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places 7UP in excellent position to capitalize on the expanding soft drink market in the Greater Phoenix Area which now serves 1,300,000 consumers. Seven-Up Canada Limited In Canada, 7UP is even more fully developed than in the U,S., based on overall per capita consumption and food store market share. The performance of Seven-Up Canada Limited was influenced by intense competition in the form of unprecedented levels of media weight and price discounting. Added beverage product dislocations from restrictive container legislation have occurred in the province of Ontario. Seven-Up Canada reports further progress in the introduction of a 1.5-liter bottle during 1976, especially in Canadci s most populous market, Montreal. Sugar Free 7UP, introduced in Canada in early 1975, continues to exhibit strong growth, particularly in Ontario, Sugar Free Fountain 7UP, introduced to McDonald's restaurants in Canada later in 1975, is now firmly established from coast to coast. Despite a slight erosion of market share in Canada in 1976, 7UP continues as the market leader in the province of British Columbia with a 19 percent share of market in food store sales, In the province of Quebec, where soft drink per capita consumption is one of the highest in the world, 7UP is holding an impressive 14 percent share of market. Colin B. Scarfe became the president of Seven-Up Canada Limited in mid-1976. Since that time, marketing priorities have been established with the objective of containing market share erosion in the face of extreme competitive pressure and legislative uncertainty, Seven-Up International, Inc. Seven-Up International achieved record sales in 1976, as sales increased in many of the overseas markets. Important new markets were opened and established territories continued productive development programs. 7UP was given a major launch in London during 1976 through the Cadbury Schweppes organization. Initial sales results, which exceeded projection, were aided by a warm, dry summer. Distribution of the brand will be extended to other important parts of the United Kingdom in 1977. The 7UP brand was also introduced successfully in 1976 in Sydney, Australia. Other new overseas markets for 7UP include: Malaga on the south coast of Spain, Nicaragua, Mauritius, and several newly franchised bottling plants to enable expansion of existing 7UP territories in Argentina, Iran, Pakistan and the Philippines. Exceptional gains were achieved in 1976 in certain markets in Southeast Asia, the Middle East and in Holland, where 7UP is vying for brand leadership, Management's objective in 1977 will emphasize further brand penetration within existing markets. 9

10 Food Colors & Flavors Warner-Jenkinson Company Warner-Jenkinson Company achieved all- a time-high sales in 1976, the result primarily of a positive showing in the Company's food color and specialty products divisions. A subsidiary of The Seven-Up Company since 1970, Warner-Jenkinson is a leading producer of flavors and colors for food products. It is the producer of extracts and flavor compounds for 7UP, Sugar Free 7UP and other 7UP soft drink products for the U.S. and a number of foreign markets. The record performance of Wamer-Jenkinson in 1976 stemmed from excellent sales volume gains. Surplus food color inventories in customers' hands, which reduced 1975 earnings, were normalized in 1976, creating a greatly improved demand. Warner-Jenkinson's new food color plant opened in St. Louis during 1976, substantially increasing the Company's production capacity. New business in 1976 was obtained in focused market areas, with Wamer-Jenkinson's specialized flavors being accepted by a number of major accounts in the fields of beverages, liqueurs, desserts and cake mixes. Warner-Jenkinson East, Inc. Plans were finalized late in 1976 for a central production and distribution facility in Carlstadt, New ` Jersey This will permit more efficient manufacture -_ Y° and marketing of fragrances and flavors produced byWamer-Jenkinsons two New York-based affiliates. ~ The new location will allow Warner-Jenkinson and its affiliates to improve customer service and pro- vide additional manufacturing and warehouse space to supplement plants in St. Louis, Missouri, Santa Ana, California and Lerma, Mexico. Warner-Jenkinson of California The Specialty Products Division of Warner- Jenkinson on the West Coast enjoyed an exceptional year in 1976. Sales of Flavor Milll~ brand gourmet flavors and Chefmaster~ cake decorating colors were the highest in the Company's history. The Santa Ana manufacturing facility, which was expanded significantly in 1976, also produces the Warner-Jenkinson line of Red Seal-I flavors and food colors, and markets these products to customers in the western part of the U. S. Warner-Jenkinson S. A de C.V. Warner-Jenkinson S.AA de C.V., with offices in Mexico City and plant in Lerma, Mexico, shipped record quantities of food colors in 1976, resulting in record sales. Excellent earnings, though adversely affected by the devaluation of the peso in the fall of the year, were the second-highest in this Company's 11 -year history, Sales prospects continue to be excellent for Warner-Jenkinson products in Mexico, and in Central and South America which are served by the Wamer-Jenkinson Lerma plant.

Lemon Products Ventura Coastal Corporation Sales of Ventura Coastal Corporation in 1976 reached record new highs. The subsidiary also made its second-best contribution to corporate profits since affiliating with Seven-Up in 1974-in part a measure of management progress in reducing Ventura Coastal's vulnerability to crop fluctuations and other uncertainities. Ventura Coastal sales of frozen concentrate for lemonade and lemon oil, a principal ingredient in 7UP extract, exceeded 1975 volume. Ventura Coastal earnings were impacted by a January-July drought and excessive early summer heat which reduced lemon crops by approxi- mately 40 percent from record 1975 output. Nevertheless, Ventura Coastal, a leading U.S. producer for frozen concentrate for lemonade, acquired some significant new business. The Company will begin supplying private label frozen lemonade concentrate requirements for two major supermarket chains, the full impact of which is expected to be evident in 1977. Ventura Coastal now produces 64 brands of frozen concentrate for lemonade, Additionally, a$2 million expansion of Ventura Coastal's fruit processing facilities is underway which will double the Company's fruit processing capacity by early 1977, Further, a new waste water recycling system will reduce operating expenses in 1977. Preliminary forecasts indicate lemon output will improve significantly in 1977 and should almost approximate record 1975 production levels, Golden Crown Citrus Corporation Golden Crown Citrus Corporation of Evanston, Illinois, became part of Ventura Coastal Corp. in November 1974. A leading producer of recon- stituted lemon and lime juice, Golden Crown has plants in Evanston and Bridgeton, N.J. In 1976, Golden Crown introduced a lemonade- flavored powdered drink mix on a test market basis in Boston, New York City, St. Louis, Chicago and Los Angeles. As a result of the test market success, Golden Crown powdered lemonade and other soft drink mixes will be introduced nationally in 1977, with the line expanded to include cherry, grape, orange and tropical punch flavors. Late in 1975, Golden Crown products were introduced on the West Coast. Sales growth of these products in the western market have been so successful the past 12 months that plans are now underway to open a West Coast bottling facility during 1977. The new production unit will permit expanded distribution of Golden Crown products on the West Coast and in adjoining states. 11

The Seven-Up Company and Subsidiaries Financial Review Business Description The Seven-Up Company is engaged in the manufacture and sale of extract to independently- owned franchised bottlers (Developers) in the United States, Canadian and international markets. The Company also supplies finished soft drink products manufactured by independent contract canners to some of these bottlers for resale and provides all bottlers with marketing, advertising, management and financial services. The Company owns and operates two bottling plants. The Company also manufactures other extracts, food flavors, and food, drug and cosmetic dyes and pigments for sale to various producers of foods and pharmaceuticals. It also manufactures fragrances and other specialty products. The Company manufactures frozen con- centrate for lemonade and packs fresh lemons for domestic and export markets, some of which are grown on Company-owned acreage. In addition, the Company collects fees for processing fruit for other growers. In each of the three product groups (soft drinks, food colors and flavors, and lemon products) competition is intense, with major competitors normally having substantially greater sales and financial resources. From time to time, raw materials essential in the manufacture of these products are difficult to acquire. The Company attempts to protect itself against such problems by maintaining adequate inventories, Management's Discussion and Analysis of Operations Consolidated sales of The Seven-Up Company and subsidiaries reached record levels of $233,282,664 for 1976 and increased 9.2 percent from 1975 sales of $213,622,918. Sales of $233,282,664 in 1976 continued the trend of unbroken yearly sales improvement since the Company's first publicly released sales for the year 1962, which were $28,365,283, 12 The Seven-Up Company 1976 Annual Report The distribution of net sales by division for the current and previous two years has been: 1976 1975 Percent Change Percent 1974 Change (000) (000) 1976/1975 (000) 1975/1974 The Seven- Up Co. and Sub- sidiaries $184,134 171,433* 7.4 154,098* 11.2 Wo.rner- Jenldnson and Sub- sidiarles 20,755 15,284* +35,8 17,995* -15.1 Ventura Coastal Corp, and Sub- sidiaty 8,394 6,906 5.5 8,786 43.2 . Total ... $233,283 S213,623 + 9.2 S 190,879 + 11.9 *1974 and 1975 sales reclassified to reflect change in scles responsibilities between divisions The distribution of dollar sales by major product groups are as follows: Year Ended December 31 1976 1975 1974 Percent Change In Dollar Sales 1976/1975 Soft Drink Extracts, Flavoring Compounds and Certain Syrups ......... 9.4% 7.0% 3.7% 16.3 Finished Products (Canned and Bottled Soft Drinks and Fountain Syrup) ......... 9.5% 3.2% 6.9% 0.2 Subtotal Soft Drinks .... 78.9% 80,2% 80.6% + 7.4 Lemon Products.. 12.6% 12.9% 10.5% + 6.3 Flavors, Colors, Fragrances and Other Specialty Products ....... .5% .9% .9% 34.6 100.0% 100.0% 100.0% + 9.2 In 1976, dollar sales growth was influenced more by real growth in product unit sales and tonnage shipped than increased product prices. Average 1976 selling prices of finished goods, particularly soft drinks and frozen concentrate for lemonade, which comprise almost 50 percent of total sales, were below 19751evels. Consolidated unit sales of both regular and sugar-free soft drink extracts set new records in 1976. Annual sales of regular 7UP extract were modestly ahead of year-ago levels in both the U. S. and Canadian markets and at 19751evels in the international markets. Both Sugar Free 7UP and Fountain 7UP extract sales were up sharply in 1976 in both the U. S. and Canadian markets, 2048iS91b$

influencing significantly the combined 7UP brand results, Unit sales of finished soft drink products were at a higher level in 1976, but the rate of unit growth was below the results achieved in the sales of soft drink extracts, reflecting the expansion of bottler canning facilities. For 1976, U. S. bottler case sales reported to the Company, converted to equivalent 8-ounce cases, indicated the following distribution of sales: " Cans ...................... Non-retumable Bottles ..... . Subtotal ................ R~,tumable Bottles. . . ....... BuL'cSales .................. Percent to Total Case Sales 1976 28.3 25.7 54.0 34.5 11.5 1 100.0 1975 27.3 26.3 53.6 35.8 10.6 100.0 U nit sales of lemon products, primarily frozen conc~.ntrate for lemonade and lemon oil, were up significantly for the year, but sales of fresh fruit and fruit processed for resale were below year-ago levels, A new product, Golden Crown powdered lemonade mix, was successfully introduced in selected U, S, test market areas, TOTAL CORPORATE NET SALES (Millions of Dollars) 233.3 146.7 132.5 1972 1973 ~ 190.9 1974 213.6 1975 1976 Combined unit sales of food flavor and color reflected a strong recovery from the depressed 1975 levels, with significantly higher product tonnages shipped in 1976. Unit sales of FD&C Red #40, a food color replacing FD&C Red #2, were particularly significant during the first and second quarters although these levels were not sustained in the second half of the year, During 1976, there were no price increases initiated on soft drink extract products in either the U. S, or Canadian markets, Extract price increases were taken in selected international markets to offset changes in local currency relationships, List prices of finished soft drinks were reduced during the year, reflecting lower raw material prices, List prices were reduced for frozen concentrate for lemonade and food colors, also, to meet severe competitive pressures. Canadian dollar sales in 1976 represented approximately 1 I percent of total consolidated sales. Canadian unit extract sales reached record levels in 1976, however, consolidated Canadian dollar sales were below 1975 results, This result was influenced by lower selling prices caused by intensive competitive pressures and reduced finished soft drink case sales in the Company's Toronto bottling operation, Continued government regulations on wages and prices are expected to influence both sales and net income results of these operations in the 1977 fiscal year. The translation of Canadian financial statements into U. S, currency had no significant effect on reported annual results, although the Canadian dollar did weaken in the fourth quarter. In 1976, Seven-Up International contributed approximately 8 percent of consolidated dollar sales or about the same level as in 1975. Significantly higher sales in continental and northern Europe, as well as in Asia, helped to minimize the effect of sales declines in Argentina and Mexico, two of the Company's largest international markets, The re-introduction of 7UP in Great Britain, as well as new market introductions in Spain and Australia, were also important in reducing the impact of Latin American operations on the Company's results Introductory marketing support funds expensed in the current year reduced initial year's profitability but provide for future development of the 7UP brand in terms of both sales and net income. Warner-Jenkinson's consolidated sales, excluding intercompany sales, were $20,754,741 and increased 35.8 percent from sales of $15,283,699 (restated) in 1975. The 1976 result was at the highest dollar sales level ever reported for this company and equaled 8.9 percent of total consolidated sales. Net income The Seven-Up Company 1976 Annual Report 13

The Seven-Up Company and Subsidiaries Financial Review (continued) increased sharply to $2,207,632 from the 1975 result of $1,062,275 (restated), Although 1975 income results were impacted unfavorably by inventory adjustments necessi- tated by the Food and Drug Administration's ban on Red #2, 1976 sales and income were favorably influenced by the capacity of this company to produce Red #40 used as a replacement for Red #2. During the first quarter of 1976 and a portion of the second quarter, sales order backlogs required extensive use of available manufacturing plant facilities and hence some abnormal and non recurring peak sales results. Currently Red #40 inventories and sales are at more normal levels and sudden action by a regulatory agency to ban its use would have a temporary, but not material, impact on corporate earnings. Ventura Coastal Corporation and its subsidiary had consolidated sales of $28,393,959, an increase of 5.5 percent from the 1975 result of $26,905,786. Net income of $564,825 declined from the record 1975 net income of $985,349. Ventura Coastal's results reflected lower ship- ments of fresh fruit and processing fees due to a significantly reduced 1976 lemon crop. Unit sales of frozen concentrate for lemonade and other lemon products were up measurably from 1975 levels, but were subjected to intense price competition beginning in the second quarter, reducing sales margins below normal for the remaining nine months of the 1976 fiscal year. The powdered lemonade mix test-marketed by Golden Crown Citrus Corp., produced sales in excess of objectives, however, introductory promotional expenses reduced reported net income. Income Before Taxes 1976 1975 1974 1973 1972 Soft Drink Extracts Flavoring Compounds and Certain Syrups, Finished Products (Canned and Bottled Soft Drinks and Fountain Syrup)* ........ . . .5% .5% .5% .2% .5% Lemon Products .... 2.5% 5.6% 2.0% 2 8% 3.8% Flavors, Colofs Fragrances and Other Specialty ! Products ......... 8.0% 4.9% 13,5% 11.0% 10.7% 100.0% 100.0% 100.0% 100.0% 100.0% *Includes vending equipment sales, which constituted less than one percent of the Companys net sales in each year The contribution by product group to income before taxes was influenced in 1976 by the increased importance of higher-margined sof t drink extract sales. Reported income was also affected by the reduced importance of finishF,d soft drink product sales. Profitability of the lemon products group was reduced because of competitive pricing pressures. Food flavor and color product profitability significantly increased from depressed 19751evels, returning to more normal pre-recession levels. COMPARISON OF HOW THE DOLLAR WAS SPENT 1976 In summary, the contribution of the three Cost of major product classifications to consolidated products sold 50.2 sales and net income before taxes for 1976 and prior years has been: Net Sales 1976 1975 1974 1973 1972 Soft Drink Extracts Flavoring Compounds and Certain Syrups, arketing Finished Products services (Canned and Bottled Soft Drinks and Fountoin Syrup)* .......... 8.9% 0.2% 0.6% 1.8% 2.7% Payroll Lemon Products .... 12.6% 12.9% 10.5% 10.7% 10.4% All other . Flavors, Colors Fragrances and Other Specialty Products ......... .5% .9% .9% .5% .9% expense, net Taxes Paid to 100.0% 100.0% 100.0% 100.0% 100.0% shareholders Reinvested in the business 14 The Seven-Up Company 1976 Annual Report 18.6 5.9 5.1 9.6 5.3 5,3 - $1.00 v 1975 52.6 16.8 5.8 6.2 9.1 3.9 5.6 $1.00 2D4a1S9170

Quarterly Review Highlights Consolidated sales for The Seven-Up Company and its subsidiaries by fiscal quarters were: Percent Percent Percent Change__ Change -. Change 1976 1976/ 1975 1975/ 1974 1974/ (000) 1975 (000) 1974 (000) 1973 First Quarter $ 49,030 + 17.8 S 41,617 +25.4 S 33,179 + 12.3 Second Quarter 67,783 +11.9 60,574 +15.7 52,349 +28A Six Months 116,813 + 14.3 102,191 + 19.5 85,528 +21.9 Third Quarter 64,374 + 4.3 61,734 + 7.3 57,509 +40.8 Nine Months 181,187 +10.5 163,925 +14.6 143,037 +28.9 Fot'rth 6ZL;arter 52,096 + 4.8 49,698 + 3.9 47,842 +33.8 Year :, . . . $233,283 + 9.2 $213,623 + 11.9 $190,879 _,. . _ +30,1 i First 6tuarter (January-March) Dollar sales of $49,029,685 in the first quarter of 1976 increased 17.8 percent, with net income of $4,898,163 increasing 56.9 percent over the comparable period of the previous year, exceed- ing management's objectives. Soft drink extract sales in the U. S. and international markets were significantly higher than the first quarter 1975, with Canadian sales at approximately year-ago levels, Domestic extract unit sales were influenced favorably by the threat of a transportation strike, abnormally inflating earnings by about 5 cents per share during this quarter, Both unit and dollar sales of food flavor and color were also up sharply during this quarter. Food color sales benefited by some abnormal sales stimulus of food dye, Red #40, the replace- ment for food dye, Red #2, banned by the Food and Drug Administration, Adjustments for translation and foreign exchange transactions were not material in 1976, but in 1975 currency losses reduced reported earnings for the quarter by about 3 cents. Earnings per share reported for this quarter were 45 cents in 1976 versus 29 cents in 1975. Second Quarter (April-June) For the quarter ended June 30, 1976, consolidated net sales were $67,783,687, an increase of 11.9 percent from the previous year, again exceeding management's objectives for the quarter. Net income of $7,340,212 increased 39.4 percent from the 1975 second quarter results. Despite the fact that strike-related U. S. extract sales were shifted into the first quarter 1976, the sales volume in this quarter was the largest dollar volume ever transacted in a three-month period in the Company's history. This quarter's sales benefited from a successful U. S. Bicentennial can promotion, bottler preparation for Bicentennial events, sharply higher sales of frozen concentrate for lemonade and continued strong food color unit sales. Sales of food dye, Red #40, during this quarter were significant in the food flavor and color products group, but at more normal levels than in the first quarter of 1976. In 1976, adjustments for translation and foreign exchange transactions were not material in this quarter, but in 1975 currency losses reduced quarterly earnings approximately 5 cents per share. Earnings per share for the quarter were 68 cents in 1976, as compared with 48 cents in 1975. Third Quarter (July- September) Consolidated sales of $64,374,469 for this quarter increased 4.3 percent from the 1975 results of $61,733,923 and net income was $6,840,745, compared with 1975 results of $6,714,714. In contrast to the experience in the two previous 1976 quarters, sales and net income results did not meet management's objectives for the third quarter. Although soft drink extract unit sales for the U. S. and international markets increased for the third quarter, Canadian unit sales were below 19751evels. The impact of lower average selling prices for finished soft drinks, as well as frozen concentrate for lemonade, reduced the contribu- tion of these product groups to total consolidated sales. For the third quarter, unit sales of finished soft drinks, at lower prices, were up significantly, with unit sales of frozen concentrate for lemonade at approximately 19751evels. Third quarter 1976 sales margins continued to reflect lower raw material costs and a changing sales mix, however, the improved margins were offset during the quarter by higher operating expenses which increased $2,513,912 from the third quarter 1975. Of the total dollar increase in expenses, approximately three-fourths repre- sented increased marketing support expenditures for advertising and promotional programs. Higher operating expenses reduced operating profit in 1976 to $11,814,473 as compared with $12,803,760 in 1975. Adjustments for translations and foreign exchange transactions increased net income and earnings per share in 1976 approximately 3 cents, reflecting primarily a gain in the Mexican peso adjustment. In the 1975 comparable quarter, currency losses reduced earnings per share approximately 4 cents. Per share earnings for the third quarter were 63 cents for both the 1976 and 1975 periods. The Seven-Up CompanY 1976 Annual Report 15

The Seven-Up Company and Subsidiaries Financial Review (continued) Fourth Quarter (October-December) Total sales for the fourth quarter of 1976 were $52,094,823 an increase of 4.8 percent from sales of $49,698,193 in the comparable 1975 quarter, Net income for the quarter was $5,671,885, compared with $5,238,619 earned the previous year, an increase of 8,3 percent. Consolidated soft drink extract unit sales for the fourth quarter modestly exceeded record fourth quarter 1975 results and represented the highest unit sales of any quarter of the Company's history. Unit sales in international markets were up significantly, with unit gains in the U. S. and Canadian markets exceeding comparable record 1975 sales, Finished soft drink unit sales, at lower selling prices, declined below year-ago levels as did unit sales of food flavor and color products, Sales of lemon products, although of minimal importance during this quarter, also registered significant unit gains at lower selling prices for the period, Gross profit on sales improved during the fourth quarter 1976, reflecting the sales mix contribution of higher margin soft drink extract NET INCOME sales. Operating expenses increased 8,4 percent (Millions of Dollars) to $17,745,090, or 34,1 percent of sales, compared with 33,0 percent in 1975, Of the total fourth quarter dollar increase in expenses, advertising expenditures to support the introduction in the U, S. of the new "UNdo it" marketing strategy were up sharply for the period, with promotional expenditures at approximate year-ago levels. In addition to marketing support funds, increased employment costs and travel represented other significant increases in expenses. Net other income for the quarter was 5735,100 in 1976, compared with $44,558 in 1975. In 1975, the fourth quarter had been unfavorably impacted by inventory adjustments taken to reflect the Food and Drug Administration ban on Red #2, - The net effect of adjustments for currency translations and foreign exchange transactions, affected primarily by the weakened Canadian dollar, decreased per share earnings by approximately i cent for the fourth quarter 1976, In 1975, currency transactions increased fourth quarter earnings by approximately 2 cents. Earnings per share were 52 cents in the 1976 final quarter versus 48 cents in 1975, drinks and lemon products, which were approxi- mately 56.1 percent of total sales in 1975, represented approximately 52.1 percent in 1976, The change in sales mix between extracts and finished products by quarter during the fiscal year, tended to lower gross profit to sales ratios in the second and third quarters from the final reported gross profit for the year, Intense pricing competition decreased sales margins in Company-owned bottling plants, as well as in the sale of food color and frozen concentrate for lemonade, Gross profit on sales in 1976 was $116,116,432 or 49,8 percent of sales, compared with $101,201,687 or 47.4 percent of sales in 1975. Offsetting the improved gross profit, which increased 14.8 percent over 1975, were increased operating costs totaling $71,482,245 ' for selling, general and administrative expenses in 1976. Operating expenses for the year increased 16.7 percent from the previous year and were 30,6 percent of sales, compared vrith 28.7 percent of sales in 1975. 16,6 14.1 12.0 Operating Results In 1976, consolidated gross profit on sales was influenced favorably by a larger proportion of total sales being made in higher-margin soft drink extract units. Finished product sales of soft 1972 1973 1974 20.3 248 1975 1976 2{3481S917': 16 The Seven-Up Company 1976 Annual Report

Consolidated expenditures for marketing services, which include advertising and promo- tional programs, increased 20.7 percent, to a record level of $43,306,814 or 18,6 percent of sales, compared with $35,859,917 or 16.8 percent in 1975. The increase of $7,446,897 for marketing programs accounted for the most significant portion of the $10,218,529 increase in 1976 operating expenses. In the two-year period 1975-1976, marketing support funds increased 514,866,791, employment costs $3,164,488, and all other expenses $2,238,329 over 1974 levels, In key U. S, markets, 1976 soft drink marketing funds increased over 50 percent from 1974 levels, in line with programs developed to support 7UP t,brand development, In 1976, media advertising 6*.nd promoTional programs increased at about the same percentage over 1975, with dollars utiliy°ed in promotional support programs representing the larger of the expenditures, ' 1'otal selling and administrative payroll, excluding fringe benefits, was equal to 5,9 cents of evely sales dollar in 1976, compared with 5.8 cents of every dollar in 1975, Total employment costs, including salaries, wages, and fringe benefits, increased $1,623,069 or 10,4 percent over 1975 expenses and were the second-largest factor in the total operating expense dollar increase. Also increasing at more modest rates were travel expenses, warehousing charges, freight, local taxes and utility bills, which exceeded 1975 expenditures by $879,035, Estimated annual sales productivity of personnel in 1976 was $143,820, compared with $133,935 in 1975. Individual sales productivity of personnel employed in each of the companies major product groups increased over year-ago levels. Consolidated operating profit was $44,634,187 or 19.1 percent of sales in 1976, an increase of 11,8 percent over $39,937,971 or 18,7 percent of sales in 1975. Both dollar operating profit and the profitability ratios from operations were at all- tirrle h}ghs. Qpprating profit ratios Iq sqles ir} the last six rnonttA of 1g76, yaere 19 percent of sales, comparing favorably with the ratio of 19.2 percent achieved in the first six months of the 1976 fiscal year. For the year, the Company exceeded consolidated sales and income objectives. Interest income (net of interest expense) increased to $1,907,738 from $1,769,827. Foreign source net interest income declined, with domestic income increasing over the previous year on a larger volume of dollar investments, Yields on short-term U. S. investments trended lower throughout the year, with the exception of a brief strengthening during June and July, - - Miscellaneous other income totaled $1,611,117 in 1976, compared with $690,961 a year ago. These amounts are principally composed of revenues from royalties, rentals, sales of assets and currency gains. Miscellaneous deductions were $1,008,037 in 1976 and $2,554,296 in 1975. These amounts include certain non recurring charges. Included in 1976, is the settlement approved by the court of the Bubble Up International suit commenced in 1968. The year 1975 included fees paid in settlement of legal action with respect to the production of food color, adjustments made in connection with the Food and Drug Administration's ban on FD&C Red #2, and foreign currency losses, In 1976, net translation and currency gains net of tax increased net income for the year $297,607 or approximately 2,8 cents per share, compared with net currency losses in 1975 of $1,146,574, which reduced earnings per share 10,8 cents, Earnings After preferred dividends of $215,280, consolidated earnings per share were $2.28, compared with $1,88 in 1975, an increase of 21.3 percent. The increase in 1976 net income per share over 1975 is explained by: ' Increased sales ................................ $1.64 Adjusted by other factors: Increased marketing expenses ......... 0.67 Increased cost of sales ................. 0.33 Increased employment costs ........... 0.14 Increased other operating expense ..... 0.09 Increased tax on higher income ........ 0.24 Increased net miscellaneous income .... (0.09) 1.38 0.26 Currency exchange and translation gains or loss 1975 10.80 loss, 1976 2,8c gain .............. 0.14 Increase in net income per share ................. $0.40 Earnings per share by quarter for the current and previous two years were: 1976 1975 1974 Percent Change 1976 from Previous Year First Quarter. . , . . . $ .45 S .29 S ,25 +55.2 Second 9.uarter.. . .68 .48 .43 -1-41,7 Third Quarter. . . . . .63 .63 .46 0 Fourth Quarter.. . . .52 .48 .40 + 8.3 $2.28 $1.88 $1,54 +2L3 After preferred dividends, earnings per share by company unit were: 1976 1975 1974 The Seven-Up Co. and Subsidiaries .............. $2.02 S 1.70 S 1.32 Wamer-Jenkinson and Subsidiaries .............. .21 .09 .22 Ventura Coastal Corp. 4~% and Subsidiaries .............. .05 .09 ,00 $2.2$ 51.88 51.54 The Seven-Up Company 1976 Annual Report 17

The Seven-Up Company and Subsidiaries ® Financial Review (continued) Dividends Total dividends paid in 1976 to holders of both preferred and common shares amounted to $12,321,524, compared with $8,279,296 in 1975. The distribution of dividends by quarter was: 1976 1975 1974 First Quarter .................. .. $0.21 S0.18 $0.11 Second Quarter ....... . ....... 0.21 0.18 0.16 Third Quarter ............. _ ... 0.21 0.18 0.16 Fourth Quarter ........ . ....... 0.30 0.21 0.18 December Extra Dividend ....... 0.20 - - $1.13 $0.75 50.61 During the fourth quarter 1976, the Dividend Policy Committee recommended, and the Board of Directors approved, an increase of 9 cents in the quarterly rate per share and the disburse- ment of an extra dividend on common stock. In 1976, dividends paid on common were equal to 49.3 percent of per share earnings, compared with 39.9 percent in 1975. The current quarterly rate is at an annual rate of $1,20 per share. The 1976 extra dividend should not be considered a basic change in dividend policy. EARNINGS AND DIVIDENDS PER SHARE* 2.28 1.88 $1.10 $.41G 1972 1.30 .4325 1973 Earnings Per Share Dividends Per Share 1.54 1974 1975 1.13 1976 *Based on weighted average shares outstanding during the Year Market Price Common Stock During the year, the market price of The Seven-Up Company stock declined modestly in quoted value on the Over-the-Counter market. In general, the market value of stocks in the soft drink industry did not increase in value for the year in comparison with the generally accepted popular indexes of stock market performance. As reported by NASDAQ, the high and low bid prices for 1976 and the previous two years were: 1976 1975 1974 First Quarter .... $41 -$32~/a $31 1ia-S 14~/4 S303,a-S24 1,a Second Quarter ...... - 37~/.- 32V4 36 - 291/2 28 -• 19i/x Third Quarter ... 38y4- 333/4 351/4 - 253.a 261ia- 12?/z Fourth Quarter .. 35 - 29~/ 351/a- 28 18 - 101/z On December 31, the closing bid price for the last three years, 1974-1976, was 514,75, $32.50 and $31.75, respectively. Balance Sheets Total assets on December 31, 1976, were $131,242,300, compared with $125,994,634 the previous year. Current assets were $86,845,565, compared with $86,594,829 in the previous year. Current liabilities on December 31, 1976, were $26,243,965, compared with $34,815,728, a decline of $8,571,763. The decline in current liabilities primarily reflected a reduction of $7,152,933 in notes payable to foreign banks. Net working capital, the difference between current assets and current liabilities, was $60,601,600, compared with $51,779,101 on December 31, 1975. The ratio of current assets to current liabilities was 3.3 in 1976 and 2.5 in 1975. During 1976, trade accounts receivable increased, in line with expanded dollar sales volume. Inventories at year end were approxi- mately 8.6 percent higher than on December 31, 1975, and are considered adequate to support current sales levels. Inventory turnover for the year was 4.7 in 1976 and 4.8 in 1975. Short-term investments earned $2,196,870 before tcxes in 1976, compared with $2,025,275 in 1975. In 1976, $347,864 originated from countries outside of the U. S., which was below the $472,411 earned last year. During the year, these funds were invested in commercial paper and tax-free municipal bonds in the United States and in money market investments in Canada and other foreign countries. In 1976, tax-free interest on U, S. municipal bonds was modestly higher than in 1975. 18 The Seven-Up Company 1976 Annual Report