Dear Fellow Shareholders Pepsico CEO

The greatest challenge in business today is to renew a successful company — positioning it for long-term growth and profitability while performing in the current marketplace. This is a challenge we embrace.

In late 2006, we recognized that our consumers and the competitive environment were changing, and that PepsiCo faced a dual challenge to perform in the short term while making some bold, transformative moves to realize future growth opportunities and create long-term shareholder value.

Starting in 2007, we began our journey of renewal. We stepped up our investments in emerging and developing markets. We continued to build our portfolio of billion-dollar brands. We boosted our investment in research and development to build long-term, differentiated platforms and significantly expand our healthier offerings within our snacks and beverages portfolios. We focused on making our business more efficient, and we began to align our global operating structure to fully leverage the scale of PepsiCo.

I am pleased to report that we have made strong progress. In 2011, despite a still-difficult macroeconomic environment, we delivered solid results.

Equally important, 2011 capped a five-year performance that delivered, on a core basis, compounded growth rates for net revenue1 of 13 percent, operating profit growth1 of 9 percent and EPS growth1 of 8 percent. We also delivered impressive cash returns: not only have dividends per share grown at 12 percent annually, but since 2007, through share repurchases and dividends, we have returned $30 billion to our shareholders.