Notes to Financial Statements

December 31, 1998 and 1997

(Tabular amounts in thousands except unit data)

(1) SUMMARY PLAN DESCRIPTION

The following brief description of the TRICON Long Term Savings Program (the "Plan") provides only general information. Participants should refer to the Plan document for a more complete description of the Plan's provisions.

(A) GENERAL

TRICON Global Restaurants, 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 Company is eligible to participate in the Plan. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA").

(B) CONTRIBUTIONS

Each participant in the Plan may elect to contribute any amount, not to exceed 15% of their eligible earnings. The Tax Reform Act of 1986 limited the maximum annual amount a participant could contribute on a before-tax basis to $7,000, indexed for inflation. For calendar years 1998 and 1997, the maximum contribution allowed under the IRS tax code section 402(g)(3), was $10,000 and $9,500, respectively. There was no matching of contributions by the employer during the period from October 7, 1997 through June 30, 1998. Beginning in July 1998, participants received a 25% matching contribution on each unit of Company stock purchased.

(C) INVESTMENT OPTIONS

Each participant in the Plan elects to have contributions invested in any one or combination of the following separate investment options:

TRICON COMMON STOCK FUND: This fund is invested primarily in the common stock of the Company. Investments in this investment option are subject to market fluctuations, and there is no guarantee of future performance.

EQUITY INDEX FUND: This fund is invested primarily in the Vanguard Institutional Index Fund, a diversified stock fund. This fund is a passively managed fund designed to mirror the performance of Standard and Poor's 500 Index, a broadly- based average of stock market performance. Investments in this investment option are subject to fluctuations, and there is no guarantee of future performance.

EQUITY - INCOME FUND: This fund is invested primarily in the Fidelity Equity - Income Fund. The fund's chief objective is to provide income, although some consideration is given to capital appreciation. Amounts invested in this investment option are subject to market fluctuations, and there is no guarantee of future performance.

6 (Continued)

TRICON LONG TERM SAVINGS PROGRAM

Notes to Financial Statements

December 31, 1998 and 1997

(Tabular amounts in thousands except unit data)

SECURITY PLUS FUND: This fund is an investment portfolio managed by State Street Global Advisors and is comprised of investment funds and contracts issued by highly rated banks and insurance companies and short-term investment funds. Guarantees of principal and interest are provided by the insurance company or other financial institutions issuing the contracts. The objective of this fund is to provide, over a period of time, a higher rate of return than average money market funds while preserving principal and providing liquidity. The rate of return on this fund will fluctuate based on existing market conditions and is not intended to provide a guaranteed rate of return.

PEPSICO CAPITAL STOCK FUND: This fund was established as a temporary investment under the Plan. Effective the end of the day on January 31, 2000, the PepsiCo Capital Stock Fund will cease to be available under the Plan. Any amount in the fund will be reallocated to the investment option designated for this purpose by the Plan Administrator unless the participant selects a different replacement option in accordance with such requirements as the Plan Administrator may apply.

BROKERAGE OPTION: The Trustee has engaged a wholly owned subsidiary, State Street Brokerage Services, Inc. ("SSBSI"), to maintain Brokerage Option accounts for participants. SSBSI has entered into an agreement with National Financial Services Corporation, a New York Stock Exchange member firm unrelated to the Trustee or SSBSI, to transact allowable trades directed by participants and maintain custody of the assets of the Brokerage Option accounts. This investment option permits electing participants and beneficiaries to invest all or a portion of their investment in the Plan in additional choices for self-directed investment, subject to written rules and procedures published by the Plan Administrator. The investments available under this fund are securities traded on the New York Stock Exchange, the American Stock Exchange, the NASDAQ National Market, and certain mutual funds as specified by the Plan Administrator.

LOAN ACCOUNT: The Plan has a loan program for participants. The maximum amount a participant may borrow is the lesser of 50% of the participant's vested interest under the Plan; $50,000 reduced by the highest outstanding loan balance during the preceding one-year period; 100% of the value of the participant's investment in the TRICON Common Stock, Equity Index, Equity - Income, Security Plus and PepsiCo Capital Stock funds; or the maximum loan amount that can be amortized by the participant's net pay up to four years. The interest rate for loans is based on the prime rate plus one percent. In addition, a one-time loan origination fee of $25 and a monthly maintenance fee are charged to those participants who obtain a loan. Loan issuances and principal repayments are included in "transfers from (to) other funds". Interest on loans is allocated to each of the funds based upon the participant's contribution election percentages. Any loans outstanding shall become immediately due and payable in full if the participant's employment is terminated.

As of December 31, 1998 and 1997, loans outstanding had an estimated average interest rate of 9.5% and maturities through the year 2002 and 2001, respectively.

The investments of the Plan are maintained in a trust (the "Trust") by State Street Bank and Trust Company (the "Trustee").

7 (Continued)

TRICON LONG TERM SAVINGS PROGRAM

Notes to Financial Statements

December 31, 1998 and 1997

(Tabular amounts in thousands except unit data)

For the purpose of providing liquidity in each of the separate investment options (other than the Brokerage Option) under the Plan, the Trustee may invest a portion of each fund in cash or short-term securities. The percentage of assets held for this purpose is normally expected to range from 2 to 10 percent, but under extraordinary circumstances, the percentages may be substantially higher. Consequently, the mix of cash, securities, and other investments in each of the investment funds could vary significantly at any given time and the performance of any particular fund may not match the performance of the fund or stock, as the case may be, outside the Plan.

(D) VESTING

Participants are fully vested in the entire value of their accounts upon contribution, including the Company matching contribution in stock purchased in 1998.

(E) WITHDRAWALS

Distributions under the Plan are made upon a participant's death, disability, retirement, or termination of employment. In the case of a participant who has not yet attained the age of 59-1/2, withdrawal shall only be permitted in the event of hardship, as defined in the Plan. As discussed above, the Plan permits withdrawals under a loan program.

(F) TERMINATION

Although it has not expressed any intent to do so, the Company has the right under the Plan to terminate the Plan. In the event that the Plan is terminated, the Trustee is not required to make any distributions from the Trust until such time as the Internal Revenue Service has determined in writing that such termination will not adversely affect the prior qualification of the Plan.

(2) SUMMARY OF ACCOUNTING POLICIES

(A) BASIS OF ACCOUNTING

The financial statements of the Plan are prepared under the accrual method of accounting.

(B) USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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 those estimates.

8 (Continued)

TRICON LONG TERM SAVINGS PROGRAM

Notes to Financial Statements

December 31, 1998 and 1997

(Tabular amounts in thousands except unit data)

(C) INVESTMENT VALUATION AND INCOME RECOGNITION

INVESTMENT VALUATION - Investment contracts in the Security Plus Fund are stated at contract value, which approximates fair value. The Security Plus Fund is credited with actual earnings on the underlying investments and charged for plan withdrawals and administration expenses charged by the issuer of the respective contracts. Cash and cash equivalents and the Loan Account are recorded at cost, which approximates fair value. The Brokerage Option is valued at quoted market prices of participants' investments. All other investments are valued at quoted market values. The investments in each fund (except the Brokerage Option and the Loan Account) are valued in units. The value of a unit has and will fluctuate in response to various factors including, but not limited to, the price of and dividends paid, earnings and losses, and the mix of assets in the respective fund.

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 in each fund are reported on the average cost method.

(D) PAYMENT OF BENEFITS

Benefits are recorded when paid.

(E) ADMINISTRATIVE COSTS

All usual and reasonable expenses of the Plan and the Plan administrator may be paid in whole or in part by the Company, and any expenses not paid by the Company will be paid by the Trustee out of the Trust. All expenses for the year ended December 31, 1998 and the period from October 7, 1997 (inception) through December 31, 1997 were borne by the Company, except for monthly investment service fees charged to the funds, loan origination and monthly maintenance fees charged to participants who obtained a loan, and maintenance and transaction fees charged to participants within the Brokerage Option account.

9 (Continued)

TRICON LONG TERM SAVINGS PROGRAM

Notes to Financial Statements

December 31, 1998 and 1997

(Tabular amounts in thousands except unit data)

                                        1998         1997
                                        ----         ----

TRICON Common Stock                   $28,262            -
Vanguard Institutional Index           34,440       24,612
Fidelity Equity-Income                 25,619       24,479
Security Plus - Investment Contracts   16,380       21,256
PepsiCo Common Stock                   69,481       79,935

At December 31, 1998 and 1997, the total units and net asset value per unit (rounded to the nearest one-hundredth) for each of the respective unit-valued funds were as follows:

                                     1998                1997
                               ----------------    ----------------
                                          NET                 NET
                                         ASSET               ASSET
                                         VALUE               VALUE
                                 TOTAL    PER       TOTAL     PER
                                 UNITS    UNIT      UNITS     UNIT
                                 -----   -----      -----    -----
TRICON Common Stock Fund       1,844,766 $15.66     890,284  $ 9.38
Vanguard Institutional
  Index Fund                   9,928,490   3.47   9,149,550    2.70
Fidelity Equity - Income Fund  8,273,781   3.10   8,904,842    2.75
Security Plus Fund            16,282,674   1.51  17,543,602    1.41
PepsiCo Capital Stock Fund     2,526,251  28.16   3,309,513   24.72

(4) TRANSFER FROM PEPSICO SAVINGS PLAN

In connection with the spin-off, as referred to in note 1(a), approximately $176 million in plan assets representing employee account balances were transferred in October 1997 to the Plan from a long term savings plan administered by PepsiCo. Such transfer has been reflected in the accompanying financial statements as a transfer from PepsiCo Long Term Savings Program.

(5) TAX STATUS

The Plan has not yet requested a determination letter from the Internal Revenue Service, however, the Plan Administrator believes that the Plan is currently designed and being operated in compliance with the applicable requirements of the Internal Revenue Code. Accordingly, no provision for income taxes has been included in the Plan's financial statements.

10 (Continued)

TRICON LONG TERM SAVINGS PROGRAM

Notes to Financial Statements

December 31, 1998 and 1997

(Tabular amounts in thousands except unit data)

(6) RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500

Notwithstanding the requirements of generally accepted accounting principles, the U.S. Department of Labor requires that unpaid benefit amounts be reported as a liability of the Plan for purposes of Internal Revenue Service Form 5500 filings. As a result, the following represents a reconciliation between the amounts shown on the accompanying financial statements and the amounts reported in the Plan's Form 5500.

                                             1998      1997
                                             ----      ----

  Net assets available for benefits, as
   reported in the financial statements     $197,689   174,729

  Less:  benefits payable at end of year          17       475
                                            --------  --------

  Net assets available for benefits as
   reported in the Plan's Form 5500         $197,672   174,254
                                            ========  ========

                     PARTICIPANT BENEFITS
-------------------------------------------------------------------
                                             1998      1997
                                             ----      ----

  Benefit payments for the year, as
   reported in the financial statements     $ 22,588     4,446

  Less:  benefits payable as of beginning
   of period                                     475         -

  Plus:  benefits payable as of end of year       17       475
                                            --------  --------

  Benefit payments for the year, as
   reported in the Plan's Form 5500         $ 22,130     4,921
                                            ========  ========

(7) YEAR 2000 (UNAUDITED)

The Company's information technology systems and non- information technology systems with embedded technology applications are part of the Company's enterprise-wide plan designed to reasonably assure that those systems and certain critical business partners are prepared for the Year 2000 issue and that plans exist for business continuity as the Company enters the coming millennium. Material third party vendors of the Company, including data exchange providers, have been included in the Company's assurance plans.

It is difficult to predict with certainty what truly will happen after December 31, 1999. Despite the Company's diligent preparation, unanticipated third party failures, general public infrastructure failures, or failures of the Company to successfully conclude its remediation efforts as planned could have a material adverse impact on the Plan's activities and, accordingly, its net assets available for benefits and changes therein.