UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934 (Amendment No.     )

 

 

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☒  Preliminary Proxy Statement
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☐  Definitive Proxy Statement
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☐  Soliciting Material under §240.14a-12

Yum China Holdings, Inc.

(Name of Registrant as Specified in its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box)all boxes that apply):

 

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This document shall also serve as a circular to holders of the common stock of Yum China Holdings, Inc. for the purposes of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Hong Kong Stock Exchange”) (the “Hong Kong Listing Rules”).

Warning: The contents of this document have not been reviewed by any regulatory authority in Hong Kong. You are advised to exercise caution when dealing in the securities of Yum China Holdings, Inc. If you are in doubt about any of the contents of this document, you should obtain independent professional advice.

Hong Kong Exchanges and Clearing Limited and the Hong Kong Stock Exchange take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

PRELIMINARY PROXY STATEMENT DATED AUGUST 15, 2022

SUBJECT TO COMPLETION DATED MARCH 26, 2021

 

LOGOLOGO

Yum China Holdings, Inc.

(NYSE TRADING SYMBOL: YUMC; HONG KONG STOCK CODE: 9987)

 

7100 Corporate Drive

 

Plano, Texas 75024

 

United States of America

 

Yum China Building

 

20 Tian Yao Qiao Road

 

Shanghai 200030

 

People’s Republic of China

April 15, 2021August [    ], 2022

Dear Fellow Stockholders:

We are pleased to invite you to attend the 2021 Annuala Special Meeting of Stockholders of Yum China Holdings, Inc. (the “AnnualSpecial Meeting”). The Annual Meeting, which will be held on Friday, May 28, 2021,Tuesday, October 11, 2022, at 8:00 a.m. Beijing/Hong Kong time (Thursday, May 27, 2021,(Monday, October 10, 2022, at 8:00 p.m. U.S. Eastern time). Our Board of Directors implemented a virtual meeting format in 2020, and determined that it is prudentThe Special Meeting will be held entirely online due to hold a virtual meeting again this year, in light of the continued public health concerns regarding the novel coronavirus (COVID-19)COVID-19 pandemic and related travel restrictions.restrictions, in order to support the health and well-being of our partners, employees, and stockholders.

The common stock of Yum China Holdings, Inc. (the “Company,” “Yum China,” “we,” “us” or “our”) currently trades on the New York Stock Exchange (the “NYSE”), where it is primarily listed, and the Hong Kong Stock Exchange, where it is secondary listed. On August 15, 2022, the Company announced that it has received the acknowledgment from the Hong Kong Stock Exchange for its application for a voluntary conversion of the listing status of the Company’s common stock listed on the Main Board of the Hong Kong Stock Exchange from a secondary listing status to a primary listing status (the “Primary Conversion”). Following the Primary Conversion, the Company’s common stock will be dual primary listed on the Hong Kong Stock Exchange and the New York Stock Exchange.

The Company considers it in the best interest of its stockholders to pursue the Primary Conversion. Therefore, in view of the Hong Kong Listing Rules applicable to issuers which have a primary listing status on the Hong Kong Stock Exchange, the Board of Directors of the Company (the “Board”) considers it in the best interest of the Company’s stockholders to call the Special Meeting for the following purposes (“Items of Business”):

1.

To approve the Board’s continuing authority to approve the Company’s issuance of shares of its common stock or securities convertible into common stock in an amount not to exceed 20% of the total number of outstanding shares of common stock of the Company as of the date of the Special Meeting, and effective from the effective date of the Primary Conversion (the “Primary Conversion Effective Date”) until the earlier of the date the next annual meeting is held or June 26, 2023;

2.

To approve the Board’s continuing authority to approve the Company’s repurchase of shares of its common stock in an amount not to exceed 10% of the total number of outstanding shares of common stock of the Company as of the date of the Special Meeting, and effective from the Primary Conversion Effective Date until the earlier of the date the next annual meeting is held or June 26, 2023; and

3.

To approve the Yum China Holdings, Inc. 2022 Long Term Incentive Plan (the “2022 LTIP”).

Stockholder approval for all the Items of Business is a condition to the Primary Conversion. The Primary Conversion shall not become effective if stockholders fail to approve any of the Items of Business described above for which the Special Meeting is called.

You may attend the AnnualSpecial Meeting via the internetInternet at www.virtualshareholdermeeting.com/YUMC2021YUMC2022SM. To participate in the AnnualSpecial Meeting, you will need the 16-digit control number which appears on your Notice of Internet Availability of Proxy Materials (the “Notice”), proxy card or the instructions that accompanied your proxy materials. The attached notice of annual meetingSpecial Meeting and proxy statement contain details of the businessItems of Business to be conducted at the AnnualSpecial Meeting and the detailed procedures for attending, submitting questions and voting at the AnnualSpecial Meeting. In addition, the Company’s 2020 annual report, which is being made available to you along with the proxy statement, contains information about the Company and its performance.

Your vote is important. We encourage you to vote promptly, whether or not you plan to attend the AnnualSpecial Meeting. You may vote your shares over the Internet or via telephone. If you received a paper copy of the proxy materials,telephone, or you may complete, sign, date and mail the proxy card in the postage-paid envelope provided.

Sincerely,

Joey Wat

Chief Executive Officer

Yum China Holdings, Inc.

Notice Of AnnualSpecial Meeting

Of Stockholders

 

Time and Date:

  

8:00 a.m. Beijing/Hong Kong time on Friday, May 28, 2021Tuesday, October 11, 2022 /

8:00 p.m. U.S. Eastern time on Thursday, May 27, 2021.Monday, October 10, 2022.

Location:

  

Online at www.virtualshareholdermeeting.com/YUMC2021.YUMC2022SM

Items of Business:

  

(1) To electapprove the 10 director nominees namedBoard’s continuing authority to approve the Company’s issuance of shares of its common stock or securities convertible into common stock in an amount not to exceed 20% of the accompanying proxy statement to serve for a one-year term expiring attotal number of outstanding shares of common stock of the 2022Company as of the date of the Special Meeting, and effective from the Primary Conversion Effective Date until the earlier of the date the next annual meeting of the Company’s stockholders.is held or June 26, 2023.

  

(2) To ratifyapprove the appointment of KPMG Huazhen LLP asBoard’s continuing authority to approve the Company’s independent auditor for 2021.repurchase of shares of its common stock in an amount not to exceed 10% of the total number of outstanding shares of common stock of the Company as of the date of the Special Meeting, and effective from the Primary Conversion Effective Date until the earlier of the date the next annual meeting is held or June 26, 2023.

  

(3) To approve on an advisory basis, the Company’s named executive officer compensation.2022 LTIP.

  

(4) To approve an amendmentPursuant to the Company’s Amended and Restated CertificateBylaws, only business within the purpose or purposes described in this Notice of Incorporation to allow stockholders holding 25%Special Meeting of Stockholders (the “Notice”) may be conducted at a special meeting. Accordingly, the Company’s outstanding shares the right to call special meetings.

(5) To transact such other business as may properly comeonly matters that will be brought before the meeting or any adjournment or postponement thereof.Special Meeting are those described above.

Who Can Vote:

  

You can vote if you were a stockholder of record as of the close of business on March 29, 2021.August 24, 2022.

Attending the Meeting:

  

Stockholders of record as of the close of business on March 29, 2021August 24, 2022 and the general public will be able to attend the AnnualSpecial Meeting by visiting our AnnualSpecial Meeting website at www.virtualshareholdermeeting.com/YUMC2021YUMC2022SM.. To participate in the AnnualSpecial Meeting, you will need the 16-digit control number included on your Notice, on your proxy card or on the instructions that accompanied your proxy materials.

 

The AnnualSpecial Meeting will begin promptly at 8:00 a.m. Beijing/Hong Kong time on May 28, 2021Tuesday, October 11, 2022 / 8:00 p.m. U.S. Eastern time on May 27, 2021.Monday, October 10, 2022. Online check-in will begin 15 minutes prior to the start of the meeting, and you should allow ample time for the online check-in procedures.

How to Vote:

  

You may vote over the Internet or via telephone by following the instructions set forth in the accompanying proxy statement. If you received a paper copy of the proxy materials, youYou may also vote by completing, signing, dating and returning the proxy card. If you attend the AnnualSpecial Meeting using your 16-digit control number, you may vote during the AnnualSpecial Meeting. Your vote is important. Whether or not you plan to attend the AnnualSpecial Meeting, please vote promptly.

Date of Mailing:

  

For the Special Meeting, we have elected to utilize the “full set delivery” option under the rules of the Securities and Exchange Commission (the “SEC”), thus we are delivering paper copies of all proxy materials to each stockholder, as well as providing access to those proxy materials on a publicly-accessible website.

This notice of annual meeting,Notice, the accompanying proxy statement and the form of proxy are first being mailed to stockholders on or about April 15, 2021.[        ], 2022.

By Order of the Board of Directors,

Joseph Chan

Chief Legal Officer

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS

FOR THE SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON OCTOBER 11, 2022 / OCTOBER 10, 2022:

The Notice of Special Meeting of Stockholders and Proxy Statement are available at http://www.proxyvote.com.

LOGO

1290 Avenue of the Americas, 9th Floor

New York, NY 10104

Shareholders, Banks and Brokers

Call Toll Free:

866-316-3922

International Number:

781-575-2137

 

 PROXY STATEMENT – TABLE OF CONTENTS

 

 

PROXY STATEMENT SUMMARY1
QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING   51
GOVERNANCE OF THE COMPANY11

Governance Highlights

11

Board Composition and Director Elections

12

Board Meetings and Director Attendance

12

Selection of Director Nominees

12

Director Qualifications and Skills

13

Diversity of the Board

13

Stockholder Nominations for Directors

14

Board Leadership Structure

14

Governance Policies

14

Risk Oversight

16

Management Development and Succession Planning

18

Director Independence

18

Stockholder Communications and Engagement

18

Policies Regarding Accounting and Auditing Matters

19

Committees of the Board

20

Related Person Transactions Policies and Procedures

22

Director and Executive Officer Stock Ownership Policies

22

Policy Regarding Hedging and Speculative Trading

23 
MATTERS REQUIRING STOCKHOLDER ACTION   248 

ITEM 1

  

ElectionAuthorization to Issue Shares up to 20% of DirectorsOutstanding Shares

   248 

ITEM 2

  RatificationAuthorization to Repurchase Shares up to 10% of Independent AuditorOutstanding Shares   3010 

ITEM 3

Advisory Vote on Named Executive Officer Compensation32

ITEM 4

  Approval of an Amendment to the Company’s Amended and Restated Certificate of Incorporation to Allow Stockholders Holding 25% of the Company’s Outstanding Shares the Right to Call Special Meetings2022 Long Term Incentive Plan   3313 
STOCK OWNERSHIP INFORMATION   3523 

EXECUTIVE COMPENSATION   3725 

Named Executive Officers

   3725 

Impact of COVID-19 on Our Business

   3826 

20202021 Business Overview and Performance Highlights

   3928 

Company Total Shareholder Return Performance

   3930 

Recent Compensation Highlights

   4030 

Alignment of Executive Compensation Program with Business Performance

   4233 

Pay Components

   4334 

Executive Compensation Practices

   4435 

Stockholder Engagement

   4435 

Elements of the Executive Compensation Program

   4536 

20202021 Named Executive Officer Compensation and Performance Summary

   5745 

How Compensation Decisions Are Made

   6050 

Compensation Policies and Practices

   6252 

Compensation Committee Report

   6353 

Executive Compensation Tables

   6454 

Pay Ratio Disclosure

   7466 
20202021 DIRECTOR COMPENSATION   7668 
EQUITY COMPENSATION PLAN INFORMATION   78
AUDIT COMMITTEE REPORT7970 
ADDITIONAL INFORMATION   8271 
APPENDIX A – YUM CHINA HOLDINGS, INC. 2022 LONG TERM INCENTIVE PLAN   85
APPENDIX B8674 

 

 PROXY STATEMENT SUMMARYQUESTIONS AND ANSWERS ABOUT THE SPECIAL

 MEETING AND VOTING

 

This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all

The Board of the information that you should consider, and you should readCompany solicits the entireenclosed proxy for use at the Special Meeting to be held at 8:00 a.m. Beijing/Hong Kong time on Tuesday, October 11, 2022 / 8:00 p.m. U.S. Eastern time on Monday, October 10, 2022. The Special Meeting will be held in a virtual-only format, through a

live audio webcast. The Special Meeting will only be conducted via webcast; there will be no physical meeting location. This proxy statement carefully before voting.contains information about the matters to be voted on at the Special Meeting and the voting process.

MEETING INFORMATION

 

Time and Date:     8:00 a.m. Beijing/Hong Kong time on Friday, May 28, 2021 /

                               8:00 p.m. U.S. Eastern time on Thursday, May 27, 2021

Location:              Online at www.virtualshareholdermeeting.com/YUMC2021

Record Date:        March 29, 2021

HOW TO VOTEWhy has the Board of Directors called a Special Meeting?

 

 

 

StockholdersThe Board called the Special Meeting in order to seek stockholder approval of record ascertain matters to facilitate a voluntary conversion of the closeCompany’s listing status from secondary to primary listing on the Hong Kong Stock Exchange (the “Primary Conversion”). On September 10, 2020, the Company’s shares of businesscommon stock began trading on March 29, 2021 may vote by usingthe Hong Kong Stock Exchange as a secondary-listed company, while also concurrently being primary listed and traded on the NYSE. The Board has determined that the Primary Conversion will provide strategic benefits to the Company, including enhancing our stock trading on an exchange that is closer to where we operate, and thus, to our employees, customers and other stakeholders, further broadening our shareholder universe and increasing liquidity.

In addition, our Board considered that the Primary Conversion will mitigate the delisting risk that the Company faces on the NYSE pursuant to the SEC’s implementation of the Holding Foreign Companies Accountable Act (the “Act”), which was signed into law on December 18, 2020. The Act requires the SEC to prohibit the securities of any “covered issuer,” including the Company, from being traded on any of the following methods:U.S. securities exchanges, including the NYSE, or traded “over-the-counter,” if the auditor of the covered issuer’s financial statements is not subject to inspection by the Public Company Accounting Oversight Board for three consecutive years, beginning in 2021. On December 2, 2021, the SEC adopted final rules

implementing the Act, pursuant to which the SEC will identify companies subject to the Act, known as “Commission-Identified Issuers,” as early as possible after the filing of their next annual report, and implement the trading prohibition as soon as practicable after they have been conclusively identified as Commission-Identified Issuers for three consecutive years.

BeforePursuant to the Annual Meeting:

•

Via Internet by following the instructions on www.proxyvote.com;

•

Via telephone by calling 1 (800) 690-6903 (toll-free in the U.S.)and following the instructions provided by the recorded message; or

Via mail,Act and the final rules adopted by the SEC, in March 2022, the Company was conclusively identified as a Commission-Identified Issuer by the SEC. In view of such identification, the Company’s shares of common stock may be delisted from the NYSE in early 2024, or in early 2023, if you received your proxy materialspending legislation passes reducing the number of consecutive non-inspection years required to trigger a trading prohibition under the Act. The Primary Conversion would provide a primary market for the trading of the Company’s shares if they are ultimately delisted from the NYSE in accordance with the Act and would facilitate the orderly transition of trading to the Hong Kong Stock Exchange in that event. Specifically, by mail, by completing, signing, datinginitiating the Primary Conversion now, the Company is undertaking a voluntary conversion in order to be proactive and mailing the proxy cardprepared in the postage-paid envelope provided.

Proxies submitted throughevent that the Internet or by telephone asCompany’s shares are ultimately delisted from the NYSE.

In view of the rationale described above, must be received by 11:59 p.m. Beijing/Hong Kong time / 11:59 a.m.

U.S. Eastern time on May 27, 2021. Proxies submitted by mail must be received prior to the meeting.

During the Annual Meeting:

•

Vote online during the Annual Meeting. You may vote during the Annual Meeting through www.virtualshareholdermeeting.com/YUMC2021 using your 16-digit control number.

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

If you hold your sharesBoard determined that it is in the namebest interests of a bank, broker or other nominee, your abilitythe Company and its stockholders to vote depends on their voting processes. Please followapply for the directions of your bank, broker or other nominee carefully.Primary Conversion.

 

ITEMS OF BUSINESS

ProposalBoard Voting
Recommendation		Page
Reference

1. Election of the 10 Director Nominees Named in this Proxy Statement to Serve for a One-Year Term

FOR each nominee24

2. Ratification of the Appointment of KPMG Huazhen LLP as the Company’s Independent Auditor for 2021

FOR30

3. Advisory Vote on Named Executive Officer Compensation

FOR32

4. Approval of an amendment to the Company’s Amended and Restated Certificate of Incorporation to allow stockholders holding 25% of the Company’s outstanding shares the right to call special meetings

FOR33


 

YUM CHINA – 2021 Proxy Statement   

  1

 

 

 

PROXY STATEMENT SUMMARYQUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND VOTING   

 

    

 

On August 15, 2022, the Company received the acknowledgement from the Hong Kong Stock Exchangefor the Company’s applicationfor Primary Conversion.

As a secondary-listed issuer on the Hong Kong Stock Exchange under Chapter 19C of the Hong Kong Listing Rules, the Company has been and is currently exempt from certain provisions of the Hong Kong Listing Rules, including, among others, rules on share issuance, repurchases, notifiable transactions, connected transactions, share option schemes and content of financial statements, as well as certain other continuing obligations. As a secondary-listed issuer, the Company was also granted a number of waivers and/or exemptions from strict compliance with the applicable Hong Kong laws and regulations.

From the Primary Conversion Effective Date, the Company will have a primary listing status on the Hong Kong Stock Exchange and the Company will be subject to the full regime of the applicable Hong Kong laws and regulations, unless specific waivers have been obtained from the Hong Kong Stock Exchange or the Securities and Futures Commission of Hong Kong.

The Board of Directors called the Special Meeting in order to obtain, in accordance with the Hong Kong Listing Rules, stockholder approval with regard to the three Items of Business set forth below. Under Delaware law and NYSE listing rules, the Company and the Board are not required to obtain stockholder approval with respect to the first two Items of Business (subject to applicable restrictions). The Company is seeking approval of the first two Items of Business described below solely to comply with the Hong Kong Listing Rules, as described in more detail below. Stockholder approval of all the proposals is a condition to the completion of the conversion to primary listing on the Hong Kong Stock Exchange.

Subject to receiving stockholder approval of all proposed items at the Special Meeting and obtaining the necessary approvals from the Hong Kong Stock Exchange, the Primary Conversion Effective Date is expected to be October 24, 2022.

The Company believes that the continuing authority of the Board to issue shares, repurchase shares and grant equity awards under the 2022 LTIP as contemplated by these

proposals is critical to the Company’s business and operations. If stockholders fail to approve any of the Items of Business for which the Special Meeting is called, the Primary Conversion shall not become effective.

IN THE EVENT THAT THE PRIMARY CONVERSION DOES NOT BECOME EFFECTIVE, THE COMPANY OVERVIEW

AND ITS BOARD WILL RETAIN THE ABILITY TO AUTHORIZE AND CARRY OUT STOCK ISSUANCES AND STOCK REPURCHASES TO THE FULL EXTENT PERMITTED UNDER APPLICABLE U.S. FEDERAL LAW, DELAWARE LAW, THE NYSE LISTING STANDARDS, AND THE COMPANY’S ORGANIZATIONAL DOCUMENTS.

 

Proposal 1: The Hong Kong Listing Rules permit primary-listed companies to issue shares subject to certain restrictions. Among such restrictions, the Hong Kong Listing Rules require that all share issuances must be approved in advance by stockholders, either by way of a “general issuance mandate” or by specific approval of a particular transaction. At the Special Meeting, Yum China Holdings, Inc., a Delaware corporation (the “Company,” “we,” “us”stockholders will vote to approve the Board’s continuing authority to approve the Company’s issuance of shares of its common stock or “our”) issecurities convertible into common stock in an amount not to exceed 20% of the largest restaurant company in China in termstotal number of system sales, with $8.3 billionoutstanding shares of revenue in 2020 and over 10,500 restaurantscommon stock of the Company as of the date of the Special Meeting, effective from the Primary Conversion Effective Date until the earlier of the date the next annual meeting is held or June 26, 2023, unless earlier revoked or modified by a duly adopted resolution of the stockholders. This approval will operate as a general issuance mandate under the Hong Kong Listing Rules.

year-endProposal 2: 2020. Our growing restaurant network consists of our flagship KFC and Pizza Hut brands, as well as emerging brands such as Little Sheep, Huang Ji Huang, COFFii & JOY, East Dawning, Taco Bell and

Lavazza. We have the exclusive rightThe Hong Kong Listing Rules permit primary-listed companies to operate and sublicense the KFC, Pizza Hut and,repurchase their shares subject to achieving certain agreed-upon milestones, Taco Bell brands in China (excludingrestrictions. Among such restrictions, the Hong Kong Macau and Taiwan), and ownListing Rules require that all repurchases of shares must be approved in advance by stockholders, either by way of a “general repurchase mandate” or by specific approval of a particular transaction. At the intellectual propertySpecial Meeting, Yum China stockholders will vote to approve the Board’s continuing authority to approve the Company’s repurchase of the Little Sheep, Huang Ji Huang, COFFii & JOY and East Dawning concepts outright.

 

SUMMARY INFORMATION REGARDING NOMINEES

The following table provides summary information about each of the nominees to our board of directors (the “Board of Directors” or the “Board”).

Name Age Director
Since		 Primary Occupation Independent Board Committee
Membership as of
April 15, 2021*
 A C G F

Fred Hu (Chairman)

 57 2016 Chairman and founder of Primavera Capital Group ✓   CC 

Joey Wat

 49 2017 Chief Executive Officer of the Company     

Peter A. Bassi

 71 2016 Former Chairman of Yum! Restaurants International ✓ X   X

Edouard Ettedgui

 69 2016 Non-Executive Chairman of Alliance Française, Hong Kong ✓  X X X

Cyril Han

 43 2019 Chief Financial Officer of Ant Group Co., Ltd. ✓ X   

Louis T. Hsieh

 56 2016 Former Chief Financial Officer of NIO Inc. ✓ X   

Ruby Lu

 50 2016 Venture capitalist ✓  CC X 

Zili Shao

 61 2016 Non-executive Chairman of Fangda Partners ✓    CC

William Wang

 46 2017 Partner of Primavera Capital Group ✓  X  

Min (Jenny) Zhang

 47 —   Vice-chairlady of Huazhu Group Limited ✓        

A – Audit Committee; C – Compensation Committee; G – Nominating and Governance Committee; F – Food Safety and Sustainability Committee; CC – Committee Chair

*

Christian L. Campbell is the chair of Audit Committee, and a member of Compensation Committee and Nominating and Governance Committee. Ed Yiu-Cheong Chan is a member of Audit Committee. Messrs. Campbell and Chan will not stand for re-election to the Board at the Annual Meeting.


 

2   

  YUM CHINA – 2021 Proxy Statement

  

 

 

   PROXY STATEMENT SUMMARYQUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND VOTING

 

   

 

GOVERNANCE HIGHLIGHTS

The Board believes that good corporate governance is a critical factor in achieving business success and in fulfilling the Board’s responsibilities to stockholders. The Board believes that its principles and practices align management and stockholder interests. Highlights include:

Director Independence

 

•  Independent Board Chairman

•  9shares of 10 director nominees are independent

Director Elections and Attendance

•  Annual electionits common stock in an amount not to exceed 10% of all directors

•  Majority voting policy for electionsthe total number of directors in uncontested elections

•  Proxy access for director nominees by stockholders

•  97% director attendance at Board and committee meetings in 2020

Board Refreshment and Diversity

•  Directors with experience, qualifications and skills across a wide rangeoutstanding shares of public and private companies

•  Directors reflect a diversitycommon stock of gender, race and ethnicity

•  Average director nominee age of 55the Company as of April 15, 2021

•  Independent and non-management directors may generally not stand for re-election after age 75

Other Governance Practices

•  Active stockholder engagement

•  No shareholder rights plan (also knownthe date of the Special Meeting, effective from the Primary Conversion Effective Date until the earlier of the date the next annual meeting is held or June 26, 2023, unless earlier revoked or modified by a duly adopted resolution of the stockholders. This approval will operate as a poison pill)

•  Director and executive officer stock ownership policies

•  Policy prohibiting hedging or other speculative trading of Company stock

•  Policy regarding resignation if any director experiences a significant change in professional roles and responsibilities

•  Board access to senior management and independent advisors


YUM CHINA – 2021 Proxy Statement

  3

PROXY STATEMENT SUMMARY   

WHERE YOU CAN FIND ADDITIONAL INFORMATION

Our Investor Relations website is located at ir.yumchina.com. Although the information contained on or connected to our website is not part of this proxy statement, you can view additional information on our website, such as our 2020 annual report, the charters of our Board committees, our Corporate Governance Principles, our Code of Conduct and reports that we file with the Securities and Exchange Commission (the “SEC”) and

the Stock Exchange of Hong Kong Limited (the “Hong Kong Stock Exchange” or the “HKEX”). Copies of these documents may also be obtained free of charge by writing Yum China Holdings, Inc., 7100 Corporate Drive, Plano, Texas 75024, or Yum China Holdings, Inc., Yum China Building, 20 Tian Yao Qiao Road, Shanghai 200030 People’s Republic of China, Attention: Corporate Secretary.

4  

  YUM CHINA– 2021 Proxy Statement

 QUESTIONS AND ANSWERS ABOUT THE MEETING

 AND VOTING

general repurchase mandate under the Hong Kong Listing Rules.

 

The BoardProposal 3: Approval of Directorsthe 2022 LTIP.

Pursuant to the Company’s Amended and Restated Bylaws, only business within the purpose or purposes described in the notice of Yum China Holdings, Inc. solicitsspecial may be conducted at a special meeting. Accordingly, the enclosed proxy for use at the Annual Meeting to be held at 8:00 a.m. Beijing/Hong Kong time on Friday, May 28, 2021 / 8:00 p.m. U.S. Eastern time on Thursday, May 27, 2021. This year, the Annual Meetingonly matters that will be heldbrought before the Special Meeting are those described in a virtual-only format, through a live audio webcast. The

meeting will only be conducted via webcast; there will be no physical meeting location. 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.

What is the purpose of the Annual Meeting?

At the Annual Meeting, stockholders 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 stockholders.Notice.

 

 

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 AnnualSpecial Meeting. As a stockholder of record as of the close of

close of business on March 29, 2021,August 24, 2022, you are invited to attend the AnnualSpecial Meeting and are entitled to vote on the itemsItems of businessBusiness described in this proxy statement.

 

 

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

As permitted by SEC rules, we are making this proxy statement and our 2020 annual report available to our stockholders electronically via the Internet. On or about April 15, 2021, we mailed to our stockholders the Notice containing instructions on how to access this proxy statement and our 2020 annual report and vote online. If you received a Notice by mail, you will not receive a printed copy of the proxy materials unless you request a copy. The Notice contains instructions on how to access and review all of the important information contained in the proxy statement and the 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 CHINA – 2021 Proxy Statement

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QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING   

Why is the Annual Meeting a virtual meeting this year?

In light of the continued public health concerns regarding the COVID-19 pandemic and related travel restrictions, the Board of Directors has determined that it is prudent to hold the Annual Meeting in a virtual-only format, conducted via live audio webcast.

The Board of Directors has been monitoring the impact of the COVID-19 pandemic, including with regard to the

health and well-being of our employees and stockholders, as well as the related government-imposed restrictions on travel. Hosting the Annual Meeting in a virtual-only format protects our employees and stockholders during this time. It provides easy access for stockholders and facilitates participation without the need to travel, since stockholders can participate from any location around the world.

How do I attend the AnnualSpecial Meeting?

 

 

 

The AnnualSpecial Meeting will be held in a virtual-only format, through a live audio webcast. The AnnualSpecial Meeting will only be conducted via webcast; there will be no physical meeting location. Stockholders of record as of the close of business on March 29, 2021August 24, 2022 and the general public will be able to attend the AnnualSpecial Meeting by visiting our AnnualSpecial Meeting website at www.virtualshareholdermeeting.com/YUMC2021YUMC2022SM. To participate in the AnnualSpecial Meeting, you will need the 16-digit control number included on your Notice, on your

proxy card or on the instructions that accompanied your proxy materials.

The AnnualSpecial Meeting will begin promptly at 8:00 a.m. Beijing/Hong Kong time on May 28, 2021Tuesday, October 11, 2022 / 8:00 p.m. U.S. Eastern time on May 27, 2021.Monday, October 10, 2022. Online check-in will begin 15 minutes prior to the start of the meeting, and you should allow ample time for the online check-in procedures. We encourage our stockholders to access the meeting prior to the start time.

 

 

May stockholders ask questions?

 

 

 

Yes. Stockholders will have the ability to submit questions during the AnnualSpecial Meeting via the AnnualSpecial Meeting website. As part of the AnnualSpecial Meeting, we will hold a live Q&A session, during which we intend to answer all

questions submitted during the meeting in accordance with the AnnualSpecial Meeting’s Rules of Conduct which are pertinent to the Company and the meeting matters, as time permits.

 

 

YUM CHINA – Proxy Statement

  3

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND VOTING   

What if I have technical difficulties or trouble accessing the AnnualSpecial Meeting?

 

 

Beginning 30 minutes prior to the start of and during the AnnualSpecial Meeting, you may contact 1 (844) 986-0822 (U.S.) or 1 (303) 562-9302 (International)the technical support number posted on the virtual meeting platform for technical assistance.assistance in accessing the Special Meeting.

Who may vote?

 

 

 

You may vote if you owned any shares of Company common stock as of the close of business on the record date, March 29, 2021.August 24, 2022. Each share of Company common stock

is entitled to one vote. As of March 29, 2021,August 24, 2022, there were [            ] shares of Company common stock outstanding.

 

 

What am I voting on?

You will be voting on the following three Items of Business at the Special Meeting:

1.

To approve the Board’s continuing authority to approve the Company’s issuance of shares of its common stock or securities convertible into common stock in an amount not to exceed 20% of the total number of outstanding shares of common stock of the Company as of the date of the Special Meeting, effective from the Primary Conversion Effective Date until the earlier of the date the next annual meeting is held or June 26, 2023;

2.

To approve the Board’s continuing authority to approve the Company’s repurchase of shares of its common stock in an amount not to exceed 10% of the total number of outstanding shares of common stock of the Company as of

the date of the Special Meeting, effective from the Primary Conversion Effective Date until the earlier of the date the next annual meeting is held or June 26, 2023; and

3.

To approve the 2022 LTIP.

Pursuant to the Company’s Amended and Restated Bylaws, only business within the purpose or purposes described in the notice of special meeting may be conducted at a special meeting. Accordingly, the only matters that will be brought before the Special Meeting are those described in the Notice.

THE PRIMARY CONVERSION SHALL NOT BECOME EFFECTIVE IF STOCKHOLDERS FAIL TO APPROVE ANY OF THE ITEMS OF BUSINESS FOR WHICH THE SPECIAL MEETING IS CALLED.

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  YUM CHINA – 2021 Proxy Statement

  

 

 

   QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND VOTING

 

   

What am I voting on?

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

The election of the 10 director nominees named in this proxy statement to serve for a one-year term;

The ratification of the appointment of KPMG Huazhen LLP as the Company’s independent auditor for 2021;

The approval, on an advisory basis, of the Company’s named executive officer compensation; and

The approval of an amendment to the Company’s Amended and Restated Certificate of Incorporation to allow stockholders holding 25% of the Company’s outstanding shares the right to call special meetings.

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

 

How does the Board of Directors recommend that I vote?

 

 

 

Our Board of Directors recommends that you vote your shares:

 

FOR eachthe approval of the 10 nominees namedBoard’s continuing authority to approve the Company’s issuance of shares of its common stock or securities convertible into common stock in this proxy statement for electionan amount not to exceed 20% of the Board;total number of outstanding shares of common stock of the Company as of the date of the Special Meeting, effective from the Primary Conversion Effective Date until the earlier of the date the next annual meeting is held or June 26, 2023;

FOR the approval of the Board’s continuing authority to approve the Company’s repurchase of shares of its common stock in an amount not to exceed 10% of the total number of outstanding shares of common stock of the Company as of the date of the Special Meeting, effective from the Primary Conversion Effective Date until the earlier of the date the next annual meeting is held or June 26, 2023; and

 

FOR the ratificationapproval of the appointment of KPMG Huazhen LLP as our independent auditor for 2021; and

FOR the proposal on named executive officer compensation.

FOR the proposal to amend the Company’s Amended and Restated Certificate of Incorporation to allow stockholders holding not less than 25% of the Company’s outstanding shares the right to call special meetings.2022 LTIP.

 

 

How do I vote before the AnnualSpecial Meeting?

 

 

 

There are three ways to vote before the meeting:

 

 • 

By Internet—we encourage you to vote online at www.proxyvote.com by following instructions on the Notice or proxy card;

 

By telephone—you may vote by making a telephone call to 1 (800) 690-6903 (toll-free in the U.S.); or

 

By mail—if you received your proxy materials by mail, you may vote by completing, signing, dating and mailing the proxy card in the postage-paid envelope provided.

Proxies submitted through the Internet or by telephone as described above must be received by 11:59 p.m.a.m. Beijing/Hong Kong time on October 10, 2022 / 11:59 a.m.p.m. U.S. Eastern time on May 27, 2021.October 9, 2022. Proxies submitted by mail must be received prior to the meeting.

If you hold your shares in the name of a bank, broker, or other nominee, your ability to vote before the AnnualSpecial Meeting depends on their voting processes. Please follow the directions of your bank, broker, or other nominee carefully.

Can I vote during the Special Meeting?

Yes. To vote during the Special Meeting, you will need the 16-digit control number included on your proxy card or on the instructions that accompanied your proxy materials. Even if you plan to attend the Special Meeting, we encourage you to vote your shares by proxy. You may still vote your shares during the Special Meeting even if you have previously voted by proxy.

If you hold your shares in the name of a bank, broker, or other nominee, your ability to vote during the Special Meeting depends on their voting processes. Please follow the directions of your bank, broker, or other nominee carefully.

 

 

YUM CHINA – 2021 Proxy Statement   

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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND VOTING   

 

    

Can I vote during the Annual Meeting?

Yes. To vote during the Annual Meeting, you will need the 16-digit control number included on your Notice, on your proxy card, or on the instructions that accompanied your proxy materials. Even if you plan to attend the Annual Meeting, we encourage you to vote your shares by proxy. You may still vote your shares during the Annual Meeting even if you have previously voted by proxy.

If you hold your shares in the name of a bank, broker or other nominee, your ability to vote during the Annual Meeting depends on their voting processes. Please follow the directions of your bank, broker or other nominee carefully.

 

Can I change my mind after I vote?

 

 

 

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

 

signing another proxy card with a later date and returning it to us for receipt prior to the AnnualSpecial Meeting;

 

voting again through the Internet or by telephone prior to 11:59 p.m.a.m. Beijing/Hong Kong time on October 10, 2022 / 11:59 a.m.p.m. U.S. Eastern time on May 27, 2021;October 9, 2022;

giving written notice to the Corporate Secretary of the Company prior to the AnnualSpecial Meeting; or

 

voting again during the AnnualSpecial Meeting.

Taking the above steps will result in the revocation of your prior vote or votes.

If you hold your shares in the name of a bank, broker, or other nominee, your ability change your vote depends on their voting processes. Please follow the directions of your bank, broker, or other nominee carefully.

 

 

Who will count the votes?

 

 

Representatives of Broadridge Financial Solutions 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 set forth on page 1.[    ].

 

 

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

 

 

 

If you received more than one Notice or 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 U.S. transfer agent is Computer-

is Computershareshare Trust Company, N.A., which may be reached at 1 (877) 854-0865 (U.S.) and 1 (781) 575-3102 (International). Computershare Investor Services Limited, which can be reached at 852-2862-8500 (Hong Kong), acts as our co-transfer agent to maintain the Hong Kong share register.

 

 

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  YUM CHINA– 2021 Proxy Statement

   QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING

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

 

 

 

Your shares may be voted on certain matters 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 (the “NYSE”) rules to vote shares for which their customers do not provide voting instructions on certain “routine” matters.

The proposal to ratify the appointment of KPMG Huazhen LLP as our independent auditor for 2021 is considered a routine matter for which brokerage firms may vote

shares for which they have not received voting instructions. The other matters to be voted on at our AnnualSpecial Meeting are not considered “routine” under applicable rules. When a matter 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 matter, the brokerage firm

cannot vote the shares on that proposal. This is called a “broker non-vote.” Because there are no routine matters on which brokerage firms can vote without instruction, no broker non-votes are expected at the Special Meeting.

 

6  

  YUM CHINA– Proxy Statement

   QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND VOTING

 

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

 

 

 

Your shares are counted as present at the AnnualSpecial Meeting if you attend the AnnualSpecial Meeting via webcast using your 16-digit control number or if you properly submit a proxy by Internet, telephone, or mail. In order for us to conduct our AnnualSpecial Meeting, a majority of the shares of Company

common stock outstanding as of March 29, 2021August 24, 2022 must be present via webcast or represented by proxy at the AnnualSpecial Meeting. This is referred to as a “quorum.” Abstentions and broker non-votes will be counted for purposes of establishing a quorum at the AnnualSpecial 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 50% of the number of votes cast with respect to that director’s election. Abstentions will be counted as present but not voted. Abstentions and broker non-votes will not affect the outcome of the election of directors. Full details of the Company’s majority voting policy are set out in our Corporate Governance Principles and are described under “Governance of the Company—Majority Voting Policy.”

YUM CHINA – 2021 Proxy Statement

  9

QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING   

How many votes are needed to approve the other proposals?

 

 

 

Proposals 1, 2, and 3 must receive the “FOR” vote of a majority of the shares of our common stock, present via webcast or represented by proxy, and entitled to vote at the AnnualSpecial Meeting. For each of thesethe proposals, you may vote “FOR,” “AGAINST”“AGAINST,” or “ABSTAIN.” Abstentions will be counted as shares present and entitled to vote at the AnnualSpecial Meeting. Accordingly, abstentions will have the

same effect as a vote “AGAINST” Proposalsproposals 1, 2, and 3. BrokerBecause matters to be voted on at our Special Meeting are not considered “routine,” broker non-votes will not be counted as shares present and entitled to vote with respect to theany particular matter on

which the broker has not voted. Thus, broker non-votes will not affect the outcome of either of these proposals.

Proposal 4 must receive the “FOR” vote of a majority of the shares of our common stock outstanding and entitled to vote on the proposal. For Proposal 4, you may vote “FOR,” “AGAINST” or “ABSTAIN.” Abstentions and broker non-votes constitute shares outstanding and entitled to vote for purposes of Proposal 4, and so a vote to “ABSTAIN” or a broker non-vote will have the same effect as a vote “AGAINST” Proposal 4.

 

 

When will the Company announce the voting results?

 

 

 

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

Meeting. The voting results will also be filed with HKEXHong Kong Stock Exchange simultaneously.

 

 

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

 

 

 

The Company knows of no other matters to be submitted to the stockholders at the AnnualSpecial Meeting, other than the proposals referred to in this proxy statement. If any other matters properly come before the stockholders at the

AnnualSpecial Meeting, it is the intention of the persons named on the proxy to vote the shares represented thereby on such matters in accordance with their best judgment.

 

 

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  YUM CHINA– 2021 Proxy Statement

 GOVERNANCE OF THE COMPANY

The business and affairs of the CompanyHow are managed under the direction of the Board of Directors. The Board believes that good corporate governance is a critical factordollar values indicated in achieving business success and in fulfilling the Board’s responsibilities to stockholders. The Board believes that its practices align management and stockholder interests.

The corporate governance section of our website makes available certain of the Company’s corporate governance materials, including our Corporate Governance Principles, the charters for each committee and our Code of Conduct. To access these documents on our Investor Relations website, ir.yumchina.com, click on “Governance” and then “Corporate Governance Documents.”

Highlights of our corporate governance policies and practices are described below.

Director Independence

•  Independent Board Chairman

•  9 of 10 director nominees are independent

Director Elections and Attendance

•  Annual election of all directors

•  Majority voting policy for elections of directors in uncontested elections

•  Proxy access for director nominees by stockholders

•  97% director attendance at Board and committee meetings in 2020

Board Refreshment and Diversity

•  Directors with experience, qualifications and skills across a wide range of public and private companies

•  Directors reflect a diversity of gender, race and ethnicity

•  Average director nominee age of 55 as of April 15, 2021

•  Independent and non-management directors may generally not stand for re-election after age 75

Other Governance Practices

•  Active stockholder engagement

•  No shareholder rights plan (also known as a poison pill)

•  Director and executive officer stock ownership policies

•  Policy prohibiting hedging or other speculative trading of Company stock

•  Policy regarding resignation if any director experiences a significant change in professional roles and responsibilities

•  Board access to senior management and independent advisors

YUM CHINA – 2021 Proxy Statement

  11

GOVERNANCE OF THE COMPANY   

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

Our Board of Directors presently consists of 11 directors, nine of whom are standing for re-election at the Annual Meeting. Each director is elected for a one-year term.

Two of our current directors, Christian L. Campbell and Ed Yiu-Cheong Chan will not stand for re-election at the

Annual Meeting. The Company thanks Messrs. Campbell and Chan for their service as members of our Board. The Board determined that, effective at the conclusion of the Annual Meeting, the size of the Board will be decreased from 11 to ten directors.

How often did the Board meet in 2020?this proxy statement?

 

 

Directors are expected, absent extraordinary circumstances, to attend all Board meetings and meetings of committees on which they serve. Our Board met 10 times and the committees collectively met 25 times during 2020. In 2020, overall attendance at Board and committee meetings was 97% and all directors attended at least 75%

of the aggregate total of meetings of the Board and committees on which the director served. Our independent directors meet privately in executive session without management present at each regularly scheduled Board meeting. Our independent Chairman leads these Board executive sessions.

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

All directors are encouraged to attend the Annual Meeting. All incumbent directors attended the 2020 annual meeting of the Company’s stockholders.

How are director nominees selected?

The Nominating and Governance Committee is responsible for recommending director candidates to the full Board for nomination and election at the annual meetings of stockholders. The Nominating and Governance Committee will interview a director candidate before the candidate is submitted to the full Board for approval. The Nominating and Governance Committee’s charter provides that it may retain a third-party search firm to identify candidates from time to time. This year, with the assistance of a third-party search firm, the Nominating and Governance Committee undertook a broad and extensive search for new directors who would contribute to the collective skills, experience and diversity of the Board. The Nominating and Governance Committee provided the search firm with guidance as to the skills, experience and qualifications that it was seeking in potential candidates, and the search firm identified several potential candidates.

After considering and interviewing a number of highly qualified candidates, the Nominating and Governance Committee recommended to the Board that Min (Jenny) Zhang be nominated to stand for election by our stockholders at the Annual Meeting.

The Nominating and Governance Committee will also consider director candidates recommended by stockholders or other sources in the same manner as nominees identified by the Committee. For a stockholder to submit a candidate for consideration by the Nominating and Governance Committee, a stockholder must notify the Company’s Corporate Secretary by mail at Yum China Holdings, Inc., 7100 Corporate Drive, Plano, Texas 75024 or at Yum China Holdings, Inc., Yum China Building, 20 Tian Yao Qiao Road, Shanghai 200030, People’s Republic of China.

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  YUM CHINA– 2021 Proxy Statement

   GOVERNANCE OF THE COMPANY

In accordance with the Corporate Governance 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 and 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 Nominating and Governance Committee seeks to complete customary vetting procedures and background checks with respect to individuals suggested for potential Board membership by stockholders ofthis proxy statement, the Company or other sources. We believe that each of our directorsuses “$” to refer to U.S. dollars, and director nominees

has met the guidelines set forth in the Corporate Governance Principles.

The Company is party“HK$” to a shareholders agreement with Primavera Capital Group (“Primavera”), and API (Hong Kong) Investment Limited, an affiliate of Zhejiang Ant Small and Micro Financial Services Group Co., Ltd. (“Ant Financial”) pursuantrefer to which Primavera has identified two director designees, Dr. Fred Hu and Mr. William Wang. In addition, Mr. Cyril Han served as the non-voting Board observer designated by Ant Financial since November 2016 and was elected as a director at the 2019 annual meeting of the Company’s stockholders.

What are the directors’ qualifications and skills?

As listed below, our directors have experience, qualifications and skills across a wide range of public and private companies spanning many different industries, possess-

ing a broad spectrum of experience both individually and collectively. They bring a diverse mix of regional, industry and professional expertise to the Company.

LOGO

How does the composition of our Board reflect diversity?

The Nominating and Governance Committee seeks to recommend nominees that bring a unique perspective to the Board in order to contribute to the collective diversity of the Board. As a part of this process, in connection with director nominations, the Nominating and Governance Committee considers several factors to ensure the entire Board collectively embraces a wide variety of characteristics, including professional background, experience,

skills and knowledge. Each director nominee will generally exhibit different and varying degrees of these characteristics. With respect to the Company’s current slate of director nominees, the Company also benefits from the diversity inherent from differences in Board member age, gender, race and ethnicity. Thirty percent of director nominees are women.

YUM CHINA – 2021 Proxy Statement

  13

GOVERNANCE OF THE COMPANY   

Can stockholders nominate directors for election to the Board?

Yes, under our Amended and Restated Bylaws (the “Bylaws”), stockholders may nominate persons for elec-

tion as directors at an annual meeting by following the procedures described under “Additional Information.”

What is the Board’s leadership structure?

Our Board is currently led by an independent Chairman, Dr. Fred Hu. Our Board believes that Board independence and oversight of management are effectively maintained through a strong independent Chairman and through the Board’s composition, committee system and policy of having regular executive sessions of non-management directors, all of which are discussed below this section. Further, separating the Chairman and Chief Executive Officer roles enables the Chairman to focus on corporate governance matters and the Chief Executive Officer to

focus on the Company’s business. We find that this structure works well to foster an open dialogue and constructive feedback among the independent directors and management. It further allows the Board to effectively represent the best interests of all stockholders and contribute to the Company’s long-term success.

To promote 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 Committee, Compensation Committee, Nominating and Governance Committee and Food Safety and Sustainability Committee of the Board of Directors operate pursuant to their respective written charters. These charters were approved by the Board of Directors and are reviewed annually by the respective committees. Each charter is available on the Company’s website at ir.yumchina.com.

•

Governance Principles. The Board of Directors has adopted Corporate Governance Principles, which are intended to embody the governance principles and procedures by which the Board functions. These principles are available on the Company’s website at ir.yumchina.com.

Ethical Guidelines. Yum China’s 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 of Conduct in a confidential manner. The Code of Conduct applies to all directors and employees of the Company, including the principal executive officer, the principal financial officer and the principal accounting officer. All employees of the Company are required, on an annual basis, to complete the Yum China Code of Conduct 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 ir.yumchina.com. The Company intends to post amendments to or waivers from the Code of Conduct (to the extent applicable to directors or executive officers and required by the rules of the SEC, NYSE or HKEX) on this website.

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  YUM CHINA– 2021 Proxy Statement

   GOVERNANCE OF THE COMPANY

What other significant Board governance practices does the Company have?

Annual Election of Directors. In accordance with our Amended and Restated Certificate of Incorporation, our directors are elected to serve a one-year term and until their successors are elected and qualified or until their earlier death, resignation or removal.

Role of Lead Director. Our Corporate Governance Principles require the independent directors to appoint a Lead Director when the Chairman does not qualify as independent in accordance with the applicable rules of the NYSE. The Company currently does not have a Lead Director because the Chairman of the Board is independent.

Executive Sessions. Our independent and non-management directors meet regularly in executive session. The executive sessions are attended only by the independent and non-management directors and are presided over by the independent Chairman. Our independent directors also meet in executive session at least once per year.

Board and Committee Evaluations. The Board recognizes that a thorough, constructive evaluation process enhances our Board’s effectiveness and is an essential element of good corporate governance. Each year, the Nominating and Governance Committee oversees the design and implementation of the evaluation process, focused on the Board’s contribution to the Company and on areas in which the Board believes a better contribution could be made. In addition, each of the Audit Committee, the Compensation Committee, the Nominating and Governance Committee and the Food Safety and Sustainability Committee also conducts a similar annual self-evaluation pursuant to their respective charters. Written questionnaires completed by each director, as well as discussions with selected directors, solicit feedback on a wide range of issues, including Board/committee composition and leadership, meetings, responsibilities and overall effectiveness. A summary of the Board and committee evaluation results is discussed with the Board and with the respective committees, and policies and practices are updated in response

to the evaluation results. Director suggestions for improvements to evaluation questionnaires and processes are considered for incorporation for the following year.

Retirement Policy. Pursuant to our Corporate Governance Principles, independent or non-management directors may not stand for re-election to the Board after they have reached the age of 75, unless the Board unanimously elects to have the director stand for re-election.

Limits on Director Service on Other Public Company Boards. Our Corporate Governance Principles provide that directors may serve on no more than four other public company boards. The Company’s Chief Executive Officer, if a director, may serve on no more than one other public company board. All directors are expected to advise the Chairman and the Chair of the Nominating and Governance Committee prior to accepting any other public company directorship or any assignment to the audit committee or compensation committee of other public company boards.

Majority Voting Policy. Our Bylaws 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” their election in excess of 50% of the number of votes cast with respect to that director’s election. The 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 and publicly disclose the Board’s decision regarding the resignation and the rationale behind the decision within 90 days from the date of the certification of the election results.

YUM CHINA – 2021 Proxy Statement

  15

GOVERNANCE OF THE COMPANY   

Access to Management and Employees. Our directors have complete and open access to senior members of management. Our Chief Executive Officer invites key employees of the Company to attend Board sessions at which the Chief Executive Officer believes they can meaningfully contribute to Board discussion.

Access to Outside Advisors. The Board and Board committees have the right to consult and retain independent legal and other advisors at the expense of the Company. The Audit Committee has the sole authority

to appoint, determine funding for and replace the independent auditor. The Compensation Committee has the sole authority to retain any advisor to assist it in the performance of its duties, after taking into consideration all factors relevant to the advisor’s independence from management. The Nominating and Governance Committee has the sole authority to retain search firms to be used to identify director candidates. The Food Safety and Sustainability Committee has the authority to consult and retain any advisor to assist it in connection with the exercise of its responsibilities and authority.

What is the Board’s role in risk oversight?

The Board maintains overall responsibility for overseeing the Company’s risk management framework. In furtherance of its responsibility, the Board has delegated specific risk-related responsibilities to the Audit Committee, the Compensation Committee and the Food Safety and Sustainability Committee.

Audit Committee

The Audit Committee engages in substantive discussions with management regarding the Company’s major risk exposures and the steps management has taken to monitor and control such exposures, including the Company’s risk assessment and risk management policies. Our Head of Corporate Audit reports directly to the Audit Committee, as well as our Chief Financial Officer. The Audit Committee also receives reports at each committee meeting regarding legal and regulatory risks from management and meets periodically in separate executive sessions with our independent auditor and our Head of Corporate Audit. The Chief Legal Officer reports regularly to the Audit Committee on the Company’s key risk areas and compliance programs. The Audit Committee periodically provides a summary to the full Board of the risk areas reviewed together with any other risk-related subjects discussed at the Audit Committee meeting. Alternatively, the Board may review and discuss directly with management the major risks arising from the Company’s business and operations.

Compensation Committee

The Compensation 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. This oversight helps ensure the Company’s compensation programs align with the Company’s goals and compensation philosophies and, along with other factors, operate to mitigate against the risk that such programs would encourage excessive or inappropriate risk-taking.

Food Safety and Sustainability Committee

The Food Safety and Sustainability Committee assists the Board in its oversight of the Company’s practices, policies, procedures, strategies and initiatives relating to the protection of food safety. The Committee monitors trends, issues and concerns affecting the Company’s food safety practices, and the risks arising therefrom, in light of the Company’s overall efforts related to food safety.

The Food Safety and Sustainability Committee also assists the Board in its oversight of the Company’s practices, policies, procedures, strategies and initiatives relating to sustainability, including environmental, supply chain and food nutrition and health. The Committee monitors trends, issues and concerns affecting the Company’s sustainability practices, policies, procedures, strategies and initiatives.

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How does the Board oversee food safety risk?

The Board and the Food Safety and Sustainability Committee are involved in oversight of the Company’s food safety risk. The Food Safety and Sustainability Committee assists the Board in the oversight of food safety risk and regularly receives reports from management in connection with the Company’s practices, procedures, strategies and initiatives relating to food safety and the risks arising therefrom. The Board and the Food Safety and

Sustainability Committee also monitor and evaluate significant changes in regulatory requirements on food safety, material food safety incidents that could potentially affect the Company, as well as any severe public health situations, including the COVID-19 pandemic, that could adversely affect the Company’s business and operations.

How does the Board oversee cybersecurity risk?

The Board and the Audit Committee are involved in oversight of the Company’s cybersecurity risk. The Audit Committee assists the Board in the oversight of cybersecurity and other technology risks, discusses with management cybersecurity risk mitigation and incident management, and reviews management reports regarding the Company’s cybersecurity governance processes, incident response system and applicable cybersecurity laws, regulations and standards, status of projects to strengthen internal cybersecurity, the evolving threat environment,

vulnerability assessments, specific cybersecurity incidents and management’s efforts to monitor, detect and prevent cybersecurity threats.

The Company’s cybersecurity programs are regularly audited by independent third parties against established regulatory and industry standards. We incorporate regular information security training as part of our employee education and development program. In addition, the Company maintains cybersecurity insurance as part of its overall insurance portfolio.

How has the Board overseen the Company’s response to COVID-19?

Since the outbreak of COVID-19, the Board and its committees took additional actions to ensure effective oversight of the Company’s response plans to mitigate the risks related to the pandemic. In addition to a COVID-19 crisis management team comprised of cross-brand and cross-functional executives at the management level, the Board has formed a crisis management committee to support management during the COVID-19 pandemic.

Through regular updates and additional communications with management, the Board has actively participated in

overseeing the Company’s management of the COVID-19 crisis, including protecting the health and safety of our employees and customers, evaluating the impact of the pandemic on the Company’s operations and strategies, monitoring continued compliance with applicable regulatory requirements, managing human capital and assessing the impact of the pandemic on the Company’s liquidity and financial position. With the ongoing COVID-19 pandemic, it will continue to be a key focus of the Board’s risk oversight activity.

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What is the Board’s role in management development and succession planning?

The Board considers management development and succession planning to be a critical part of our Company’s long-term strategy. In accordance with our Corporate Governance Principles, the Board reviews the Company’s succession planning, including succession planning in the case of retirement of the Chief Executive Officer of the Company. The Chief Executive Officer periodically reports to the Board with regard to his or her recommen-

dations for potential successors to senior executive positions and development plans for such individuals. In addition, the Board reviews recommendations from an independent committee with regard to the performance evaluation of the Chief Executive Officer, which the committee conducts annually, in accordance with its charter.

How does the Board determine which directors are considered independent?

The Company’s Corporate Governance Principles, adopted by the Board, require that a majority of the directors qualify as independent in accordance with the applicable rules of the NYSE. The Board also considers independence requirements of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “HK Listing Rules”). The Board determines on an annual basis whether each director qualifies as independent pursuant to the applicable rules of the NYSE and the HK Listing Rules.

Pursuant to the Corporate Governance 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 Corporate Governance 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 the review, the Board affirmatively determined that all of the directors and director nominees are independent of the Company and its management under NYSE rules and the HK Listing Rules, with the exception of Joey Wat. Ms. Wat is not considered an independent director because she is the current Chief Executive Officer of the Company.

In reaching this conclusion, the Board determined that Dr. Hu, Messrs. Bassi, Campbell, Chan, Ettedgui, Han, Hsieh, Shao and Wang and Mess. Lu and Zhang had no material relationship with the Company other than, in the case of incumbent directors, their relationship as a director.

How do stockholders communicate with the Board?

Stockholders or other parties who wish to communicate directly with the non-management directors, individually or as a group, or the entire Board may do so by writing to the Nominating and Governance Committee, c/o the Corporate Secretary, Yum China Holdings, Inc., 7100 Corporate Drive, Plano, Texas, 75024. The Nominating and Governance Committee of the Board has approved a pro-

cess for handling correspondence received by the Company and addressed to non-management members of the Board or the entire Board. Under that process, the Corporate Secretary of the Company reviews all such correspondence and regularly forwards to a designated member of the Nominating and Governance Committee copies of all such correspondence (except commercial

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correspondence and correspondence that is duplicative in nature) and a summary of all such correspondence. 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 stockholders relating to accounting, internal controls or auditing matters are

brought to the attention of the Chairperson of the Audit Committee and to the internal audit department and are handled in accordance with procedures established by the Audit Committee with respect to such matters (described below). Correspondence from stockholders relating to Compensation Committee matters are referred to the Chairperson of the Compensation Committee.

How do the Board and management engage with stockholders?

Our Board and management are committed to regular engagement with our stockholders. In 2020, we reached out to our top 25 stockholders, which comprise holders of more than 50% of the outstanding shares of Company common stock, in order to solicit their input on important governance, executive compensation, sustainability and other matters. Additionally, our senior management team, including our Chief Executive Officer and Chief Financial Officer, regularly engage in meaningful dialogue with our stockholders, including through our quarterly earnings calls and investor conferences and meetings. Our senior management team regularly reports to our Board and, as applicable, committees of our Board, regarding stockholder views.

We evaluate and respond to the views voiced by our stockholders. Based on feedback received during the Company’s stockholder engagement efforts over the past several years, the Compensation Committee approved

certain changes to the Company’s executive compensation program in 2020, including expanding the recipients of annual performance stock unit (“PSU”) grants, and using PSU grants with multiple performance metrics to replace the existing restricted stock unit (“RSU”) component. For more information on stockholder engagement regarding compensation for executive officers, please see “Executive Compensation—Stockholder Engagement.”

With the increasing focus on environmental sustainability issues, the responsibilities of the Food Safety Committee (recently renamed as the Food Safety and Sustainability Committee) have been expanded to also cover the oversight of environmental, supply chain and food nutrition and health issues. In addition, beginning with the 2021 annual incentive program, environmental, social and governance (“ESG”) measures will be incorporated into the key performance indicators that are used to determine the individual performance factor for each leadership team member.

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

The Audit Committee has established policies on reporting concerns regarding accounting and auditing matters in addition to our policy on communicating with our non-management directors. Any employee may, on a confidential or anonymous basis, submit complaints or concerns regarding accounting or auditing matters to the Chief Legal Officer of the Company through the Company’s Employee Hotline or by e-mail or regular mail. If an

employee is uncomfortable for any reason contacting the Chief Legal Officer, the employee may contact the Chairperson of the Audit Committee. The Chief Legal Officer maintains a log of all complaints or concerns, tracking their receipt, investigation and resolution and prepares a periodic summary report thereof for the Audit Committee.

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GOVERNANCE OF THE COMPANY   

What are the Committees of the Board?

The Board of Directors has standing Audit, Compensation, Nominating and Governance and Food Safety and Sustainability Committees. Set forth below is a summary of the functions of each committee, the members of each committee as of April 15, 2021 and the number of meetings each committee held in 2020.

Audit Committee

Christian L. Campbell*, Chair

Peter A. Bassi

Ed Yiu-Cheong Chan*

Cyril Han

Louis T. Hsieh

Number of meetings held in 2020: 11

•  Possesses sole authority regarding the selection and retention of the independent auditor

•  Reviews and has oversight over the Company’s internal audit function

•  Reviews and approves all auditing services, internal control-related services and permitted non-audit services to be performed for the Company by the independent auditor

•  Reviews the independence, qualification and performance of the independent auditor

•  Reviews and discusses with management and the independent auditor any major issues as to the adequacy of the Company’s internal controls, any special steps adopted in light of material control deficiencies and the adequacy of disclosures about changes in internal control over financial reporting

•  Reviews and discusses with management and the independent auditor the annual audited financial statements, results of the review of the Company’s quarterly financial statements and significant financial reporting issues and judgments made in connection with the preparation of the Company’s financial statements

•  Review and discuss with the independent auditor any critical audit matter (“CAM”) addressed in the audit of the Company’s financial statements and the relevant financial statement accounts and disclosures that relate to each CAM.

•  Reviews the Company’s accounting and financial reporting principles and practices, including any significant changes thereto

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

•  Discusses with management the Company’s major risk exposures and the steps management has taken to monitor and control such exposures; and assists the Board in the oversight of cybersecurity and other technology risks. 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?” and “How does the Board oversee cybersecurity risk?”

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. The Board has also determined that each member of the Audit Committee is financially literate within the meaning of the listing standards of the NYSE and that each of Messrs. Bassi, Chan, Han and Hsieh is qualified as an audit committee financial expert within the meaning of SEC regulations.

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Compensation Committee

Ruby Lu, Chair

Christian L. Campbell*

Edouard Ettedgui

William Wang

Number of meetings

held in 2020: 9

•  Oversees the Company’s executive compensation plans and programs and reviews and recommends changes to these plans and programs

•  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 corporate goals and objectives relevant to the Chief Executive Officer’s and other senior executives’ compensation and evaluates their performance in light of those goals and objectives

•  Determines and approves the compensation level of the Chief Executive Officer and other senior executive officers based on this evaluation

•  Reviews the Company’s compensation plans, policies and programs to assess the extent to which they encourage excessive or inappropriate risk-taking or earnings manipulation

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

Nominating and

Governance Committee

Fred Hu, Chair

Christian L. Campbell*

Edouard Ettedgui

Ruby Lu

Number of meetings

held in 2020: 3

•  Identifies and proposes to the Board individuals qualified to become Board members and recommends to the Board director nominees for each committee

•  Advises the Board on matters of corporate governance

•  Reviews and reassesses from time to time the adequacy of the Company’s Corporate Governance Principles and recommends any proposed changes to the Board for approval

•  Receives comments from all directors and reports annually to the Board with assessment of the Board’s performance

•  Reviews annually and makes recommendations to the Board with respect to the compensation and benefits of directors

•  Reviews management succession planning and makes recommendations to the Board

•  Review emerging corporate governance issues and best practices

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.

Food Safety and

Sustainability

Committee

Zili Shao, Chair

Peter A. Bassi

Edouard Ettedgui

Number of meetings

held in 2020: 2

•  Reviews, evaluates and advises the Board regarding the practices, procedures, strategies and initiatives to protect food safety

•  Reviews, evaluates and advises the Board regarding trends, issues and concerns which affect or could affect the Company’s food safety practices, and the risks arising therefrom, in light of the Company’s overall efforts related to food safety

•  Reviews and evaluates any corrective action taken by management to address any food safety related risks or incident, if any, and advises the Board regarding any proposed action in relation thereto

•  Reviews, evaluates and advises the Board regarding the Company’s practices, policies, procedures, strategies and initiatives relating to sustainability, including environmental, supply chain and food nutrition and health

•  Reviews and evaluates the trends, issues and concerns which affect or could affect the Company’s sustainability practices, policies, procedures, strategies and initiatives

•  Reviews and oversees the development and implementation of the goals the Company may establish from time to time with respect to its sustainability initiatives

•  Oversees the reporting and communication with stakeholders with respect to sustainability

* At the Annual Meeting, Messrs. Campbell and Chan are stepping down from the Board and its committees and are not standing for re-election.dollars.

 

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GOVERNANCE OF THE COMPANY   

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

Under the Company’s Related Person Transaction Policies and Procedures, the Audit Committee reviews the material facts of all related person transactions that require the Audit Committee’s approval and either approves or disapproves of the entry into the related person transaction. In determining whether to approve or ratify a related person transaction, the Audit Committee will determine whether such transaction is in, or not opposed to, the best interest of the Company and will take into account, among other factors it deems appropriate, whether such transaction is on terms no less favorable to the Company than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related person’s interest in the transaction. Transactions, arrangements or relationships or any series of similar transactions, arrangements or relationships in which (i) a related person has or will have a direct or indirect material interest, (ii) the Company is a participant and (iii) that exceed $120,000 in any calendar year are subject to the Audit Committee’s review. Any director who is a related person with respect to a transaction under review may not participate in any discussion or approval of the transaction, except that the director will provide all material information concerning the transaction to the Audit Committee.

Related persons are directors, director nominees, executive officers, beneficial owners of 5% or more of the outstanding shares of Company common stock and their immediate family members. An immediate family member includes a person’s children, stepchildren, parents, stepparents, spouse, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, and brothers- and sisters-in-law and anyone sharing such person’s household (other than a tenant or employee).

After its review, the Audit 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 $120,000. 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 consolidated gross revenues and the related person is not an executive officer of the other company.

There were no transactions considered to be a related person transaction from January 1, 2020 through the date of this proxy statement.

Does the Company require stock ownership by directors?

The Board believes that the number of shares of Company common stock owned by each director is a personal decision. However, the Board strongly supports the position that directors should own a meaningful number of shares of Company common stock and expects that a director will not sell any shares received as director compensation until at least 12 months following the director’s retirement or departure from the Board.

The Company’s non-employee directors receive a significant portion of their annual compensation in shares of Company common 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 stockholders.

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Does the Company require stock ownership by executive officers?

The Board has adopted Stock Ownership Guidelines, which require executive officers to own a substantial amount of Company common stock in order to promote an ownership mentality among management and align

their interests with those of stockholders. See “Executive Compensation—Compensation Policies and Practices—Stock Ownership Guidelines” for more information.

How many shares of Company common stock do the directors and executive officers own?

Stock ownership information for our directors and executive officers is shown under “Stock Ownership Information.”

Does the Company have a policy on hedging or other speculative trading in Company common stock?

Directors, executive officers and certain other designated employees are prohibited from speculative trading in Company common stock, including trading in puts, calls or other hedging or monetization transactions.

How are directors compensated?

Employee directors do not receive additional compensation for serving on the Board of Directors. The annual compensation for each director who is not an employee of the Company is discussed under “2020 Director Compensation.”

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 MATTERS REQUIRING STOCKHOLDER ACTION

 

ITEM 1.Election    Authorization to Issue Shares up to 20% of DirectorsOutstanding Shares.

 

 

 

WhoPrior to the Primary Conversion Effective Date, the Board’s authority includes the ability to issue shares. Such authority is generally on par with other NYSE-listed U.S. companies. This authority is fundamental to our business and enables us to issue shares, including, if applicable, in connection with acquisitions and raising capital. However, under the Hong Kong Listing Rules, a primary-listed company must have authority from its stockholders to issue any shares, including shares that are the director nominees?

Eachpart of the director nominees, other than Min (Jenny) Zhang, currently serves ascompany’s authorized but unissued share capital, unless they are offered to existing stockholders pro-rata to their existing holdings. Granting the Board this authority is an annual, routine matter for primary-listed companies on the Hong Kong Stock Exchange and is consistent with market practice. Approval of this proposal will permit the Board the authority to authorize the Company to issue shares in compliance with the Hong Kong Listing Rules to the same extent already authorized under our Amended and Restated Certificate of Incorporation. We are not asking you to approve an increase in our authorized share capital or to approve a directorspecific issuance of shares, nor does the Board have any current plans to issue shares pursuant to this authorization.

In addition, we note that, because the Company is listed on the NYSE, our stockholders continue to benefit from the protections afforded to them under the rules and regulations of the Company. Ms. ZhangNYSE and SEC, including those rules that limit our ability to issue shares without stockholder approval in specified circumstances. Furthermore, we note that this authorization is being nominated asrequired solely to comply with the Hong Kong Listing Rules and is not otherwise required for us to comply with the rules of the NYSE.

In accordance with the Hong Kong Listing Rules, it is a directorcustomary practice for election atprimary-listed companies on the

Hong Kong Stock Exchange to seek stockholder authority to issue up to 20% of a company’s outstanding shares and for such authority to be effective until the next annual meeting, unless otherwise earlier revoked or modified by a duly adopted resolution of the stockholders. June 26, 2023 is the thirteen-month anniversary of the 2022 Annual Meeting following a search process undertaken byand reflects the Nominating and Governance Committee, as described above under “Governanceend date of the Company—Howauthorization, after which the authorization cannot extend. Therefore, consistent with this market practice, and as allowed under the Hong Kong Listing Rules, we are director nominees selected?”

Each nominee has been nominated by the Boardseeking approval for election at the Annual Meeting to hold officecontinuing authority for a one-year term. If elected, the nominees will hold office until the 2022 annual meeting of the Company’s stockholders and until their respective successors have been duly elected and qualified or until their earlier death, resignation or removal.

At the Annual Meeting, proxies cannot be voted for a greater number of individuals than the 10 nominees named in this proxy statement.

The biographies of each of the nominees below contain 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 determineauthorize the Company to issue common stock or securities convertible into common stock up to a maximum of 20% of our outstanding shares as of the date of the Special Meeting, for a period from the Primary Conversion Effective Date until the earlier of the 2023 Annual Meeting of Stockholders or June 26, 2023. We expect to propose a renewal of this authorization at our 2023 Annual Meeting of Stockholders, and then annually thereafter. Pursuant to this proposal, assuming for illustrative purposes that

our outstanding shares remain unchanged from August 24, 2022 to the person should serve asdate of the Special Meeting, the Company will be allowed to issue a directormaximum of [             ] shares of common stock.

The approval of this proposal is a condition for the Company. Primary Conversion to become effective.

In addition to the information presented below regarding each nominee’s specific experience, qualifications, attributes and skillsevent 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 toPrimary Conversion does not become effective, the Company and our Board.

There are no family relationships among anyits Board will retain the ability to authorize and carry out stock issuances to the full extent permitted under applicable U.S. federal law, Delaware law, the NYSE listing standards, and the Company’s organizational documents notwithstanding the outcome of the directors, director nominees and executive officers of the Company. Ages are as of April 15, 2021.

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.

The Board of Directors recommends that you vote FOR the election of the 10 director nominees.this vote.

 

 

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   MATTERS REQUIRING STOCKHOLDER ACTION

 

   

 

Director NomineesAccordingly, we ask our stockholders to vote in favor of the following resolution at the Special Meeting:

To approve the Board’s continuing authority to approve the Company’s issuance of shares of its common stock or securities convertible into common stock in an amount not to exceed 20% of the total number of outstanding shares of common stock of the Company as of the date of the Special Meeting, effective from the Primary Conversion Effective Date until the earlier of the date the next annual meeting is held or June 26, 2023.

LOGO

Fred Hu

Age 57

Director Since 2016

Fred Hu has served as the chairman and founder of Primavera, a China-based global investment firm, since its inception in 2011. Prior to Primavera, Dr. Hu served in various roles at Goldman Sachs from 1997 to 2010, including as partner and chairman of Greater China at Goldman Sachs Group, Inc. From 1991 to 1996, he served as an economist at the International Monetary Fund (IMF) in Washington D.C. Dr. Hu currently is a member of the board of directors of Hong Kong Exchanges and Clearing Limited, a company listed on the Hong Kong Stock Exchange (stock code: 0388), Industrial and Commercial Bank of China Limited, a company listed on both the Hong Kong Stock Exchange (stock code: 1398) and the Shanghai Stock Exchange (SHA: 601398), and UBS Group AG, a company listed on both the SIX Swiss Stock Exchange (SIX: UBSG) and the New York Stock Exchange (NYSE: UBS). From May 2011 to May 2018, Dr. Hu served as an independent non-executive director of Hang Seng Bank Limited, a company listed on the Hong Kong Stock Exchange (stock code: 0011). Dr. Hu serves as an independent non-executive director for Ant Group Co., Ltd. since August 2020 and as a co-director of the National Center for Economic Research and a professor at Tsinghua University. Dr. Hu obtained his doctoral degree in economics from Harvard University. Dr. Hu brings to our Board extensive expertise in international affairs and the Chinese economy. In addition, Dr. Hu brings valuable business, strategic development and corporate leadership experience as well as expertise in economics, finance and global capital markets.

For clarity, this authority will include the authority to issue securities convertible into shares of common stock, or options, warrants or similar rights to subscribe for shares of common stock or such convertible securities of the Company and to make or grant offers, agreements and/or options (including bonds, warrants and debentures convertible into shares of common stock), subject to the limitations described in the resolution set forth above.

LOGO

Joey Wat

Age 49

Director Since 2017

Joey Wat has served as a director of our Company since July 2017 and as the Chief Executive Officer of our Company since March 2018. She served as our President and Chief Operating Officer from February 2017 to February 2018 and the Chief Executive Officer, KFC from October 2016 to February 2017, a position she held at Yum! Restaurants China, from August 2015 to October 2016. Ms. Wat joined Yum! Restaurants China in September 2014 as President of KFC China and was promoted to Chief Executive Officer for KFC China in August 2015. Before joining YUM, Ms. Wat served in both management and strategy positions at A.S. Watson Group (“Watson”), an international health, beauty and lifestyle retailer, in the U.K. from 2004 to 2014. Her last position at Watson was managing director of Watson Health & Beauty U.K., which operates Superdrug and Savers, two retail chains specializing in the sale of pharmacy and health and beauty products, from 2012 to 2014. She made the transition from head of strategy of Watson in Europe to managing director of Savers in 2007. Before joining Watson, Ms. Wat spent seven years in management consulting including with McKinsey & Company’s Hong Kong office from 2000 to 2003. Ms. Wat obtained a master of management degree from Kellogg School of Management at Northwestern University in 2000. Ms. Wat brings to our Board extensive knowledge of the Company’s business and her industry acumen acquired in the course of a career that included several leadership roles in retail companies.

What vote is required to approve this proposal?

Approval of this proposal requires the affirmative vote of a majority of shares present via webcast or represented by proxy and entitled to vote at the Special Meeting.

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

 

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MATTERS REQUIRING STOCKHOLDER ACTION   

LOGO

Peter A. Bassi

Age 71

Director Since 2016

Peter A. Bassi served as Chairman of Yum! Restaurants International from 2003 to 2005 and as its President from 1997 to 2003. Prior to that position, Mr. Bassi spent 25 years in a wide range of financial and general management positions at PepsiCo, Inc., Pepsi-Cola International, Pizza Hut (U.S. and International), Frito-Lay and Taco Bell. Mr. Bassi currently serves as lead independent director and chairman of the governance and nominating committee of BJ’s Restaurant, Inc. (NASDAQ: BJRI), where he also serves on the audit committee and compensation committee. He has been a member of the board of BJ’s Restaurant, Inc. since 2004. From January 2009 to May 2019, Mr. Bassi held various positions on the board of Potbelly Corporation (NASDAQ: PBPB). From June 2015 to December 2018, Mr. Bassi served on the value optimization board for Mekong Capital Partners, a private equity firm based in Vietnam. He also served on the board of supervisors of AmRest Holdings SE (WSE: EAT) from 2013 to 2015, and served on the board of the Pep Boys-Manny, Moe & Jack from 2002 to 2009. Mr. Bassi received his master’s degree of business administration (MBA) from the University of Rhode Island in 1972. He brings to our Board knowledge of the restaurant industry and global franchising, as well as financial expertise and extensive public company board and corporate governance experience.

LOGO

Edouard Ettedgui

Age 69

Director Since 2016

Edouard Ettedgui has served as the non-executive chairman of Alliance Française, Hong Kong since 2016. He also served as a non-executive director of Mandarin Oriental International Limited from April 2016 to May 2020, the company for which he was the group chief executive from 1998 to 2016. Prior to his time at Mandarin Oriental International, Mr. Ettedgui was the chief financial officer for Dairy Farm International Holdings, and he served in various roles for British American Tobacco (“BAT”), including as the business development director, group finance controller and group head of finance. From 1990 to 1996, he spent around six years with BAT Industries PLC in London, initially as the head of finance and later as the group finance controller and director for new business development. Mr. Ettedgui graduated from ESSEC Business School (France) in 1975. He brings to our Board senior management experience in various international consumer-product industries, extensive financial expertise and public company board experience.

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LOGO

Cyril Han

Age 43

Director Nominee

Cyril Han has served as the chief financial officer of Ant Group Co., Ltd., an innovative technology provider, since April 2020. Mr. Han joined Ant Group Co., Ltd. in May 2014 and previously served as senior director and vice president. He joined Alibaba Group, a Chinese multinational conglomerate, as senior director of the corporate finance department in 2011. Before joining Alibaba Group, Mr. Han worked at the investment banking division of China International Capital Corporation from July 2001 to September 2011. He has served as a non-executive director of Hundsun Technologies Inc., a company listed on the Shanghai Stock Exchange (SHA: 600570), since February 2016, and has served as a non-executive director of Zhong An Online P & C Insurance Co., Ltd., a company listed on the Hong Kong Stock Exchange (stock code: 6060), since October 2016. Mr. Han obtained his master’s degree in economics from Tsinghua University. He brings to our Board deep knowledge and insights in the fields of finance and technology.

LOGO

Louis T. Hsieh

Age 56

Director Since 2016

Louis T. Hsieh served as the chief financial officer of NIO Inc., an electric and autonomous vehicle developer that is listed on the New York Stock Exchange (NYSE: NIO), from May 2017 to October 2019. Mr. Hsieh has held various positions at New Oriental Education & Technology Group, a private educational service provider that is listed on the New York Stock Exchange (NYSE: EDU), including positions as a director since 2007, the president from 2009 to 2016 and the chief financial officer from 2005 to 2015. In addition, Mr. Hsieh serves as an independent director, member of the nominating and corporate governance committee and chairman of the audit committee for JD.com, Inc., an e-commerce company that is listed on the Nasdaq Stock Market (NASDAQ: JD) and the Hong Kong Stock Exchange (stock code: 9618). Previously, Mr. Hsieh served as an independent director and chairman of the audit committee for Nord Anglia Education, Inc. (NYSE: NORD). He also served as an independent director and the chairman of audit committee for both Perfect World Co., Ltd. and China Digital TV Holding Co., Ltd. Mr. Hsieh obtained a juris doctor degree from the University of California at Berkeley in 1990. He brings to our Board corporate leadership and public company board experience as well as his extensive financial and international business experience.

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MATTERS REQUIRING STOCKHOLDER ACTION   

LOGO

Ruby Lu

Age 50

Director Since 2016

Ruby Lu is a venture capitalist investing in technology start-ups in the U.S. and China. Ms. Lu founded Atypical Ventures, an early-stage technology venture investment firm, in 2019. In 2006, she co-founded DCM China, a venture capital firm. During her more than 12-year tenure at DCM, she invested in, and served as a board member for, many leading technology companies, including BitAuto Holdings Limited, Ecommerce China Dangdang Inc. and Pactera Technology International Ltd. Prior to joining DCM in 2003, Ms. Lu was a vice president in the investment banking group of technology, media and telecommunications at Goldman Sachs & Co. in Menlo Park, California. She also served as an independent director and on the audit committee of iKang Healthcare Group, Inc., and served as an independent director and Chairman of the special committee for iDreamSky Technologies Limited before these two companies were taken private. She is currently an independent director on the board of Uxin Limited (NASDAQ: UXIN) and Blue City Holdings Limited (NASDAQ: BLCT). In both companies, she serves as the chairman of the compensation committee and a member of the audit committee, and in Uxin Limited, she also serves as a member of nominating and corporate governance committee. Ms. Lu obtained her master of arts from Johns Hopkins University in 1996. She brings to our Board public company board experience as well as extensive financial and global market experience.

LOGO

Zili Shao

Age 61

Director Since 2016

Zili Shao has served as the non-executive chairman of Fangda Partners, a leading law firm, since June 2017. Mr. Shao also serves as an independent non-executive director of Bank of Montreal (China) Co., Ltd. Mr. Shao is the founder and chairman of MountVue Capital Management Co. Ltd. From September 2015 to January 2018, he served as a non-executive director of Elife Holdings Limited, a company listed on the Hong Kong Stock Exchange (stock code: 0223). From April 2015 to May 2017, he served as co-chairman and partner at King & Wood Mallesons China, a law firm. From 2010 to 2015, Mr. Shao held various positions at JP Morgan Chase & Co. (“JP Morgan”), a financial services company, including roles such as chairman and chief executive officer of JP Morgan China and vice chairman of JP Morgan Asia Pacific. Prior to JP Morgan, he was a former partner at Linklaters LLP, a leading international law firm, for 12 years. He acted as managing partner of Linklaters of Greater China and subsequently was appointed managing partner of the Asia Pacific region. Mr. Shao obtained his master’s degree in law from the University of Melbourne in 1994. Mr. Shao brings to our Board extensive professional experience in Asia and public company board and corporate governance experience.

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LOGO

William Wang

Age 46

Director Since 2017

William Wang is one of the founding partners of Primavera. Prior to Primavera, Mr. Wang served as a managing director of Goldman Sachs Merchant Banking/Principal Investment Area, where he led significant successful investments in China for the group. Prior to that, Mr. Wang worked in the investment banking division and private equity group of China International Capital Corporation Limited. Mr. Wang currently serves as a director on the board of Geely Automobile Holdings Limited, a company listed on the Hong Kong Stock Exchange (stock code: 0175), and Sunlands Technology Group, a company listed on the New York Stock Exchange (NYSE: STG), in addition to directorships at Primavera’s portfolio companies. Mr. Wang obtained a master of management degree in management science and engineering from Shanghai Jiao Tong University in 2000. He brings to our Board deep knowledge and investment insights of the Chinese market.

LOGO

Min (Jenny) Zhang

Age 47

Min (Jenny) Zhang has served as the vice-chairlady of Huazhu Group Limited (“Huazhu”), a multi-brand hotel group listed on both the Nasdaq Stock Market (NASDAQ: HTHT) and the Hong Kong Stock Exchange (stock code: 1179), since July 20, 2020. Ms. Zhang joined Huazhu in September 2007 and held various leadership positions, including as executive vice-chairlady from November 2019 to July 2020, chief executive officer from May 2015 to November 2019, president from January 2015 to May 2015, chief financial officer from March 2008 to May 2015, chief strategic officer from November 2013 to January 2015 and senior vice president of finance from September 2007 to February 2008. Ms. Zhang also serves as an independent director of LAIX Inc., an artificial intelligence company listed on the New York Stock Exchange (NYSE: LAIX). She served as an independent non-executive director of Genscript Biotech Corporation, a company listed on the Hong Kong Stock Exchange (stock code: 1548), from August 2015 to November 2018, and an independent director of OneSmart Education Group Limited, a company listed on the New York Stock Exchange (NYSE: ONE), from March 2018 to February 2020. Ms. Zhang received a master of business administration degree from Harvard Business School in 2003. Ms. Zhang will bring to our board leadership experience in a consumer-focused industry in China, extensive financial expertise and public company board experience.

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ITEM 2.Ratification    Authorization to Repurchase Shares up to 10% of Independent AuditorOutstanding Shares.

 

 

 

What am I voting on?This section serves as a reference to the explanatory statement pursuant to Rule 10.06(1)(b) of the Hong Kong Listing Rules to provide information for our stockholders to make a reasonably informed decision on whether to vote for or against the resolution with respect to the authorization to repurchase shares to be proposed at the Special Meeting.

We are asking stockholdershave historically used share repurchases as a means of returning cash to approve a proposal to ratify the appointment of KPMG Huazhen LLP (“KPMG”) as our independent auditor for 2021. KPMG has served as our independent auditor since 2016.

As part of its audit engagement process, the Audit Committee considers on at least an annual basis the engagement of the independent auditor. In deciding to engage KPMG as the independent auditor for 2021, the Audit Committee considered:

KPMG’s performance in 2020;

KPMG’s independence;

stockholders. The depth and expertise of the KPMG’s audit team, including its understanding of the Company’s industry, business, operations and systems, as well as accounting policies and processes;

The appropriateness of KPMG’s fees;

A consideration of KPMG’s known legal risks and significant proceedings that may impair its ability to perform the audit; and

KPMG’s tenure as the Company’s independent auditor.

KPMG rotates its lead audit engagement partner every five years. The Audit Committee is directly involved in the evaluation of the lead audit engagement partner to ensure that the he or she is appropriately qualified to lead the Company’s audit. After considering the criteria set forth above, the Audit CommitteeBoard believes that, retaining KPMG asafter we become a primary-listed company on the Company’s independent auditorHong Kong Stock Exchange it is in the best interests of the Company and our stockholders to continue have a general authority from our stockholders to enable our Company to purchase shares of common stock in the markets. Further, the Company prioritizes the equality of our stockholders, regardless of the exchange on which the shares they hold trade. After we become a primary-listed company on the Hong Kong Stock Exchange, our goal is to maintain that priority and ensure that our stockholders holding our shares that trade on the Hong Kong Stock Exchange are also allowed the benefit of our share repurchase program.

The Company first adopted a share repurchase program in the U.S. in 2017 (the “U.S. Repurchase Program”) and has increased the authorization thereunder from time to time. The Company has also adopted plans in compliance with Rule 10b5-1 and/or Rule 10b-18 of the Securities Exchange Act of 1934 (the “Exchange Act”) to effect repurchases under the U.S. Repurchase Program. After we become a primary-listed company on the Hong Kong Stock Exchange, we intend to carry on the U.S. Repurchase Program. It is also anticipated that we will adopt a share repurchase program in Hong Kong which is analogous to the U.S. Repurchase Program after the Primary Conversion.

Under the Hong Kong Listing Rules, a primary-listed company must obtain authority from its stockholders.

Willstockholders to repurchase its shares on the Hong Kong Stock Exchange if it wishes to conduct share repurchases on the Hong Kong Stock Exchange. Granting the Company this authority is a representativeroutine matter for primary-listed companies on the Hong Kong Stock Exchange and is consistent with

market practice. After we become a primary-listed company on the Hong Kong Stock Exchange, we expect to propose a renewal of KPMG attend the Annual Meeting?

Representatives of KPMG will attend thethis authorization during our 2023 Annual Meeting of Stockholders and annually thereafter. Without this authority, the Company’s ability to repurchase shares would be limited to the repurchase of shares that trade on the NYSE and would not include repurchases on the Hong Kong Stock Exchange. Granting the Company this authority will haveensure continuous parity between investors who hold our shares that trade on the opportunityNYSE and investors that hold our shares on the Hong Kong Stock Exchange. Any repurchases made in Hong Kong or the United States will reduce the available authority under the repurchase mandate and the repurchase authorization.

In connection with the authorizations established by the Board regarding our share repurchase programs, these repurchases would be made only at price levels that the Company would consider to make a statement if they

desire and will be available to respond to appropriate questions from stockholders.

What vote is required to approve this proposal?

Approval of this proposal requiresin the affirmative vote of a majoritybest interests of the shares present via webcast or represented by proxy and entitled to vote atstockholders generally, after taking into account the Annual Meeting.

The Audit Committee and theCompany’s overall financial position. Our Board of Directors recommendhas authorized an aggregate of $2.4 billion for our share repurchase program, including its most recent increase in authorization in March 2022. As of June 30, 2022, approximately $1.2 billion remained available under that you vote FOR approvalprogram. As a Delaware corporation, we are bound by the requirements the Delaware General Corporation Law, which prohibits a corporation from purchasing its shares of this proposal.capital stock when the purchase would cause any impairment of our capital, as well as applicable SEC and NYSE requirements.

Share Capital

What were KPMG’s fees for audit and other services for 2020 and 2019?

The following table presents fees for professional services rendered by KPMG forAs of August 24, 2022, the audittotal number of outstanding shares of common stock of the Company’s annual financial statements,Company was [             ]. Pursuant to this proposal, and fees billedassuming for audit-related services, tax services and all other services rendered by KPMG for 2020 and 2019. All KPMG services for 2020 and 2019 were approved in advance byillustrative purposes that our outstanding shares remain unchanged from August 24, 2022 to the Audit Committee specifically or pursuantdate of the Special Meeting, we are seeking continuing authority to procedures outlined below.repurchase up to a maximum of [                    ] shares of common stock, representing 10% of our outstanding shares as of the date

   2020    2019 

Audit fees(1)

  $    3,840,887   $    2,613,403 

Audit-related fees(2)

   236,235    12,237 

Tax fees(3)

   29,253    25,905 

All other fees

   —    — 
  

 

 

 

TOTAL FEES

  $4,106,375   $2,651,545 
  

 

 

 

(1)

Audit fees include fees for the audit of the annual consolidated financial statements included in the Company’s annual reports, reviews of the interim condensed consolidated financial statements included in the Company’s quarterly reports, and services related to statutory filings or engagements. Audit fees in 2020 also included audit services in connection with our global offering and secondary listing on the HKEX.

(2)

Audit-related fees include audits of certain employee benefit plans and agreed-upon procedures. Audit-related fees in 2020 also included the

 

 

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review of internal controls in connection with our global offering and secondary listing on the HKEX, which are not reported under “Audit fees.”

(3)

Tax fees consist principally of fees for tax filling assistance services.

Whatof the Special Meeting. The authority will be effective for a period from the Primary Conversion Effective Date until the earlier of the 2023 Annual Meeting of Stockholders or June 26, 2023, unless earlier revoked or modified by a duly adopted resolution of the stockholders. As noted, June 26, 2023 is the Company’s policy regardingthirteen-month anniversary of the approval2022 Annual Meeting and reflects the end date of audit and the authorization, after which the authorization cannot extend.

non-audit services?Funding of Repurchase

The Audit Committee has implementedrepurchases may depend on market conditions and funding arrangements at the time and will be made only when the Company believes that such repurchases will benefit the Company and our stockholders. Repurchases of shares of common stock will be funded out of funds legally available for such purposes in accordance with the Company’s Amended and Restated Bylaws, the Hong Kong Listing Rules, applicable U.S. federal law, Delaware law, the NYSE listing standards, and other applicable laws and regulations in U.S. and Hong Kong.

Impact of Repurchases

The repurchase of common stock pursuant to this proposal may have a policymaterial adverse impact on the working capital or leverage of the Company as compared with the position as at June 30, 2022 in the event that the proposed repurchases were to be carried out in full at any time during proposed repurchase period. However, our directors are subject to fiduciary duties to the Company and are bound by the requirements the Delaware General Corporation Law, which prohibits a corporation from purchasing its shares of capital stock when the purchase would cause any impairment of our capital.

The Code on Takeovers and Mergers (the “Takeovers Code”)

If, as a result of a repurchase pursuant to the authorization to repurchase shares, a stockholder’s proportionate interest in the voting rights of our Company increases, such increase will be treated as an acquisition of voting rights for the pre-approvalpurposes of all auditthe Takeovers Code. Accordingly, a stockholder, or a group of stockholders acting in concert (within the meaning under the Takeovers Code), depend-

ing on the level of increase in the stockholder’s interest, could obtain or consolidate control of our Company and permitted thereby become obliged to make a mandatory offer in accordance with Rule 26 of the Takeovers Code.

As of August 24, 2022, to the best knowledge and belief of our Board of Directors, our largest stockholder beneficially owned 40,727,617 shares of common stock, representing approximately [    ]% of our outstanding shares, based on Amendment No. 3 to the Schedule 13G filed on February 10, 2022 with the SEC by the stockholder. In the event that our Board of Directors should exercise in full the authorization to repurchase shares, the shareholding of our largest stockholder will be increased to approximately [    ]% of our outstanding shares.

To the best knowledge and belief of our Board of Directors, such increase would not give rise to an obligation to make a mandatory offer under the Takeovers Code. Our Board of Directors has no present intention to repurchase the shares of common stock to the extent that will trigger the obligations under the Takeovers Code for our largest stockholder to make a mandatory offer. Our Board of Directors is not aware of any other consequences which may arise under the Takeovers Code as a result of a repurchase pursuant to the authorization to repurchase shares. The Hong Kong Listing Rules prohibit a company from buying back shares on the Hong Kong Stock Exchange if the result of the repurchases would be that less than 25% (or such other prescribed minimum percentage as determined by the Hong Kong Stock Exchange) of our outstanding shares would be in public hands. Our Board of Directors does not propose to repurchase shares which would result in less than the prescribed minimum percentage of shares of common stock in public hands.

non-auditMarket Prices of Shares services, including tax services, proposed

This section includes information required to be provided to the Company by its independent auditor. Under the policy, the Audit Committee may approve engagements on a case-by-case basis or pre-approve engagements on a categorical basis 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 Chairperson.

In considering pre-approvals, the Audit Committee considers the nature, scope and feesRule 10.06(1)(b) of the serviceHong Kong Listing Rules. While our shares are primary listed on the NYSE, the information set forth below relates exclusively to be pro-

vided toour secondary listing on the Company as well asHong Kong Stock Exchange and is therefore provided in Hong Kong dollars. The below values do not represent trading prices of our shares on the principles and guidance established by the SEC and the Public Company Accounting Oversight Board (“PCAOBNYSE.”) with respect to auditor independence. Services as to which a general pre-approval has been granted on an annual basis are effective for the applicable year. Any proposed service for which the estimated fees would cause the total fees for that class of service to exceed the applicable estimated fee threshold requires specific approval by the Audit Committee or its delegate.

The Principal Accounting Officer monitors the performance of all services provided by the independent auditor and determines whether such services are in compliance with this policy. The Principal Accounting Officer reports periodically to the Audit Committee with respect to compliance with this policy and the status of outstanding engagements, including actual services provided by the independent auditor and associated fees, and must promptly report to the Chairperson of the Audit Committee any non-compliance (or attempted non-compliance) with this policy of which the Corporate Controller becomes aware.

 

 

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ITEM 3.    Advisory Vote on Named Executive Officer Compensation

What am I voting on?

In accordance with SEC rules, we are asking stockholders to approve, on a non-binding basis, the compensation of the Company’s named executive officers as disclosed in this proxy statement. This non-binding advisory vote is also known as the “Say on Pay” vote. This is not a vote on the Company’s general compensation policies or the compensation of the Board. At the 2020 annual meeting of the Company’s stockholders, approximately 94% of the votes cast by our stockholders were voted in approval of the compensation of our named executive officers as disclosed in the 2020 proxy statement.

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 stockholder 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 stockholders.

In deciding how to vote on this proposal, we urge you to read the Compensation Discussion and Analysis section of this proxy statement, which discusses in detail how our compensation policies and procedures operate and are

designed to meet our compensation goals and how our Compensation Committee makes compensation decisions under our programs.

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

“RESOLVED, that the compensation paid to the named executive officers, as disclosed in the Compensation Discussion and Analysis, the compensation tables and related materials included in the proxy statement, is hereby approved.”

What vote is required to approve this proposal?

Approval of this proposal requires the affirmative vote of a majority of shares present via webcast 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 Compensation Committee will review the voting results and consider stockholder concerns in their continuing evaluation of the Company’s compensation program.

What is the recommendation of the Board of Directors?

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

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ITEM 4.    Approval of an Amendment to the Company’s Amended and Restated Certificate of Incorporation to Allow Stockholders Holding 25% of the Company’s Outstanding Shares the Right to Call Special Meetings

In connection with the secondary listing of the Company’s common stock on the HKEX, the Board agreed to propose an amendment to the Company’s Amended and Restated Certificate of Incorporation to allow stockholders holding not less than 25% of the Company’s outstanding shares the right to call special meetings of stockholders (the “Special Meeting Amendment”), and if the stockholders approve the Special Meeting Amendment, to amend the Company’s Bylaws accordingly. The description in this Proposal 4 of the proposed Special Meeting Amendment is qualified in its entirety by and should be read in conjunction with the full text of the Special Meeting Amendment set forth in Article SEVENTH(b) of the proposed Amended and Restated Certificate of Incorporation, which is included as Appendix A to this proxy statement.

If this Proposal 4 is approved by our stockholders, the Board plans to adopt amendments to the Bylaws to implement the special meeting request right. The description in this Proposal 4 of the contemplated amendments to the Bylaws is qualified in its entirety by and should be read in conjunction with the full text of the contemplated amendments, which are set forth in Appendix B to this proxy statement.

Description of the Amendment to the Amended and Restated Certificate of Incorporation

Delaware law does not grant stockholders of a corporation the absolute right to call or to request that the corporation call a special meeting. Rather, it provides that special meetings of stockholders may be called by the board of directors or by such person or persons as may be authorized by the certificate of incorporation or by the bylaws of the corporation. Our Amended and Restated Certificate of Incorporation currently allows special meetings of stockholders to be called only (i) by the Board or (ii) by the Chairman of the Board, the CEO or the Corporate

Secretary, in each case with the concurrence of a majority of the Board. If this Proposal 4 is approved by stockholders, special meetings may also be called by the Corporate Secretary upon the written request of stockholders holding at least 25% of our outstanding shares of common stock and who otherwise comply with the requirements set forth in the Bylaws.

The Board believes that a 25% ownership threshold strikes an appropriate balance between giving stockholders the ability to call a special meeting to vote on important matters and protecting the interests of all Yum China stockholders and resources of Yum China. The 25% ownership threshold is also aligned with the interests of stockholders and is consistent with prevailing market practice at large U.S. public companies.

Overview of Related Changes to the Bylaws

If this Proposal 4 is approved by our stockholders, our Board of Directors will adopt amendments to the Bylaws to implement the special meeting request right, which are expected to include provisions setting forth the holding period, procedural and informational requirements described below. Our Board of Directors believes that these requirements are important to protect the long-term interests of the Company and its stockholders by deterring against the abuse of the right to request a special meeting. Among other things, these procedural and informational requirements are designed to ensure that the Company avoids duplicative and unnecessary special meetings addressing matters recently considered by stockholders or that stockholders will soon consider at an upcoming stockholder meeting. In addition, they provide certain protections so that the special meeting right is not abused by short-term stockholders, including those with special interests, and prevent them from triggering the expense and distraction of a special meeting (i) to pursue interests that are not widely shared by our stockholders or (ii) for reasons that may not be in the best interests of Yum China

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The shares of common stock were listed on the Hong Kong Stock Exchange on September 10, 2020. The following table sets forth the highest and lowest prices at which the shares of common stock traded on the Hong Kong Stock Exchange during each month during the previous twelve months and until July 2022:

Yum China’s Highest and Lowest Monthly Close Price (July 2021 – July 2022)

   Share price 
    Highest   Lowest 
   (HK$)   (HK$) 

2021

    

July

   514.5    467.8 

August

   480.2    453.0 

September

   498.2    416.4 

October

   473.8    450.0 

November

   449.8    390.2 

December

   407.0    366.6 

2022

    

January

   390.4    348.8 

February

   412.8    347.4 

March

   416.4    290.0 

April

   355.4    313.2 

May

   360.2    292.8 

June

   385.2    320.4 

July

   392.2    358.2 

Repurchases of Shares

For the year ended December 31, 2021 and the six months ended June 30, 2022, we repurchased approximately 1.3 million shares and 9 million shares of our stockholders. These provisions are also intendedcommon stock in open market transactions for a total cost of approximately $75 million and $400 million, respectively.

The approval of this proposal is a condition for the Primary Conversion to providebecome effective.

In the event that the Primary Conversion does not become effective, the Company with reasonable information regardingand its Board will retain the identityability to authorize and carry out stock repurchases to the full extent permitted under applicable U.S. federal law, Delaware law, the NYSE listing standards, and the Company’s organizational documents, notwithstanding the outcome of this vote.

Accordingly, we ask our stockholders to vote in favor of the requesting stockholders and the matters proposed to be addressedfollowing resolution at the special meeting. These requirements include, without limitation:Special Meeting:

The requesting stockholder(s) must have heldTo approve the requisiteBoard’s continuing authority to approve the Company’s repurchase of shares of its common stock in an amount not to exceed 10% of the Company’stotal number of outstanding shares of common stock for at least one year prior to requesting the special meeting.

The requesting stockholder(s) must provide information demonstrating that such stockholders have continuously owned 25% or more of the Company’s common stock for at least one year.

The requesting stockholder(s) must provide information regarding the business proposed to be conducted at the special meeting and information regarding the requesting stockholder(s) that is generally similar to the information required in order for a stockholder to nominate directors or propose business at our annual meetings.

In order to avoid duplicative or unnecessary special meetings, the provisions provide for certain circumstances where a special meeting request would not be valid. For example, a special meeting cannot be requested beginning 90 days prior to the first anniversary dateCompany as of the preceding annual meeting of stockholders and ending on the date of the final adjournmentSpecial Meeting, effective from the Primary Conversion Effective Date until the earlier of the date the next annual meeting is held or if a substantially similar item was presented at any meeting of stockholders held within 120 days prior to our receipt of the special meeting request or is included in our notice of a stockholder meeting that has been or will be called and will be held within 90 days after receipt of the special meeting request. We are also not required to call a special meeting if the proposed special meeting relates to an item of business that is not a matter on which stockholders are

authorized to act under, or that involves a violation of, applicable law.

If the conditions described in the Bylaw amendments are satisfied, we would be required to hold a stockholder-requested special meeting within 90 days after receipt of proper stockholder request for the meeting. Business transacted at the meeting would be limited to the purpose(s) stated in the special meeting request, and any other matters submitted to the meeting by our Board.

After these Bylaw amendments are adopted, these provisions will be subject to further possible amendments or modifications from time to time by the Board in accordance with the amendment provisions of the Bylaws.June 26, 2023.

What vote is required to approve this proposal?

In order to be approved,Approval of this Proposal 4proposal requires the affirmative vote of the holders of a majority of the shares of our common stock outstandingpresent via webcast or represented by proxy and entitled to vote onat the Special Meeting Amendment. If the Company’s stockholders approve this Proposal 4, we intend to promptly file with the Secretary of State of the State of Delaware the Amended and Restated Certificate of Incorporation setting forth the Special Meeting Amendment attached to this proxy statement as Appendix A, and we will adopt amendments to the Bylaws attached to this proxy statement as Appendix B to implement the special meeting request right. If the Company’s stockholders do not approve this Proposal 4, stockholders will not have the ability to request that the Company call a special meeting.

What is the recommendation of the Board of Directors?Meeting.

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

 

 

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ITEM 3.    Approval of Yum China Holdings, Inc. 2022 Long Term Incentive Plan.

On August 15, 2022, the Board approved the Yum China Holdings, Inc. 2022 Long Term Incentive Plan (the “2022 LTIP”), subject to approval by our stockholders at the Special Meeting. Following approval by our stockholders at the Special Meeting, the 2022 LTIP will become effective upon consummation of the Primary Conversionin accordance with its terms.

If the 2022 LTIP is approved by stockholders, the 2022 LTIP will replace the Yum China Holdings, Inc. Long Term Incentive Plan (the “2016 LTIP”), which was adopted in connection with our spin-off from Yum! Brands, Inc. (“YUM”). No new awards will be granted under the 2016 LTIP after the 2022 LTIP becomes effective, but the 2016 LTIP will continue to govern awards granted under the 2016 LTIP prior to the effectiveness of the 2022 LTIP. After the 2022 LTIP becomes effective upon consummation of the Primary Conversion, we will be able to make awards of long-term equity incentives under the 2022 LTIP, which we believe are critical for attracting, motivating, rewarding and retaining a talented team who will contribute to our success.

If the 2022 LTIP is not approved by our stockholders or the Primary Conversation does not become effective, the Company will continue to operate the 2016 LTIP pursuant to its current provisions and grant awards under the 2016 LTIP.

The 2022 LTIP is largely based on the 2016 LTIP, but with updates to conform to the Hong Kong Listing Rules, to delete provisions relating to our spin-off that are no longer applicable and to make certain other administrative changes.The 2022 LTIP will be subject to the requirements under Chapter 17 of the Hong Kong Listing Rules, as amended, supplemented or otherwise modified from time to time.

Equity Grant Practices

We attempt to manage our long-term shareholder dilution by limiting the number of equity incentive awards we grant annually. The Compensation Committee carefully monitors our annual burn rate, total dilution, and equity expense in order to maximize shareholder value by granting only the number of equity incentive awards that it believes is necessary to attract, reward, and retain employees.

As of August 24, 2022, there were [             ] shares of Company common stock subject to restricted stock unit (“RSU”) and performance stock unit (“PSU”) awards granted and outstanding under the 2016 LTIP (assuming achievement of the target vesting level for the outstanding PSUs). Under the terms of the award agreements, the vesting levels for PSU awards may range from 0% to 200% of target (or, in some cases, 240% of target), depending on achievement against the applicable performance goals with respect to such awards. As of August 24, 2022, there were [             ] shares of Company common stock subject to stock options and stock appreciation rights (“SARs”) outstanding under the 2016 LTIP. As of that date, the weighted average base price of our outstanding SARs and stock options was $[             ], and the weighted average remaining contractual term for the outstanding SARs and stock options was [    ] years. As of August 24, 2022, there were [             ] shares of Company common stock that remained available for future issuances under the 2016 LTIP (assuming outstanding performance awards are counted at the maximum vesting level and applying the two-for-one fungible share ratio applicable to RSU and PSU awards). If our stockholders approve the 2022 LTIP, then after the 2022 LTIP becomes effective upon consummation of the Primary Conversion, we will not make any additional awards under the 2016 LTIP.

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Burn rate is a measure of the number of shares subject to equity awards that we grant annually, which helps indicate the life expectancy of our equity plans and is a measure of stockholder dilution. We determine our burn rate

by dividing the aggregate number of shares subject to awards granted during the year by the weighted average number of shares outstanding during the year. Our burn rate for the past three fiscal years has been as follows:

     Full Value Awards      



Weighted

Average

Number of

Ordinary
Shares
Outstanding

 

 

 

 
 
 

  
    

SARs

Granted

   

RSUs

Granted

   

PSUs

Granted(1)

   

Direct

Stock
Issuances

Granted

   

SARs +

Full Value

Awards

   

Burn

Rate

 

2021

   1,171,030    460,785    135,241    31,182    1,798,238    422,540,478    0.43% 

2020

   1,313,547    103,913    1,110,091    54,757    2,582,308    389,907,587    0.66% 

2019

   1,468,569    284,076    47,700    60,419    1,860,764    377,361,406    0.49% 

(1)

Our annual PSU grants have a three-year period and cliff vest following the expiration of the three-year performance period.

Our three-year average burn rate is 0.53%. Applying the two-for-one fungible share ratio applicable to full value awards granted under the 2016 LTIP would result in a three-year average burn rate of 0.72%.

Certain Corporate Governance Features of the 2022 LTIP

The following features of the 2022 LTIP are designed to reinforce alignment between the equity compensation arrangements awarded pursuant to the 2022 LTIP and our stockholders’ interests:

Awards will be subject to a one-year minimum vesting period, subject to limited exceptions set forth in the 2022 LTIP as described below and the Committee’s (as defined below) ability to provide for accelerated exercisability or vesting of any award in cases of retirement, separation, retention, death, disability or a change in control, as set forth in the terms of the award agreement or otherwise;

Full Value Awards (as defined below) reduce the available share pool on a two-for-one basis, while stock options and SARs reduce the share reserve on a one-for-one basis;

No discounting of stock options or SARs;

No repricing or replacement of underwater stock options or SARs without stockholder approval;

No dividend equivalents on stock options or SARs;

No dividends or dividend equivalents paid on unearned awards;

Annual non-employee director compensation limit;

During any five calendar-year period, no individual may receive stock options and SARs with respect to more than 9,000,000 shares or Full Value Awards with respect to more than 3,000,000 shares;

No “liberal” change in control definition under the 2022 LTIP;

No automatic single trigger vesting upon a change in control; and

Awards granted under the 2022 LTIP will be, unless otherwise specified by the Committee, subject to our compensation recovery, clawback and recoupment policies as in effect from time to time.

Purposes of the 2022 LTIP

Equity-based compensation is a significant component of our compensation program and the 2022 LTIP is intended to serve the following purposes:

Attract and retain persons eligible to participate in the 2022 LTIP;

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Motivate participants, by means of appropriate incentives, to achieve long-range goals;

Provide incentive compensation opportunities that are competitive with those of other similar companies; and

Align the interests of participants with those of the Company’s stockholders.

Under the 2022 LTIP, the Company may grant:

Non-qualified stock options;

Incentive stock options (within the meaning of Section 422 of the Internal Revenue Code);

SARs;

“Full Value Awards” (including restricted stock, RSUs, performance shares and performance units); and

Cash incentive awards.

Description of the 2022 LTIP

The following description is qualified in its entirety by reference to the plan document, a copy of which is attached as Appendix A and incorporated into this proxy statement by reference.

Administration

The 2022 LTIP is administered by a “Committee” selected by the Board consisting of two or more non-employee members of the Board or, if no Committee is selected or for any other reason determined by the Board, the Board may take any action under the 2022 LTIP that would otherwise be the responsibility of the Committee. The Compensation Committee currently serves as the “Committee” under the 2016 LTIP and is expected to serve as the “Committee” under the 2022 LTIP. The members of the Compensation Committee meet the independence requirements of the NYSE.

Subject to the express provisions of the 2022 LTIP, the Committee has the authority and discretion to, among other items, (a) select from among the eligible individuals

those persons who will receive awards under the 2022 LTIP, (b) determine the time or times of receipt, (c) determine the types of awards and the number of shares covered by the awards, (d) establish the terms, conditions, performance targets, restrictions and other provisions of such awards, and, subject to the terms and conditions of the 2022 LTIP, cancel or suspend awards or accelerate the exercisability or vesting of any award, (e) to the extent that the Committee determines that the restrictions imposed by the 2022 LTIP preclude the achievement of the material purposes of the awards in jurisdictions outside the United States, modify those restrictions as the Committee determines to be necessary or appropriate to conform to applicable requirements or practices of jurisdictions outside of the United States, (f) conclusively interpret the 2022 LTIP, (g) establish, amend and rescind any rules and regulations relating to the 2022 LTIP, (h) determine the terms and provisions of any award agreement made pursuant to the 2022 LTIP and (i) make all other determinations that may be necessary or advisable for the administration of the 2022 LTIP.

Except to the extent prohibited by applicable law or the applicable rules of a stock exchange on which shares of the Company’s common stock are listed, 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.

Available Shares

Subject to the capitalization adjustment provisions included in the 2022 LTIP, the maximum number of shares of Company common stock that may be delivered to participants and their beneficiaries in respect of all awards to be granted under the 2022 LTIP will be the lower of (i) 32,000,000 shares and (ii) 10% of the total number of shares of Company common stock outstanding as of the date of the Special Meeting (the “10% Limit”), reduced by the number of shares (or, with respect to Full Value Awards, two times the number of shares) subject to any grants that occur under the 2016 LTIP between August 24, 2022 and the effectiveness of the 2022 LTIP. The number of shares that may be delivered to participants and their beneficiaries under the 2022 LTIP may be increased by our stockholders in a general meeting after

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three years from the date of their approval of the previous increase (or the date of the adoption of the 2022 LTIP). Additional increases within any three-year period must be approved by our independent stockholders in a manner compliant with Chapter 17 of the Hong Kong Listing Rules in force from time to time. Any increase to the share limit under the 2022 LTIP may not result in the number of shares of Company common stock that may be delivered to participants and their beneficiaries under the 2022 LTIP exceeding 10% of the total number of shares outstanding as of the date our stockholders approve such increase. On the record date, the closing sales price per share of Company common stock as reported on the NYSE was $[]. Shares available under the 2022 LTIP will be authorized but unissued shares.

To the extent shares subject to an award granted under the 2022 LTIP were not issued or delivered by reason of (i) lapse of awards due to termination, expiration or forfeiture of such award, (ii) the settlement of such award in cash, or (iii) the withholding of such shares by the Company to satisfy the applicable tax withholding obligation or exercise price (by way of net settlement or net exercise), in each case, then such shares will not reduce the number of shares remaining available for issuance under the 2022 LTIP. Only the shares subject to a stock-settled SAR that are issued to a participant upon exercise of such stock-settled SAR will reduce the number of shares remaining available for issuance under the 2022 LTIP. In addition, subject to the 10% Limit, (x) shares withheld by the Company after August 24, 2022 to pay the withholding taxes related to an outstanding award granted under the 2016 LTIP and (y) shares subject to awards granted under the 2016 LTIP between August 24, 2022 and the date of the Special Meeting which are not delivered to a participant or beneficiary because they have lapsed in accordance with the terms of the 2016 LTIP, including due to forfeiture, termination, or expiration of the award, in each case, will also become available for grant under the 2022 LTIP.

The 2022 LTIP uses a fungible share counting method, such that Full Value Awards reduce the 2022 LTIP’s share reserve at a ratio of two shares for every share subject to the Full Value Award and stock options and SARs will reduce the share reserve on a one-for-one basis.

Other Share Limits

Under the terms of the 2022 LTIP, (i) the number of shares initially available for grants of incentive stock options under the 2022 LTIP equals 32,000,000, subject to any lower limits imposed under the Hong Kong Listing Rules or the rules of the NYSE; (ii) the maximum number of shares that may be covered by stock options or SARs granted to any one individual during any five calendar-year period will be 9,000,000; (iii) for Full Value Awards, no more than 3,000,000 shares may be subject to Full Value Awards granted to any one individual during any five-calendar-year period; and (iv) a non-employee director may not be granted during any calendar year an award or awards having a value determined on the grant date in excess of $1,500,000.

In addition, to the extent any grant of an award to any one individual would result in the shares issued or to be issued in respect of all awards granted to such individual (excluding any awards that have been forfeited or lapsed in accordance with the terms of the 2022 LTIP) in the 12-month period up to and including the date of such grant representing in the aggregate more than the limit set out in the Hong Kong Listing Rules (currently 1% of the shares of the Company issued as of such date), then such grant must be separately approved by our stockholders in accordance with the Hong Kong Listing Rules. Pursuant to the Hong Kong Listing Rules, if (i) a grant of an award (excluding options and SARs) (the “Other Equity Awards”) to any one of our directors whose role is executive in nature or our Chief Executive Officer or any of their associates would result in the shares issued and the shares to be issued in respect of all Other Equity Awards granted (excluding the awards lapsed in accordance with the 2022 LTIP) in the 12-month period up to and including the date of such grant representing in aggregate over 0.1% of the total issued shares on the date of such grant, or (ii) a grant of an award (including options, SARs and any other types of share awards) to any one of our independent directors or substantial shareholder of the Company or any of their associates would result in the shares issued and the shares to be issued in respect of all awards (excluding the awards lapsed in accordance with the 2022 LTIP) in the 12-month period up to and including the date of such grant representing in aggregate over 0.1% of the total issued shares on

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the date of such grant, such further grant exceeding the 0.1% limit must be approved by our stockholders.

Change in Control

Unless otherwise provided in the 2022 LTIP or an award agreement, in the event a participant’s employment is involuntarily terminated by the Company other than for cause on or within two years following a change in control of the Company, then (i) all outstanding options (regardless of whether in tandem with SARs) will become fully exercisable, (ii) all outstanding SARs (regardless of whether in tandem with options) will become fully exercisable, and (iii) all Full Value Awards will become fully vested and the Committee will determine the extent to which any applicable performance conditions have been met in accordance with the terms of the 2022 LTIP and the applicable award agreement. In no event will the application of this provision cause the vesting period of any award held by a participant who is not an Employee Participant (as defined below) to be less than 12 months.

Under the terms of the 2022 LTIP, a change in control is generally defined as (i) a change in our Board resulting in the incumbent directors ceasing to constitute at least a majority of our Board, (ii) certain acquisitions of 35% or more of the Company’s then outstanding securities eligible to vote for the election of our Board, or (iii) the consummation of certain mergers or consolidations involving the Company or any of its subsidiaries.

No Repricing

Other than pursuant to the adjustment provisions described below or as approved by the Company’s stockholders, the exercise price for any outstanding option or SAR may not be decreased and no outstanding option or SAR may be surrendered to the Company in exchange for a replacement option or SAR with a lower exercise price or a Full Value Award. Except as approved by the Company’s stockholders, no option or SAR may be surrendered to the Company in consideration for a cash payment if, at the time of such surrender, the exercise price of the option or SAR is greater than the then current fair market value of a share of Company common stock.

Restrictions, Misconduct and Recoupment

The Committee, in its discretion, may impose such restrictions on shares of stock acquired pursuant to the 2022 LTIP, whether pursuant to the exercise of a stock option or SAR, settlement of a Full Value Award or otherwise, as it determines to be desirable, including restrictions relating to disposition of the shares and forfeiture restrictions based on service, performance, stock ownership by the participant, conformity with our recoupment, compensation recovery or clawback policies and such other factors as the Committee determines to be appropriate.

If the Committee determines that a present or former employee has (a) used for profit or disclosed to unauthorized persons, confidential or trade secrets of the Company or our subsidiaries, (b) breached any contract with or violated any fiduciary obligation to the Company or our subsidiaries, or (c) engaged in any conduct which the Committee determines is injurious to us or our subsidiaries, the Committee may cause that employee to forfeit his or her outstanding awards under the 2022 LTIP. This provision does not apply during any period where there is a potential change in control in effect or following a change in control.

Effective Date, Termination and Amendment

The 2022 LTIP will become effective upon consummation of the Primary Conversionand will terminate on the ten-year anniversary of its approval by our stockholders. Subject to applicable law and the listing rules of the NYSE and the Hong Kong Stock Exchange, the Board may, at any time, amend or terminate the 2022 LTIP (and the Committee may amend any award agreement). However, no amendment or termination of the 2022 LTIP or amendment of any award agreement may, in the absence of written consent to the change by the affected participant or beneficiary, if applicable, adversely affect in any material way the rights of any participant or beneficiary under any award granted under the 2022 LTIP prior to the date of such amendment or termination, unless the Committee expressly reserved the right to do so at the time the award was granted. Adjustments pursuant to corporate transactions and restructurings are not subject to the foregoing limitations. In addition, all material amendments to the 2022 LTIP, including but not limited to amendments to

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the provisions of the 2022 LTIP that prohibit the repricing of stock options and SARs, amendments expanding the group of eligible individuals, or amendments increasing the aggregate number of shares reserved under the 2022 LTIP, the shares that may be issued in the form of incentive stock options, the individual limits on awards and the limitations on awards, will not be effective unless approved by our stockholders, in each case, to the extent required by applicable law. In addition, no amendment will be made to the 2022 LTIP, applicable award agreements or the terms of award granted under the 2022 LTIP without the approval of our stockholders, the Board, the independent directors of the Board or the Committee, as applicable, if such approval is required by law or the rules of any stock exchange on which shares of the Company common stock are listed, including the rules of the NYSE and the Hong Kong Stock Exchange. Further, the amended Plan or the amended award agreement must still comply with the relevant applicable laws or applicable rules of any stock exchange on which the Stock is listed. Upon termination of the 2022 LTIP, no further award will be offered but the provisions of the 2022 LTIP will remain in full force and effect with respect to awards granted prior to the termination of the 2022 LTIP, and termination of the 2022 LTIP will not affect the terms or conditions of any award granted prior to termination. Awards granted prior to such termination will continue to be valid and exercisable in accordance with the 2022 LTIP.

Eligibility

Participants in the 2022 LTIP will consist of such officers, directors or other employees of the Company, its subsidiaries or its associated companies in which the Company has an equity interest and persons who are expected to become officers, employees or directors of the Company or a subsidiary or an associated company in which the Company has an equity interest, as may be selected by the Committee. Grants of awards under the 2022 LTIP will be made based on the basis of the contributions of participants to the development and growth of the Company, as determined by the Company and, except as required by applicable law, the participant is not required to pay any amount in order to apply or accept an award.

As of July 31, 2022, approximately 400,000 employees, including ten executive officers, and nine non-employee

directors would be eligible to participate in the 2022 LTIP if selected by the Committee.

Performance Measures

Performance measures used with respect to performance-based awards granted under the 2022 LTIP may include any one or more of the following corporate-wide or subsidiary, division, operating unit, line of business, project, geographic or individual measures: cash flow; earnings; earnings per share; market value added or economic value added; profits; return on assets; return on equity; return on investment; sales; revenues; stock price; total shareholder return; customer satisfaction metrics; restaurant unit development; and such other goals as the Committee may determine whether or not listed in the 2022 LTIP, or any combination of the foregoing.

Minimum Vesting Conditions

Notwithstanding any other provision of the 2022 LTIP to the contrary, awards granted under the 2022 LTIP (other than cash-based awards) will vest no earlier than the first anniversary of the date on which the award is granted; provided, that the following awards granted to directors, officers or other employees of the Company or any of its subsidiaries and persons who are expected to become directors, officers or other employees of the Company or any of its subsidiaries (“Employee Participants”) will not be subject to the foregoing minimum vesting requirement: any (i) substitute awards granted in connection with awards that are assumed, converted or substituted pursuant to a merger, acquisition or similar transaction entered into by the Company or any of its subsidiaries, (ii) shares subject to a minimum holding period of 12 months which are delivered to an Employee Participant under his or her compensation arrangements with the Company (including shares of Company common stock delivered to non-employee directors in respect of their annual retainers), (iii) awards to non-employee directors that vest on earlier of the one-year anniversary of the date of grant and the next annual meeting of stockholders which is at least 50 weeks after the immediately preceding year’s annual meeting, and (iv) additional awards the Committee may grant, up to a maximum of five percent (5%) of the available share reserve authorized for issuance under the 2022 LTIP (subject to adjustment under the corporate

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capitalization provisions under the 2022 LTIP) in respect of (A) sign-on or make-whole grants to new Employee Participants, (B) grants of awards with performance-based vesting conditions, (C) grants of awards that are made in batches for administrative or compliance reasons, (D) grants of awards that vest evenly over a period of 12 months or more and (E) grants of awards with a total vesting and holding period of more than 12 months.

The Board and the Committee believe that the types of awards described in clauses (i) to (iv) in the previous paragraph are appropriate and align with the purposes of the 2022 LTIP (i.e., to attract and retain individuals to the Company, motivate performance, provide competitive incentive opportunities and align the interests of participants with those of our stockholders). In clause (i), in the context of an acquisition of a target, the transaction may involve the assumption of equity awards granted to the target’s employees. Because the equity awards with respect to the target would represent a contractual arrangement between the target and the participant, the Company would not be able to unilaterally change the terms in a way that would be adverse to the interests of the participant. As such, the Company needs flexibility to grant equity awards with vesting schedules of less than one year to the extent the corresponding award of the target had a vesting schedule of less than one year. In clause (ii), the equity granted would not be a new compensation arrangement but would rather be a settlement of compensation that had already been earned by the participant. To require the Company to include an additional vesting condition of at least 12 months would impair the Company’s ability to stock-settle fully earned awards when the circumstances warranted it and would be unfair to the participants who had already earned such retainer or payment. In the case of awards described in clause (iii), the Committee believes that such awards are appropriate and align with the purposes of the 2022 LTIP as such grants would coincide with the directors’ term in office generally. The exception in clause (iii) would allow the award to vest if the next annual meeting at which directors are elected falls short of the 12-month anniversary of the date of grant, which happens on occasion. In such instance, any director that does not stand for re-election would still vest in his/her award since they served the full term, provided that the annual meeting occurs at least 50 weeks following the prior

annual meeting. Clauses (iv)(A)-(iv)(E) provide the Board and the Committee with the flexibility to grant awards from a limited pool of shares. Sign-on and make-whole grants assist the Company in attracting key talent; and awards with performance-based vesting conditions align the interests of participants with those of our stockholders and provide competitive incentive compensation opportunities. The 12-month minimum vesting requirement does not apply to the Committee’s discretion to provide for accelerated exercisability or vesting of any award in cases of retirement, separation, retention arrangements, death, disability or a change in control, to the extent set forth in the terms of the award agreement or otherwise.The Committee believes that its ability to provide for the accelerated exercisability or vesting of an award in such cases allows it to attract and retain individuals to provide services to the Company and its subsidiaries, and to provide for succession planning and the effective transition of employee responsibilities.

Stock Options and SARs

The 2022 LTIP provides for the grant of stock options and SARs. A SAR entitles the holder to receive upon exercise (subject to withholding taxes) cash or shares of Company common stock with an aggregate value equal to the difference between the fair market value of the shares of Company common stock on the exercise date and the exercise price of the SAR.

The Committee will determine the conditions to the exercisability of each option and SAR. Each option and SAR will be exercisable for no more than ten (10) years after its date of grant. Except in the case of substitute awards granted in connection with a corporate transaction (subject to approval, waiver, confirmation or otherwise as applicable from the Hong Kong Stock Exchange), the exercise price of an option or SAR will not be less than the higher of (i) the fair market value of a share of Company common stock on the date of grant (which must be a NYSE trading day) and (ii) the average fair market value of a share of Company common stock for the five NYSE trading days immediately preceding the date of grant (or, if greater, the par value of a share of Company common stock on such date(s)).

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The exercise price of each option or SAR will be established or determined by a method established by the Committee at the time of grant, subject to the restrictions described above.

Notwithstanding anything in the award agreement to the contrary, the holder of an option or SAR will not be entitled to receive dividend equivalents with respect to the shares of Company common stock subject to such option or SAR.

Full Value Awards and Cash Incentive Awards

A “Full Value Award” is a grant of one or more shares of Company common stock or a right to receive one or more shares of Company common stock in the future (including restricted stock, restricted stock units, performance shares and performance units) that is contingent on continuing service, the achievement of performance objectives during a specified performance period or other restrictions as determined by the Committee. The grant of Full Value Awards may also be subject to such other conditions, restrictions and contingencies, as determined by the Committee. Except as otherwise provided in the 2022 LTIP, no award under the 2022 LTIP will confer upon its holder any rights as a stockholder of the Company prior to the date on which the individual fulfills all conditions for receipt of such rights and shares are registered in his or her name.

A “Cash Incentive Award” is the grant of a right to receive a payment of cash (or in the discretion of the Committee, shares of stock having value equivalent to the cash otherwise payable) that is contingent on achievement of performance objectives over a specified period established by the Committee. The grant of Cash Incentive Awards may also be subject to such other conditions, restrictions and contingencies, as determined by the Committee.

Grants of Full Value Awards will be made based on the basis of their contributions to the development and growth of the Company and its subsidiaries, as determined by the Company, and the participant is not required to pay any purchase price of shares of Company common stock awarded under the Full Value Award and the Cash Incentive Award.

Lapse and Cancellation of Awards

Unless otherwise set forth in the award agreement or determined by the Committee, awards will cease to vest upon a termination of the participant’s employment or service with the Company or the participant ceasing to be an eligible individual under the 2022 LTIP. In the event an option or SAR expires without being exercised during the exercise period or an award does not vest, such award will lapse automatically and be forfeited and cancelled by the Company without action on the part of the participant and for no consideration and the Company will owe no liability to any participant for the lapse of any award under this paragraph.

Rights as Stockholders

The shares of Company common stock to be allotted and issued upon settlement or exercise of an award will rank pari passu in all respects with other fully-paid shares of Company common stock in issue as of the date of allotment. No participant will have any right as a stockholder of the Company with respect to any shares of Company common stock unless and until such participant becomes a stockholder of record with respect to such share of Company common stock. Once a participant becomes a stockholder of record with respect to the share of Company common stock subject to the award, the participant will have all rights as a stockholder, including, but not limited to, voting rights, the right to receive dividends and the right to participate in any capital adjustment applicable to all stockholders.

Transferability of Awards

An award will not be transferable except as designated by the participant by will or by the laws of descent and distribution or, if provided by the Committee, pursuant to a qualified domestic relations order (within the meaning of the Internal Revenue Code and applicable rules thereunder), in each case, to the extent permitted by applicable law. To the extent that a participant who receives an award under the 2022 LTIP has the right to exercise such award, the award may be exercised during the lifetime of the participant only by the participant. Notwithstanding the foregoing, if provided by the Committee and subject to approval, waiver, confirmation or otherwise (as

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applicable) from the Hong Kong Stock Exchange, awards may be transferred to or for the benefit of the participant’s family (including, without limitation, to a trust or partnership for the benefit of a participant’s family), subject to such procedures as the Committee may establish. In no event will an incentive stock option be transferable to the extent that such transferability would violate the requirements applicable to such option under Section 422 of the Internal Revenue Code.

Effect of Capitalization Adjustments

In the event of a capitalization issue, rights issue, subdivision or consolidation of shares or reduction of capital, the Committee will make such equitable adjustments, in accordance with Section 409A of the Internal Revenue Code and the Hong Kong Listing Rules to the extent applicable and as it determines are necessary and appropriate, in: (i) the number and class of securities available under the 2022 LTIP; (ii) the terms of each outstanding option and SAR (including the number and class of securities subject to each outstanding option or SAR and the exercise price or base price per share); and (iii) the terms of each outstanding Full Value Award (including the number and class of securities subject thereto). Only where approval, waiver, confirmation or otherwise as applicable from the Hong Kong Stock Exchange is obtained, in the event of any other equity restructuring event as defined under Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation—Stock Compensation or any successor or replacement accounting standard, or any other change in corporate capitalization, including a merger, consolidation, reorganization, or partial or complete liquidation of the Company, such equitable adjustments described in the foregoing sentence may be made as determined to be appropriate and equitable by the Committee to prevent dilution or enlargement of rights of participants. In case of an adjustment pursuant to the adjustment provisions of the 2022 LTIP, the decision of the Committee regarding any such adjustment will be final, binding and conclusive.

New Plan Benefits

The 2022 LTIP does not provide for set benefits or amounts of awards and the Committee has not approved any awards that are conditioned on shareholder approval. The Committee has the discretion to grant awards under the

2022 LTIP and, therefore, it is not possible as of the date of this proxy statement to determine future awards that will be received by participants under the 2022 LTIP. Information regarding awards granted in 2021 under the 2016 LTIP to the named executive officers is provided in the “2021 Summary Compensation Table” and the “2021 Grants of Plan-Based Awards” table. Information regarding awards granted in 2021 under the 2016 LTIP to non-employee directors is provided in the “2021 Director Compensation” table.

U.S. Federal Income Tax Consequences

The following is a brief summary of certain United States federal income tax consequences generally arising with respect to awards under the 2022 LTIP. This discussion does not address all aspects of the United States federal income tax consequences of participating in the 2022 LTIP that may be relevant to participants in light of their personal investment or tax circumstances and does not discuss any state, local or non-United States tax consequences of participating in the 2022 LTIP. Each participant is advised to consult his or her particular tax advisor concerning the application of the United States federal income tax laws to such participant’s particular situation, as well as the applicability and effect of any state, local or non-United States tax laws before taking any actions with respect to any awards.

Section 162(m) of the Internal Revenue Code

Section 162(m) of the Internal Revenue Code generally limits to $1 million the amount that a publicly held corporation is allowed each year to deduct for the compensation paid to each of the corporation’s chief executive officer, the corporation’s chief financial officer and certain other current and former executive officers of the corporation.

Stock Options

A participant will not recognize taxable income at the time an option is granted and the Company will not be entitled to a tax deduction at that time. A participant will recognize compensation taxable as ordinary income (and subject to income tax withholding in respect of an employee) upon exercise of a non-qualified stock option equal to the excess of the fair market value of the shares purchased over their exercise price, and the Company will

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be entitled to a corresponding deduction, subject to the deduction limits under Section 162(m) of the Internal Revenue Code. A participant will not recognize income (except for purposes of the alternative minimum tax) upon exercise of an incentive stock option. If the shares acquired by exercise of an incentive stock option are held for the longer of two years from the date the option was granted and one year from the date it was exercised, any gain or loss arising from a subsequent disposition of those shares will be taxed as long-term capital gain or loss, and the Company will not be entitled to any deduction. If, however, those shares are disposed of within the above-described period, then in the year of that disposition the participant will recognize compensation taxable as ordinary income equal to the excess of (1) the lesser of the amount realized upon that disposition and the fair market value of those shares on the date of exercise over (2) the exercise price, and the Company will be entitled to a corresponding deduction, subject to the deduction limits under Section 162(m) of the Internal Revenue Code.

SARs

A participant will not recognize taxable income at the time SARs are granted and the Company will not be entitled to a tax deduction at that time. Upon exercise, the participant will recognize compensation taxable as ordinary income (and subject to income tax withholding in respect of an employee) in an amount equal to the fair market value of any shares delivered and the amount of cash paid by the Company, and the Company will be entitled to a corresponding deduction, subject to the deduction limits under Section 162(m) of the Internal Revenue Code.

Full Value Awards

The U.S. federal income tax consequences of a Full Value Award will depend on the type of award. The tax treatment of the grant of shares of Company common stock depends on whether the shares are subject to a substantial risk of forfeiture (as determined under the Internal Revenue Code) at the time of the grant. If the shares are subject to a substantial risk of forfeiture, the participant will not recognize taxable income at the time of the grant (and the

Company will not be entitled to a tax deduction) and when the restrictions on the shares lapse (that is, when the shares are no longer subject to a substantial risk of forfeiture), the participant will recognize ordinary taxable income in an amount equal to the fair market value of the shares at that time less the price paid, if any, for such shares. If the shares are not subject to a substantial risk of forfeiture or if the participant elects to be taxed at the time of the grant of such shares under Section 83(b) of the Internal Revenue Code, the participant will recognize taxable income at the time of the grant of the shares in an amount equal to the fair market value of such shares at that time, determined without regard to any of the restrictions, less the price paid, if any, for such shares.

If the shares are forfeited before the restrictions lapse, the participant will not be entitled to any deduction on account of such forfeiture. The participant’s tax basis in the shares is the amount recognized by him or her as income attributable to such shares plus the amount, if any, that the participant paid for such shares.

In the case of RSUs or PSUs, the participant generally will not have taxable income upon the grant of the award. Participants will generally recognize ordinary income when the award is settled. At that time, the participant will recognize taxable income equal to the cash or the then fair market value of the shares issuable in settlement of such award, and such amount will be the tax basis for any shares received.

Cash Incentive Awards

A participant generally will not recognize income at the time a Cash Incentive Award is granted. When a Cash Incentive Award vests and is paid, the participant will recognize ordinary income in an amount equal to the cash paid. The Company will generally be entitled to a deduction at the same time and in the same amount as the participant recognizes ordinary income.

The Board of Directors recommends that stockholders vote FOR the approval of the Yum China Holdings, Inc. 2022 Long Term Incentive Plan.

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 STOCK OWNERSHIP INFORMATION

 

Who are our largest stockholders?

 

 

 

The following table sets forth the number of shares of Company common stock beneficially owned as of March 29, 2021August 24, 2022, except as otherwise noted, by (i) beneficial owners of more than 5% of the outstanding shares of Company common stock, (ii) each of the Company’s named executive officers, (iii) each of the Company’s directors and director nominees and (iv) all of the Company’s directors and executive officers as a group.

In accordance with SEC rules, beneficial ownership includes all shares the stockholder actually owns beneficially or of record, all shares over which the stockholder has or shares voting or dispositive control and all shares the stockholder has the right to acquire within 60 days of March 29, 2021.August 24, 2022. Except as indicated in the footnotes to the table, the Company believes that the persons named in the table have sole voting and investment power with respect to all shares owned beneficially by them.

 

 

Name of Beneficial Owner  Number of Shares
Beneficially Owned		  

    Percent of    

Shares(1)    

 

More Than 5% Owners

   

Invesco Ltd.

   41,897,72940,727,617(2)   [    ]]% 

1555 Peachtree Street NE, Suite 1800

   

Atlanta, GA 30309

   

BlackRock, Inc.

   29,685,92732,413,842(3)   [    ]]% 

55 East 52nd Street

   

New York, NY 10055

   

Goldman Sachs & Co. LLC

23,919,072(4)[    ]% 

200 West Street

New York, NY 10282

Primavera Capital Management Ltd.

19,913,992.81(5)[    ]% 

28 Hennessy Road, 28th Floor

Hong Kong

 

Named Executive Officers

   

Joey Wat

   [    ]  *[    ] 

Andy Yeung

   [    ]  *[    ]

Joseph Chan

[    ][    ] 

Johnson Huang

   [    ]  *[    ]

Aiken Yuen

[    ][    ] 

Danny Tan

   [    ] *

Aiken Yuen

  [    ]* 

 

Non-Employee Directors and Director Nominees

   

Peter A. Bassi

   [    ] *

Christian L. Campbell

  [    ]*

Ed Yiu-Cheong Chan

[    ] * 

Edouard Ettedgui

   [    ]  *[    ] 

Cyril Han

   [    ]  *[    ] 

Louis T. Hsieh

   [    ]  *[    ] 

Fred Hu

   [    ]  *[    ] 

Ruby Lu

   [    ]  *[    ] 

Zili Shao

   [    ]  *[    ] 

William Wang

   [    ]  *[    ] 

Min (Jenny) Zhang

   —[    ]   —[    ] 

 

Ownership of all directors and executive officers as a group (20(18 total)

   [    ]  *[    ] 

 

(1)

Percentage ownership is determined based on a total of [                 ] shares of Company common stock outstanding as of August 24, 2022.

 

YUM CHINA – 2021 Proxy Statement   

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STOCK OWNERSHIP INFORMATION   

 

    

 

*

Represents less than one percent

(1)

Percentage ownership is determined based on a total of [    ] shares of Company common stock outstanding as of March 29, 2021.

(2)

Based on Amendment No. 23 to the Schedule 13G filed by Invesco Ltd. on February 12, 2021,10, 2022, which indicated that, as of December 31, 2020,2021, Invesco Ltd. had sole voting power over 41,865,97040,684,815 shares of Company common stock and sole dispositive power over 41,897,72940,727,617 shares of Company common stock.

 

(3)

Based on Amendment No. 56 to the Schedule 13G filed by BlackRock, Inc. on March 15, 2021,February 3, 2022, which indicated that, as of December 31, 2020,2021, BlackRock, Inc. had sole voting power over 25,046,30127,828,370 shares of Company common stock and sole dispositive power over 29,685,92732,413,842 shares of Company common stock.

 

(4)

Based on the Schedule 13G filed by The Goldman Sachs Group, Inc. on February 12, 2021, which indicated that, as of December 31, 2020, The Goldman Sachs Group, Inc. had shared voting power over 23,744,213 shares of Company common stock and shared dispositive power over 23,919,072 shares of Company common stock.

(5)

Based on Amendment No. 6 to the Schedule 13D filed by Primavera Capital Management Ltd. on November 4, 2020, which indicated that, as of October 30, 2020, Primavera Capital Management Ltd. had sole voting and dispositive power over 19,913,992.81 shares of Company common stock, Pollos Investment GP Ltd. shared voting and dispositive control over 16,364,778 shares of Company common stock and Pollos L.L.C. shared voting and dispositive control over 3,549,214.81 shares of Company common stock. The amount reported in the table includes 3,549,214.81 shares underlying outstanding Warrants.

3624   

  YUM CHINA – 2021 Proxy Statement

 

 EXECUTIVE COMPENSATION

 

COMPENSATION DISCUSSION AND ANALYSIS

 

 

 

This Compensation Discussion and Analysis (our “CD&A”) provides an overview of our executive compensation programprograms for 2020 and2021, the context under which our executive compensation philosophiesdecisions were determined, and objectives.how we performed within that environment.

Our named executive officers (“NEOs”) consist of our Chief Executive Officer, our Chief Financial Officer, and our

three other most highly compensated executive officers for 2020.who were serving as executive officers at the end of 2021, and our former Chief Supply Chain Officer. References to “continuing NEOs” in this CD&A refer to the NEOs other than our former Chief Supply Chain Officer.

 

 

For 2020,2021, our NEOs were:

 

Name  Title

Joey Wat

  

Chief Executive Officer (“CEO”)

Andy Yeung

  

Chief Financial Officer (“CFO”)

Joseph Chan

Chief Legal Officer

Johnson Huang

  

General Manager, KFC

Danny Tan

Chief Supply Chain Officer

Aiken Yuen

  

Chief People Officer

Danny Tan*

Former Chief Supply Chain Officer

*

Mr. Tan resigned as Chief Supply Chain Officer of the Company, effective November 8, 2021.

This CD&A is divided into four sections:

 

Executive Summary

  

•  Impact of COVID-19 on our BusinessContext for Determining Executive Compensation Decisions

  

•  20202021 Business Overview and Performance Highlights

  

•  Company Total Shareholder Return Performance

  

•  Recent Compensation Highlights

  

•  Alignment of Executive Compensation Program with Business Performance

  

•  Pay Components

  

•  Executive Compensation Practices

  

•  Stockholder Engagement

 

Elements of the Executive

Compensation Program

  

•  Base Salary

  

•  Annual Performance-Based Cash Bonuses

  

•  Long-Term Equity Incentives

  

•  2020 Partner Long-Term Performance-Based2021 Chairman Grants

  

•  2021 Chairman2022 Lavazza ESOP Grants

YUM CHINA – Proxy Statement

  25

EXECUTIVE COMPENSATION   

  

•  Other Elements of Executive Compensation Program

  

•  20202021 NEO Compensation and Performance Summary

 

How Compensation Decisions Are Made  

•  Executive Compensation Philosophy

  

•  Role of the Compensation Committee

  

•  Role of the Independent Consultant

  

•  Competitive Market Review

 

YUM CHINA – 2021 Proxy Statement

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EXECUTIVE COMPENSATION   

Compensation Policies

and Practices

  

•  Compensation Recovery Policy

  

•  Equity-Based Awards Grant Policy

  

•  Stock Ownership Guidelines and Retention Policy

  

•  Hedging and Pledging of Company Stock

 

Executive Summary

 

Impact of COVID-19 on Our CompanyContext for Determining Executive Compensation Decisions

The COVID-19 pandemic has presented unprecedented challenges and has significantly impacted the Company’s operations and financial results in 2020. During the 2020 Chinese New Year holiday period, the pandemic led to same-store sales declines of 40-50% compared to the comparable period in 2019. Approximately 35% of stores were closed by mid-February 2020 at the peakA unique feature of the outbreak, with significant regional differences. For restaurantsCompany is that remained open, same-store sales declined due to shortened operating hourswhile it is incorporated in Delaware and reduced traffic, with a significant portion of stores providing only deliverylisted on the NYSE and takeaway services. Operating results improved sequentially in the following three quarters of 2020, although sales continued to be impacted by reduced traffic at transportation and tourist locations, delayed and shortened school holidays, regional resurgences and the other lingering effects of the COVID-19 pandemic.

The management team led the implementation of key actions that we undertook to protect our employees, serve our customers, drive stockholder value-creation and give back to the community in connection with the COVID-19 pandemic,Hong Kong Stock Exchange, substantially all of which we believe have contributed to our ability to navigate the pandemic to date. These actions included:

We prioritized the safety and health of our employees and customers. We supported our employees and their families by extending their holiday pay and strengthening their medical insurance coverage. Our Board members and senior executives contributed to a fund to provide additional assistance for frontline employees and their families impacted by COVID-19 as well as other emergency relief.

A majority of our stores remained open, and our employees and delivery riders continued to provide a

critical food service in a time of crisis. For stores that were temporarily closed, we honored our commitments to our employees for scheduled hours, which allowed us to re-open the stores quickly as restrictions eased and when appropriate. Actions such as this allowed us to nimbly respond to changing circumstances and foster goodwill among our employees.

We leveraged our vast member platform to provide information to, and engageits operations are located in China, with members. Our loyalty program continued to grow with11,788 restaurants in over 300 million members1,600 cities across China at the end of 2020, with member sales accounting for approximately 60%2021. Our operating environment and regulatory requirements are complex and our leadership must be capable of adapting our businesses, and supporting our growth goals, amid these complexities. As a result, the operating environment and competitive market in China are significant factors in the Compensation Committee’s decision-making process and the design of our system salescompensation program. In making compensation decisions, the Compensation Committee considers our performance in 2020.

Leveragingthe context of the Chinese operating environment, the restaurant industry in China and our digital pre-order capabilityChina-based peers, as well as our performance against our U.S. peers. Importantly, because our operating environment and strong value proposition, we captured consumer demand for delivery and takeaway. In late January 2020, we rolled out contactless deliverythe restaurant industry in China may be uniquely, or more significantly, impacted by certain factors than on our Super App at both KFCU.S. peers, the Compensation Committee seeks to maintain flexibility to design and Pizza Hut, which was well received by our customers. Delivery was crucialrefine the Company’s executive compensation program to driving online ordersbe responsive to our stores, while takeaway offeredoperating environment even if that results in a safe alternativecompensation program that differs from our U.S. peers.

In addition, as a Delaware-incorporated company listed on both the NYSE and Hong Kong Stock Exchange, our leadership team must also possess, in addition to deep

knowledge of the U.S. and Hong Kong governance requirements, the global perspectives and expertise required to resolve many novel and complex issues amid the evolving global regulatory landscape, including dine-ingeo-political services were limited or closed. Delivery sales grew rapidlychallenges. Because the Company is designing an executive compensation program that attracts, retains and contributed to approximately 30%incentivizes global talent but with specific knowledge of Company sales in 2020, compared to approximately 21% in 2019.

We quickly implemented measures to control costs,the evolving Chinese regulatory and operating environment, including the challenges and complexities of managing inventory in order to reduce write-offs,the extensive supply chain and dynamically scheduling employeesstore operations, the Company’s executive compensation program may differ from our U.S. peers to reflect reduced volumesthe competitive market in China, the need to attract a global skillset with deep knowledge of both U.S. and increased safety protocols. WithChinese regulatory regimes and the dedicationCompany’s desire to incentivize an entrepreneurial mindset to encourage actions that support our long-term growth and strategy. For these reasons, the Compensation Committee looked at the totality of our employees across dine-in, deliveryfactors the Company faces when it considers and takeaway and a strong digital platform, we were quick to adapt and tackle operational challenges, from inventory management to labor productivity improvement.

We provided over 170,000 free meals to many hospitals and community health centers across China.

38  

  YUM CHINA– 2021 Proxy Statement

   EXECUTIVE COMPENSATION

While new store openings were interrupted due to outbreak-related traffic restrictions and reduced availability of construction workers, we overcame many operational challenges to accelerate development schedule in the second half of 2020. The Company opened 1,165 new stores in 2020, marking the highest new store openings in our 33-year history of operating in China.

2020 Business Overview and Performance Highlights

2020 was an unprecedented year that tested our people, systems and capabilities. As noted above, we adjusted our operations and leveraged our digital and delivery resources to capture dine-in and off-premise opportunities. Sales and traffic recovered sequentially since the first quarter of 2020.

Despite the impact of the COVID-19 pandemic on our operations, we had strong execution against our 2020 operating plan and our 2020 performance highlights include the following:determines executive compensation.

 

 •

We delivered a total shareholder return (“TSR”) in 2020 of 22.74%, calculated based on the 20 trading day average closing price prior to and including the start and end dates of the 2020 calendar year and assuming reinvestment of all dividends;

Opened 1,165 new stores during the year, bringing total store count to 10,506 across more than 1,500 cities in China;

Remodeled 939 stores;

The KFC and Pizza Hut loyalty programs exceeded 300 million members combined, with member sales accounting for approximately 60% of system sales in 2020;

We completed our secondary listing on the main board of the Hong Kong Stock Exchange and global offering on September 10, 2020, with net proceeds of $2.2 billion and which expanded our stockholder base in China and Asia;

When responding to the challenges created by the COVID-19 pandemic, our management team undertook immediate and strategic actions to protect our businesses, sales and operations. Despite the significant impact of the COVID-19 pandemic on our operations, we managed to achieve total revenues at a year-over-year decline of 6%, from $8.78 billion in 2019 to $8.26 billion in 2020;

With the additional measures implemented to control costs, the Company delivered Operating Profit of $961 million, compared to $901 million in 2019, with the year-over-year increase primarily due to the re-measurement gain of the Suzhou KFC acquisition and a year-over-year decline of 20% in Adjusted Operating Profit from $912 million to $732 million;

Net Income increased 10% to $784 million from $713 million in the prior year, primarily due to the increase in Operating Profit, Adjusted Net Income declined 16% to $615 million from $729 million in the prior year (a 19% decline excluding $75 million and $63 million net gains in 2020 and 2019, respectively, from our equity investment in Meituan); and

Diluted Earnings Per Common Share increased 6% to $1.95 from $1.84 in the prior year, and Adjusted Diluted Earnings Per Common Share declined 19% to $1.53 from $1.88 in the prior year (a 22% decline excluding the net gains from our equity investment in Meituan in 2020 and 2019).

See the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 for a reconciliation of the most directly comparable GAAP financial measures to the non-GAAP adjusted financial measures.

Company Total Shareholder Return Performance

The Board and the Compensation Committee believe that the leadership provided by the Company’s management team was key to the Company’s execution and strong performance in 2020. In addition, since its spin-off from YUM! Brands, Inc. (“YUM”) on November 1, 2016, the Company’s TSR outperformed that of the MSCI China Index, as shown in the graph below. The graph assumes that the value of the investment in the

YUM CHINA – 2021 Proxy Statement 

  39

EXECUTIVE COMPENSATION   

Company’s common stock and the MSCI China Index on November 1, 2016 was $100 and that all dividends were reinvested, and tracks it each year thereafter on the

last day of each calendar year through December 31, 2020. Under such assumption, the Company delivered a TSR of 19.47% in 2020 and 124.55% since its spin-off.

LOGO

Operating Environment: The Company delivered a TSR of 22.74% in 2020, calculated based on the 20 trading day average closing price prior to and including the start and end dates of the 2020 calendar year and assuming reinvestment of all dividends.

Recent Compensation Highlights

As part of its ongoing review of the executive compensation program and after considering market practices, input from the Compensation Committee’s compensation consultant and stockholder feedback, the Compensation Committee implemented the changes set forth below to the Company’s executive compensation program. Certain of these compensation changes were made in response to the pandemic and its resulting impact.

•

Voluntary Salary Reductions to Address Impact of COVID-19—During 2020, our Board members and senior executives, including the NEOs, agreed to voluntarily forgo 10% of their base compensation during the period of April 2020 to December 2020 as contributions to fund additional assistance for frontline employees and their families impacted by COVID-19 as well as other emergency relief.

•

Supplemented Annual Incentive Program Performance Measurespandemic continued to Addresspresent significant volatility to the ImpactCompany’s operations in 2021. In the first half of COVID-19—In July 2020, the Compensation Committee considered the impact of2021, the COVID-19 pandemic onsituation was relatively stable. However, multiple waves of Delta-variant outbreaks started in late July 2021 and spread to nearly all provinces in China. These widespread outbreaks resulted in stringent preventive public health measures across China, which included the Company’s operations and the restaurant

industrylockdowns of several major cities, closures of many tourist locations resulting in general, and the shifting consumer demand from dine-in services to delivery and takeaway services. To further incentivize the capturing of market opportunities in takeaway and delivery, the Compensation Committee evaluated whether any adjustments to the 2020 annual incentive plan were necessary in order to continue to incentivize and reward actions designed to support critical strategies and long-term value creation, including strategies designed to help the Company navigate through the pandemic and emerge as an innovative and strong market leader.    On July 16, 2020, the Compensation Committee determined that it was in the best interests of the Company and its stockholders to supplement the annual performance metrics with additional key performance indicators (“KPIs”) as well as a relative total shareholder return (“rTSR”) measure. These KPIs were viewed as supportive of the Company’s long-term strategy and the creation of stockholder value and the Compensation Committee believed that performance against these measures would reflect the extent of the Company’s success in the execution of its operating plan after the outbreak of COVID-19. Specifically, the KPIs measured the Company’s ability to grow non-dine-in transactions, capture the market, contain costs, and increase stockholder value.substantially

 

 

4026   

  YUM CHINA – 2021 Proxy Statement

  

 

 

   EXECUTIVE COMPENSATION

 

   

 

 

lower travel volume, cancelled summer holiday trips and fewer social activities. Eastern China, the most vibrant economic region and the most important market for us, was significantly impacted during the summer, our peak trading period. According to government statistics, the restaurant industry in China was considerably impacted in August 2021 with a revenue decline of approximately 10% compared to August 2019. At the peak of the outbreak in August 2021, more than 500 of

our stores in 17 provinces were closed or offered only takeaway and delivery services. In the fourth quarter 2021, total revenues of the restaurant industry in China declined year-over-year, a significant divergent trend comparing to the performance of the U.S. restaurant industry. The graph below shows China’s 2021 restaurant industry monthly revenue growth compared to that of 2020:

China Restaurant Industry Monthly

Revenue Growth, 2021 vs. 2020

LOGO

Source: National Bureau of Statistics of China

• 

2021 Chairman GrantsCompetitive Market: —Knowledge and expertise of U.S., China and Hong Kong regulatory regimes and business practices are required for many of the Company’s executive officers. In February 2021,addition, because our executive team is located in China, we are required to compete in the Chinese market for executive talent with this unique skillset. Given the unique skillset of our executives, the Company is increasingly competing for executive talent against China-based companies with, or planning for, listing outside of China. These competitors often offer

compensation packages with significant one-time equity grants, which is a common practice in the Chinese executive compensation market. In determining executive compensation decisions, the Compensation Committee awarded three-year cliff-vesting RSU awards to select Companyconsiders this increased competition and the related new-hire offers of significant one-time equity grants, coupled with an already challenging local market for international executive officerstalent, and employees. These awards are intended to provide recognition for exemplary individual leadership demonstrated by select executives and employees during 2020, in particular in resolving many novel and complex regulatory issues to execute the Company’s secondary listing onneed to retain and motivate the Hong Kong Stock ExchangeCompany’s global and navigatingvisionary leadership team.

YUM CHINA – Proxy Statement

  27

EXECUTIVE COMPENSATION   

•

Peer Company Performance Comparisons: In assessing the performance of the Company throughand our executive team, the COVID-19 crisis. WhileCompensation Committee considers performance against U.S. peers as well as peers in China, which allows the Compensation Committee to assess performance in the midstcontext of the constraintsoperating market in China which can vary significantly as compared to the U.S. operating market as was the case in 2021. Accordingly, in approving incentive compensation, the Compensation Committee considers the performance of a global pandemic, we completed the listing on an accelerated timeframe, resulting in the Company being the first Delaware and non-TMT company to qualify as an innovative company and successfully list on the Hong Kong Stock Exchange. The secondary listing on the Hong Kong Stock Exchange raised net proceeds of $2.2 billion and expanded the Company’s stockholder baserestaurant companies in China and Asia. Amongseeks to reward performance that reflects the NEOs, Ms. Wat and Mr. Yeung were selectedCompany’s operating performance, as recipientsopposed to just a comparison to the Company’s U.S. peers, which often are subject to a different operating environment than the Company. In terms of the Chairman long-term equity grant. While these awards were grantedtotal shareholder return (“TSR”) performance, the MSCI China Index was down approximately 22% in recognition of2021, while the significant individual achievements and leadership displayedS&P 500 Index was up approximately 27%. In particular, the MSCI China Consumer Discretionary Index was down approximately 36% in 2021, while the Company’s TSR declined by recipients during 2020, the Compensation Committee elected to deliver the Chairman grants as RSUs that cliff-vest on the third anniversary of the grant date to incentivize retention over this three-year period.approximately 12%.

 

 • 

Incorporate ESG Metrics into 2021 Annual Incentive ProgramSupport Long-Term Strategy: —ManagementDespite the enormous challenges to drive sales and protect profits in the Board have engagedshort-term, the Company is also committed to building core capabilities to achieve long-term sustainable growth. To support the Company’s long-term growth, the Compensation Committee has sought to design a compensation program aligned with our long-term strategy, including accelerating store network development, expanding to new categories, growing emerging brands and reinforcing strategic capabilities. This desire to incentivize performance to achieve the Company’s growth initiatives resulted in extensive discussions regarding howthe inclusion of performance goals relating to further incentivizedelivery sales and assess performance with respect to specific ESG, Sustainability and Human Capital Management initiatives. Beginning withmember sales in the 2021 annual incentive program, ESG measures will be incorporated intoas well as the KPIs that are usedgranting of equity awards with respect to determine the individual performance factor for each leadership team member. Depending on their rolesjoint venture (the “Lavazza Joint Venture”) established by the Company and responsibilities, leadership team members will be requiredLavazza Luigi S.p.A. (“Lavazza Group”). This Lavazza Joint Venture was established to reflect ESGexplore and develop the Lavazza coffee shop concept in their performance goals, against which the Committee will assess their performance in these areas. As such, the NEOs’ performance on ESG-related areas could significantly impact payouts underChina, as part of the Company’s 2021 annual incentive program.strategy of making coffee a meaningful part of its business. The Compensation Committee believes that it is important to approach compensation in a way that supports a

founder’s mentality and the execution of goals linked to our long-term strategy, which will allow the Company to emerge from the pandemic even stronger than before.

 

 • 

Annual Incentive Program Adjustments. In September 2021, in light of the changes in operating environment and the significant impact of the Delta-variant outbreaks on the Company’s operating and financial performance since July 2021, the Compensation Committee considered potential real-time actions to help manage the immediate challenges, retain talent and motivate performance. While the Compensation Committee’s practice has generally been to establish and communicate goals at the beginning of each year, the Compensation Committee also retains flexibility to modify the Company’s executive compensation program when circumstances warrant, in order to continue to incentivize actions to drive operational performance and long-term strategies. Considering the significant impact of the COVID-19, and that the Company’s incentive program targets were set in early 2021 based on the then operating environment with sequential improvement in operating results, the Compensation Committee determined to keep the original goals but that, instead of measuring performance with respect to the Adjusted Operating Profit Growth and Same Store Sales Growth over one performance period covering the entire fiscal year, it would instead measure performance with respect to these team performance measures over three separate performance periods: the first half of 2021 (weighted 50%); the third quarter of 2021 (weighted 25%); and the fourth quarter of 2021 (weighted 25%). The performance targets for each of these three distinct performance periods were derived from the performance goals established in early 2021, with the only difference being the segregation of performance into the three distinct performance periods. This change retained the same performance targets and performance-based program design, but helped in executive motivation, retention and business focus.

2021 Business Overview and Performance Highlights

As noted above, the COVID-19 pandemic continued to significantly impact the Company’s operations in 2021.

28  

  YUM CHINA– Proxy Statement

   EXECUTIVE COMPENSATION

Our management team undertook immediate and strategic actions to drive sales and protect profits. These actions included:

We continue to prioritize the safety and health of our employees and customers. In 2021, we enhanced the medical insurance coverage for our restaurant general managers, restaurant management team and service team leaders. The enhanced benefits are expected to cover around 100,000 front-line employees and their family members.

We drove traffic and sales by delivering good food and great value. Leveraging our innovation capabilities, we launched over 500 new or upgraded products and expanded product categories, such as beef burgers and whole chicken, in 2021. We built on a well-established promotion mechanism to offer effective value promotions while minimizing margin impact.

To capture the shift to off-premise demand, we quickly adjusted operations and marketing offers. We also increased store density to improve our coverage and better serve the customers. Delivery sales grew 60% in 2021 compared to 2019 and contributed to approximately 32% of Company sales for 2021. Combined with takeaway, off-premise services presented more than half of Company sales in 2021.

Leveraging our vast member platform, we engaged with members to drive repeat purchases. We continued to improve the digital experience for our customers, including refining our apps for more convenient ordering and allowing for more personalization, while broadening our member base. Our loyalty program grew 20% in the past year to over 360 million members at the end of 2021, with member sales accounting for approximately 60% of our system sales in 2021. In addition, digital sales exceeded $7 billion, or over 85% of Company sales, in 2021.

We proactively managed costs to alleviate cost pressures and continued to improve labor productivity and operating efficiency using technology and automation. For example, we have adopted AI-enabled technology to analyze and forecast transaction volume so that we can improve labor scheduling and inventory

management. We have also upgraded our rider management platform to help optimize delivery order queuing, trade zone and rider routing.

We strengthened our market leadership with record openings of 1,806 gross new stores, or 1,282 net new stores during the year and remodeled 842 stores.

With the tremendous effort from all of the employees led by the management team and despite the continued negative impact on our business as a result of the COVID-19 pandemic, the Company delivered substantial profits in 2021. Our 2021 performance highlights include the following:

•

Total revenues increased 19% year-over-year to $9.85 billion from $8.26 billion (a 12% increase excluding foreign currency translation (“Expanded RecipientsF/X”)).

Total system sales increased 10% year-over-year, excluding F/X.

Operating Profit increased 44% to $1.39 billion from $961 million, with the year-over-year increase primarily due to the re-measurement gain of the Hangzhou KFC joint venture acquisition and a year-over-year increase of 5% in Adjusted Operating Profit from $732 million to $766 million, despite that we received approximately $90 million less in one-time relief from the government and landlords comparing to 2020.

Net Income increased 26% to $990 million from $784 million in the prior year, primarily due to the increase in Operating Profit. Adjusted Net Income declined 15% to $525 million from $615 million in the prior year (a 7% increase excluding the net loss of $52 million in 2021 and the $75 million net gain in 2020 from mark-to-market investments).

Diluted Earnings Per Common Share increased 17% to $2.28 from $1.95 in the prior year, and Adjusted Diluted Earnings Per Common Share decreased 21% to $1.21 from $1.53 in the prior year (a 1% decrease excluding the net loss in 2021 and the net gain in 2020, respectively, from mark-to-market investments). Approximately 41.9 million shares of common stock were issued as a result of the secondary listing in

YUM CHINA – Proxy Statement

  29

EXECUTIVE COMPENSATION   

Hong Kong in September 2020. On a year over year basis, the dilution impact from the weighted average share count was 7% in 2021.

See the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 for a reconciliation of the most directly comparable GAAP financial measures to the non-GAAP adjusted financial measures.

Company Total Shareholder Return Performance

The Board and the Compensation Committee believe that the leadership provided by the Company’s management

team was key to the Company’s strong performance in delivering multi-year shareholder returns. The graph below shows our TSR as the cumulative return to stockholders over the past five years. As illustrated, a $100 investment in our common stock on December 31, 2016 would have grown to $198 on December 31, 2021, with dividends reinvested. The Company’s shareholder return significantly outperformed that of the China market as measured by the MSCI China Index, which covers approximately 85% of the China equity market, and approximately 28% of its constituent companies are in the China Consumer Discretionary sector.

LOGO

Recent Compensation Highlights

Although the key features of our executive compensation program are substantially unchanged, the Compensation Committee implemented several enhancements and changes to our executive compensation program, as set forth below. In approving these changes, the Compensation Committee considered our strategic priorities, stockholder feedback, market practices in both the U.S. and China, input from the Compensation Committee’s compensation consultant, and the operating environment in China, as described further above.

•

LTI (Annual PSU) Grants—In early 2021, in response to the uncertainty and challenges presented by the COVID-19 pandemic with respect to setting targets for the annual PSU grants (the “Annual PSUAwards”), the Compensation Committee determined to grant the Annual PSU Grants—Since 2018, the CEO’s annual equity grant has been deliveredAwards in the form oftwo equally weighted PSUsgrants, with the first grant occurring in February 2021 and stock appre-

  

ciation rightsvesting based on the Company’s achievement of performance goals relating to relative total shareholder return (“SARsrTSR”), while and the Company’s other NEOs generally received an equal mix of SARssecond grant occurring in May 2021 and time-based RSUs. Beginning with the 2020 annual equity grants, the PSU program has been expanded to include all of the Company’s executive officers, with a 2020 annual equity grant in the form of SARs and PSUs. As a result of this change, the entire portion of the annual equity grant is considered by the Compensation Committee to be performance-based. The 2020 PSUs will vestvesting based only on the Company’s achievement of performance goals relating to growth in adjusted total revenue adjusted to exclude certain items for the purpose of the Annual PSU Grants (“Adjusted Total Revenue Growth”) and growth in adjusted diluted earnings per common share adjusted(“Adjusted Diluted Earnings Per Common Share Growth”). In particular, the Compensation Committee elected to exclude certain items forinclude rTSR as an absolute goal, weighted 50% of the purpose of Annual PSU Grants (“Awards, as compared to its prior practice of including rTSR as a payout modifier in recognition of the difficult and volatile operating environment due to the continuing COVID-19 pandemic. Given the uncertainty presented by the continuing COVID-19 pandemic, the Compensation Committee considered a number of options to design the Annual PSU Awards in a manner that served as an appropriate

30  

  YUM CHINA– Proxy Statement

   EXECUTIVE COMPENSATION

incentive vehicle while also aligning the long-term interests of recipients with our stockholders, including the possibility of setting annual performance goals for each year in the three-year performance period with respect to the Adjusted Total Revenue Growth and Adjusted Diluted Earnings Per Common Share Growth”), performance goals. In order to align the Annual PSU Awards with the long-term interest of the stockholders, the Compensation Committee ultimately decided to approve a rTSR payout modifierthree-year performance period, as compared to three annual performance periods. To obtain greater clarity on the operating environment and assess the rigor of these three-year performance goals, the Compensation Committee delayed the grant date by three months until May 2021 for the Annual PSU Awards with vesting tied to these two performance goals. Consistent with the Company’s usual practice of granting annual LTI awards in February, the number of shares subject to the May 2021 portion of the PSU grant was determined based on our performance against the MSCI China Index. The SARs will realize value only to the extent the Company’sFebruary 2021 stock price increases fromrather than the stock price on the grant date of grant.in May 2021.

 

 • 

Expanded PerformanceAnnual Incentive Program Metrics Used—To support key objectives linked to the Company’s long-term strategy, the Compensation Committee added delivery sales growth and member sales as performance goals to be used to determine payouts under the LTI Program—Beginning with2021 annual incentive program. To incentivize the 2020 PSU grants, vesting will beachievement of these goals relating to the Company’s long-term strategy, the Compensation Committee reduced its historical weightings assigned to the adjusted operating profit growth and same store sales growth goals and eliminated the customer satisfaction goal. As a result of this change, for 2021, annual incentive program payouts were determined based on three performance measures (Adjusted Total Revenue Growth, Adjusted Diluted Earnings Per Common Share Growthadjusted operating profit growth, same store sales growth, delivery sales growth, system gross new builds, and rTSR) as comparedmember sales. These goals were designed to measure our prior practicesuccess in the execution of using rTSR as the sole performance measure underboth our PSU program. The Compensation Committee believes that this combination of metrics strikes an appropriate balance with respect to incentivizing top-line growth, profitabilityannual and stock price performance.long-term operating plan.

 

 • 

February 2020 Partner PSU AwardsAnnual Incentive Program Adjustments—As further described belowThe team factor targets were set at the beginning of 2021 when the COVID-19 situation was relatively stable. However, multiple waves of Delta-variant outbreaks persisted throughout the second half of 2021. In September 2021, in light of the “2020 Partner Long-Term Performance-Based Grants” section,changes in operating environment

and the significant impact of the Delta-variant outbreaks on the Company’s operating and financial performance since July 2021, the Compensation Committee endorsedadjusted the performance periods for measuring performance with respect to the Adjusted Operating Profit Growth and Same Store Sales Growth over one performance period covering the entire fiscal year, it would instead measure performance with respect to these team performance measures over three separate performance periods: the first half of 2021 (weighted 50%); the third quarter of 2021 (weighted 25%); and the fourth quarter of 2021 (weighted 25%). The performance targets for each of these three distinct performance periods were derived from the performance goals established in early 2021, with the only difference being the segregation of performance into the three distinct performance periods. This change retained the same performance targets and performance-based program design, but helped to achieve executive motivation, retention and drive business focus. For details, see “Executive Summary—Context for Determining Executive Compensation Decisions—Annual Incentive Program Adjustments” and “Elements of special PSUsthe Executive Compensation Program—Annual Performance-Based Cash Bonuses—Team Performance Factors.” When approving the final team factor for Company performance, the Compensation Committee applied discretion to reduce the result from 112% to 105%.

•

2021 Chairman Grants—As disclosed in last year’s CD&A, in February 2021, the Compensation Committee awarded three-year cliff-vesting RSU awards to select Company executive officers and employees (the “Partner PSU Awards2021 Chairman Grants”),. These awards are intended to provide recognition for exemplary individual leadership demonstrated by select executives and approved,employees during 2020, in particular in resolving many novel and complex regulatory issues to execute the Company’s secondary listing on February 7, 2020the Hong Kong Stock Exchange, which was viewed as a grant of Partner PSU Awards to select employees oftransformative step for the Company, and its subsidiaries who were deemed critical tonavigating the Company’s execution of its strategic operating plan, including eachCompany through the COVID-19 crisis. While in the midst of the NEOs.constraints of a global pandemic, we completed the listing on an accelerated timeframe, resulting in the Company being the first Delaware and non-TMT company to qualify as an innovative company and successfully list on the Hong Kong Stock Exchange. The Partner PSU Awards will vest only if threshold performance goals relating to stock price, growth in Adjusted Total Revenue Growth, growth in EBITDA adjusted to exclude certain items for the purpose of Partner PSUsecondary listing on

 

 

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EXECUTIVE COMPENSATION   

 

    

 

  

Awards (“Adjusted EBITDA Growth”),the Hong Kong Stock Exchange raised net proceeds of $2.2 billion and transformational objectives are achieved over a four-year performance period commencing on January 1, 2020expanded the Company’s stockholder base in China and ending on December 31, 2023. The Partner PSU Awards also include non-competitionAsia. Among the NEOs, our CEO, CFO and non-solicitation restrictive covenants. The Partner PSU AwardsChief Legal Officer were selected as recipients of the Chairman long-term equity grant. While these awards were granted in recognition of the significant individual achievements and leadership displayed by recipients during 2020, the Compensation Committee elected to (i) address increased competition from new retail platform companies in Chinadeliver the 2021 Chairman Grants as well as other startup companies andstock-settled RSUs that cliff-vest on the existing pay gap betweenthird anniversary of the grant date to align their long-term interests with those of stockholders. While these awards are not a component of the Company’s annual executive compensation program, and the relevant competitive market, (ii) incentivize an entrepreneurial mindset and transformational performance that the Compensation Committee determined that the 2021 Chairman Grants were appropriate to recognize the listing on the Hong Kong Stock Exchange and to incentivize similar actions that required significant efforts and innovativeness by select executives. The Compensation Committee believes that an equitable administration of the Company’s compensation programs entails the periodic use of grants similar to the 2021 Chairman Grants, when warranted by facts and circumstances, so as to accomplish the Company’s compensation objectives and support the execution of key business initiatives.

•

Incorporated ESG Metrics into 2021 Annual Incentive Program—Management and the Board have engaged in extensive discussions regarding how to further incentivize and assess performance with respect to specific ESG, Sustainability and Human Capital Management initiatives. Beginning with the 2021 annual incentive program, ESG measures have been incorporated into the key performance indicators that are used to determine the individual performance factor for each leadership team member. ESG performance goals are tailored for each member of the leadership team based on their roles and responsibilities and the Compensation Committee will contributeassess their performance in these areas. ESG, Sustainability and Human Capital Management goals included goals relating to the publication of the Company’s sustainability report, goals relating to climate, the Company’s supply chain and environmental impact, initiatives relating to customer awareness of environmental goals, plastic reduction initiatives, goals relating to the KFC Food Banks, employee satisfaction and

gender equality. As such, the NEOs’ performance on ESG-related areas could significantly impact payouts under the Company’s 2021 annual incentive program.

•

Adopted Severance Plan for Termination without Cause—In September 2021, the Compensation Committee adopted a severance plan (“Executive Severance Plan”) to provide severance benefits to certain key management employees, including each of the NEOs, upon an involuntary termination by the Company without cause or, for participants subject to the PRC law, termination for statutory reasons and subject to severance pay under PRC law, absent a change in control.

The Executive Severance Plan aids in recruitment and retention and promotes smooth succession planning, while providing transitional pay for a limited period of time to executives whose employment is involuntarily terminated. Payments are conditioned upon the executive’s execution of a release of claims in favor of the Company and compliance with restrictive covenants. Severance benefits payable under the Executive Severance Plan are equal to two times the sum of annual base salary plus annual target bonus for the CEO and one time the sum of annual base salary plus target annual bonus for the other NEOs, will be in lieu of any cash severance benefits under any other arrangement with the participant and are subject to recoupment in the event the executive violates his or her restrictive covenants with the Company.

•

2022 Lavazza ESOP Grants—As previously disclosed, the Company and Lavazza Group established the Lavazza Joint Venture to explore and develop the Lavazza coffee shop concept in China. In order to support a founder’s mentality and to incentivize the efforts of employees of the Company, Lavazza Group and the Lavazza Joint Venture to execute on the Lavazza Joint Venture’s business growthplan, including the target to open 1,000 Lavazza stores in China by 2025, the Lavazza Joint Venture established equity plans (the “JV EquityPlans”) allowing for the grant of equity awards with respect to the Lavazza Joint Venture to key employees of the Lavazza Joint Venture, Lavazza Group and exceptional stockholderthe Company. In February 2022, the Lavazza Joint Venture and the Compensation Committee approved equity awards under the applicable JV Equity Plan to certain

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  YUM CHINA– Proxy Statement

   EXECUTIVE COMPENSATION

employees of the Company, including the continuing NEOs, in the form of performance stock units. Under the JV Equity Plans, up to 15% of the equity in the Lavazza Joint Venture may be granted as equity awards under the JV Equity Plans, with employees and other eligible participants of the Lavazza Joint Venture eligible to receive up to 80% of the JV Equity Plan shares, or 12% of the equity in the Lavazza Joint Venture. The remaining JV Equity Plan shares will be allocated to the employees of the Company and Lavazza Group in accordance with their respective equity interest in the Lavazza Joint Venture, or up to 2% and 1%, respectively, of the equity in the Lavazza Joint Venture. The performance stock unit awards granted to the continuing NEOs are subject to both performance-based vesting conditions and the occurrence of a liquidity event, including an initial public offering of the Lavazza Joint Venture which must occur within seven years of the grant date. As discussed above, the JV Equity Plans and related grants to key contributors were adopted in order to help execute the Company’s strategy for the Lavazza Joint Venture by aligning their interests to the success of the Lavazza Joint Venture.

•

Stock Ownership Guidelines and Retention Policy. In January 2021, the Compensation Committee modified the Company’s stock ownership guidelines to require stock retention of 50% of the after-tax value creationof shares until the guideline is met during the five-year compliance period to comply with the guidelines and (iii) facilitate long-term100% retention whichafter the five-year compliance period has become increasingly important in light of senior leadership changes over the past several years.elapsed.

Alignment of Executive Compensation Program with Business Performance

Attracting, motivating and retaining talented executives is critical to our success, and our executiveOur pay-for-performance incentive compensation program isprograms are designed to support this objective.align the long-term interests of our executives with those of our stockholders and to attract and retain top talent in a competitive market. The Company’s executive compensation program is structured to support the long-term sustainable growth of the Company and create value for stockholders by aligning our executives with business performance goals.goals and motivating entrepreneurial and innovative thinking. As such, the Compensation Committee reviews and endorses performance goals that are deemed central to the Company’s

business performance, long-term strategy and stockholder value creation. Specifically, the Compensation Committee has selected performance goals under the Company’s 20202021 incentive programs that are based on metrics such as operating profit, same store sales, delivery sales, new builds, customer satisfaction,member sales, rTSR, adjusted total shareholder return, revenue growth, adjusted diluted earnings per share growth, and other key performance indicators described in greater detail below. These performance goals comprise an overall executive compensation program that the Compensation Committee believes appropriately reflects the Company’s emphasis on increasing profitability and revenue, enhancing customer experience, andsupporting an entrepreneurial mindset, creating stockholder value.value, while at the same time supporting key ESG initiatives.

While the Compensation Committee’s practice has generally been to establish and communicate goals at the beginning of each year, the Compensation Committee also retains flexibility to modify the Company’s executive compensation program when circumstances warrant, in order to continue to incentivize actions to drive operational performance and long-term strategies. For 2020, the Compensation Committee incorporated additional performance factors to be considered when determining annual incentive compensation2021, in light of the changes in operating environment and the significant impact of COVID-19the Delta-variant outbreaks on the CompanyCompany’s operating and the unprecedented challenging business environment on the economy in general and the restaurant industry in particular that had caused a shifting consumer demand from dine-in services to delivery and takeaway services. To further incentivize the capturing of market opportunities in takeaway and delivery,financial performance since July 2021, the Compensation Committee approved additional teamadjusted the 2021 annual incentive program to measure performance factors in orderwith respect to continue to incentivizethe Adjusted Operating Profit Growth and reward actions designed to support critical strategiesSame Store Sales Growth, using the same performance goals as established at the beginning of the year, over three separate performance periods covering the first half of 2021, the third quarter of 2021 and long-term value creation, including strategies designed to help the Company navigate through the pandemic and emerge as an innovative and strong market leader.fourth quarter of 2021. The Compensation Committee believes that maintaining this flexibility allows the Company to appropriately reward performance in areas deemed critical to the Company’s long-term strategy.

The following chart provides an overview of the 20202021 target total direct compensation program applicable to our CEO, consisting of base salary, annual performance-based cash incentives (i.e., short-term incentives, or “STI”), and long-term equity incentives (“LTI”). As demonstrated by the following chart, 20202021 compensation for our CEO was heavily weighted toward variable pay elements, and such elements represented approximately 85%87% of the 20202021 annual target compensation for Ms. Wat (consisting

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EXECUTIVE COMPENSATION   

(consisting of the target payout opportunity under the cash bonus plan, target annual PSUs and stock-settled SARs). For purposes of this calculation, we have excluded the Partner PSU Awards2021 Chairman

Grants described below, as such grants do not represent an annuala component of the Company’s annual executive compensation program.

 

 

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  YUM CHINA– 2021 Proxy Statement

   EXECUTIVE COMPENSATION

20202021 CEO Target Compensation Mix

 

LOGO

LOGO

Pay Components

 

The Company’s executive compensation program has three primary pay components: (i) base salary; (ii) annual performance-based cash bonuses (i.e., short-term incentives);

and (iii) long-term equity awards. We believe that

these key elements are aligned with the Company’s compensation philosophy and objectives, as illustrated in the following table.

 

 

Objective    Base
Salary		     Annual
Performance-
Based Cash
Bonuses		     

  Long-Term  

Equity
Incentives

 

Attract and retain the right talent to achieve superior stockholder results — Competitive total reward program structure that enables pay to vary based on role, responsibility, experience, market value and future potential of talent in order to drive superior results year over year.year-over-year.

 

     

 

X

 

 

 

     

 

X

 

 

 

     

 

X

 

 

 

Reward performance — Motivate both short-term and long-term performance through annual and long-term equity programs. A majority of NEO annual target compensation is performance-based or variable and, therefore, at-risk.

 

         

 

X

 

 

 

     

 

X

 

 

 

Emphasize long-term value creation — The Company’s belief is simple: if it creates long-term value for stockholders, then it shares a portion of that value with those responsible for the results. SARs and PSUs focus on the long-term performance of the Company and directly align the interests of the recipients with those of the Company’s stockholders.

 

             

 

X

 

 

 

Drive ownership mentality — We require executives to invest in the Company’s success by owning a substantial amount of Company stock.

 

                   

 

X

 

 

 

 

YUM CHINA – 2021 Proxy Statement34   

  43  YUM CHINA– Proxy Statement

 

 

 

EXECUTIVE COMPENSATION

 

  

 

Executive Compensation Practices

 

The Compensation Committee reviews on an ongoing basis the Company’s executive compensation program to evaluate whether it supports the Company’s executive compensation philosophies and objectives and is aligned

with stockholder interests. Our executive compensation practices include the following, each of which the Compensation Committee believes reinforces our executive compensation philosophy and objectives:

 

 

 

Our Executive Compensation Practices

 

✓

  

We deliver a significant percentage of annual target compensation in the form of variable compensation tied to performance, with 85%87% of Ms. Wat’s 20202021 annual target compensation in the form of variable pay elements

✓

  

We deliver a significant portion of total compensation in the form of equity

✓

Maximum payout opportunity for STI and PSUs

  

✓

  

We have multi-year vesting periods for equity awards

  

✓

  

We perform market comparisons of executive compensation against a relevant peer group, recognizing the different geographic regions where executives are sourced and recruited

✓

The vesting of the rTSR portion of the PSU awards will be capped at target if our TSR performance is negative over the performance period

  

✓

  

We use an independent compensation consultant reporting directly to the Compensation Committee

  

✓

  

We have double-trigger vesting for equity awards in the event of a change in control under our long-term incentive plan

  

✓

  

We maintain stock ownership guidelines, which includes a retention requirement until the guideline is achieved

  

✓

  

We maintain a compensation recovery policy

  

✓

  

We maintain an equity-based awards grant policy specifying pre-determined dates for annual equity grants

  

✓

  

We hold an annual “say on pay” vote

  

✓

  

We maintain an annual stockholder engagement process

✓

  

Our Compensation Committee regularly meets in executive session without any members of management present

 

  

X

  

We do not pay dividends or dividend equivalents on PSUs unless and until they vest

  

X

  

We do not allow repricing of underwater SARs under our long-term incentive plan without stockholder approval

  

X

  

We do not allow hedging, short sales or pledging of our securities

  

X

  

We do not allow backdating of SARs

  

X

  

We do not provide for tax gross-ups relating to a change in control

 

Stockholder Engagement

 

In its compensation review process, the Compensation Committee focuses on structuring the executive compensation program to serve the interests of our stockholders. In that respect, as part of its ongoing review of our executive compensation program, the Compensation Committee considered the approval by approximately 94%93% of the

votes cast for the Company’s “say on pay” vote at our 20202021 Annual Meeting of Stockholders. Although the Compensation Committee was pleased with this favorable outcome and interpreted this level of support as an endorsement by our stockholders of our executive com-

pensationcompensation program and policies, the Compensation

YUM CHINA – Proxy Statement  

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EXECUTIVE COMPENSATION   

Committee continuously evaluates program design and considers adjustments to the Company’s compensation program based on stockholder feedback, market practices, operating environment and other considerations in order to deliver a program designed to be aligned with our business strategy, the creation of long-term value and our stockholders’ interests.

During 2020,2021, the Company reached out to its 25 largest stockholders and select stockholders who previously indicated interest for having engagement calls (which represented more than 50% of the Company’s outstanding shares) to solicit feedback on a

44  

  YUM CHINA– 2021 Proxy Statement

   EXECUTIVE COMPENSATION

variety of corporate governance matters (including with respect to executive

compensation), and the Company held discussions with all stockholders who accepted an invitation. Management shared this stockholder feedback with the Compensation Committee for its consideration in designing the Company’s executive compensation program.

Based on feedback received during the Company’s stockholder engagement efforts over the past several years, the Compensation Committee has approved the following changes to its compensation program, including the Company’s executive compensation program:

•

Expanded Use of PSUs—Beginning in 2020, the Compensation Committee expanded the PSU program to include all NEOs.

•

50% of Equity Compensation Delivered as PSUs—Beginning with the 2020 annual PSU grants, the NEOs’ annual equity awards are delivered in the form of PSUs and SARs, each weighted 50%, with the PSUs vesting based on the achievement of

pre-established performance goals and the SARs only delivering value if the stock price appreciates from the grant date.    By replacing the RSU component with PSUs, the Compensation Committee considers the entire portion of the annual equity grant to be performance-based.

•

Expanded Performance Metrics Used under the LTI Program—Beginning with the 2020 PSU grants, vesting will be determined based on three performance measures (Adjusted Total Revenue Growth, Adjusted Diluted Earnings Per Common Share Growth and rTSR) as compared to our prior practice of using rTSR as the sole performance measure under our PSU program.

•

Incorporate ESG Metrics into 2021 Annual Incentive Program— As noted above, beginning with the 2021 annual incentive program, ESG measures will be incorporatedincorporation of ESG measures and targets into the key performance indicators that are used to determine the individual performance factor under the 2021 annual incentive program for each leadership team member.

 

 

Elements of the Executive Compensation Program

 

The Company’s 20202021 executive compensation program consists of three primary pay components: (i) base salary; (ii) annual performance-based cash bonuses (i.e., short-term incentives); and (iii) long-term equity awards. The following charts demonstrate that 20202021 annual target compensation for Ms. Wat, our CEO, and our otherthe continuing NEOs was heavily weighted toward variable pay elements. Such elements represented approximately 85%87% of the 2020

the 2021 annual target compensation for Ms. Wat and, on average, 70%72% of the 20202021 annual target compensation for our other NEOs (consisting of the target payout opportunity under the cash bonus plan and target annual equity grants and excluding the Partner PSU Awards2021 Chairman Grants and all other compensation reported in the 20202021 Summary Compensation Table).

 

 

20202021 CEO Target Compensation Mix  

20202021 Other NEOs Average

Target Compensation Mix

LOGO

LOGO

 

YUM CHINA – 2021 Proxy Statement36   

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EXECUTIVE COMPENSATION

 

  

 

Base Salary

The Company provides a fixed level of cash compensation to attract and retain high-caliber talent. Base salary in the form of cash compensates executives for their primary roles and responsibilities. An executive’s actual salary is dependent on factors such as the executive’s role (including the market value of the role), level of responsibility, experience, individual performance and future potential. The Compensation Committee annually reviews salary levels of the Company’s executive officers.officers

As noted above, during 2020, senior executives, including the NEOs, agreed to voluntarily forgo 10% ofmaintain market competitiveness and reflect their base compensation during the period of April 2020 to December 2020 as contributions to fund additional assistance for frontline employees and their families impacted by COVID-19 as well as other emergency relief.evolving responsibilities.

Annual Performance-Based Cash Bonuses

The principal purpose of our cash-based annual incentive program is to motivate and reward short-term team and individual performance. The following is the formula used to calculate 20202021 annual performance-based cash bonuses:

 

 

Base Salary ×
 

 

Target Bonus
Percentage
(As a % of
Base Salary)

 

 × 

 

Team
Performance
Factor
(0%-200%)

 

 × 

 

Individual
Performance
Factor
(0%-150%)

 

 = 

 

Final

Individual

Performance

Bonus Payout

 

Team Performance Factors

The Compensation Committee reviewed the performance measures used in the annual incentive plan to assess the program’s alignment of the incentive payouts with key performance measures of the Company’s overall business and operating segments at the time the measures were set. In reviewing the performance measures used in the annual incentive plan, the Compensation Committee considered the Company’s operational plans and strategic priorities, in light of the current and expected future operating environment. The measures described below were selected because they were viewed at the time to be key indicators of the Company’s success in executing against its business plans.

segments. The Compensation Committee established the initial team performance measures, targets and weights for the 20202021 bonus program at the beginning of the year after receiving input and recommendations from management and the Compensation Committee’s compensation consultant.

The team performance objectives and targets in 20202021 were developed through the Company’s annual financial

planning process, which took into account growth strategies, historical performance, and the existing and expected future operating environment of the Company, including the Company’s very strong performance in 2019 which reset the performance baseline to measure 2020 improvement. Because the target setting process begins in late 2019 and is completed in early 2020, these targets were set prior to the full onset of the COVID-19 pandemic.Company.

At the time the targets were set, the performance targets were designed to be challenging but achievable given the

operating environment at the time and with strong management performance. 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 the annual bonus. This leverage increases the payouts when targets are exceeded and reduces payouts when performance is below target, with a threshold level of performance required in order for any bonus associated with such metric to be paid and a cap on bonus payments.

The team performance targets actual results,and weights and overall performance for each measure established at the

46  

  YUM CHINA– 2021 Proxy Statement

   EXECUTIVE COMPENSATION

beginning of 20202021 for the Company’s NEOs are outlined below. The Company’s performance metrics were established as growth rate goals with 20192020 as the base line measure. This methodology required performance better than in 20192020 in order to receive a target payout. As such, while

Team Performance Measures   Target    Weighting 

Adjusted Operating Profit Growth*

   10%    40% 

Same Store Sales Growth**

   6.8%    15% 

Delivery Sales Growth

   20%    15% 

System Gross New Builds

   1,100    20% 

Member Sales***

   61.5%    10% 
  

 

 

 

YUM CHINA – Proxy Statement

  37

EXECUTIVE COMPENSATION   

The incentive targets for the Team Performance Factor were set based on the operating environment at the beginning of 2021 when the COVID-19 situation was relatively stable. However, multiple waves of Delta-variant outbreaks persisted, and our business was significantly affected, in the second half of the year. For details, see “Executive Summary—Context for Determining Executive Compensation Decisions—Operating Environment.”

In light of the changes in operating environment and the significant impact of the Delta-variant outbreaks on the Company’s operating and financial performance since July 2021, in September 2021, the Compensation Committee determined to measure performance with respect to the Adjusted Operating Profit Growth rate goal wasand Same Store

set below last year’s growth rate goal, such goal would still require improvementSales Growth team performance measures over last year’s actual results.three separate performance periods: the first half of 2021 (weighted 50%); the third quarter of 2021 (weighted 25%); and the fourth quarter of 2021 (weighted 25%). The performance targets for each of these three distinct performance periods were derived from the performance goals established in early 2021, with the only difference being the segregation of performance into the three distinct performance periods. This methodology resulted in particularly challengingchange retained the same performance-based program design and kept the original goals, in 2020 given that 2019 was an exceptionally strong performance year and was not impacted bybut helped address the volatility associated with the COVID-19 pandemic. The team performance targets, actual results, weights and overall performance for each measure following the adjustments described above are outlined below.

 

 

COMPANY

Team Performance Measures   Target      Actual    
Earned As a
% of Target
 		   

Weighting

(at the beginning

of 2020)

 

 

 

   
Final Team
Performance
 		   Target    Actual    
Earned As a
% of Target
 		   Weighting    
Final Team
Performance
 

Adjusted Operating Profit Growth*

   2.5%      

Negative

Growth Rate

 

 

   0    50%    0           

Same Store Sales Growth

   2.8%      

Negative

Growth Rate

 

 

   0    25%    0 

System Gross New Builds**

   832      1,044    200    15%    30 

System Customer Satisfaction***

   —      —    198    10%    19.8 

First Half of 2021

   67%    132%    200%    20%    40 

Third Quarter of 2021

   -7%    -52%    0%    10%    0 

Fourth Quarter of 2021

   -31%    -92%    0%    10%    0 

Same Store Sales Growth**

          

First Half of 2021

   8.1%    7.8%    97%    7.5%    7 

Third Quarter of 2021

   6.9%    -7.1%    0%    3.75%    0 

Fourth Quarter of 2021

   6.8%    -10.7%    0%    3.75%    0 

Delivery Sales Growth

   20%    18%    82%    15%    12 

System Gross New Builds

   1,100    1,806    200%    20%    40 

Member Sales***

   61.5%    62.1%    129%    10%    13 
  

 

 

   

 

 

 

FINAL COMPANY TEAM FACTOR

             49.8            112 
  

 

 

   

 

 

 

 

*

Adjusted Operating Profit Growth as a team performance measure is the adjusted operating profit growth, excluding the impact from the acquisition of “Huang Ji Huang,” the launch of Lavazza and foreign exchange rate. The impact from the acquisition of “Huang Ji Huang” and the launch of Lavazza were excluded to allow adjusted operating profit growth to be calculated on a comparable basis with 2019. We also excluded the effects of RMB to USD translations (either positive or negative) because we believe that changes in the foreign exchange rate can cause Operating Profit Growth to appear more or less favorable than business results indicate. If measured on a full-year basis, actual result would be -2%.

 

**

The Compensation Committee excluded Huang Ji Huang and Lavazza, when determining the Company’s target andIf measured on a full-year basis, actual results for the System Gross New Builds performance measure because the Lavazza business remains in an initial testing stage, with the Company’s annual plans for new builds subject to change, and Huang Ji Huang was acquired after the setting of the performance targets.result would be -0.9%.

 

***

System Customer Satisfaction is measured based on feedback obtained from customers through online customer surveys. ForMember Sales refers to member sales for the Company, this goal is measured on an aggregate basis for allKFC and Pizza Hut brands as a percentage of the Company’s brands.total system sales.

 

In lightAs noted above, a team factor of 112% was achieved based on the five performance measures set out above with the performance periods for the performance measures of Adjusted Operating Profit Growth and Same Store Sales Growth being segregated into three distinct performance periods. With Adjusted Operating Profit Growth and Same Store Sales Growth measured on a full-year basis as established in early 2021, the team factor would have been 65% due to the volatility of COVID-19

on the Company’s performance during 2021. Although the strong performance, particularly in the first half of 2021, and the extraordinary effort of the management team in containing cost and delivering positive profit amid the severe impact of the COVID-19 pandemic, beginning in May 2020,the second half of 2021, would have resulted in a team factor of 112%, the Compensation Committee beganapplied discretion to re-evaluatereduce the 2020 annual incentive planresult from 112% and acknowledged that the unprecedented challenging business environment on the economy in general and the restaurant industry in particular had causedapproved a shifting consumer demand from dine-in services to delivery and takeaway services. This shift in services and the impactfinal team factor of the pandemic made the achievement of the team performance targets described above significantly more challenging than was originally intended. To further incentivize the capturing of market opportunities in takeaway and delivery, the Compensation Committee evaluated whether any Team Performance Factor adjustments were necessary to

the 2020 annual incentive plan in order to continue to incentivize and reward actions designed to support critical strategies and long-term value creation, including strategies designed to help the105% for Company navigate through the pandemic and emerge as an innovative and strong market leader. Specifically, the Compensation Committee wanted to support the following strategies, which would be critical to the Company’s success in successfully responding to the pandemic: implementing end to end digitalization; deepening the B2B ecosystem; accelerating delivery and business-to-business opportunities; and expanding new retail businesses, with the goal of motivating transformative actions to grow the business post-pandemic.performance.

 

 

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In its review, the Compensation Committee discussed a number of alternatives, including the use of a discretionary year-end adjustment to recognize the strategic achievements and replacing the performance goals entirely. The Compensation Committee determined that it was still appropriate to use the initial goals set at the beginning of the year to determine annual incentive payouts in order to hold management accountable to such goals, but with such goals supplemented with additional KPIs as well as a rTSR measure to help motivate management to focus on critical strategies discussed above that were deemed essential to the Company’s ability to operate in the COVID-19 environment and which were deemed supportive of long-term value creation and aligned with stockholder interests. At the time, the Compensation Committee determined to establish a performance framework for evaluating the supplemental KPIs, which included target goals.

After reviewing feedback from management regarding the KPIs as well as input from the Compensation Committee’s compensation consultant, in July 2020, the Compensation Committee approved (i) the maintaining of the original KPIs to hold participants accountable to such goals, but with a reduction in the weighting of the team performance factors described above from 100% to 35% of the team factor weighting, (ii) the introduction of six supplemental KPIs, accounting for 35% of the team factor weighting in order to motivate strategic actions designed to help the Company navigate through the pandemic and emerge as an innovative and strong market leader, and (iii) the introduction of a rTSR metric, accounting for the remaining 30% of the team factor weighting, as illustrated in the following graphic:

LOGO

*

Based on the achievement of the original team performance measures discussed above and the adjusted weighting approved in July 2020, the final team performance factor for the original KPIs was 17.5 (team performance factor of 49.8 multiplied by adjusted weighting).

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The Compensation Committee determined that this combination of performance metrics was appropriate to motivate management to focus on the successful execution against the Company’s operational plan during this challenging time and, at the same time, were aligned with the Company’s strategic priorities in order to position the Company as a strong market leader.

The six new KPIs approved by the Compensation Committee in July 2020 are set forth in the table below. Four of the KPIs (Digital, B2B Ecosystem, KFC Delivery Sales Growth and Pizza Hut Non-Dine-In Transactions) were

aligned with the Company’s strategy of exploring new growth opportunities given the reduced dine-in traffic during 2020 and were deemed essential to the Company’s ability to navigate the COVID-19 pandemic and emerge as a strong market leader. The cost control measure was viewed as a critical measure to protect operating margin and profitability. Finally, the market penetration factor was viewed as a strong factor contributing to the Company’s long-term growth. The KPIs were designed to motivate the NEOs to achieve strategically important goals that were also designed to be challenging but attainable with strong management performance.

Key Performance Indicator   Target    Actual    

Performance

v. Target

 

 

   Weighting 

Market Penetration*

   *    *    on target    25% 

Digital**

   60.0%    60.2%    on target    15% 

B2B Ecosystem***

   920    1,015    above target    10% 

KFC Delivery Sales Growth****

   38.0%    41.9%    above target    25% 

Pizza Hut Non-Dine-In Transactions*****

   42.0%    45.2%    above target    15% 

Cost Control******

   -10.0%    -12%    above target    10% 

*

Market Penetration measures the Company’s total store count as a percentage of the total store count of the Company and its key peer companies. The Company is not disclosing this goal due to the competitively sensitive nature of such goal. The goal was designed to be challenging but achievable with strong management performance.

**

Digital measures digital member sales for the KFC and Pizza Hut brands as a percentage of total system sales.

***

B2B Ecosystem measures the Company’s total business-to-business gross merchandising value in millions of U.S. dollars.

****

KFC measures the year-over-year delivery sales growth of our KFC brand.

*****

Pizza Hut measures the percentage of sales of our Pizza Hut brand that are attributable to non-dine-in transactions.

******

Cost Control measures actual general and administrative expenses for 2020 compared to the Company’s operating plan for the year.

Based on an assessment of performance, the Committee assigned 40 points to the achievement of the six new KPIs. This performance assessment reflected the Company’s overall strong performance in these categories in the challenging COVID-19 environment, as evidenced by the on target and above target attainment levels.

In July 2020, the Compensation Committee also determined to include rTSR as a supplemental Team Perfor-

mance Factor in the adjusted annual incentive program. The Compensation Committee determined that rTSR was viewed as a core measure to evaluate the Company’s performance and stockholder value creation. In addition, the use of rTSR was viewed as appropriate in light of the unpredictable operating environment as a result of the COVID-19 pandemic. In making this decision, the Compensation Committee also considered the fact that the rTSR performance measure was in addition to the abso-

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lute performance goals, both in terms of the original KPIs and the supplemental business transformation KPIs introduced in July 2020, in order to strike an appropriate balance in 2020 with respect to incentivizing financial, operational, transformational and TSR performance.

The rTSR portion of the annual incentive program was to be paid out based on the Company’s 2020 rTSR perfor-

mance as compared to the constituents of the MSCI China Index as of January 1, 2020 in accordance with the schedule set forth below. Based on the Company’s TSR performance of 22.74% and a corresponding percentile ranking at the 57th percentile, the TSR team performance factor was 32 points based on the weighting assigned to the TSR performance metric (TSR vesting level of 106.77% of target multiplied by the TSR weighting).

   YUMC TSR v. Constituents of MSCI CHINA INDEX* 

Percentile Ranking Achieved

   <40th      40th    55th    85th    Actual 

Proportion of Target Award Vesting

   0%      50%    100%    200%    106.77% 

*

Calculated based on the 20 trading day average closing price prior to and including the start and end dates of the 2020 calendar year and assuming reinvestment of all dividends.

Based on the achievement of the Team Factor performance goals, including the original and supplemental KPIs and the rTSR metric discussed above, the Compensation Committee determined a Team Performance Factor of 90%.

Individual Performance Factors

In February 2020,2021, the Compensation Committee establishedapproved the performance goals that would be used to determine the Individual Performance Factor for the CEO and provided input on the performance goals setrecommended by the CEO for the other NEOs, which would subsequently be used by the CEO to recommend to the Compensation Committee the Individual Performance Factor for each NEO. As part of the Company’s annual performance evaluation process, the CEO, after having received input from the Compensation Committee and after consultation with each NEO, establishes that NEO’s performance objectives for the coming year, which are ultimately approved by the Compensation Committee. These performance objectives are not intended to be rigid or formulaic, but rather to serve as the framework upon which the CEO evaluates the NEO’s overall performance.

These annual performance goals generally fell within the performance categories of mitigating the impact of the COVID-19 pandemic, increasing stockholder returns, accelerating the growth of our brands, driving new business initiatives, and building people capabilities and organizational strength and resilience.ESG objectives. Under each performance goal category, each NEO has a number of

underlying pre-established goals against which the NEO’s performance is assessed to determine whether the NEO has achieved the overall performance goal. The evaluation of an executive’s performance relative to these goals is inherently subjective, involving a high degree of judgment based on the CEO’s observations of, and interactions with, the executive throughout the year. As an additional input to the evaluation of an executive’s performance, the CEO assesses the overall performance of the Company in light of the dynamics of the China market. As a result, no single performance goal or group of goals is determinative for the CEO’s evaluation of the executive’s performance.

The above evaluation provides the basis for the CEO’s recommendation to the Compensation Committee for the executive’s Individual Performance Factor. The Compensation Committee then meets with the CEO and discusses the CEO’s recommendations and meets separately in executive session to discuss the CEO’s recommendations and make a determination of the Individual Performance Factor for the NEOs, excluding the CEO.

The Compensation Committee applies similar factors in determining the Individual Performance Factor for the CEO. The Compensation Committee meets in executive session to discuss the CEO’s individual performance and then consults with the Chairman of the Board for their collective determination of the CEO’s Individual Performance Factor. The evaluation of the CEO’s overall performance relative to these factors is also inherently

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subjective, involving a high degree of judgment. The Compensation Committee and the other independent directors assess the overall performance of the Company in light of the dynamics of the China market in which the Company operates. As a result, no single performance goal or group of goals is determinative for the evaluation of the CEO’s performance.

The use of Individual Performance Factors provides the Company with a degree of flexibility (applied reasonably and in moderation by the Compensation Committee) to reward contributions to strategic business initiatives and the building of organizational capabilities supportive of the creation of long-term value.

Based on the foregoing, the Compensation Committee assigned 20202021 Individual Performance Factors for the NEOs ranging from 100% to 150%130%, as described below under “2020“2021 NEO Compensation and Performance Summary.”

Long-Term Equity Incentives

The Company provides long-term equity compensation to its executives to encourage decision-making that creates long-term sustainable stockholder value. In determining the size of the annual equity awards, the Compensation Committee considers the following:

 

Prior year individual and team performance;

 

Expected contributions in future years;

 

The market value of the executive’s role compared with similar roles in the Company’s peer group, based on compensation survey data; and

 

Achievement of the Company’s stock ownership guidelines.

Beginning

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Consistent with the 2020 annual equity grants, the PSU program has been expanded to include each of the NEOs, resulting in 20202021 annual equity grants in the formconsisted of SARs and PSUs, equally weighted. As a result of this change,

theThe entire portion of the annual equity grant is considered by the Compensation Committee to be performance-based as the PSUs will vest based only on the Company’s achievement of performance goals relating to rTSR, Adjusted Total Revenue Growth and Adjusted Diluted Earnings Per Common Share Growth, with a rTSR payout modifier, and the SARs will realize value only to the extent the Company’s stock price increases from the date of grant.

The SARs vest annually in equal installments of 25%, beginning on the first anniversary of the grant date and generally subject to continued employment through the applicable vesting date. The exercise price of each SAR grant is based on the closing market price of the underlying Company stock on the date of grant.

The annual PSU grants (the “Annual PSU Awards”) are designed to incentivize each NEO’s performance over the performance period from January 1, 20202021 to December 31, 2022 performance period2023 and to further align their interests with the interests of our stockholders. TheIn early 2021, in response to the challenges presented by the COVID-19 pandemic with respect to setting targets for the Annual PSU Awards, willthe Compensation Committee determined to grant the Annual PSU Awards in two equally weighted grants, with the first grant occurring in February 2021 and to vest based on the Company’s achievement of rTSR performance goals and the second grant occurring three months later in May 2021 and to vest based on the Company’s achievement of performance goals relating to Adjusted Total Revenue Growth (with a weighting of 60%(weighted 50%), and Adjusted Diluted Earnings Per Common Share Growth (with(weighted 50%). Given the uncertainty presented by the continuing COVID-19 pandemic, the Compensation Committee considered a weightingnumber of 40%),options to design the Annual PSU Awards in a manner that served as an appropriate incentive vehicle while also aligning the long-term interests of recipients with our stockholders, including the possibility of setting annual performance goals for each year in the three-year performance period with respect to the Adjusted Total Revenue Growth and Adjusted Diluted Earnings Per Common Share Growth performance goals. In order to align the Annual PSU Awards with the long-term interest of the stockholders, the Compensation Committee ultimately decided to approve a three-year performance period from January 1, 2021 to

December 31, 2023, as compared to three annual performance periods. To obtain greater clarity on the operating environment and assess the rigor of these three-year performance goals, the Compensation Committee delayed the grant date by three months until May 2021 for the Annual PSU Awards with vesting tied to these two performance goals. Consistent with the Company’s usual practice of granting annual LTI awards in February, the number of shares subject to the May 2021 portion of the PSU grant was determined based on the February 2021 stock price rather than the stock price on the grant date in May 2021. This resulted in larger grant date fair value as compared to the grant level approved in February 2021 due to higher stock price in May 2021.

The rTSR payout modifier.performance goal for the 3-year performance period from January 1, 2021 to December 31, 2023 is measured as achievement compared against constituents of the MSCI China Index. The vesting is capped at target if TSR performance is negative over the performance period. For Company performance at the 30th percentile, threshold shares (50% of target) would be earned, at the above median 55th percentile 100% of target shares would be earned, and at the 80th percentile or greater, maximum shares (200% of target) would be earned. The Adjusted Total Revenue Growth and Adjusted Diluted Earnings Per Share Growth goals use the 20192020 results as a baseline from which to measure growth. Given 2019 performance and the Company’s operating plan overperformance in 2020 (and the three-year performance period,first quarter of 2021 with respect to the Adjusted Total Revenue Growth and Adjusted Diluted Earnings Per Share Growth performance goals) and the Company’s operating plan over the three-year performance period, the performance goals applicable to the Annual PSU Awards were designed to be challenging but achievable with strong management performance. If the Company outperformed or underperformed the MCSI China Index by 20%, then the number of PSUs that would vest based on the Company’s Adjusted Total Revenue Growth and Adjusted Diluted Earnings Per Common Share Growth performance would be increased or decreased by 20% based on the Company’s rTSR. Based on performance, vesting may range from 0% to 240% of the target number of shares subject to the Annual PSU Awards

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The PSU program was first used by the Company in 2018 and 20202021 represented the final year of the 2018-20202019-2021 performance period for Ms. Wat’s 2018 PSU award. Ms. Wat served as the Company’s CEO for nearly the entire performance period.PSUs granted in 2019. Under the 20182019 PSU program, Ms. Wat’s 20182019 PSUs would be settled in shares of our

common stock based on our rTSR performance over the 2018-20202019-2021 performance period relative to 143 of the 149 companies in the MSCI International China Index as of January 1, 2018.2019 and that were still active as of December 31, 2021. Under the program, payout would be capped at target if the Company’s TSR was negative over the three-year performance period.

 

 

           Threshold   Target   Maximum 

TSR Percentile Rank Achieved

   <30%      30%    55%    85% 

Proportion of Target Award Vesting*

   0%      35%    100%    200% 

*

Vesting proportion for performance between performance levels would be determined based on linear interpolation.

Based on the Company’s 44.76% TSR performance during the three-year performance period, the Company ranked at the 79th percentile as compared to the TSR performance of the active constituents of the MSCI International China Index at the end of the performance period, resulting in 181.27% of the target PSUs and dividend equivalents vesting, or 111,489.79 shares of our common stock.

2020 Partner Long-Term Performance-Based Grants

The Compensation Committee supplemented the executive compensation program in 2020 to include an award of PSUs in the form of the Partner PSU Awards to select employees of the Company and its subsidiaries, including the NEOs, who were deemed critical to the Company’s execution of its strategic operating plan. The Compensation Committee determined that these Partner PSU Awards were necessary to:

•

Address Increased Competition and the Existing Pay Gap—The Company is increasingly competing for executive talent with new food retail platform companies in China as well as other startup companies. The Company, with a proven and successful track record, is prominent in the restaurant and retail industry in China. Competitors in the new retail space, including startups considering United States or overseas listing, are increasingly competing for executive talent with deep knowledge of both the United States and China market practices and regulatory environments. These competitors often offer compensation programs with significant one-time equity grants, which is a common practice in

the Chinese executive compensation market. This increased competition and the related new-hire offers of significant one-time equity grants, coupled with an already challenging market for executive talent, has created a pay gap for the Company’s leadership team as compared to the competitive market and has posed significant challenges to the Company’s ability to retain and motivate the Company’s visionary and entrepreneurial leadership team. In 2019, four executive team members left the Company and joined startups or companies with new retail platforms preparing for overseas listing. The Compensation Committee believes that the Partner PSU Awards will help address the existing pay gap, are responsive to the compensation packages offered by this increased competition, including the practice of granting significant one-time equity grants, and are designed to create an entrepreneurial mindset.

•

Motivate Transformational Performance—The Compensation Committee determined that the Partner PSU Awards were particularly important as the Company is at a strategic inflection point as it executes on its vision to become the world’s most innovative pioneer in the restaurant industry. Specifically, the Partner PSU Awards are designed to support the execution of the Company’s multi-year strategic operating plan, focusing on the transformation and reengineering of the Company’s strong casual dining businesses and expanding their monetization capabilities by deepening the connections with customers, suppliers, distributors and business partners via the Company’s end-to-end digital ecosystem. The Company believes that integrating offline restaurants with online presence and its leadership in digital, data and delivery are crucial to building

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           Threshold   Target   Maximum 

TSR Percentile Rank Achieved

   <30%      30%    55%    85% 

Proportion of Target Award Vesting*

   0%      35%    100%    200% 

*

a transformational business model aimed at meeting the evolving needs of its customers. The Partner PSU Awards have been designed to incentivize an entrepreneurial mindset and transformationalVesting proportion for performance that the Compensation Committee believes will contribute to business growth and exceptional stockholder value creation.between performance levels would be determined based on linear interpolation.

 

•

Encourage Long-Term Retention—Over the past several years, the Company has experienced a number of senior leadership changes. The Board is committed to building an organization with continuity in its leadership. In designing the award, the Compensation Committee considered, in particular, the challenges associated with attracting and retaining high-quality leadership over the long-term to manage the complexities of the Company’s business. The Committee sought to structure an award that would incentivize longer-term retention.

The Compensation Committee evaluated a number of alternatives to structure this special incentive in a way to addressBased on the pay gapCompany’s 45.71% TSR performance during the three-year performance period, the Company ranked at the 72nd percentile as compared to the competitive market and to serve as a meaningful incentive for retention and the executionTSR performance of the Company’s strategic operating plan. With advice from the Compensation Committee’s independent compensation consultant, the Compensation Committee determined that the best way to retain key leaders for at least the next four years was to provide them with a compelling upside compensation opportunity, beyond the Company’s regular long-term incentive programs, that would motivate them to achieve the Company’s strategic priorities, including growthactive constituents of the business and continued executionMSCI International China Index at the end of innovation and strategy. These grants are intended to provide value to the executive officers only if the Company successfully executes on its strategic operating plan, which the Compensation Committee believes will contribute to a significant increase in stockholder value. Given the unique nature of these grants, the Compensation Committee has committed not to grant similar, special grants of performance units during the performance period, although award recipients will continue to receive equity awards as part of the Company’s regular annual program.

Accordingly,resulting in February 2020, the Compensation Committee approved the long-term Partner PSU Awards to the NEOs. On the grant date, Partner PSU Awards with an aggregate grant date fair value, assuming target performance, were granted to the NEOs as follows: Ms. Wat, $12,000,000; Mr. Yeung, $2,000,000; Mr. Huang, $2,000,000; Mr. Tan, $1,500,000; and Mr. Yuen, $1,500,000. With the annualized value of the Partner PSU Awards over their four-year performance period, target total direct compensation for Ms. Wat would be positioned at approximately the median of that of the compensation peers and between approximately the lower quartile and median of the relevant market for the other NEOs.

These long-term Partner PSU Awards will vest only if threshold performance goals relating to stock price (weighted 55%), Adjusted Total Revenue Growth (weighted 20%), Adjusted EBITDA Growth (weighted 15%) and transformational objectives (weighted 10%) are achieved over a four-year performance period, commencing on January 1, 2020 and ending on December 31, 2023. Target vesting with respect to the stock price trigger will not occur unless the Company’s stock price is at least $80.00 measured as the trailing 60-day average closing price, with threshold vesting and maximum vesting occurring based on average stock prices equal to $60.00 and $100.00, respectively. The closing stock price on the date of grant was $42.71. The other performance goals were designed to be challenging but achievable with strong execution of the Company’s strategic operating plan. Adjusted Total Revenue Growth and Adjusted EBITDA Growth are set at a compound annual growth rate (CAGR) using the 2019 results as the baseline, and are aligned with the Company’s long-term growth plan to drive value creation for stockholders. Based on performance, vesting may range from 0% to 200%157.43% of the target numberPSUs and dividend equivalents vesting, or 67,686 shares of shares subject to the Partner PSU Awards.our common stock.

In designing the Partner PSU Awards, the Compensation Committee sought to align the interests of the recipients with the Company’s stockholders and to incentivize long-term stockholder value creation, resulting in the following features in the Partner PSU Award design:

•

4-Year Performance and Vesting Period—Even if the performance goals are achieved prior to the expiration

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of the performance period, the Partner PSU Awards remain subject to service-based vesting through the expiration of the performance period.

•

Challenging Stock Price Targets—In order to receive target payout for the award, the stock price must almost double from the closing stock price on the date of grant and threshold payout requires a 40% increase in the stock price.

•

Payout Cap to Incentivize Stock Price Performance for Duration of Performance Period—In order to incentivize stock price performance throughout the entire performance period, payout will be capped at target if the average stock price for the last 60 days of the performance period is below threshold, even if a higher stock price average was attained earlier in the performance period.

•

Termination Provisions—The awards will generally vest pro rata based on actual performance through the end of the performance period in the event of termination due to death, retirement, or termination without cause. In the event of a termination of employment by the Company without cause or by the award recipient due to good reason within two years following a change in control of the Company, the award will vest based on the greater of actual performance and target.

•

Compensation Recovery Policy—The Partner PSU Awards are subject to the Company’s Compensation Recovery Policy, which allows the Company to recover or cancel performance awards, such as the Partner PSU Awards.

•

Restrictive Covenants—The Partner PSU Awards also include non-competition and non-solicitation restrictive covenants.

2021 Chairman Grants

In February 2021, the Compensation Committee awarded three-year cliff-vesting RSU awardsthe 2021 Chairman Grants to select Company executive officers and employees. Among the NEOs, Ms. Wat and Mr.Messrs. Yeung and Chan were selected as recipients of the Chairman long-term equity grant. These awards are intended to provide recognition for exemplary individual

leadership demonstrated by select executives and employees during 2020, in particular in resolving many novel and complex regulatory issues to execute the Company’s secondary listing on the Hong Kong Stock Exchange and navigating the Company through the COVID-19 crisis. The Company considers it important to retain the flexibility to make long-term equity awards to specifically reward demonstrated individual leadership actions and behaviors that are not factored into the corporate performance goals underlying the equity awards made to our entire management team, but which still recognize individual actions and behaviors that the Company wants to encourage and foster. While these awards were granted in recognition of the significant individual achievements and leadership displayed by recipients during 2020, the Compensation Committee elected to deliver the 2021 Chairman grantsGrants as RSUs that cliff-vest on the third anniversary of the grant date to incentivize retention over this three-year period. Factors considered in awarding the Chairman Awards included:

 

 • 

Listing on the Stock Exchange of Hong Kong—Management assumed a significant amount of additionaladdi-

tional duties to resolve many novel and complex regulatory issues to execute the Company’s secondary listing on the Hong Kong Stock Exchange on an accelerated timeframe in the midst of the global pandemic to become the first Delaware and non-TMT company to qualify as an innovative company and successfully list on the exchange. The secondary listing on the Hong Kong Stock Exchange raised net proceeds of $2.2 billion and expanded the Company’s stockholder base in China and Asia.

 

 • 

COVID-19 Responsiveness—The management team led the implementation of key actions that we undertook to protect our employees, serve our customers, drive stockholder value-creation and give back to the community in connection with the COVID-19 pandemic, all of which we believe have contributed to our ability to navigate the pandemic to date.in 2020. These actions included: implementing stringent health measures at our restaurants and workplaces and providing extended healthcare and other support to employees; keeping majority of our stores open even at the peak of the outbreak; launching contactless delivery, takeaway and corporate catering to support businesses during the time

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of reduced dine-in traffic; and addressing operational complexities and challenges in response to changes in regulatory requirements imposed by governmental authorities. Throughout the pandemic in 2020, management demonstrated their commitment to our long-term success by taking actions that were key to the Company’s ability to effectively navigate the pandemic and emerge even stronger, even if such actions entail certain additional costs. For example, while many of our competitors elected to lay-off employees during the pandemic, we kept employees on our payroll to allow us to recall employees as soon as possible once restrictions eased and it was appropriate to open stores. Actions such as this allowed us to nimbly respond to changing circumstances and foster goodwill among our employees. SalesDuring 2020, sales and traffic recovered

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sequentially since the first quarter of 2020. The Company also served over 170,000 free meals to 1,450 hospitals and medical centers.

 

 • 

Strong Execution Against the Company’s Strategic Operating Plan—In the context of a challenging year without precedent, the Company delivered strong results, including the opening of 1,165 new stores, bringing total store count to over 10,500 across more than 1,500 cities in China. The KFC and Pizza Hut loyalty programs exceeded 300 million members combined, with member sales accounted for approximately 60% of system sales in 2020. Leveraging its digital and delivery capabilities, the Company continued to capture dine-in and off-premise opportunities. These priorities were aligned with the Company’s strategic operating plan in order to position the Company as a strong market leader.

The grants to Ms. Wat and Mr.Messrs. Yeung and Chan have a grant date fair value of $2,500,000, $1,600,000 and $1,600,000,$1,500,000, respectively, and will cliff-vest on the three-year anniversary of the grant date based on continued service through the vesting date. The Compensation Committee elected to deliver the 2021 Chairman grantsGrants as RSUs rather than as cash bonuses in order to further incentivize the retention of these key contributors over the applicable vesting period and to further align their interests with the interests of our stockholders. While these awards are not a component of the Company’s annual executive compensation program, the Compensation Committee considereddetermined that the strong contributions2021 Chairman Grants were appropriate to recognize the listing on the Hong Kong Stock Exchange and to incentivize similar actions that required significant efforts and innovativeness by our select executives.

2022 Lavazza ESOP Grants

As previously disclosed, the Company and Lavazza Group established the Lavazza Joint Venture to explore and develop the Lavazza coffee business in China. In order to incentivize the efforts of these executive officersemployees of the Company, Lavazza Group and employeesthe Lavazza Joint Venture to execute on the Lavazza Joint Venture’s business plan, including the target to open 1,000 Lavazza stores in China by 2025, the Lavazza Joint Venture established the JV

Equity Plans allowing for the grant of equity awards with respect to the Company’s performance during 2020Lavazza Joint Venture to key employees of the Lavazza Joint Venture, as well as select employees of Lavazza Group and the Company. Under the JV Equity Plans, up to 15% of the equity in determining thesethe Lavazza Joint Venture may be granted as equity awards these awards are considered

2021 compensation under applicable SEC disclosure rulesthe JV Equity Plans, with employees and other eligible participants of the Lavazza Joint Venture, including general restaurant managers, eligible to receive up to 80% of the JV Equity Plan shares, or 12% of the equity in the Lavazza Joint Venture. The remaining JV Equity Plan shares will be reflectedallocated to the employees of the Company and Lavazza Group in accordance with their respective equity interest in the 2021 SummaryLavazza Joint Venture, or up to 2% and 1%, respectively, of the equity in the Lavazza Joint Venture. The Compensation Table.Committee has discretion to award the portion of the JV equity pool allocated to the Company to employees of the Company who have been key contributors to the efforts of the Lavazza Joint Venture and are deemed to be essential to the successful execution of the Lavazza Joint Venture’s business plan. The JV Equity Plans and related grants were adopted in order to support entrepreneurial and innovative thinking and leadership through a compensation structure linked to brand expansion and our long-term strategy.

After considering the input of the Compensation Committee’s compensation consultant with respect to form and amount of equity awards to be granted to Company employees, on February 10, 2022, the Lavazza Joint Venture and the Compensation Committee approved equity awards under the applicable JV Equity Plan to certain employees of the Company, including the continuing NEOs, in the form of PSUs. The PSUs are subject to both performance-based vesting conditions and the occurrence of a liquidity event. The performance-based vesting conditions relate to the Lavazza Joint Venture’s performance with respect to revenue, store-level profitability, brand-level profitability and store count, each equally weighted, with performance to be measured on a rolling four-consecutive quarter basis over a four-year performance period. The liquidity event vesting condition, which includes the occurrence of an initial public offering of the Lavazza Joint Venture, must occur within seven years of the grant date. Any portion of the award that does not vest, either based on the achievement of the applicable performance-based vesting conditions or the non-occurrence of

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the liquidity event, will be forfeited in their entirety. To recognize the efforts of each of the continuing NEOs with respect to the Lavazza Joint Venture and to incentivize and galvanize their continued focus on the success of the Lavazza Joint Venture, the Compensation Committee granted PSUs with the following grant date fair values to each of the continuing NEOs: Ms. Wat, $1,000,000; Mr. Yeung, $200,000; Mr. Chan, $200,000; Mr. Huang, $200,000 and Mr. Yuen, $200,000.

Other Elements of Executive Compensation Program

As with all Company employees, Company executive officers receive certain employment benefits. We believe the benefits we offer are an important part of retention and capital preservation for all levels of employees. Our benefits are designed to protect against unexpected catastrophic losses of health and earnings potential and provide a means to save and accumulate assets for retirement.

Post-Termination and Change in Control Compensation.

The Company provides certain post-termination and change in control compensation to help accomplish the Company’s compensation philosophy of attracting and retaining executive talent.

Change in Control Severance Plan. The Compensation Committee believesCompany maintains a change in control compensation promotes management independence and helps retain, stabilize, and focus the executive officers in the event of a change in control.severance plan that covers all NEOs. Severance benefits are payable only upon a qualifying termination, which is defined as a termination by the Company without cause or by the participant due to good reason, within 24 months following the consummation of a change in control of the Company. In addition,The Compensation Committee believes change in control compensation promotes management independence and helps retain, stabilize, and focus the executive officers in the event of a change in control.

Executive Severance Plan. As noted above, in September 2021, the Compensation Committee adopted the Executive Severance Plan to provide severance benefits to certain post-termination compensation offeredkey management employees of the Company and its affiliates who are selected by the Compensation Committee to participate in the plan, including each of the NEOs.

The Executive Severance Plan aids in recruitment and retention and promotes smooth succession planning, while providing transitional pay for a limited period of time to executives whose employment is involuntarily terminated. Payments are conditioned upon the executive’s execution of a release of claims in favor of the Company helps protectand compliance with restrictive covenants. Severance benefits payable under the Company’s interests as such compensation is provided in exchangeExecutive Severance Plan are equal to two times the sum of annual base salary plus annual target bonus for the CEO and one time the sum of annual base salary plus target annual bonus for the other NEOs, will be in lieu of any cash severance benefits under any other arrangement with the participant and are subject to recoupment in the event the executive officer agreeing to complyviolates his or her restrictive covenants with post-termination restrictive covenants.the Company.

The terms of the Change in Control Severance Plan and Executive Severance Plan were determined after considering market data and the input of the compensation consultant. The award agreements with respect to the Company’s outstanding equity awards also provide for pro-rata accelerated vesting in the event of certain qualifying terminations of employment. The terms of the Company’s post-termination and change in control compensation were determined after considering market data, the input of the compensation consultant and, in some cases, the negotiations of the parties.employment, as described below.

Please see the “Potential Payments upon a Termination or a Change in Control” section below for a quantification of the amounts that would be payable to each of the continuing NEOs in connection with a termination of employment or change in control as of December 31, 2020.2021.

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Retirement Plans. The Company offers certain executives working in China retirement benefits under the Bai Sheng Restaurants China Holdings Limited Retirement Scheme (“BSRCHLRS”). Under the BSRCHLRS, executives may make personal contributions, and the Company provides a company-funded contribution ranging from 5% to 10% of a participating executive’s base salary. During 2020,2021, all of our NEOs were participants in the BSRCHLRS, and each NEO received a company-funded contribution.

Medical, Dental, and Life Insurance and Disability Coverage. The Company provides benefits such as medical, dental, and life insurance and disability coverage to its executive officers through the same benefit plans that are provided to all eligible China-based employees.

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Perquisites. Certain perquisites are provided to certain Company executive officers relating to overseas assignments. These perquisites are governed by the Company’s formal mobility policy, are offered on a case-by-case basis and reflect each executive’s particular circumstances while also generally reflecting market practices for similarly situated, globally mobile execu-

tivesexecutives working in international companies based in mainland China. For example, the Company may offer perquisites such as housing cost subsidies, dependent education, and home leave payments to executives performing services in China. These perquisites are considered to be a necessary component of the Company’s executive compensation program in order to attract and retain high-performing executives from different countries who have the skill sets and experience to successfully manage and lead the Company in mainland China.

Prior to our spin-off from YUM, certain of our NEOs were offered tax equalization benefits as an element of their compensation. These tax equalization benefits represent legacy compensation arrangements entered into with our former parent. After the spin-off, the Compensation Committee began to phase out tax equalization benefits for the NEOs (other than certain grandfathered benefits pursuant to the legacy arrangements).

See the 20202021 All Other Compensation Table in this CD&A for details regarding the perquisites received by our NEOs during 2020.2021.

 

 

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20202021 NEO Compensation and Performance Summary

 

Below is a summary of our NEOs’ 20202021 compensation—which includes base salary, annual cash bonus, and equity

awards—and an overview of our NEOs’ 20202021 performance relative to the annual performance goals.

 

 

Joey Wat

Chief Executive Officer

 

 

20202021 Performance Summary.. The Compensation Committee determined Ms. Wat’s performance to be significantly above target with an Individual Performance Factor of 150%130%. TheAt the beginning of the year, the Compensation Committee recognized that Ms. Wat’s foresight and leadership were critical in guiding the Company through the crisis.set individual performance goals for Ms. Wat directed an immediate strategic response plan to navigatecovering five pre-defined performance areas: (1) financial performance as measured by sales and tackleprofit growth; (2) ESG; (3) accelerating growth of leading brands; (4) growing new business initiatives and (5) building people, culture and organization.

Further, Ms. Wat was recognized for leading the emergingCompany’s crisis management team in tackling many challenges arising out of the unprecedentedCOVID-19 pandemic such as evolving government regulations, city lockdowns, logistics challengesin 2021 and potential material write-offs. Ms. Wat demonstrated her strong leadershipcontinuing to transformexecute the Company’s business focus to capture new opportunities. Withplan through a disciplined review process. While the innovative “contactless delivery” model, she guidedCOVID-19 pandemic heavily impacted the Company’s business in the second half of 2021, Ms. Wat led the Company in delivering system sales growth of 10% and achieving delivery sales growth of 20% for KFC and 14% for Pizza Hut. Under Ms. Wat’s leadership, Pizza Hut’s revitalization program, which started in 2017, has significantly improved fundamentals, and Pizza Hut to drive significantachieved remarkable growth from their deliveryin both sales and non-dine-in businesses.profit in 2021. The Company achieved record openings of 1,806 gross new stores with diversified store models and healthy unit economics. Since Ms. Wat also supported a flexible operating model to help identify and satisfy customers’ unmet needs and fast-trackedWat’s appointment as CEO in early 2018, the Company’s corporate catering business.TSR consistently outperformed that of the MSCI China Index. The Compensation Committee also attached importance to Ms. Wat’s management of the Company’s talent base. Under her direction, the Company initiated the building of a B2B ecosystem through collaboration with selected strategic partners, which have demonstrated promising new business opportunities. Under her oversight,digital research and development center in three cities to support the multi-year end-to-end digitalization initiative. Ms. Wat also took an active role in guiding the Company’s secondary listing on the Hong Kong Stock Exchange was successfully completed in September 2020, raising net proceeds of $2.2 billion and expandingESG efforts. The Company’s 2021 ESG achievements included phasing-out disposable plastic cutlery, as well as gradually replacing non-degradable plastic bags with paper or biodegradable plastic bags. Ms. Wat also assembled a

project team supported by external advisors to develop a long-term greenhouse gas emissions strategy leading to the Company’s stockholder base in China and Asia. Inannouncement of its commitment to setting the context of a challenging year without precedent, the Company still delivered strong results, including the opening of 1,165 new stores, bringing total store count to over 10,500 across more than 1,500 cities in China, the expansion of the KFC and Pizza Hut loyalty programs, which

exceeded 300 million members combined and with member sales accounting for approximately 60% of system sales in 2020, and delivering a total shareholder return for 2020 of 22.74%. Leveraging its digital and delivery capabilities, the Company also continued to capture dine-in and off-premise opportunities. These priorities were aligned with the Company’s strategic operating plan in order to position the Company as a strong market leader.Science Based Targets.

20202021 Compensation Decisions.. Effective February 1, 2020,2021, the Compensation Committee setdecided to bring Ms. Wat’s 20202021 target compensation levels closer in line with the median of the Company’s compensation peer group, after taking into account Ms. Wat’s experience in and knowledge of the China consumer market and global expertise. These decisions positioned Ms. Wat’s total target direct compensation at the 42nd percentile of the Company’s 2021 compensation peer group. After considering the advice of its compensation consultant, market practices, and Ms. Wat’s individual performance.performance, the Compensation Committee made the following compensation decisions.

 

 • 

Base Salary. Ms. Wat’s base salary was increased from $1,188,000$1,250,000 to $1,250,000.$1,350,000, an increase of 8%.

 

 • 

Annual Incentive Plan Target and Payout Level. Ms. Wat’s annual cash bonus target increased from 130%150% to 150%200% of her base salary, resulting in a blended bonus target for the year of $1,853,825.$2,642,671. Ms. Wat’s 20202021 annual cash bonus award payout was $2,502,664,$3,607,246, reflecting a total payout of 135%137% of target based on the Team Performance Factor of 90%105% and Individual Performance Factor of 150%130%.

 

 • 

Long-Term Incentive Award. Ms. Wat receivedThe Compensation Committee approved an annual long-term incentive award with a grant date fair value of approximately $5,000,000$6,000,000 to Ms. Wat in 2020, unchanged from 2019 andFebruary 2021, delivered equally in SARs and PSUs.PSUs, which was increased from an annual long-term incentive award of $5,000,000 in 2020. Consistent with the Company’s usual practice of granting annual LTI awards in February, the number of shares subject to the May 2021 portion of Ms. Wat also received a Partner PSU Award with an aggregate grant date fair value, assuming target performance, of $12,000,000.Wat’s

 

 

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PSU grant was determined based on the February 2021 stock price rather than the stock price on the grant date in May 2021, which resulted in larger grant date fair value of $6,203,901 as compared to the grant level approved in February 2021 due to higher stock price in May 2021. Ms. Wat also received a 2021 Chairman

Grant with a grant date fair value of $2,500,000. Inclusive of the Chairman Grant, target total direct compensation awarded in 2021 was positioned at the 56th percentile of the Company’s 2021 compensation peer group.

Andy Yeung

Chief Financial Officer

 

 

20202021 Performance Summary. The Compensation Committee determined Mr. Yeung’s performance to be significantly above target with an Individual Performance Factor of 140%125%. Mr. Yeung was recognized for hisdriving disciplined financial planning and vigorous cost management measures, achieving a year-over-year increase in Operating Profit despite the significant contribution asimpact due to the overall leader forresurgence of COVID-19 in the successful completionsecond half of 2021. He also led the development of the Company’s secondary listingmulti-year capital allocation strategy. With the Company becoming newly listed on the main board of the Hong Kong Stock Exchange in September 2020. He2020, he led the team in resolving many novelefforts for the Company’s compliance with the rules of the SEC and complex issues, making Yum China the first U.S. incorporated company to be listed in Hong Kong as well as the first non-TMT company to complete a secondary listingStock Exchange. Mr. Yeung played an active role in Hong Kong as an innovative company. This global offering raised net proceeds of $2.2 billion and expandedESG, including the Company’s stockholder base in Chinastrategy and Asia.roadmap relating to setting Science Based Targets. For new growth initiatives, Mr. Yeung was instrumental in protectingformulating the Company’s liquidity duringlong-term joint venture agreement with Lavazza Group. He also devised and implemented robust monthly financial reviews on all new growth initiatives, including the peak ofLavazza Joint Venture, to complement the pandemic through a number of proactive measures, includingleadership team’s comprehensive business reviews on these growth initiatives and support disciplined, working capital management as well as thoughtful operating and cash flow models and cash allocation guidelines. To address the sharp drop in sales particularly in the first quarter of 2020, Mr. Yeung quickly developed and orchestrated a Company-wide cost control plan, resulting in 12% in savings in general and administrative expenses for 2020 compared to the Company’s operating plan for the year.accelerated growth.

20202021 Compensation DecisionsDecisions.. Effective February 1, 2020,2021, the Compensation Committee set Mr. Yeung’s 20202021 compensation levels after considering the advice of its compensation consultant, market practices and Mr. Yeung’s strong individual performance since he assumedperformance. Specifically, the rolecompensation adjustments for Mr. Yeung were made to bring the components of CFO.his annual target total direct compensation closer in line with that of the median of the compensation peer group.

 • 

Base Salary. Mr. Yeung’s base salary was increased from $650,000$700,000 to $700,000.$800,000.

 

 • 

Annual Incentive Plan Target and Payout Level. Mr. Yeung’s annual cash bonus target increased from 75%80% to 100% of his base salary, resulting in a blended bonus target for the year of $786,411. Mr. Yeung’s 2021 annual cash bonus award payout was $ 1,032,164, reflecting a total payout of 131% of target based on the Team Performance Factor of 105% and Individual Performance Factor of 125%.

•

Long-Term Incentive Award. The Compensation Committee approved an annual long-term incentive award of $1,500,000 to Mr. Yeung in February 2021, delivered equally in SARs and PSUs, which was increased from an annual long-term incentive award of $1,200,000 in 2020, which positioned Mr. Yeung’s annual target total direct compensation at the 41st percentile of the compensation peer group. Consistent with the Company’s usual practice of granting annual LTI awards in February, the number of shares subject to the May 2021 portion of Mr. Yeung’s PSU grant was determined based on the February 2021 stock price rather than the stock price on the grant date in May 2021, which resulted in larger grant date fair value of $1,551,056 as compared to the grant level approved in February 2021 due to higher stock price in May 2021. Mr. Yeung also received a 2021 Chairman Grant with a grant date fair value of $1,600,000. Inclusive of the Chairman Grant, target total direct compensation awarded in 2021 was positioned between the median and the upper quartile of the compensation peer group.

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Joseph Chan

Chief Legal Officer

2021 Performance Summary. The Compensation Committee determined Mr. Chan’s performance to be above target with an Individual Performance Factor of 125%. Mr. Chan also contributed significantly to the building and updating of the Company’s compliance and governance framework especially following its secondary listing on the Hong Kong Stock Exchange in September 2020. Mr. Chan also played an instrumental role in supporting the execution of strategic investments including transaction structuring, due diligence, definitive agreement drafting and negotiation and regulatory approvals. Mr. Chan also further enhanced the Company’s capability to manage and mitigate emerging risks such as cybersecurity and intellectual property protection. Mr. Chan was recognized for serving as a core member of the Company’s Sustainability Committee to lead and guide the Company’s sustainability disclosures to follow evolving regulatory requirements and market practices. He made significant contributions in the ESG strategy and roadmap formulation, including the Company’s commitment to setting Science Based Targets.

2021 Compensation Decisions. Effective February 1, 2021, the Compensation Committee set Mr. Chan’s 2021 compensation levels after considering the advice of its compensation consultant, market practices and Mr. Chan’s individual performance.

•

Base Salary. Mr. Chan’s base salary was increased from $540,000 to $600,000.

•

Annual Incentive Plan Target and Payout Level. Mr. Chan’s annual cash bonus target increased from 65% to 80% of his base salary, resulting in a blended bonus target for the year of $557,036.$472,356. Mr. Yeung’s 2020Chan’s 2021 annual cash bonus award payout was $701,865,$619,967, reflecting a total payout of 126%131% of target based on the Team Performance Factor of 90%105% and Individual Performance Factor of 140%125%.

 

 • 

Long-Term Incentive Award. Mr. Yeung received an annualThe Compensation Committee approved a long-term incentive award of $1,125,000 to Mr. Chan in February 2021, to be delivered equally in SARs and PSUs. Consistent with the Company’s usual practice of granting annual LTI awards in February, the number of shares subject to the May 2021 portion of Mr. Chan’s PSU grant was determined based on the February 2021 stock price rather than the stock price on the grant date in May 2021, which resulted in larger grant date fair value of $1,163,248 as compared to the grant level approved in February 2021 due to higher stock price in May 2021. Mr. Chan also received a 2021 Chairman Grant with a grant date fair value of approximately $1,200,000 in 2020, delivered equally in SARs and PSUs. Mr. Yeung also received a Partner PSU Award with an aggregate grant date fair value, assuming target performance, of $2,000,000.$1,500,000.

 

 

Johnson Huang

General Manager, KFC

 

 

20202021 Performance Summary. During 2020,2021, Mr. Huang served as General Manager, KFC.KFC, after returning from medical leave of absence during 2020. The Compensation Committee determined that Mr. Huang’s 20202021 performance was on target with an Individual Performance Factor of 100%110%. As previously disclosed, Mr. Huang took a medical leavewas recognized for driving KFC’s prompt actions in response to the disruptions due to the multiple waves of absence during the year and returned from his medical leaveCOVID-19 outbreaks especially in December 2020. Beforethe second half of 2021. The KFC Brand, under Mr. Huang’s medical leaveleadership, delivered an 8% increase in 2020, he effectivelysystem sales growth, and achieved delivery sales growth of 20%, openings of 1,232 gross new stores and new member acquisition of 55 million. Mr. Huang made significant

progress in implementing KFC’s strategy in both expanding regionally-inspired menu items and adopting diversified store models. He also led the KFC teamefforts to improve restaurant productivity through the use of digital technologies and automation, leading to labor productivity improvement and wastage reduction. Mr. Huang supported the Company’s ESG strategy by launching the first carbon neutral product and replacing disposable plastic straws, cutlery and bags, representing savings of over 7,000 tons of plastic in keeping most2021. He supported the continued expansion of the stores open evenKFC food bank project to 27 cities at the peakend of the outbreak, while implementing safety measures for employees and customers, and capturing off-premise consumption opportunities leveraging KFC’s digital and delivery capabilities. Throughout 2020, Mr. Huang provided direction and guidance to his team in2021.

managing various complex issues, including city lockdowns, mandated store closures and potential raw material write-offs.

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20202021 Compensation Decisions.. Effective February 1, 2020,2021, the Compensation Committee set Mr. Huang’s 20202021 compensation levels after considering the advice of its compensation consultant, market practices, Mr. Huang’s individual performance and the strong performance of KFC.

 

 • 

Base Salary. Mr. Huang’s base salary remains unchanged at $740,000.

•

Annual Incentive Plan Target and Payout Level. Mr. Huang’s annual cash bonus target was increased from 90% to 100% of his base salary, resulting in a blended bonus target for the year of $733,715. Mr. Huang’s 2021 annual cash bonus award payout was $847,441, reflecting a total payout of 116% of target based on the blended Team Performance Factor of 105% and Individual Performance Factor of 110%.

•

Long-Term Incentive Award. The Compensation Committee approved a long-term incentive award of $1,250,000 to Mr. Huang in February 2021, to be delivered equally in SARs and PSUs, as the compensation review showed that the prior year award size, which had remained unchanged from that of the year before last, was under-competitive. Consistent with the Company’s usual practice of granting annual LTI awards in February, the number of shares subject to the May 2021 portion of Mr. Huang’s PSU grant was determined based on the February 2021 stock price rather than the stock price on the grant date in May 2021, which resulted in larger grant date fair value of $1,292,558 as compared to the grant level approved in February 2021 due to higher stock price in May 2021.

Aiken Yuen

Chief People Officer

2021 Performance Summary. The Compensation Committee determined Mr. Yuen’s performance to be above target with an Individual Performance Factor of 125%. Mr. Yuen was recognized for his instrumental role in guiding and coordinating employees’ health and safety measures against the multiple waves of the COVID-19 outbreaks especially in the second half of 2021. In 2021, the Company upgraded the medical insurance coverage of our restaurant general managers, restaurant management teams and supervisors. To build organizational capability, he contributed significantly in building the Company’s digital research and development center and the Lavazza Joint Venture team from scratch. Mr. Yuen also served as a core member of the Company’s Sustainability Committee. He provided valuable guidance and input in enhancing the Company’s disclosures on human capital management in the Company’s Annual Report and Sustainability Report. In 2021, the Company was named to the Bloomberg Gender-Equality Index and was certified as a Top Employer 2021 in China by the Top Employers Institute, both for the third consecutive year.

2021 Compensation Decisions. Effective February 1, 2021, the Compensation Committee set Mr. Yuen’s 2021

compensation levels after considering the advice of its compensation consultant, market practices and Mr. Yuen’s individual performance.

•

Base Salary. Mr. Yuen’s base salary was increased from $560,000 to $600,000.

•

Annual Incentive Plan Target and Payout Level. Mr. Yuen’s annual cash bonus target increased from 65% to 70% of his base salary, resulting in a blended bonus target for the year of $417,452. Mr. Yuen’s 2021 annual cash bonus award payout was $547,906, reflecting a total payout of 131% of target based on the Team Performance Factor of 105% and Individual Performance Factor of 125%.

•

Long-Term Incentive Award. The Compensation Committee approved a long-term incentive award of $700,000 to $740,000.Mr. Yuen in February 2021, to be delivered equally in SARs and PSUs, as the compensation review showed that the prior year annual long-term incentive award was under-competitive. Consistent with the Company’s usual practice of granting annual LTI awards in February, the number of shares subject to the

 

 

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 • 

Annual Incentive Plan Target and Payout Level.May 2021 portion of Mr. Huang’s annual cash bonus targetYuen’s PSU grant was increased from 85% to 90% of his base salary, resulting in a blended bonus target for the year of $662,866. Mr. Huang’s 2020 annual cash bonus award payout was $251,021, reflecting a total payout of 38% of targetdetermined based on the blended Team Performance Factor of 90% and Individual Performance Factor of 100% and pro-rated for his period of service duringFebruary 2021 stock price rather than the year.stock price on the grant date in May 2021,

 • 

Long-Term Incentive Award. Mr. Huang received a long-term incentive award with awhich resulted in larger grant date fair value of approximately $1,200,000$723,892 as compared to the grant level approved in 2020, delivered equallyFebruary 2021 due to higher stock price in SARs and PSUs, as the compensation review showed that the prior year award size, which had remained unchanged from that of the year before last, was under-competitive. Mr. Huang also received a Partner PSU Award with an aggregate grant date fair value, assuming target performance, of $2,000,000.May 2021.

 

 

Danny Tan

Former Chief Supply Chain OfficerOfficer(through November 8, 2021) and Senior Advisor to the CEO (from November 9, 2021 to February 10, 2022)

 

 

20202021 Performance Summary.The Compensation Committee determined Mr. Tan’s performance to be significantly aboveon target with an Individual Performance Factor of 130%100%. Mr. Tan was recognized for his contribution in managing and optimizing cost of sales, leading to significant contribution to addresssavings for raw materials and logistics cost. He also provided valuable input in planning for the many operational challenges and complexities during the pandemic, and for being a core memberexpansion of the Company’s crisis management team. Under Mr. Tan’s leadership,logistics center network. In 2021, the supply chain team overcameCompany acquired land for three logistics centers, of which the global shortage atCompany started greenfield construction for two. When serving as the time to secure adequate protective equipment for employees, and addressed the complex logistics issues due to city lockdowns. Mr. Tan also ensured the continuous compliance with food safety requirements and precautionary measures imposed by different levels of governments across China, both in our stores and with our supply chains. Mr. Tan also successfully led the effort in conjunctionchairperson of the brand teamsSustainability Committee, he was instrumental in minimizing raw materials write-offs at the outbreak of the pandemic. Mr. Tan led the refinement offormulating the Company’s sustainabilityESG strategy and roadmap, including the Company’s commitment to setting Science Based Targets, and seeking alignment from key stakeholders. Under his leadership, the Company’s ESG efforts achieved progressive improvements, as well asdemonstrated by the preparation of its sustainability report. In 2020, Yum China made significant progress on sustainabilityassessment results from third-party agencies, including DJSI, ISS and was ranked by Dow Jones Sustainability Index (DJSI) as number one out of 30 companies in the global restaurant industry.MSCI.

20202021 Compensation Decisions. Effective February 1, 2020,2021, the Compensation Committee set Mr. Tan’s 2020

2021 compensation levels after considering the advice of its compensation consultant, market practices and Mr. Tan’s individual performance.

 

 • 

Base Salary. Mr. Tan’s base salary was increased from $630,000$670,000 to $670,000.$700,000.

 

 • 

Annual Incentive Plan Target and Payout Level. Mr. Tan’s annual cash bonus target was set at 80% of

his base salary, unchanged from the prior year, resulting in a bonus target for the year of $536,000.$ 560,000. Mr. Tan’s 20202021 annual cash bonus award payout was $631,166,$588,000, reflecting a total payout of 118%105% of target based on the Team Performance Factor of 90%105% and Individual Performance Factor of 130%100%.

 

 • 

Long-Term Incentive Award. Mr. Tan receivedThe Compensation Committee approved a long-term incentive award with a grant date fair value of approximately $950,000$1,000,000 to Mr. Tan in 2020,February 2021, to be delivered equally in SARs and PSUs, as the compensation review shows that the prior year long-term incentive award, which had remained unchanged from the prior year, was under-competitive. Consistent with the Company’s usual practice of granting annual LTI awards in February, the number of shares subject to the May 2021 portion of Mr. Tan also received a PartnerTan’s PSU Award with an aggregategrant was determined based on the February 2021 stock price rather than the stock price on the grant date in May 2021, which resulted in larger grant date fair value assuming target performance, of $1,500,000.

Aiken Yuen

Chief People Officer

$1,034,078 as compared to the grant level approved in February 2021 due to higher stock price in May 2021.

2020 Performance Summary. The Compensation Committee determinedPlease see the “Potential Payments upon a Termination or a Change in Control” section below for a quantification of the amounts Mr. Yuen’s performance to be significantly above targetTan received in connection with an Individual Performance

Factor of 140%. Mr. Yuen was in charge of coordinating the Company’s COVID-19 crisis management team. In such role, Mr. Yuen was responsible for establishing andhis separation.

 

 

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implementing measures to protect the safety and health of our employees and to comply with the differentiated health tracking and reporting requirements across China. Mr. Yuen also directed timely employee communication to maintain employee morale, engagement and confidence during the unprecedented pandemic. Mr. Yuen helped re-evaluate performance objectives used for eligible employees to establish bonus programs that would serve as a strong incentive device and redirect employees to focus on key performance goals designed to address the particularly challenging environment due to the pandemic and to position the Company as a strong market leader. Mr. Yuen was also a key participant in the Company-wide cost management initiatives and worked with all functions to adjust their people planning, contributing to a 12% savings in general and administrative expenses for 2020 compared to the Company’s operating plan for the year.

2020 Compensation Decisions. Effective February 1, 2020, the Compensation Committee set Mr. Yuen’s 2020 compensation levels after considering the advice of its compensation consultant, market practices and Mr. Yuen’s individual performance.

•

Base Salary. Mr. Yuen’s base salary was increased from $518,000 to $560,000.

•

Annual Incentive Plan Target and Payout Level. Mr. Yuen’s annual cash bonus target remained at 65% of his base salary, resulting in a bonus target for the year of $364,000. Mr. Yuen’s 2020 annual cash bonus award payout was $461,599, reflecting a total payout of 127% of target based on the Team Performance Factor of 90% and Individual Performance Factor of 140%.

•

Long-Term Incentive Award. Mr. Yuen received a long-term incentive award with a grant date fair value of approximately $650,000 in 2020, delivered equally in SARs and PSUs, as the compensation review showed that the prior year annual long-term incentive award was under-competitive. Mr. Yuen also received a Partner PSU Award with an aggregate grant date fair value, assuming target performance, of $1,500,000.

•

Retention Award. Mr. Yuen received the second of two installment payments of his 2018 cash retention award in the amount of $100,566 in February 2020, based on his continued employment with the Company through the applicable payment date.

How Compensation Decisions Are Made

 

Executive Compensation Philosophy

A unique feature of the Company is that while it is registeredincorporated in the U.S.Delaware and listed on the NYSE it operates largelyand Hong Kong Stock Exchange, substantially all of its operations are located in China. As a result, knowledge and expertise of both U.S. and China regulatory regimes and business practices are required for many of the Company’s executive officers.

The Company’s executive compensation program has been designed to attract and retain the talent necessary to achieve superior stockholder results and support the long-term sustainable growth of the Company while simultaneously holding our executives accountable to continuously achieve results year after year. In addition, the program has been designed to reward performance, emphasize long-term value creation and drive an ownership mentality.

Role of the Compensation Committee

The Compensation Committee reviews and approves goals and objectives relevant to the compensation of the CEO and other executive officers, sets the compensation levels of each of the executive officers, and together with the other independent directors of the Board, approves the compensation of the CEO. The Compensation Committee’s responsibilities under its charter are further described in the “Governance of the Company” section of this Proxy Statement. While not members of the Compensation Committee, the CEO, the CFO, the Chief People Officer, and the Chief Legal Officer, when necessary, also attended meetings of the Compensation Committee in 20202021 to contribute to and understand the Compensation Committee’s oversight of, and decisions relating to, executive compensation. The CEO, the CFO, the Chief People Officer, and the Chief Legal Officer did not attend portions of the meetings relating to their own compensation.

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The Compensation Committee regularly conducts executive sessions without management present. The Compensation Committee also engages in an ongoing dialogdialogue with its compensation consultant, the CEO, and the Chief People Officer for the evaluation and establishment of the elements of our executive compensation program.

Role of the Independent Consultant

During 2020,2021, the Compensation Committee retained Mercer (Hong Kong) Limited (“Mercer”) as its independent consultant to advise it on executive compensation matters. Mercer attended Compensation Committee meetings in 20202021 and provided advice and guidance to the Compensation Committee on (i) the market competitiveness of the Company’s executive pay practices and levels; (ii) the Partner PSU Awards; (iii) trends in the restaurant sector affecting executiveincentive compensation due to the impact of COVID-19,plan design market practice, including regulatory changes,developments, and institutional shareholder views;views, and in relation to equity awards under the applicable JV Equity Plan; (iii) executive severance plan design benchmarks; (iv) the incorporation of additional performance factors into the 2020 annual incentive plan in light of the impact of COVID-19 on the Company; (v) the 20212022 compensation peer group; (vi)(v) the results of equity compensation analytics and award valuations; (vi) the 2021 Chairman equity awards for select Company officers;Grants; (vii) the Company’s stock ownership guidelines and retention policies; and (viii) pay disclosures, including this CD&A. The Compensation Committee has assessed the independence of Mercer pursuant to NYSE rules and conflicts of interest specifically enumerated by the SEC’s six factors, and the Company has concluded that Mercer’s work for the Compensation Committee does not raise any conflicts of interest. The Compensation Committee annually reviews its relationship with Mercer and determines whether to renew the engagement. Only the Compensation Committee has the right to approve the services to be provided by, or to terminate the services of, its compensation consultant.

Competitive Market ReviewExecutive Compensation Peer Group

One of the key objectives of our executive compensation program is to retain and reward the right talent by providing reasonable and competitive compensation. One method that the Compensation Committee utilizes to attain this objective is by establishing a group of peer companies for comparison of executive compensation practices.

The peer group approved by the Compensation Committee based on the recommendations of Mercer consisted of companies in the restaurant, food and consumer services industries in the United States, Greater China and Europe.Europe, as these represent the sectors with which the Company

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competes for executive talent. In addition, Mercer suggested that, for purposes of benchmarking compensation levels for NEOs other than the CEO, the peer group data be supplemented with compensation survey data to provide a broader perspective on market practices. References in this CD&A to market data refer to the peer group or survey data, as appropriate.

After considering the advice of Mercer, the Compensation Committee approved a revised peer group for evaluating 20202021 compensation decisions for the NEOs, which consisted of the companies below. As part of these revisions, the Compensation Committee added Beyond Meat, Inc., China Mengniu Dairy, eBay Inc., Expedia Group,

Inc., Kellogg Company, Marriott International, Inc., and McCormick & Company, Incorporated and removed Hyatt Hotels Corporation, Melco International Development Limited, US Foods Holding Corp., Whitbread PLC, Wm Morrison Supermarkets PLC, Wynn Macau, Limited and X5 Retail Group N.V. These changes were made in order to further align the peer group with the Company’s size and operations. Founder CEOs at Beyond Meat, Inc., Haidilao International HoldingHoldings Ltd., and McDonald’s Corporation toWant Want China Holdings Limited were excluded from the revised peer group because these companies operate in the same industry and are direct competitors, and removed The Gap, Inc. because it considered specialty retail to be a less relevant industry.competitive market review. Our peer group reflects a median market capitalization of $12.6$23.6 billion and median annual revenues of $7.9$11.2 billion, both as of June 30, 2020,2021, and consists of 1317 U.S. and 1410 non-U.S. companies.

 

 

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EXECUTIVE COMPENSATION   

Executive Compensation Peer Group

   

Aramark Corporation

LOGO

Chipotle Mexican Grill, Inc.

Compass Group PLC

Conagra Brands, Inc.

Darden Restaurants, Inc.

Domino’s Pizza, Inc.

Haidilao International Holdings Ltd.

Hilton Worldwide Holdings Inc.

Hyatt Hotels Corporation

Lenovo Group Limited

Link Real Estate Investment Trust

McDonald’s Corporation

Melco International Development

Restaurant Brands International Inc.

Sodexo S.A.

Starbucks Corporation

Techtronic Industries Company Limited

The Hershey Company

Tingyi (Cayman Islands) Holding Corp.

US Foods Holding Corp.

Want Want China Holdings Limited

WH Group Limited

Whitbread PLC

Wm Morrison Supermarkets PLC

Wynn Macau, Limited

X5 Retail Group N.V.

YUM! Brands, Inc.

 

Data from our 20202021 peer group was supplemented by data from companies included in three executive compensation surveys conducted by Mercer in China, Hong Kong, and the U.S., size adjusted to reflect the Company’s revenue. During 2020,2021, the Compensation Committee reviewed a report summarizing compensation levels at the 25th, 50th25th, 50th and 75th75th percentiles of the peer group and, as applicable, of the survey data for positions comparable to our NEOs. The report compared target and actual total cash compensation (base salary and annual incentives) and total direct compensation (base salary plus annual incentives plus long-term incentives) for each of the NEOs against these benchmarks. The Compensation Committee also reviewed detailed tally sheets that captured comprehensive compensation, benefits and stock ownership details.details, and comparisons of the CEO’s realized total direct compensation and realizable equity vis-à-vis that of the peer group.

In December 2020,September 2021, the Compensation Committee revised the Company’s compensation peer group and decided to remove seven (7)four (4) companies and add seven

(7)three (3) companies so as to eliminate casinofor reasons of industry appropriateness and gaming as well as food retail companies and to place greater emphasis on internet- and direct marketing retail and packaged food sectors.disclosed data availability. The Compensation Committee addedremoved Beyond Meat, Inc., China Mengniu Dairy, eBay Inc., ExpediaWH Group Inc., Kellogg Company, Marriott International, Inc., and McCormick & Co. and removed Hyatt Hotels Corporation, Melco International Development Limited, US Foods Holding Corp., Whitbread PLC, Wm Morrison Supermarkets PLC, Wynn Macau, Limited and X5 RetailWant China Holdings Limited, and added DoorDash, Inc., General Mills, Inc. and Chow Tai Fook Jewellery Group N.V.Limited. The new compensation peer group consists of 17 U.S. and 10nine non-U.S. peers. These changes were made in order to further align the peer group with the Company’s size and operations. This revised peer group will be used to evaluate 20212022 compensation decisions. FounderThe founder CEOs at Beyond Meat,DoorDash, Inc., and Haidilao International Holdings Ltd., and Want Want China Holdings Limited are expected to be excluded from the CEO’s competitive market review.

 

 

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EXECUTIVE COMPENSATION   

Competitive Positioning and Setting Compensation

At the beginning of 2021, the Compensation Committee considered executive compensation peer group data as a frame of reference for establishing target compensation levels for base salary and annual and long-term incentive awards for each NEO. The Compensation Committee conducted an extensive review of market data and made the decision to position target total direct compensation close to the market median, with variation based on the marketability, performance and potential of each NEO and the criticality of the role on the organization.

Compensation Policies and Practices

Compensation Recovery Policy

Pursuant to the Company’s Compensation Recovery Policy, in the event of any restatement of the Company’s financial statements due to material noncompliance with any financial reporting requirement under the securities laws, the Compensation Committee will recover or cancel any performance awards that were awarded to a current or

former executive officer as a result of achieving performance targets that would not have been met under the restated results. The Company’s recovery authority applies to any performance award received by a current or former executive officer during the three most-recently completed fiscal years immediately preceding the date on which the Company is required to prepare the restatement. Under the terms of the policy, a performance award

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means any cash or equity-based award that is made, vests or is payable based wholly or in part on the results of a financial reporting measure.

Equity-Based Awards Grant Policy

The Company’s Equity-Based Awards Grant Policy provides for certain procedures with respect to the granting of equity awards, including specifying pre-determined dates for annual and off-cycle grants and specifying that the Company will not purposely accelerate or delay the public release of material information in consideration of pending equity grants. Generally, annual equity grants are effective as of the date that is two business days after the Company publicly discloses its results for the previous fiscal year.

Stock Ownership Guidelines and Retention Policy

To align the efforts of our executives with the long-term interests of our stockholders and to reinforce their commitment to the Company’s long-term objectives, the Compensation Committee established a stock ownership and retention policy that applies to our Section 16 Officers and all members of our Leadership Team. Under the stock ownership and retention policy, the executives have a five-year period from July 1, 2017 or, if later, the date of appointment to a covered position to attain the required ownership level. During the five-year phase-in period, the executives must retain, until the required ownership guideline levels have been achieved, at least 50% of the after-tax shares resulting from the vesting or exercise of

equity awards, including PSUs. If the guideline is not achieved after such five-year compliance period, the executive officer will be required to retain 100% of after-tax shares resulting from the vesting or exercise of equity awards until the guideline is achieved.

The chart below shows stock ownership requirements as a multiple of annual base salary for our continuing NEOs. As of the Record Date,record date, each continuing NEO is in compliance with the Company’s stock ownership requirements.requirements and retention policy.

 

NEO  Stock Ownership as a
a Multiple of Annual
Base Salary		 

CEO

   6X 

CFO

   3X 

General Manager, KFCChief Legal Officer

   2X 
Chief Supply Chain OfficerGeneral Manager, KFC   2X 

Chief People Officer

   2X 

 

 

Hedging and Pledging of Company Stock

Under the Company’s Code of Conduct, no employee or director is permitted to engage in securities transactions that would allow such employee or director either to insulate himself or herself from, or profit from, a decline in the Company’s stock price. Similarly, no employee or director may enter into hedging transactions in Company 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 the Company’s stock. Pledging of Company stock by executive officers and directors is also prohibited.

 

 

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COMPENSATION COMMITTEE REPORT

 

 

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management.

Based on such review and discussion with management, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statementthe Company’s definitive proxy statement relating to its Annual Meeting of Stockholders, filed on April 14, 2022 and incorporated by reference in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.2021.

Compensation Committee:

Ruby Lu (Chair)

Christian L. Campbell

Edouard Ettedgui

William Wang

Min (Jenny) Zhang

 

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EXECUTIVE COMPENSATION   

 

    

 

20202021 SUMMARY COMPENSATION TABLE

 

 

The following table and footnotes summarize the total compensation awarded to, earned by or paid to the NEOs for fiscal year 20202021 and, to the extent required by SEC executive compensation disclosure rules, fiscal years 20192020 and 2018.2019. The Company’s NEOs for the 20202021 fiscal year are its Chief Executive Officer, Chief Financial Officer, andCEO, CFO, the three other most highly compensated executive officers.officers serving as executive officers as of December 31, 2021, and its former Chief Supply Chain Officer.

 

Name and Principal Position

 Year 

Salary

($)(1)

 

Bonus

($)(2)

 

Stock

Awards

($)(3)

 

Option/
SAR

Awards

($)(4)

 

Non-Equity

Incentive Plan

Compensation

($)(5)

 

All Other

Compensation

($)(6)

 

Total

($)(7)

  Year 

Salary

($)

 

Bonus

($)

 

Stock

Awards

($)(1)

 

Option/
SAR

Awards

($)(2)

 

Non-Equity

Incentive Plan

Compensation

($)(3)

 

All Other

Compensation

($)(4)

 

Total

($)(5)

 Adjusted Total
Compensation
Without Legacy
Tax
Reimbursements(6)		 
(a) (b) (c) (d) (e) (f) (g) (h) (i) (j) 

Joey Wat

 2020  1,151,083   —  14,500,084  2,500,003  2,502,664  517,744  21,171,578  2021  1,341,667   —  5,703,920  3,000,004  3,607,246  2,902,835  16,555,672  13,993,639 

Chief Executive Officer

 2019  1,180,667   —  2,500,031  2,500,012  4,355,208  1,634,083  12,170,001  2020  1,151,083   —  14,500,084  2,500,003  2,502,664  517,744  21,171,578  20,995,478 
 2018  1,041,667   —  2,500,032  2,516,929  1,635,469  2,792,279  10,486,376  2019  1,180,667   —  2,500,031  2,500,012  4,355,208  1,634,083  12,170,001  10,900,805 

Andy Yeung

 2020  643,333   —  2,600,068  600,013  701,865  149,144  4,694,423  2021  791,512   —  2,401,075  750,014  1,032,164  135,769  5,110,534  5,110,534 

Chief Financial Officer

  2019   189,895   —   1,000,030   —   322,407   29,638   1,541,970  2020  643,333   —  2,600,068  600,013  701,865  149,144  4,694,423  4,694,423 

Johnson Huang(8)

 2020  516,814   —  2,600,068  600,013  251,021  209,701  4,177,617 
 2019  189,895   —  1,000,030   —  322,407  29,638  1,541,970  1,541,970 

Joseph Chan

 2021  595,000   —  2,100,748  562,502  619,967  177,468  4,055,685  4,055,685 

Chief Legal Officer

                  

Johnson Huang

 2021  740,000   —  667,558  625,000  847,441  320,245  3,200,244  3,108,580 

General Manager, KFC

  2019   695,833   —   440,013   440,007   1,682,635   386,480   3,644,968   2020   516,814   —   2,600,068   600,013   251,021   209,701   4,177,617   4,177,617 
  2018   644,583   —   440,007   440,011   866,775   453,540   2,844,916   2019   695,833   —   440,013   440,007   1,682,635   386,480   3,644,968   3,466,790 

Aiken Yuen

 2021  595,236   —  373,881  350,011  547,906  596,068  2,463,102  2,066,736 

Chief People Officer

  2020   517,413   100,566   1,825,078   325,011   461,599   542,754   3,772,421   3,388,514 
 2019   512,527   99,552   228,005   228,010   882,224   193,251   2,143,569   2,107,840 

Danny Tan

 2020  618,431   —  1,975,039  475,001  631,166  602,913  4,302,550  2021  695,544   —  534,074  500,004  588,000  1,542,364  3,859,986  2,605,097 

Chief Supply Chain Officer

  2019   624,689   —   380,023   380,013   1,313,575   666,369   3,364,669   2020   618,431   —   1,975,039   475,001   631,166   602,913   4,302,550   3,968,872 
 2018   592,990   —   380,015   380,005   554,218   1,338,085   3,245,313   2019   624,689   —   380,023   380,013   1,313,575   666,369   3,364,669   2,956,605 

Aiken Yuen

 2020  517,413  100,566  1,825,078  325,011  461,599  542,754  3,772,421 

Chief People Officer

  2019   512,527   99,552   228,005   228,010   882,224   193,251   2,143,569 

 

(1)

During 2020, our senior executives, including the NEOs, agreed to voluntarily forgo 10% of their base compensation during the period of April 2020 to December 2020 as contributions to fund additional assistance for frontline employees and their families impacted by COVID-19 as well as other emergency relief. The amounts reported in this column for 2020 reflect the 10% salary reduction.

(2)

The amount reported in this column for 2020 represents the second installment of a 2018 cash retention award paid to Mr. Yuen.

(3)

The amounts reported in this column for 20202021 represent the grant date fair value of the Annual PSU Awards and the Partner PSU Awards granted to each ofNamed Executive Officer and the NEOs,2021 Chairman Grants awarded in RSU granted to Ms. Wat and Messrs. Yeung and Chan, calculated in accordance with Accounting Standards Codification Topic 718 (“ASC 718”), Compensation—Stock Compensation. The grant date fair value for the Chairman Grants was calculated by multiplying the number of RSUs granted by the closing stock price of a share of Company common stock on the date of grant. The aggregate fair value of PSU awards with performance-based conditions are based on the closing price of our Common Stockcommon stock on the date of grant and the probable satisfaction of the performance conditions for such awards as of the date of grant. The fair value of PSU awards with market–based conditions has been determined based on the outcome of a Monte-Carlo simulation model. The maximum value of the 20202021 PSU awards at the grant date assuming that the highest level of performance conditions will be achieved is as follows: Ms. Wat, Annual PSU Award—$5,000,037 and Partner PSU Award—$17,400,104;$4,907,768; Mr. Yeung, Annual PSU Award—$1,200,036 and Partner PSU Award—$2,900,078;$1,227,058; Mr. Chan, $920,243; Mr. Huang, Annual PSU Award—$1,200,036$1,022,582; Mr. Yuen, $572,710 and Partner PSU Award—$2,900,078; Mr. Tan, Annual PSU Award—$950,000 and Partner PSU Award—$2,175,071; and Mr. Yuen, Annual PSU Award—$650,077 and Partner PSU Award—$2,175,071.$818,107. See Note 1415 to the Company’s Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, 20202021 (the “Audited Financial Statements”) for further discussion of the relevant assumptions used in calculating these amounts.

 

(4)(2)

The amounts reported in this column for 20202021 represent the grant date fair value of the annual SAR awards granted to each of the NEOs, calculated in accordance with ASC 718. To computeSee Note 15 to the grant date fair valueCompany’s Audited Financial Statements for further discussion of SARthe relevant assumptions used in calculating these amounts.

 

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   EXECUTIVE COMPENSATION

 

   

 

awards, the Company uses the Black-Scholes model with the following assumptions: risk-free interest rate of 1.5%, expected term based on historical experience of 6.5 years, expected volatility of 33.2%, and expected dividend yield of 1.1%. See Note 14 to the Company’s Audited Financial Statements for further discussion of the relevant assumptions used in calculating these amounts.

(5)(3)

Amounts in this column reflect the annual incentive awards earned for the applicable fiscal year performance periods under the annual bonus program, which is described further in our CD&A under the heading “Annual Performance-Based Cash Bonuses.”

 

(6)(4)

The amounts in this column for 20202021 are detailed in the 20202021 All Other Compensation Table and footnotes to that table, which follow.

 

(7)(5)

Certain compensation included in the All Other Compensation column was denominated in Chinese Renminbi. Messrs. Tan and Yuen’s salaries and 20202021 annual incentive and bonus awards were denominated in Hong Kong dollars. Compensation paid in Chinese Renminbi or Hong Kong dollars was converted to U.S. dollars using an exchange rate of 6.89466.4489 and 7.7561,7.7725, respectively, for disclosure purposes.

 

(8)(6)

During 2020, Mr. Huang took a medical leave of absenceThe amounts in this column are calculated by subtracting the legacy tax reimbursements reflected in the 2021 All Other Compensation Table below from the Company“Total” column. As noted in the CD&A, prior to our spin-off from YUM, certain of our NEOs were offered tax equalization benefits as an element of their compensation. These tax equalization benefits represent a legacy compensation arrangement entered into while we were a subsidiary of our former parent. After the spin-off, the Compensation Committee began to phase out tax equalization benefits with respect to the continuing NEOs (other than certain grandfathered benefits pursuant to the legacy arrangements from YUM). We are providing this supplemental Total as we believe it better reflects the compensation decisions made by the Compensation Committee because the compensation received pursuant to the grandfathered tax reimbursements represent legacy contractual agreements entered into prior to the spin-off. The amounts reported in this column differ from, and returned from such leaveare not a substitute for, the amounts reported in December 2020. Mr. Huang’s 2020 base salary and annual incentive award compensation is reducedthe “Total” column, as comparedcalculated pursuant to 2019 due to such medical leave.the Summary Compensation Table rules.

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EXECUTIVE COMPENSATION   

20202021 ALL OTHER COMPENSATION TABLE

 

 

The following table and footnotes summarize the compensation and benefits included under the “All Other Compensation” column in the 20202021 Summary Compensation Table that were awarded to, earned by or paid to the Company’s NEOs for the fiscal year ended December 31, 2020.2021.

 

Name

  

Perquisites and
Other Personal
Benefits

($)(1)

     

Tax

Reimbursements

($)(2)

     

Retirement

Scheme

Contributions

($)(3)

     

Other

($)(4)

     

Total

($)

   

Perquisites and
Other Personal
Benefits

($)(1)

     

Tax

Reimbursements

($)(2)

     

Retirement

Scheme

Contributions

($)(3)

     

Other

($)(4)

     

Total

($)

 

(a)

  (b)     (c)     (d)     (e)     (f)   (b)     (c)     (d)     (e)     (f) 

Ms. Wat

   148,474      176,100      124,608      68,562      517,744    150,590      2,562,032      134,108      56,105      2,902,835 

Mr. Yeung

   92,004      —      34,826      22,314      149,144    62,934      —      39,566      33,269      135,769 

Mr. Chan

   99,963      —      29,737      47,768      177,468 

Mr. Huang

   113,131      —      73,740      22,830      209,701    112,430      91,664      73,966      42,185      320,245 

Mr. Yuen

   113,224      396,366      59,524      26,954      596,068 

Mr. Tan

   167,277      333,677      67,044      34,915      602,913    176,881      1,254,888      69,583      41,012      1,542,364 

Mr. Yuen

   83,679      383,907      55,965      19,203      542,754 

 

(1)

Amounts in this column represent: for Ms. Wat, an education reimbursement ($34,340)28,960) and housing cost subsidy ($114,134)121,630); for Messrs. Yeung, Chan, Huang and Yuen, a housing cost subsidy; and for Mr. Tan, an education reimbursement ($43,703)44,765) and housing cost subsidy ($123,574)132,116). Such amounts are valued based on the amounts paid directly to the NEOs or the service providers, as applicable.

 

(2)

Amounts in this column for Ms. Wat, Messrs. TanHuang, Yuen and YuenTan represent legacy tax reimbursements for gains realized in 20202021 on equity awards granted before 2018. For Ms. Wat,2018, and do not represent any new benefits but rather the amount consistssettlement of legacy tax reimbursements for the exercise of Yum! Brands, Inc. SARs.existing contractual agreements.

 

(3)

This column represents contributions to the BSRCHLRS for all of our NEOs.

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EXECUTIVE COMPENSATION   

 

(4)

This column reports the total amount of other benefits provided. Such amounts, which are reflective of market practice for similarly situated global executives working in international companies based in mainland China, are paid directly to the NEOs or service providers, as applicable. Other than for certain benefits described below, none of the other benefits individually exceeded the greater of $25,000 or 10% of the total amount of these other benefits and the perquisites and other personal benefits shown in column (b) for the NEO. These other benefits consist of amounts paid for utilities, home leave expenses, transportation allowances, repatriation expense reimbursement and executive physicals. In 2020,2021, Ms. Wat received home leave reimbursement of $29,566.$27,478.

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20202021 GRANTS OF PLAN-BASED AWARDS

 

 

The following table provides information on the annual incentive program that the Company’s NEOs participated in during 20202021 and the SARs, Annual PSU Awards and Partner PSU AwardsChairman Grants granted under the Company’s Long Term Incentive Plan in 20202021 to the Company’s NEOs.

 

Name 

Grant
Date

  Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards(1)		      Estimated Future Payouts
Under Equity Incentive
Plan Awards		  All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#)(2)		 All Other
Option/
SAR
Awards:
Number of
Securities
Underlying
Options
(#)(3)		 Exercise or
Base  Price
of
Option/
SAR
Awards
($/Sh)(4)		 

Grant Date  

Fair Value  

of Stock,  

Option and  

SAR  
Awards  

($)(5)

 
  
  
  
  
     Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards(1)		      Estimated Future Payouts
Under Equity Incentive
Plan Awards		  All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#)		 All Other
Option/
SAR
Awards:
Number of
Securities
Underlying
Options
(#)(2)		 Exercise or
Base Price
of
Option/
SAR
Awards
($/Sh)(3)		 

Grant Date  

Fair Value  

of Stock,  

Option and  

SAR  
Awards  

($)(4)

    
Grant
Date		  Threshold
($)		 Target
($)		 Maximum
($)		      Threshold
(#)		 Target
(#)		 Maximum
(#)		  Threshold
($)		 Target
($)		 

Maximum

($)

      Threshold
(#)		 Target
(#)		 Maximum
(#)		 

(a)

 (b) (c) (d) (e)   (f) (g) (h) (i) (j) (k) (l)  (b) (c) (d) (e)   (f) (g) (h) (i) (j) (k) (l) 

Ms. Wat

  —   —  1,853,825  5,561,475    —   —   —   —   —   —   —   —   —  2,642,671  7,928,013    —   —   —   —   —   —   — 
 2/5/2021   —   —   —    —   —   —   —  171,989  57.39  3,000,004 
 2/7/2020   —   —   —    —   —   —   —  187,063  $42.71  2,500,003  2/5/2021   —   —   —    —   —   —  43,562   —   —  2,500,023 
 2/7/2020(5)   —   —   —   23,213  58,032  139,277   —   —   —  2,500,019  2/5/2021(6)   —   —   —   10,262  20,523  41,046   —   —   —  1,500,026 
 2/7/2020(6)   —   —   —    156,333  312,666  625,332   —   —   —  12,000,065  5/25/2021(6)   —   —   —    13,069  26,137  52,274   —   —   —  1,703,871 

Mr. Yeung

  —   —  557,036  1,671,108    —   —   —   —   —   —   —   —   —  786,411  2,359,233    —   —   —   —   —   —   — 
 2/7/2020   —   —   —    —   —   —   —  44,896  $42.71  600,013  2/5/2021   —   —   —    —   —   —   —  42,998  57.39  750,014 
 2/7/2020(5)   —   —   —   5,571  13,928  33,427   —   —   —  600,018  2/5/2021   —   —   —    —   —   —  27,880   —   —  1,600,033 
 2/7/2020(6)   —   —   —    26,056  52,112  104,224   —   —   —  2,000,050  2/5/2021(6)   —   —   —   2,566  5,131  10,262   —   —   —  375,025 
 5/25/2021(6)   —   —   —    3,268  6,535  13,070   —   —   —  426,017 

Mr. Chan

  —   —  472,356  1,417,068    —   —   —   —   —   —   — 
 2/5/2021   —   —   —    —   —   —   —  32,248  57.39  562,502 
 2/5/2021   —   —   —    —   —   —  26,137   —   —  1,500,002 
 2/5/2021(6)   —   —   —   1,924  3,848  7,696   —   —   —  281,250 
 5/25/2021(6)     —   —    2,451  4,901  9,802   —   —   —  319,496 

Mr. Huang

  —   —  662,866  1,988,598    —   —   —   —   —   —   —   —   —  733,715  2,201,145    —   —   —   —   —   —   — 
 2/5/2021   —   —   —    —   —   —   —  35,831  57.39  625,000 
 2/5/2021(6)   —   —   —   2,138  4,276  8,552   —   —   —  312,533 
 5/25/2021(6)   —   —   —    2,723  5,446  10,892   —   —   —  355,025 

Mr. Yuen

  —   —  417,452  1,252,356    —   —   —   —   —   —   — 
 2/7/2020   —   —   —    —   —   —   —  44,896  $42.71  600,013  2/5/2021   —   —   —    —   —   —   —  20,066  57.39  350,011 
 2/7/2020(5)   —   —   —   5,571  13,928  33,427   —   —   —  600,018  2/5/2021(6)   —   —   —   1,198  2,395  4,790   —   —   —  175,051 
 2/7/2020(6)   —   —   —    26,056  52,112  104,224   —   —   —  2,000,050  5/25/2021(6)   —   —   —    1,525  3,050  6,100   —   —   —  198,830 

Mr. Tan

  —   —  536,000  1,608,000    —   —   —   —   —   —   —   —   —  560,000  1,680,000    —   —   —   —   —   —   — 
 2/7/2020   —   —   —    —   —   —   —  35,542  $42.71  475,001  2/5/2021   —   —   —    —   —   —   —  28,665  57.39  500,004 
 2/7/2020(5)   —   —   —   4,410  11,026  26,462   —   —   —  475,000  2/5/2021(6)   —   —   —   1,711  3,421  6,842   —   —   —  250,041 
 2/7/2020(6)   —   —   —    19,542  39,084  78,168   —   —   —  1,500,039  5/25/2021(6)   —   —   —    2,179  4,357  8,714   —   —   —  284,033 

Mr. Yuen

  —   —  364,000  1,092,000    —   —   —   —   —   —   — 
 2/7/2020   —   —   —    —   —   —   —  24,319  $42.71  325,011 
 2/7/2020(5)   —   —   —   3,018  7,545  18,108   —   —   —  325,039 
 2/7/2020(6)   —   —   —    19,542  39,084  78,168   —   —   —  1,500,039 

 

(1)

Amounts in columns (c), (d) and (e) provide the minimum, target and maximum amounts payable as annual incentive compensation to each NEO based on team and individual performance during 2020.2021. The actual amounts of annual incentive compensation awards paid for 20202021 performance are shown in the “Non-Equity Incentive Plan Compensation” column of the 20202021 Summary Compensation Table. The performance measurements, performance targets and target bonus percentages are described in the CD&A, beginning under the heading “Annual Performance-Based Cash Bonuses.”

 

(2)

Amounts in column (i) represent the number of 2021 Chairman Grants awarded to selected Company executive officers and employees, including Ms. Wat and Messrs. Yeung and Chan. The 2021 Chairman Grants were granted in RSUs on February 5, 2021 and vest 100% on the third anniversary of the grant, subject to the recipient’s

66  YUM CHINA – Proxy Statement 

  YUM CHINA– 2021 Proxy Statement  57

 

 

 

EXECUTIVE COMPENSATION

 

  

 

(2)

continued employment through the vesting date. During the vesting period, the RSUs will be adjusted to reflect the accrual of dividend equivalents, which will be distributed as additional Company shares at the same time and to the extent the underlying shares vest.

(3)

SARs allow the grantee to receive the number of shares of the underlying common stock that is equal in value to the appreciation in the underlying common stock with respect to the number of SARs granted from the date of grant to the date of exercise. SARs become exercisable in equal installments on the first, second, third and fourth anniversaries of the grant date, subject to the recipient’s continued employment through the applicable vesting date.

 

(3)(4)

The exercise price of the SARs equals the closing price of the underlying common stock on the grant date.

 

(4)(5)

The amounts reported in this column for 20202021 represent the grant date fair value of the annual SAR awards, the Annual PSU awards and the Partner PSU Awards granted to each of the NEOs and the Chairman Grants awarded to Ms. Wat and Messrs. Yeung and Chan, calculated in accordance with ASC 718. The aggregate fair value of PSU awards with performance-based conditions are based on the closing price of our Common Stockcommon stock on the date of grant and the probable satisfaction of the performance conditions as of the date of grant. The fair value of PSU awards with market –basedmarket–based conditions has been determined based on the outcome of a Monte-Carlo simulation model. To compute theThe grant date fair value of SAR awards, the Company uses the Black-Scholes model with the following assumptions: risk-free interest rate of 1.5%, expected termRSUs was determined based on historical experiencethe closing stock price of 6.5 years, expected volatilityCompany common stock on the date of 33.2%, and expected dividend yield of 1.1%.grant. See Note 1415 to the Company’s Audited Financial Statements for further discussion of the relevant assumptions used in calculating the grant date fair value for the SARsSAR, RSU and PSU awards.

 

(5)(6)

Amounts reported in this row and associated with columns (f), (g) and (h) provide the threshold, target and maximum numbers of shares of common stock that may be received by the grantee upon vesting of the Annual PSU Awards. The Annual PSU Awards granted to each of the NEOs on February 7, 20205, 2021 and May 25, 2021 will be settled in shares of common stock, subject to the achievement of performance goals relating to rTSR, Adjusted Total Revenue Growth and Adjusted Diluted Earnings Per Common Share Growth with a rTSR payout modifier, during a performance period beginning on January 1, 20202021 and extending through December 31, 2022, and the NEO’s continued employment through the last day of the performance period. Amounts reported in the “Threshold” column represent payout of 40% of target PSUs awarded, and amounts reported in the “Maximum” column represent payout of 240% of the target PSUs awarded.

(6)

Amounts reported in this row and associated with columns (f), (g) and (h) provide the threshold, target and maximum numbers of shares of common stock that may be received by the grantee upon vesting of the Partner PSU Awards. The Partner PSU Awards granted to each of the NEOs on February 7, 2020 will be settled in shares of common stock, subject to the achievement of performance goals relating to absolute stock price hurdles, Adjusted Total Revenue Growth, Adjusted EBITDA Growth and transformational objectives during a four-year performance period beginning on January 1, 2020 and ending on December 31, 2023, and the NEO’s continued employment through the last day of the performance period. Amounts reported in the “Threshold” column represent payout of 50% of target PSUs awarded, and amounts reported in the “Maximum” column represent payout of 200% of the target PSUs awarded.

 

YUM CHINA – 2021 Proxy Statement58   

  67  YUM CHINA– Proxy Statement

 

 

 

EXECUTIVE COMPENSATION

 

  

 

OUTSTANDING EQUITY AWARDS AT 20202021 YEAR-END

 

 

The following table shows the number of Company shares covered by exercisable and unexercisable SARs, unvested RSUs and unvested PSUs held by the Company’s NEOs on December 31, 2020.2021. This table excludes any YUM shares received by the NEOs upon conversion of their outstanding YUM equity awards in connection with the spin-off.

 

     Option/SAR Awards      Stock Awards      Option/SAR Awards      Stock Awards 
Name Grant
Date		  

Number of
Securities
Underlying
Unexercised
Options/
SARs

(#)
Exercisable

 Number of
Securities
Underlying
Unexercised
Options/ SARs
(#)
Unexercisable(1)		 

Option/
SAR
Exercise
Price

($)

 Option/
SAR
Expiration
Date		      

Number

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

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

Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other
Rights

That Have
Not Vested
(#)(4)

 

Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights

That Have
Not Vested
($)(3)

  Grant
Date		  

Number of
Securities
Underlying
Unexercised
Options/
SARs

(#)
Exercisable

 Number of
Securities
Underlying
Unexercised
Options/ SARs
(#)
Unexercisable(1)		 

Option/
SAR
Exercise
Price

($)

 Option/
SAR
Expiration
Date		      

Number

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

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

Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other
Rights

That Have
Not Vested
(#)(4)

 

Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights

That Have
Not Vested
($)(3)

 
(a) (b) (c) (d) (e) (f)   (g) (h) (i) (j)  (b) (c) (d) (e) (f)   (g) (h) (i) (j) 

Ms. Wat

 2/6/2015  27,063   —  22.32  2/6/2025    —   —   —   —  2/6/2015  27,063   —  22.32  2/6/2025    —   —   —   — 
 3/25/2015  32,309   —  23.90  3/25/2025    —   —   —   —  3/25/2015  32,309   —  23.90  3/25/2025    —   —   —   — 
 2/5/2016  41,316   —  21.06  2/5/2026    —   —   —   —  2/5/2016  41,316   —  21.06  2/5/2026    —   —   —   — 
 11/11/2016  48,846   —  26.98  11/11/2026    —   —   —   —  11/11/2016  48,846   —  26.98  11/11/2026    —   —   —   — 
 2/10/2017  83,830  27,944(i)  26.56  2/10/2027   77,532(i)  4,426,314   —   —  2/10/2017  111,774   —  26.56  2/10/2027    —   —   —   — 
 2/9/2018  93,075  93,076(ii)  40.29  2/9/2028    —   —   —   —  2/9/2018  139,613  46,538(i)  40.29  2/9/2028    —   —   —   — 
 2/7/2019  46,525  139,575(iii)  41.66  2/7/2029    —   —  83,950(i)  4,792,706  2/7/2019  93,050  93,050(ii)  41.66  2/7/2029    —   —   —   — 
 2/7/2020   —  187,063(iv)  42.71  2/7/2030    —   —  23,213(ii)  1,325,219  2/7/2020  46,765  140,298(iii)  42.71  2/7/2030    —   —  23,213(i)  1,156,926 
 2/7/2020   —   —   —   —     —   —  156,333(iii)  8,925,051  2/7/2020   —   —   —   —    —   —  312,666(ii)  15,583,273 
 2/5/2021   —  171,989(iv)  57.39  2/5/2031   43,931(i)  2,189,536  10,262(iii)  511,433 
 5/25/2021   —   —   —   —        13,069(iii)  651,334 

Mr. Yeung

 11/1/2019   —   —   —   —   16,287(ii)  929,809   —   —  11/1/2019   —   —   —   —   8,335(ii)  415,440   —   — 
 2/7/2020  11,224  33,672(iii)  42.71  2/7/2030    —   —  5,571(i)  277,669 
 2/7/2020   —   —   —   —    —   —  52,112(ii)  2,597,262 
 2/5/2021   —  42,998(iv)  57.39  2/5/2031   28,116(i)  1,401,319  2,566(iii)  127,865 
 5/25/2021   —   —   —   —     —   —  3,268(iii)  162,852 

Mr. Chan

 9/3/2019   —   —   —   —   3,571(iv)  177,970   —   — 
 2/7/2020  7,482  22,449(iii)  42.71  2/7/2030    —   —  3,714(i)  185,126 
 2/7/2020   —   —   —   —    —   —  39,084(ii)  1,947,947 
 2/7/2020   —  44,896(iv)  42.71  2/7/2030    —   —  5,571(ii)  318,060  2/5/2021   —  32,248(iv)  57.39  2/5/2031   26,359(i)  1,313,712  1,924(iii)  95,892 
 2/7/2020   —   —   —   —     —   —  26,056(iii)  1,487,537  5/25/2021   —   —   —   —     —   —  2,451(iii)  122,133 

Mr. Huang

 2/8/2012  8,994   —  19.46  2/8/2022    —   —   —   —  2/6/2013  9,652   —  19.00  2/6/2023    —   —   —   — 
 2/6/2013  9,652   —  19.00  2/6/2023    —   —   —   —  2/5/2014  6,797   —  21.30  2/5/2024    —   —   —   — 
 2/5/2014  6,797   —  21.30  2/5/2024    —   —   —   —  2/5/2014  9,516   —  21.30  2/5/2024    —   —   —   — 
 2/5/2014  9,516   —  21.30  2/5/2024    —   —   —   —  2/6/2015  10,149   —  22.32  2/6/2025    —   —   —   — 
 2/6/2015  10,149   —  22.32  2/6/2025    —   —   —   —  2/5/2016  13,772   —  21.06  2/5/2026    —   —   —   — 
 2/5/2016  13,772   —  21.06  2/5/2026    —   —   —   —  11/11/2016  24,423   —  26.98  11/11/2026    —   —   —   — 
 11/11/2016  24,423   —  26.98  11/11/2026    —   —   —   —  2/10/2017  37,258   —  26.56  2/10/2027    —   —   —   — 
 2/10/2017  27,943  9,315(i)  26.56  2/10/2027    —   —   —   —  2/9/2018  24,407  8,136(i)  40.29  2/9/2028    —   —   —   — 
 11/1/2017   —   —   —   —   20,801(iii)  1,187,549   —   —  2/7/2019  16,377  16,377(ii)  41.66  2/7/2029   10,819(iii)  539,194   —   — 
 2/9/2018  16,271  16,272(ii)  40.29  2/9/2028   11,217(iv)  640,387   —   —  2/7/2020  11,224  33,672(iii)  42.71  2/7/2030    —   —  5,571(i)  277,669 
 2/7/2019  8,188  24,566(iii)  41.66  2/7/2029   10,728(v)  612,436   —   —  2/7/2020   —   —   —   —    —   —  52,112(ii)  2,597,262 
 2/7/2020   —  44,896(iv)  42.71  2/7/2030    —   —  5,571(ii)  318,060  2/5/2021   —  35,831(iv)  57.39  2/5/2031    —   —  2,138(iii)  106,558 
 2/7/2020   —   —   —   —     —   —  26,056(iii)  1,487,537  5/25/2021   —   —   —   —     —   —  2,723(iii)  135,714 

Mr. Tan

 2/8/2012  3,679   —  19.46  2/8/2022    —   —   —   — 
 2/6/2013  7,556   —  19.00  2/6/2023    —   —   —   — 
 2/5/2014  6,797   —  21.30  2/5/2024    —   —   —   — 
 2/5/2014  7,681   —  21.30  2/5/2024    —   —   —   — 
 2/6/2015  10,149   —  22.32  2/6/2025    —   —   —   — 
 2/5/2016  13,772   —  21.06  2/5/2026    —   —   —   — 
 11/11/2016  24,423   —  26.98  11/11/2026    —   —   —   — 
 2/10/2017  27,943  9,315(i)  26.56  2/10/2027    —   —   —   — 
 2/9/2018  14,052  14,053(ii)  40.29  2/9/2028   9,688(iv)  553,075   —   — 
 2/7/2019  7,072  21,216(iii)  41.66  2/7/2029   9,265(v)  528,938   —   — 
 2/7/2020   —  35,542(iv)  42.71  2/7/2030    —   —  4,410(ii)  251,790 
 2/7/2020   —   —   —   —     —   —  19,542(iii)  1,115,653 

 

68  YUM CHINA – Proxy Statement 

  YUM CHINA– 2021 Proxy Statement  59

 

 

 

EXECUTIVE COMPENSATION

 

  

 

     Option/SAR Awards      Stock Awards      Option/SAR Awards      Stock Awards 
Name Grant
Date		  

Number of
Securities
Underlying
Unexercised
Options/
SARs

(#)
Exercisable

 Number of
Securities
Underlying
Unexercised
Options/ SARs
(#)
Unexercisable(1)		 

Option/
SAR
Exercise
Price

($)

 Option/
SAR
Expiration
Date		      

Number

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

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

Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other
Rights

That Have
Not Vested
(#)(4)

 

Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights

That Have
Not Vested
($)(3)

  Grant
Date		  

Number of
Securities
Underlying
Unexercised
Options/
SARs

(#)
Exercisable

 Number of
Securities
Underlying
Unexercised
Options/ SARs
(#)
Unexercisable(1)		 

Option/
SAR
Exercise
Price

($)

 Option/
SAR
Expiration
Date		      

Number

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

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

Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other
Rights

That Have
Not Vested
(#)(4)

 

Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights

That Have
Not Vested
($)(3)

 
(a) (b) (c) (d) (e) (f)   (g) (h) (i) (j)  (b) (c) (d) (e) (f)   (g) (h) (i) (j) 

Mr. Yuen

 2/8/2012  2,290   —  19.46  2/8/2022    —   —   —   —  2/6/2013  3,591   —  19.00  2/6/2023    —   —   —   — 
 2/6/2013  3,591   —  19.00  2/6/2023    —   —   —   —  2/5/2014  3,602   —  21.30  2/5/2024    —   —   —   — 
 2/5/2014  3,602   —  21.30  2/5/2024    —   —   —   —  2/6/2015  4,060   —  22.32  2/6/2025    —   —   —   — 
 2/6/2015  4,060   —  22.32  2/6/2025    —   —   —   —  2/6/2015  4,060   —  22.32  2/6/2025    —   —   —   — 
 2/6/2015  4,060   —  22.32  2/6/2025    —   —   —   —  2/5/2016  4,614   —  21.06  2/5/2026    —   —   —   — 
 2/5/2016  4,614   —  21.06  2/5/2026    —   —   —   —  2/10/2017  11,364   —  26.56  2/10/2027    —   —   —   — 
   2/10/2017  8,523  2,841(i)  26.56  2/10/2027    —   —   —   —  2/9/2018  12,647  4,216(i)  40.29  2/9/2028    —   —   —   — 
 2/9/2018  8,431  8,432(ii)  40.29  2/9/2028   5,812(iv)  331,833   —   —  2/7/2019  8,486  8,487(ii)  41.66  2/7/2029   5,606(iii)  279,398   —   — 
 2/7/2019  4,243  12,730(iii)  41.66  2/7/2029   5,559(v)  317,350   —   —  2/7/2020  6,079  18,240(ii)  42.71  2/7/2030    —   —  3,018(i)  150,417 
 2/7/2020   —  24,319(iv)  42.71  2/7/2030    —   —  3,018(ii)  172,298  2/7/2020   —   —   —   —    —   —  39,084(ii)  1,947,947 
 2/7/2020   —   —   —   —     —   —  19,542(iii)  1,115,653  2/5/2021   —  20,066(iv)  57.39  2/5/2031    —   —  1,198(iii)  59,683 
 5/25/2021   —   —   —   —     —   —  1,525(iii)  76,006 

Mr. Tan(5)

 11/11/2016  24,423   —  26.98  11/11/2026    —   —   —   — 
 2/10/2017  37,258   —  26.56  2/10/2027    —   —   —   — 
 2/9/2018   —  7,027  40.29  2/9/2028    —   —   —   — 
 2/7/2019   —  14,144  41.66  2/7/2029   9,344  465,682   —   — 
 2/7/2020   —  26,657  42.71  2/7/2030    —   —  4,410  219,814 
 2/7/2020   —   —   —   —    —   —  39,084  1,947,947 
 2/5/2021   —  28,665  57.39  2/5/2031    —   —  1,711  85,251 
 5/25/2021   —   —   —   —     —   —  2,179  108,576 

 

(1)

The actual vesting dates for unexercisable SARs are as follows:

 

 (i)

Remainder of the unexercisable award vested on February 10, 2021.9, 2022.

 

 (ii)

One-half of the unexercisable award vested or will vest on each of February 9, 20217, 2022 and 2022.2023.

 

 (iii)

One-third of the unexercisable award vested or will vest on each of February 7, 2021, 2022, 2023 and 2023.2024.

 

 (iv)

One-fourth of the unexercisable award vested or will vest on each of February 7, 2021,5, 2022, 2023, 2024 and 2024.2025.

 

(2)

The RSUs reported in this column include additional RSUs received with respect to dividend equivalents, which remain subject to the same underlying vesting conditions. The actual vesting dates for unvested RSUs are as follows:

 

 (i)

The RSUs vestedwill vest in full on February 10, 2021.5, 2024.

 

 (ii)

One-half of theThe RSUs will vest on each of November 1, 2021 and 2022.

 

 (iii)

The RSUs will vestvested in full on November 1, 2021.February 7, 2022.

 

 (iv)

The RSUs vested in fullwill vest on February 9, 2021.September 3, 2022.

 

(v)
60  

The RSUs will vest in full on February 7, 2022.  YUM CHINA– Proxy Statement

   EXECUTIVE COMPENSATION

 

(3)

The market value of each award is calculated by multiplying the number of shares covered by the award by $57.09,$49.84, the closing price of the Company’s stock on the NYSE on December 31, 2020.2021.

 

(4)

The awards reported in this column represent PSU awards granted to the NEOs with the following vesting terms:

 

 (i)

PSU award scheduled to vest based on the Company’s rTSR performance against constituents of the MSCI International China Index over the January 1, 2019 through December 31, 2021 performance period, sub-

YUM CHINA – 2021 Proxy Statement

  69

EXECUTIVE COMPENSATION   

ject to Ms. Wat’s continued employment through the last day of the performance period except as otherwise provided for in the underlying equity award agreement upon a qualifying termination of employment. In accordance with SEC disclosure rules, the amount reported for this award is reported assuming maximum payout. Based on performance, these PSUs will vest in full on December 31, 2021.

(ii)

PSU awards that are scheduled to vest based on the Company’s Adjusted Total Revenue Growth and Adjusted Diluted Earnings Per Common Share Growth, with a rTSR payout modifier, over the January 1, 2020 through December 31, 2022 performance period, subject to the NEO’s continued employment through the last day of the performance period except as otherwise provided for in the underlying equity award agreement upon a qualifying termination of employment. In accordance with SEC disclosure rules, the amount reported for this award is reported assuming threshold payout. Based on performance, these PSUs will vest in full on December 31, 2022.

 

 (iii)(ii)

PSU awards that are scheduled to vest based on the absolute Company stock price hurdles, Adjusted Total Revenue Growth, Adjusted EBITDA Growth and transformational objectives, over the January 1, 2020 through December 31, 2023 performance period, subject to the NEO’s continued employment through the last day of the performance period except as otherwise provided for in the underlying equity award agreement upon a qualifying termination of employment. The PSU swards are subject to different goals with different levels of projected performance and the amount reported for this award is reported assuming target payout. Based on performance, these PSUs will vest in full on December 31, 2023.

(iii)

PSU awards that are scheduled to vest based on the Company’s achievement of rTSR performance goals and the Company’s Adjusted Total Revenue Growth and Adjusted Diluted Earnings Per Common Share Growth, over the January 1, 2021 through December 31, 2023 performance period, subject to the NEO’s continued employment through the last day of the performance period except as otherwise provided for in the underlying equity award agreement upon a qualifying termination of employment. In accordance with SEC disclosure rules, the amount reported for this award is reported assuming threshold payout. Based on performance, these PSUs will vest in full on December 31, 2023.

 

(5)

In accordance with the terms of the award agreements, Mr. Tan has 90 days from the last day of employment to exercise his vested SARs, and all of his unvested equity awards were forfeited upon his departure.

70  YUM CHINA – Proxy Statement 

  YUM CHINA– 2021 Proxy Statement  61

 

 

 

EXECUTIVE COMPENSATION

 

  

 

20202021 OPTION/SAR EXERCISES AND STOCK VESTED

 

 

The table below shows the number of Company shares acquired during 20202021 upon the exercise of Company SAR awards and the vesting of Company stock awards and before payment of applicable withholding taxes and broker commissions. This table does not include any shares acquired upon the exercise or vesting of outstanding YUM equity awards.

 

    Option/SAR Awards         Stock Awards   Option/SAR Awards        Stock Awards 

Name

    

Number

of Shares
Acquired on
Exercise

(#)

     Value
Realized
on
Exercise
($)		         

Number

of Shares
Acquired on
Vesting

(#)

   

Value
Realized on
Vesting

($)

   

Number

of Shares
Acquired on
Exercise

(#)

   Value
Realized
on
Exercise
($)		        

Number

of Shares
Acquired on
Vesting

(#)

   

Value
Realized on
Vesting

($)

 

(a)

    (b)     (c)       (d)   (e)   (b)   (c)       (d)   (e) 

Ms. Wat

     —      —       111,489(1)    6,364,952(1)    —    —      145,218    8,064,169(1) 

Mr. Yeung

     —      —       8,005    426,103    —    —      8,069    469,965 

Mr. Chan

   —    —      3,440    215,008 

Mr. Huang

     —      —       —    —    6,342    418,581      32,143    1,903,658 

Mr. Yuen

   1,480    81,570      5,812    354,909 

Mr. Tan

     5,238      305,584       —    —    34,112    1,668,564       9,688    591,535 

Mr. Yuen

     2,015      116,713        —    — 

 

(1)

This amount includes the number of shares acquired upon the vesting of the 20182019 PSU award based on performance during the 2018-20202019-2021 performance period, with the value realized on vesting determined based on the closing stock price of our common stock on December 31, 2020.2021.

Nonqualified Deferred Compensation

 

The Company offers certain executives working in China retirement benefits under the BSRCHLRS. Under this program, executives may make personal contributions and the Company provides a company-funded contribution ranging from 5% to 10% of an executive’s base salary. In 2020,2021, Mr. Tan made a personal contribution to the BSRCHLRS equal to 5% of base salary. The Company’s contribution for 20202021 was equal to 5% of salary for Mr.Messrs. Yeung and Chan, and 10% of salary for each of Ms. Wat and Messrs. Huang, TanYuen and Yuen.Tan. Participants may elect a

variety of mutual funds in which to invest their

account balances under the plan. Additionally, upon termination, participants receive a lump sum equal to a percentage of the Company’s contributions, including investment returns. This percentage is based on a vesting schedule that provides participants with a vested 30% interest upon completion of a minimum of three years of service, and an additional 10% vested interest for each additional completed year, up to a maximum of 100%. In connection with Mr. Tan’s departure in February 2022, Mr. Tan received a lump sum distribution from the BSRCHLRS.

 

 

YUM CHINA – 2021 Proxy Statement62   

  71  YUM CHINA– Proxy Statement

 

 

 

EXECUTIVE COMPENSATION

 

  

 

20202021 NONQUALIFIED DEFERRED COMPENSATION TABLE

 

 

 

Name

 

Executive

Contributions

in Last Fiscal
Year

($)(1)

 

Registrant

Contributions

in Last Fiscal
Year

($)(2)

 

Aggregate

Earnings in

Last Fiscal
Year

($)(3)

 

Aggregate

Withdrawals/

Distributions

($)

 

Aggregate

Balance at

Last
Fiscal
Year End

($)(4)

  

Executive

Contributions

in Last Fiscal
Year

($)(1)

 

Registrant

Contributions

in Last Fiscal
Year

($)(2)

 

Aggregate

Earnings in
Last Fiscal
Year

($)(3)

 

Aggregate

Withdrawals/

Distributions

($)

 

Aggregate

Balance at

Last
Fiscal
Year End

($)(4)

 
 (a) (b) (c) (d) (e)  (a) (b) (c) (d) (e) 

Ms. Wat

  —  124,608   —   —  444,920(5)   —  134,108   —   —  582,608(5) 

Mr. Yeung

  —  34,826   —   —  43,972(5)   —  39,566   —   —  83,893(5) 

Mr. Chan

  —  29,737   —   —  71,240(5) 

Mr. Huang

  —  73,740   —   —  422,252(5)   —  73,966   —   —  499,617(5) 

Mr. Yuen

  —  59,524   —   —  347,921(5) 

Mr. Tan

 33,522  67,044   —   —  392,809(5)  34,792  69,583   —   —  465,553(5) 

Mr. Yuen

  —  55,965   —   —  286,095(5) 

 

(1)

Amounts in this column reflect Mr. Tan’s personal contributions to the BSRCHLRS with respect to 2020.2021.

 

(2)

Amounts in this column reflect registrant contributions to the BSRCHLRS for the NEOs and which are reflected in the 20202021 Summary Compensation Table.

 

(3)

Under the Hong Kong Data Privacy Act, the administrator of the BSRCHLRS is restricted from disclosing individual account balances under the BSRCHLRS, and accordingly, the Company is unable to compile earnings information with respect to the BSRCHLRS. Under the terms of the BSRCHLRS, participants may elect a variety of mutual funds in which to invest their account balances under the BSRCHLRS.

 

(4)

The amounts reflected in this column are the estimated year-end balances for the NEOs under the BSRCHLRS.

 

(5)

This amount represents the aggregate amount of Company contributions, excluding investment returns. See note (3) to this table for further information regarding investment returns with respect to the BSRCHLRS. This amount was denominated in Hong Kong dollars and was converted to U.S. dollars using an exchange rate of 7.75617.7725 Hong Kong dollars to U.S. dollars for disclosure purposes.

Potential Payments upon a Termination or a Change in Control

 

Termination of Employment without a Change in Control. As noted in the CD&A, during 2021, the Compensation Committee adopted the Executive Severance Plan, which provides severance benefits to our NEOs upon termination of employment by the Company without cause or, for participants subject to PRC law, termination for any statutory reason and subject to severance pay under PRC law (each, an “Executive Severance Plan Qualifying Termination”). In the event of an Executive Severance Plan Qualifying Termination, the NEO would receive, in lieu of any severance benefits under any other arrangement with the participant (including, without limitation, the Restrictive Covenant Letter Agreements and

the Company’s change in control severance plan, pro-vided that in the event of a qualifying termination under the change in control severance plan, the terms of the change in control severance plan will govern), the following severance benefits:

Cash severance benefits consisting of the greater of (i) the sum of statutory severance payable under PRC law and an amount equal to five times the participant’s average monthly salary in the 12 months prior to the Executive Severance Plan Qualifying Termination as consideration for compliance with certain restrictive covenants, including covenants relating to

YUM CHINA – Proxy Statement

  63

EXECUTIVE COMPENSATION   

non-competition as further described below and (ii) the sum of the participant’s monthly base salary plus 1/12 of the participant’s target annual bonus, multiplied by a severance multiple of 24, in the case of the CEO, and 12 for all other participants;

Any accrued, but unpaid as of the date of the Executive Severance Plan Qualifying Termination, annual cash bonus for any completed fiscal year preceding an Executive Severance Plan Qualifying Termination; and

If the Executive Severance Plan Qualifying Termination occurs on or after June 30, a pro-rated annual bonus for the year of the Executive Severance Plan Qualifying Termination based on actual performance and pro-rated for the employment period during the year.

In the event of a participant’s material breach of a material obligation to the Company pursuant to any award or agreement between the participant and the Company, including a material breach of the restrictive covenants set forth in any offer letter, restrictive covenant or other agreement entered into by the participant with the Company or a determination that an event constituting “cause” has occurred, then the Compensation Committee may (i) terminate the participant’s right to receive payments under the Executive Severance Plan and (ii) seek the recoupment of any payments previously made to the participant under the Executive Severance Plan, including through exercising rights of set-off, forfeiture or cancellation, to the full extent permitted by law, with respect to any other awards, benefits or payments otherwise due to the participant from the Company or any of its affiliates.

The Company is party to Restrictive Covenant Letter Agreements with each NEO. The Restrictive Covenant Letter Agreements include restrictive covenants relating to non-disclosure, non-competition, non-solicitation and non-disparagement, as well as cooperation in investigations and litigation clauses. As consideration for the restrictive covenants, the Company is obligated to pay an amount equivalent to five times the NEO’s average monthly salary upon a termination of employment, other than in the case of a change-in-control-related termination or the NEO’s death. Such amount iswould be offset by amounts otherwise owed under any other termination-related agreement between the employee and the Company (including the agree-

ments described below for Ms. Wat and Mr. Yeung)Executive Severance Plan) so that there is no duplication of payments.

As of December 31, 2020, Ms. Wat was party to an individual agreement with the Company, which provided that if Ms. Wat’s employment had been terminated by the Company without “cause” prior to March 1, 2021, then Ms. Wat would have been entitled to a severance payment ($6,250,000), payable in monthly installments, equal to two times her annual base salary and annual bonus target, subject to Ms. Wat’s execution of a post-termination agreement that includes restrictive covenants relating to non-solicitation, non-competition and non-disclosure. The amount payable under Mr. Wat’s letter agreement would be offset by the amount paid pursuant to the

72  

  YUM CHINA– 2021 Proxy Statement

   EXECUTIVE COMPENSATION

Restrictive Covenant Letter Agreement. In addition, in the event Ms. Wat became eligible for benefits under the Change in Control Severance Plan, such benefits would be paid in lieu of any amounts under her letter agreement.

As of December 31, 2020, Mr. Yeung was party to a letter agreement with the Company, which provided that if Mr. Yeung’s employment is terminated by the Company without “cause,” the Company will pay Mr. Yeung a lump sum payment ($289,930) equal to five times his average monthly base salary during the 12-month period prior to termination. In return for this payment, Mr. Yeung must comply with certain non-competition restrictive covenants for one year following his termination of employment. The amount payable under Mr. Yeung’s letter agreement would be offset by the amount paid pursuant to the Restrictive Covenant Letter Agreement.

The Company’s equity awards provide for pro-rata vesting for terminations due to death, retirement (age 55 and ten years of service or age 65 and five years of service) or involuntary termination by the Company without cause, with PSUs determined based on actual performance. Outstanding equity awards are forfeited upon a termination for cause. If the NEOs’ employment had terminated as of December 31, 20202021 without cause or due to death or retirement, they would have been entitled to pro-rata vesting of their outstanding RSUs, SARs and PSUs as follows: Ms. Wat, $14,323,412;$12,360,918; Mr. Yeung, $1,237,918;$ 2,550,850; Mr. Chan, $1,955,632; Mr. Huang, $3,617,420; Mr. Tan, $2,233,000;$2,677,732 and Mr. Yuen, $1,514,707,$1,712,176, assuming target performance for purposes of this disclosure. As of December 31, 2020,2021, Messrs. Huang and Yuen were retirement eligible.

The below table shows the maximum amount of payments and other benefits that each continuing NEO would have received upon a qualifying termination under the Executive Severance Plan on December 31, 2021 and the Company’s equity award agreements, assuming target performance of the PSUs for purposes of this disclosure.

   

Wat

$

 

 

   

Yeung

$

 

 

   

Chan

$

 

 

   

Huang

$

 

 

   

Yuen

$

 

 

Cash Severance

   8,100,000    1,600,000    1,080,000    1,480,000    1,020,000 

Release Payment

   1,551    1,551    1,551    1,551    1,551 

Pro-rata Vesting of SARs

   1,061,916    73,358    48,908    205,978    108,461 

Pro-rata Vesting of RSUs

   669,025    497,421    460,735    524,216    271,637 

Pro-rata Vesting of PSUs

   10,629,977    1,980,070    1,445,989    1,947,537    1,332,078 
  

 

 

 

TOTAL

   20,462,469    4,152,400    3,037,183    4,159,282    2,733,727 
  

 

 

 

64  

  YUM CHINA– Proxy Statement

   EXECUTIVE COMPENSATION

Termination of Employment Following a Change in Control. As noted in the CD&A, the Company maintains the Changea change in Control Severance Plan,control severance plan, which provides severance benefits to our NEOs in the event of a termination of employment by the Company without “cause” or by the NEO due to “good reason,” in each case within 24 months following a change in control (a “CIC Qualifying Termination”). Each NEO has executed a participation and restrictive covenant agreement to participate in the Change in Control Severance Plan, which contains

restrictive covenants in favor of the Company relating to non-competition, non-solicitation, non-disclosure, and non-disparagement. In the event of a CIC Qualifying Termination under the Change in Control Severance Plan, the NEO would receive, in lieu of any severance benefits under any other arrangement with the participant, the following severance benefits:

 

 • 

An amount equal to the “Severance Multiple” multiplied by the sum of (x) such NEO’s monthly base salary in effect immediately prior to a CIC Qualifying Termination (or prior to any reduction for purposes of good reason) and (y) 1/12 of the greater of such NEO’s annual target cash bonus for the calendar year in which the CIC Qualifying Termination occurs and the most recent annual cash bonus paid to the NEO, with such amounts payable over the 12-month period following the NEO’s termination of employment. The Severance Multiple is 30 for the CEO and 24 for each of the other participating NEOs. For purposes of the 2020 calculation, the severance calculation for each NEO other than Mr. Yeung was determined based on 2019 actual bonus, while Mr. Yeung’s severance calculation was determined based on 2020 target bonus.

 

Any accrued, but unpaid as of the date of the CIC Qualifying Termination, annual cash bonus for any completed fiscal year preceding a CIC Qualifying Termination, to be paid within 60 days of the CIC Qualifying Termination.

 

Accrued benefits under any retirement plan or health or welfare plan.

 

If permitted by the terms of the Company’s health plan and applicable law, continued health insurance coverage, subsidized by the Company at active employee rates, through the earlier of the one-year anniversary of the participant’s termination of employment and the participant becoming eligible for health insurance coverage under another employer’s plan.

rates, through the earlier of the one-year anniversary of the participant’s termination of employment and the participant becoming eligible for health insurance coverage under another employer’s plan.

 

Outplacement services, in an aggregate cost to the Company not to exceed $25,000, for a one-year period (or, if earlier, until the NEO accepts an offer of employment).

YUM CHINA – 2021 Proxy Statement

  73

EXECUTIVE COMPENSATION   

Under the terms of our equity agreements, prior to 2020, all outstanding SARs RSUs and PSUsRSUs would fully and immediately vest following a change in control of the Company if the NEO is employed on the date of the change in control and is involuntarily terminated (other than for cause) on or within two years following the change in control, with performance measured through the date of termination and subject to proration for time served during the performance period in the case of the PSUs.control. Under the terms of the 2020 Annual PSU Awards starting from 2020 and the 2020 Partner PSU Awards, if the NEO is employed on the date of the change in control and resigns for good reason or is involuntarily terminated other than for cause within two years following a change in control, then vesting shall be measured based on the greater of (i) actual performance for the performance period through the date of ter-

minationtermination of employment and (ii) target performance (provided, however, that if the change in control and termination of employment occur during the first year of the performance period, then performance will be measured based on target performance). In addition, beginning with the 2020 equity awards, if awards are not effectively assumed in a change in control of the Company, then the awards will vest in full upon such change in control with any stock price performance goal vesting based on the per share transaction price in such change in control and the other performance goals vesting at the greater of actual performance through the date of the change in control and target performance (provided, however, if the change in control occurs during the first year of the performance period, then performance will be measured based on target performance).

 

 

YUM CHINA – Proxy Statement

  65

EXECUTIVE COMPENSATION   

The below table shows the maximum amount of payments and other benefits that each continuing NEO would have received upon a change in control and qualifying termination on December 31, 20202021 under the terms of the Changechange in Control Severance Plancontrol severance plan and the Company’s equity award agreements, assuming target performance of the PSUs for purposes of this disclosure.

 

   

Wat

$

 

 

   

Yeung

$

 

 

   

Huang

$

 

 

   

Tan

$

 

 

   

Yuen

$

 

 

   

Wat

$

 

 

   

Yeung

$

 

 

   

Chan

$

 

 

   

Huang

$

 

 

   

Yuen

$

 

 

Cash Severance

   14,013,020    2,520,000    4,845,270    3,967,150    2,884,448    10,125,000    3,200,000    2,160,000    2,960,000    2,123,198 

Continued Health Insurance Coverage

   17,664    10,773    10,773    16,621    12,615    18,885    11,517    17,770    11,517    13,487 

Outplacement Services

   25,000    25,000    25,000    25,000    25,000    25,000    25,000    25,000    25,000    25,000 

Accelerated Vesting of SARs

   7,260,415    645,604    1,582,414    1,358,934    774,524    2,205,912    240,081    160,061    451,744    239,738 

Accelerated Vesting of RSUs

   4,426,314    929,809    2,440,371    1,082,012    649,184    2,189,536    1,816,760    1,491,682    539,194    279,398 

Accelerated Vesting of PSUs

   22,886,919    3,788,245    3,788,245    2,874,455    2,674,774    21,063,899    3,920,908    2,882,072    3,823,308    2,628,266 
  

 

 

   

 

 

 

TOTAL

   48,629,332    7,919,432    12,692,074    9,324,172    7,020,545    35,628,232    9,214,266    6,736,585    7,810,763    5,309,087 
  

 

 

   

 

 

 

Arrangement with Mr. Tan

In connection with Mr. Tan’s departure, the Company entered into a post-termination agreement with Mr. Tan (the “Tan Termination Agreement”). Under the Tan Termination Agreement, the Company agreed to pay Mr. Tan’s 2021 annual cash bonus based on actual performance, which was paid at the same time that the 2021 annual cash bonuses were paid to the other NEOs, a payment of HK$2,260,415 ($290,236, based on the exchange rate of 7.7882 Hong Kong dollars to U.S. dollars), representing five times Mr. Tan’s average gross monthly salary in the past 12 months pursuant to the terms of his prior Restrictive Covenant Letter Agreement, as well as a release payment of RMB10,000 ($1,564, based on the

exchange rate of 6.3949 RMB to U.S. dollars) and a long-service payment of HK$375,000 ($48,150, based on the exchange rate of 7.7882 Hong Kong dollars to U.S. dollars) in accordance with applicable local requirements. If Mr. Tan receives a tax rebate with respect to the long-service payment, Mr. Tan is required to return such rebate to the Company. In accordance with the terms of the award agreements, Mr. Tan has 90 days from the last date of employment to exercise his vested SARs, and all of his unvested equity awards were forfeited upon his departure. The Tan Termination Agreement provides for restrictive covenants in favor of the Company relating to non-competition, non-solicitation, non-disparagement, and non-disclosure.

PAY RATIO DISCLOSURE

 

 

 

As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Company is providing the following disclosure about the relationship of the annual total compensation of our employees to the annual total compensation of Ms. Wat.

Identification of Median Pay Employee

The Company employed over 400,000450,000 persons as of year-end 2020,2021, and substantially all of them are based in China. Given the nature of its operations, approximately 90% of the Company’s employees were restaurant crewmembers. Approximately 74%75% of the 366,000405,000 crewmembers worked part-time, approximately 42%41% of whom

attended university at the same time, and were paid on an hourly basis. Our wage rates for crewmembers are deter-

mineddetermined based on a number of factors, including but not limited to cost of living, labor supply and demand, and competitive market pay rates in the city in which the crewmember works.

We selected December 31, 2020,2021, as the date on which to determine our median employee. For purposes of identifying the median employee from the employee population base (excluding Ms. Wat), we considered the total compensation of all of our employees, as compiled from our payroll records. In addition, we measured compensation for purposes of determining the median employee using December 2020 payroll records. Compensation paid in foreign currencies was converted to U.S. dollars based on a weighted average exchange rate for the relevant period.

 

 

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   EXECUTIVE COMPENSATION

 

   

 

December 2021 payroll records. Compensation paid in foreign currencies was converted to U.S. dollars based on a weighted average exchange rate for the relevant period.

Using this methodology, our median employee was identified as a part-time crewmember attending university and located in a second-tier city in China.

Ratio

For 2020:2021:

 

The annual total compensation of the median employee, as identified above, was $5,507.$6,738.

 

Ms. Wat’s annual total compensation, as reported in the Total column of the 20202021 Summary Compensation Table, was $21,171,578.$16,555,672.

 

Based on this information, the ratio of the annual total compensation of Ms. Wat to the median of the annual total compensation of all employees is approximately 3,8442,457 to 1.

Our pay ratio is significantly impacted by the fact that substantially all of our employees are based in China, approximately 74%75% of our 366,000405,000 crewmembers are employed on a part-time and hourly basis, and typical wages vary between the cities in which our restaurants are located.

The above ratio and annual total compensation amount of the median employee are reasonable estimates that have been calculated using methodologies and assumptions permitted by SEC rules. The ratio and annual total compensation amount may not be directly comparable to those of other companies because the methodologies and assumptions used to identify the median employee may vary significantly among companies.

Alternative Ratio Annualizing Partner PSU Awards

As discussed above in the CD&A during 2020, each of the NEOs, including Ms. Wat, received a Partner PSU Award to address increased competitionTo provide supplemental disclosure and the Compa-

ny’s existing pay gap, motivate transformational performance, and encourage long-term retention over the four-year performance period. Under SEC disclosure rules, the entire grant date fair value of the Partner PSU Award is required to be reported in the Summary Compensation Table in the year of grant rather than over the performance period. Accordingly, when calculating the pay ratio disclosed above, Ms. Wat’s 2020 Partner PSU Award was included in the calculation at its full grant date fair value.

When determining grant levels, however, the Compensation Committee considers the long-term performance period of the Partner PSU Awards and reviews executive pay on an annualized basis rather than on a grant date basis. The Compensation Committee believes that annualizing Ms. Wat’s 2020 Partner PSU Award over the performance period is more representative of how the awards are earned and provides a better comparison to market levels that are reported on an annualized basis. In addition to the required pay ratio calculation above, the Company has calculated an alternative pay ratio using an adjusted amount of compensation for Ms. Wat that annualizes Ms. Wat’s 2020 Partner PSU Award by (i) deducting the grant date fair value of the 2020 Partner PSU Award from 2020 compensation and (ii) instead includingnot as 2020 compensation one-fourth of the grant date fair value of the 2020 Partner PSU Award granted to Ms. Wat to reflect the four-year performance period. When calculated in this manner, Ms. Wat’s adjusted compensation is $12,171,529 and the ratio of the annual total compensation of Ms. Wat to the median of the annual total compensation of all of the Company’s employees other than Ms. Wat is estimated to be 2,210 to 1.

This alternative pay ratio is not a substitute for the pay ratio calculated in accordance with the SEC executive compensation disclosure rules, butwe also reviewed the Company believes it is helpfulCEO pay ratio excluding the value of the one-time Chairman Awards granted in fully evaluatingFebruary 2021. Excluding such awards, the ratio of Ms. Wat’sCEO’s 2021 annual total compensation would have been $14,055,649 and the CEO pay ratio for fiscal 2021 would have been 2,086 to the median of the annual total compensation of all of the Company’s employees.1.

 

 

YUM CHINA – 2021 Proxy Statement   

  7567

 

 20202021 DIRECTOR COMPENSATION

 

 

The Company primarily uses stock-based compensation to attract and retain qualified candidates to serve on the Board. In setting director compensation, the Board 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. The Nominating and Governance Committee of the Board considers advice from the compensation consultant and reviews and makes recommendations to the Board with respect to the compensation and benefits of directors on an annual basis. The Company’s director compensation structure for 20202021 is discussed below.

Employee Directors. Employee directors do not receive additional compensation for serving on the Board of Directors. Please see the 20202021 Summary Compensation Table for the compensation received by Ms. Wat during 20202021 for her role as CEO of the Company.

Non-Employee Directors Retainer. Our non-employee directors were each compensated with an annual retainer

equal to $275,000, payable in Company common stock or, if requested by a director, up to one-half in cash. The annual retainers were paid in June 20202021 to compensate the

directors for their services from June 1, 20202021 to May 31, 2021. During 2020, members of our Board agreed to voluntarily forgo 10% of their retainers during the period of June 2020 to December 2020 as contributions to fund additional assistance for frontline employees and their families impacted by COVID-19 as well as other emergency relief, which are reflected in the table disclosing the retainers to non-employee directors during 2020.2022.

Chairman and Committee Chairperson Retainer. In addition to the annual retainer paid to all non-employee directors, the Chairman of the Board (Dr. Hu) received an additional annual cash retainer of $225,000. The Chairperson of the Audit Committee (Mr. Campbell)Bassi) received an additional $30,000 stock retainer, the Chairperson of the Compensation Committee (Ms. Lu) received an additional $20,000 stock retainer, the Chairperson of the Nominating and Governance Committee (Dr. Hu) received an additional $15,000 stock retainer, and the Chairperson of the Food Safety and Sustainability Committee (Mr. Shao) received an additional $15,000 stock retainer. All such retainers were paid in June 20202021 to compensate the directors for their services from June 1, 20202021 to May 31, 2021.2022.

 

 

The table below summarizes cash compensation earned by and stock retainers granted to each non-employee director director during 2020.2021.

 

Name

    

Fees Earned or

Paid in Cash($)(1)

     

Stock Awards

($)(2)

     

Total

($)

     

Fees Earned or

Paid in Cash($)

   

Stock Awards

($)(5)

     

All Other
Compensation

($)

   

Total

($)

 

(a)

    (b)     (c)     (d)     (b)   (c)     (d)   (e) 

Peter A. Bassi

     129,479      129,479      258,958      137,500(1)    167,500      —    305,000 

Christian L. Campbell

     —      288,958      288,958 

Ed Yiu-Cheong Chan

     —      275,000      275,000 

Edouard Ettedgui

     —      258,958      258,958      —    275,000      —    275,000 

Cyril Han

     —      258,958      258,958      —    275,000      —    275,000 

Louis T. Hsieh

     —      275,000      275,000      137,500(1)    137,500      —    275,000 

Fred Hu

     225,000      273,958      498,958      225,000(2)    290,000      —    515,000 

Ruby Lu

     —      278,958      278,958      —    295,000      —    295,000 

Zili Shao

     —      273,958      273,958      —    290,000      —    290,000 

William Wang

     —      258,958      258,958      —    275,000      —    275,000 

Min (Jenny) Zhang

     137,500(3)    137,500      —    275,000 

Christian L. Campbell

     —    —      127,500(6)    127,500 

Ed Yiu-Cheong Chan

     —(4)    —      —    — 

(1)

Represents the portion of the annual retainer that Messrs. Bassi and Hsieh elected to receive in cash rather than equity.

(2)

Represents the annual cash retainer paid to Dr. Hu as Chairman of the Board.

 

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   20202021 DIRECTOR COMPENSATION

 

   

 

(1)(3)

Represents the portion of the annual retainer that Mr. BassiMs. Zhang elected to receive in cash rather than equity andequity. Ms. Zhang was first elected to the annual cash retainer paid to Dr. Hu as ChairmanBoard at the 2021 Annual Meeting of the Board.Stockholders.

 

(2)(4)

Mr. Chan did not stand for re-election at the 2021 Annual Meeting of Stockholders. While Mr. Chan served as a director during 2021, he did not receive any compensation in 2021 with respect to such service, as his 2020 equity grant that was reported in the 2020 Director Compensation Table represented compensation for his service until May 2021.

(5)

Represents the grant date fair value for annual stock retainer awards granted in 2020.2021. Each director received shares of Company common stock determined by dividing the applicable annual retainer by the closing market price of a share of Company common stock on the date of grant, with any fractional shares paid in cash rather than equity.

(6)

Mr. Campbell did not stand for re-election at the 2021 Annual Meeting of Stockholders. While Mr. Campbell served as a director during 2021, he did not receive any compensation in 2021 with respect to such service, as his 2020 equity grant that was reported in the 2020 Director Compensation Table represented compensation for his service until May 2021. On July 15, 2021, Mr. Campbell entered into a senior advisor service contract with the Company, pursuant to which Mr. Campbell will provide governance and other advisory services to the Board from July 1, 2021 to May 31, 2022, with a monthly retainer of $21,000. Pursuant to the senior advisor service contract, hours in excess of 42 hours per quarter were paid at $1,500 per hour. The amount represents the advisory retainer paid to Mr. Campbell in 2021.

 

Stock Ownership Requirements. Although our directors are not subject to the Stock Ownership Guidelines, we nevertheless expect our directors to own a meaningful number of shares of Company common stock, and we have a share retention policy in place for directors. Pursu-

ant to the share retention policy, no director may sell any shares received as director compensation until at least 12 months following the director’s retirement or departure from the Board.

 

 

YUM CHINA – 2021 Proxy Statement   

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 EQUITY COMPENSATION PLAN INFORMATION

 

The following table summarizes, as of December 31, 2020,2021, the equity compensation we may issue to our directors, officers, employees and other persons under the Company’s Long Term Incentive Plan (the “2016 LTIP,”), which was approved by YUM as the Company’s sole stockholder prior to the Company’s spin-off from YUM.

 

Plan Category

    Number of Securities to
be Issued Upon
Exercise of Outstanding
Options, Warrants and
Rights		   Weighted-
Average
Exercise  Price
of Outstanding
Options,
Warrants and
Rights		   

Number of Securities  

Remaining Available  

For Future Issuance  

Under Equity  

Compensation Plans  

(Excluding Securities  

Reflected in  

Column (a))  

     Number of Securities to
be Issued Upon
Exercise of Outstanding
Options, Warrants and
Rights		   Weighted-
Average
Exercise Price
of  Outstanding
Options,
Warrants and
Rights		   

Number of Securities  

Remaining Available  

For Future Issuance  

Under Equity  

Compensation Plans  

(Excluding Securities  

Reflected in  

Column (a))  

 
    (a)   (b)   (c)     (a)   (b)   (c) 

Equity compensation plans approved by security holders

     13,627,981(1)    27.49(2)    11,640,269(3)      12,811,477(1)     31.65(2)    10,060,206(3)  

Equity compensation plans not approved by security holders

     —    —    —      —    —    — 
    

 

 

     

 

 

 

TOTAL

     13,627,981    27.49    11,640,269      12,811,477    31,65    10,060,206 
    

 

 

     

 

 

 

 

(1)

Includes 1,778,0571,988,944 shares issuable in respect of restricted stock unitsRSUs and performance share units.PSUs.

 

(2)

Restricted stock unitsRSUs and performance share unitsPSUs do not have an exercise price. Accordingly, this amount represents the weighted-average exercise price of outstanding stock appreciation rightsSARs and stock options.

 

(3)

After the spin-off, full value awards granted to the Company’s employees under the 2016 LTIP, including restricted stock unitsRSUs and performance share units,PSUs, will reduce the number of shares available for issuance by two shares. Stock appreciation rightsSARs granted to the Company’s employees under the 2016 LTIP will reduce the number of shares available for issuance only by one share.

 

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  YUM CHINA – 2021 Proxy Statement

  AUDIT COMMITTEE REPORT

Who serves on the Audit Committee of the Board of Directors?

The members of the Audit Committee are Christian L. Campbell (Chair), Peter A. Bassi, Ed Yiu-Cheong Chan, Cyril Han and Louis T. Hsieh, each of whom are independent within the meaning of applicable SEC regu-

lations and the listing standards of the NYSE. For additional information about the members of the Audit Committee, see “Governance of the Company—What are the Committees of the Board?”

What document governs the activities of the Audit Committee?

The Audit Committee operates under a written charter adopted by the Board of Directors. The Audit Committee’s responsibilities are set forth in the charter. The Audit Committee annually reviews and reassesses the adequacy

of its charter and recommends any proposed changes to the Board for approval. The charter is available on our website at ir.yumchina.com.

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 auditor’s qualifications and independence and the performance of the Company’s internal audit function and independent auditor. The Audit Committee has the authority to obtain advice and assistance from independent legal, accounting or other advisors as the Audit Committee deems necessary or appropriate to carry out its duties and receive appropriate funding, as determined by the Audit Committee, from the Company for such advice and assistance.

The Audit Committee has sole authority to appoint, determine funding for or replace the independent auditor and manages the Company’s relationship with its independent auditor, which reports directly to the Audit Committee. Each year, the Audit Committee evaluates the perfor-

mance, qualifications and independence of the independent auditor. In doing so, the Audit Committee considers whether the independent auditor’s quality controls are adequate and the provision of permitted non-audit services is compatible with maintaining the auditor’s independence, taking into account the opinions of management and internal auditor.

The members of the Audit Committee meet periodically in separate executive sessions with management (including the Company’s Chief Financial Officer, Chief Legal Officer and Principal Accounting Officer), the internal auditors and the independent auditor, and have such other direct and independent interaction with such persons from time to time as the members of the Audit Committee deem appropriate. The Audit Committee may request any officer or employee of the Company or the Company’s outside counsel or independent auditor to attend a meeting of the Audit Committee or to meet with any members of, or consultants to, the Audit Committee.

YUM CHINA – 2021 Proxy Statement

  79

AUDIT COMMITTEE REPORT   

What matters have members of the Audit Committee discussed with management and the independent auditor?

As part of its oversight of the Company’s financial statements, the Audit Committee reviews and discusses with both management and the Company’s independent auditor all annual and quarterly financial statements prior to their issuance. During 2020, management advised the Audit 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 Audit Committee. These reviews included discussions with the independent auditor of matters required to be discussed pursuant to applicable requirements of the PCAOB and the SEC, 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, disclosures related to critical accounting practices, and critical audit matters during the course of the audit. The Audit Committee has also discussed with KPMG matters relating to its independence, including a review of audit and non-audit fees and the written disclosures and letter received from KPMG required by applicable require-

ments of the PCAOB regarding KPMG’s communications with the Audit Committee concerning independence. The Audit Committee also considered whether non-audit services provided by the independent auditor are compatible with the independent auditor’s independence. The Audit 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 Audit 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 Audit Committee monitored 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 Audit Committee also reviewed and discussed legal and compliance matters with management, and, as necessary or advisable, the Company’s independent auditor.

Has the Audit Committee made a recommendation regarding the audited financial statements for fiscal 2020?

Based on the Audit Committee’s discussions with management and the independent auditor and the Audit Committee’s review of the representations of management and the report of the independent auditor to the Board of Directors, and subject to the limitations on the Audit Committee’s role and responsibilities referred to above

and in the Audit Committee Charter, the Audit 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 31, 2020 for filing with the SEC.

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  YUM CHINA– 2021 Proxy Statement

   AUDIT COMMITTEE REPORT

Who prepared this report?

This report has been furnished by the members of the Audit Committee:

Christian L. Campbell, Chair

Peter A. Bassi

Ed Yiu-Cheong Chan

Cyril Han

Louis T. Hsieh

YUM CHINA – 2021 Proxy Statement

  81

 

 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. We have retained Georgeson Inc.LLC to act as a proxy solicitor for a fee estimated to be $10,000,$25,000, plus reimbursement of out-of-pocket expenses. expenses. In addition, our directors, officers

officers and regular employees, without additional compensation, may solicit proxies personally, by e-mail, telephone, telephone, fax or special letter. We will reimburse brokerage firms and others for their expenses in forwarding proxy materials to the beneficial owners of shares of Company common stock.

 

 

How may I elect to receive stockholder materials?

 

LOGO

For stockholders of our common stock registered on our U.S. register

Stockholders with shares registered directly in their name who received stockholder 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 stockholders with added convenience, to reduce our environmental impact and to reduce annual report printing and mailing costs.

To elect this option, go to www.computershare.com, click on Shareholder Account Access, log in and locate the option to receive Company mailings via e-mail. Stockholders 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, Computershare Trust Company, N.A., 505000, Louisville, KY 40233-5000, or by logging onto www.computershare.com and following the applicable instructions. Also, while this consent is in effect, if you decide you would like to receive a hard copy1290 Avenue of the proxy materials, you may call, write or e-mail Computershare Trust Company, N.A.Americas, 9th Floor

For stockholders of our common stock registered on our Hong Kong registerNew York, NY 10104

We will publish annual reportsShareholders, Banks and proxy statements on our website and on HKEX’s website in English and Chinese. We will provide printed copies of proxy materials in English and Chinese at no cost upon your request.Brokers

Call Toll Free:

866-316-3922

International Number:

781-575-2137

I share an address with another stockholder, 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 the annual report, to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders or they participate in electronic delivery of proxy materials.

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  YUM CHINA– 2021 Proxy Statement

   ADDITIONAL INFORMATION

Stockholders 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 China Holdings, Inc., 7100 Corporate Drive, Plano, Texas 75024, or to Yum China Holdings, Inc., Yum China Building, 20 Tian Yao Qiao Road, Shanghai 200030 People’s Republic of China, Attention: Investor Relations.Relations, or by calling +86 21 2407 7556 / +852 2267 5801.

 

YUM CHINA – Proxy Statement

  71

ADDITIONAL INFORMATION   

 

May I propose actions for consideration at next year’s annual meetingAnnual Meeting of the Company’s stockholders or nominate individuals to serve as directors?

 

 

 

Under the rules of the SEC, if a stockholder wants us to include a proposal in our proxy statement and proxy card for presentation at the 20222023 annual meeting of the Company’s stockholders, the proposal must be received by our Corporate Secretary at our principal executive offices, Yum China Holdings, Inc., 7100 Corporate Drive, Plano, Texas 75024, or Yum China Holdings, Inc., Yum China Building, 20 Tian Yao Qiao Road, Shanghai 200030, People’s Republic of China, by December 16, 2021.2022. We strongly encourage any stockholder interested in submitting a proposal to contact our Chief Legal Officer in advance of this deadline to discuss the proposal. Stockholders may want to consult knowledgeable counsel with regard to the detailed requirements of applicable securities laws. Submitting a proposal does not guarantee that we will include it in our proxy statement.

In addition, our Bylaws include provisions permitting, subject to certain terms and conditions, stockholders owning at least 3% of the outstanding shares of Company common stock for at least three consecutive years to use our annual meeting proxy statement to nominate a number of director candidates not to exceed 20% of the number of directors in office, subject to reduction in certain circumstances (the “Proxy Access”Access”). Pursuant to our Proxy Access bylaw, stockholder nomination of directors to be included in our proxy statement and proxy card for the 20222023 annual meeting of the Company’s stockholders must be received by our Corporate Secretary no earlier than November 16, 202115, 2022 and no later than December 16, 2021.15, 2022. Stockholders must also satisfy the other requirements specified in our Bylaws. You may contact the

Company’s Corporate Secretary at the addresses mentioned above for a copy of the relevant bylaw provisions regarding the requirements for nominating director candidates pursuant to Proxy Access.

Under our Bylaws, stockholders may also nominate persons for election as directors at an annual meeting or introduce an item of business 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 must be submitted in writing to our Corporate Secretary at our principal executive offices, and the stockholder submitting any such nomination or item of business must include information set forth in our Bylaws. For the 20222023 annual meeting of the Company’s stockholders, we must receive the notice of your intention to introduce a nomination or to propose an item of business no earlier than January 28, 202227, 2023 and no later than February 27, 2022,26, 2023, unless we hold the 20222023 annual meeting before April 28, 202227, 2023 or after June 27, 2022,26, 2023, in which case notice must be received no later than 10 days after notice of the date of the annual meeting is mailed or public disclosure of the date of the annual meeting is made, whichever first occurs. Stockholders must also satisfy the other requirements specified in our Bylaws. You may contact the Company’s Corporate Secretary at the addresses mentioned above for a copy of the relevant bylaw provisions regarding the requirements for making stockholder proposals and nominating director candidates.

In addition to satisfying the foregoing requirements under our Bylaws, to comply with the universal proxy rules (once effective), stockholders who intend to solicit proxies in support of director nominees other than our nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than March 28, 2023.

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  YUM CHINA– Proxy Statement

   ADDITIONAL INFORMATION

Is any other business expected to be conducted at the Special Meeting?

The Board is not aware of any matters that are expected to come before the Special Meeting other than those referred to in this proxy statement. If any other matter should come before the Special Meeting, the individuals named on the form of proxy intend to vote the proxies in accordance with their best judgment.

The chairman of the Special 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.

Forward-Looking Statements

This proxy statement contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act, including, without limitation, statements regarding the timeline and completion of the Proposed Primary Conversion and statements regarding our future compensation arrangements, including pursuant to the 2022 LTIP. We intend all forward-looking statements to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by the fact that they do not relate strictly to historical or current facts and by the use of forward-looking words such as “expect,” “expectation,” “believe,” “anticipate,” “may,” “could,” “intend,” “belief,” “plan,” “estimate,” “target,” “predict,” “project,” “likely,” “will,” “continue,” “should,” “forecast,” “outlook” or similar terminology. These statements are based on current estimates and assumptions made by us in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we believe are appropriate and reasonable under the circumstances, but there can be no assurance that such estimates and assumptions will prove to be correct. Forward-looking statements are not guarantees of performance and are inherently subject to known

and unknown risks and uncertainties that are difficult to predict and could cause our actual results or events to differ materially from those indicated by those statements. We cannot assure you that any of our expectations, estimates or assumptions will be achieved. The forward-looking statements included in this proxy statement are only made as of the date of this proxy statement, and we disclaim any obligation to publicly update any forward-looking statement to reflect subsequent events or circumstances, except as required by law. Numerous factors could cause our actual results or events to differ materially from those expressed or implied by forward-looking statements. In addition, other risks and uncertainties not presently known to us or that we currently believe to be immaterial could affect the accuracy of any such forward-looking statements. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. You should consult our filings with the SEC (including the information set forth under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q) for additional detail about factors that could affect our financial and other results.

 

 

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 APPENDIX A – YUM CHINA HOLDINGS, INC. 2022 LONG  TERM INCENTIVE PLAN

YUM CHINA HOLDINGS, INC.

2022 LONG TERM INCENTIVE PLAN

SECTION 1.

General

1.1 Purpose. This Yum China Holdings, Inc. 2022 Long Term Incentive Plan (the “Plan”) has been established by Yum China Holdings, Inc. (the “Company”) to (i) attract and retain persons eligible to participate in the Plan; (ii) motivate Participants, by means of appropriate incentives, to achieve long-range goals; (iii) provide incentive compensation opportunities that are competitive with those of other similar companies; and (iv) align the interests of Participants with those of the Company’s shareholders. The Plan replaces the Yum China Holdings, Inc. Long Term Incentive Plan (the “2016 Plan”) and the 2016 Plan shall continue to govern awards granted prior to the Effective Date (as defined below) but no new awards shall be granted under the 2016 Plan following the Effective Date.

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 Individuals on the basis of their contributions to the development and growth of the Group, as determined by the Company, those persons who will be granted one or more Awards under the Plan, and thereby become a “Participant” in the Plan.

1.3 Operation, Administration, and Definitions. The operation and administration of the Plan shall be vested in the Committee, as described in Section 7. Capitalized terms in the Plan shall be defined as set forth in the Plan (including the definition provisions of Section 9 hereof).

SECTION 2.

Options and SARS

2.1 Definitions.

(a)

The grant of an “Option” entitles the Participant to purchase shares of Stock at an Exercise Price and during a specified time established by the Committee. Any Option granted under this Section 2 may be either a non-qualified option (an “NQO”) or an incentive stock option (an “ISO”), as determined in the discretion of the Committee. An “NQO” is an Option that is not intended to be an “incentive stock option” as that term is described in Code Section 422(b). An “ISO” is an Option that satisfies the requirements applicable to an “incentive stock option” described in Code Section 422(b) and which is designated at the time of grant as an “incentive stock option.” An Option will be deemed to be a NQO unless it is specifically designated by the Committee as an ISO and/or to the extent that it does not meet the requirements of an ISO.

(b)

The grant of a stock appreciation right (an “SAR”) entitles the Participant to receive, in cash or Stock (as determined in accordance with the terms of the Plan and specified in the applicable Award Agreement), value equal to (or otherwise based on) the excess of: (i) the Fair Market Value of a specified number of shares of Stock at the time of exercise; over (ii) an Exercise Price established by the Committee.

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2.2 Eligibility. The Committee shall designate the Participants to whom Options or SARs are to be granted under this Section 2 and shall determine the number of shares of Stock subject to each such Option or SAR and the other terms and conditions thereof, not inconsistent with the Plan. Without limiting the generality of the foregoing, the Committee may not grant dividends or dividend equivalents (current or deferred) with respect to any Option or SAR granted under the Plan. ISOs may only be granted to employees of the Company or a Subsidiary.

2.3 Limits on ISOs. If the Committee grants ISOs, then to the extent that the aggregate fair market value of shares of Stock with respect to which ISOs are exercisable for the first time by any individual during any calendar year (under all plans of the Company, any parent and all Subsidiaries) exceeds the amount (currently $100,000) established by the Code, such Options shall be treated as NQOs to the extent required by Code Section 422. Any Option that is intended to constitute an ISO shall satisfy any other requirements of Code Section 422 and, to the extent such Option does not satisfy such requirements, the Option shall be treated as an NQO.

2.4 Exercise Price. The “Exercise Price” of each Option or SAR granted under this Section 2 shall be established by the Committee or shall be determined by a method established by the Committee at the time the Option or SAR is granted; provided, however, that the Exercise Price shall not be less than the higher of (i) the Fair Market Value of a share of Stock on the date of grant (which must be a NYSE trading day) and (ii) the average Fair Market Value of a Share of common stock for the five NYSE trading days immediately preceding the date of grant (or, if greater, the par value of a share of Stock on such date(s)). Notwithstanding the foregoing and subject to approval, waiver, confirmation or otherwise as applicable from the HKEx, Options and SARs granted under the Plan in replacement for awards under plans and arrangements of the Company or a Subsidiary that are assumed in business combinations or similar corporate transactions may provide for Exercise Prices that are less than the Fair Market Value of the Stock at the time of the replacement grants, if the Committee determines that such Exercise Price is appropriate to preserve the economic benefit of the award.

2.5 Exercise/Vesting. Except as otherwise expressly provided in the Plan, an Option or SAR granted under the Plan shall be exercisable in accordance with the following:

(a)

The terms and conditions relating to exercise and vesting of an Option or SAR shall be established by the Committee to the extent not inconsistent with the Plan and may include, without limitation, conditions relating to completion of a specified period of service, achievement of performance standards as assessed in accordance with the Performance Measures prior to exercise or the achievement of stock ownership guidelines by the Participant.

(b)

No Option or SAR may be exercised by a Participant prior to the date on which it is exercisable (or vested) or after the ten-year anniversary of the date on which the Option or SAR was granted (or such shorter period as determined by the Committee at the time of grant or as required by law or the rules of any stock exchange on which the Stock is listed or the Code).

2.6 Payment of Option Exercise Price. The payment of the Exercise Price of an Option granted under this Section 2 shall be subject to the following:

(a)

Subject to the following provisions of this subsection 2.6, the full Exercise Price for shares of Stock purchased upon the exercise of any Option shall be paid at the time of such exercise (except that, in the case of an exercise arrangement approved by the Committee and described in paragraph 2.6(c), payment may be made as soon as practicable after the exercise).

(b)

The Exercise Price shall be payable in cash or by way of a net exercise through authorizing the Company to withhold whole shares of Stock which would otherwise be delivered having an aggregate Fair Market

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Value, determined as of the date of exercise, equal to the amount necessary to satisfy such obligation, or in any combination thereof, as determined by the Committee.

(c)

The Committee may permit a Participant to elect to pay the Exercise Price upon the exercise of an Option by irrevocably authorizing a third party to sell shares of Stock (or a sufficient portion of the shares) acquired upon exercise of the Option and remit to the Company a sufficient portion of the sale proceeds to pay the entire Exercise Price and any tax withholding resulting from such exercise.

2.7 Post-Exercise Limitations. The Committee, in its discretion, may impose such restrictions on shares of Stock acquired pursuant to the exercise of an Option or SAR as it determines to be desirable, including, without limitation, restrictions relating to disposition of the shares and forfeiture restrictions based on service, performance, Stock ownership by the Participant, conformity with the Company’s recoupment or clawback policies and such other factors as the Committee determines to be appropriate.

2.8 Tandem Grants of Options and SARS. An Option may but need not be in tandem with an SAR, and an SAR may but need not be in tandem with an Option (in either case, regardless of whether the original award was granted under this Plan or another plan or arrangement). If an Option is in tandem with an SAR, the Exercise Price of both the Option and SAR shall be the same, and the exercise of the corresponding tandem SAR or Option shall cancel the corresponding tandem SAR or Option with respect to such share. If an SAR is in tandem with an Option but is granted after the grant of the Option, or if an Option is in tandem with an SAR but is granted after the grant of the SAR, the later granted tandem Award shall have the same Exercise Price as the earlier granted Award, but in any event subject to subsection 2.4.

2.9 No Repricing. Except for either adjustments pursuant to subsection 4.2 (relating to the adjustment of shares) or reductions of the Exercise Price approved by the Company’s shareholders, the Exercise Price for any outstanding Option or SAR may not be decreased after the date of grant nor may an outstanding Option or SAR granted under the Plan be surrendered to the Company as consideration for the grant of a replacement Option or SAR with a lower Exercise Price or a Full Value Award. Except as approved by the Company’s shareholders, in no event shall any Option or SAR granted under the Plan be surrendered to the Company in consideration for a cash payment if, at the time of such surrender, the Exercise Price of the Option or SAR is greater than the then current Fair Market Value of a share of Stock. In the event of a repricing, the Exercise Price shall still be subject to any other requirements imposed or waivers granted under applicable laws or applicable rules of any stock exchange on which the Stock is listed.

SECTION 3.

Full Value Awards and Cash Incentive Awards

3.1 Definitions.

(a)

A “Full Value Award” is a grant of one or more shares of Stock or a right to receive one or more shares of Stock in the future (including restricted stock, restricted stock units, performance shares, and performance units) which is contingent on continuing service, the achievement of performance objectives as assessed in accordance with the Performance Measures during a specified performance period, or other restrictions as determined by the Committee. The grant of Full Value Awards may also be subject to such other conditions, restrictions and contingencies, as determined by the Committee, including provisions relating to dividend or dividend equivalent rights and deferred payment or settlement. Notwithstanding the foregoing, no dividends or dividend equivalent rights will be paid or settled on Full Value Awards that have not been earned or vested.

(b)

A “Cash Incentive Award” is the grant of a right to receive a payment of cash (or in the discretion of the Committee, shares of Stock having value equivalent to the cash otherwise payable) that is contingent on achieve-

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ment of performance objectives as assessed in accordance with the Performance Measures over a specified period established by the Committee. The grant of Cash Incentive Awards may also be subject to such other conditions, restrictions and contingencies, as determined by the Committee, including provisions relating to deferred payment.

3.2 Restrictions on Full Value Awards. Each Full Value Award shall be subject to such conditions, restrictions and contingencies set forth in this Plan and as the Committee shall determine and which are consistent with this Plan.

3.3 No Purchase Price. Grants of Full Value Awards shall be made based on the basis of their contributions to the development and growth of the Group, as determined by the Company, and the Participant is not required to pay any purchase price of shares of Stock awarded under the Full Value Award and the Cash Incentive Award.

SECTION 4.

Stock Reserved and Limitations

4.1 Shares Reserved and Other Amounts Subject to the Plan/Limitations. The shares of Stock for which Awards (which, for the avoidance of doubt, includes Options, SARs and Full Value Awards) may be granted under the Plan shall be subject to the following:

(a)

The shares of Stock with respect to which Awards may be made under the Plan shall be shares currently authorized but unissued.

(b)

Subject to the following provisions of this subsection 4.1 and the provisions of subsection 4.2, the maximum number of shares of Stock that may be delivered to Participants and their beneficiaries under the Plan shall be equal to 32,000,000; provided, however, that the maximum number of shares of Stock in respect of all Awards which may be granted under this Plan (the “Scheme Mandate Limit”) shall be the lower of (i) 32,000,000 shares of Stock and (ii) such number of shares of Stock representing 10% of the total number of shares of Stock outstanding as of the date of approval of the Plan by the Company’s shareholders (the “10% Limit”). The foregoing Scheme Mandate Limit shall be reduced by the number of shares of Stock (or, with respect to Full Value Awards, two times the number of shares of Stock) subject to any grants that occur under the 2016 Plan between August 24, 2022 and the Effective Date. For purposes of applying the limitations of this paragraph 4.1(b), each share of Stock delivered pursuant to Section 3 (relating to Full Value Awards) shall be counted as covering two shares of Stock, and shall reduce the number of shares of Stock available for delivery under this paragraph 4.1(b) by two shares.

(c)

To the extent provided by the Committee and set forth in the Award Agreement, any Award may be settled in cash rather than Stock. To the extent any shares of Stock covered by an Award are not delivered to a Participant or beneficiary because the Award is settled in cash, such shares shall not be deemed to have been delivered for purposes of determining the maximum number of shares of Stock available for delivery under the Plan.

(d)

To the extent any shares of Stock covered by an Award are not delivered to a Participant or beneficiary because they have already lapsed in accordance with the terms of this Plan, including due to forfeiture, termination, or expiration of the Award, then such shares shall not reduce the Scheme Mandate Limit and shall remain available for grant under the Plan. In addition, only the shares subject to a stock-settled SAR that are issued to a Participant upon exercise of such stock-settled SAR shall reduce the Scheme Mandate Limit. To the extent any shares of Stock covered by an Award are not delivered to a Participant or beneficiary because (i) the shares of Stock were subject to an Option and were not issued or delivered upon the net settlement or net

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exercise of such Option or (ii) the shares of Stock were withheld by the Company to pay the purchase price or the withholding taxes related to an outstanding Award, then such shares shall not reduce the Scheme Mandate Limit and shall remain available for grant under the Plan. In addition, subject to the 10% Limit, (x) shares withheld by the Company after August 24, 2022 to pay the withholding taxes related to an outstanding Award granted under the 2016 Plan and (y) shares subject to Awards granted under the 2016 Plan between August 24, 2022 and the Effective Date which are not delivered to a Participant or beneficiary because they have lapsed in accordance with the terms of the 2016 Plan, including due to forfeiture, termination, or expiration of the Award, in each case, shall become available for grant under the Plan. Shares of Stock repurchased by the Company on the open market with the proceeds of an Option exercise shall be cancelled and shall not again be available for delivery under the Plan.

(e)

Subject to the terms and conditions of the Plan, the maximum number of shares of Stock that may be delivered to Participants and their beneficiaries with respect to ISOs under the Plan shall be 32,000,000; provided, however, that to the extent that shares not issued must be counted against this limit as a condition of satisfying the rules applicable to ISOs, such rules shall apply to the limit on ISOs granted under the Plan.

(f)

Subject to subsection 4.2, the following additional maximums are imposed under the Plan:

(i)

Within the Scheme Mandate Limit, the maximum number of shares of Stock that may be issued in respect of all Awards granted to any Eligible Individual pursuant to Section 2 (relating to Options and SARs) shall be 9,000,000 shares during any five calendar-year period and shall be subject to any other requirements imposed under applicable laws or applicable rules of any stock exchange on which the Stock is listed. If an Option is in tandem with an SAR, such that the exercise of the Option or SAR with respect to a share of Stock cancels the tandem SAR or Option right, respectively, with respect to such share, the tandem Option and SAR rights with respect to each share of Stock shall be counted as covering one share of Stock for purposes of applying the limitations of this subparagraph (i).

(ii)

For Full Value Awards, no more than 3,000,000 shares of Stock may be subject to such Awards granted to any Eligible Individual during any five-calendar-year period (regardless of when such shares are deliverable) and shall be subject to any other requirements imposed under applicable laws or applicable rules of any stock exchange on which the Stock is listed.

(iii)

To the extent any grant of an Award to an Eligible Individual would result in the shares of Stock issued or to be issued in respect of all Awards granted to such individual (excluding any Awards that have been forfeited or lapsed in accordance with the terms of the Plan) in the 12-month period up to and including the date of such grant representing in the aggregate more than the limit set out in the HKEx Listing Rules (which is currently 1% of the shares of Stock of the Company issued as of such date (the “1% Individual Limit”)), such grant must be separately approved by the shareholders of the Company in accordance with the HKEx Listing Rules.

(iv)

In the case of any Award to a Non-employee Director, in no event shall the dollar value of the Award granted to any Non-employee Director for any calendar year (determined as of the date of grant) exceed $1,500,000.

(g)

The Company shall in any event comply with all applicable requirements, including the approval requirement, in respect of grants beyond applicable individual limits under any applicable laws or applicable rules of any stock exchange on which the Stock is listed.

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4.2 Adjustments to Shares of Stock and Stock Awards. In the event of a capitalization issue, rights issue, subdivision or consolidation of shares or reduction of capital, the number and class of securities available under this Plan, the terms of each outstanding Option and SAR (including the number and class of securities subject to each outstanding Option or SAR and the Exercise Price or base price per share) and the terms of each outstanding Full Value Award (including the number and class of securities subject thereto), shall be appropriately adjusted by the Committee, such adjustments to be made in the case of outstanding Options and SARs in accordance with Section 409A of the Code and Rule 17.03(13) of the HKEx Listing Rules to the extent applicable. Only where approval, waiver, confirmation or otherwise as applicable from the HKEx is obtained, in the event of any other equity restructuring event as defined under Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation—Stock Compensation or any successor or replacement accounting standard, or any other change in corporate capitalization, including a merger, consolidation, reorganization, or partial or complete liquidation of the Company, such equitable adjustments described in the foregoing sentence may be made as determined to be appropriate and equitable by the Committee to the extent necessary to prevent dilution or enlargement of rights of participants. In case of an adjustment pursuant to this Section 4.2, the decision of the Committee regarding any such adjustment shall be final, binding and conclusive.

4.3 Grant of Awards to Directors, Chief Executive Officer or Substantial Shareholders. Where an Award is to be granted to a Director, chief executive officer or substantial shareholder of the Company or any of their associates (as determined in accordance with the HKEx Listing Rules) or any other connected persons of the Company (as defined under the HKEx Listing Rules), the grant shall be subject to approval requirements under applicable laws or applicable rules of any stock exchange on which the Stock is listed.

4.4 Refreshment of the Scheme Mandate Limit. Subject to the requirements of the HKEx Listing Rules in force from time to time, the Scheme Mandate Limit may be refreshed by the shareholders in a general meeting after three years from the date of the Company’s shareholders’ approval for the last refreshment (or the adoption of this Plan). Additional “refreshment” within any three year period must be approved by independent shareholders of the Company in a manner compliant with Chapter 17 of the Listing Rules in force from time to time. The Scheme Mandate Limit so refreshed shall not exceed 10% of the total number of issued shares of Stock as at the date of the shareholders’ approval of the refreshing of the Scheme Mandate Limit.

4.5 Grants beyond the Scheme Mandate Limit. The Company may seek separate approvals from the shareholders for granting Awards beyond the Scheme Mandate Limit in a manner as allowed under the HKEx Listing Rules.

4.6 Minimum Vesting Requirements. Notwithstanding any other provision of the Plan to the contrary, Awards granted under the Plan (other than cash-based awards) shall vest no earlier than the first anniversary of the date on which the Award is granted; provided, that the following Awards granted to Employee Participants shall not be subject to the foregoing minimum vesting requirement: any (i) Substitute Awards granted in connection with awards that are assumed, converted or substituted pursuant to a merger, acquisition or similar transaction entered into by the Company or any of its Subsidiaries, (ii) shares of Stock subject to a minimum holding period of 12 months which are delivered to an Employee Participant under his/her compensation arrangements with the Company, including shares of stock delivered to a Non-employee Director in respect of such Non-employee Director’s annual retainer, (iii) Awards to Non-employee Directors that vest on earlier of the one-year anniversary of the date of grant and the next annual meeting of shareholders which is at least 50 weeks after the immediately preceding year’s annual meeting, and (iv) any additional Awards the Committee may grant, up to a maximum of five percent (5%) of the Scheme Mandate Limit pursuant to Section 4.1(b) (subject to adjustment under Section 4.2) in respect of (A) sign-on or make-whole grants to new Employee Participants, (B) grants of Awards with performance-based vesting conditions, (C) grants of Awards that are made in batches for administrative or compliance reasons, (D) grants of Awards that vest evenly over a period of 12 months or more, and

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(E) grants of Awards with a total vesting and holding period of more than 12 months; and, provided, further, that the foregoing restriction does not apply to the Committee’s discretion to provide for accelerated exercisability or vesting of any award in cases of retirement, separation, retention arrangements, death, disability or a Change in Control, in the terms of the Award Agreement or otherwise. The Committee shall when determining the vesting period of each grant of Award consider the purpose of the Plan, including but not limited to attraction and retention of individuals to the Company, motivation of performance and provision of competitive incentive opportunities.

4.7 Lapse of Awards. Unless otherwise set forth in the Award Agreement or determined by the Committee, Awards shall cease to vest upon a termination of the Participant’s employment or service with the Company or the Participant ceasing to be an Eligible Individual. In the event an Option or SAR expires without being exercised during the period prescribed under section 2.5(b) or an Award do not vest, such Award shall lapse, automatically forfeited and cancelled by the Company without action on the part of the Participant and for no consideration. The Company shall owe no liability to any participant for the lapse of any Award under this paragraph.

SECTION 5.

Change in Control

Subject to the provisions of subsection 4.2 (relating to the adjustment of shares), and except as otherwise provided in the Plan or the Award Agreement reflecting the applicable Award, if a Change in Control occurs prior to the date on which an Award is vested and prior to the Participant’s separation from service and if the Participant’s employment is involuntarily terminated by the Company (other than for cause) on or within two years following the Change in Control, then:

(a)

All outstanding Options (regardless of whether in tandem with SARs) shall become fully exercisable.

(b)

All outstanding SARs (regardless of whether in tandem with Options) shall become fully exercisable.

(c)

All Full Value Awards (including any Award payable in Stock which is granted in conjunction with a Company deferral program) shall become fully vested and the Committee shall determine the extent to which performance conditions as assessed in accordance with the Performance Measures are met in accordance with the terms of the Plan and the applicable Award Agreement.

In no event shall the application of this Section 5 cause the vesting period of any Award of any Participant who is not an Employee Participant to be less than 12 months.

Notwithstanding anything in this Plan or any Award agreement to the contrary, to the extent any provision of this Plan or an Award agreement would cause a payment of deferred compensation that is subject to Code Section 409A to be made upon the occurrence of a Change in Control, then such payment shall not be made unless such Change in Control also constitutes a “change in ownership”, “change in effective control” or “change in ownership of a substantial portion of the Company’s assets” within the meaning of Code Section 409A.

SECTION 6.

Miscellaneous

6.1 Effective Date; Duration. Subject to its prior approval by the Company’s shareholders, this Plan shall become effective as of the effective date of the dual primary listing of the Stock on the Main Board of HKEx (the “Effective Date”). This Plan shall terminate as of the tenth anniversary of the date on which it was approved by the Company’s shareholders, unless terminated earlier by the Board. Upon termination of the Plan, no further Award will be offered but the provisions of this Plan shall remain in full force and effect in all other respects. Termination of this Plan

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shall not affect the terms or conditions of any Award granted prior to termination. Awards granted but not yet exercised or vested shall continue to be valid and exercisable in accordance with this Plan.

6.2 General Restrictions. Distribution of shares of Stock or other amounts under the Plan shall be subject to the following:

(a)

Notwithstanding any other provision of the Plan, the Company shall have no liability to deliver any shares of Stock under the Plan or make any other distribution of benefits under the Plan unless such delivery or distribution would comply with all applicable laws (including, without limitation, the requirements of the Securities Act of 1933), and the applicable requirements of any securities exchange or similar entity.

(b)

In the case of a Participant who is subject to Section 16(a) and 16(b) of the Exchange Act, the Committee may, at any time, add such conditions and limitations to any Award to such Participant, or any feature of any such Award, as the Committee, in its sole discretion, deems necessary or desirable to comply with Section 16(a) or 16(b) of the Exchange Act and the rules and regulations thereunder or to obtain any exemption therefrom.

(c)

To the extent that the Plan provides for issuance of stock certificates to reflect the issuance of shares of Stock, the issuance may be effected on a non-certificated basis, to the extent not prohibited by applicable law or the applicable rules of any stock exchange.

6.3 Tax Withholding. All distributions under the Plan are subject to withholding of all applicable taxes, and the Committee may condition the delivery of any shares or other benefits under the Plan on satisfaction of the applicable withholding obligations. The Committee, in its discretion, and subject to such requirements as the Committee may impose prior to the occurrence of such withholding, may permit such withholding obligations to be satisfied through (i) cash payment by the Participant, (ii) net settlement by authorizing the Company to withhold whole shares of Stock which would otherwise be delivered having an aggregate Fair Market Value, determined as of the date of settlement, equal to the amount necessary to satisfy such withholding obligation, (iii) the Participant irrevocably authorizing a third party to sell shares of Stock (or a sufficient portion of the shares) acquired upon settlement of the Award and remit to the Company a sufficient portion of the sale proceeds to pay the tax withholding resulting from such settlement, or (iv) any other means approved by the Committee and permitted under applicable law; provided, however, previously-owned Stock that has been held by the Participant or Stock to which the Participant is entitled under the Plan may only be used to satisfy the minimum tax withholding required by applicable law (or, if permitted by the Company, such other rate as shall not cause adverse accounting consequences under the accounting rules then in effect).

6.4 Grant and Use of Awards. Subject to subsection 4.1, in the discretion of the Committee, a Participant may be granted any Award permitted under the provisions of the Plan, and more than one Award may be granted to a Participant. Except as required by applicable law, a Participant is not required to pay any amount in order to apply or accept an Award. Subject to subsection 2.9, Awards may be granted as alternatives to or replacement of awards granted or outstanding under the Plan, or any other plan or arrangement of the Company or a Subsidiary (including a plan or arrangement of a business or entity, all or a portion of which is acquired by the Company or a Subsidiary). Subject to applicable laws and applicable rules of any stock exchange on which the Stock is listed and the overall limitation on the number of shares of Stock that may be delivered under the Plan, the Committee may use available shares of Stock as the form of payment for compensation, grants or rights earned or due under any other compensation plans or arrangements of the Company or a Subsidiary, including the plans and arrangements of the Company or a Subsidiary assumed in business combinations.

6.5 Timing on the grant of Awards. No Awards shall be granted in the periods prohibited under applicable law or the applicable rules of any stock exchange on which the Stock is listed.

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6.6 Settlement and Payments. Awards may be settled through cash payments, the delivery of shares of Stock, the granting of replacement Awards, or combination thereof as the Committee shall determine. Any Award settlement, including payment deferrals, may be subject to such conditions, restrictions and contingencies as the Committee shall determine. The Committee may permit or require the deferral of any Award payment (other than Option or SAR other than to the extent permitted by Code Section 409A), subject to such rules and procedures as it may establish, which may include provisions for the payment or crediting of interest, or dividend equivalents, including converting such credits into deferred Stock equivalents. Each Subsidiary shall be liable for payment of cash due under the Plan with respect to any Participant to the extent that such benefits are attributable to the services rendered for that Subsidiary by the Participant. Any disputes relating to liability of a Subsidiary for cash payments shall be resolved by the Committee.

6.7 Transferability. Awards under the Plan are not transferable except as designated by the Participant by will or by the laws of descent and distribution, or, if provided by the Committee, pursuant to a qualified domestic relations order (within the meaning of the Code and applicable rules thereunder), in each case, to the extent permitted by applicable law. To the extent that Participant who receives an Award under the Plan has the right to exercise such Award, the Award may be exercised during the lifetime of the Participant only by the Participant. Notwithstanding the foregoing provisions of this subsection 6.7, if provided by the Committee and subject to approval, waiver, confirmation or otherwise (as applicable) from the HKEx, Awards may be transferred to or for the benefit of the Participant’s family (including, without limitation, to a trust or partnership for the benefit of a Participant’s family), subject to such procedures as the Committee may establish. In no event shall an ISO be transferable to the extent that such transferability would violate the requirements applicable to such option under Code Section 422.

6.8 Rights as Shareholder. No Participant shall have any right as a shareholder of the Company with respect to any shares of Stock unless and until such Participant becomes a shareholder of record with respect to such shares of Stock. Once a Participant becomes a shareholder of record with respect to the shares of Stock subject to the Award, the Participant shall have all rights as a shareholder of the Company, including, but not limited to, voting rights, the right to receive dividends and the right to participate in any capital adjustment applicable to all holders of Common Stock; provided, however, that a distribution or dividend with respect to shares of Stock subject to vesting conditions, including a regular cash dividend, shall be deposited with the Company and shall be subject to the same restrictions as the shares of Stock with respect to which such distribution was made.

6.9 Form and Time of Elections. Unless otherwise specified herein, each election required or permitted to be made by any Participant or other person entitled to benefits under the Plan, and any permitted modification, or revocation thereof, shall be in writing filed with the Committee at such times, in such form, and subject to such restrictions and limitations, not inconsistent with the terms of the Plan, as the Committee shall require.

6.10 Agreement with Company. An Award under the Plan shall be subject to such terms and conditions, not inconsistent with the Plan, as the Committee shall, in its sole discretion, prescribe. The terms and conditions of any Award to any Participant shall be reflected in such form of written document as is determined by the Committee. A copy of such document shall be provided to the Participant, and the Committee may, but need not require that the Participant sign a copy of such document. Such document is referred to in the Plan as an “Award Agreement” regardless of whether any Participant signature is required.

6.11 Notices. Any notice or document required to be filed with the Committee under the Plan shall be properly filed if delivered or mailed by registered mail, postage prepaid, to the Committee, in care of the Company or the Subsidiary, as applicable, at its principal executive offices. The Committee may, by advance written notice to affected persons, revise such notice procedure from time to time. Any notice required under the Plan (other than a notice of election) may be waived by the person entitled to notice.

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6.12 Action by Company or Subsidiary. Any action required or permitted to be taken under the Plan by the Company or any Subsidiary shall be by resolution of its board of directors, or by action of one or more non-employee members of the board (including a committee of the board) who are duly authorized to act for the board, or (except to the extent prohibited by applicable law or applicable rules of any stock exchange) by a duly authorized officer of such company, or by any employee of the Company or a Subsidiary who is delegated by the board of directors authority to take such action.

6.13 Gender and Number. Where the context admits, words in any gender shall include any other gender, words in the singular shall include the plural and the plural shall include the singular.

6.14 Limitation of Implied Rights.

(a)

Neither a Participant nor any other person shall, by reason of participation in the Plan, acquire any right in or title to any assets, funds or property of the Company or any of the Subsidiaries whatsoever, including, without limitation, any specific funds, assets, or other property which the Company or any of the Subsidiaries, in its sole discretion, may set aside in anticipation of a liability under the Plan. A Participant shall have only a contractual right to the Stock or amounts, if any, payable under the Plan, unsecured by any assets of the Company or any of the Subsidiaries, and nothing contained in the Plan shall constitute a guarantee that the assets of the Company or any of the Subsidiaries shall be sufficient to pay any benefits to any person.

(b)

The Plan does not constitute a contract of employment or continued service, and selection as a Participant will not give any participating employee or other individual the right to be retained in the employ of the Company or a Subsidiary or the right to continue to provide services to the Company or a Subsidiary, nor any right or claim to any benefit under the Plan, unless such right or claim has specifically accrued under the terms of the Plan. Except as otherwise provided in the Plan, no Award under the Plan shall confer upon the holder thereof any rights as a shareholder of the Company prior to the date on which the individual fulfills all conditions for receipt of such rights and shares of Stock are registered in his name.

6.15 Evidence. Evidence required of anyone under the Plan may be by certificate, affidavit, document or other information which the person acting on it considers pertinent and reliable, and signed, made or presented by the proper party or parties.

6.16 Misconduct. If the Committee determines that a present or former employee has (a) used for profit or disclosed to unauthorized persons, confidential or trade secrets of the Company or any Subsidiary; (b) breached any contract with or violated any fiduciary obligation to the Company or any Subsidiary; or (c) engaged in any conduct which the Committee determines is injurious to the Company or its Subsidiaries, the Committee may cause that employee to forfeit his or her outstanding awards under the Plan, provided, however, that during the pendency of a Potential Change in Control and as of and following the occurrence a Change in Control, no outstanding awards under the Plan shall be subject to forfeiture pursuant to this subsection 6.16. Nothing in this Plan or otherwise is intended to, or does, prohibit an Eligible Individual from (i) filing a charge or complaint with, providing truthful information to, or cooperating with an investigation being conducted by a governmental agency (such as the U.S. Equal Employment Opportunity Commission, another other fair employment practices agency, the U.S. National Labor Relations Board, the U.S. Department of Labor, or the U.S. Securities and Exchange Commission (the “SEC”)); (ii) engaging in other legally-protected activities; (iii) giving truthful testimony or making statements under oath in response to a subpoena or other valid legal process or in any legal proceeding; (iv) otherwise making truthful statements as required by law or valid legal process; or (v) disclosing a trade secret in confidence to a governmental official, directly or indirectly, or to an attorney, if the disclosure is made solely for the purpose of reporting or investigating a suspected violation of law. Accordingly, an Eligible Individual shall not be

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Isheld criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (i) is made (A) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and (B) solely for the purpose of reporting or investigating a suspected violation of law; or (ii) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. In the event an Eligible Individual files a lawsuit for retaliation by the Company for reporting a suspected violation of law, the Eligible Individual may disclose the trade secret(s) of the Company to his attorney and use the trade secret information in the court proceeding, if the Eligible Individual (i) files any document containing the trade secret under seal; and (ii) does not disclose the trade secret, except pursuant to court order. In accordance with applicable law, and notwithstanding any other business expectedprovision of this Plan, nothing in this Plan or any of any policies or agreements of the Company or any affiliate applicable to the Eligible Individual (i) impedes an Eligible Individual’s right to communicate with the SEC or any other governmental agency about possible violations of federal securities or other laws or regulations or (ii) requires an Eligible Individual to provide any prior notice to the Company or its affiliates or obtain their prior approval before engaging in any such communications.

6.17 Restrictions on Shares and Awards. The Committee, in its discretion, may impose such restrictions on shares of Stock acquired pursuant to the Plan, whether pursuant to the exercise of an Option or SAR, settlement of a Full Value Award or Cash Incentive Award or otherwise, as it determines to be conducted atdesirable, including, without limitation, restrictions relating to disposition of the Annual Meeting?shares and forfeiture restrictions based on service, performance, Stock ownership by the Participant, conformity with the Company’s recoupment, compensation recovery, or clawback policies and such other factors as the Committee determines to be appropriate. Without limiting the generality of the foregoing, unless otherwise specified by the Committee, any awards under the Plan and any shares of Stock issued pursuant to the Plan shall be subject to the Company’s compensation recovery, clawback, and recoupment policies as in effect from time to time.

6.18 Applicable Law. The Board is not awareprovisions of any matters that are expected to come before the 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 proxiesPlan shall be construed in accordance with their best judgment.

The chairmanthe laws of the Annual Meeting may refuseState of Delaware, without giving effect to allowchoice of law principles. In the transactionevent any term of any business,this Plan shall be inconsistent with or to acknowledge the nomination of any person, not made in compliance with the applicable rules of the NYSE or the HKEx, the applicable rules of the NYSE or the HKEx shall prevail.

6.19 Foreign Individuals. Notwithstanding any other provision of the Plan to the contrary, the Committee may grant Awards to eligible persons who are foreign nationals on such terms and conditions different from those specified in the Plan as may, in the judgment of the Committee, be necessary or desirable to foster and promote achievement of the purposes of the Plan. In furtherance of such purposes, the Committee may make such modifications, amendments, procedures and subplans as may be necessary or advisable to comply with provisions of laws in other countries or jurisdictions in which the Company or any of the Subsidiaries operates or has employees. The foregoing procedures.provisions of this subsection 6.19 shall not be applied to increase the share limitations of Section 4 or to otherwise change any provision of the Plan that would otherwise require the approval of the Company’s shareholders.

6.20 Liability for Cash Payments. Subject to the provisions of this Section 6, each Subsidiary shall be liable for payment of cash due under the Plan with respect to any Participant to the extent that such payment is attributable to the services rendered for that Subsidiary by the Participant. Any disputes relating to liability of a Subsidiary for cash payments shall be resolved by the Committee.

SECTION 7.

Committee

7.1 Administration. The authority to control and manage the operation and administration of the Plan shall be vested in a committee of the Board (the “Committee”) in accordance with this Section 7. The Committee shall be

 

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 APPENDIX A

PROPOSED AMENDMENTS TO ARTICLE SEVENTH(b) OF YUM CHINA’S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

For the text of the proposed amendments, deletions are indicated by strikeouts and additions are indicated by underlining.

(b) Special meetings of the Stockholders may be called exclusively: (i) by the Board of Directors;or(ii) by the Chairman of the Board of Directors, the Corporation’s Chief Executive Officer or the Corporation’s Secretary, in each case with the concurrence of a majority of the Board of Directors; or (iii) by the Corporation’s Secretary upon written request by Stockholders owning at least twentyfive (25) percent of all outstanding shares of common stock of the Corporation as determined pursuant to the Bylaws and who otherwise comply with such other requirements and procedures set forth in the Bylaws, as now or hereinafter in effect. Special meetings of Stockholders shall be held at such places and times as determined by the Board of Directors in its discretion. Advance notice of stockholder nominations for the election of Directors and of business to be brought before any meeting of the Stockholders shall be given in the manner provided in the Bylaws.

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 APPENDIX B

PROPOSED AMENDMENTS TO YUM CHINA’S AMENDED AND RESTATED BYLAWS

If the stockholders approve Proposal 4 at the Annual Meeting, the Board of Directors currently intends to amend Section 3 and 4 of Article 2 of the Company’s Bylaws as follows:

For the text of the proposed amendments, deletions are indicated by strikeouts and additions are indicated by underlining.

Section 3.    Special Meetings.

(a)    General. Special meetings of the Stockholders may be called exclusively: (ai) by the Board of Directors;or(bii) by the Chairman of the Board of Directors, the Corporation’s Chief Executive Officer or the Corporation’s Secretary, in each case with the concurrence of a majority of the Board of Directors;Special meetings of the Stockholders shall be held at such places, if any, and times as: or (iii) by the Corporation’s Secretary upon the written request (each such request, a “Special Meeting Request” and such meeting, a “Stockholder Requested Special Meeting”) of Stockholders of record representing not less than 25% of all outstanding shares of common stock, par value $0.01 per share, of the Corporation (“Common Stock”) entitled to vote on the matter or matters to be brought before the Stockholder Requested Special Meeting (such percentage, the “Requisite Percentage”) that have complied in full with the requirements set forth in this Section 3 and related provisions of these Bylaws; provided, that each such Stockholder of record, or beneficial owner directing such Stockholder of record, must have continuously held all of his, her or its shares included in such aggregate amount constituting the Requisite Percentage for at least one (1) year prior to the date such Special Meeting Request is delivered to the Corporation. Whether the Stockholders have submitted valid Special Meeting Requests representing the Requisite Percentage and complying with the requirements ofthis Section 3 and related provisions of these Bylaws (a“Valid Special Meeting Request”) shall be determined in good faith by the Board of Directors,in its discretionwhich determination shall be conclusive and binding on the Corporation and the Stockholders.

(b)    Calling a Stockholder Requested Special Meeting. In order for a Stockholder Requested Special Meeting to be called, the Special Meeting Requests must be signed by Stockholders of record (or their duly authorized agents) representing in the aggregate not less than the Requisite Percentage, and be dated and delivered personally or by registered mail to the Corporation’s Secretary at the principal executive offices of the Corporation. Such Special Meeting Requests shall comply with Section 3 and shall include with particularity as to the Stockholders of record submitting the Special Meeting Requests and any Stockholder Associated Persons (as defined below)(collectively, the “Requesting Stockholders”): (i) a statement of the specific purpose or purposes of the Stockholder Requested Special Meeting, including a description of all intended proposals; (ii) except with respect to any Solicited Stockholders (as defined below), all information required to be set forth in a notice under Section 9(a)–(d) of this Article 2; (iii) documentary evidence that the Requisite Percentage of shares have been owned continuously for the one-year period by each Stockholder of record who signed a Special Meeting Request; provided, however, that if any Stockholders of record making a Special Meeting Request are not the beneficial owner of the shares of Common Stock representing the Requisite Percentage, then to be valid, each such Special Meeting Request must also include documentary evidence that the beneficial owners on whose behalf such Special Meeting Request is made beneficially owned, together with the Stockholders of record

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who are beneficial owners,selected by the Requisite Percentage asBoard, and shall consist solely of two or more non-employee members of the dateBoard, each of whom is intended to be (i) a “Non-Employee Director” within the meaning of Rule 16b-3 under the Exchange Act and (ii) “independent” within the meaning of the rules of the principal stock exchange onwhich such Special Meeting Requestthe Stock is delivered tothen traded. If the Corporation’s Secretary andCommittee does not exist, or for a minimumany other reason determined by the Board, the Board may take any action under the Plan that would otherwise be the responsibility of one full year priorthe Committee. As of the Effective Date, the Committee shall mean the Compensation Committee of the Board.

7.2 Powers of Committee. The Committee’s administration of the Plan shall be subject to the date of such delivery; (iv) an acknowledgmentfollowing:

(a)

Subject to the provisions of the Plan, the Committee will have the authority and discretion to select from among the Eligible Individuals those persons who shall receive Awards, to determine the time or times of receipt, to determine the types of Awards and the number of shares covered by the Awards, to establish the terms, conditions, performance targets, restrictions, and other provisions of such Awards, and, subject to the restrictions imposed by Section 8, to cancel or suspend Awards, reissue or repurchase Awards, and accelerate the exercisability or vesting of any Award. In making such Award determinations, the Committee may take into account the nature of services rendered by the respective employee, the individual’s contributions to the Company’s or a Subsidiary’s success and such other factors as the Committee deems relevant.

(b)

To the extent that the Committee determines that the restrictions imposed by the Plan preclude the achievement of the material purposes of the Awards in jurisdictions outside the United States, the Committee will have the authority and discretion to modify those restrictions as the Committee determines to be necessary or appropriate to conform to applicable requirements or practices of jurisdictions outside of the United States.

(c)

The Committee will have the authority and discretion to conclusively interpret the Plan, to establish, amend, and rescind any rules and regulations relating to the Plan, to determine the terms and provisions of any agreement made pursuant to the Plan, and to make all other determinations that may be necessary or advisable for the administration of the Plan.

(d)

Any interpretation of the Plan by the Committee and any decision made by it under the Plan is final and binding on all persons.

(e)

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.

7.3 Delegation by each Requesting Stockholder and the beneficial owners, if any, on whose behalf a Special Meeting Request is being made (or their respective duly authorized agents) that any reduction in the number of shares owned by such Stockholders as of the date of delivery of the Special Meeting Request and prior to the record date for the proposed Stockholder Requested Special Meeting shall constitute a revocation of the Special Meeting RequestCommittee. Except to the extent of such reduction, and a commitment to promptly notify the Corporation of any such decrease; and (v) a representation that at least one Requesting Stockholder, or a qualified representative of at least one Requesting Stockholder, intends to appear in person to present each item of business to be brought before the Stockholder Requested Special Meeting. In addition, each Requesting Stockholder that is not a Solicited Stockholder shall promptly provide any other information reasonably requestedprohibited by the Corporation in connection with the Special Meeting Request. If the Board of Directors determines that the Special Meeting Request complies with the provisions of these Bylaws and that the proposal to be considered or business to be conducted is a proper subject for Stockholder action under applicable law or the Board of Directors shall call and send noticeapplicable rules of a Stockholder Requested Special Meeting forstock exchange on which the purpose set forth inStock is listed, the Special Meeting Request in accordance with Section 4 of this Article 2.

In addition, to be considered timely, proper and valid, a Special Meeting Request shall further be updated, if necessary, so that the information provided or required to be provided in such Special Meeting Request shall be true and correct (x) as of the record date for the Stockholder Requested Special Meeting and (y) as of the date that is ten (10) business days prior to such meetingCommittee may allocate all or any adjournmentportion of its responsibilities and powers to any one or postponement thereof (provided that such update shall be delivered to the Corporation’s Secretary at the principal executive officesmore of the Corporation not later than five (5) business days after the record date for the meeting in the case of the update required to be made pursuant to the foregoing clause (x),its members and not later than eight (8) business days prior to the date for the meetingmay delegate all or any adjournment or postponement thereof in the casepart of theupdate requiredits responsibilities and powers to be made pursuant to the foregoingclause (y)). For the avoidance of doubt, the obligation toupdate as set forth in this Section 3 or any other section of these Bylaws shall not limit the Corporation’s rights with respect to any deficiencies in any Special Meeting Request or other notice provided by a Stockholder, extend any applicable deadlines hereunder to amend or update any proposal or nomination (or notice thereof) or to submit any new proposal or nomination (or notice thereof), including, without limitation, by changing or adding nominees, matters, business and/or resolutions proposed to be brought before a meeting of the Stockholders.

For the purposes of this Section 3, “Solicited Stockholder” shall mean any Stockholder that has provided a request to call a special meeting in response to a solicitation made pursuant to, and in accordance with, Section 14 of the Exchange Act; and “Stockholder Associated Person” shall mean (A) any person who is a member of a “group” (as such term is used in Rule 13d-5 under the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (as so amended and inclusive of such rules and regulations, the “Exchange Act”) (or any successor provision at law)) with or otherwise acting in concert with such Stockholder providing notice, (B) any beneficial owner of Common Stock owned of record by such Stockholder (other than a Stockholder that is a depositary), (C) any affiliate or associate of such Stockholder or such Stockholder Associated Person, (D) any participant (as defined in paragraphs (a)(ii)-(vi) of Instruction 3 to Item 4 of Schedule 14A, or any successor instructions) with such Stockholder or other Stockholder Associated Person in respect of any proposals or nominations, as applicable and (E) any person whom the Stockholder proposes to nominate for election or reelection as a director of the Corporation; provided, however, that in no case shall it mean a Solicited Stockholder.

(c)    Multiple Special Meeting Requests. In determining whether Special Meeting Requests have met the requirements of this Section 3, multiple Special Meeting Requests will be considered together only if (i) each Special Meeting Request identifies the same or substantially the same purpose or purposes of the Stockholder Requested Special Meeting and the same or substantially the same items of business proposed to be brought before the Stockholder Requested Special Meeting (which, ifsuch purpose is the nominating of a person or persons forelectionselected by it. Any such allocation or delegation may be revoked by the Committee at any time.

7.4 Information to be Furnished to Committee. The Company and the BoardSubsidiaries shall furnish the Committee with such data and information as it determines may be required for it to discharge its duties. The records of Directors, will meanthe Company and the Subsidiaries as to an individual’s or Participant’s employment (or other provision of services), termination of employment (or cessation of the provision of services), 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.

 

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7.5 Limitation on Liability and Indemnification of Committee. No member or authorized delegate of the Committee shall be liable to any person for any action taken or omitted in connection with the administration of the Plan unless attributable to his own fraud or willful misconduct; nor shall the Company or any Subsidiary be liable to any person for any such action unless attributable to fraud or willful misconduct on the part of a director or employee of the Company or Subsidiary. The Committee, the individual members thereof, and persons acting as the authorized delegates of the Committee under the Plan, shall be indemnified by the Company against any and all liabilities, losses, costs and expenses (including legal fees and expenses) of whatsoever kind and nature which may be imposed on, incurred by or asserted against the Committee or its members or authorized delegates by reason of the performance of a Committee function if the Committee or its members or authorized delegates did not act dishonestly or in willful violation of the law or regulation under which such liability, loss, cost or expense arises. This indemnification shall not duplicate but may supplement any coverage available under any applicable insurance.

SECTION 8.

Amendment and Termination

The Board may, at any time, amend or terminate the Plan (and the Committee may amend any Award Agreement); provided, however, that:

(a)

no amendment or termination of the Plan or amendment of any Award Agreement 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 in any material way the rights of any Participant or beneficiary under any Award granted under the Plan prior to the date such amendment or termination is adopted by the Board or the Committee, as applicable, unless the Committee expressly reserved the right to do so at the time the Award was granted;

(b)

adjustments pursuant to subsection 4.2 shall not be subject to the foregoing limitations of this Section 8;

(c)

all material amendments to the Plan, including but not limited to amendments to the provisions of subsection 2.9 (relating to Option and SAR repricing), amendments expanding the group of Eligible Individuals, and amendments to or increases in the number of shares reserved under the Plan pursuant to paragraphs 4.1(b) (total shares reserved), 4.1(e) (relating to the limitations on ISOs), and 4.1(f) (relating to individual limits) will not be effective unless approved by the Company’s shareholders, in each case, to the extent required by applicable law;

(d)

if applicable laws or the rules of any stock exchange on which the Stock is listed require any amendment to the Plan, the Award Agreement and the terms of the Awards to seek the approval from the Company’s shareholders, the Board, the independent directors of the Board or the Committee, as applicable, such approval shall be obtained. It is the intention of the Company that, to the extent that any provisions of this Plan or any Awards granted hereunder are subject to Code Section 409A, the Plan and the Awards comply with the requirements of Code Section 409A and that the Board shall have the authority to amend the Plan as it deems necessary or desirable to conform to Code Section 409A. Notwithstanding the foregoing, neither the Company nor the Subsidiaries guarantee that Awards under the Plan will comply with Code Section 409A and the Committee is under no obligation to make any changes to any Award to cause such compliance; and

(e)

the amended Plan or the amended Award Agreement must still comply with the relevant applicable laws or applicable rules of any stock exchange on which the Stock is listed.

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SECTION 9.

Defined Terms

In addition to the other definitions contained herein, the following definitions shall apply:

(a)

1% Individual Limit. The term “1% Individual Limit” is defined in subsection 4.1(f)(iii).

(b)

10% Limit. The term “10% Limit” is defined in subsection 4.1(b).

(c)

Award. The term “Award” shall mean any award or benefit granted under the Plan, including, without limitation, the grant of Options, SARs, or Full Value Awards.

(d)

Award Agreement. The term “Award Agreement” is defined in subsection 6.10.

(e)

Board. The term “Board” shall mean the Board of Directors of the Company.

(f)

Change in Control. A “Change in Control” shall be deemed to have occurred if the event set forth in any one of the following subparagraphs shall have occurred:

(i)

any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its Affiliates) representing 35% or more of the combined voting power of the Company’s then outstanding securities, excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in clause (I) of subparagraph (iii) below; or

(ii)

the following individuals cease for any reason to constitute a majority of the number of directors then serving; individuals who, on the date hereof, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company), whose appointment or election by the Board or nomination for election by the Company’s shareholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the date hereof or whose appointment, election or nomination for election was previously so approved or recommended; or

(iii)

there is consummated a merger or consolidation of the Company or any direct or indirect Subsidiary with any other corporation, other than (I) a merger or consolidation (A) immediately following which those individuals who, immediately prior to the consummation of such merger or consolidation, constituted the Board, constitute a majority of the board of directors of the Company or the surviving or resulting entity or any parent thereof, or (B) which results in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary of the Company, at least 50% of the combined voting power of the securities of the Company (or such surviving entity or any parent thereof) outstanding immediately after such merger or consolidation, or (II) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially

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owned by such Person any securities acquired directly from the Company or its Affiliates) representing 35% or more of the combined voting power of the Company’s then outstanding securities.

that the exact same person or persons are nominated in each relevant Special Meeting Request), and (ii) such Special Meeting Requests have been dated and delivered to the Corporation’s Secretary within sixty (60) days of the delivery to the Corporation’s Secretary of the earliest dated Special Meeting Request relating to such item(s) of business. A Requesting Stockholder may revoke a Special Meeting Request at any time by written revocation delivered to the Corporation’s Secretary and if, following such revocation, there are outstanding un-revoked requests from Requesting Stockholders holding less than the Requisite Percentage, the Board of Directors may, in its discretion, cancel the Stockholder Requested Special Meeting.

(d)    Valid Items of Business for a Stockholder Requested Special Meeting. Notwithstanding the foregoing, provisions of this Section 3, a Stockholder Requested Special Meeting“Change in Control” shall not be held if (i)deemed to have occurred by virtue of the Special Meeting Request does not comply with these Bylaws; (ii)consummation of any transaction or series of integrated transactions immediately following which the Special Meeting Request relates to an itemrecord holders of business that is not a proper subject for Stockholder action under applicable law; (iii) the Special Meeting Request is received bycommon stock of the Corporation’s Secretary during the period commencing ninety (90) daysCompany immediately prior to such transaction or series of transactions continue to have substantially the anniversary datesame proportionate ownership in an entity which owns all or substantially all of the prior year’s annual meeting of Stockholders and ending on the dateassets of the final adjournmentCompany immediately following such transaction or series of transactions. Notwithstanding the foregoing definition or any other provision of this Plan, the term Change in Control shall not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the next annual meeting of Stockholders; (iv) an identical or substantially similar item (a “Similar Item”) was presented at any meeting of Stockholders held not more than one hundred twenty (120) days prior to receipt by the Corporation’s Secretary of the Special Meeting Request; (v) the Board of Directors has called or calls for an annual or special meeting of Stockholders to be held within ninety (90) days after the Corporation’s Secretary receives the Special Meeting Request and the Board of Directors determines that the business of such meeting includes (among any other matters properly brought before the annual or special meeting) a Similar Item; or (vi) the Special Meeting Request was made in a manner that involved a violation of Regulation 14A under the Exchange Act, would violate an applicable law or regulation, or would cause the company to violate the law or other applicable law.Company. For purposes of this Section 3(d),definition, the nomination, election or removal of directorsfollowing terms shall be deemed a “Similar Item” with respect to all items of business involvinghave the nomination, election or removal of directors, thechanging of the size of the Board of Directors and the filling of vacancies and/or newly created directorships resulting from any increase in the authorized number of Directors. If none of the Requesting Stockholders appears or sends a qualified representative to present the item of business submitted by the Stockholder(s) for consideration at the Stockholder Requested Special Meeting, such item of business shall not be submitted for a vote of the Stockholders at such Stockholder Requested Special Meeting, notwithstanding that proxies in respect of such vote may have been received by the Corporation or such Stockholder(s). Whether the Requesting Stockholders have complied with the requirements of this Section 3 and related provisions of these Bylaws shall be determined in good faith by the Board of Directors, which determination shall be exclusive and binding on the Corporation and the Stockholders. Nothing contained in this Section 3 shall prohibit the Board of Directors from submitting matters to Stockholders at any Stockholder Requested Special Meeting.meaning specified:

(e)    Holding a Special Meeting. Special meetings of Stockholders shall be held at such date, time and place as may be fixed by the Board of Directors; provided, however, that the date of any Stockholder Requested Special Meeting requested pursuant to a Valid Special Meeting Request shall be not more than ninety (90) days after the date on which a Valid Special Meeting Request has been delivered to the Corporation’s Secretary.

(I)

“Affiliate” shall have the meaning set forth in Rule 12b-2 under Section 12 of the Exchange Act.

Section 4.    Notice of Meetings. At least ten (10) and no more than sixty (60) days prior to any annual or special meeting of the Stockholders, the Corporation shall notify the Stockholders of the date, time and place, if any, and means of remote communication, if any, of the meeting and, in the case of a special meeting or where otherwise required by the Corporation’s Amended and Restated Certificate of Incorporation (the “Certificate”) or by statute, shall briefly describe the purpose or purposes of the meeting. Without limiting the manner by which notice otherwise may be given effectively to Stockholders, notice of meetings may be given to Stockholders by means of electronic transmission in accordance with applicable law. Only business within the purpose or purposes described in the notice may be conducted at a special meeting. Nothing contained herein shall prohibit theBoard of Directors from submitting matters to the Stockholders at

(II)

“Beneficial Owner” shall have the meaning set forth in Rule 13d-3 under the Exchange Act, 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.

(III)

“Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 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.

(g)

Code. The term “Code” shall mean the U.S. Internal Revenue Code of 1986, as amended. A reference to any Code provision shall include reference to any successor provision of the Code.

(h)

Committee. The term “Committee” is defined in subsection 7.1.

(i)

Director. For purposes of the Plan, the term “Director” shall mean a member of the Board.

(j)

Effective Date. The term “Effective Date” is defined in subsection 6.1.

(k)

Eligible Individual. For purposes of the Plan, the term “Eligible Individual” shall mean Employee Participants and any officers, directors or other employees of associated companies of the Company in which the Company has an equity interest, and persons who are expected to become Employee Participants or officers, directors or other employees of associated companies of the Company in which the Company has an equity interest (but effective no earlier than the date on which such individual begins to provide services to the Company, a Subsidiary or an associated company of the Company).

(l)

Employee Participant. For purposes of the Plan, “Employee Participant” shall mean any officers, directors or other employees of the Company (including, for the avoidance of doubt, Non-employee Directors) or any of its Subsidiaries, and persons who are expected to become officers, directors or other employees of the Company or any of its Subsidiaries.

(m)

Exchange Act. The term “Exchange Act” shall mean the U.S. Securities Exchange Act of 1934, as amended from time to time.

 

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(n)

Exercise Price. The term “Exercise Price” is defined in subsection 2.4.

any Stockholder Requested Special Meeting. Unless otherwise required by the Certificate or by statute, the Corporation shall be required to give notice only to the Stockholders entitled to vote at the meeting. If an annual or special Stockholders’ meeting is adjourned to a different date, time or place, notice thereof need not be given if the new date, time or place, if any, and means of remote communication, if any, is announced at the meeting before adjournment. If a new record date for the adjourned meeting is fixed pursuant to Article 7, Section 5 hereof, notice of the adjourned meeting shall be given to persons who are Stockholders as of the new record date. If mailed, notice shall be deemed to be effective when deposited in the United States mail with postage thereon prepaid, correctly addressed to the Stockholder’s address shown in the Corporation’s current record of Stockholders.

(o)

Fair Market Value. The “Fair Market Value” of a share of Stock means, as of any date, the value determined in accordance with the following rules:

(i)

If the Stock is at the time listed or admitted to trading on the New York Stock Exchange, then the Fair Market Value shall be the closing price per share of Stock on such date on the New York Stock Exchange or, if no such sale is reported on that date, on the last preceding date on which a sale was so reported.

(ii)

If the Stock is not listed or admitted on the New York Stock Exchange and at the time listed or admitted to trading on another exchange, then the Fair Market Value shall be the closing price per share of Stock on such date on the exchange on which the Stock is then listed or admitted to trading or, if no such sale is reported on that date, on the last preceding date on which a sale was so reported.

(iii)

If the Stock is not at the time listed or admitted to trading on a stock exchange, the Fair Market Value shall be the closing average of the closing bid and asked price of a share of Stock on the date in question in the over-the-counter market, as such price is reported in a publication of general circulation selected by the Committee and regularly reporting the market price of Stock in such market.

(iv)

If the Stock is not listed or admitted to trading on any stock exchange or traded in the over-the-counter market, the Fair Market Value shall be as determined by the Committee in good faith.

(p)

Group. The term “Group” shall mean the Company and its Subsidiaries.

(q)

HKEx. The term “HKEx” shall mean The Stock Exchange of Hong Kong Limited.

(r)

HKEx Listing Rules. The term “HKEx Listing Rules” shall mean the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

(s)

Non-employee Director. For purposes of the Plan, the term “Non-employee Director” shall mean a member of the Board, who is not an officer or employee of the Company or any Subsidiary.

(t)

NYSE. The term “NYSE” shall mean the New York Stock Exchange.

(u)

Other Awards. The term “Other Awards” shall mean all categories of Awards excluding Options and SARs.

(v)

Participant. The term “Participant” is defined in subsection 1.2.

(w)

Performance Measures. The term “Performance Measures” shall mean any one or more of the following corporate-wide or subsidiary, division, operating unit, line of business, project, geographic or individual measures: cash flow; earnings; earnings per share; market value added or economic value added; profits; return on assets; return on equity; return on investment; sales; revenues; stock price; total shareholder return; customer satisfaction metrics; restaurant unit development; and such other goals as the Committee may determine whether or not listed herein, or any combination of the foregoing. Each goal may be expressed on an absolute and/or relative basis, may be based on or otherwise employ comparisons based on internal targets, the past performance of the Company and/or the past or current performance of other companies, and in the case of

 

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earnings-based measures, may use or employ comparisons relating to capital, shareholders’ equity and/or shares outstanding, investments or to assets or net assets. Performance Measures may be applied on a pre- or post-tax basis and may be adjusted to include or exclude components of any Performance Measure, including, without limitation, foreign exchange gains and losses, asset writedowns, acquisitions and divestitures, change in fiscal year, unbudgeted capital expenditures, special charges such as restructuring or impairment charges, debt refinancing costs, extraordinary or noncash items, unusual, infrequently occurring, nonrecurring or one-time events affecting the Company or its financial statements or changes in law or accounting principles (“Adjustment Events”). In the sole discretion of the Committee, the Committee may amend or adjust the Performance Measures or other terms and conditions of an outstanding award in recognition of any Adjustment Events. Performance Measures shall be subject to such other special rules and conditions as the Committee may establish at any time.

(x)

Potential Change in Control. A “Potential Change in Control” shall exist during any period in which the circumstances described in subparagraphs (i), (ii), (iii) or (iv), below, exist (provided, however, that a Potential Change in Control shall cease to exist not later than the occurrence of a Change in Control):

(i)

the Company or any successor or assign thereof enters into an agreement, the consummation of which would result in the occurrence of a Change in Control; provided that a Potential Change in Control described in this subparagraph (i) shall cease to exist upon the expiration or other termination of all such agreements.

(ii)

Any Person (including the Company) publicly announces an intention to take or to consider taking actions which if consummated would constitute a Change in Control; provided that a Potential Change in Control described in this subparagraph (ii) shall cease to exist upon the withdrawal of such intention, or upon a reasonable determination by the Board that there is no reasonable chance that such actions would be consummated.

(iii)

Any Person becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 15% or more of the combined voting power of the Company’s then outstanding securities (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or any of its Affiliates). However, a Potential Change in Control shall not be deemed to exist by reason of ownership of securities of the Company by any person, to the extent that such securities of the Company are acquired pursuant to a reorganization, recapitalization, spin-off or other similar transactions (including a series of prearranged related transactions) to the extent that immediately after such transaction or transactions, such securities are directly or indirectly owned in substantially the same proportions as the proportions of ownership of the Company’s securities immediately prior to the transaction or transactions.

(iv)

The Board adopts a resolution to the effect that, for purposes of this Plan, a potential change in control exists; provided that a Potential Change in Control described in this subparagraph (iv) shall cease to exist upon a reasonable determination by the Board that the reasons that give rise to the resolution providing for the existence of a Potential Change in Control have expired or no longer exist.

(y)

Scheme Mandate Sublimit. The term “Scheme Mandate Sublimit” is defined in subsection 4.1(b).

(z)

Subsidiaries. The term “Subsidiary” shall mean (i) any entity which is accounted for and consolidated in the audited consolidated accounts of another entity as a subsidiary pursuant to the accounting standards adopted

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by the Company; and (ii) any entity which will, as a result of acquisition of its equity interest by another entity, be accounted for and consolidated in the next audited consolidated accounts of such other entity as a subsidiary pursuant to the accounting standards adopted by the Company.

(aa)

Substitute Award. The term “Substitute Award” means an Award granted or shares of Stock issued by the Company in assumption of, or in substitution or exchange for, an award previously granted, or the right or obligation to make a future award, in all cases by a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines. In no event shall the issuance of Substitute Awards change the terms of such previously granted awards such that the change, if applied to a current Award, would be prohibited under the provisions of subsection 2.9.

(bb)

Stock. The term “Stock” shall mean shares of common stock of the Company which shall rank pari passu in all respects with other fully-paid shares of Stock in issue.

YUM CHINA – Proxy Statement

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PRELIMINARY PROXY CARD DATED AUGUST 15, 2022

SUBJECT TO COMPLETION

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w SCAN TO VIEW MATERIALS & VOTE YUM CHINA HOLDINGS, INC. 7100 CORPORATE DRIVE PLANO, TX 75024 VOTE BY INTERNET Before The Meeting—Go to www.proxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m.a.m. on May 26, 2022 Beijing/Hong Kong Timetime / 11:59 a.m.p.m. on May 25, 2022 U.S. Eastern Time on May 27, 2021.time. Have your proxy card in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form. During The Meeting—Go to www.virtualshareholdermeeting.com/YUMC2021YUMC2022 You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. VOTE BY PHONE—1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m.a.m. on May 26, 2022 Beijing/Hong Kong Timetime / 11:59 a.m.p.m. on May 25, 2022 U.S. Eastern Time on May 27, 2021.time. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: D42388-P53537 KEEP THIS PORTION FOR YOUR RECORDS THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLYD74754-P70528 YUM CHINA HOLDINGS, INC. The Board of Directors recommends you vote FOR the following: 1. Election of Directors Nominees: For Against Abstain Nominees: 1a. Fred Hu For Abstain Against 1b. Joey Wat The Board of Directors recommends you vote FOR For Against Abstain proposals 2 3 and 4.3. 1c. Peter A. Bassi 2. Ratification of the Appointment of KPMG Huazhen LLP as the Company’s Independent Auditor for 2022 1d. Edouard Ettedgui 3. Advisory Vote to Approve Executive Compensation 1e. Cyril Han 4. Amended Approval and of an Restated Amendment CertificateNOTE: The proxies are authorized to of the Incorporation Company’s to Allow Stockholders Holding 25% of the Company’s 1f. Louis T. Hsieh Outstanding Shares the Right to Call Special Meetings 1g. Ruby Luvote in their discretion upon NOTE: such The other proxies business are authorized as may properly to vote in come their before discretion the meeting or any adjournment or postponement thereof. 1e. Cyril Han 1f. Louis T. Hsieh 1g. Ruby Lu 1h. Zili Shao 1i. William Wang 1j. Min (Jenny)(Jfcenny) Zhang Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) DateOctober 10 www.virtualshareholdermeeting.com/YUMC2022SM October 9 1. To approve the Board of Director’s continuing authority to approve issuances of shares of common stock or convertible securities in an amount not to exceed 20% of Yum China’s total number of outstanding shares of common stock as of the date of the Special Meeting, effective from the effective date of the conversion of the Yum China’s listing status on the Hong Kong Stock Exchange to primary listing until the earlier of the date the next annual meeting is held or June 26, 2023. 2. To approve the Board of Director’s continuing authority to approve the repurchases of shares of common stock in an amount not to exceed 20% of Yum China’s total number of outstanding shares of common stock as of the date of the Special Meeting, effective from the effective date of the conversion of the Yum China’s listing status on the Hong Kong Stock Exchange to primary listing until the earlier of the date the next annual meeting is held or June 26, 2023. 3. To approve the Yum China Holdings, Inc. 2022 Long Term Incentive Plan. NOTE: The proxies are authorized to vote in their discretion upon such other business as may properly come before the meeting or any adjournment or postponement thereof.

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D74755-P70528 Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Form 10-K are available at www.proxyvote.com. D42389-P53537 YUM CHINA HOLDINGS, INC. Annual Meeting of Stockholders 8:00 a.m. on May 28, 202127, 2022 Beijing/Hong Kong Time / 8:00 p.m. on May 27, 202126, 2022 U.S. Eastern Time This proxy is solicited by the Board of Directors The undersigned stockholder(s) hereby appoint(s) Andy Yeung and Joseph Chan, or either of them, as proxies, each with the power to appoint his substitute, revoking all proxies previously given, and hereby authorize(s) them to represent and to vote, as designated on the reverse side of this proxy, all of the shares of common stock of Yum China Holdings, Inc. that the stockholder(s) is/are entitled to vote at the Annual Meeting of Stockholders to be held via a live webcast at www.virtualshareholdermeeting.com/YUMC2021YUMC2022 at 8:00 a.m. on May 28, 202127, 2022 Beijing/Hong Kong Time / 8:00 p.m. on May 27, 202126, 2022 U.S. Eastern Time, and any adjournment or postponement thereof. This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors’ recommendations. Continued and to be signed on reverse side Special Special October 11 October 10 Special October 11 www.virtualshareholdermeeting.com/YUMC2022SM October 10