TWST: Would you begin with a very brief historical sketch of the company and a picture of the things you're doing at the present time?

Mr. Jerzyk: We were spun off from PepsiCo in 1997, as three restaurant brands: Taco Bell, Pizza Hut and KFC. In the early days we were spun off with quite a bit of debt, nearly $5 billion. Fortunately, our business generated so much cash we were able to pay down a lot of that debt and get to an investment-grade rating relatively quickly. In the early part of the past decade, we reached investment-grade rating, and we started to pay a dividend in 2004. We have increased the dividend every year since then. We also started buying back our stock and returning a fair amount of cash to our shareholders.

Recently, we have been very focused on adding sales layers, which are new incremental sales-growth programs, to better utilize our restaurant assets. We are getting some benefits from that now in various parts of our business around the world and expect to continue the strategy in the future.

The biggest thing that we have been focused on since the spin-off is building our international presence. Since our spin-off from PepsiCo, we have established ourselves as a powerful global company going from 22% of profits coming from outside the U.S. in 1998 to more than 65% in 2010. There has been a tremendous amount of capital expenditures and organizational focus around our international development, which has resulted in Yum! (YUM) becoming the largest U.S. retail developer in China and the largest restaurant company in emerging markets. Yum! has definitely established itself as a leading consumer company with a significant international presence with our KFC and Pizza Hut brands.

TWST: What is the outlook for your industry in general right now and for Yum! Brands in particular?

Mr. Jerzyk: I would call the outlook for the industry in the U.S. challenging but cautiously upbeat. Unemployment is slowly easing, which is definitely important for our industry, and disposable income seems to be rising. Value is clearly a focus for the consumer, and not just regular-price value but also abundant value and quality value.

From our perspective, the outlook in the U.S. is definitely on the upswing. We had a good year last year with 3% earnings growth from the U.S. business. We ended the year on a positive note in terms of same-store sales, and we are continuing to make progress on sales layers to better utilize our restaurant assets. For example, we are testing breakfast at Taco Bell - that would be one example of the sales layer initiative.

Internationally the outlook for our company is fabulous. KFC is by far the number one quick-service restaurant brand in China with more than 3,200 stores in more than 700 cities. Our competitive leadership position was 2.5 times more than our nearest competitor in 2010 and continues to widen each year. In the last three years, our China division's profit has more than doubled to $755 million. We have a long runway for growth in China and believe we could have 20,000 restaurants there someday, including 15,000 KFCs.

We are beginning to open in new areas of Africa beyond South Africa. We opened the first KFC in Nigeria last year with a great response from consumers. By 2014 we expect to double the number of restaurants in Africa to approximately 1,200 KFCs and for KFC to be nearly a $2 billion brand. We are continuing to build in Vietnam. KFC is the leading quick-service restaurant brand in Vietnam with nearly 100 restaurants, and by 2020 we expect to have 500 KFCs there. We are just getting started in India, which as you know is well over one billion people. Yum! is the largest and fastest-growing restaurant company in India with more than 100 KFC restaurants and more than 170 Pizza Huts. We expect to have 1,250 KFCs alone in India by 2020. We are also just getting started in Russia, which is a huge opportunity for KFC in terms of a customer base.

In addition to emerging markets we are also really getting started in some developed countries like France and Germany. These are well-established Western European countries, but there is a tremendous amount of opportunity for us. For example, KFC in France has the highest average unit volumes in the world. We are also getting started developing Taco Bell into our third global brand. We opened Taco Bell restaurants in 10 different countries in the past two years, opening the first locations in India, the United Kingdom and South Korea.

TWST: How does commodity inflation impact the company, both now and over the next 12 to 18 months?

Mr. Jerzyk: Currently many commodity costs remain at high levels. We are expecting about 5% food and paper inflation in China, about 4% in the U.S. and 3% in YRI. On the consumer side we are very value focused. You have to convey a very tight and compelling message to consumers in terms of price value, abundant value and quality value.

TWST: I read that you recently took some price in China. How do you balance taking price with the economic realities in various markets?

Mr. Jerzyk: In the emerging markets where the middle class is just getting started, you want to continue to expand your visit frequency of that growing consumer group; therefore, you need to make sure that you do everything you can to extract the efficiencies out of your cost structure. We have done that especially in a market like China, where we have a tremendous advantage in terms of the fact that we own our own distribution system, and our supply chain has certainly expanded. As the largest restaurant company in China with more than 3,900 KFC and Pizza Hut restaurants in more 700 cities, we do have those advantages.

We have always been very strategic with pricing, making sure that our business model with the consumer is strong and that we have everyday value offerings. At the same time your customer base is growing, their wages are rising and their disposable incomes are increasing.

TWST: The headlines focused on the 27% profit growth reported in your earnings in February as well as your China numbers. Company executives called 2010 the company's best as a public company. What is the message executives wanted to get across that quarter and the year?

Mr. Jerzyk: First of all, we have definitely demonstrated financial consistency over the years with double-digit earnings growth. Last year was the ninth straight year. If you think about it over nine years, there were a variety of challenging macroeconomic conditions and we consistently provided double-digit earnings growth to our shareholders. Not many companies can say that.

I think last year especially our performance was driven more so by the operating side of the business. If you look at the operating profit growth excluding foreign exchange gains, it was 15%. Which was one of the strongest years ever. That was strong growth across all three of our businesses with 26% growth in China, 11% for Yum! Restaurants International, YRI, and 3% for the U.S. That is in addition to our ninth straight year of double-digit EPS growth - 17% EPS in 2010.

We also opened nearly 1,400 new restaurants outside the U.S. last year, marking the 10th consecutive year of opening more than 1,000 new international stores. We feel very strongly that we are truly on the ground floor of global growth in emerging markets around the world. I think that is one of the big messages last year that we were emphasizing in terms of communicating to the investment community.

TWST: You mentioned EPS has grown 13% to 17% for the last nine years. Would you put that into perspective?

Mr. Jerzyk: In addition to EPS growth, return on investment capital, ROIC, is also very important to us. We have a great track record, increasing it every year, to nearly 21% ROIC in 2010. If you look at our consistent double-digit EPS growth combined with strong ROIC, we are among the leaders in our industry. There are really only 10 or 11 companies that we can find over the past seven or eight years that are in that same realm in terms of high ROIC and consistent double-digit EPS growth. We are also extremely proud of the fact that our five year average total return, including stock appreciation and dividend reinvestment, is 18% versus the S&P average of 2%.

TWST: Yum! Brands' international sales are now more than 65% of revenues compared to 22% in 1998. What sets the company apart as an international brand in a highly competitive landscape?

Mr. Jerzyk: First of all one big way that we are different than anybody else is that we have two leading international brands with KFC and Pizza Hut. That definitely sets us apart, and the good thing is that they are very different brands. Pizza Hut is on the casual dining side, which is a big focus for us internationally. It's a sharing experience. As consumers' income grows and more people are in the workforce, they want to go out and celebrate. That is what Pizza Hut provides, a very affordable dining experience. Then on the KFC side chicken is definitely a preferred protein in most of the world. Generally, if we build KFC restaurants and operate them well, our customers come - and they come in numbers. Combined with the fact that we have over 1,000 international franchisees that are definitely growth ready and very interested in continuing to invest and grow the business, we have huge opportunities to grow everywhere in the world.

TWST: You're just at the early stages of taking the Taco Bell franchise global.

Mr. Jerzyk: Taco Bell is the second most profitable restaurant brand overall in the U.S., the category leader in value and our most profitable brand, accounting for more than 60% of our U.S. profits. We are leveraging that strength by developing Taco Bell into our third global brand. We went into about 10 new countries in the past two years. Our international franchisees are interested in Taco Bell, so we are continuing to go down the path of building more Taco Bells in various countries, such as India. We also opened Taco Bell in the U.K., Spain, South Korea, Cyprus and Dubai, to name a few. We will continue to build the concept and build the supply-chain infrastructure, which definitely takes some time to do. We are optimistic about the long-term potential of growing Taco Bell internationally.

TWST: You have 475 new restaurants forecasted in China for 2011, more than Starbucks and McDonald's combined. Would you speak about the pace of expansion internationally and address the possibility that you may overexpand?

Mr. Jerzyk: We are very focused on making sure that as we build new restaurants, we are building them with the right return, the right operations and great consumer viewpoint in terms of our brands. First of all as we go around the world and we begin to build - whether it's in China, India, France or Germany - the first thing that we focus on is ensuring that our operational capability is in place. We do not want to put our cash ahead of our people capability, so that is our first focus.

As we start building I believe we have a very disciplined process around investing new capital for building restaurants, especially in new markets. We look at our returns on new restaurants quarterly. We have a new unit tracking system in place around the world. All of our general managers around the world and our operating and finance teams monitor our performance. And if we see any deviation from trends, we will immediately start to slow down development in a particular area. For example, a couple of years ago we actually slowed down our development in China with the Pizza Hut business. We went from approximately 100 new openings to about 50. We were in the process of dramatically changing the business model to expand the brand's menu. Today Pizza Hut has an extensive menu that is revamped twice a year, offering a broad variety of pizzas, entrees, pasta, rice dishes, appetizers, beverages and desserts at its more than 500 restaurants in China.

We are not chasing any particular number. The important thing is to do it with quality, and we are going to make sure that we are investing appropriately and that we have the right operating and people capability for our customers and our shareholders.

TWST: You forecasted operating profit of about $3 billion in 2015, with 60% from emerging markets. Would you tell us more about that forecast and address what makes the emerging market stores still profitable?

Mr. Jerzyk: By 2015 we expect to generate about 60% of our profits from emerging markets. We are not making any new assumptions. This is an extension of the trends that we are on right now. We are experiencing strong double-digit profit growth in China, and we don't see that changing over the next several years. We are getting similar double-digit profit growth from the emerging market segment within our YRI business, whether it's South Africa, Latin American countries, India or all the emerging countries of Asia.

Yum! is the largest and fastest-growing restaurant company in emerging markets, with more than 10,000 restaurants and a 2-to-1 advantage over our nearest competitor. There really is very little competition from a Western-brand perspective in most emerging markets. For example, KFC is one of the only Western brands in Vietnam. Indonesia and Malaysia are also huge developing markets for us. We have tremendous infrastructures in these developing countries. We have a great company presence, and we are willing to invest capital because the returns are really good. Another example is South Africa where we have over 600 KFCs. As a reference point, McDonald's, a great international company, has about 200 stores in South Africa.

In the emerging markets, Yum! and KFC are leading the way, and combined with Pizza Hut in a lot of markets we are well ahead of any Western competition. We have a good level of scale to continue to build on, and the good thing is if you look at our pace of new unit development it is well ahead of anybody else in our category. We have relatively little competition in the emerging markets from Western brands. We have the infrastructure and the scale that we have in place today to continue to build on, and we are definitely well ahead in terms of our competitors. Without a doubt our two leading global brands have tremendous consumer appeal no matter where you go in the world.

TWST: Regarding the recent Taco Bell beef news coverage, CEO David Novak said we're seeing a negative short-term impact, that the tide has been turned with the aggressive response and that we're waiting to see the ultimate impact. Would you comment on that response and the impact you feel it will have on investors?

Mr. Jerzyk: The claims made against Taco Bell's seasoned beef were absolutely false. As you saw we defended that strongly. We defended the Taco Bell brand and the quality of our seasoned beef. We believe we turned the tide with the aggressive response. We will have to wait and see the ultimate impact, but we will definitely defend our brand and the quality that we provide our customers.

TWST: Would you give us an update on what seems to be the planned sale of A&W and Long John Silver's? Why is the company selling? What's the expected time frame? What will be the impact on your three brands and on your investors?

Mr. Jerzyk: We do not believe Long John Silver's and A&W All-American Restaurants currently fit into our long-term strategy. If you look at everything we just talked about, those two brands are more U.S. focused. We are basically rechanneling our resources and becoming more focused on the international side. We decided to put these two great brands up for sale, and we will complete the sale only once we have the right buyer or buyers identified and can definitely ensure a seamless transition. It is hard to say how long it will take, but the process has begun and the biggest thing from a focus perspective for us is finding the right buyers. They are definitely two great brands, and we want to make sure that the transition is good for all parties.

TWST: One of your strategies is to dramatically improve U.S. brand position and returns. Would you tell us a little bit more about how you're doing that?

Mr. Jerzyk: As I mentioned earlier we are focused on developing sales layers. Basically, how do we better leverage those thousands of restaurant assets that we have in the U.S. If you think about all of our brands, not one of them sells breakfast. Taco Bell has a relatively small dinner business, Pizza Hut is basically focused on selling and delivering pizzas and KFC is pretty much dinner focused, although they have a reasonably good lunch business. If you think about the upside and what can be done in terms of serving the U.S. consumer, there is a tremendous amount of opportunity.
For example, Taco Bell could sell breakfast. Taco Bell could also get into a dinner/home meal replacement business. We are testing ways to provide a compelling opportunity for the consumer to come to Taco Bell for breakfast and dinner. We are also testing an expanded beverage line at Taco Bell, focused on juice-based drinks, snacks and desserts to give consumers a reason to come to Taco Bell in the middle of the day for a snack.

All these kinds of things are focused on basically taking the existing restaurant asset, adding more employees in some cases and looking to gain more sales from the particular restaurant. The ultimate objective is to increase our average unit volume, which will obviously benefit our returns from a capital perspective.

At Pizza Hut you may recall we launched pasta a couple of years ago, and we also have launched a chicken wing concept called WingStreet. We have expanded our chicken offerings to our delivery and restaurant customers, and we added pasta to give our consumers yet another reason to access Pizza Hut from a delivery perspective, rather than maybe just once a week.

TWST: What will be some year-by-year milestones or indicators that investors should be looking for?

Mr. Jerzyk: We are pretty clear in communicating to investors. We have a New York analyst and investor meeting every December where we recap the year that just ended and provide a look forward. We are very open and transparent in what we are looking to accomplish in the next year. I think an important indicator for Yum! is that we opened nearly 1,400 new international restaurants last year between China and YRI, the 10th consecutive year of opening more than 1,000 new international stores. I think that is one thing that investors should continue to look at. As long as we are on that path, that is a great indication of the strength of our business.

In terms of China where we are building approximately 500 restaurants a year, an indication of the returns that we are getting there. We will only build those restaurants if we are getting great returns. If our development in China stays steady or grows, that is a great sign of the vitality of the business. It is the same thing on the YRI side, because we are opening approximately 900 restaurants in over 50 countries a year, and over 90% of those typically are opened by our franchisees. That is yet another great indication that all of our franchisees across all these countries have a great view of the future of our brands. The fact that they are putting their own capital tells you a lot in terms of the people on the ground operating these businesses, what they see in terms of the vitality of the brands and the future outlook in their markets.

I think one other thing would be to look at the emerging markets where we obviously have core strength and a great competitive advantage. What is our progress in India? What is our progress in Africa? Are we continuing to open in new countries in Africa and then Russia as time passes? In Russia we spent a fair amount of time and effort this past year to build a strong team to basically get our people capability right, get our resources set up and establish our infrastructure for good growth ahead. I would look to that market, and then also France and Germany. Our scale in France and Germany is very small, so we have a huge opportunity in these countries and very strong businesses.

I would also look at our progress in developing sales layers in the U.S. We don't have to successfully add all the sales layers I referenced earlier that we're testing, but if we even just get one or two of those to be successful, that will have a big benefit in terms of our average unit sales for those restaurants and the returns on our assets.

TWST: Thank you. (MJW)

Tim Jerzyk

Senior Vice President of Investor Relations

Yum! Brands, Inc.

1441 Gardiner Lane

Louisville, KY 40213

(502) 874-8300

(502) 454-2410 - FAX