was written off (representing 4% of beginning-of-
year goodwill).

See Note 2 for a further discussion of our policies regarding goodwill.

allowances for Franchise and License
receivables/Guarantees

Franchise and license receivable balances include continuing fees, initial
fees, rent and other ancillary receivables such as fees for support services.
Our reserve for franchisee or licensee receivable balances is based upon
pre-defined aging criteria or upon the occurrence of other events that
indicate that we may not collect the balance due. This methodology results
in an immaterial amount of unreserved past due receivable balances at
December 28, 2013. As such, we believe our allowance for franchise and
license receivables is adequate to cover potential exposure from uncollectible
receivable balances at December 28, 2013.

We issue certain guarantees on behalf of franchisees primarily as a result of
1) assigning our interest in obligations under operating leases, primarily as a
condition to the refranchising of certain Company restaurants, 2) facilitating
franchisee development and 3) equipment financing arrangements to facilitate
the launch of new sales layers by franchisees. We recognize a liability for
the fair value of such guarantees upon inception of the guarantee and upon
any subsequent modification, such as franchise lease renewals, when we
remain contingently liable. The fair value of a guarantee is the estimated
amount at which the liability could be settled in a current transaction
between willing unrelated parties.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-KPart II Part II
Item 7 management’s Discussion and Analysis of Financial Condition and Results of Operations

The present value of the minimum payments of the assigned leases,
discounted at our pre-tax cost of debt, is approximately $625 million
at December 28, 2013. Current franchisees are the primary lessees
under the vast majority of these leases. Additionally, we have guaranteed
approximately $40 million of franchisee loans for various programs. We
generally have cross-default provisions with these franchisees that would
put them in default of their franchise agreement in the event of non-payment
under assigned leases and certain of the loan programs. We believe these
cross-default provisions significantly reduce the risk that we will be required
to make payments under these guarantees and, historically, we have not
been required to make significant payments for guarantees. If payment on
these guarantees becomes probable and estimable, we record a liability
for our exposure under these guarantees. At December 28, 2013 we have
recorded an immaterial liability for our probable exposure under these
guarantees. If we begin to be required to perform under these guarantees
to a greater extent, our results of operations could be negatively impacted.

See Note 2 for a further discussion of our policies regarding franchise
and license operations.

See Note 19 for a further discussion of our guarantees.

Self-Insured Property and Casualty Losses

We record our best estimate of the remaining cost to settle incurred self-
insured workers’ compensation, employment practices liability, general
liability, automobile liability, product liability and property losses (collectively
“property and casualty losses”). The estimate is based on the results of an
independent actuarial study and considers historical claim frequency and
severity as well as changes in factors such as our business environment,
benefit levels, medical costs and the regulatory environment that could
impact overall self-insurance costs. Additionally, our reserve includes a
risk margin to cover unforeseen events that may occur over the several
years required to settle claims, increasing our confidence level that the
recorded reserve is adequate.

See Note 19 for a further discussion of our insurance programs.

Pension Plans

Certain of our employees are covered under defined benefit pension
plans. Our two most significant plans are in the U.S. and combined had
a projected benefit obligation (“PBO”) of $1,025 million and a fair value of
plan assets of $933 million at December 28, 2013.

The PBO reflects the actuarial present value of all benefits earned to date
by employees and incorporates assumptions as to future compensation
levels. Due to the relatively long time frame over which benefits earned to
date are expected to be paid, our PBOs are highly sensitive to changes
in discount rates. For our U.S. plans, we measured our PBOs using a
discount rate of 5.4% at December 28, 2013. This discount rate was
determined with the assistance of our independent actuary. The primary
basis for our discount rate determination is a model that consists of a
hypothetical portfolio of ten or more corporate debt instruments rated Aa
or higher by Moody’s or S&P with cash flows that mirror our expected
benefit payment cash flows under the plans. We exclude from the model
those corporate debt instruments flagged by Moody’s or S&P for a
potential downgrade (if the potential downgrade would result in a rating
below Aa by both Moody’s and S&P) and bonds with yields that were
two standard deviations or more above the mean. In considering possible
bond portfolios, the model allows the bond cash flows for a particular year
to exceed the expected benefit cash flows for that year. Such excesses
are assumed to be reinvested at appropriate one-year forward rates
and used to meet the benefit payment cash flows in a future year. The
weighted-average yield of this hypothetical portfolio was used to arrive at
an appropriate discount rate. We also ensure that changes in the discount
rate as compared to the prior year are consistent with the overall change in
prevailing market rates and make adjustments as necessary. A 50 basis-
point increase in this discount rate would have decreased our U.S. plans’

PBOs by approximately $70 million at our measurement date. Conversely,
a 50 basis-point decrease in this discount rate would have increased our
U.S. plans’ PBOs by approximately $79 million at our measurement date.

The pension expense we will record in 2014 is also impacted by the
discount rate we selected at our measurement date. We expect pension
expense for our U.S. plans to decrease approximately $60 million in 2014.
The decrease is primarily driven by a decrease in amortization of net loss
due to lower net unrecognized losses in Accumulated other comprehensive
income as well as lapping pension settlement charges from 2013, including
settlement charges allocated to Special Items of $10 million. Lower net
unrecognized losses in Accumulated other comprehensive income are
primarily a result of a higher discount rate at our 2013 measurement
date. A 50 basis-point change in our discount rate assumption at our
measurement date would impact our 2014 U.S. pension expense by
approximately $9 million.

The assumption we make regarding our expected long-term rates of
return on plan assets also impacts our pension expense. Our estimated
long-term rate of return on U.S. plan assets is based upon the weighted-
average of historical returns for each asset category. Our expected long-
term rate of return on U.S. plan assets, for purposes of determining 2014
pension expense, at December 28, 2013 was 6.9%. We believe this rate
is appropriate given the composition of our plan assets and historical
market returns thereon. A one percentage-point change in our expected
long-term rate of return on plan assets assumption would impact our
2014 U.S. pension expense by approximately $8 million.

A decrease in discount rates over time has largely contributed to an
unrecognized pre-tax actuarial net loss of $119 million included in
Accumulated other comprehensive income (loss) for the U.S. plans at
December 28, 2013. For purposes of determining 2013 pension expense,
we recognized $48 million of net loss in net periodic benefit cost. We will
recognize approximately $17 million of such loss in 2014.

See Note 14 for further discussion of our pension plans.

Stock Options and Stock appreciation
rights Part IIExpense

Compensation expense for stock options and stock appreciation rights
(“SARs”) is estimated on the grant date using a Black-Scholes option
pricing model. See Note 15 for details of the risk-free interest rate, expected
term, expected volatility and expected dividend yield used in valuing these
awards. Additionally, we estimate pre-vesting forfeitures for purposes of
determining compensation expense to be recognized. Future expense
amounts for any particular quarterly or annual period could be affected by
changes in our assumptions or changes in market conditions.

We have determined that it is appropriate to group our stock option and
SAR awards into two homogeneous groups when estimating expected term
and pre-vesting forfeitures. These groups consist of grants made primarily
to restaurant-level employees under our Restaurant General Manager Stock
Option Plan (the “RGM Plan”) and grants made to executives under our
other stock award plans. Historically, less than 10% of total options and
SARs granted have been made under the RGM Plan.

Stock option and SAR grants under the RGM Plan typically cliff-vest after
four years and grants made to executives under our other stock award
plans typically have a graded vesting schedule and vest 25% per year
over four years. We use a single weighted-average expected term for our
awards that have a graded vesting schedule. We re-evaluate our expected
term assumptions using historical exercise and post-vesting employment
termination behavior on a regular basis. We have determined that 5 years
and 6.25 years are appropriate expected terms for awards to restaurant-
level employees and to executives, respectively.

Upon each significant stock award grant we re-evaluate the expected
volatility, including consideration of both historical volatility of our common
stock as well as implied volatility associated with our publicly traded options.
We have estimated pre-vesting forfeitures based on historical data. Based

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-KPart II Part II
Item 7A Quantitative and Qualitative Disclosures About market Risk

on such data, we believe that approximately 50% of all awards granted
under the RGM Plan will be forfeited and approximately 20% of all awards
granted to above-store executives will be forfeited.

Income taxes

At December 28, 2013, we had valuation allowances of approximately
$200 million to reduce our $1.0 billion of deferred tax assets to amounts
that are more likely than not to be realized. The net deferred tax assets
primarily relate to temporary differences in profitable U.S. federal and
state and foreign jurisdictions, net operating losses in certain foreign
jurisdictions, the majority of which do not expire, and U.S. foreign tax
credit carryovers that expire 10 years from inception and for which we
anticipate having foreign earnings to utilize. In evaluating our ability to
recover our deferred tax assets, we consider future taxable income in the
various jurisdictions as well as carryforward periods and restrictions on
usage. The estimation of future taxable income in these jurisdictions and
our resulting ability to utilize deferred tax assets can significantly change
based on future events, including our determinations as to feasibility of
certain tax planning strategies. Thus, recorded valuation allowances may
be subject to material future changes.

As a matter of course, we are regularly audited by federal, state and foreign
tax authorities. We recognize the benefit of positions taken or expected
to be taken in our tax returns in our Income Tax Provision when it is more
likely than not that the position would be sustained upon examination by
these tax authorities. A recognized tax position is then measured at the
largest amount of benefit that is greater than fifty percent likely of being
realized upon settlement. At December 28, 2013 we had $243 million of
unrecognized tax benefits, $170 million of which, if recognized, would
impact the effective tax rate. We evaluate unrecognized tax benefits,
including interest thereon, on a quarterly basis to ensure that they have
been appropriately adjusted for events, including audit settlements, which
may impact our ultimate payment for such exposures.

Additionally, we have not provided deferred tax for investments in foreign
subsidiaries where the carrying values for financial reporting exceed the
tax basis, totaling approximately $2.6 billion at December 28, 2013, as
we believe the excess is essentially permanently invested. If our intentions
regarding the duration of these investments change, deferred tax may need
to be provided on this excess that could materially impact the provision
for income taxes.

See Note 17 for a further discussion of our income taxes.

ItEM Part II7a Quantitative and Qualitative Disclosures

about Market risk

The Company is exposed to financial market risks associated with interest rates, foreign currency exchange rates and commodity prices. In the normal
course of business and in accordance with our policies, we manage these risks through a variety of strategies, which may include the use of financial
and commodity derivative instruments to hedge our underlying exposures. Our policies prohibit the use of derivative instruments for trading purposes,
and we have processes in place to monitor and control their use.

Interest rate risk

We have a market risk exposure to changes in interest rates, principally in
the U.S. We attempt to minimize this risk and lower our overall borrowing
costs on a portion of our debt through the utilization of derivative financial
instruments, primarily interest rate swaps. These swaps are entered into
with financial institutions and have reset dates and critical terms that
match those of the underlying debt. Accordingly, any change in fair value
associated with interest rate swaps is offset by the opposite impact on
the related debt.

At both December 28, 2013 and December 29, 2012 a hypothetical 100
basis-point increase in short-term interest rates would result, over the
following twelve-month period, in a reduction of approximately $3 million
in income before income taxes. The estimated reductions are based

Foreign Currency Exchange rate risk

upon the current level of variable rate debt and assume no changes in the
volume or composition of that debt and include no impact from interest
income related to cash and cash equivalents. In addition, the fair value of our
derivative financial instruments at December 28, 2013 and December 29,
2012 would decrease approximately $7 million and $10 million,
respectively, as a result of the same hypothetical 100 basis-point increase
and the fair value of our Senior Unsecured Notes at December 28, 2013
and December 29, 2012 would decrease approximately $185 million and
$225 million, respectively. Fair value was determined based on the present
value of expected future cash flows considering the risks involved and
using discount rates appropriate for the duration.

Changes in foreign currency exchange rates impact the translation of
our reported foreign currency denominated earnings, cash flows and net
investments in foreign operations and the fair value of our foreign currency
denominated financial instruments. Historically, we have chosen not to
hedge foreign currency risks related to our foreign currency denominated
earnings and cash flows through the use of financial instruments. We
attempt to minimize the exposure related to our net investments in foreign
operations by financing those investments with local currency debt when
practical. In addition, we attempt to minimize the exposure related to foreign

currency denominated financial instruments by purchasing goods and
services from third parties in local currencies when practical. Consequently,
foreign currency denominated financial instruments consist primarily of
intercompany short-term receivables and payables. At times, we utilize
forward contracts to reduce our exposure related to these intercompany
short-term receivables and payables. The notional amount and maturity
dates of these contracts match those of the underlying receivables or
payables such that our foreign currency exchange risk related to these
instruments is minimized.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-KPart II Part II
Item 8 Financial Statements and Supplementary Data

The combined Operating Profits of China, YRI and India constitute
approximately 70% of our segment Operating Profit in 2013. In addition,
the Company’s foreign currency net asset exposure (defined as foreign
currency assets less foreign currency liabilities) totaled approximately
$4.2 billion as of December 28, 2013. Operating in international markets
exposes the Company to movements in foreign currency exchange rates.

The Company’s primary exposures result from our operations in Asia-Pacific,
Europe and the Americas. For the fiscal year ended December 28, 2013
Operating Profit would have decreased approximately $155 million if all
foreign currencies had uniformly weakened 10% relative to the U.S. dollar.
This estimated reduction assumes no changes in sales volumes or local
currency sales or input prices.

Commodity Price risk

We are subject to volatility in food costs as a result of market risk associated with commodity prices. Our ability to recover increased costs through
higher pricing is, at times, limited by the competitive environment in which we operate. We manage our exposure to this risk primarily through pricing
agreements with our vendors.

ItEM 8 Financial Statements

and Part IISupplementary Part IIData

Index to Financial Information

Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Income for the fiscal years ended December 28, 2013, December 29, 2012 and December 31, 2011
Consolidated Statements of Comprehensive Income for the fiscal years ended December 28, 2013, December 29, 2012 and
December 31, 2011
Consolidated Statements of Cash Flows for the fiscal years ended December 28, 2013, December 29, 2012 and December 31, 2011
Consolidated Balance Sheets as of December 28, 2013 and December 29, 2012
Consolidated Statements of Shareholders’ Equity for the fiscal years ended December 28, 2013, December 29, 2012 and
December 31, 2011
Notes to Consolidated Financial Statements
Management’s responsibility for Financial Statements

Page
Reference

37
38

39
40
41

42
43
71

Financial Statement Schedules

No schedules are required because either the required information is not present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the above-listed financial statements or notes thereto.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K
Part II Part II
Item 8 Financial Statements and Supplementary Data

report of Independent registered Public
accounting Part IIFirm

The Board of Directors and Shareholders

YUM! Brands, Inc.

We have audited the accompanying consolidated balance sheets of
YUM! Brands, Inc. and Subsidiaries (YUM) as of December 28, 2013 and
December 29, 2012, and the related consolidated statements of income,
comprehensive income, shareholders’ equity, and cash flows for each of
the fiscal years in the three-year period ended December 28, 2013. We
also have audited YUM’s internal control over financial reporting as of
December 28, 2013, based on criteria established in Internal Control –
Integrated Framework (1992) issued by the Committee of Sponsoring
Organizations of the Treadway Commission. YUM’s management is
responsible for these consolidated financial statements, for maintaining
effective internal control over financial reporting, and for its assessment
of the effectiveness of internal control over financial reporting, included in
the accompanying Item 9A, “Management’s Report on Internal Control
over Financial Reporting”. Our responsibility is to express an opinion on
these consolidated financial statements and an opinion on YUM’s internal
control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audits to obtain reasonable assurance
about whether the financial statements are free of material misstatement
and whether effective internal control over financial reporting was maintained
in all material respects. Our audits of the consolidated financial statements
included examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the
overall financial statement presentation. Our audit of internal control over
financial reporting included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists,
and testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk. Our audits also included performing
such other procedures as we considered necessary in the circumstances.
We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles. A company’s
internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets
of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts
and expenditures of the company are being made only in accordance
with authorizations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the company’s assets
that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of YUM as
of December 28, 2013 and December 29, 2012, and the results of its
operations and its cash flows for each of the fiscal years in the three-year
period ended December 28, 2013, in conformity with U.S. generally
accepted accounting principles. Also in our opinion, YUM maintained, in
all material respects, effective internal control over financial reporting as
of December 28, 2013, based on criteria established in Internal Control –
Integrated Framework (1992) issued by the Committee of Sponsoring
Organizations of the Treadway Commission.

/s/ KPMG LLP

Louisville, Kentucky

February 18, 2014

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-KPart II Part II
Item 8 Financial Statements and Supplementary Data

Consolidated Statements of Income

YUM! BraNDS, INC. aND SUBSIDIarIES

FISCaL YEarS ENDED DECEMBEr 28, 2013, DECEMBEr 29, 2012 aND DECEMBEr 31, 2011

(in millions, except per share data)
revenues
Company sales
Franchise and license fees and income
Total revenues
Costs and Expenses, Net
Company restaurants
Food and paper
Payroll and employee benefits
Occupancy and other operating expenses

Company restaurant expenses
General and administrative expenses
Franchise and license expenses
Closures and impairment (income) expenses
Refranchising (gain) loss
Other (income) expense
Total costs and expenses, net
Operating Profit
Interest expense, net
Income Before Income taxes
Income tax provision
Net Income – including noncontrolling interests
Net Income (loss) – noncontrolling interests
NET INCOME – YUM! BRANDS, INC.
BASIC EARNINGS PER COMMON SHARE
DILUTED EARNINGS PER COMMON SHARE
DIVIDENDS DECLARED PER COMMON SHARE

See accompanying Notes to Consolidated Financial Statements.

2013

2012

2011

11,184 $
1,900
13,084

3,669
2,499
3,333
9,501
1,412
158
331
(100)
(16)
11,286
1,798
247
1,551
487
1,064
(27)
1,091
2.41
2.36
1.41

$
$
$
$

11,833 $
1,800
13,633

3,874
2,620
3,358
9,852
1,510
133
37
(78)
(115)
11,339
2,294
149
2,145
537
1,608
11

1,597
3.46
3.38
1.24

$
$
$
$

10,893
1,733
12,626

3,633
2,418
3,089
9,140
1,372
145
135
72
(53)
10,811

1,815
156
1,659
324
1,335
16

1,319
2.81
2.74
1.07

$
$
$
$

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

Part II Part II
Item 8 Financial Statements and Supplementary Data

Consolidated Statements of Comprehensive Income

YUM! BraNDS, INC. aND SUBSIDIarIES

FISCaL YEarS ENDED DECEMBEr 28, 2013, DECEMBEr 29, 2012 aND DECEMBEr 31, 2011

(in millions)
Net income – including noncontrolling interests
Other comprehensive income (loss), net of tax:

Translation adjustments and gains (losses) from intra-entity transactions
of a long-term investment nature

Tax (expense) benefit

Reclassifications of currency translation adjustments into Net Income

Tax expense (benefit)

Net unrealized gains (losses) arising during the year on pension and
post-retirement plans

Tax (expense) benefit

Reclassification of pension and post-retirement losses to Net Income

Tax expense (benefit)

Net unrealized gains (losses) on derivative instruments arising during the year

Tax (expense) benefit

Reclassification of derivative (gains) losses into Net Income

Tax expense (benefit)

Other comprehensive income (loss), net of tax
Comprehensive Income – including noncontrolling interests
Comprehensive Income (loss) – noncontrolling interests
COMPREHENSIVE INCOME – YUM! BRANDS, INC.

See accompanying Notes to Consolidated Financial Statements.

2013
1,064 $

2012
1,608 $

2011
1,335

10
(2)
—
—

221
(85)
83
(30)

6
(2)
(2)
1

27
(3)
3
—

(19)

9
156
(57)
(6)
2
6
(2)
116
1,724

200
1,264
(23)
1,287

1,712

88
3
—
—

(205)
77
34
(12)
(3)
1
4
(1)
(14)
1,321
22
1,299

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

Part II Part II
Item 8 Financial Statements and Supplementary Data

Consolidated Statements of Cash Flows

YUM! BraNDS, INC. aND SUBSIDIarIES

FISCaL YEarS ENDED DECEMBEr 28, 2013, DECEMBEr 29, 2012 aND DECEMBEr 31, 2011

(in millions)
Cash Flows – Operating activities
Net Income – including noncontrolling interests
Depreciation and amortization
Closures and impairment (income) expenses
Refranchising (gain) loss
Contributions to defined benefit pension plans
Pension settlement charges
Losses and other costs related to the extinguishment of debt
Gain upon acquisition of Little Sheep
Deferred income taxes
Equity income from investments in unconsolidated affiliates
Distributions of income received from unconsolidated affiliates
Excess tax benefit from share-based compensation
Share-based compensation expense
Changes in accounts and notes receivable
Changes in inventories
Changes in prepaid expenses and other current assets
Changes in accounts payable and other current liabilities
Changes in income taxes payable
Other, net
NET CASH PROVIDED BY OPERATING ACTIVITIES
Cash Flows – Investing activities
Capital spending
Proceeds from refranchising of restaurants
Acquisitions
Changes in restricted cash
Other, net
NET CASH USED IN INVESTING ACTIVITIES
Cash Flows – Financing activities
Proceeds from long-term debt
Repayments of long-term debt
Revolving credit facilities, three months or less, net
Short-term borrowings, by original maturity

More than three months – proceeds
More than three months – payments
Three months or less, net

Repurchase shares of Common Stock
Excess tax benefit from share-based compensation
Employee stock option proceeds
Dividends paid on Common Stock
Other, net
NET CASH USED IN FINANCING ACTIVITIES
EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS – BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS – END OF YEAR

See accompanying Notes to Consolidated Financial Statements.

2013

2012

1,064 $
721
331
(100)
(23)
30
120
—
(24)
(26)
43
(44)
49
(12)
18
(21)
(102)
14
101

2,139

(1,049)

260
(99)
—
2

(886)

599
(666)

—

56
(56)
—

(770)

44
37

(615)
(80)
(1,451)
(5)
(203)
776
573

1,608 $
665
37
(78)
(119)

89
—
(74)
28
(47)
41
(98)
50
(18)

(14)

126

2,294

(1,099)

364
(543)
300
(27)
(1,005)

—

(282)

—

—
—
—

(965)

98
62

(544)
(85)
(1,716)
5
(422)
1,198
776

2011

1,335
637
135
72
(63)
—
—
—
(137)
(47)
39
(66)
59
(39)
(75)
(25)
144
109
92
2,170

(940)
246
(81)
(300)
69
(1,006)

404
(666)
—

—
—
—
(752)
66
59
(481)
(43)
(1,413)
21
(228)
1,426
1,198

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

Consolidated Balance Sheets

Part II Part II
Item 8 Financial Statements and Supplementary Data

YUM! BraNDS, INC. aND SUBSIDIarIES

DECEMBEr 28, 2013 aND DECEMBEr 29, 2012

(in millions)
aSSEtS
Current assets
Cash and cash equivalents
Accounts and notes receivable, net
Inventories
Prepaid expenses and other current assets
Deferred income taxes
Advertising cooperative assets, restricted

total Current assets

Property, plant and equipment, net
Goodwill
Intangible assets, net
Investments in unconsolidated affiliates
Other assets
Deferred income taxes
TOTAL ASSETS
LIaBILItIES aND SHarEHOLDErS’ EQUItY
Current Liabilities
Accounts payable and other current liabilities
Income taxes payable
Short-term borrowings
Advertising cooperative liabilities

total Current Liabilities

Long-term debt
Other liabilities and deferred credits

total Liabilities

redeemable noncontrolling interest
Shareholders’ Equity
Common Stock, no par value, 750 shares authorized; 443 shares and 451 shares issued in 2013 and 2012,
respectively
Retained earnings
Accumulated other comprehensive income (loss)

total Shareholders’ Equity – YUM! Brands, Inc.

Noncontrolling interests

total Shareholders’ Equity

TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND SHAREHOLDERS’ EQUITY $

See accompanying Notes to Consolidated Financial Statements.

2013

2012

573 $
319
294
286
123
96
1,691
4,459
889
638
53
566
399
$

8,695

1,929 $
169
71
96
2,265
2,918
1,244
6,427
39

—
2,102
64
2,166
63
2,229
$
8,695

776
301
313
272
127
136
1,925
4,250
1,034
690
72
575
467

9,013

2,036
97
10
136
2,279
2,932
1,490
6,701
59

—

2,286
(132)
2,154
99
2,253
9,013

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

Part II Part II
Item 8 Financial Statements and Supplementary Data

Consolidated Statements of Shareholders’ Equity

YUM! BraNDS, INC. aND SUBSIDIarIES

FISCaL YEarS ENDED DECEMBEr 28, 2013, DECEMBEr 29, 2012 aND DECEMBEr 31, 2011

Yum! Brands, Inc.

Issued Common
Stock

Amount

Retained
Earnings

Accumulated Other
Comprehensive
Income (Loss)

Noncontrolling
Interests

(in millions)
Balance at December 25, 2010
Net Income (loss)
Translation adjustments and gains (losses) from
intra-entity transactions of a long-term investment
nature (net of tax impact of $3 million)
Pension and post-retirement benefit plans
(net of tax impact of $65 million)
Net unrealized gain on derivative instruments
(net of tax impact of less than $1 million)
Comprehensive Income (loss)
Dividends declared
Repurchase of shares of Common Stock
Employee stock option and SARs exercises
(includes tax impact of $71 million)
Compensation-related events (includes tax
impact of $5 million)
Balance at December 31, 2011
Net Income (loss)
Translation adjustments and gains (losses) from
intra-entity transactions of a long-term investment
nature (net of tax impact of $3 million)
Reclassification of translation adjustments into
income
Pension and post-retirement benefit plans
(net of tax impact of $48 million)
Comprehensive Income (loss)
Noncontrolling Interest – Little Sheep acquisition
Dividends declared
Repurchase of shares of Common Stock
Employee stock option and SARs exercises
(includes tax impact of $89 million)
Compensation-related events (includes tax
impact of $11 million)
Balance at December 29, 2012
Net Income (loss)
Translation adjustments and gains (losses) from
intra-entity transactions of a long-term investment
nature (net of tax impact of $2 million)
Pension and post-retirement benefit plans
(net of tax impact of $115 million)
Net unrealized gain on derivative instruments
(net of tax impact of $1 million)
Comprehensive Income (loss)
Dividends declared
Acquisition of Little Sheep store-level
noncontrolling interests
Repurchase of shares of Common Stock
Employee stock option and SARs exercises
(includes tax impact of $42 million)
Compensation-related events (includes tax
impact of $8 million)
BALANCE AT DECEMBER 28, 2013

469 $

86 $

1,717 $
1,319

(227) $

(14)

(250)

119

—
460 $

63
18 $

(106)

(501)
(483)

2,052 $
1,597

(247) $

(15)

(191)

111

451 $

62
— $

(569)
(794)

2,286 $
1,091

(132) $

189

(635)

(11)

(110)

(640)

See accompanying Notes to Consolidated Financial Statements.

Redeemable
Noncontrolling
Interest
—

—

—
59

59
(22)

(20)

Total
Shareholders’
Equity
1,669
1,335

93 $
16

(22)

93 $
11

16
(22)

99 $
(5)

(18)

(15)

(106)

1
1,321
(523)
(733)

119

63
1,916
1,608

89
1,724
16
(591)
(985)

111

62
2,253
1,086

189

3
1,284
(653)

(15)
(750)

443

61
— $

2,102

61
2,229

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

Notes to Consolidated Financial Statements

Part II Part II
Item 8 Financial Statements and Supplementary Data

(Tabular amounts in millions, except share data)

NOtE 1

Description of Business

YUM! Brands, Inc. and Subsidiaries (collectively referred to herein as
“YUM” or the “Company”) comprise primarily the worldwide operations
of its KFC, Pizza Hut and Taco Bell (collectively the “Concepts”). YUM
has over 40,000 units of which 55% are located outside the U.S. in more
than 125 countries and territories. YUM was created as an independent,
publicly-owned company on October 6, 1997 via a tax-free distribution by
our former parent, PepsiCo, Inc., of our Common Stock to its shareholders.
References to YUM throughout these Consolidated Financial Statements
are made using the first person notations of “we,” “us” or “our.”

Through our widely-recognized Concepts, we develop, operate, franchise
and license a system of both traditional and non-traditional quick service
restaurants. Each Concept has proprietary menu items and emphasizes
the preparation of food with high quality ingredients as well as unique
recipes and special seasonings to provide appealing, convenient, tasty
and attractive food at competitive prices. Our traditional restaurants
feature dine-in, carryout and, in some instances, drive-thru or delivery
service. Non-traditional units, which are principally licensed outlets, include
express units and kiosks which have a more limited menu and operate
in non-traditional locations like malls, airports, gasoline service stations,
train stations, subways, convenience stores, stadiums, amusement parks
and colleges, where a full-scale traditional outlet would not be practical
or efficient. We also operate multibrand units, where two or more of our
Concepts are operated in a single unit.

As of and through December 28, 2013, YUM consisted of six operating
segments: YUM Restaurants China (“China” or “China Division”), YUM

Restaurants International (“YRI” or “International Division”), KFC U.S.,
Pizza Hut U.S., Taco Bell U.S., and YUM Restaurants India (“India” or
“India Division”). The China Division includes mainland China, and the India
Division includes India, Bangladesh, Mauritius, Nepal and Sri Lanka. YRI
includes the remainder of our international operations. For financial reporting
purposes, management considers the three U.S. operating segments to
be similar and, therefore, has aggregated them into a single reportable
operating segment (“U.S.”). As a result of changes to our management
reporting structure, in 2012 we began reporting information for our India
business as a standalone reporting segment separated from YRI. While our
consolidated results are not impacted, our historical segment information
has been restated to be consistent with the current period presentation.
In December 2011 we sold our Long John Silver’s (“LJS”) and A&W All
American Food Restaurants (“A&W”) brands to key franchise leaders and
strategic investors in separate transactions. The results for these businesses
through the sale date are included in the Company’s results for 2011.

NOtE Part II2

Summary of Significant accounting Policies

Our preparation of the accompanying Consolidated Financial Statements
in conformity with Generally Accepted Accounting Principles in the
United States of America (“GAAP”) requires us to make estimates and
assumptions that affect reported amounts of assets and liabilities, disclosure
of contingent assets and liabilities at the date of the financial statements,
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from these estimates.

them to which we are a party. At the end of 2013, YUM has future lease
payments due from franchisees, on a nominal basis, of approximately
$400 million. As our franchise and license arrangements provide our
franchisee and licensee entities the power to direct the activities that
most significantly impact their economic performance, we do not consider
ourselves the primary beneficiary of any such entity that might otherwise
be considered a VIE.

Principles of Consolidation and Basis of Preparation. Intercompany
accounts and transactions have been eliminated in consolidation. We
consolidate entities in which we have a controlling financial interest,
the usual condition of which is ownership of a majority voting interest.
We also consider for consolidation an entity, in which we have certain
interests, where the controlling financial interest may be achieved through
arrangements that do not involve voting interests. Such an entity, known
as a variable interest entity (“VIE”), is required to be consolidated by its
primary beneficiary. The primary beneficiary is the entity that possesses
the power to direct the activities of the VIE that most significantly impact
its economic performance and has the obligation to absorb losses or the
right to receive benefits from the VIE that are significant to it.

Our most significant variable interests are in entities that operate restaurants
under our Concepts’ franchise and license arrangements. We do not generally
have an equity interest in our franchisee or licensee businesses with the
exception of certain entities in China as discussed below. Additionally,
we do not typically provide significant financial support such as loans or
guarantees to our franchisees and licensees. However, we do have variable
interests in certain franchisees through real estate lease arrangements with

See Note 19 for additional information on an entity that operates a franchise
lending program that is a VIE in which we have a variable interest but for
which we are not the primary beneficiary and thus do not consolidate.

Certain investments in entities that operate KFCs in China are accounted for
by the equity method. These entities are not VIEs and our lack of majority
voting rights precludes us from controlling these affiliates. Thus, we do not
consolidate these affiliates, instead accounting for them under the equity
method. Our share of the net income or loss of those unconsolidated affiliates
is included in Other (income) expense. On February 1, 2012, we acquired
an additional 66% interest in Little Sheep Group Limited (“Little Sheep”),
increasing our ownership to 93%. As a result, we began consolidating this
business, which was previously accounted for using the equity method.
See Note 4 for a further description of the accounting upon acquisition
of additional interest in Little Sheep. A meat processing entity affiliated
with our Little Sheep business is accounted for by the equity method.

We report Net income attributable to non-controlling interests, which
includes the minority shareholders of the entities that operate the KFCs
in Beijing and Shanghai, China and the minority shareholders of Little

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-KPart II Part II
Item 8 Financial Statements and Supplementary Data

Sheep, separately on the face of our Consolidated Statements of Income.
The portion of equity not attributable to the Company for KFC Beijing and
KFC Shanghai is reported within equity, separately from the Company’s
equity on the Consolidated Balance Sheets. The shareholder that owns
the remaining 7% ownership interest in Little Sheep holds an option that, if
exercised, requires us to redeem their non-controlling interest. Redemption
may occur any time after the third anniversary of the acquisition. This
Redeemable non-controlling interest is classified outside permanent equity
and recorded in the Consolidated Balance Sheet as the greater of the
initial carrying amount adjusted for the non-controlling interest’s share of
net income (loss), or its redemption value.

We participate in various advertising cooperatives with our franchisees
and licensees established to collect and administer funds contributed
for use in advertising and promotional programs designed to increase
sales and enhance the reputation of the Company and its franchise
owners. Contributions to the advertising cooperatives are required for both
Company-owned and franchise restaurants and are generally based on a
percentage of restaurant sales. We maintain certain variable interests in
these cooperatives. As the cooperatives are required to spend all funds
collected on advertising and promotional programs, total equity at risk is
not sufficient to permit the cooperatives to finance their activities without
additional subordinated financial support. Therefore, these cooperatives
are VIEs. As a result of our voting rights, we consolidate certain of these
cooperatives for which we are the primary beneficiary. The Advertising
cooperatives assets, consisting primarily of cash received from the
Company and franchisees and accounts receivable from franchisees,
can only be used to settle obligations of the respective cooperative. The
Advertising cooperative liabilities represent the corresponding obligation
arising from the receipt of the contributions to purchase advertising and
promotional programs for which creditors do not have recourse to the
general credit of the primary beneficiary. Therefore, we report all assets
and liabilities of these advertising cooperatives that we consolidate as
Advertising cooperative assets, restricted and Advertising cooperative
liabilities in the Consolidated Balance Sheet. As the contributions to these
cooperatives are designated and segregated for advertising, we act as an
agent for the franchisees and licensees with regard to these contributions.
Thus, we do not reflect franchisee and licensee contributions to these
cooperatives in our Consolidated Statements of Income or Consolidated
Statements of Cash Flows.

Fiscal Year. Our fiscal year ends on the last Saturday in December and,
as a result, a 53rd week is added every five or six years. The first three
quarters of each fiscal year consist of 12 weeks and the fourth quarter
consists of 16 weeks in fiscal years with 52 weeks and 17 weeks in fiscal
years with 53 weeks. Our subsidiaries operate on similar fiscal calendars
except that China, India and certain other international subsidiaries operate
on a monthly calendar, and thus never have a 53rd week, with two months
in the first quarter, three months in the second and third quarters and four
months in the fourth quarter. YRI closes one period earlier to facilitate
consolidated reporting.

Fiscal year 2011 included 53 weeks for our U.S. businesses and a portion
of our YRI business. The 53rd week in 2011 added $91 million to total
revenues, $15 million to Restaurant profit and $25 million to Operating
Profit in our 2011 Consolidated Statement of Income. The $25 million
benefit was offset throughout 2011 by investments, including franchise
development incentives, as well as higher-than-normal spending, such
as restaurant closures in the U.S. and YRI.

Foreign Currency. The functional currency of our foreign entities is the
currency of the primary economic environment in which the entity operates.
Functional currency determinations are made based upon a number of
economic factors, including but not limited to cash flows and financing
transactions. The operations, assets and liabilities of our entities outside
the United States are initially measured using the functional currency of that
entity. Income and expense accounts for our operations of these foreign
entities are then translated into U.S. dollars at the average exchange
rates prevailing during the period. Assets and liabilities of these foreign
entities are then translated into U.S. dollars at exchange rates in effect
at the balance sheet date. As of December 28, 2013, net cumulative

translation adjustment gains of $170 million are recorded in Accumulated
other comprehensive income (loss) in the Consolidated Balance Sheet.

As we manage and share resources at either the country level for all of
our brands in a country or, for some countries in which we have more
significant operations, at the individual brand level within the country,
cumulative translation adjustments are recorded and tracked at the foreign-
entity level that represents either our entire operations within a country
or the operations of our individual brands within that country. Translation
adjustments recorded in Accumulated other comprehensive income (loss)
are subsequently recognized as income or expense generally only upon
sale or upon complete or substantially complete liquidation of the related
investment in a foreign entity. For purposes of determining whether a sale
or complete or substantially complete liquidation of an investment in a
foreign entity has occurred, we consider those same foreign entities for
which we record and track cumulative translation adjustments. Restaurant
closures and refranchising transactions during the periods presented
constituted disposals or sales of assets within our foreign entities and
thus did not result in any translation adjustments being recognized as
income or expense. The adoption of Accounting Standards Update No.
2013-05, Foreign Currency Matters, (Topic 830): Parent’s Accounting
for the Cumulative Translation Adjustment upon Derecognition of Certain
Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment
in a Foreign Entity, in 2014 is not anticipated to have a significant impact
on our accounting for foreign currency matters.

Gains and losses arising from the impact of foreign currency exchange
rate fluctuations on transactions in foreign currency are included in Other
(income) expense in our Consolidated Statement of Income.

reclassifications. We have reclassified certain items in the Consolidated
Financial Statements for prior periods to be comparable with the classification
for the fiscal year ended December 28, 2013. These reclassifications had
no effect on previously reported Net Income – YUM! Brands, Inc.

Franchise and License Operations. We execute franchise or license
agreements for each unit operated by third parties which set out the terms
of our arrangement with the franchisee or licensee. Our franchise and
license agreements typically require the franchisee or licensee to pay an
initial, non-refundable fee and continuing fees based upon a percentage
of sales. Subject to our approval and their payment of a renewal fee, a
franchisee may generally renew the franchise agreement upon its expiration.

The internal costs we incur to provide support services to our franchisees
and licensees are charged to General and Administrative (“G&A”) expenses
as incurred. Certain direct costs of our franchise and license operations
are charged to franchise and license expenses. These costs include
provisions for estimated uncollectible fees, rent or depreciation expense
associated with restaurants we lease or sublease to franchisees, franchise
and license marketing funding, amortization expense for franchise-related
intangible assets and certain other direct incremental franchise and license
support costs.

revenue recognition. Revenues from Company-owned restaurants are
recognized when payment is tendered at the time of sale. The Company
presents sales net of sales-related taxes. Income from our franchisees
and licensees includes initial fees, continuing fees, renewal fees and rental
income from restaurants we lease or sublease to them. We recognize
initial fees received from a franchisee or licensee as revenue when we
have performed substantially all initial services required by the franchise
or license agreement, which is generally upon the opening of a store. We
recognize continuing fees, which are based upon a percentage of franchisee
and licensee sales and rental income as earned. We recognize renewal
fees when a renewal agreement with a franchisee or licensee becomes
effective. We present initial fees collected upon the sale of a restaurant
to a franchisee in Refranchising (gain) loss.

While the majority of our franchise agreements are entered into with terms
and conditions consistent with those at a prevailing market rate, there are
instances when we enter into franchise agreements with terms that are not
at market rates (for example, below-market continuing fees) for a specified
period of time. We recognize the estimated value of terms in franchise

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-Kagreements entered into concurrently with a refranchising transaction that
are not consistent with market terms as part of the upfront refranchising
gain (loss) and amortize that amount into Franchise and license fees and
income over the period such terms are in effect. The value of terms that are
not considered to be at market within franchise agreements is estimated
based upon the difference between cash expected to be received under
the franchise agreement and cash that would have been expected to be
received under a franchise agreement with terms substantially consistent
with market.

Direct Marketing Costs. We charge direct marketing costs to expense
ratably in relation to revenues over the year in which incurred and, in
the case of advertising production costs, in the year the advertisement
is first shown. Deferred direct marketing costs, which are classified as
prepaid expenses, consist of media and related advertising production
costs which will generally be used for the first time in the next fiscal year
and have historically not been significant. To the extent we participate in
advertising cooperatives, we expense our contributions as incurred which
are generally based on a percentage of sales. Our advertising expenses
were $607 million, $608 million and $593 million in 2013, 2012 and 2011,
respectively. We report substantially all of our direct marketing costs in
Occupancy and other operating expenses.

research and Development Expenses. Research and development
expenses, which we expense as incurred, are reported in G&A expenses.
Research and development expenses were $31 million, $30 million and
$34 million in 2013, 2012 and 2011, respectively.

Share-Based Employee Compensation. We recognize all share-based
payments to employees, including grants of employee stock options and
stock appreciation rights (“SARs”), in the Consolidated Financial Statements
as compensation cost over the service period based on their fair value
on the date of grant. This compensation cost is recognized over the
service period on a straight-line basis for awards that actually vest. We
present this compensation cost consistent with the other compensation
costs for the employee recipient in either Payroll and employee benefits
or G&A expenses. See Note 15 for further discussion of our share-based
compensation plans.

Legal Costs. Settlement costs are accrued when they are deemed
probable and reasonably estimable. Anticipated legal fees related to self-
insured workers’ compensation, employment practices liability, general
liability, automobile liability, product liability and property losses (collectively,
“property and casualty losses”) are accrued when deemed probable and
reasonably estimable. Legal fees not related to self-insured property
and casualty losses are recognized as incurred. See Note 19 for further
discussion of our legal proceedings.

Impairment or Disposal of Property, Plant and Equipment. Property,
plant and equipment (“PP&E”) is tested for impairment whenever events
or changes in circumstances indicate that the carrying value of the assets
may not be recoverable. The assets are not recoverable if their carrying
value is less than the undiscounted cash flows we expect to generate from
such assets. If the assets are not deemed to be recoverable, impairment is
measured based on the excess of their carrying value over their fair value.

For purposes of impairment testing for our restaurants, we have concluded
that an individual restaurant is the lowest level of independent cash flows
unless our intent is to refranchise restaurants as a group. We review our
long-lived assets of such individual restaurants (primarily PP&E and allocated
intangible assets subject to amortization) semi-annually for impairment, or
whenever events or changes in circumstances indicate that the carrying
amount of a restaurant may not be recoverable. We use two consecutive
years of operating losses as our primary indicator of potential impairment
for our semi-annual impairment testing of these restaurant assets. We
evaluate the recoverability of these restaurant assets by comparing
the estimated undiscounted future cash flows, which are based on our
entity-specific assumptions, to the carrying value of such assets. For
restaurant assets that are not deemed to be recoverable, we write-down
an impaired restaurant to its estimated fair value, which becomes its new
cost basis. Fair value is an estimate of the price a franchisee would pay

Part II Part II
Item 8 Financial Statements and Supplementary Data

for the restaurant and its related assets and is determined by discounting
the estimated future after-tax cash flows of the restaurant, which include
a deduction for royalties we would receive under a franchise agreement
with terms substantially at market. The after-tax cash flows incorporate
reasonable assumptions we believe a franchisee would make such as sales
growth and margin improvement. The discount rate used in the fair value
calculation is our estimate of the required rate of return that a franchisee
would expect to receive when purchasing a similar restaurant and the
related long-lived assets. The discount rate incorporates rates of returns
for historical refranchising market transactions and is commensurate with
the risks and uncertainty inherent in the forecasted cash flows.

In executing our refranchising initiatives, we most often offer groups of
restaurants for sale. When we believe a restaurant or groups of restaurants
will be refranchised for a price less than their carrying value, but do not
believe the restaurant(s) have met the criteria to be classified as held for sale,
we review the restaurants for impairment. We evaluate the recoverability
of these restaurant assets at the date it is considered more likely than not
that they will be refranchised by comparing estimated sales proceeds plus
holding period cash flows, if any, to the carrying value of the restaurant
or group of restaurants. For restaurant assets that are not deemed to be
recoverable, we recognize impairment for any excess of carrying value
over the fair value of the restaurants, which is based on the expected net
sales proceeds. To the extent ongoing agreements to be entered into with
the franchisee simultaneous with the refranchising are expected to contain
terms, such as royalty rates, not at prevailing market rates, we consider
the off-market terms in our impairment evaluation. We recognize any such
impairment charges in Refranchising (gain) loss. We classify restaurants
as held for sale and suspend depreciation and amortization when (a) we
make a decision to refranchise; (b) the restaurants can be immediately
removed from operations; (c) we have begun an active program to locate a
buyer; (d) the restaurant is being actively marketed at a reasonable market
price; (e) significant changes to the plan of sale are not likely; and (f) the
sale is probable within one year. Restaurants classified as held for sale
are recorded at the lower of their carrying value or fair value less cost to
sell. We recognize estimated losses on restaurants that are classified as
held for sale in Refranchising (gain) loss.

Refranchising (gain) loss includes the gains or losses from the sales of our
restaurants to new and existing franchisees, including impairment charges
discussed above, and the related initial franchise fees. We recognize
gains on restaurant refranchisings when the sale transaction closes, the
franchisee has a minimum amount of the purchase price in at-risk equity,
and we are satisfied that the franchisee can meet its financial obligations.
If the criteria for gain recognition are not met, we defer the gain to the
extent we have a remaining financial exposure in connection with the sales
transaction. Deferred gains are recognized when the gain recognition
criteria are met or as our financial exposure is reduced. When we make a
decision to retain a store, or group of stores, previously held for sale, we
revalue the store at the lower of its (a) net book value at our original sale
decision date less normal depreciation and amortization that would have
been recorded during the period held for sale or (b) its current fair value.
This value becomes the store’s new cost basis. We record any resulting
difference between the store’s carrying amount and its new cost basis to
Closure and impairment (income) expense.

When we decide to close a restaurant, it is reviewed for impairment and
depreciable lives are adjusted based on the expected disposal date. Other
costs incurred when closing a restaurant such as costs of disposing of the
assets as well as other facility-related expenses from previously closed
stores are generally expensed as incurred. Additionally, at the date we
cease using a property under an operating lease, we record a liability for
the net present value of any remaining lease obligations, net of estimated
sublease income, if any. Any costs recorded upon store closure as well as
any subsequent adjustments to liabilities for remaining lease obligations as
a result of lease termination or changes in estimates of sublease income
are recorded in Closures and impairment (income) expenses. To the
extent we sell assets, primarily land, associated with a closed store, any
gain or loss upon that sale is also recorded in Closures and impairment
(income) expenses.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-KPart II Part II
Item 8 Financial Statements and Supplementary Data

Considerable management judgment is necessary to estimate future cash
flows, including cash flows from continuing use, terminal value, sublease
income and refranchising proceeds. Accordingly, actual results could vary
significantly from our estimates.

Impairment of Investments in Unconsolidated affiliates. We record
impairment charges related to an investment in an unconsolidated affiliate
whenever events or circumstances indicate that a decrease in the fair value
of an investment has occurred which is other than temporary. In addition,
we evaluate our investments in unconsolidated affiliates for impairment
when they have experienced two consecutive years of operating losses. We
recorded no impairment associated with our investments in unconsolidated
affiliates during 2013, 2012 and 2011.

Guarantees. We recognize, at inception of a guarantee, a liability for the fair
value of certain obligations undertaken. The majority of our guarantees are
issued as a result of assigning our interest in obligations under operating
leases as a condition to the refranchising of certain Company restaurants.
We recognize a liability for the fair value of such lease guarantees upon
refranchising and upon subsequent renewals of such leases when we remain
contingently liable. The related expense and any subsequent changes
in the guarantees are included in Refranchising (gain) loss. The related
expense and subsequent changes in the guarantees for other franchise
support guarantees not associated with a refranchising transaction are
included in Franchise and license expense.

Income taxes. We record deferred tax assets and liabilities for the future
tax consequences attributable to temporary differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases as well as operating loss, capital loss and tax
credit carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date. Additionally,
in determining the need for recording a valuation allowance against the
carrying amount of deferred tax assets, we consider the amount of taxable
income and periods over which it must be earned, actual levels of past
taxable income and known trends and events or transactions that are
expected to affect future levels of taxable income. Where we determine
that it is more likely than not that all or a portion of an asset will not be
realized, we record a valuation allowance.

We recognize the benefit of positions taken or expected to be taken in
our tax returns in our Income tax provision when it is more likely than
not (i.e. a likelihood of more than fifty percent) that the position would be
sustained upon examination by tax authorities. A recognized tax position
is then measured at the largest amount of benefit that is greater than
fifty percent likely of being realized upon settlement. We evaluate these
amounts on a quarterly basis to insure that they have been appropriately
adjusted for audit settlements and other events we believe may impact
the outcome. Changes in judgment that result in subsequent recognition,
derecognition or a change in measurement of a tax position taken in a prior
annual period (including any related interest and penalties) are recognized
as a discrete item in the interim period in which the change occurs. We
recognize accrued interest and penalties related to unrecognized tax
benefits as components of our Income tax provision.

We do not record a U.S. deferred tax liability for the excess of the book
basis over the tax basis of our investments in foreign subsidiaries to the
extent that the basis difference results from earnings that meet the indefinite
reversal criteria. This criteria is met if the foreign subsidiary has invested,
or will invest, the undistributed earnings indefinitely. The decision as to the
amount of undistributed earnings that we intend to maintain in non-U.S.
subsidiaries considers items including, but not limited to, forecasts and
budgets of financial needs of cash for working capital, liquidity plans and
expected cash requirements in the United States.

See Note 17 for a further discussion of our income taxes.

Fair Value Measurements. Fair value is the price we would receive to sell
an asset or pay to transfer a liability (exit price) in an orderly transaction

between market participants. For those assets and liabilities we record
or disclose at fair value, we determine fair value based upon the quoted
market price, if available. If a quoted market price is not available for
identical assets, we determine fair value based upon the quoted market
price of similar assets or the present value of expected future cash flows
considering the risks involved, including counterparty performance risk if
appropriate, and using discount rates appropriate for the duration. The
fair values are assigned a level within the fair value hierarchy, depending
on the source of the inputs into the calculation.

Level 1

Level 2

Level 3

Inputs based upon quoted prices in active markets
for identical assets.
Inputs other than quoted prices included within
Level 1 that are observable for the asset, either
directly or indirectly.
Inputs that are unobservable for the asset.

Cash and Cash Equivalents. Cash equivalents represent funds we have
temporarily invested (with original maturities not exceeding three months),
including short-term, highly liquid debt securities. Cash and overdraft
balances that meet the criteria for right to offset are presented net on our
Consolidated Balance Sheet.

receivables. The Company’s receivables are primarily generated from
ongoing business relationships with our franchisees and licensees as a result
of franchise, license and lease agreements. Trade receivables consisting of
royalties from franchisees and licensees are generally due within 30 days
of the period in which the corresponding sales occur and are classified
as Accounts and notes receivable on our Consolidated Balance Sheets.
Our provision for uncollectible franchise and licensee receivable balances
is based upon pre-defined aging criteria or upon the occurrence of other
events that indicate that we may not collect the balance due. Additionally,
we monitor the financial condition of our franchisees and licensees and
record provisions for estimated losses on receivables when we believe
it probable that our franchisees or licensees will be unable to make their
required payments. While we use the best information available in making
our determination, the ultimate recovery of recorded receivables is also
dependent upon future economic events and other conditions that may be
beyond our control. We recorded $2 million in net provisions, $1 million in
net recoveries and $7 million in net provisions within Franchise and license
expenses in 2013, 2012 and 2011, respectively, related to uncollectible
franchise and license trade receivables. Trade receivables that are ultimately
deemed to be uncollectible, and for which collection efforts have been
exhausted, are written off against the allowance for doubtful accounts.

Accounts and notes receivable
Allowance for doubtful accounts
Accounts and notes receivable, net

2013
330 $
(11)
319 $

2012
313
(12)
301

Our financing receivables primarily consist of notes receivables and direct
financing leases with franchisees which we enter into from time to time.
As these receivables primarily relate to our ongoing business agreements
with franchisees and licensees, we consider such receivables to have
similar risk characteristics and evaluate them as one collective portfolio
segment and class for determining the allowance for doubtful accounts.
We monitor the financial condition of our franchisees and licensees
and record provisions for estimated losses on receivables when we
believe it is probable that our franchisees or licensees will be unable to
make their required payments. Balances of notes receivable and direct
financing leases due within one year are included in Accounts and notes
receivable while amounts due beyond one year are included in Other
assets. Amounts included in Other assets totaled $22 million (net of an
allowance of $1 million) and $18 million (net of an allowance of $3 million)
at December 28, 2013 and December 29, 2012, respectively. Financing
receivables that are ultimately deemed to be uncollectible, and for which
collection efforts have been exhausted, are written off against the allowance
for doubtful accounts. Interest income recorded on financing receivables
has traditionally been insignificant.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

Inventories. We value our inventories at the lower of cost (computed on
the first-in, first-out method) or market.

Property, Plant and Equipment. We state PP&E at cost less accumulated
depreciation and amortization. We calculate depreciation and amortization
on a straight-line basis over the estimated useful lives of the assets as
follows: 5 to 25 years for buildings and improvements, 3 to 20 years for
machinery and equipment and 3 to 7 years for capitalized software costs.
As discussed above, we suspend depreciation and amortization on assets
related to restaurants that are held for sale.

Leases and Leasehold Improvements. The Company leases land, buildings
or both for nearly 7,300 of its restaurants worldwide. The length of our
lease terms, which vary by country and often include renewal options, are
an important factor in determining the appropriate accounting for leases
including the initial classification of the lease as capital or operating and
the timing of recognition of rent expense over the duration of the lease.
We include renewal option periods in determining the term of our leases
when failure to renew the lease would impose a penalty on the Company
in such an amount that a renewal appears to be reasonably assured at
the inception of the lease. The primary penalty to which we are subject
is the economic detriment associated with the existence of leasehold
improvements which might be impaired if we choose not to continue the use
of the leased property. Leasehold improvements, which are a component
of buildings and improvements described above, are amortized over the
shorter of their estimated useful lives or the lease term. We generally do
not receive leasehold improvement incentives upon opening a store that
is subject to a lease.

We expense rent associated with leased land or buildings while a restaurant
is being constructed whether rent is paid or we are subject to a rent
holiday. Additionally, certain of the Company’s operating leases contain
predetermined fixed escalations of the minimum rent during the lease
term. For leases with fixed escalating payments and/or rent holidays, we
record rent expense on a straight-line basis over the lease term, including
any option periods considered in the determination of that lease term.
Contingent rentals are generally based on sales levels in excess of stipulated
amounts, and thus are not considered minimum lease payments and are
included in rent expense when attainment of the contingency is considered
probable (e.g. when Company sales occur).

Internal Development Costs and abandoned Site Costs. We capitalize
direct costs associated with the site acquisition and construction of a
Company unit on that site, including direct internal payroll and payroll-
related costs. Only those site-specific costs incurred subsequent to the
time that the site acquisition is considered probable are capitalized. If we
subsequently make a determination that it is probable a site for which
internal development costs have been capitalized will not be acquired
or developed, any previously capitalized internal development costs are
expensed and included in G&A expenses.

Goodwill and Intangible assets. From time to time, the Company
acquires restaurants from one of our Concept’s franchisees or acquires
another business. Goodwill from these acquisitions represents the excess
of the cost of a business acquired over the net of the amounts assigned
to assets acquired, including identifiable intangible assets and liabilities
assumed. Goodwill is not amortized and has been assigned to reporting
units for purposes of impairment testing. Our reporting units are our
operating segments in the U.S. (see Note 18), our YRI business units
(which are aligned based on geography) and individual brands in our
India and China Divisions. Goodwill is assigned to reporting units that are
expected to benefit from the synergies of the combination even though
other assets or liabilities acquired may not be assigned to that reporting
unit. The amount of goodwill assigned to a reporting unit that has not
been assigned any of the other assets acquired or liabilities assumed
is determined by comparing the fair value of the reporting unit before
the acquisition to the fair value of the reporting unit after the acquisition.

We evaluate goodwill for impairment on an annual basis or more often if
an event occurs or circumstances change that indicate impairment might
exist. We have selected the beginning of our fourth quarter as the date
on which to perform our ongoing annual impairment test for goodwill.

Part II Part II
Item 8 Financial Statements and Supplementary Data

We may elect to perform a qualitative assessment for our reporting units
to determine whether it is more likely than not that the fair value of the
reporting unit is greater than its carrying value. If a qualitative assessment
is not performed, or if as a result of a qualitative assessment it is not more
likely than not that the fair value of a reporting unit exceeds its carrying
value, then the reporting unit’s fair value is compared to its carrying value.
Fair value is the price a willing buyer would pay for a reporting unit, and is
generally estimated using discounted expected future after-tax cash flows
from Company-owned restaurant operations and franchise royalties. The
discount rate is our estimate of the required rate of return that a third-party
buyer would expect to receive when purchasing a business from us that
constitutes a reporting unit. We believe the discount rate is commensurate
with the risks and uncertainty inherent in the forecasted cash flows. If the
carrying value of a reporting unit exceeds its fair value, goodwill is written
down to its implied fair value.

If we record goodwill upon acquisition of a restaurant(s) from a franchisee and
such restaurant(s) is then sold within two years of acquisition, the goodwill
associated with the acquired restaurant(s) is written off in its entirety. If the
restaurant is refranchised two years or more subsequent to its acquisition,
we include goodwill in the carrying amount of the restaurants disposed
of based on the relative fair values of the portion of the reporting unit
disposed of in the refranchising and the portion of the reporting unit that
will be retained. The fair value of the portion of the reporting unit disposed
of in a refranchising is determined by reference to the discounted value
of the future cash flows expected to be generated by the restaurant and
retained by the franchisee, which includes a deduction for the anticipated,
future royalties the franchisee will pay us associated with the franchise
agreement entered into simultaneously with the refranchising transition.
The fair value of the reporting unit retained is based on the price a willing
buyer would pay for the reporting unit and includes the value of franchise
agreements. Appropriate adjustments are made if a franchise agreement
includes terms that are determined to not be at prevailing market rates.
As such, the fair value of the reporting unit retained can include expected
cash flows from future royalties from those restaurants currently being
refranchised, future royalties from existing franchise businesses and company
restaurant operations. As a result, the percentage of a reporting unit’s
goodwill that will be written off in a refranchising transaction will be less
than the percentage of the reporting unit’s Company-owned restaurants
that are refranchised in that transaction and goodwill can be allocated to
a reporting unit with only franchise restaurants.

We evaluate the remaining useful life of an intangible asset that is not
being amortized each reporting period to determine whether events and
circumstances continue to support an indefinite useful life. If an intangible
asset that is not being amortized is subsequently determined to have a finite
useful life, we amortize the intangible asset prospectively over its estimated
remaining useful life. Intangible assets that are deemed to have a definite
life are generally amortized on a straight-line basis to their residual value.

We evaluate our indefinite-lived intangible assets for impairment on an
annual basis or more often if an event occurs or circumstances change that
indicate impairments might exist. We perform our annual test for impairment
of our indefinite-lived intangible assets at the beginning of our fourth quarter.
We may elect to perform a qualitative assessment to determine whether
it is more likely than not that the fair value of an indefinite-lived intangible
asset is greater than its carrying value. If a qualitative assessment is not
performed, or if as a result of a qualitative assessment it is not more likely
than not that the fair value of an indefinite-lived intangible asset exceeds
its carrying value, then the asset’s fair value is compared to its carrying
value. Fair value is an estimate of the price a willing buyer would pay for
the intangible asset and is generally estimated by discounting the expected
future after-tax cash flows associated with the intangible asset.

Our definite-lived intangible assets that are not allocated to an individual
restaurant are evaluated for impairment whenever events or changes in
circumstances indicate that the carrying amount of the intangible asset may
not be recoverable. An intangible asset that is deemed not recoverable on
a undiscounted basis is written down to its estimated fair value, which is
our estimate of the price a willing buyer would pay for the intangible asset
based on discounted expected future after-tax cash flows. For purposes of

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-KPart II Part II
Item 8 Financial Statements and Supplementary Data

our impairment analysis, we update the cash flows that were initially used
to value the definite-lived intangible asset to reflect our current estimates
and assumptions over the asset’s future remaining life.

$794 million and $483 million in share repurchases were recorded as a
reduction in Retained Earnings in 2013, 2012 and 2011, respectively. See
Note 16 for additional information.

Derivative Financial Instruments. We use derivative instruments primarily
to hedge interest rate and foreign currency risks. These derivative contracts
are entered into with financial institutions. We do not use derivative
instruments for trading purposes and we have procedures in place to
monitor and control their use.

We record all derivative instruments on our Consolidated Balance Sheet
at fair value. For derivative instruments that are designated and qualify as
a fair value hedge, the gain or loss on the derivative instrument as well as
the offsetting gain or loss on the hedged item attributable to the hedged
risk are recognized in the results of operations. For derivative instruments
that are designated and qualify as a cash flow hedge, the effective portion
of the gain or loss on the derivative instrument is reported as a component
of other comprehensive income (loss) and reclassified into earnings in
the same period or periods during which the hedged transaction affects
earnings. For derivative instruments that are designated and qualify as a net
investment hedge, the effective portion of the gain or loss on the derivative
instrument is reported in the foreign currency translation component of
other comprehensive income (loss). Any ineffective portion of the gain or
loss on the derivative instrument for a cash flow hedge or net investment
hedge is recorded in the results of operations immediately. For derivative
instruments not designated as hedging instruments, the gain or loss is
recognized in the results of operations immediately. See Note 12 for a
discussion of our use of derivative instruments, management of credit risk
inherent in derivative instruments and fair value information.

Common Stock Share repurchases. From time to time, we repurchase
shares of our Common Stock under share repurchase programs authorized
by our Board of Directors. Shares repurchased constitute authorized,
but unissued shares under the North Carolina laws under which we are
incorporated. Additionally, our Common Stock has no par or stated value.
Accordingly, we record the full value of share repurchases, upon the trade
date, against Common Stock on our Consolidated Balance Sheet except
when to do so would result in a negative balance in such Common Stock
account. In such instances, on a period basis, we record the cost of any
further share repurchases as a reduction in retained earnings. Due to the
large number of share repurchases and the increase in the market value
of our stock over the past several years, our Common Stock balance
is frequently zero at the end of any period. Accordingly, $640 million,

Pension and Post-retirement Medical Benefits. We measure and recognize
the overfunded or underfunded status of our pension and post-retirement
plans as an asset or liability in our Consolidated Balance Sheet as of our
fiscal year end. The funded status represents the difference between the
projected benefit obligations and the fair value of plan assets, which is
calculated on a plan-by-plan basis. The projected benefit obligation and
related funded status are determined using assumptions as of the end of
each year. The projected benefit obligation is the present value of benefits
earned to date by plan participants, including the effect of future salary
increases, as applicable. The difference between the projected benefit
obligations and the fair value of plan assets that has not previously been
recognized in our Consolidated Statement of Income is recorded as a
component of Accumulated other comprehensive income (loss).

The net periodic benefit costs associated with the Company’s defined
benefit pension and post-retirement medical plans are determined using
assumptions regarding the projected benefit obligation and, for funded
plans, the market-related value of plan assets as of the beginning of each
year. We have elected to use a market-related value of plan assets to
calculate the expected return on assets in net periodic benefit costs. We
recognize differences in the fair value versus the market-related value of
plan assets evenly over five years. For each individual plan we amortize into
pension expense the net amounts in Accumulated other comprehensive
income (loss), as adjusted for the difference between the fair value and
market-related value of plan assets, to the extent that such amounts
exceed 10% of the greater of a plan’s projected benefit obligation or
market-related value of assets, over the remaining service period of active
participants in the plan or, for plans with no active participants, over the
expected average life expectancy of the inactive participants in the plan.
We record a curtailment when an event occurs that significantly reduces
the expected years of future service or eliminates the accrual of defined
benefits for the future services of a significant number of employees. We
record a curtailment gain when the employees who are entitled to the
benefits terminate their employment; we record a curtailment loss when
it becomes probable a loss will occur.

We recognize settlement gains or losses only when we have determined
that the cost of all settlements in a year will exceed the sum of the service
and interest costs within an individual plan.

NOtE Part II3

Earnings Per Common Share (“EPS”)

NET INCOME – YUM! BRANDS, INC.
Weighted-average common shares outstanding (for basic calculation)
Effect of dilutive share-based employee compensation
WEIGHTED-AVERAGE COMMON AND DILUTIVE POTENTIAL COMMON SHARES
OUTSTANDING (FOR DILUTED CALCULATION)
BASIC EPS
DILUTED EPS
UNEXERCISED EMPLOYEE STOCK OPTIONS AND STOCK APPRECIATION
RIGHTS (IN MILLIONS) EXCLUDED FROM THE DILUTED EPS COMPUTATION(a)

$
$

2013
1,091 $
452
9

461
2.41 $
2.36 $

2012
1,597 $
461
12

473
3.46 $
3.38 $

4.9

3.1

2011
1,319
469
12

481
2.81
2.74

4.2

(a) These unexercised employee stock options and stock appreciation rights were not included in the computation of diluted EPS because to do so would have been antidilutive for the periods

presented.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

Part II Part II
Item 8 Financial Statements and Supplementary Data

NOtE Part II4

Items affecting Comparability of Net Income and Cash Flows

Little Sheep acquisition and Subsequent
Impairment

On February 1, 2012 we acquired an additional 66% interest in Little Sheep
Group Limited (“Little Sheep”) for $540 million, net of cash acquired of $44
million, increasing our ownership to 93%. The acquisition was driven by our
strategy to build leading brands across China in every significant category.
Prior to our acquisition of this additional interest, our 27% interest in Little
Sheep was accounted for under the equity method of accounting. As a
result of the acquisition we obtained voting control of Little Sheep, and
thus we began consolidating Little Sheep upon acquisition. As required by
GAAP, we remeasured our previously held 27% ownership in Little Sheep,
which had a recorded value of $107 million at the date of acquisition, at
fair value based on Little Sheep’s traded share price immediately prior to
our offer to purchase the business and recognized a non-cash gain of
$74 million. This gain, which resulted in no related income tax expense,
was recorded in Other (income) expense on our Consolidated Statement
of Income in 2012 and was not allocated to any segment for performance
reporting purposes.

We recorded the following assets acquired and liabilities assumed upon
acquisition of Little Sheep as a result of our purchase price allocation:

Current assets, including cash of $44
Property, plant and equipment
Goodwill
Intangible assets, including indefinite-lived
trademark of $404
Other assets
Total assets acquired
Deferred taxes
Other liabilities
Total liabilities assumed
Redeemable noncontrolling interest
Other noncontrolling interests
NET ASSETS ACQUIRED

109
64
376

421
35
1,005
105
60
165
59
16
765

The fair values of intangible assets were determined using an income
approach based on expected cash flows. The goodwill recorded resulted
from the value expected to be generated from applying YUM’s processes
and knowledge in China, including YUM’s development capabilities, to
the Little Sheep business. The goodwill is not expected to be deductible
for income tax purposes and has been allocated to the China operating
segment.

As part of the acquisition, YUM granted an option to the shareholder that
holds the remaining 7% ownership interest in Little Sheep that would require
us to purchase their remaining shares owned upon exercise, which may occur
any time after the third anniversary of the acquisition. This noncontrolling
interest has been recorded as a Redeemable noncontrolling interest in the
Consolidated Balance Sheet. The Redeemable noncontrolling interest was
reported at its fair value of $59 million at the date of acquisition, which was
based on the Little Sheep traded share price immediately subsequent to
our offer to purchase the additional interest.

Under the equity method of accounting, we previously reported our 27%
share of the net income of Little Sheep as Other (income) expense in
the Consolidated Statements of Income. Since the acquisition, we have
reported Little Sheep’s results of operations in the appropriate line items
of our Consolidated Statement of Income. We no longer report Other
(income) expense as we did under the equity method of accounting. Net
income attributable to our partner’s ownership percentage is recorded
in Net Income (loss) – noncontrolling interests. Little Sheep reports on a

one month lag, and as a result, their consolidated results were included
in the China Division starting the second quarter of 2012. In 2012, the
consolidation of Little Sheep increased China Division Revenues by 4%
and did not have a significant impact on China Division Operating Profit
versus 2011.

The purchase price paid for the additional 66% interest and the resulting
purchase price allocation assumed same-store sales growth and new
unit development for the brand. Little Sheep’s sales were negatively
impacted by a longer than expected purchase approval and ownership
transition phase. Our efforts to regain sales momentum were significantly
compromised in May 2013 due to negative publicity regarding quality
issues with unrelated hot pot concepts in China, even though there was
not an issue with the quality of Little Sheep products.

The sustained declines in sales and profits that began in May 2013 and
continued through the third quarter, coupled with the anticipated time it will
now take for the business to recover, resulted in a determination during the
quarter ended September 7, 2013 that it is not more likely than not that
the Little Sheep trademark and reporting unit fair values are in excess of
their carrying values. Therefore, our Little Sheep trademark and goodwill
were tested for impairment in the quarter ended September 7, 2013, prior
to the annual impairment reviews performed at the beginning of the fourth
quarter of each year in accordance with our accounting policy.

As a result of comparing the trademark’s fair value of $345 million to its
carrying value of $414 million, an impairment charge of $69 million was
recorded in the quarter ended September 7, 2013. Additionally, after
determining the fair value of the Little Sheep reporting unit was less than
its carrying value, goodwill was written down to $162 million, resulting in
an impairment charge of $222 million. The Company also evaluated other
Little Sheep long-lived assets for impairment and recorded a $4 million
impairment charge related to restaurant-level PP&E.

These non-cash impairment charges totalling $295 million were recorded in
Closures and impairment (income) expense on our Consolidated Statement
of Income and were not allocated to any segment for performance
reporting purposes, consistent with the classification of the $74 million
gain that was recorded upon acquisition. We recorded an $18 million tax
benefit associated with these impairments and allocated $19 million of
the net impairment charges to Net Income (loss) - noncontrolling interests,
which resulted in a net impairment charge of $258 million allocated to Net
Income – YUM! Brands, Inc.

The fair values of the Little Sheep trademark and reporting unit were based
on the estimated prices a willing buyer would pay. The fair value of the
trademark was determined using a relief from royalty valuation approach
that included future estimated sales as a significant input. The reporting
unit fair value was determined using an income approach with future cash
flow estimates generated by the business as a significant input. Future
cash flow estimates are impacted by new unit development, sales growth
and margin improvement. Both fair values incorporated a discount rate of
13% as our estimate of the required rate of return that a third-party buyer
would expect to receive when purchasing the Little Sheep trademark or
reporting unit.

The inputs used in determining the fair values of the Little Sheep trademark
and reporting unit assumed that the business will recover to pre-acquisition
average-unit sales volumes and profit levels over the next three years. At
such pre-acquisition sales and profit levels, we believe that the Little Sheep
restaurant-level unit economics will support the new unit development we
assumed in the fair value estimations of the trademark and reporting unit.
Long-term average growth assumptions subsequent to this assumed
recovery include same-store-sales growth of 4% and average annual net
unit growth of approximately 75 units.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

Part II Part II
Item 8 Financial Statements and Supplementary Data

Losses related to the Extinguishment of Debt

Pension Settlement Charges

As a result of settlement payments exceeding the sum of service and interest
costs within these U.S. pension plans in 2013 and 2012, pursuant to our
accounting policy we recorded pre-tax settlement charges of $30 million
and $89 million for the years ended December 28, 2013 and December 29,
2012, respectively, in General and administrative expenses. These
amounts included settlement charges of $10 million and $84 million in the
years ended December 28, 2013 and December 29, 2012, respectively,
related to the programs discussed above that were not allocated for
performance reporting purposes. See Note 14 for further discussion of
our pension plans.

U.S. Business transformation

As part of our plan to transform our U.S. business we took several measures
in 2013, 2012 and 2011 (“the U.S. business transformation measures”).
These measures included: continuation of our U.S. refranchising; G&A
productivity initiatives and realignment of resources (primarily severance
and early retirement costs).

For information on our U.S. refranchising, see the Refranchising (Gain)
Loss section below.

China
YRI(a)
U.S.(b)
India
WORLDWIDE

In connection with our G&A productivity initiatives and realignment of
resources (primarily severance and early retirement costs), we recorded
pre-tax charges of $5 million, $5 million and $21 million in the years
ended December 28, 2013, December 29, 2012 and December 31,
2011, respectively. The unpaid current liability for the severance portion
of these charges was $1 million and $5 million as of December 28, 2013
and December 29, 2012, respectively. Severance payments in the years
ended December 28, 2013, December 29, 2012 and December 31, 2011
totaled approximately $4 million, $14 million and $4 million respectively.

We are not including the impacts of these U.S. business transformation
measures in our U.S. segment for performance reporting purposes as we
do not believe they are indicative of our ongoing operations.

LJS and a&W Divestitures

In 2011 we sold the Long John Silver’s and A&W All American Food
Restaurants brands to key franchise leaders and strategic investors in
separate transactions.

We recognized $86 million of pre-tax losses and other costs primarily in
Closures and impairment (income) expenses during 2011 as a result of
these transactions. Additionally, we recognized $104 million of tax benefits
related to tax losses associated with the transactions.

We are not including the pre-tax losses and other costs in our U.S. and
YRI segments for performance reporting purposes as we do not believe
they are indicative of our ongoing operations. In 2012, System sales and
Franchise and license fees and income in the U.S. were negatively impacted
versus 2011 by 5% and 6%, respectively, due to these divestitures while
YRI’s system sales and Franchise and license fees and income were both
negatively impacted by 1%. While these divestitures negatively impacted
both the U.S. and YRI segments’ Operating Profit by 1% in 2012, the
impact on our consolidated Operating Profit was not significant.

refranchising (Gain) Loss

The Refranchising (gain) loss by reportable segment is presented below.
We do not allocate such gains and losses to our segments for performance
reporting purposes.

Refranchising (gain) loss
2013

2012

(5) $
(4)
(91)
—
(100) $

(17) $
61

(122)

—
(78) $

2011
(14)
69
17
—
72

(a) During the fourth quarter of 2012, we refranchised our remaining 331 Company-owned Pizza Hut dine-in restaurants in the United Kingdom (“UK”). The franchise agreement for these stores
allows the franchisee to pay continuing franchise fees in the initial years of the agreement at a reduced rate. We agreed to allow the franchisee to pay these reduced fees in part as consideration
for their assumption of lease liabilities related to underperforming stores that we anticipate they will close that were part of the refranchising. We recognize the estimated value of terms in
franchise agreements entered into concurrently with a refranchising transaction that are not consistent with market terms as part of the upfront refranchising (gain) loss. Accordingly, upon the
closing of this refranchising we recognized a loss of $53 million representing the estimated value of these reduced continuing fees. The associated deferred credit is being amortized into YRI’s
Franchise and license fees and income through 2016. This upfront loss largely contributed to a $70 million Refranchising loss we recognized during 2012 as a result of this refranchising. Also
included in that loss was the write-off of $14 million in goodwill allocated to the Pizza Hut UK reporting unit. The remaining carrying value of goodwill allocated to our Pizza Hut UK business of
$87 million, immediately subsequent to the aforementioned write-off, was determined not to be impaired as the fair value of the Pizza Hut UK reporting unit exceeded its carrying amount. For the
year ended December 28, 2013, the refranchising of the Pizza Hut UK dine-in restaurants decreased Company sales by 18% and increased Franchise and license fees and income and Operating
Profit by 2% and 3%, respectively, for the YRI Division versus 2012.
During 2011, we recorded a $76 million charge in Refranchising (gain) loss as a result of our decision to refranchise or close all of our remaining Company-owned Pizza Hut UK dine-in
restaurants, primarily to write down these restaurants’ long-lived assets to their then estimated fair value. Impairment charges of Pizza Hut UK long-lived assets incurred as a result of this decision,
including the charge mentioned in the previous sentence, reduced depreciation expense versus what would have otherwise been recorded by $13 million and $3 million for the years ended
December 29, 2012 and December 31, 2011, respectively. These depreciation reductions were not allocated to the YRI segment resulting in depreciation expense in the YRI segment results
continuing to be recorded at the rate which it was prior to the impairment charges being recorded for these restaurants.

(b) U.S. Refranchising (gain) loss in the years ended December 28, 2013 and December 29, 2012 is primarily due to gains on sales of Taco Bell restaurants. U.S. Refranchising (gain) loss in
the year ended December 31, 2011 is primarily due to losses on sales of and offers to refranchise KFCs in the U.S. The non-cash impairment charges that were recorded related to our
offers to refranchise these Company-owned KFC restaurants in the U.S. decreased depreciation expense versus what would have otherwise been recorded by $3 million and $10 million in
the years ended December 29, 2012 and December 31, 2011, respectively. These depreciation reductions were not allocated to the U.S. segment resulting in depreciation expense in the
U.S. segment results continuing to be recorded at the rate at which it was prior to the impairment charges being recorded for these restaurants.

See Note 2 for our policy for writing off goodwill in a refranchising transaction.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

Part II Part II
Item 8 Financial Statements and Supplementary Data

Store Closure and Impairment activity
Store closure (income) costs and Store impairment charges by reportable segment are presented below. These tables exclude $295 million of Little Sheep
impairment losses in 2013 and $80 million of net losses related to the LJS and A&W divestitures in 2011, which were not allocated to any segment for
performance reporting purposes.

China

YRI

U.S.

India

2013

Store closure (income) costs(a)
Store impairment charges
CLOSURE AND IMPAIRMENT (INCOME) EXPENSES

(1) $
31
30 $

China

(4) $
13

9 $

China

(1) $
13
12

(4) $
3
(1) $

YRI
12

YRI
4
18
22

— $
5
5 $

— $
2
2 $

2012

2011

U.S.

India

— $
9
9 $

— $
—
— $

U.S.

India

4 $

17
21 $

— $
—
— $

Worldwide
(5)
41
36

Worldwide
8
29
37

Worldwide
7
48
55

(a) Store closure (income) costs include the net gain or loss on sales of real estate on which we formerly operated a Company-owned restaurant that was closed, lease reserves established

when we cease using a property under an operating lease and subsequent adjustments to those reserves and other facility-related expenses from previously closed stores.

The following table summarizes the 2013 and 2012 activity related to reserves for remaining lease obligations for closed stores.

2013 Activity
2012 Activity

Beginning
Balance
27
34

$
$

Amounts
Used
(11)
(14)

New
Decisions
1
3

Estimate/
Decision
Changes
4
3

CTA/Other

Ending Balance
21
27

— $
$
1

Changes in our Effective tax rate

For 2013 our effective tax rate was 6.4 percentage points higher than 2012. See Note 17 for further discussion of our effective tax rate.

NOtE Part II5

Supplemental Cash Flow Data

Cash Paid For:

Interest(a)
Income taxes

Significant Non-Cash Investing and Financing Activities:

Capital lease obligations incurred
Capital lease obligations relieved, primarily through divestitures and refranchisings
Increase (decrease) in accrued capital expenditures

2013

2012

269
489

(41)

166 $
417

17 $

112
35

2011

199
349

58
65
55

(a) 2013 includes $109 million of cash premiums and fees paid related to the extinguishment of debt, which is the primary component of the $120 million loss on debt extinguishment which

was not allocated for performance reporting purposes. See the Losses Related to the Extinguishment of Debt section of Note 4 for details.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

Part II Part II
Item 8 Financial Statements and Supplementary Data

NOtE Part II6

Franchise and License Fees and Income

Initial fees, including renewal fees
Initial franchise fees included in Refranchising (gain) loss

Continuing fees and rental income
FRANCHISE AND LICENSE FEES AND INCOME

NOtE Part II7

Other (Income) Expense

Equity (income) loss from investments in unconsolidated affiliates
Gain upon acquisition of Little Sheep(a)
Foreign exchange net (gain) loss and other
OTHER (INCOME) EXPENSE

(a) See Note 4 for further details on the acquisition of Little Sheep.

NOtE Part II8

Supplemental Balance Sheet Information

Prepaid Expenses and Other Current Assets
Income tax receivable
Assets held for sale(a)
Other prepaid expenses and current assets
PREPAID EXPENSES AND OTHER CURRENT ASSETS

2013

90 $
(13)
77
1,823
1,900

2013

(26) $
—
10
(16) $

(a) Reflects restaurants we have offered for sale to franchisees and excess properties that we do not intend to use for restaurant operations in the future.

Property, Plant and Equipment
Land
Buildings and improvements
Capital leases, primarily buildings
Machinery and equipment
Property, plant and equipment, gross
Accumulated depreciation and amortization
PROPERTY, PLANT AND EQUIPMENT, NET

2012

92 $
(24)
68
1,732
1,800

2012

(47) $
(74)

6
(115) $

2013
89
16
181
286

2013
508 $
4,393
199
2,750
7,850
(3,391)
4,459

2011

83
(21)
62
1,671
1,733

2011
(47)
—
(6)
(53)

2012
55
56
161
272

2012
469
4,093
200
2,627
7,389
(3,139)
4,250

Depreciation and amortization expense related to property, plant and equipment was $686 million, $629 million and $599 million in 2013, 2012 and
2011, respectively.

Accounts Payable and Other Current Liabilities
Accounts payable
Accrued capital expenditures
Accrued compensation and benefits
Dividends payable
Accrued taxes, other than income taxes
Other current liabilities
ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES

2013
704
223
442
164
93
303

1,929

2012
684
264
487
151
103
347
2,036

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

Part II Part II
Item 8 Financial Statements and Supplementary Data

NOtE Part II9

Goodwill and Intangible assets

The changes in the carrying amount of goodwill are as follows:

Balance as of December 31, 2011

Goodwill, gross
Accumulated impairment losses
Goodwill, net
Acquisitions(a)
Disposals and other, net(b)

Balance as of December 29, 2012

Goodwill, gross
Accumulated impairment losses
Goodwill, net
Acquisitions(c)
Impairment Losses(d)
Disposals and other, net(b)

Balance as of December 28, 2013

Goodwill, gross
Accumulated impairment losses

GOODWILL, NET

China

YRI

U.S.

India

Worldwide

88
—
88
376
2

466
—
466
2

(222)

478
(222)
256

299 $
(17)
282
—
(11)

288
(17)
271
86
—
(18)

356
(17)
339

311 $
—
311
—
(14)

297
—
297
—
—
(5)

292
—

292

— $
—
—
—
—

—
—
—
2
—
—

2
—
2 $

698
(17)
681
376
(23)

1,051
(17)
1,034
90
(222)
(13)

1,128
(239)
889

(a) We recorded goodwill of $376 million related to our acquisition of Little Sheep. See the Little Sheep Acquisition and Subsequent Impairment section of Note 4.
(b) Disposals and other, net includes the impact of foreign currency translation on existing balances and goodwill write-offs associated with refranchising.
(c) We recorded goodwill of $86 million in our YRI segment related to the acquisition of 65 KFC and 41 Pizza Hut restaurants in Turkey.
(d) We recorded an impairment charge of $222 million to write down Little Sheep’s goodwill in 2013. See the Little Sheep Acquisition and Subsequent Impairment section of Note 4 for details.

Intangible assets, net for the years ended 2013 and 2012 are as follows:

Definite-lived intangible assets
Reacquired franchise rights
Franchise contract rights
Lease tenancy rights
Favorable operating leases
Other

Indefinite-lived intangible assets

KFC trademark
Little Sheep trademark(a)

2013

2012

Gross Carrying
Amount

Accumulated
Amortization

Gross Carrying
Amount

Accumulated
Amortization

188 $
130
71
20
52
461 $

31
348
379

(66)
(90)
(12)
(12)
(22)
(202)

163 $
131
57
21
51
423 $

31
409
440

(47)
(84)
(12)
(11)
(19)
(173)

(a) We recorded an impairment charge of $69 million to write down the Little Sheep trademark in 2013. See the Little Sheep Acquisition and Subsequent Impairment section of Note 4 for details.

Amortization expense for all definite-lived intangible assets was $28 million in 2013, $28 million in 2012 and $31 million in 2011. Amortization expense for
definite-lived intangible assets will approximate $27 million in 2014, $26 million in 2015, $25 million in 2016, $23 million in 2017 and $22 million in 2018.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

Part II Part II
Item 8 Financial Statements and Supplementary Data

NOtE Part II10 Short-term Borrowings and Long-term Debt

Short-term Borrowings
Current maturities of long-term debt
Long-term Debt
Senior Unsecured Notes
Capital lease obligations (See Note 11)

Less current maturities of long-term debt
Long-term debt excluding long-term portion of hedge accounting adjustment
Long-term portion of fair value hedge accounting adjustment (See Note 12)
LONG-TERM DEBT INCLUDING HEDGE ACCOUNTING ADJUSTMENT

2013

2012

71 $

2,803 $
172
2,975
(71)
2,904
14

2,918

2,750
170
2,920
(10)
2,910
22

2,932

Our primary bank credit agreement comprises a $1.3 billion syndicated
senior unsecured revolving credit facility (the “Credit Facility”) which matures
in March 2017. The Credit Facility includes 24 participating banks with
commitments ranging from $23 million to $115 million. Under the terms of
the Credit Facility, we may borrow up to the maximum borrowing limit, less
outstanding letters of credit or banker’s acceptances, where applicable.
At December 28, 2013, our unused Credit Facility totaled $1.2 billion net
of outstanding letters of credit of $65 million. There were no borrowings
outstanding under the Credit Facility at December 28, 2013. The interest
rate for most borrowings under the Credit Facility ranges from 1.00%
to 1.75% over the London Interbank Offered Rate (“LIBOR”). The exact
spread over LIBOR under the Credit Facility depends upon our performance
against specified financial criteria. Interest on any outstanding borrowings
under the Credit Facility is payable at least quarterly.

The Credit Facility is unconditionally guaranteed by our principal domestic
subsidiaries. This agreement contains financial covenants relating to
maintenance of leverage and fixed charge coverage ratios and also contains
affirmative and negative covenants including, among other things, limitations
on certain additional indebtedness and liens, and certain other transactions
specified in the agreement. Given the Company’s strong balance sheet and
cash flows, we were able to comply with all debt covenant requirements at
December 28, 2013 with a considerable amount of cushion. Additionally,
the Credit Facility contains cross-default provisions whereby our failure to

make any payment on our indebtedness in a principal amount in excess of
$125 million, or the acceleration of the maturity of any such indebtedness,
will constitute a default under such agreement.

The majority of our remaining long-term debt primarily comprises Senior
Unsecured Notes with varying maturity dates from 2014 through 2043 and
stated interest rates ranging from 2.38% to 6.88%. The Senior Unsecured
Notes represent senior, unsecured obligations and rank equally in right
of payment with all of our existing and future unsecured unsubordinated
indebtedness. Our Senior Unsecured Notes provide that the acceleration
of the maturity of any of our indebtedness in a principal amount in excess
of $50 million will constitute a default under the Senior Unsecured Notes if
such acceleration is not annulled, or such indebtedness is not discharged,
within 30 days after notice.

During the fourth quarter of 2013, we issued $325 million aggregate principal
amount of 3.88% 10 year Senior Unsecured Notes and $275 million
aggregate principal amount of 5.35% 30 year Senior Unsecured Notes. We
used the proceeds from our issuances of these Senior Unsecured Notes
in part to repurchase $550 million of our Senior Unsecured Notes due
either March 2018 or November 2037 with aggregate principal amounts
of $275 million each. See Losses Related to the Extinguishment of Debt
section of Note 4 for further detail.

The following table summarizes all Senior Unsecured Notes issued that remain outstanding at December 28, 2013:

Issuance Date(a)
April 2006
October 2007
October 2007
August 2009
August 2009
August 2010
August 2011
September 2011
October 2013
October 2013

Maturity Date
April 2016
March 2018
November 2037
September 2015
September 2019
November 2020
November 2021
September 2014
November 2023
November 2043

Principal Amount
(in millions)
300
325
325
250
250
350
350
58
325
275

$
$
$
$
$
$
$
$
$
$

Interest Rate
Stated

Effective(b)

6.25%
6.25%
6.88%
4.25%
5.30%
3.88%
3.75%
2.38%
3.88%
5.35%

6.03%
6.36%
7.45%
4.44%
5.59%
4.01%
3.88%
2.89%
4.01%
5.42%

(a)
(b)

Interest payments commenced approximately six months after issuance date and are payable semi-annually thereafter.
Includes the effects of the amortization of any (1) premium or discount; (2) debt issuance costs; and (3) gain or loss upon settlement of related treasury locks and forward-starting interest
rate swaps utilized to hedge the interest rate risk prior to the debt issuance. Excludes the effect of any swaps that remain outstanding as described in Note 12.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

The annual maturities of short-term borrowings and long-term debt as of December 28, 2013, excluding capital lease obligations of $172 million and fair value
hedge accounting adjustments of $14 million, are as follows:

Part II Part II
Item 8 Financial Statements and Supplementary Data

Year ended:
2014
2015
2016
2017
2018
Thereafter
TOTAL

58
250
300
—
325
1,875
2,808

Interest expense on short-term borrowings and long-term debt was $270 million, $169 million and $184 million in 2013, 2012 and 2011, respectively.
2013 included $118 million in losses recorded in Interest expense, net as a result of premiums paid and other costs related to the extinguishment of
debt. See Losses Related to the Extinguishment of Debt section of Note 4 for further discussion.

NOtE Part II11 Leases

At December 28, 2013 we operated more than 8,100 restaurants, leasing the
underlying land and/or building in nearly 7,300 of those restaurants with the
vast majority of our commitments expiring within 20 years from the inception
of the lease. Our longest lease expires in 2087. We also lease office space for

headquarters and support functions, as well as certain office and restaurant
equipment. We do not consider any of these individual leases material to our
operations. Most leases require us to pay related executory costs, which
include property taxes, maintenance and insurance.

Future minimum commitments and amounts to be received as lessor or sublessor under non-cancelable leases are set forth below:

2014
2015
2016
2017
2018
Thereafter

Commitments
Capital

18 $
19
19
17
17
186
276 $

Operating
721
672
627
569
515
2,593
5,697

Lease Receivables

Direct Financing
$

2 $
2
3
2
2
7
18 $

Operating
61
56
52
47
43
152
411

At December 28, 2013 and December 29, 2012, the present value of minimum payments under capital leases was $172 million and $170 million, respectively.
At December 28, 2013, unearned income associated with direct financing lease receivables was $6 million.

The details of rental expense and income are set forth below:

RENTAL EXPENSE
Minimum
Contingent

RENTAL INCOME

NOtE Part II12

Derivative Instruments

2013

2012

2011

$
$

759 $
293
1,052 $
94 $

721 $
290
1,011 $
77 $

625
233
858
66

The Company is exposed to certain market risks relating to its ongoing
business operations. The primary market risks managed by using derivative
instruments are interest rate risk and cash flow volatility arising from foreign
currency fluctuations.

We enter into interest rate swaps with the objective of reducing our exposure
to interest rate risk and lowering interest expense for a portion of our fixed-rate
debt. At December 28, 2013, our interest rate swaps outstanding had notional
amounts of $300 million and have been designated as fair value hedges of
a portion of our debt. These fair value hedges meet the shortcut method
requirements and no ineffectiveness has been recorded.

We enter into foreign currency forward contracts with the objective of reducing
our exposure to cash flow volatility arising from foreign currency fluctuations
associated with certain foreign currency denominated intercompany short-term
receivables and payables. The notional amount, maturity date, and currency
of these contracts match those of the underlying receivables or payables. For
those foreign currency exchange forward contracts that we have designated
as cash flow hedges, we measure ineffectiveness by comparing the cumulative
change in the fair value of the forward contract with the cumulative change
in the fair value of the hedged item. At December 28, 2013, foreign currency
forward contracts outstanding had a total notional amount of $141 million.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

Part II Part II
Item 8 Financial Statements and Supplementary Data

The fair values of derivatives designated as hedging instruments for the years ended December 28, 2013 and December 29, 2012 were:

Interest Rate Swaps – Asset
Foreign Currency Forwards – Asset
Foreign Currency Forwards – Liability
TOTAL

Fair Value

2013

2012

17 $
2
(1)
18

24
—
(5)
19

Consolidated Balance Sheet Location
Other assets
Prepaid expenses and other current assets
Accounts payable and other current liabilities

The unrealized gains associated with our interest rate swaps that hedge the interest rate risk for a portion of our debt have been reported as an addition of
$14 million and $22 million to Long-term debt at December 28, 2013 and December 29, 2012, respectively. During the years ended December 28, 2013 and
December 29, 2012, Interest expense, net was reduced by $8 million and $12 million, respectively for recognized gains on these interest rate swaps.

Changes in fair value of derivative instruments:

Beginning of Year Balance
Changes in fair value recognized into Other Comprehensive Income (“OCI”)
Changes in fair value recognized into income
Cash receipts
ENDING BALANCE

2013

2012

19 $
6
2
(9)
18

34
(7)
16
(24)
19

For our cash flow hedges the following effective portions of gains and losses were recognized into Accumulated OCI and reclassified into income from
Accumulated OCI in the years ended December 28, 2013 and December 29, 2012.

Gains (losses) recognized into Accumulated OCI, net of tax
Gains (losses) reclassified from Accumulated OCI into income, net of tax

$
$

2013
4
1

$
$

2012
(4)
(4)

The gains/losses reclassified from Accumulated OCI into income were
recognized as Other income (expense) in our Consolidated Statement
of Income, largely offsetting foreign currency transaction losses/gains
recorded when the related intercompany receivables and payables were
adjusted for foreign currency fluctuations. Changes in fair values of the
foreign currency forwards recognized directly in our results of operations
either from ineffectiveness or exclusion from effectiveness testing were
insignificant in the years ended December 28, 2013 and December 29, 2012.

Additionally, we had a net deferred loss of $9 million and $12 million, net of
tax, as of December 28, 2013 and December 29, 2012, respectively within
Accumulated OCI due to treasury locks and forward-starting interest rate
swaps that have been cash settled, as well as outstanding foreign currency
forward contracts. The majority of this loss arose from the settlement of
forward starting interest rate swaps entered into prior to the issuance of

our Senior Unsecured Notes due in 2037, and is being reclassified into
earnings through 2037 to interest expense. In 2013, 2012 and 2011 an
insignificant amount was reclassified from Accumulated OCI to Interest
expense, net as a result of these previously settled cash flow hedges.

As a result of the use of derivative instruments, the Company is exposed
to risk that the counterparties will fail to meet their contractual obligations.
To mitigate the counterparty credit risk, we only enter into contracts with
carefully selected major financial institutions based upon their credit
ratings and other factors, and continually assess the creditworthiness
of counterparties. At December 28, 2013 and December 29, 2012, all
of the counterparties to our interest rate swaps and foreign currency
forwards had investment grade ratings according to the three major ratings
agencies. To date, all counterparties have performed in accordance with
their contractual obligations.

NOtE Part II13

Fair Value Disclosures

At December 28, 2013 the carrying values of cash and cash equivalents,
short-term investments, accounts receivable and accounts payable
approximated their fair values because of the short-term nature of these
instruments. The fair value of notes receivable net of allowances and lease
guarantees less subsequent amortization approximates their carrying
value. The Company’s debt obligations, excluding capital leases, were
estimated to have a fair value of $3.0 billion (Level 2), compared to their
carrying value of $2.8 billion. We estimated the fair value of debt using
market quotes and calculations based on market rates.

recurring Fair Value Measurements

The following table presents fair values for those assets and liabilities
measured at fair value on a recurring basis and the level within the fair
value hierarchy in which the measurements fall. No transfers among the
levels within the fair value hierarchy occurred during the years ended
December 28, 2013 or December 29, 2012.

Foreign Currency Forwards, net
Interest Rate Swaps, net
Other Investments
TOTAL

Fair Value
2013

Level

2 $
2
1

1 $

17
18
36 $

2012
(5)
24
17
36

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

The fair value of the Company’s foreign currency forwards and interest rate
swaps were determined based on the present value of expected future cash
flows considering the risks involved, including nonperformance risk, and
using discount rates appropriate for the duration based upon observable
inputs. The other investments include investments in mutual funds, which
are used to offset fluctuations in deferred compensation liabilities that
employees have chosen to invest in phantom shares of a Stock Index
Fund or Bond Index Fund. The other investments are classified as trading
securities in Other assets in our Consolidated Balance Sheets and their fair
value is determined based on the closing market prices of the respective
mutual funds as of December 28, 2013 and December 29, 2012.

Non-recurring Fair Value Measurements

The following table presents (income) expense recognized from all non-
recurring fair value measurements during the year ended December
28, 2013 for assets and liabilities that remained on our Consolidated
Balance Sheet as of December 28, 2013 or for all non-recurring fair value
measurements during the year ended December 29, 2012 that remained
on our Consolidated Balance Sheet as of December 29, 2012. These
assets and liabilities include restaurants or groups of restaurants that
were impaired either as a result of our semi-annual impairment review or
when it was more likely than not a restaurant or restaurant group would
be refranchised.

Part II Part II
Item 8 Financial Statements and Supplementary Data

2013

2012

Little Sheep impairment
(Level 3)(a)
Little Sheep acquisition gain
(Level 2)(a)
Refranchising related
impairment – other (Level 3)(b)
Restaurant-level impairment
(Level 3)(c)
TOTAL

295 $

—

19
314 $

—

(74)

16
(54)

(a) See the Little Sheep Acquisition and Subsequent Impairment section of Note 4 for

further discussion.

(b) Refranchising related impairment results from writing down the assets of restaurants
or restaurant groups offered for refranchising, including certain instances where a
decision has been made to refranchise restaurants that are deemed to be impaired.
The fair value measurements used in our impairment evaluation are based on either
actual bids received from potential buyers (Level 2), or on estimates of the sales prices
we anticipated receiving from a buyer for the restaurant or restaurant groups (Level 3).
The remaining net book value of assets measured at fair value during the years ended
December 28, 2013 and December 29, 2012 is insignificant.

(c) Restaurant-level impairment charges are recorded in Closures and impairment (income)
expenses and resulted primarily from our semi-annual impairment evaluation of long-lived
assets of individual restaurants that were being operated at the time of impairment and had
not been offered for refranchising. The fair value measurements used in these impairment
evaluations were based on discounted cash flow estimates using unobservable inputs
(Level 3). The remaining net book value of assets measured at fair value during the years
ended December 28, 2013 and December 29, 2012 is not significant.

NOtE Part II14

Pension, retiree Medical and retiree Savings Plans

Pension Benefits

We sponsor qualified and supplemental (non-qualified) noncontributory
defined benefit plans covering certain full-time salaried and hourly U.S.
employees. The qualified plan meets the requirements of certain sections
of the Internal Revenue Code. A qualified plan typically provides benefits
to a broad group of employees with restrictions on discriminating in favor
of highly compensated employees with regard to coverage, benefits
and contributions. The supplemental plans provide additional benefits to
certain employees. We fund our supplemental plans as benefits are paid.

The most significant of these plans is the YUM Retirement Plan (the “Plan”),
which is a qualified plan. Our funding policy with respect to the Plan is
to contribute amounts necessary to satisfy minimum pension funding
requirements, including requirements of the Pension Protection Act of
2006, plus additional amounts from time to time as are determined to
be necessary to improve the Plan’s funded status. We currently do not
anticipate making any contributions to the Plan in 2014. We expect to
make $8 million in benefit payments related to our significant U.S. non-
qualified plan in 2014. During 2001, our two significant U.S. plans were
amended such that any salaried employee hired or rehired by YUM after
September 30, 2001 is not eligible to participate in those plans.

We also sponsor various defined benefit plans covering certain of our
non-U.S. employees, the most significant of which are in the UK. During
the quarter ended March 23, 2013, one of our UK plans was frozen such
that existing participants can no longer earn future service credits. Our
other UK plan was previously frozen to future service credits in 2011.

The funding rules for our pension plans outside of the U.S. vary from
country to country and depend on many factors including discount rates,
performance of plan assets, local laws and regulations. We do not plan
to make any significant contributions to any pension plan outside of the
U.S. in 2014.

We do not anticipate any plan assets being returned to the Company
during 2014 for any plans.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

Part II Part II
Item 8 Financial Statements and Supplementary Data

Obligation and Funded Status at Measurement Date:

The following chart summarizes the balance sheet impact, as well as benefit obligations, assets, and funded status associated with our significant U.S.
and International pension plans. The actuarial valuations for all plans reflect measurement dates coinciding with our fiscal year ends.

U.S. Pension Plans

International Pension Plans

2013

2012

2013

2012

Change in benefit obligation

Benefit obligation at beginning of year

1,290

Service cost
Interest cost
Participant contributions
Plan amendments
Curtailments
Special termination benefits
Exchange rate changes
Benefits paid
Settlements(a)(b)
Actuarial (gain) loss

Benefit obligation at end of year

Change in plan assets

Fair value of plan assets at beginning of year
Actual return on plan assets
Employer contributions
Participant contributions
Settlement payments(a)
Benefits paid
Exchange rate changes
Administrative expenses

Fair value of plan assets at end of year
FUNDED STATUS AT END OF YEAR

Amounts recognized in the Consolidated Balance Sheet:

Prepaid benefit asset – non-current
Accrued benefit liability – current
Accrued benefit liability – non-current

$
$

21
54
—
—
(3)
5
—
(21)
(151)
(170)
1,025

945
116

22
—

(123)
(21)
—
(6)
933
$
(92) $

1,381
26
66
—
5
(10)
3
—
(14)
(278)
111
1,290

998
144
100

—

(278)
(14)
—
(5)
945
(345)

$
$

193

1
8
—
—
(5)
—
4
(3)
—
28

226

226
30

1
—
—
(3)
5
—

259
33

$
$

187
2
8
1
—
—
—
5
(4)
—
(6)
193

183
21
19
1
—
(4)
6
—
226
33

U.S. Pension Plans

International Pension Plans

2013

10 $
(8)
(94)
(92) $

2012

—
(19)
(326)
(345)

2013

33 $
—
—
33 $

2012

33
—
—
33

(a) For discussion of the settlement payments and settlement losses, see Pension Settlement Charges section of Note 4.
(b) 2013 includes the transfer of certain non-qualified pension benefits into a defined benefit plan not included in the table above due to its insignificance.

The accumulated benefit obligation for the U.S. and International pension plans was $1,209 million and $1,426 million at December 28, 2013 and
December 29, 2012, respectively.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

2012
1,290
1,239
945

2013

— $
—
—

2012
—
—
—

International Pension Plans

2013

— $
—
—

2012
—
—
—

International Pension Plans

2013

2012

2011

1 $
8

—

(12)
1

2 $
8

—

(11)

5
10

—

(12)
2

—

—
—

Information for pension plans with an accumulated benefit obligation in excess of plan assets:

U.S. Pension Plans

International Pension Plans

Part II Part II
Item 8 Financial Statements and Supplementary Data

Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets

2013
102 $
94
—

Information for pension plans with a projected benefit obligation in excess of plan assets:

Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets

Components of net periodic benefit cost:

U.S. Pension Plans

2013
102 $
94
—

Net periodic benefit
cost
Service cost
Interest cost
Amortization of prior
service cost(a)
Expected return on
plan assets
Amortization of net loss
NET PERIODIC
BENEFIT COST
Additional (gain) loss
recognized due to:
Settlements(b)
Special termination
benefits(c)
Curtailment(d)

$
$

U.S. Pension Plans
2012

2013

21 $
54

(59)
48

26 $
66

(71)
63

2011

24 $
64

(71)
31

(2) $

— $

5 $
— $

3 $
— $

— $

5 $
— $

— $

— $
(5) $

— $

— $
— $

(a) Prior service costs are amortized on a straight-line basis over the average remaining service period of employees expected to receive benefits.
(b) Settlement losses result from benefit payments exceeding the sum of the service cost and interest cost for each plan during the year. $10 million and $84 million for 2013 and 2012,

respectively of these settlement losses, were not allocated for performance reporting purposes. See Note 4 for discussion of the settlement payments and settlement losses.

(c) Special termination benefits primarily related to the U.S. business transformation measures taken in 2013, 2012 and 2011.
(d) Gain is a result of terminating future service benefits for all participants in one of our UK plans in 2013. The gain was recorded in YRI’s G&A expenses, as amounts in Accumulated other

comprehensive income (loss) related to this plan were in a net gain position.

Pension (gains) losses in Accumulated other comprehensive income (loss):

U.S. Pension Plans

International Pension Plans

2013

2012

Beginning of year
Net actuarial (gain) loss
Curtailments
Amortization of net loss
Amortization of prior service cost
Prior service cost
Settlement charges
Exchange rate changes
END OF YEAR

2013
428 $
(221)
(3)
(48)
(2)
—
(30)
—
124

2012
543 $
43
(10)
(63)
(1)
5
(89)
—
428

14 $
10
—
(1)
—
—
—
—
23

Accumulated pre-tax losses recognized within Accumulated Other Comprehensive Income:

Actuarial net loss
Prior service cost

U.S. Pension Plans

International Pension Plans

2013
119 $
5
124 $

2012
421
7
428

2013

23 $
—
23 $

30
(15)
—
(1)
—
—
—
—
14

2012
14
—
14

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

Part II Part II
Item 8 Financial Statements and Supplementary Data

The estimated net loss for the U.S. and International pension plans that will be amortized from Accumulated other comprehensive income (loss) into net
periodic pension cost in 2014 is $17 million and less than $1 million, respectively. The estimated prior service cost for the U.S. pension plans that will
be amortized from Accumulated other comprehensive income (loss) into net periodic pension cost in 2014 is $1 million.

Weighted-average assumptions used to determine benefit obligations at the measurement dates:

U.S. Pension Plans

International Pension Plans

Discount rate
Rate of compensation increase

2013
5.40%
3.75%

2012
4.40%
3.75%

2013
4.70%
N/A(a)

Weighted-average assumptions used to determine the net periodic benefit cost for fiscal years:

Discount rate
Long-term rate of return on plan assets
Rate of compensation increase

U.S. Pension Plans

International Pension Plans

2013
4.40%
7.25%
3.75%

2012
4.90%
7.25%
3.75%

2011
5.90%
7.75%
3.75%

2013
4.69%
5.37%
1.74%

2012
4.75%
5.55%
3.85%

(a) As of 2013, both plans presented are now frozen to future service cost credits.

2012
4.70%
3.70%

2011
5.40%
6.64%
4.41%

Our estimated long-term rate of return on plan assets represents the weighted-average of expected future returns on the asset categories included in
our target investment allocation based primarily on the historical returns for each asset category.

Plan Assets

The fair values of our pension plan assets at December 28, 2013 by asset category and level within the fair value hierarchy are as follows:

U.S. Pension Plans

International Pension Plans

Level 1:
Cash(a)
Level 2:

Cash Equivalents(a)
Equity Securities – U.S. Large cap(b)
Equity Securities – U.S. Mid cap(b)
Equity Securities – U.S. Small cap(b)
Equity Securities – Non-U.S.(b)
Fixed Income Securities – U.S. Corporate(b)
Fixed Income Securities – Non-U.S. Corporate(b)
Fixed Income Securities – U.S. Government and Government Agencies(c)
Fixed Income Securities – Other(d)

— $

5
329
55
53
110
234

—

129
15
930

—
—
—
—
159
—
33
—
66
259

TOTAL FAIR VALUE OF PLAN ASSETS(e)

(a) Short-term investments in money market funds
(b) Securities held in common trusts
(c)
(d)
(e) U. S. plans exclude net unsettled trades receivable of $3 million

Investments held directly by the Plan
Includes securities held in common trusts and investments held directly by the Plan

Our primary objectives regarding the investment strategy for the Plan’s
assets, which make up 78% of total pension plan assets at the 2013
measurement date, are to reduce interest rate and market risk and to provide
adequate liquidity to meet immediate and future payment requirements.
To achieve these objectives, we are using a combination of active and
passive investment strategies. Our equity securities, currently targeted to
be rebalanced to 45% from 55% of our investment mix, consist primarily of
low-cost index funds focused on achieving long-term capital appreciation.
We diversify our equity risk by investing in several different U.S. and foreign
market index funds. Investing in these index funds provides us with the
adequate liquidity required to fund benefit payments and plan expenses.

The fixed income asset allocation, currently targeted to be rebalanced
to 55% from 45% of our mix, is actively managed and consists of long-
duration fixed income securities that help to reduce exposure to interest
rate variation and to better correlate asset maturities with obligations. The
fair values of all pension plan assets are determined based on closing
market prices or net asset values.

A mutual fund held as an investment by the Plan includes shares of YUM
common stock valued at $0.2 million at December 28, 2013 and $0.7 million
at December 29, 2012 (less than 1% of total plan assets in each instance).

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

Benefit Payments

The benefits expected to be paid in each of the next five years and in the
aggregate for the five years thereafter are set forth below:

Year ended:
2014
2015
2016
2017
2018
2019–2023

U.S. Pension Plans
$

International Pension Plans
1
1
1
1
1
7

50 $
46
48
47
50
282

Expected benefits are estimated based on the same assumptions used
to measure our benefit obligation on the measurement date and include
benefits attributable to estimated future employee service.

retiree Medical Benefits

Our post-retirement plan provides health care benefits, principally to U.S.
salaried retirees and their dependents, and includes retiree cost-sharing
provisions. During 2001, the plan was amended such that any salaried
employee hired or rehired by YUM after September 30, 2001 is not eligible
to participate in this plan. Employees hired prior to September 30, 2001 are
eligible for benefits if they meet age and service requirements and qualify for
retirement benefits. We fund our post-retirement plan as benefits are paid.

At the end of 2013 and 2012, the accumulated post-retirement benefit
obligation was $70 million and $83 million, respectively. An actuarial gain
of $2 million was recognized in Accumulated other comprehensive loss
at the end of 2013, and an actuarial loss of $8 million was recognized in
Accumulated other comprehensive loss at the end of 2012. The net periodic

Part II Part II
Item 8 Financial Statements and Supplementary Data

benefit cost recorded was $5 million in 2013, and was $6 million in both
2012 and 2011, the majority of which is interest cost on the accumulated
post-retirement benefit obligation. The weighted-average assumptions
used to determine benefit obligations and net periodic benefit cost for the
post-retirement medical plan are identical to those as shown for the U.S.
pension plans. Our assumed heath care cost trend rates for the following
year as of 2013 and 2012 are 7.2% and 7.4%, respectively, with expected
ultimate trend rates of 4.5% reached in 2028.

There is a cap on our medical liability for certain retirees. The cap for
Medicare-eligible retirees was reached in 2000 and the cap for non-
Medicare eligible retirees is expected to be reached in 2014; once the cap
is reached, our annual cost per retiree will not increase. A one-percentage-
point increase or decrease in assumed health care cost trend rates would
have less than a $1 million impact on total service and interest cost and on
the post-retirement benefit obligation. The benefits expected to be paid in
each of the next five years are approximately $6 million and in aggregate
for the five years thereafter are $23 million.

retiree Savings Plan

We sponsor a contributory plan to provide retirement benefits under the
provisions of Section 401(k) of the Internal Revenue Code (the “401(k)
Plan”) for eligible U.S. salaried and hourly employees. Participants are
able to elect to contribute up to 75% of eligible compensation on a
pre-tax basis. Participants may allocate their contributions to one or any
combination of multiple investment options or a self-managed account
within the 401(k) Plan. We match 100% of the participant’s contribution
to the 401(k) Plan up to 6% of eligible compensation. We recognized as
compensation expense our total matching contribution of $12 million in
2013, $13 million in 2012 and $14 million in 2011.

NOtE Part II15 Share-based and Deferred Compensation Plans

Overview

At year end 2013, we had four stock award plans in effect: the YUM!
Brands, Inc. Long-Term Incentive Plan and the 1997 Long-Term Incentive
Plan (collectively the “LTIPs”), the YUM! Brands, Inc. Restaurant General
Manager Stock Option Plan (“RGM Plan”) and the YUM! Brands, Inc.
SharePower Plan (“SharePower”). Under all our plans, the exercise price
of stock options and SARs granted must be equal to or greater than the
average market price or the ending market price of the Company’s stock
on the date of grant.

Potential awards to employees and non-employee directors under the LTIPs
include stock options, incentive stock options, SARs, restricted stock,
stock units, restricted stock units (“RSUs”), performance restricted stock
units, performance share units (“PSUs”) and performance units. Through
December 28, 2013, we have issued only stock options, SARs, RSUs and
PSUs under the LTIPs. While awards under the LTIPs can have varying
vesting provisions and exercise periods, outstanding awards under the
LTIPs vest in periods ranging from immediate to five years. Stock options
and SARs expire ten years after grant.

Potential awards to employees under the RGM Plan include stock options,
SARs, restricted stock and RSUs. Through December 28, 2013, we have
issued only stock options and SARs under this plan. RGM Plan awards
granted have a four-year cliff vesting period and expire ten years after grant.
Certain RGM Plan awards are granted upon attainment of performance
conditions in the previous year. Expense for such awards is recognized
over a period that includes the performance condition period.

Potential awards to employees under SharePower include stock options,
SARs, restricted stock and RSUs. Through December 28, 2013, we
have issued only stock options and SARs under this plan. These awards
generally vest over a period of four years and expire no longer than ten
years after grant.

At year end 2013, approximately 16 million shares were available for future
share-based compensation grants under the above plans.

Our Executive Income Deferral (“EID”) Plan allows participants to defer
receipt of a portion of their annual salary and all or a portion of their incentive
compensation. As defined by the EID Plan, we credit the amounts deferred
with earnings based on the investment options selected by the participants.
These investment options are limited to cash, phantom shares of our
Common Stock, phantom shares of a Stock Index Fund and phantom
shares of a Bond Index Fund. Investments in cash and phantom shares
of both index funds will be distributed in cash at a date as elected by the
employee and therefore are classified as a liability on our Consolidated
Balance Sheets. We recognize compensation expense for the appreciation
or the depreciation, if any, of investments in cash and both of the index
funds. Deferrals into the phantom shares of our Common Stock will be
distributed in shares of our Common Stock, under the LTIPs, at a date as
elected by the employee and therefore are classified in Common Stock
on our Consolidated Balance Sheets. We do not recognize compensation
expense for the appreciation or the depreciation, if any, of investments
in phantom shares of our Common Stock. Our EID plan also allows

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

Part II Part II
Item 8 Financial Statements and Supplementary Data

participants to defer incentive compensation to purchase phantom shares
of our Common Stock and receive a 33% Company match on the amount
deferred. Deferrals receiving a match are similar to a RSU award in that
participants will generally forfeit both the match and incentive compensation
amounts deferred if they voluntarily separate from employment during a
vesting period that is two years from the date of deferral. We expense
the intrinsic value of the match and the incentive compensation over the
requisite service period which includes the vesting period.

award Valuation

Historically, the Company has repurchased shares on the open market in
excess of the amount necessary to satisfy award exercises and expects
to continue to do so in 2014.

We estimated the fair value of each stock option and SAR award as of the date of grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions:

2013

0.8%
6.2
29.9%
2.1%

2012

0.8%
6.0
29.0%
1.8%

2011

2.0%
5.9
28.2%
2.0%

When determining expected volatility, we consider both historical volatility
of our stock as well as implied volatility associated with our publicly traded
options. The expected dividend yield is based on the annual dividend
yield at the time of grant.

The fair values of RSU and PSU awards granted prior to 2013 are based on
the closing price of our stock on the date of grant. In 2013, the Company
granted PSU awards with market-based conditions valued using a Monte
Carlo simulation.

Risk-free interest rate
Expected term (years)
Expected volatility
Expected dividend yield

We believe it is appropriate to group our stock option and SAR awards into
two homogeneous groups when estimating expected term. These groups
consist of grants made primarily to restaurant-level employees under the
RGM Plan, which cliff-vest after four years and expire ten years after grant,
and grants made to executives under our other stock award plans, which
typically have a graded vesting schedule of 25% per year over four years
and expire ten years after grant. We use a single weighted-average term
for our awards that have a graded vesting schedule. Based on analysis
of our historical exercise and post-vesting termination behavior, we have
determined that our restaurant-level employees and our executives
exercised the awards on average after 5 years and 6.25 years, respectively.

award activity

Stock Options and Sars

Outstanding at the beginning of the year
Granted
Exercised
Forfeited or expired
OUTSTANDING AT THE END OF THE YEAR
EXERCISABLE AT THE END OF THE YEAR

Shares (in thousands)
28,612
3,767
(4,030)
(636)
27,713(a)
17,787

Weighted-Average
Exercise Price
37.05
63.83
27.15
47.69
41.77
33.58

$
$

Weighted-Average
Remaining
Contractual Term

Aggregate
Intrinsic Value
(in millions)

5.72
4.45

$
$

890
717

(a) Outstanding awards include 3,103 options and 24,610 SARs with average exercise prices of $34.58 and $42.68, respectively.

The weighted-average grant-date fair value of stock options and SARs
granted during 2013, 2012 and 2011 was $14.67, $15.00 and $11.78,
respectively. The total intrinsic value of stock options and SARs exercised
during the years ended December 28, 2013, December 29, 2012 and
December 31, 2011, was $176 million, $319 million and $226 million,
respectively.

As of December 28, 2013, there was $85 million of unrecognized
compensation cost related to stock options and SARs, which will be
reduced by any forfeitures that occur, related to unvested awards that is
expected to be recognized over a remaining weighted-average period of
approximately 1.8 years. The total fair value at grant date of awards that
vested during 2013, 2012 and 2011 was $51 million, $48 million and
$43 million, respectively.

rSUs and PSUs

As of December 28, 2013, there was $7 million of unrecognized compensation cost related to 0.9 million unvested RSUs and PSUs.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

Part II Part II
Item 8 Financial Statements and Supplementary Data

Impact on Net Income

The components of share-based compensation expense and the related income tax benefits are shown in the following table:

Options and SARs
Restricted Stock Units
Performance Share Units
TOTAL SHARE-BASED COMPENSATION EXPENSE
DEFERRED TAX BENEFIT RECOGNIZED
EID compensation expense not share-based

$
$
$

2013
44
6
(1)
49
15
11

$
$
$

2012

42 $
5
3
50 $
15 $
5 $

2011
49
5
5
59
18
2

Cash received from stock option exercises for 2013, 2012 and 2011, was $37 million, $62 million and $59 million, respectively. Tax benefits realized
on our tax returns from tax deductions associated with share-based compensation for 2013, 2012 and 2011 totaled $65 million, $120 million and
$82 million, respectively.

NOtE Part II16 Shareholders’ Equity

Under the authority of our Board of Directors, we repurchased shares of our Common Stock during 2013, 2012 and 2011. All amounts exclude
applicable transaction fees.

Authorization Date
November 2013
November 2012
November 2011
January 2011
March 2010
TOTAL

Shares Repurchased (thousands)
2013
—
10,922
—
—
—
10,922(a)

2012
—
1,069
11,035
2,787
—
14,891(a)

2011
—
—
—
10,864
3,441
14,305(b)

Dollar Value of Shares Repurchased
2013
—
750
—
—
—
750(a)

2012
—
47
750
188
—
985(a)

2011
—
—
—
562
171
733(b)

(a) 2013 amount excludes and 2012 amount includes the effect of $20 million in share repurchases (0.3 million shares) with trade dates prior to the 2012 fiscal year end but with settlement

dates subsequent to the 2012 fiscal year end.

(b) 2011 amount excludes the effect of $19 million in share repurchases (0.4 million shares) with trade dates prior to the 2010 fiscal year end but cash settlement dates subsequent to the

2010 fiscal year.

May 2015 of up to $750 million (excluding applicable transaction fees)
of our outstanding Common Stock. As of December 28, 2013, we have
$953 million available for future repurchases under these authorizations.

Changes in accumulated other comprehensive income (loss) (“OCI”) are presented below.

Balance at December 31, 2011, net of tax
Amounts classified into OCI, net of tax
Amounts reclassified from accumulated
OCI, net of tax
OCI, net of tax

Balance at December 29, 2012, net of tax
Amounts classified into OCI, net of tax
Amounts reclassified from accumulated
OCI, net of tax
OCI, net of tax

Balance at December 28, 2013, net of tax

Translation Adjustments
and Gains (Losses) From
Intra-Entity Transactions
of a Long-Term Nature
140
$
23

Pension and Post-
Retirement Benefit
Plan Losses(a)(b)

(375) $

(10)

99
89
(286)
136

53
189
(97) $

Net Unrealized
Loss on Derivative
Instruments
(12)
(4)

4
—
(12)
4

(1)
3
(9)

Total
(247)
9

106
115
(132)
144

52
196
64

3
26
166
4

—
4
170

(a) Amounts reclassified from accumulated OCI to pension and post-retirement benefit plan losses during 2012 include amortization of net losses of $66 million, settlement charges

of $89 million, amortization of prior service cost of $1 million and the related income tax benefit of $57 million. See Note 14 Pension Benefits for further information.

(b) Amounts reclassified from accumulated OCI for pension and post-retirement benefit plan losses during 2013 include amortization of net losses of $51 million, settlement charges of

$30 million, amortization of prior service cost of $2 million and the related income tax benefit of $30 million. See Note 14 Pension Benefits for further information.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

Part II Part II
Item 8 Financial Statements and Supplementary Data

NOtE Part II17

Income taxes

U.S. and foreign income before taxes are set forth below:

U.S.
Foreign

The details of our income tax provision (benefit) are set forth below:

Current:

Deferred:

Federal
Foreign
State

$
$

2013
464
1,087
1,551

2013
159
330
22

511

42
(53)
(13)
(24)
487

$
$

2012
504
1,641
2,145

2012
160
314
35

509
91
(57)
(6)
28
537

2011
266
1,393
1,659

2011
78
374
9
461
(83)
(40)
(14)
(137)
324

The reconciliation of income taxes calculated at the U.S. federal tax statutory rate to our effective tax rate is set forth below:

2013

2012

2011

543
3
(177)
49
—
23
46
487

35.0% $

0.2

(11.4)
3.1
—
1.5
3.0

31.4% $

751
4
(165)
(47)
—
14
(20)
537

35.0% $

0.2
(7.7)
(2.2)
—
0.6
(0.9)
25.0% $

580
2
(218)
24
(72)
22
(14)
324

35.0%
0.1

(13.1)

1.4
(4.3)
1.3
(0.9)
19.5%

Statutory rate differential attributable to foreign operations. This item
includes local taxes, withholding taxes, and shareholder-level taxes, net
of foreign tax credits. The favorable impact is primarily attributable to a
majority of our income being earned outside of the U.S. where tax rates
are generally lower than the U.S. rate.

In 2013, this item was negatively impacted by the provision recorded related
to the continuing dispute with the IRS regarding the valuation of rights
to intangibles transferred to certain foreign subsidiaries. See discussion
below in the Internal Revenue Service Proposed Adjustments for details.

In 2012, this item was favorably impacted by the resolution of uncertain
tax positions in certain foreign jurisdictions.

Net benefit from LJS and A&W divestitures. This item includes a one-time
$117 million tax benefit, including approximately $8 million U.S. state

benefit, recognized on the LJS and A&W divestitures in 2011, partially
offset by $45 million of valuation allowance, including approximately
$4 million state expense, related to capital loss carryforwards recognized
as a result of the divestitures. In addition, we recorded $32 million of tax
benefits on $86 million of pre-tax losses and other costs, which resulted in
$104 million of total net tax benefits related to the divestitures.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

Other. This item primarily includes the impact of permanent differences
related to current year earnings as well as U.S. tax credits and deductions.

In 2013, this item was negatively impacted by the $222 million non-cash
impairment of Little Sheep goodwill, which resulted in no related tax benefit.

The details of 2013 and 2012 deferred tax assets (liabilities) are set forth below:

Part II Part II
Item 8 Financial Statements and Supplementary Data

In 2012, this item was positively impacted by a one-time pre-tax gain of
$74 million, with no related income tax expense, recognized on our
acquisition of additional interest in, and consolidation of Little Sheep.

Operating losses and tax credit carryforwards
Employee benefits
Share-based compensation
Self-insured casualty claims
Lease-related liabilities
Various liabilities
Property, plant and equipment
Deferred income and other
Gross deferred tax assets

Deferred tax asset valuation allowances

Net deferred tax assets

Intangible assets, including goodwill
Property, plant and equipment
Other

Gross deferred tax liabilities

NET DEFERRED TAX ASSETS (LIABILITIES)

Reported in Consolidated Balance Sheets as:
Deferred income taxes – current
Deferred income taxes – long-term
Accounts payable and other current liabilities
Other liabilities and deferred credits

$
$

2013
310 $
182
118
48
120
88
42
58
966
(203)
763 $
(233) $
(93)
(55)
(381) $
$
382

123 $
399
(2)
(138)
382

2012
337
251
108
50
115
82
39
57
1,039
(200)
839
(256)
(95)
(48)
(399)
440

127
467
(5)
(149)
440

We have investments in foreign subsidiaries where the carrying values for
financial reporting exceed the tax basis. We have not provided deferred
tax on the portion of the excess that we believe is essentially permanent
in duration. This amount may become taxable upon an actual or deemed
repatriation of assets from the subsidiaries or a sale or liquidation of
the subsidiaries. We estimate that our total temporary difference upon
which we have not provided deferred tax is approximately $2.6 billion at
December 28, 2013. A determination of the deferred tax liability on this
amount is not practicable.

At December 28, 2013, the Company has foreign operating and capital loss
carryforwards of $0.6 billion and U.S. state operating loss, capital loss and
tax credit carryforwards of $1.2 billion and U.S. federal capital loss and tax
credit carryforwards of $0.2 billion. These losses are being carried forward in
jurisdictions where we are permitted to use tax losses from prior periods to
reduce future taxable income and will expire as follows:

Foreign
U.S. state
U.S. federal

Year of Expiration

2014

2015-2018

2019-2033

Indefinitely

38 $
16
—
54 $

132 $
105
90
327 $

91 $

1,040
64
1,195 $

325 $
—
—
325 $

Total
586
1,161
154
1,901

We recognize the benefit of positions taken or expected to be taken in
tax returns in the financial statements when it is more likely than not that
the position would be sustained upon examination by tax authorities. A
recognized tax position is measured at the largest amount of benefit that
is greater than fifty percent likely of being realized upon settlement.

The Company had $243 million and $309 million of unrecognized tax benefits
at December 28, 2013 and December 29, 2012, respectively, $170 million
and $184 million of which, if recognized, would impact the effective income
tax rate. A reconciliation of the beginning and ending amount of unrecognized
tax benefits follows:

Beginning of Year

Additions on tax positions - current year
Additions for tax positions - prior years
Reductions for tax positions - prior years
Reductions for settlements
Reductions due to statute expiration
Foreign currency translation adjustment

END OF YEAR

2013
309 $
19
55

(102)
(23)
(16)

243

2012
348
50
23
(90)
(6)
(16)
—

309

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

Part II Part II
Item 8 Financial Statements and Supplementary Data

The Company believes it is reasonably possible its unrecognized tax
benefits may decrease by approximately $26 million in the next twelve
months, including approximately $20 million which, if recognized upon
audit settlement or statute expiration, would affect the 2014 effective tax
rate. Each of these positions is individually insignificant.

The Company’s income tax returns are subject to examination in the U.S.
federal jurisdiction and numerous foreign jurisdictions. The following table
summarizes our major jurisdictions and the tax years that are either currently
under audit or remain open and subject to examination:

Jurisdiction
U.S. Federal
China
United Kingdom
Mexico
Australia

Open Tax Years
2004–2013
2010–2013
2010–2013
2006–2013
2009–2013

In addition, the Company is subject to various U.S. state income tax examinations, for which, in the aggregate, we had significant unrecognized tax
benefits at December 28, 2013, each of which is individually insignificant.

The accrued interest and penalties related to income taxes at December 28, 2013 and December 29, 2012 are set forth below:

Accrued interest and penalties

During 2013, 2012 and 2011, a net expense of $18 million, net benefit
of $3 million and net benefit of $2 million, respectively, for interest and
penalties was recognized in our Consolidated Statements of Income as
components of its income tax provision.

Internal revenue Service Proposed
adjustments

NOtE Part II18

reportable Operating Segments

We are principally engaged in developing, operating, franchising and
licensing the worldwide KFC, Pizza Hut and Taco Bell concepts. KFC, Pizza
Hut and Taco Bell operate in 118, 91, and 21 countries and territories,
respectively. Our five largest international markets based on Operating
Profit in 2013 are China, Asia Franchise, United Kingdom, Australia and
Latin America Franchise.

China
YRI
U.S.
India

2013

64 $

2012
50

that would result in approximately $270 million of additional taxes plus
net interest to date of approximately $40 million for fiscal years 2007 and
2008. Furthermore, the Company expects the IRS to make similar claims
for years subsequent to fiscal 2008. The potential additional taxes for 2009
through 2013, computed on a similar basis to the 2004-2008 additional
taxes, would be approximately $140 million plus net interest to date of
approximately $10 million.

We believe we have properly reported our taxable income and paid taxes
consistent with all applicable laws and intend to vigorously defend our
position, including through litigation, if we are unable to settle with the IRS
through administrative proceedings. As the final resolution of the proposed
adjustments remains uncertain, there can be no assurance that payments
due upon final resolution of this issue will not exceed our currently recorded
reserve and such payments could have a material adverse effect on our
financial position. Additionally, if increases to our reserves are deemed
necessary due to future developments related to this issue, such increases
could have a material adverse effect on our results of operations as they are
recorded. The Company does not expect resolution of this matter within
twelve months and cannot predict with certainty the timing of such resolution.

We identify our operating segments based on management responsibility.
The China Division includes mainland China and the India Division includes
India, Bangladesh, Mauritius, Nepal and Sri Lanka. YRI includes the
remainder of our international operations. We consider our KFC, Pizza Hut
and Taco Bell operating segments in the U.S. to be similar and therefore
have aggregated them into a single reportable operating segment. Our
U.S. and YRI segment results also include the operating results of our
LJS and A&W businesses prior to our disposal of those businesses in
December 2011.

2013
6,905 $
3,099
2,953
127
13,084 $

Revenues

2012
6,898 $
3,281
3,352
102
13,633 $

2011
5,566
3,192
3,786
82
12,626

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

China(b)
YRI
U.S.
India
Unallocated Occupancy and other(a)(c)
Unallocated and corporate expenses(a)(d)
Unallocated Closures and impairment expense(a)(e)
Unallocated Other income (expense)(a)(f)
Unallocated Refranchising gain (loss)(a)(g)
Operating Profit
Interest expense, net(h)
INCOME BEFORE INCOME TAXES

China
YRI
U.S.
India
Corporate(c)

China
YRI
U.S.
India
Corporate

China(i)
YRI
U.S.
India
Corporate(j)

Part II Part II
Item 8 Financial Statements and Supplementary Data

Operating Profit; Interest Expense, Net; and Income
Before Income Taxes

2013
777 $
760
684
(15)
—
(207)
(295)

(6)

100
1,798
(247)
1,551

2012
1,015 $
715
666
(1)
16
(271)

—
76
78
2,294
(149)
2,145

Depreciation and Amortization
2013
394 $
175
135
9
8
721 $

2012
337 $
167
147
6
8
665 $

Capital Spending
2012
655 $
251
173
18
2

2013
568 $
289
157
31
4

1,049 $

1,099 $

Identifiable Assets
2012
3,752 $
2,663
1,844
68
686
9,013 $

2013
3,720 $
2,618
1,705
99
553
8,695 $

2011
908
673
589
—
14
(223)
(80)
6
(72)
1,815
(156)
1,659

2011
258
183
179
5
12
637

2011
405
240
256
16
23
940

2011
2,527
2,847
2,070
52
1,338
8,834

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

Part II Part II
Item 8 Financial Statements and Supplementary Data

China
YRI
U.S.
India
Corporate

Long-Lived Assets(k)

201 3
2,667 $
1,732
1,489
66
32
5,986 $

2012
2,779 $
1,561
1,555
47
32
5,974 $

2011
1,546
1,600
1,805
35
36
5,022

(a) Amounts have not been allocated to any segment for performance reporting purposes.
(b)
(c) 2012 and 2011 include depreciation reductions arising from the impairments of Pizza Hut UK restaurants we sold in 2012 of $13 million and $3 million, respectively. 2012 and 2011 include

Includes equity income from investments in unconsolidated affiliates of $26 million, $47 million and $47 million in 2013, 2012 and 2011, respectively, for China.

depreciation reductions arising from the impairment of KFC restaurants we offered to sell of $3 million and $10 million, respectively. See Note 4.

(d) 2013 and 2012 include pension settlement charges of $22 million and $87 million, respectively. 2013, 2012 and 2011 include approximately $5 million, $5 million and $21 million,

respectively, of charges relating to U.S. G&A productivity initiatives and realignment of resources. See Note 4.

(e) 2013 represents impairment loss related to Little Sheep. 2011 represents net losses resulting from the LJS and A&W divestitures. See Note 4.
(f) 2012 includes gain upon acquisition of Little Sheep of $74 million. See Note 4.
(g) See Note 4 for further discussion of Refranchising gain (loss).
(h)
(i) China includes investments in 4 unconsolidated affiliates totaling $53 million, $72 million and $167 million for 2013, 2012 and 2011, respectively.
(j)

Includes $118 million of premiums and other costs related to the extinguishment of debt. See Losses Related to the Extinguishment of Debt section of Note 4.

Primarily includes cash, deferred tax assets and property, plant and equipment, net, related to our office facilities. 2011 includes $300 million of restricted cash related to the 2012 Little
Sheep acquisition.
Includes property, plant and equipment, net, goodwill, and intangible assets, net.

(k)

See Note 4 for additional operating segment disclosures related to impairment and store closure (income) costs.

NOtE Part II19 Contingencies

Lease Guarantees

As a result of (a) assigning our interest in obligations under real estate
leases as a condition to the refranchising of certain Company restaurants;
(b) contributing certain Company restaurants to unconsolidated affiliates;
and (c) guaranteeing certain other leases, we are frequently contingently
liable on lease agreements. These leases have varying terms, the latest of
which expires in 2066. As of December 28, 2013, the potential amount
of undiscounted payments we could be required to make in the event
of non-payment by the primary lessee was approximately $725 million.
The present value of these potential payments discounted at our pre-tax
cost of debt at December 28, 2013 was approximately $625 million.
Our franchisees are the primary lessees under the vast majority of these
leases. We generally have cross-default provisions with these franchisees
that would put them in default of their franchise agreement in the event of
non-payment under the lease. We believe these cross-default provisions
significantly reduce the risk that we will be required to make payments
under these leases. Accordingly, the liability recorded for our probable
exposure under such leases at December 28, 2013 and December 29,
2012 was not material.

Franchise Loan Pool and Equipment
Guarantees

We have agreed to provide financial support, if required, to a variable
interest entity that operates a franchisee lending program used primarily to
assist franchisees in the development of new restaurants or the upgrade
of existing restaurants and, to a lesser extent, in connection with the
Company’s refranchising programs in the U.S. We have determined that
we are not required to consolidate this entity as we share the power to
direct this entity’s lending activity with other parties. We have provided
guarantees of approximately $35 million in support of the franchisee loan

program at December 28, 2013. The total loans outstanding under the
loan pool were $38 million at December 28, 2013 with an additional
$42 million available for lending at December 28, 2013.

In addition to the guarantees described above, YUM has provided
guarantees of up to approximately $100 million on behalf of franchisees
for several financing programs related to specific initiatives. The total
loans outstanding under these financing programs were approximately
$44 million at December 28, 2013.

Unconsolidated affiliates Guarantees

From time to time we have guaranteed certain lines of credit and loans of
unconsolidated affiliates. At December 28, 2013 there are no guarantees
outstanding for unconsolidated affiliates. Our unconsolidated affiliates had
total revenues of approximately $1.1 billion for the year ended December 28,
2013 and assets and debt of approximately $365 million and
$85 million, respectively, at December 28, 2013.

Insurance Programs

We are self-insured for a substantial portion of our current and prior years’
coverage including property and casualty losses. To mitigate the cost of
our exposures for certain property and casualty losses, we self-insure
the risks of loss up to defined maximum per occurrence retentions on a
line-by-line basis. The Company then purchases insurance coverage, up
to a certain limit, for losses that exceed the self-insurance per occurrence
retention. The insurers’ maximum aggregate loss limits are significantly
above our actuarially determined probable losses; therefore, we believe
the likelihood of losses exceeding the insurers’ maximum aggregate loss
limits is remote.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

The following table summarizes the 2013 and 2012 activity related to our net self-insured property and casualty reserves as of December 28, 2013.

Part II Part II
Item 8 Financial Statements and Supplementary Data

2013 Activity
2012 Activity

In the U.S. and in certain other countries, we are also self-insured for
healthcare claims and long-term disability for eligible participating employees
subject to certain deductibles and limitations. We have accounted for our
retained liabilities for property and casualty losses, healthcare and long-term
disability claims, including reported and incurred but not reported claims,
based on information provided by independent actuaries.

Due to the inherent volatility of actuarially determined property and casualty
loss estimates, it is reasonably possible that we could experience changes
in estimated losses which could be material to our growth in quarterly
and annual Net income. We believe that we have recorded reserves for
property and casualty losses at a level which has substantially mitigated
the potential negative impact of adverse developments and/or volatility.

Legal Proceedings

We are subject to various claims and contingencies related to lawsuits, real
estate, environmental and other matters arising in the normal course of
business. An accrual is recorded with respect to claims or contingencies
for which a loss is determined to be probable and reasonably estimable.

In early 2013, four putative class action complaints were filed in the U.S.
District Court for the Central District of California against the Company and
certain executive officers alleging claims under sections 10(b) and 20(a)
of the Securities Exchange Act of 1934. Plaintiffs alleged that defendants
made false and misleading statements concerning the Company’s current
and future business and financial condition. The four complaints were
subsequently consolidated and transferred to the U.S. District Court for the
Western District of Kentucky. On August 5, 2013, lead plaintiff, Frankfurt
Trust Investment GmbH, filed a Consolidated Class Action Complaint
(“Amended Complaint”) on behalf of a putative class of all persons who
purchased the Company’s stock between February 6, 2012 and February 4,
2013 (the “Class Period”). The Amended Complaint no longer includes
allegations relating to misstatements regarding the Company’s business
or financial condition and instead alleges that, during the Class Period,
defendants purportedly omitted information about the Company’s supply
chain in China, thereby inflating the prices at which the Company’s securities
traded. On October 4, 2013, the Company and individual defendants
filed a motion to dismiss the Amended Complaint. Briefing on the motion
to dismiss is now complete. The Company denies liability and intends
to vigorously defend against all claims in the Amended Complaint. A
reasonable estimate of the amount of any possible loss or range of loss
cannot be made at this time.

On January 24, 2013, Bert Bauman, a purported shareholder of the
Company, submitted a letter demanding that the Board of Directors
initiate an investigation of alleged breaches of fiduciary duties by directors,
officers and employees of the Company. The breaches of fiduciary duties
are alleged to have arisen primarily as a result of the failure to implement
proper controls in connection with the Company’s purchases of poultry
from suppliers to the Company’s China operations. Subsequently, similar
demand letters by other purported shareholders were submitted. Those
letters were referred to a special committee of the Board of Directors (the
“Special Committee”) for consideration. The Special Committee, upon
conclusion of an independent inquiry of the matters described in the
letters, unanimously determined that it is not in the best interests of the
Company to pursue the claims described in the letters and, accordingly,
rejected each shareholder’s demand.

On May 9, 2013, Mr. Bauman filed a putative derivative action in Jefferson
Circuit Court, Commonwealth of Kentucky against certain current and former
officers and directors of the Company asserting breach of fiduciary duty,
waste of corporate assets and unjust enrichment in connection with an

Beginning Balance
142
140

$
$

Expense
47
58

Payments

Ending Balance
128
142

(61) $
(56) $

alleged failure to implement proper controls in the Company’s purchases
of poultry from suppliers to the Company’s China operations and with
an alleged scheme to mislead investors about the Company’s growth
prospects in China. By agreement of the parties, the matter is temporarily
stayed pending the outcome of the motion to dismiss the securities class
action. A reasonable estimate of the amount of any possible loss or range
of loss cannot be made at this time.

On February 14, 2013, Jennifer Zona, another purported shareholder of
the Company, submitted a demand letter similar to the demand letters
described above. On May 21, 2013, Ms. Zona filed a putative derivative
action in the U.S. District Court for the Western District of Kentucky against
certain officers and directors of the Company asserting claims similar to
those asserted by Mr. Bauman. The case was subsequently reassigned to
the same judge that the securities class action is before. On October 14,
2013, the Company filed a motion to dismiss on the basis of the Special
Committee’s findings. By agreement of the parties, the matter is temporarily
stayed pending the outcome of the motion to dismiss the securities class
action. A reasonable estimate of the amount of any possible loss or range
of loss cannot be made at this time.

On May 17, 2013, Sandra Wollman, another purported shareholder of
the Company, submitted a demand letter similar to the demand letters
described above. On December 9, 2013, Ms. Wollman filed a putative
derivative action in the U.S. District Court for the Western District of Kentucky
against certain current and former officers and directors of the Company
asserting claims similar to those asserted by Mr. Bauman and Ms. Zona. By
agreement of the parties, the matter was consolidated with the Zona action
and is temporarily stayed pending the outcome of the motion to dismiss
the securities class action. A reasonable estimate of the amount of any
possible loss or range of loss cannot be made at this time.

Taco Bell was named as a defendant in a number of putative class action
suits filed in 2007, 2008, 2009 and 2010 alleging violations of California
labor laws including unpaid overtime, failure to timely pay wages on
termination, failure to pay accrued vacation wages, failure to pay minimum
wage, denial of meal and rest breaks, improper wage statements, unpaid
business expenses, wrongful termination, discrimination, conversion and
unfair or unlawful business practices in violation of California Business &
Professions Code §17200. Some plaintiffs also seek penalties for alleged
violations of California’s Labor Code under California’s Private Attorneys
General Act as well as statutory “waiting time” penalties and allege violations
of California’s Unfair Business Practices Act. Plaintiffs seek to represent a
California state-wide class of hourly employees.

These matters were consolidated, and the consolidated case is styled In
Re Taco Bell Wage and Hour Actions. The In Re Taco Bell Wage and Hour
Actions plaintiffs filed a consolidated complaint in June 2009, and in March
2010 the court approved the parties’ stipulation to dismiss the Company
from the action. Plaintiffs filed their motion for class certification on the
vacation and final pay claims in December 2010, and on September 26, 2011
the court issued its order denying the certification of the vacation and
final pay claims. Plaintiffs then sought to certify four separate meal and
rest break classes. On January 2, 2013, the District Court rejected three
of the proposed classes but granted certification with respect to the late
meal break class. The parties thereafter agreed on a list of putative class
members, and the class notice and opportunity to opt out of the litigation
were mailed on January 21, 2014.

Taco Bell denies liability and intends to vigorously defend against all claims
in this lawsuit. We have provided for a reasonable estimate of the possible
loss relating to this lawsuit. However, in view of the inherent uncertainties
of litigation, there can be no assurance that this lawsuit will not result in
losses in excess of those currently provided for in our Consolidated Financial

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-KPart II Part II
Item 8 Financial Statements and Supplementary Data

Statements. A reasonable estimate of the amount of any possible loss or
range of loss in excess of that currently provided for in our Consolidated
Financial Statements cannot be made at this time.

On May 16, 2013, a putative class action styled Bernardina Rodriguez v.
Taco Bell Corp. was filed in California Superior Court. The plaintiff seeks
to represent a class of current and former California hourly restaurant
employees alleging various violations of California labor laws including
failure to provide meal and rest periods, failure to pay hourly wages, failure
to provide accurate written wage statements, failure to timely pay all final
wages, and unfair or unlawful business practices in violation of California
Business & Professions Code §17200. This case appears to be duplicative
of the In Re Taco Bell Wage and Hour Actions case described above. Taco
Bell removed the case to federal court and, on June 25, 2013, plaintiff
filed a first amended complaint to include a claim seeking penalties for
alleged violations of California’s Labor Code under California’s Private
Attorneys General Act. Taco Bell’s motion to dismiss or stay the action
in light of the In Re Taco Bell Wage and Hour Actions case was denied
on October 30, 2013.

Taco Bell denies liability and intends to vigorously defend against all claims
in this lawsuit. A reasonable estimate of the amount of any possible loss
or range of loss cannot be made at this time.

In December 2002, Taco Bell was named as the defendant in a class
action lawsuit filed in the U.S. District Court for the Northern District of
California styled Moeller, et al. v. Taco Bell Corp. In August 2003, plaintiffs
filed an amended complaint alleging, among other things, that Taco Bell
has discriminated against the class of people who use wheelchairs or
scooters for mobility by failing to make its approximately 200 Company-
owned restaurants in California accessible to the class. Plaintiffs contend
that queue rails and other architectural and structural elements of the
Taco Bell restaurants relating to the path of travel and use of the facilities
by persons with mobility-related disabilities do not comply with the U.S.
Americans with Disabilities Act (the “ADA”), the Unruh Civil Rights Act (the
“Unruh Act”), and the California Disabled Persons Act (the “CDPA”). Plaintiffs
have requested: (a) an injunction from the District Court ordering Taco
Bell to comply with the ADA and its implementing regulations; (b) that the
District Court declare Taco Bell in violation of the ADA, the Unruh Act, and
the CDPA; and (c) monetary relief under the Unruh Act or CDPA. Plaintiffs,
on behalf of the class, are seeking the minimum statutory damages per
offense of either $4,000 under the Unruh Act or $1,000 under the CDPA
for each aggrieved member of the class. Plaintiffs contend that there may
be in excess of 100,000 individuals in the class. In February 2004, the
District Court granted plaintiffs’ motion for class certification. The class
included claims for injunctive relief and minimum statutory damages.

In May 2007, a hearing was held on plaintiffs’ Motion for Partial Summary
Judgment seeking judicial declaration that Taco Bell was in violation of
accessibility laws as to three specific issues: indoor seating, queue rails
and door opening force. In August 2007, the court granted plaintiffs’
motion in part with regard to dining room seating. In addition, the court
granted plaintiffs’ motion in part with regard to door opening force at some
restaurants (but not all) and denied the motion with regard to queue lines.

In December 2009, the court denied Taco Bell’s motion for summary
judgment on the ADA claims and ordered plaintiffs to select one restaurant
to be the subject of a trial. The trial for the exemplar restaurant began on
June 6, 2011, and on October 5, 2011 the court issued Findings of Fact
and Conclusions of Law ruling that plaintiffs established that classwide
injunctive relief was warranted with regard to maintaining compliance as to
corporate Taco Bell restaurants in California. The court declined to order
injunctive relief at the time, however, citing the pendency of Taco Bell’s
motions to decertify both the injunctive and damages class. The court

also found that twelve specific items at the exemplar store were once out
of compliance with applicable state and/or federal accessibility standards.

Taco Bell filed a motion to decertify the class in August 2011, and in July
2012, the court granted Taco Bell’s motion to decertify the previously certified
state law damages class but denied Taco Bell’s motion to decertify the ADA
injunctive relief class. In September 2012, the court set a discovery and
briefing schedule concerning the trials of the four individual plaintiffs’ state
law damages claims, which the court stated will be tried before holding
further proceedings regarding the possible issuance of an injunction. The
court subsequently issued an order modifying its October 2011 Findings
of Facts and Conclusions of Law deleting the statement that an injunction
was warranted. Plaintiffs appealed that order, and on June 24, 2013 the
Ninth Circuit Court of Appeals dismissed plaintiff’s appeal. On January 15,
2014, plaintiffs filed a motion seeking issuance of a classwide injunction,
and Taco Bell filed a motion to dismiss both the individual and class ADA
claims based on a lack of jurisdiction.

Taco Bell denies liability and intends to vigorously defend against all claims
in this lawsuit. Taco Bell has taken steps to address potential architectural
and structural compliance issues at the restaurants in accordance with
applicable state and federal disability access laws. The costs associated
with addressing these issues have not significantly impacted our results
of operations. We have provided for a reasonable estimate of the possible
loss relating to this lawsuit. However, in view of the inherent uncertainties
of litigation, there can be no assurance that this lawsuit will not result in
losses in excess of those currently provided for in our Consolidated Financial
Statements. A reasonable estimate of the amount of any possible loss or
range of loss in excess of that currently provided for in our Consolidated
Financial Statements cannot be made at this time.

In July 2009, a putative class action styled Mark Smith v. Pizza Hut, Inc.
was filed in the U.S. District Court for the District of Colorado. The complaint
alleged that Pizza Hut did not properly reimburse its delivery drivers for
various automobile costs, uniforms costs, and other job-related expenses
and seeks to represent a class of delivery drivers nationwide under the
Fair Labor Standards Act (FLSA) and Colorado state law. In January 2010,
plaintiffs filed a motion for conditional certification of a nationwide class
of current and former Pizza Hut, Inc. delivery drivers. However, in March
2010, the court granted Pizza Hut’s pending motion to dismiss for failure
to state a claim, with leave to amend. Plaintiffs subsequently filed an
amended complaint, which dropped the uniform claims but, in addition
to the federal FLSA claims, asserted state-law class action claims under
the laws of sixteen different states. Pizza Hut filed a motion to dismiss the
amended complaint, and plaintiffs sought leave to amend their complaint a
second time. In August 2010, the court granted plaintiffs’ motion to
amend. Pizza Hut filed another motion to dismiss the Second Amended
Complaint. In July 2011, the Court granted Pizza Hut’s motion with respect
to plaintiffs’ state law claims but allowed the FLSA claims to go forward.
Plaintiffs filed their Motion for Conditional Certification in August 2011,
and the Court granted plaintiffs’ motion in April 2012. The opt-in period
closed on August 23, 2012, and approximately 6,000 individuals opted in.

Pizza Hut denies liability and intends to vigorously defend against all claims
in this lawsuit. A reasonable estimate of the amount of any possible loss
or range of loss cannot be made at this time.

We are engaged in various other legal proceedings and have certain
unresolved claims pending, the ultimate liability for which, if any, cannot
be determined at this time. However, based upon consultation with legal
counsel, we are of the opinion that such proceedings and claims are not
expected to have a material adverse effect, individually or in the aggregate,
on our Consolidated Financial Statements.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-KPart II Part II
Item 8 Financial Statements and Supplementary Data

NOtE Part II20 Selected Quarterly Financial Data (Unaudited)

Revenues:

Company sales
Franchise and license fees and income
Total revenues
Restaurant profit
Operating Profit(a)
Net Income – YUM! Brands, Inc.(c)
Basic earnings per common share
Diluted earnings per common share
Dividends declared per common share

Revenues:

Company sales
Franchise and license fees and income
Total revenues
Restaurant profit
Operating Profit(b)
Net Income – YUM! Brands, Inc.
Basic earnings per common share
Diluted earnings per common share
Dividends declared per common share

First Quarter Second Quarter

Third Quarter

Fourth Quarter

Total

2013

2,099 $
436
2,535
333
487
337
0.74
0.72
0.335

2,474 $
430
2,904
310
390
281
0.62
0.61
0.335

3,021 $
445
3,466
531
350
152
0.34
0.33
—

2012

3,590 $
589
4,179
509
571
321
0.72
0.70
0.74

11,184
1,900
13,084
1,683
1,798
1,091
2.41
2.36
1.41

First Quarter Second Quarter

Third Quarter

Fourth Quarter

Total

2,344 $
399
2,743
440
645
458
0.99
0.96
0.285

2,762 $
406
3,168
423
473
331
0.71
0.69
0.285

3,142 $
427
3,569
599
671
471
1.02
1.00
—

3,585 $
568
4,153
519
505
337
0.74
0.72
0.67

11,833
1,800
13,633
1,981
2,294
1,597
3.46
3.38
1.24

(a)

(b)

(c)

Includes a non-cash charge of $295 million in the third quarter related primarily to the impairment of Little Sheep intangible assets and net U.S. refranchising gains of $17 million,
$28 million, $37 million and $9 million in the first, second, third and fourth quarters, respectively. See Note 4 for further discussion.
Includes a non-cash gain recognized upon acquisition of Little Sheep of $74 million in the first quarter, refranchising losses associated with the Pizza Hut UK dine-in business of $24 million
and $46 million in the first and fourth quarters, respectively, net U.S. refranchising gains of $45 million and $69 million in the first and fourth quarters, respectively and a pension settlement
charge of $84 million in the fourth quarter. See Note 4 for further discussion.
Includes an after-tax charge of $75 million in the fourth quarter related to the repurchase of Senior Unsecured Notes. See Note 4 for further discussion.

Management’s responsibility for Financial Statements

To Our Shareholders:

We are responsible for the preparation, integrity and fair presentation of the
Consolidated Financial Statements, related notes and other information
included in this annual report. The financial statements were prepared in
accordance with accounting principles generally accepted in the United
States of America and include certain amounts based upon our estimates
and assumptions, as required. Other financial information presented in
the annual report is derived from the financial statements.

We maintain a system of internal control over financial reporting, designed to
provide reasonable assurance as to the reliability of the financial statements,
as well as to safeguard assets from unauthorized use or disposition. The
system is supported by formal policies and procedures, including an
active Code of Conduct program intended to ensure employees adhere
to the highest standards of personal and professional integrity. We have
conducted an evaluation of the effectiveness of our internal control over
financial reporting based on the framework in Internal Control – Integrated
Framework (1992) issued by the Committee of Sponsoring Organizations
of the Treadway Commission. Based on our evaluation, we concluded that
our internal control over financial reporting was effective as of December 28,
2013. Our internal audit function monitors and reports on the adequacy of
and compliance with the internal control system, and appropriate actions
are taken to address significant control deficiencies and other opportunities
for improving the system as they are identified.

The Consolidated Financial Statements have been audited and reported
on by our independent auditors, KPMG LLP, who were given free access
to all financial records and related data, including minutes of the meetings
of the Board of Directors and Committees of the Board. We believe that
management representations made to the independent auditors were
valid and appropriate. Additionally, the effectiveness of our internal control
over financial reporting has been audited and reported on by KPMG LLP.

The Audit Committee of the Board of Directors, which is composed
solely of outside directors, provides oversight to our financial reporting
process and our controls to safeguard assets through periodic meetings
with our independent auditors, internal auditors and management. Both
our independent auditors and internal auditors have free access to the
Audit Committee.

Although no cost-effective internal control system will preclude all errors
and irregularities, we believe our controls as of December 28, 2013 provide
reasonable assurance that our assets are reasonably safeguarded.

Patrick J. Grismer

Chief Financial Officer

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

Part II Part II

ItEM 9 Changes In and Disagreements

with Part IIaccountants on accounting
and Part IIFinancial Disclosure

None.

ItEM 9a Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company has evaluated the effectiveness of the design and operation
of its disclosure controls and procedures pursuant to Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934 as of the end of the
period covered by this report. Based on the evaluation, performed under
the supervision and with the participation of the Company’s management,

including the Chairman and Chief Executive Officer (the “CEO”) and the
Chief Financial Officer (the “CFO”), the Company’s management, including
the CEO and CFO, concluded that the Company’s disclosure controls and
procedures were effective as of the end of the period covered by this report.

Management’s report on Internal Control Over Financial reporting

Our management is responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is defined in Rules
13a-15(f) under the Securities Exchange Act of 1934. Under the supervision
and with the participation of our management, including our principal
executive officer and principal financial officer, we conducted an evaluation
of the effectiveness of our internal control over financial reporting based on
the framework in Internal Control – Integrated Framework (1992) issued by
the Committee of Sponsoring Organizations of the Treadway Commission.

Based on our evaluation under the framework in Internal Control – Integrated
Framework (1992), our management concluded that our internal control
over financial reporting was effective as of December 28, 2013.

KPMG LLP, an independent registered public accounting firm, has audited
the Consolidated Financial Statements included in this Annual Report
on Form 10-K and the effectiveness of our internal control over financial
reporting and has issued their report, included herein.

Changes in Internal Control

There were no changes with respect to the Company’s internal control over financial reporting or in other factors that materially affected, or are reasonably
likely to materially affect, internal control over financial reporting during the quarter ended December 28, 2013.

ItEM 9B Other Information

None.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-KPart III Part III
Item 14 Principal Accountant Fees and Services

PART III

ItEM 10 Directors, Executive Officers and Corporate

Governance

Information regarding Section 16(a) compliance, the Audit Committee and the Audit Committee financial expert, the Company’s code of ethics and
background of the directors appearing under the captions “Stock Ownership Information,” “Governance of the Company,” “Executive Compensation”
and “Item 1: Election of Directors and Director biographies” is incorporated by reference from the Company’s definitive proxy statement which will be
filed with the Securities and Exchange Commission no later than 120 days after December 28, 2013.

Information regarding executive officers of the Company is included in Part I.

ItEM 11 Executive Compensation

Information regarding executive and director compensation and the Compensation Committee appearing under the captions “Governance of the
Company” and “Executive Compensation” is incorporated by reference from the Company’s definitive proxy statement which will be filed with the
Securities and Exchange Commission no later than 120 days after December 28, 2013.

ItEM 12 Security Ownership of Certain Beneficial

Owners and Management and related
Stockholder Matters

Information regarding equity compensation plans and security ownership of certain beneficial owners and management appearing under the captions
“Executive Compensation” and “Stock Ownership Information” is incorporated by reference from the Company’s definitive proxy statement which will
be filed with the Securities and Exchange Commission no later than 120 days after December 28, 2013.

ItEM 13 Certain relationships and related

transactions, and Director Independence

Information regarding certain relationships and related transactions and information regarding director independence appearing under the caption
“Governance of the Company” is incorporated by reference from the Company’s definitive proxy statement which will be filed with the Securities and
Exchange Commission no later than 120 days after December 28, 2013.

ItEM 14 Principal accountant Fees and Services

Information regarding principal accountant fees and services and audit committee pre-approval policies and procedures appearing under the caption
“Item 2: Ratification of Independent Auditors” is incorporated by reference from the Company’s definitive proxy statement which will be filed with the
Securities and Exchange Commission no later than 120 days after December 28, 2013.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-KPart IV Part IV
Item 15 exhibits and Financial Statement Schedules

PART IV

ItEM 15 Exhibits and Financial Statement Schedules

(a)

(1)
(2)

(3)

Financial Statements: Consolidated Financial Statements filed as part of this report are listed under Part II, Item 8 of this Form 10-K.
Financial Statement Schedules: No schedules are required because either the required information is not present or not present in
amounts sufficient to require submission of the schedule, or because the information required is included in the Consolidated Financial
Statements thereto filed as a part of this Form 10-K.
Exhibits: The exhibits listed in the accompanying Index to Exhibits are filed as part of this Form 10-K. The Index to Exhibits specifically
identifies each management contract or compensatory plan required to be filed as an exhibit to this Form 10-K.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

Part IV Part IV

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Form 10-K annual report
to be signed on its behalf by the undersigned, thereunto duly authorized.

Date:

February 18, 2014

YUM! BraNDS, INC.
By:

/s/DAVID C. NOVAK

Pursuant to the requirements of the Securities Exchange Act of 1934, this annual report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.

Signature

Title

Date

/s/DAVID C. NOVAK
David C. Novak

/s/PATRICK J. GRISMER
Patrick J. Grismer

/s/DAVID E. RUSSELL
David E. russell

Chairman of the Board, Chief Executive Officer (principal executive officer)

February 18, 2014

Chief Financial Officer (principal financial officer)

February 18, 2014

Vice President, Finance and Corporate Controller (principal accounting officer)

February 18, 2014

/s/MICHAEL J. CAVANAGH
Michael J. Cavanagh

Director

/s/DAVID W. DORMAN
David W. Dorman

Director

/s/MASSIMO FERRAGAMO
Massimo Ferragamo

Director

/s/MIRIAN GRADDICK-WEIR
Mirian Graddick-Weir

Director

/s/J. DAVID GRISSOM
J. David Grissom

/s/BONNIE G. HILL
Bonnie G. Hill

/s/JONATHAN S. LINEN
Jonathan S. Linen

/s/THOMAS C. NELSON
thomas C. Nelson

/s/THOMAS M. RYAN
thomas M. ryan

/s/JING-SHYH S. SU
Jing-Shyh S. Su

Director

Vice-Chairman of the Board

/s/ROBERT D. WALTER
robert D. Walter

Director

February 18, 2014

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-KPart IV Part IV

Exhibit Index (Item 15)

Exhibit
Number
3.1

3.2

4.1

Description of Exhibits
Restated Articles of Incorporation of YUM, effective May 26, 2011, which is incorporated herein by reference from Exhibit 3.1 to YUM’s
Report on Form 8-K filed on May 31, 2011.
Amended and restated Bylaws of YUM, effective May 26, 2011, which are incorporated herein by reference from Exhibit 3.2 to YUM’s
Report on Form 8-K filed on May 31, 2011.
Indenture, dated as of May 1, 1998, between YUM and The Bank of New York Mellon Trust Company, N.A., successor in interest to
The First National Bank of Chicago, which is incorporated herein by reference from Exhibit 4.1 to YUM’s Report on Form 8-K filed on
May 13, 1998.
(i)

6.25% Senior Notes due April 15, 2016 issued under the foregoing May 1, 1998 indenture, which notes are incorporated by
reference from Exhibit 4.2 to YUM’s Report on Form 8-K filed on April 17, 2006.
6.25% Senior Notes due March 15, 2018 issued under the foregoing May 1, 1998 indenture, which notes are incorporated by
reference from Exhibit 4.2 to YUM’s Report on Form 8-K filed on October 22, 2007.
6.875% Senior Notes due November 15, 2037 issued under the foregoing May 1, 1998 indenture, which notes are incorporated
by reference from Exhibit 4.3 to YUM’s Report on Form 8-K filed on October 22, 2007.
4.25% Senior Notes due September 15, 2015 issued under the foregoing May 1, 1998 indenture, which notes are incorporated
by reference from Exhibit 4.1 to YUM’s Report on Form 8-K filed on August 25, 2009.
5.30% Senior Notes due September 15, 2019 issued under the foregoing May 1, 1998 indenture, which notes are incorporated
by reference from Exhibit 4.1 to YUM’s Report on Form 8-K filed on August 25, 2009.
3.875% Senior Notes due November 1, 2020 issued under the foregoing May 1, 1998 indenture, which notes are incorporated
by reference from Exhibit 4.2 to YUM’s Report on Form 8-K filed on August 31, 2010.
3.750% Senior Notes due November 1, 2021 issued under the foregoing May 1, 1998 indenture, which notes are incorporated
by reference from Exhibit 4.2 to YUM’s Report on Form 8-K filed August 29, 2011.
3.875% Senior Notes due November 1, 2023 issued under the foregoing May 1, 1998 indenture, which notes are incorporated
by reference from Exhibit 4.2 to YUM’s Report on Form 8-K filed October 31, 2013.
5.350% Senior Notes due November 1, 2043 issued under the foregoing May 1, 1998 indenture, which notes are incorporated
by reference from Exhibit 4.3 to YUM’s Report on Form 8-K filed October 31, 2013.

(ii)

(iii)

(iv)

(v)

(vi)

(vii)

(viii)

(ix)

10.1+

10.2

10.3†

10.3.1†

10.4†

10.5†

10.6†

10.6.1†

10.7†

10.7.1†

10.7.2†

Master Distribution Agreement between Unified Foodservice Purchasing Co-op, LLC, for and on behalf of itself as well as the
Participants, as defined therein (including certain subsidiaries of Yum! Brands, Inc.) and McLane Foodservice, Inc., effective as of
January 1, 2011 and Participant Distribution Joinder Agreement between Unified Foodservice Purchasing Co-op, LLC, McLane
Foodservice, Inc., and certain subsidiaries of Yum! Brands, Inc., which are incorporated herein by reference from Exhibit 10.1 to
YUM’s Quarterly Report on Form 10-Q for the quarter ended September 4, 2010.
Credit Agreement, dated March 22, 2012 among YUM, the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative
Agent, Citibank, N.A. and Wells Fargo Bank, National Association, as Syndication Agents, J.P. Morgan Securities LLC, Citigroup
Global Markets Inc. and Wells Fargo Securities, LLC, as Lead Arrangers and Bookrunners and HSBC Bank USA, National Association,
US Bank, National Association and Fifth Third Bank, as Documentation Agents, which is incorporated herein by reference from Exhibit
10.26 to YUM’s Quarterly Report on Form 10-Q for quarter ended March 24, 2012.
YUM Director Deferred Compensation Plan, as effective October 7, 1997, which is incorporated herein by reference from Exhibit 10.7
to YUM’s Annual Report on Form 10-K for the fiscal year ended December 27, 1997.
YUM Director Deferred Compensation Plan, Plan Document for the 409A Program, as effective January 1, 2005, and as Amended
through November 14, 2008, which is incorporated by reference from Exhibit 10.7.1 to YUM’s Quarterly Report on Form 10-Q for the
quarter ended June 13, 2009.
YUM 1997 Long Term Incentive Plan, as effective October 7, 1997, which is incorporated herein by reference from Exhibit 10.8 to
YUM’s Annual Report on Form 10-K for the fiscal year ended December 27, 1997.
YUM Executive Incentive Compensation Plan, as effective May 20, 2004, and as Amended through the Second Amendment, as
effective May 21, 2009, which is incorporated herein by reference from Exhibit A of YUM’s Definitive Proxy Statement on Form DEF
14A for the Annual Meeting of Shareholders held on May 21, 2009.
YUM Executive Income Deferral Program, as effective October 7, 1997, and as amended through May 16, 2002, which is incorporated
herein by reference from Exhibit 10.10 to YUM’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005.
YUM! Brands Executive Income Deferral Program, Plan Document for the 409A Program, as effective January 1, 2005, and as
Amended through June 30, 2009, which is incorporated by reference from Exhibit 10.10.1 to YUM’s Quarterly Report on Form 10-Q
for the quarter ended June 13, 2009.
YUM! Brands Pension Equalization Plan, Plan Document for the Pre-409A Program, as effective January 1, 2005, and as Amended
through December 31, 2010, which is incorporated by reference from Exhibit 10.7 to Yum’s Quarterly Report on Form 10-Q for the
quarter ended March 19, 2011.
YUM! Brands, Inc. Pension Equalization Plan, Plan Document for the 409A Program, as effective January 1, 2005, and as Amended
through December 30, 2008, which is incorporated by reference from Exhibit 10.13.1 to YUM’s Quarterly Report on Form 10-Q for
the quarter ended June 13, 2009.
YUM! Brands Pension Equalization Plan Amendment, as effective January 1, 2012, which is incorporated by reference from Exhibit
10.7.2 to Yum’s Quarterly Report on Form 10-Q for the quarter ended March 23, 2013.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-K

Part IV
Item 15 exhibit Index

Exhibit
Number
10.7.3†

10.8†

10.9†

10.10†

10.11

10.12†

10.13†

10.14†

10.15†

10.15.1†

10.16†

10.17†

10.18†

10.18.1†

10.20†

10.20.1†

10.21†

10.22†

10.23†

10.24†

10.25†

12.1
21.1
23.1
31.1

31.2

32.1

32.2

Description of Exhibits
YUM! Brands Pension Equalization Plan Amendment, as effective January 1, 2013, which is incorporated by reference from Exhibit
10.7.3 to Yum’s Quarterly Report on Form 10-Q for the quarter ended March 23, 2013.
Form of Directors’ Indemnification Agreement, which is incorporated herein by reference from Exhibit 10.17 to YUM’s Annual Report on
Form 10-K for the fiscal year ended December 27, 1997.
Form of YUM! Brands, Inc. Change in Control Severance Agreement, which is incorporated herein by reference from Exhibit 10.1 to
Yum’s Report on Form 8-K filed on March 21, 2013.
YUM Long Term Incentive Plan, as Amended through the Fourth Amendment, as effective November 21, 2008, which is incorporated
by reference from Exhibit 10.18 to YUM’s Quarterly Report on Form 10-Q for the quarter ended June 13, 2009.
Second Amended and Restated YUM Purchasing Co-op Agreement, dated as of January 1, 2012, between YUM and the Unified
Foodservice Purchasing Co-op, LLC, which is incorporated herein by reference from Exhibit 10.11 to YUM’s Annual Report on Form
10-K for the fiscal year ended December 31, 2011.
YUM Restaurant General Manager Stock Option Plan, as effective April 1, 1999, and as amended through June 23, 2003, which is
incorporated herein by reference from Exhibit 10.22 to YUM’s Annual Report on Form 10-K for the fiscal year ended December 31,
2005.
YUM SharePower Plan, as effective October 7, 1997, and as amended through June 23, 2003, which is incorporated herein by
reference from Exhibit 10.23 to YUM’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005.
Form of YUM Director Stock Option Award Agreement, which is incorporated herein by reference from Exhibit 10.25 to YUM’s
Quarterly Report on Form 10-Q for the quarter ended September 4, 2004.
Form of YUM 1999 Long Term Incentive Plan Award Agreement, which is incorporated herein by reference from Exhibit 10.26 to
YUM’s Quarterly Report on Form 10-Q for the quarter ended September 4, 2004.
Form of YUM 1999 Long Term Incentive Plan Award Agreement (2013) (Stock Options), as incorporated by reference from Exhibit
10.15.1 to YUM’s Quarterly Report on Form 10-Q for the quarter ended March 23, 2013.
YUM! Brands, Inc. International Retirement Plan, as in effect January 1, 2005, which is incorporated herein by reference from Exhibit
10.27 to YUM’s Annual Report on Form 10-K for the fiscal year ended December 25, 2004.
Letter of Understanding, dated July 13, 2004, and as amended on May 18, 2011, by and between the Company and Samuel
Su, which is incorporated herein by reference from Exhibit 10.28 to YUM’s Annual Report on Form 10-K for the fiscal year ended
December 25, 2004, and from Item 5.02 of Form 8-K on May 24, 2011.
Form of 1999 Long Term Incentive Plan Award Agreement (Stock Appreciation Rights) which is incorporated by reference from Exhibit
99.1 to YUM’s Report on Form 8-K as filed on January 30, 2006.
Form of YUM 1999 Long Term Incentive Plan Award Agreement (2013) (Stock Appreciation Rights), which is incorporated by reference
from Exhibit 10.18.1 to YUM’s Quarterly Report on Form 10-Q for the quarter ended March 23, 2013.
YUM! Brands Leadership Retirement Plan, as in effect January 1, 2005, which is incorporated herein by reference from Exhibit 10.32
to YUM’s Quarterly Report on Form 10-Q for the quarter ended March 24, 2007.
YUM! Brands Leadership Retirement Plan, Plan Document for the 409A Program, as effective January 1, 2005, and as Amended
through December, 2009, which is incorporated by reference from Exhibit 10.21.1 to YUM’s Annual Report on Form 10-K for the fiscal
year ended December 26, 2009.
1999 Long Term Incentive Plan Award (Restricted Stock Unit Agreement) by and between the Company and David C. Novak, dated as
of January 24, 2008, which is incorporated herein by reference from Exhibit 10.33 to YUM’s Annual Report on Form 10-K for the fiscal
year ended December 29, 2007.
YUM! Performance Share Plan, as effective January 1, 2009, which is incorporated by reference from Exhibit 10.24 to YUM’s Annual
Report on Form 10-K for the fiscal year ended December 26, 2009.
YUM! Brands Third Country National Retirement Plan, as effective January 1, 2009, which is incorporated by reference from Exhibit
10.25 to YUM’s Annual Report on Form 10-K for the fiscal year ended December 26, 2009.
2010 YUM! Brands Supplemental Long Term Disability Coverage Summary, as effective January 1, 2010, which is incorporated by
reference from Exhibit 10.26 to YUM’s Annual Report on Form 10-K for the fiscal year ended December 26, 2009.
1999 Long Term Incentive Plan Award (Restricted Stock Unit Agreement) by and between the Company and Jing-Shyh S. Su, dated
as of May 20, 2010, which is incorporated by reference from Exhibit 10.27 to YUM’s Annual Report on Form 10-K for the fiscal year
ended December 25, 2010.
Computation of ratio of earnings to fixed charges.
Active Subsidiaries of YUM.
Consent of KPMG LLP.
Certification of the Chairman and Chief Executive Officer pursuant to Rule 13a-14(a) of Securities Exchange Act of 1934, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of Securities Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of the Chairman and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-KPart IV Part IV
Item 15 exhibit Index

Exhibit
Number
101.INS
101.SCH
101.CAL
101.LAB
101.PRE
101.DEF
+ Confidential treatment has been granted for certain portions which are omitted in the copy of the exhibit electronically filed with the SEC. The omitted information has been filed separately

Description of Exhibits
XBRL Instance Document
XBRL Taxonomy Extension Schema Document
XBRL Taxonomy Extension Calculation Linkbase Document
XBRL Taxonomy Extension Label Linkbase Document
XBRL Taxonomy Extension Presentation Linkbase Document
XBRL Taxonomy Extension Definition Linkbase Document

with the SEC pursuant to our application for confidential treatment.
Indicates a management contract or compensatory plan.

†

YUM! BRANDS, INC. - 2013 Form 10-KForm 10-KShareholder Information

Inquiries Regarding Your YUM Holdings

REGISTERED SHAREHOLDERS (those who hold YUM
shares in their own names) should address communications
concerning statements, address changes, lost certificates and
other administrative matters to:

BENEFICIAL SHAREHOLDERS (those who hold YUM shares
in the name of a bank or broker) should direct communications
about all administrative matters related to their accounts to their
stockbroker.

LONG TERM INCENTIVE PLAN (LTIP) AND YUMBUCKS
PARTICIPANTS (employees with rights to LTIP and YUMBUCKS
stock options and stock appreciation rights) should address all
questions regarding their accounts, outstanding stock options/
stock appreciation rights or shares received through stock option/
stock appreciation right exercises to:

Merrill Lynch
Equity Award Services
1400 Merrill Lynch Drive
Mail Stop # NJ2-140-03-40
Pennington, NJ 08534
Phone: (888) 986-4321 (U.S.A., Puerto Rico and Canada)

(609) 818-8156 (all other locations)

In all correspondence, please provide the last 4 digits of your
account number, your address, your telephone number and indicate
that your inquiry relates to YUM holdings. For telephone inquiries,
please have a copy of your most recent statement available.

EMPLOYEE BENEFIT PLAN PARTICIPANTS
Capital Stock Purchase Program (888) 439-4986

YUM Savings Center (888) 875-4015
YUM Savings Center (904) 791-2005 (outside U.S.)

P.O. Box 5166
Boston, MA 02206-5166

Please have a copy of your most recent statement available when
calling. Press 0#0# for a customer service representative and give
the representative the name of the plan.

F
o
r
m
1
0
-
K

American Stock Transfer & Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219
Phone: (888) 439-4986
International: (718) 921-8124
www.amstock.com
or
Shareholder Coordinator
Yum! Brands, Inc.
1441 Gardiner Lane
Louisville, KY 40213
Phone: (888) 298-6986
E-mail: yum.investor@yum.com

In all correspondence or phone inquiries, please provide your
name and your YUM account number if you know it.

REGISTERED SHAREHOLDERS can access their accounts and
complete the following functions online at the website of American
Stock Transfer & Trust Company (“AST”): www. amstock.com.

•• Access account balance and other general account information
•• Change an account’s mailing address
•• View a detailed list of holdings represented by certificates and

the identifying certificate numbers

•• Request a certificate for shares held at AST
•• Replace a lost or stolen certificate
•• Retrieve a duplicate Form 1099-B
•• Purchase shares of YUM through the Company’s Direct Stock

Purchase Plan

•• Sell shares held at AST

Access accounts online at the following URL:

https://secure.amstock.com/Shareholder/sh_login.asp. Your
account number and Social Security Number are required.
If you do not know your account number, please call AST at
(888) 439-4986 or YUM Shareholder Coordinator at (888) 298-6986.

INDEPENDENT AUDITORS

KPMG LLP
400 West Market Street, Suite 2600
Louisville, KY 40202
Phone: (502) 587-0535

STOCK TRADING SYMBOL-YUM

The New York Stock Exchange is the principal market for YUM
Common Stock, which trades under the symbol YUM.

Shareholder Services

DIRECT STOCK PURCHASE PLAN A prospectus and a brochure
explaining this convenient plan are available from our transfer agent:

American Stock Transfer & Trust Company
P.O. Box 922
Wall Street Station
New York, NY 10269-0560
Attn: Plan Administration Dept.
Phone: (888) 439-4986

FINANCIAL AND OTHER INFORMATION
Securities analysts, portfolio managers, representatives of financial
institutions and other individuals with questions regarding YUM’s
performance are invited to contact:

Steve Schmitt
Vice President, Investor Relations &
Corporate Strategy
Yum! Brands, Inc.
1441 Gardiner Lane
Louisville, KY 40213
Phone: (502) 874-8006

Franchise Inquiries

ONLINE FRANCHISE INFORMATION
Information about potential franchise opportunities is available at
www.yumfranchises.com

YUM’s Annual Report contains many of the valuable trademarks
owned and used by YUM and its subsidiaries and affiliates in the
United States and worldwide.

K
-
0
1
m
r
o
F

dynasty

growth model

our future back vision

Be the Defining Global Company That Feeds the World.

our goal

Be the Best in the World at Building Global Restaurant Brands!

our passion

Customer Mania... with our customers

front and center in everything we do

our formula

for success

People Capability First… satisfied

customers and profitability follow

how we lead with ABR and TPWY

Step Change Thinkers

Know How Builders

Action Drivers

People Growers

how we grow

Build Powerful Brands

Through Superior Marketing,

Breakthrough Innovation

and Compelling Value

Drive Aggressive Unit

Expansion Everywhere,

Especially in Emerging

Markets

Create Industry

Leading Returns Through

Franchising and Disciplined

Use of Capital

With a Foundation Built on

Winning Food and World

Class Operations

Build Leading Brands in

Every Significant Category

in China and India

Maximize Long-Term

Shareholder Value

how we win together

Believe in All People

Be Restaurant and Customer Maniacs…NOW!

Recognize! Recognize! Recognize!

Go for Breakthrough

Build Know How

Take the Hill Teamwork

Board of Directors

david C. Novak 61
Chairman and Chief Executive Officer,
Yum! Brands, Inc.

Jing-shyh s. (“sam”) su 61
Vice Chairman, Yum! Brands, Inc.
Chairman and Chief Executive Officer,
Yum! Restaurants China

Michael J. Cavanagh 48
Co-Chief Executive Officer,
JP Morgan Chase and Co.‘s
Corporate and Investment Bank

david W. dorman 60
Non-Executive Chairman,
CVS Caremark Corporation
Founding Partner, Centerview Capital

Massimo ferragamo 56
Chairman, Ferragamo USA, Inc.,
a subsidiary of Salvatore Ferragamo Italia

Mirian M. Graddick-Weir 59
Executive Vice President Human Resources
Merck & Co., Inc.

J. david Grissom 75
Chairman, Mayfair Capital, Inc. and
Chairman, The Glenview Trust Company

bonnie G. hill 72
President, B. Hill Enterprises, LLC

Jonathan s. Linen 70
Advisor to Chairman, American Express Company

thomas C. Nelson 51
Chairman, Chief Executive Officer and President,
National Gypsum Company

thomas M. ryan 61
Former Chairman and CEO,
CVS Caremark Corporation

robert d. Walter 68
Founder and Retired Chairman/CEO,
Cardinal Health, Inc.

Senior Officers

david C. Novak 61
Chairman and Chief Executive Officer,
Yum! Brands, Inc.

Jing-shyh s. (“sam”) su 61
Vice Chairman, Yum! Brands, Inc.
Chairman and Chief Executive Officer,
Yum! Restaurants China

scott o. bergren 67
Chief Executive Officer, Pizza Hut and
Chief Innovation Officer, Yum! Brands, Inc.

Jonathan d. blum 55
Senior Vice President, Chief Public Affairs and
Global Nutrition Officer, Yum! Brands, Inc.

Anne p. byerlein 55
Chief People Officer, Yum! Brands, Inc.

Christian L. Campbell 63
Senior Vice President, General Counsel, Secretary and
Chief Franchise Policy Officer, Yum! Brands, Inc.

richard t. Carucci 56
President, Yum! Brands, Inc. (1)

Niren Chaudhary 51
President, Yum! Restaurants India

Greg Creed 56
Chief Executive Officer, Taco Bell

roger eaton 53
President, KFC and Chief Operations Officer,
Yum! Brands, Inc.

Larry Gathof 52
Vice President and Treasurer, Yum! Brands, Inc.

patrick Grismer 52
Chief Financial Officer, Yum! Brands, Inc.

Muktesh (“Micky”) pant 59
Chief Executive Officer, KFC

david e. russell 44
Vice President, Finance and Corporate Controller,
Yum! Brands, Inc.

...as one system

(1) Richard T. Carucci will retire as President of Yum! Brands, Inc. in March 2014.

the pOwer OF

Only 2

Yum! restaurants per milliOn
peOple in the u.s.

Yum! restaurants per milliOn peOple in
the tOp ten emerGinG markets.

On the GrOund FlOOr OF GlObal GrOwth

Yum! Brands, Inc., trades under the symbol YUM and is proud to meet the listing requirements of the NYSE, the world’s leading equities market.