SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
11-K
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[ X
]
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ANNUAL
REPORT PURSUANT TO SECTION 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
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FOR THE
FISCAL YEAR ENDED DECEMBER 31, 2008
OR
[ ] TRANSITION
REPORT PURSUANT TO SECTION 15(D) OF THE SECURITIES
EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM
__________ to __________
COMMISSION
FILE NUMBER: 1-13163
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A.
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FULL
TITLE OF THE PLAN AND THE ADDRESS OF THE PLAN, IF DIFFERENT FROM THAT OF
THE ISSUER
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NAMED
BELOW:
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YUM!
BRANDS 401(K) PLAN
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B.
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NAME
OF ISSUER OF THE SECURITIES HELD PURSUANT TO THE PLAN AND
THE
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ADDRESS
OF ITS PRINCIPAL EXECUTIVE OFFICE:
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YUM!
BRANDS, INC.
1441
GARDINER LANE
LOUISVILLE,
KENTUCKY 40213
YUM!
BRANDS 401(k) PLAN
Financial
Statements and Supplemental Schedule
December
31, 2008 and September 30, 2007
(With
Report of Independent Registered Public Accounting Firm
Thereon)
YUM!
BRANDS 401(k) PLAN
Table
of Contents
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Page
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Report
of Independent Registered Public Accounting Firm
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1
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Statements
of Net Assets Available for Benefits as of December 31, 2008
and
September
30, 2007
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2
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Statements
of Changes in Net Assets Available for Benefits for the Year ended
December 31, 2008 and the Transition Period from October 1, 2007 through
December 31, 2007
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3
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Notes
to Financial Statements
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4
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Schedule
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Schedule
H, Line 4i – Schedule of Assets (Held at End of Year) – December 31,
2008
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14
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Report
of Independent Registered Public Accounting Firm
Plan
Administrator and Participants of the YUM! Brands 401(k) Plan
YUM!
Brands 401(k) Plan:
We have
audited the accompanying Statements of Net Assets Available for Benefits of the
YUM! Brands 401(k) Plan (the Plan) as of December 31, 2008 and
September 30, 2007 and the related Statements of Changes in Net Assets
Available for Benefits for the year ended December 31, 2008 and the transition
period from October 1, 2007 through December 31, 2007. These financial
statements are the responsibility of the Plan’s management. Our responsibility
is to express an opinion on these financial statements 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 audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the net assets available for benefits of the Plan as of
December 31, 2008 and September 30, 2007, and the changes in net assets
available for benefits for the year ended, December 31, 2008 and the transition
period from October 1, 2007 through December 31, 2007, in conformity with U.S.
generally accepted accounting principles.
Our
audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental Schedule H, Line 4i
– Schedule of Assets (Held at End of Year) as of December 31, 2008 is presented
for the purpose of additional analysis and is not a required part of the basic
financial statements, but is supplementary information required by the
Department of Labor’s Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. This
supplemental schedule is the responsibility of the Plan’s management. The
supplemental schedule has been subjected to the auditing procedures applied in
the audits of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
/s/ KPMG
LLP
Louisville,
Kentucky
June 29,
2009
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YUM!
BRANDS 401(k) PLAN
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Statements
of Net Assets Available for Benefits
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December
31, 2008 and September 30, 2007
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(In
thousands)
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December
31, 2008
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September
30, 2007
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Assets:
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Investments:
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Investments,
at fair value:
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YUM!
Stock Fund
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$
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167,932
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$
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189,566
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Investment
in common/commingled trusts
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195,466
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242,762
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Self-directed
brokerage
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4,565
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7,123
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Total
investments
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367,963
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439,451
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Receivables:
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Participant
loans
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15,438
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15,151
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Participants’
contributions
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278
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301
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Employer
contributions
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224
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176
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Interest
and dividends
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140
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162
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Total
receivables
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16,080
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15,790
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Cash
and cash equivalents
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3,155
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3,013
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Total
assets
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387,198
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458,254
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Liabilities:
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Other
liabilities
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(509)
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(48)
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Total
liabilities
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(509)
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(48)
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Net
assets available for benefits at fair value
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$
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386,689
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$
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458,206
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Adjustment
from fair value to contract value for fully benefit-responsive investment
contracts
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5,408
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1,000
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Net
assets available for benefits
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$
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392,097
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$
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459,206
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See
accompanying notes to financial statements.
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YUM!
BRANDS 401(k) PLAN
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Statements
of Changes in Net Assets Available for Benefits
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For
the Year ended December 31, 2008 and the Transition Period
from
October
1, 2007 through December 31, 2007
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(In
thousands)
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Year
Ended
December
31, 2008
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Transition
Period from
October
1, 2007 through
December
31, 2007
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Investment
(loss) income:
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Net
(depreciation) appreciation in fair value of investments
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$
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(91,912)
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$
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20,956
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Interest
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1,309
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371
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Dividends
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3,695
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837
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Other
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(2,322)
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(45)
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(89,230)
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22,119
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Less
investment expenses
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(558)
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(112)
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Total
investment (loss) income
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(89,788)
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22,007
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Contributions:
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Participant
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31,262
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7,267
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Employer
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16,537
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3,101
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Total
contributions
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47,799
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10,368
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Deductions
from net assets attributed to:
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Benefits
paid to participants
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(46,741)
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(10,754)
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Net
(decrease) increase in net assets
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(88,730)
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21,621
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Net
assets available for benefits:
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Beginning
of period
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480,827
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459,206
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End
of period
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$
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392,097
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$
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480,827
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See
accompanying notes to financial statements.
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YUM!
BRANDS 401(k) PLAN
Notes to
Financial Statements
For the
Year ended December 31, 2008 and the Transition Period from
October
1, 2007 through December 31, 2007
(Tabular
amounts in thousands)
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(1)
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Summary
Plan Description
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The
following description of the Yum! Brands 401(k) Plan (the Plan) provides only
general information. Participants should refer to the Plan document for a more
complete description of the Plan’s provisions.
YUM!
Brands, Inc. (the Company) adopted the Plan effective October 7, 1997 as a
result of the spin-off of the Company from PepsiCo, Inc. The Plan is a successor
of the PepsiCo Long Term Savings Program. Any employee within a group or class
so designated by the Plan document is eligible to participate in the Plan. The
Plan is subject to the provisions of the Employee Retirement Income Security
Act, as amended (ERISA).
The
investments of the Plan are maintained in a trust (the Trust) by State Street
Bank and Trust Company (the Trustee) who has been appointed as Trustee by the
Plan. The Trustee is responsible for the management and control of
the Plan’s assets.
ING
Institutional Plan Services, LLC serves as the recordkeeper for the
Plan.
On
October 1, 2007, the Plan was amended to change the Plan year end from September
30 to December 31. Accordingly, the accompanying financial statements
include the statement of changes in net assets available for benefits for the
three month transition period from October 1, 2007 to December 31, 2007 (the
Transition Period).
On
October 1, 2001, the Plan was amended to adopt a safe harbor matching
contribution, in accordance with Code section 401(k)(12)(B).
Each
participant in the Plan may elect to contribute eligible earnings, as defined in
the Plan document, up to 25% before January 1, 2009 and up to 75% from and after
January 1, 2009. The maximum pre-tax annual contribution allowed for
the 2008 and 2007 calendar years was $15,500.
Additionally,
for deferral contributions that are made on and after April 1, 2008, eligible
participants will receive a matching contribution from the Company that is equal
to 100% of such salary deferral contribution that does not exceed 6% of the
participant’s eligible pay for such pay period. For periods prior to
April 1, 2008, eligible participants received matching contributions from the
Company equal to the sum of: (a) 100% of such salary deferral contribution that
does not exceed 3% of the participant’s eligible pay for such pay period, and
(b) 50% of such salary deferral contribution that exceeds 3% and does not exceed
5% of the participant’s eligible pay for such pay
period. Participants direct the investment of contributions into
various investment options offered by the Plan. The Company may
also make discretionary contributions to the Plan. No discretionary
contributions were made by the Company during 2008 or the Transition
Period.
YUM!
BRANDS 401(k) PLAN
Notes to
Financial Statements
For the
Year ended December 31, 2008 and the Transition Period from
October
1, 2007 through December 31, 2007
(Tabular
amounts in thousands)
The Plan
allows eligible participants to make additional tax-deferred contributions.
Participants eligible to make additional tax-deferred contributions must be
50 years or older by the end of the calendar year in which they want to
make the additional tax-deferred contribution. These contributions are made in
the same manner as salary deferral contributions and are deposited in the
participant’s salary deferral account. Participants elect a whole dollar amount
as a percentage of eligible pay on a per pay period basis. These contributions
are not subject to the eligible earnings limitation as defined by the Plan.
Thus, a participant can contribute more than their eligible earnings of pay to
the extent needed to make an additional tax-deferred contribution. The 2008 and
2007 annual ERISA limit on these contributions was $5,000. Additional
tax-deferred contributions are not eligible for Company matching
contributions. The Internal Revenue Service (IRS) may adjust the
dollar amounts annually to take into account cost of living
adjustments.
This fund
pools participants’ contributions to buy shares of the Company’s Common Stock.
The fund also holds short-term investments to provide the fund with liquidity to
make distributions. The fund is paid cash dividends, which are used to purchase
additional shares of the Company’s Common Stock.
The
Stable Value Fund invests in a diversified portfolio of stable value contracts
issued by insurance companies, banks and other financial institutions. The
Stable Value Fund utilizes high-quality fixed income securities wrapped by an
insurance company, bank or other financial institution.
The Fund
invests in all 500 stocks in the S&P 500 Index in proportion to their
weighting in the S&P 500 Index. The Fund may also hold 2-5% of its value in
futures contracts (an agreement to buy or sell a specific security by a specific
date at an agreed upon price).
The Fund
invests primarily in government, corporate, mortgage-backed and asset-backed
securities. The Fund invests in a well-diversified portfolio that is
representative of the broad domestic bond market.
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Mid-sized
Company Index Fund
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The Fund
invests in all 400 stocks in the S&P MidCap 400 Index (MidCap Index) in
proportion to their weighting in the MidCap Index. The Fund may also hold 2-5%
of its value in futures contracts.
The Fund
attempts to invest in all 2,000 stocks in the Russell 2000 Index (Russell Index)
in proportion to their weighting in the Russell Index. The Fund may
also hold 2-5% of its value in futures contracts.
YUM!
BRANDS 401(k) PLAN
Notes to
Financial Statements
For the
Year ended December 31, 2008 and the Transition Period from
October
1, 2007 through December 31, 2007
(Tabular
amounts in thousands)
International
Index Fund
The Fund
typically invests in all the stocks in the Morgan Stanley Capital International
Europe, Australasia, and Far East Index (International Index) in proportion to
their weighting in the International Index.
All
investments, with the exception of the YUM! Stock Fund, are classified as
common/commingled trusts.
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(d)
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Participants
Accounts
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Each
participant’s account is credited with the participant’s contribution and
allocations of (a) the Company’s contribution and (b) Plan earnings, and charged
with an allocation of administrative expenses. Allocations of Plan
earnings and administrative expenses are based on participant earnings or
account balances, as defined. The benefit to which a participant is
entitled is the benefit that can be provided from the participant’s vested
account.
The Plan
has a loan program for participants. The maximum amount a participant may
borrow, when aggregated with all other outstanding loans of the participant, is
the lesser of: a) 50% of the participant’s vested interest under the Plan; b)
$50,000 reduced by the excess of the highest outstanding loan balance during the
preceding one-year period ending on the day prior to the date the loan was made,
over the outstanding balance of loans on the date the loan was made; c) 100% of
the value of the participant’s investment in certain funds; or d) the maximum
loan amount that can be amortized by the participant’s net pay. Loans are
generally outstanding for up to four years. The interest rate for loans is based
on the prime rate as of the last day of the month before the loan request plus
1%. A participant may have up to two loans outstanding from the Plan at any
time. A one-time loan origination fee of $50 per loan is charged to those
participants who obtain a loan. Interest on loans is allocated to each of the
funds based upon the participant’s investment election percentages. For each
month or part thereof the loan remains outstanding, the borrowing participant
may be assessed a monthly administration fee. Any loans outstanding shall become
immediately due and payable in full if the participant’s employment is
terminated. Principal and interest is paid ratably through monthly payroll
deductions.
As
required by Section 526 of the Soldiers’ and Sailors’ Civil Relief Act of
1940, as amended, no interest rate shall be more than 6% for the loan of any
participant during the period that the participant is serving in the United
States military. This limit includes traditional interest and any other service
charge or other fee with respect to the loan.
The loans
are secured by the balance in the participant’s account. Outstanding
loans bear interest at rates that range from 4.00% to 9.25% with maturity dates
ranging from 2009 to 2013, as of December 31, 2008.
Participants
are fully vested in the entire value of their accounts upon contribution,
including the Company matching contribution.
YUM!
BRANDS 401(k) PLAN
Notes to
Financial Statements
For the
Year ended December 31, 2008 and the Transition Period from
October
1, 2007 through December 31, 2007
(Tabular
amounts in thousands)
Distributions
under the Plan are made upon a participant’s death, disability, retirement,
hardship or termination of employment. Benefit payments are made in the form of
a lump sum cash amount or in kind distribution. An in kind
distribution is limited to the Participant’s interest in the Company’s Common
Stock and certain securities held in the Self-directed Brokerage
funds.
Although
it has not expressed any intent to do so, the Company has the right under the
Plan to terminate the Plan, subject to the provisions of ERISA and the Internal
Revenue Code (IRC).
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(i)
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Recently
Adopted Accounting Standards
|
In July
2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation
No. 48, “Accounting for Uncertainty in Income Taxes”, an interpretation of FASB
Statement 109 (FIN 48). FIN 48 clarifies the accounting for
uncertainty in income taxes recognized in an enterprise’s financial statements
and prescribes a threshold of more-likely-than-not for recognition of tax
benefits of uncertain tax positions taken or expected to be taken in a tax
return. FIN 48 also provides related guidance on measurement,
derecognition, classification, interest and penalties, and
disclosure. The Company adopted the provisions of FIN 48 on October
1, 2007. The adoption of FIN 48 did not have an impact on the
financial statements.
Effective
January 1, 2008, the FASB issued Statement of Financial Accounting Standards No.
157 (SFAS 157), “Fair Value Measurements”. SFAS 157 establishes a
single authoritative definition of fair value, sets out a framework for
measuring fair value and requires additional disclosures about fair value
measurement. Disclosures for fair value measurements of plan
investments are summarized in Note 4. The adoption of SFAS 157 did
not have a material impact on the Plan’s financial statements.
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(2)
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Summary
of Accounting Policies
|
The
financial statements of the Plan are prepared under the accrual method of
accounting.
The
preparation of financial statements in conformity with U.S. generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and changes therein, and
disclosure of contingent assets and liabilities. Actual results could differ
from those estimates.
YUM!
BRANDS 401(k) PLAN
Notes to
Financial Statements
For the
Year ended December 31, 2008 and the Transition Period from
October
1, 2007 through December 31, 2007
(Tabular
amounts in thousands)
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(c)
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Investment
Valuation and Income Recognition
|
Investment
Valuation
Cash and
cash equivalents are recorded at cost, which approximates fair
value. Investments are reported at fair value. Fair value
is the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the
measurement date. See Note 4 for discussion of fair value
measurements.
The
Stable Value Fund invests in a variety of investment contracts such as
traditional guaranteed investment contracts issued by insurance companies and
other financial institutions and other investment products with similar
characteristics. As described in Financial Accounting Standards Board Staff
Position, FSP AAG INV-1 and SOP 94-4-1, “Reporting of Fully Benefit-Responsive
Investment Contracts Held by Certain Investment Companies Subject to the AICPA
Investment Company Guide and Defined Contribution Health and Welfare and Pension
Plans” (the FSP), investment contracts held by a defined contribution plan are
required to be reported at fair value. However, contract value is the
relevant measurement attribute for that portion of the net assets available for
benefits of a defined contribution plan attributable to fully benefit-responsive
investment contracts because contract value is the amount participants would
receive if they were to initiate permitted transactions under the terms of the
plan. The average yield earned at December 31, 2008 and 2007
representing the annualized earnings of all investments in the Stable Value Fund
divided by the period-end fair value of all investments in the Stable Value Fund
was 6.44% and 5.84%, respectively. The crediting rate is the periodic interest
rate accrued to plan participants and is either set at the beginning of the
contract and held constant, or reset periodically to reflect the performance of
the underlying securities. The average yield earned at December 31,
2008 and 2007 representing the annualized earnings credited to participants in
the Stable Value Fund (the crediting rate) as of the last day of the period,
divided by the period-end fair value of all investments in the Stable Value Fund
was 3.27% and 4.44%, respectively. As required by the FSP, the
statement of net assets available for benefits presents the fair value of the
investment contracts with an adjustment to contract value. The
statement of changes in net assets available for benefits is prepared on a
contract value basis.
Income
Recognition
Dividend
income is recorded on the ex-dividend date. Income from investments is recorded
as earned on an accrual basis. Purchases and sales of securities are recorded on
a trade-date basis. Realized gains and losses on the sales of securities are
reported on the average cost method.
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|
(d)
|
Participant
Loan Valuation
|
Participant
loans are recorded at amortized cost which represents unpaid principal plus
accrued interest. The recorded value of participant loans do not
materially differ from fair value at December 31, 2008 or September 30,
2007.
YUM!
BRANDS 401(k) PLAN
Notes to
Financial Statements
For the
Year ended December 31, 2008 and the Transition Period from
October
1, 2007 through December 31, 2007
(Tabular
amounts in thousands)
In
accordance with guidance issued by the American Institute of Certified Public
Accountants, the Plan accounts for participant distributions when paid. For
purposes of reporting on Form 5500, “Annual Return/Report of Employee
Benefit Plan,” distributions are recorded in the period such amounts are
authorized to be paid to participants. Such treatment resulted in differences
between the Plan’s Form 5500 and the accompanying financial statements for
the year ended December 31, 2008 and the Transition Period and are summarized in
Note 6.
All usual
and reasonable expenses of the Plan may be paid in whole or in part by the
Company. Any expenses not paid by the Company will be paid by the Trustee with
assets of the Trust. All expenses are borne by the Company, except for monthly
investment service fees charged to the funds, loan application fees charged to
participants who obtained a loan and transaction fees charged to participants
within the Self-directed Brokerage Account.
Individual
investments that represent 5% or more of the Plan’s net assets available for
benefits at fair value as of December 31, 2008 and September 30, 2007 were as
follows:
|
|
|
|
|
|
|
|
|
December
31, 2008
|
|
September
30, 2007
|
|
YUM!
Stock Fund
|
|
$
|
167,932
|
|
$
|
189,566
|
|
Stable
Value Fund
|
|
|
55,690
|
|
|
38,777
|
|
Large
Company Index Fund
|
|
|
45,734
|
|
|
72,838
|
|
Bond
Market Index Fund
|
|
|
34,643
|
|
|
29,716
|
|
Mid-sized
Company Index Fund
|
|
|
23,772
|
|
|
39,695
|
|
International
Index Fund
|
|
|
20,245
|
|
|
36,325
|
|
Small
Company Index Fund
|
|
|
15,382
|
|
|
25,411
|
Appreciation
(depreciation), including gains and losses on investments bought and sold, as
well as held during the years, on investments was as follows:
|
|
|
|
|
Transition
Period
from
|
|
|
|
|
|
October
1, 2007
|
|
|
|
Year
Ended
|
|
through
|
|
|
|
December
31, 2008
|
|
December
31, 2007
|
|
YUM!
Stock Fund
|
|
$
|
(36,280)
|
|
$
|
24,841
|
|
Investment
in common/commingled trusts
|
|
|
(55,632)
|
|
|
(3,885)
|
|
|
|
$
|
(91,912)
|
|
$
|
20,956
|
YUM!
BRANDS 401(k) PLAN
Notes to
Financial Statements
For the
Year ended December 31, 2008 and the Transition Period from
October
1, 2007 through December 31, 2007
(Tabular
amounts in thousands)
|
(4)
|
Fair
Value of Financial Investments, Carried at Fair
Value
|
SFAS 157,
“Fair Value Measurements”, defines fair value and establishes a framework for
measuring fair value. The
framework provides a fair
value hierarchy that prioritizes the inputs to valuation techniques used to
measure fair value. The hierarchy gives the highest priority to unadjusted
quoted prices in active markets for identical assets or liabilities (level
1 measurements) and the lowest priority to unobservable inputs (level 3
measurements). The three levels of the fair value hierarchy under SFAS 157 are
described below:
Level 1 –
Inputs to the valuation methodology are quoted prices available in active
markets for identical investments as of the reporting date;
Level
2 – Inputs to the valuation methodology are other than quoted prices in
active markets, which are either directly or indirectly observable as of the
reporting date, and fair value can be determined through the use of models or
other valuation methodologies; and
Level 3 –
Inputs to the valuation methodology are unobservable inputs in situations where
there is little or no market activity for the asset or liability and the
reporting entity makes estimates and assumptions related to the pricing of the
asset or liability including assumptions regarding risk.
A
financial instrument’s level within the fair value hierarchy is based on the
lowest level of any input that is significant to the fair value
measurement. Valuation techniques used need to maximize the use of
observable inputs and minimize the use of unobservable inputs.
The
following is a description of the valuation methodologies used for instruments
measured at fair value, including the general classification of such instruments
pursuant to the valuation hierarchy.
YUM!
Stock Fund
YUM!
Brands Inc. common stock is valued at the closing price reported on the New York
Stock Exchange Composite Listing and is classified within level 1 of the
valuation hierarchy.
Common
/ Commingled Trusts
These
investments are public investment vehicles valued using the net asset value
(NAV) provided by the administrator of the fund. The NAV is based on the value
of the underlying assets owned by the fund, minus its liabilities, and then
divided by the number of shares outstanding. The NAV is classified within level
2 of the valuation hierarchy because the NAV’s unit price is quoted on a private
market that is not active; however, the unit price is based on underlying
investments which are traded on an active market.
Common
/ Preferred Stock
These
investments are valued at the closing price reported on the active market on
which the individual securities are traded and classified within level 1 of the
valuation hierarchy.
YUM!
BRANDS 401(k) PLAN
Notes to
Financial Statements
For the
Year ended December 31, 2008 and the Transition Period from
October
1, 2007 through December 31, 2007
(Tabular
amounts in thousands)
Mutual
Funds
These
investments are valued at the NAV of shares held by the fund at year end and
classified within level 2 of the valuation hierarchy.
Limited
Partnership Units
Investments
in these publicly traded investment funds are valued at the closing price
reported on the active market on which the individual securities are traded and
classified within level 1 of the valuation hierarchy.
Below are
the Plan’s financial instruments measured at fair value on a recurring basis by
the FAS 157 fair value hierarchy levels.
|
|
Level
1
|
|
Level
2
|
|
Level
3
|
|
Total
Fair Value
|
|
YUM!
stock fund
|
$
|
167,932
|
|
$
|
-
|
|
$
|
-
|
|
$
|
167,932
|
|
Common/commingled
trusts
|
|
-
|
|
|
195,466
|
|
|
-
|
|
|
195,466
|
|
Self-directed
brokerage account:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock
|
|
2,248
|
|
|
-
|
|
|
-
|
|
|
2,248
|
|
Mutual
funds
|
|
-
|
|
|
2,252
|
|
|
-
|
|
|
2,252
|
|
Preferred
stock
|
|
4
|
|
|
-
|
|
|
-
|
|
|
4
|
|
Limited
partnership units
|
|
61
|
|
|
-
|
|
|
-
|
|
|
61
|
|
|
|
2,313
|
|
|
2,252
|
|
|
-
|
|
|
4,565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
170,245
|
|
$
|
197,718
|
|
$
|
-
|
|
$
|
367,963
|
The Plan
has concluded that for the funds recorded using the net asset value, in which
the net asset value reported by the underlying fund approximates the fair value
of the investment and these investments are redeemable with the fund at net
asset value. However, it is possible that these redemption rights may
be restricted or eliminated by the funds in the future in accordance with the
underlying fund agreements. Due to the nature of the investments held
by the funds, changes in market conditions and the economic environment may
significantly impact the net asset value of the funds and, consequently, the
fair value of the Plan’s interests in the funds. Although a secondary
market exists for these investments, it is not active and individual
transactions are typically not observable. When transactions do occur
in this limited secondary market, they may occur at discounts to the reported
net asset value. It is therefore reasonably possible that if the fund
were to sell these investments in the secondary market a buyer may require a
discount to the reported net asset value, and the discount could be
significant.
The
methods described above may produce a fair value calculation that may not be
indicative of net realizable value or reflective of future fair
values. Furthermore, while the Plan believes it’s valuation methods
are appropriate and consistent with other market participants, the use of
different methodologies or assumptions to determine the fair value of certain
financial instruments could result in a different fair value measurement at the
reporting date.
YUM!
BRANDS 401(k) PLAN
Notes to
Financial Statements
For the
Year ended December 31, 2008 and the Transition Period from
October
1, 2007 through December 31, 2007
(Tabular
amounts in thousands)
The
Company obtained its latest determination letter dated January 15, 2004, in
which the IRS stated that the Plan and related trust are operating in accordance
with the applicable requirements of the IRC. Although the Plan has
been amended since receiving the determination letter, the Plan administrator
and the Plan’s tax counsel believe that the Plan is designed and is operating in
accordance with the applicable requirements of the IRC.
|
(6)
|
Reconciliation
of Financial Statements to
Form 5500
|
The
following represents a reconciliation between the amounts shown on the
accompanying financial statements and the amounts reported in the Plan’s
Form 5500.
Net
assets available for benefits
|
|
|
|
|
|
|
|
|
December
31, 2008
|
|
September
30, 2007
|
|
Net
assets available for benefits per the financial statements
|
|
$
|
392,097
|
|
$
|
459,206
|
|
Less
benefits payable at end of period
|
|
|
(210)
|
|
|
(261)
|
|
Less
adjustment from fair value to contract value for fully benefit-responsive
investment contracts
|
|
|
(5,408)
|
|
|
(1,000)
|
|
Net
assets available for benefits per the Plan’s Form 5500
|
|
$
|
386,479
|
|
$
|
457,945
|
Participant
benefits
|
|
|
|
|
Transition
Period
|
|
|
|
|
|
from
October
1, 2007
|
|
|
|
Year
Ended
|
|
through
|
|
|
|
December
31, 2008
|
|
December
31, 2007
|
|
Benefit
payments per the financial statements
|
|
$
|
46,741
|
|
$
|
10,754
|
|
Less
benefits payable at beginning of period
|
|
|
(226)
|
|
|
(261)
|
|
Add
benefits payable at end of period
|
|
|
210
|
|
|
226
|
|
Benefit
payments per the Plan’s Form 5500
|
|
$
|
46,725
|
|
$
|
10,719
|
YUM!
BRANDS 401(k) PLAN
Notes to
Financial Statements
For the
Year ended December 31, 2008 and the Transition Period from
October
1, 2007 through December 31, 2007
(Tabular
amounts in thousands)
Investment
(loss) income
|
|
|
|
|
Transition
Period
|
|
|
|
|
|
from
October
1, 2007
|
|
|
|
Year
Ended
|
|
through
|
|
|
|
December
31, 2008
|
|
December
31, 2007
|
|
Total
investment (loss) income per the financial statements
|
|
$
|
(89,788)
|
|
$
|
22,007
|
|
Less
adjustment from fair value to contract value for fully benefit-responsive
investment contracts
|
|
|
(4,417)
|
|
|
9
|
|
Total
investment (loss) income per the Plan’s Form 5500
|
|
$
|
(94,205)
|
|
$
|
22,016
|
|
(7)
|
Related
Party Transactions
|
Certain
Plan investments are shares of common/commingled trusts managed by the Trustee.
Transactions involving these investments qualify as party-in-interest
transactions. Fees paid by the Plan for the investment management
services amounted to approximately $409,000 and $112,000 for the year ended
December 31, 2008 and the Transition Period, respectively.
|
(8)
|
Risks
and Uncertainties
|
The Plan
invests in various investment securities. The Plan’s exposure to a
concentration of credit risk is dependent upon funds selected by
participants. Investment securities are exposed to various risks and
uncertainties such as interest rate, market, and credit risks, as well as
economic changes, political unrest and regulatory changes. Due to the
level of risk associated with certain investment securities, it is at least
reasonably possible that changes in the values of investment securities will
occur in the near term and that such changes could materially affect
participants’ account balances and the amounts reported in the statement of net
assets available for benefits.
SUPPLEMENTAL
SCHEDULE
|
|
|
EIN:
13-3951308
|
|
PN:
003
|
|
Schedule
H, Line 4i – Schedule of Assets (Held at End of Year)
|
|
December
31, 2008
|
|
|
|
|
|
|
Identity
of issue,
|
Description
|
|
|
|
borrower,
or similar party
|
of
interest
|
|
Fair
value
|
|
YUM!
Stock Fund
1
|
5,331,168
|
shares
|
|
$
|
167,931,802
|
|
|
|
|
|
|
|
|
Common/commingled
trusts:
|
|
|
|
|
|
|
Stable
Value Fund
1
|
55,689,807
|
shares
|
|
|
55,689,807
|
|
Large
Company Index Fund
1
|
255,586
|
shares
|
|
|
45,733,554
|
|
Bond
Market Index Fund
1
|
1,780,781
|
shares
|
|
|
34,643,313
|
|
Mid-Sized
Company Index Fund
1
|
1,222,607
|
shares
|
|
|
23,772,365
|
|
Small
Company Index Fund
1
|
915,404
|
shares
|
|
|
15,381,540
|
|
International
Index Fund
1
|
1,508,137
|
shares
|
|
|
20,245,227
|
|
Total
|
|
|
|
|
195,465,806
|
|
|
|
|
|
|
|
|
Self-directed
Brokerage Account
1
|
Various
|
|
|
4,565,029
|
|
|
|
|
|
|
|
|
Loans
to participants
1
|
Interest
rates ranging
|
|
|
15,438,598
|
|
|
from
4.00% to 9.25%
|
|
|
|
|
|
|
|
|
|
|
|
Government
STIF
1,
2
|
3,026,040
|
shares
|
|
|
3,026,040
|
|
Cash
and cash equivalents
1
|
|
|
|
|
129,003
|
|
Total
cash and cash equivalents
|
|
|
|
|
3,155,043
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
$
|
386,556,278
|
|
|
|
|
|
|
|
|
1
Party-in-interest
as defined by ERISA.
|
|
|
|
|
|
|
|
|
2
The Government STIF consists of cash equivalent investments and is
classified as cash and cash
|
|
equivalents
in the Statement of Net Assets Available for Benefits.
|
|
|
|
|
|
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the trustees (or
other persons who administer the employee benefit plan) have duly caused this
annual report to be signed on its behalf by the undersigned hereunto duly
authorized.
|
|
YUM!
BRANDS 401(k) PLAN
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/
Robin Lancaster
|
|
|
|
Robin
Lancaster on behalf of YUM! Brands, Inc., The Plan
Administrator
|
|
|
|
|
Date: June
29, 2009
|
|