GlaxoSmithKline Pakistan Limited Ten Years of Success

Ten years is an achievement, but for us it is a celebration of touching the lives of millions of people across Pakistan. Being one of the world’s leading research healthcare companies, we devote all our resources and efforts towards creating truly innovative medicines, and delivering products of value.

This year’s Annual Report celebrates our journey and our continued resolve to make a meaningful difference in people’s lives. We look forward to many more years of success together, helping the world do more, feel better and live longer. Contents

02 Corporate Information 04 Vision and Mission 06 Ethical Conduct 08 Values and Behaviours 10 History of GlaxoSmithKline 11 Milestones 14 Strategic Priorities 16 GSK Products 20 Corporate Social Responsibility at GSK 26 Awards

28 Great People Power 31 Directors’ Profiles 33 Board & Management Committees 34 Directors’ Report to Shareholders 38 Chairman / Chief Executive’s Review 41 Financial Performance at a Glance 42 Statement of Value Added 43 Key Operating & Financial Data 45 Vertical Analysis 46 Horizontal Analysis 48 Financial Statements 2010 49 Statement of Compliance with the Code of Corporate Governance 51 Review Report to the Members on Statement of Compliance with Best Practices of Code of Corporate Governance 52 Auditors’ Report to the Members 53 Balance Sheet 55 Profit and Loss Account 56 Cash Flow Statement 57 Statement of Changes in Equity 58 Notes to and forming part of the Financial Statements 90 Pattern of Shareholding 91 Categories of Shareholders 92 Shareholding Information 93 Notice of Annual General Meeting 95 Factories and Distribution / Sales Offices 96 Proxy Form

Corporate Information

Board of Directors Management Committee

Mr. M. Salman Burney Mr. M. Salman Burney Chairman / Chief Executive Chairman / Chief Executive

Mr. Rafique Dawood Dr. Muzaffar Iqbal Non-Executive Director Technical Director Mr. Shahid Mustafa Qureshi Mr. Husain Lawai Legal, Corporate Affairs, Industrial Non-Executive Director Bankers Relations, Administration & Citibank NA Regulatory Affairs Director / Dr. Iffat Yazdani Standard Chartered Bank (Pakistan) Company Secretary Area Director Asia Pacific Clinical Limited Operations Mr. Javed Ahmedjee HSBC Bank Middle East Limited Director Finance and Logistics Habib Bank Limited Dr. Muzaffar Iqbal Faysal Bank Limited Technical Director Ms. Erum S. Rahim Director Marketing and Business Auditors Mr. Shahid Mustafa Qureshi Development Legal, Corporate Affairs, Industrial A. F. Ferguson & Co. Relations, Administration & Mr. Maqbool ur Rehman Chartered Accountants Regulatory Affairs Director / Sales Director Company Secretary Legal Advisors Mr. Sohail Matin Rizvi, Isa, Afridi & Angell Country Manager - Consumer Mr. Javed Ahmedjee Mandviwalla & Zafar Healthcare Director Finance and Logistics Orr, Dignam & Co. Dr. Atif Mirza Surridge & Beecheno Audit Committee Director Medical Services Vellani & Vellani

Mr. Rafique Dawood Ms. Fariha Salauddin Registered Office Chairman Director Human Resources 35 - Dockyard Road, West Wharf, Karachi - 74000. Mr. Husain Lawai Company Secretary Tel: 92-21-111-475-725 Member Mr. Shahid Mustafa Qureshi (111-GSK-PAK) Mr. M. Salman Burney Chief Financial Officer Fax: 92 21 32314898, 32311122 Member Mr. Javed Ahmedjee Website: www.gsk.com.pk

02 GlaxoSmithKline Pakistan Limited Vision

GlaxoSmithKline’s vision has translated into a decade of excellence and achievement:

“the opportunity to make a difference to the lives of billions of people”

Our value system and operating principles provide the necessary professional and ethical guidelines on how we work at GlaxoSmithKline. The key to our success is our desire and passion to pursue our vision of creating a healthier world. We feel honored by the fact that the work we do enhances the quality of people’s lives, and take pride in our commitment to help patients and communities overcome challenges.

Every member of the GSK family strives to contribute his/her time, talents, and ideas to make a real and meaningful contribution towards improving the quality of human life.

GSK is driven by performance, but we strongly believe that there is no achievement without integrity. We contribute to the health and well being of people with enthusiasm and vigour.

Each year we set the bar higher and aim further in the quest of outperforming ourselves, and we look forward to another decade worth celebrating. Mission

GlaxoSmithKline has a challenging and inspiring mission: to advance the quality of human lives by enabling people to

This mission is at the heart of everything that we do. Our legacy of great science, development of innovative health care solutions and a history of medical breakthroughs help people live healthier and fulfilled lives around the world, every single day.

04

Our Ethical Compass Always Points to Fair Practices

We are committed to creating a strong ethical culture at GSK. Putting patients first is the core principle of being an ethical pharmaceutical company. Profit without principle is short lived.

Our Code of Conduct sets out the fundamental standards to be followed by staff in their every day actions on behalf of GSK, and seeks to promote honest and ethical conduct.

Our employees are committed to:

Conduct business with honesty, integrity, and in a Where permitted by local laws, promptly report to the professional manner that protects the company’s good company any breach of laws or regulations, ethical public image and reputation. principles or company policies that come to attention and cooperate fully in any audit, enquiry, review or Build relationship with customers, vendors, suppliers investigations by the company. and fellow employees based on trust, and treating each of these individuals with respect and dignity when Provide access to the company’s external auditor at conducting business. all times to the company’s records and accounts (in whatever form they are held) and provide additional Become familiar with, and comply with legal information as requested by the external auditor. If such requirements and company policies & procedures. requested information is legally privileged, the legal department must be contacted before responding to Avoid any activity that could involve or lead to the request. involvement in any unlawful practice or harm to GSK’s reputation and image. Managers should ensure all their employees receive guidance, trainings and communication on ethical Avoid actual or potential conflicts of interest with the behavior and legal compliance relevant to their duties company or the appearance thereof, in all transactions. for the company.

Provide accurate and reliable information in records Senior management should be the role-model for submitted, safeguard the company’s confidential these standards by visibly demonstrating support and information, and respect the confidential information by regularly encouraging adherence by managers. of other parties with whom GSK does business or competes. Preventing corrupt practices and maintaining standards of documentation.

06 GlaxoSmithKline Pakistan Limited Values GSK Behaviours

Respect for people: GSK fosters a dynamic learning culture which We believe that respecting each other is the key to progress thrives on innovation and flexibility. We do this and growth for everyone; our business, employees and so that we can provide the best customer-centric customers. Therefore the culture at GSK celebrates diversity health solutions by adapting to the changing and achieving goals with team work and cooperation. needs of the healthcare market. Therefore, our work is embodied by six behaviours. Patient focused: Our commitment to our purpose of improving the lives Flexible thinking: We explore multiple options of billions ensures that all our efforts, be it research, for problem-solving manufacturing or distribution are geared towards improving patient access to quality health solutions. Enable and drive change: Our ideas are executed to realize benefit for customers and Transparency: business growth We are committed to building and streamlining existing systems to eliminate any possibility of unfair practices. This Continuous improvement: We not only excel in has been possible only because of our employees who are what we do, but find innovative improvements honest and fair in everything they do and take personal to current practices responsibility for all their actions. Customer driven: Our philosophy of improving Integrity: lives of billions of people is at the heart of Our guiding principles go beyond complying with legal everything we do and ethical regulations. Each member of the GSK family takes pride in making decisions which are not only Developing people: Empowered employees profitable but are morally sound, each has the sincere take initiatives and provide creative solutions intent of benefiting the patients, which has helped us to challenges foster long-term relationships. Building relationships: Trust and openness inculcated in everything we do. It helps us to foster long-lasting partnerships

08

History of GSK

In 2001, Glaxo Wellcome and SmithKline Beecham merged to form GlaxoSmithKline, one of the largest Pharmaceutical companies in the world.

The advent of today’s leading research-based pharmaceutical company started with individual entrepreneurs of the 1800s. Their pioneering efforts laid the groundwork for growth in the different companies that, over the years, were to lead to today’s GlaxoSmithKline.

We are exceptionally proud of how far we have come, and in a world where the only constant is change, we are always thinking, adapting and growing.

John K. Smith opens Thomas Beecham Burroughs Wellcome SmithKline & Co. Glaxo is registered a drug store in launches Beecham’s & Company is acquires French, by Joseph Nathan Philadelphia pills in England founded Richards & Company & Company as a trademark for dried milk

SmithKline & French SmithKline & Glaxo & Wellcome becomes research Beecham merge merge focused GlaxoSmithKline

10

Strategic Priorities

By focusing our business around our five strategic priorities, we’re confident that we can fulfill our promises to the world.

Grow a diversified global business: Create a culture of individual empowerment: We are diversifying our business and also strengthening our core We are working towards building pharmaceutical business, to create an open and constructive culture by a more balanced portfolio by ensuring that our employees receive investing in key growth areas such the tools and inspiration they need to as emerging markets, vaccines, make decisions with confidence and biopharmaceuticals and healthcare to accountability. generate future sales growth.

Deliver more products of value: Building trust We are transforming R&D by focusing We are nurturing partnerships with on best science, diversifying through all our stakeholders, because we externalization of research and see building trust as a fundamental building a sustainable industry- platform. Essentially, without trust, we leading pipeline of products. don’t have a business.

Simplify the operating model: We believe that these strategic priorities will transform GSK into a company that delivers more growth with less We are simplifying our operating risk and will result in improved financial performance. model by streamlining processes to They will also enable us to successfully navigate through aid efficient decision-making, which the coming years and help us retain our competitive edge supports our diverse and growing as a company. business.

14 GlaxoSmithKline Pakistan Limited Innovative Products that deliver great value

Pharmaceutical Products Our pharmaceutical products cover a wide array of health categories with new portfolios and products added every year. Our products include treatment for asthma, chronic hepatitis B, depression, heart failure, infectious diseases, GI disorders and cancers.

Vaccines GSK delivered 1.4 billion vaccine doses in 2009, of which nearly 1 billion were shipped for use in developing countries. Our vaccines protect against potentially life-threatening or crippling illnesses such as hepatitis A, hepatitis B, diphtheria, tetanus, whooping cough, measles, mumps, rubella, polio, typhoid, influenza and bacterial meningitis.

Skincare Range Stiefel, a GSK company, is committed to advancing dermatology and skin science around the world by providing consumers with innovative pharmaceutical, non-prescription and aesthetic dermatology products to better achieve healthier skin.

Consumer Health Products We bring dental health products, over-the-counter medicines and nutritional drinks to millions of people.

Many of our brands, such as Panadol, Aquafresh, Sensodyne, Horlicks, Iodex and Eno have been trusted household names for years.

16

GSK in the Community

GlaxoSmithKline (GSK) strives to be a valued corporate citizen no matter where it does business. We have always shown strong commitment and support for public health and awareness initiatives and champion many social causes.

GSK CORPORATE RESPONSIBILITY PRINCIPLE Medicine Index’ for the second successive time. The Access “We will make a positive contribution to the communities to Medicine Index is a ranking of the world´s largest in which we operate, and will invest in health and pharmaceutical companies on their efforts to increase education programmes and partnerships that aim to bring access to medicine for societies in need. This year, GSK sustainable improvements to under-served people in the also announced the formation of a new operating unit developed and developing world” dedicated to expanding access to medicines for people living in Least Developed Countries (LDCs). At GSK, we know that part of being a successful and sustainable business is fulfilling our social responsibilities, In March 2010, GSK became one of the first manufacturers making our company more responsive, more flexible and to sign an Advance Market Commitment agreement with more open to society’s expectations. GAVI, to supply up to 300 million doses of Synflorix™ (GSK’s Pneumonia vaccine) over ten years, to prevent deaths from We are working towards improving access to our pneumonia of millions of children in the world’s poorest medicines, enhancing research opportunities for countries. neglected tropical diseases, raising the ethical standards for conducting our research and business activities, and being more open and transparent in the way we run our business. We are adapting our business model to adopt a more open approach to R&D for diseases of the developing world.

GSK has put many of its important resources –including a pool of patents, research ‘know-how’ and technology assets –into an open ‘knowledge pool.’ Researchers outside of GSK can now use this information, which will hopefully stimulate cutting-edge research on medicines for neglected diseases, including malaria. The knowledge pool is now being administered by the not-for-profit BIO Ventures for Global Health. At GSK, we work as partners with under-served As part of this initiative, GSK announced in January 2010, communities in the developed and developing world the establishment of the first ever ‘Open Lab’ to act as an supporting programmes that are innovative, sustainable engine room of scientific innovation for neglected tropical and bring real benefit to these communities diseases. GSK has created capacity for up to 60 scientists Our programmes are organised into global, regional and from around the world to have access to the ‘Open Lab’, local activities. which will be based at the company’s research centre at the Tres Cantos Campus, Spain. In the ‘Open Lab’, scientists Global health programmes will be encouraged to tap into the expertise, knowledge In communities around the world, people affected by and infrastructure of the company, while pursuing their certain diseases face stigma and discrimination, disability own projects as part of an integrated drug discovery team. and a vicious cycle of ill health and poverty. In the In June 2010, GSK was ranked top in the ‘Access to

20 developing world, diseases that can be prevented, preferential pricing of our anti-malarials in the least managed or cured cause significant suffering and mortality developed countries and sub-Saharan Africa and through due to a lack of basic knowledge and inadequate health our community investment activities funded by the GSK services. We support activities to tackle these diseases African Malaria Partnership. through donations of medicines, financial and practical GSK’s RTS,S –the world’s most advanced malaria vaccine support. candidate –is now in a Phase III clinical trial that includes 11 sites in seven African countries. We have chosen to focus our efforts on lymphatic filariasis (LF) and malaria as well as diarrhoea-related disease in Personal Hygiene and Sanitation Education (PHASE) children. Established in 1988, PHASE is a low-cost education programme helping to reduce diarrhoea-related disease by encouraging school children to wash their hands. PHASE currently operates in 16 countries – Bangladesh, Bolivia, Brazil, India, Indonesia, Kenya, Malawi, Mexico, Nicaragua, Peru, Philippines, Senegal, Tajikistan, Uganda, UK and Zambia- reaching more than one million children and their extended families.

Lymphatic Filariasis Also known as elephantiasis or LF, this is a disfiguring disease found mainly in tropical countries. It is caused by a parasite and spread by mosquitoes and is one of the world’s major causes of permanent disability affecting over 120 million people. GSK is a key member of the Global Alliance to Eliminate Lymphatic Filariasis, a 20 year programme to eliminate the disease by donating our anti- Humanitarian relief parasitic medicine albendazole. We know that our medicines can play a vital role in the humanitarian Relief efforts in disaster zones, or to As part of our commitment to eliminate LF, we have donated support basic healthcare provision in the world’s poorest over 1.4 billion treatments to stop the transmission of this communities. Donations of these products where they are disease. In 2009, we donated 425 million albendazole needed most form an important part of our community treatments to 28 countries. Our aim is to donate as much investment activities. albendazole as required to treat the one billion people in 83 countries who are at risk from this disease. We provided supplies of antibiotics and basic medicines in response to: Malaria At GSK we are committed to playing a significant role Pakistan (2010), Haiti (2010), the disasters in South East in improving the health of communities affected by Asia (2009), Floods in El Salvador (2009), Myanmar (2008) malaria in three ways: Through on-going research into and China (2008) new malaria medicines treatments and vaccines, with

21 GSK Pakistan - Local Community Programmes GlaxoSmithKline Pakistan supports various health, women and social development, education, and relief programs at grass root level in Pakistan.

Center of Nursing Excellence In 2008, GSK approved a grant of £250,000 to support the development of a Center of Nursing Excellence in Karachi. This three-year project, in collaboration with the Pakistan National Forum on Women’s Health (PNF) and the Pakistan Nursing Council (PNC), aims at improving the quality of nursing education through training to develop teaching capabilities of the nursing faculty across Pakistan. The Centre was formally inaugurated on 18 November 2008. The first batch of 31 students graduated in April 2009 and the second batch graduated in November 2009. GSK’s work with communities It is estimated that a single well-trained nursing teacher The company’s programmes are tailored to the needs of could eventually impact the care of approximately 40,000 the communities they support. GSK supports community patients each year by teaching an average of 100 new initiatives in both the developed and the developing world. nurses. Corporate social investment programmes are identified on the basis of need and their potential to bring real benefits to the communities concerned. Additionally, they must be sustainable and innovative, must target neglected or underserved areas and must deliver measurable results.

Around the world, some examples of our community partnerships include:

Independent living programme for young people with disabilities in the UK

Residential camps in Ireland, Hungary, France and Italy where seriously-ill children can have fun and develop their self-confidence

Care for children with incurable illness in Romania The Trust for Health and Medical Sciences GSK Pakistan supports the Trust for Health and Medical Migrant Health Promotion programme in Xintu, China Sciences which has been running a charitable clinic in the Landhi area of Karachi since the early 1980s and charges Leonard Cheshire Disability Resource Centre, Sri Lanka a nominal fee for treating patients. Since 1983, around two million patients have been treated and the clinic has National Forum of Women’s Health, Nurse and Midwifery matured into a large set up with multiple medical facilities. Training, Pakistan More than 90,000 patients receive medical attention annually, and the clinic has recently started treatment and counselling for drug addicts.

22 Concern for Children Trust Concern For Children (CFC) has been promoting preventive (NCHD), Provincial relief efforts and other NGOs. These and primary healthcare and education for children in organizations have played a timely and significant role Pakistan since 1997. With GSK’s support, CFC has set in the emergency relief efforts, and provided aid to the up three computer literacy projects with low-income millions of displaced across Pakistan. schools across Karachi. Approximately 8,000 children have benefited from these facilities so far. CFC is developing GlaxoSmithKline flood relief contributions also assisted a project in Mohammadi Machhar Colony, a shanty the World Food Programme (WFP) and International settlement along the Karachi port. Federation of Red Cross (IFRC) operations in provision of food and clean water in the flood affected regions. A mother and child healthcare centre is also being set up to provide primary, pre-natal, anti-natal services and In the true spirit of GSK, employees also actively contributed health information and education to 8,000-10,000 mothers to the flood relief efforts through donations in kind and and children each year. GSK Pakistan regularly provides cash. medicines for free healthcare camps organized by CFC in different parts of the country.

GSK Flood Relief Contributions GlaxoSmithKline was one of the first pharmaceutical companies to respond to the healthcare needs of the flood victims, by urgently and proactively donating medicines and through contributions. GSK has partnered with a number of organisations, working in all flood-affected areas to provide shelter, clean water, healthcare and food.

GSK donated medicines such as antibiotics, analgesics, skin ointments, and anti-diarrhoeals, to a number of local and foreign relief agencies. GSK medicines have helped support a number of medical camps set up by partner organizations, including the Pakistan Medical Association (PMA), International Medical Corps (IMC), National Commission for Human Development of Pakistan

23 GSK Pakistan employees give back! The GSK ‘Orange Day’ initiative allows employees to take one day fully paid to volunteer for a chosen community project, organisation or cause which they support.

In July 2010, GSK Pakistan employees invited over 320 children from the “Mohammadi (Machar) Colony” & “SOS Children’s Village” to spend a fun filled day at Sindbad Amusement Park, Karachi, Pakistan.

191 GSK Pakistan employees from across all departments took part in this event.

The children spent the day thrilled by the park rides and playing challenging carnival games. They crowded the face painting and henna stalls, and enjoyed the candy floss and popcorn. At the end of the busy day, the children happily departed with their orange colored school bags, filled with stationary and notebooks.

Orange Day served as an emotionally fulfilling and personally gratifying experience for every employee who volunteered. And the efforts and energy of the GSK Pakistan Orange Day volunteers translated into hundreds of bright smiles on the faces of our special guests.

24 GlaxoSmithKline Pakistan Limited Awards GSK Pakistan Wins Corporate Excellence Award GSK Pakistan Limited was judged to be the winner of the 27th Corporate Excellence Award in the Pharma & Bio Tech Sector by the Management Association of Pakistan (MAP) in an award ceremony on 23rd November, 2010.

The Corporate Excellence Awards recognize the best managed companies in Pakistan and have become one of the most sought after accolades in the Pakistan corporate space. The award is synonymous with quality, achievement, prestige and progress.

Corporate Social Responsibility (CSR) Excellence Award GSK Pakistan was once again awarded the “CSR National Excellence Award” by Help International Welfare Trust (HIWT), in an award ceremony on 13th January, 2011. The award is in recognition of our values, efforts and a clear commitment to make sustainable difference in the community.

The GSK CSR philosophy aims to support programmes that are innovative, long-lasting and which produce tangible benefits to the communities in which GSK operates. Best Place to Work Award 2010 GSK Pakistan was recognized as the “Best Place to work” Annual Environment Excellence Award 2010 by Engage HR, a leading HR consultancy in Pakistan, in For a successive year, GSK Pakistan was awarded the association with the Pakistan Society for Human Resource “Annual Environment Excellence Award” by the National Management. Forum for Environment and Health, an independent NGO advocating environmental-friendly practices, health care GSK Pakistan received the highest score out of all and safety. pharmaceutical companies that participated in the survey. Companies were judged by an independent panel of GSK strongly believes in managing its ecological footprint experts in four categories; sense of belonging, growth efficiently by implementing policies and practices that opportunities, level of commitment, and alignment with ensure environmental responsibility and wellbeing of the organization. employees and community.

26

Great People Power

GSK Pakistan strives to be the ‘Employee Champion’ and we at GSK truly believe that our employees are our most valuable asset. We not only recognize and reward hard work and talent of our people but more importantly we contribute towards their professional and personal development and growth. Enabling our people to guide GSK’s success story requires honesty, integrity, reciprocity and most importantly, respect. At GSK, people come together and work as teams, facilitating one another to go one step ahead and deliver excellence.

We encourage our people to speak their minds without inhibitions. Challenging the norm and creative problem solving helps us generate a pool of innovators, each contributing inspiring ideas that have made GSK Pakistan the leading pharmaceutical company in Pakistan. Our focus on transparency and integrity has gained us the reputation of being one of the best organizations in Pakistan. We help each member of the GSK family maximize their potential to accomplish great things every day.

Some of our initiatives to bring the best out in our people include: I 2 US: an interactive session where employees from Café Learning: an interactive session encouraging across business functions are given the opportunity discussion and learning in areas of personal to interact with one another via group discussions and development such as work-life balance, health and games safety etc

The Coffee hour: an initiative taken to bring employees Workshops: an ongoing initiative, encouraging together in small informal group meetings with the employees to undertake trainings to strengthen their CEO skills and knowledge. These training sessions are held by leading HR consultancies in Pakistan, conducted by renowned national and international trainers My decade-long journey at GSK has been extremely rewarding. Great diversity balanced with excellent leadership and empowerment has inculcated a ‘culture of performers’ at GSK, each member striving to overcome challenges and going an extra mile to find innovative healthcare solutions to improve the lives we touch. Great People Power One asset that GSK Pakistan has always been proud of is the people that are associated with it. Our employees have been contributing towards GSK’s success with their relentless hardwork, support and dedication for over a decade and share their views on being an integral part of GSK Pakistan.

GSK has been a truly wonderful experience for me. The dynamic culture with work-life balance Each day at GSK comes with at GSK does not only new opportunities and prospects provide avenues for to strengthen our commitment of exposure and growth but making a meaningful difference it instills in its people the to healthcare in Pakistan. We confidence to embrace enjoy taking bold initiatives challenges and to implement our ideas and aim higher every time. provide quality life-saving drugs to patients across Pakistan.

GSK has emerged as a I am excited to be a winner through time, growing and part of the GSK team. All our diversifying its business to remain the efforts are geared towards largest pharmaceutical in Pakistan. raising the platform for I am proud to be a part of GSK, a excellence. With a culture dynamic workplace where diverse that celebrates diversity, individuals come together to promotes teamwork and deliver excellence. goal orientation, I believe GSK will continue to lead tomorrow with integrity and excellence. My GSK journey has been nothing short of an exhilarating experience. Each new day brings new challenges which we readily accept with the desire of outperforming ourselves every time. This has been a result of exceptional leadership at GSK coupled with our mission of safeguarding the health and well being of patients.

I feel honored to be part of GSK, a team of dedicated individuals pursuing business excellence with ethics, integrity and moral responsibility, taking decisions with the sincere intent of benefitting the communities we serve. At GSK we implement robust policies to ensure ethical standards that become the industry benchmark.

I am extremely proud of the progress GSK has made in the last decade. Our progress is fuelled by our unmatched passion and strong commitment to integrity and ethics. GSK is one place where people live their values, where systems and policies are transparent and our business and partnerships are built upon respect and trust.

GSK truly believes in people power where everyone is empowered to explore At GSK, I feel part of one big opportunities with creative family with an immense sense of problem-solving. Each belonging. Respect for people is individual takes pride and deeply embedded in GSK personal responsibility in culture and is at the heart making decisions that ensure of everything we do. This performance with integrity drives us to continuously and transparency. improve and innovate with a patient-focus approach. Directors’ Profiles

Mr. M Salman Burney Mr. Rafique Dawood Mr. Husain Lawai

Mr. M. Salman Burney joined Mr. Rafique Dawood is the Chairman Mr. Hussain Lawai is the President SmithKline Beecham as Director of First Dawood Investment Bank and CEO of Summit Bank Limited Marketing & Sales in 1992 and was Limited, B.R.R. Modaraba and and is a seasoned banker with vast appointed Managing Director of Crescent Standard Modaraba. Apart experience in the banking and SmithKline Beecham in 1997. He is from the group companies, he is financial services industry. Mr. Lawai the CEO of GlaxoSmithKline Pakistan also on the Board of GSK Pakistan held the position of President & since the SmithKline Beecham’s Limited, Pioneer Cement Limited Chief Executive Officer at Muslim merger with GlaxoWellcome in 2001. and Hyderabad Electric Supply Commercial Bank and holds the He also has Regional management Corporation. distinction of establishing Faysal responsibility for Iran & Afghanistan. Islamic Bank, Pakistan branches; the first Islamic Sharia compliant Bank (now known as Faysal Bank Limited). He also served as the General Manager, Emirates NBD Bank for Pakistan and Far East, and as Director, Security investment and Finance Limited, UK. Currently, Mr. Lawai is on the Board of Directors of Pakistan International Airlines (PIA), Sanofi- Aventis Pakistan Limited, and on the Implementation & Coordination Board of Civil Hospital Karachi.

31 Dr. Iffat Yazdani Dr. Muzaffar Iqbal Mr. Shahid Mustafa Mr. Javed Ahmedjee Qureshi Dr. Iffat Yazdani joined SK&F Dr. Muzaffar Iqbal joined Javed Ahmedjee is the Pakistan as Medical Director GSK in 1987. He was Mr. Shahid Mustafa Chief Financial Officer of in 1986 and has worked in appointed Technical Director Qureshi is the Director the company and also diverse roles of increasing GlaxoWellcome in 1998. and Company Secretary responsible for Distribution seniority in Medical Services He is currently Technical of GlaxoSmithKline and Institutional Sales. and R&D, gaining broad Director GSK, responsible Pakistan Limited. He is A Fellow Member of the experience and managing for manufacturing and also responsible for Legal, Institute of Chartered large teams. In 2004, Dr. supply functions in Corporate Affairs, Industrial Accountants of Pakistan with Iffat was responsible for Pakistan. He worked as Relations, Administration over 16 years experience establishing GSK Pakistan Research Associate at Case and Regulatory functions in senior management as a pioneer of Phase II / III Western Reserve University, of the Company. positions in financial/ clinical trials within the MENA Cleveland, Ohio and as a manufacturing sectors. Over region. In 2007, she became Senior Research Associate at the period he has gained Area Director for Clinical Washington University, St. extensive experience in Operations AP/CHINDIA Louis, Missouri, USA before business partnering, shared and Regional Specialist joining GSK. He has a PhD services, multiple entity for infectious disease. She degree in Chemistry and an integration/merger & ERP has strong interpersonal, MS degree in Manufacturing implementations, supply communication and Leaders Programme from chain management and negotiation skills with Cambridge University UK. He institutional sales. He has constant interaction with is a Certified Facilitator from also gained rich business Medicine Development Senn-Delaney Leadership experience while facilitating Centre in the US and Consulting Group Inc., Egypt/Sudan and Gulf Near interfaces with 100 personnel USA for Leadership Edge East Markets in preparing for across AP/CHK/INDIA. Programme. Global Internal Audit.

32 Board & Management Committees

Audit Committee Environment Health & Safety Committee The Audit Committee assists the Board in the effective The Environment Health & Safety Committee is chaired by discharge of its responsibilities for corporate governance the respective Site Heads. It ensures operations are fully and financial reporting. The Audit Committee comprises of compliant with the EHS practices as outlined by regulatory three members of which two are non-executive directors. control and corporate. It appraises the major EHS projects The committee meets at least four times in a year. It reviews and monitors their implementation and also identifies the internal control systems including financial and risk conditions, organizes training programs to educate operational controls, accounting systems and reporting employees for EHS issues. structure are adequate and effective. Vision Team Management Committee Vision team at GSK gives input for alignment of the GSK The Management Committee comprises of the Functional strategy and futuristic objectives. It primarily reviews Heads to ensure smooth operations of the Company, line capacities at the various sites over the long term strategic business planning, decision making and overall perspective focusing on capacity constraints, potential management of the Company. It also ensures adequacy of for export markets, product initiatives and new packaging operational, administrative and financial controls. requirements.

Risk Management & Compliance Board Risk management & Compliance Board comprises of the Functional Heads and a full time compliance officer. It reviews significant risks affecting the business, including financial, operational and legal compliance risks. It oversees and ensures the identification and implementation of internal control to mitigate significant risks. The Board monitors the various compliance initiatives and promotes risk management and compliance culture in the Company.

33 Directors’ Report to Shareholders

The Board of Directors of GlaxoSmithKline Pakistan Limited Pattern of Shareholding: is pleased to present the annual report and the Company’s The Company shares are traded in Karachi and Lahore audited financial statements for the year ended December stock exchanges. The shareholding information as at 31, 2010. December 31, 2010 and other related information are set out on pages 90 to 92. The directors’ report is prepared under section 236 of the Companies Ordinance, 1984 and clause xix of the Code of The Directors, CEO, Company Secretary and CFO, their Corporate Governance. This report is to be submitted to spouses and minor children did not carry out any trade in the members at the Sixty Fourth Annual General Meeting the shares of the Company. of the Company to be held on April 20, 2011. Chairman / Chief Executive’s review Operating results The Chairman / Chief Executive’s review on pages 38 to 40 Rs. in million deals with: Profit for the year before taxation 1,931 The performance of the Company during the year in Taxation (874) comparison to last year with reasons for variances. Profit after taxation 1,057 Effective cash management strategy. Un-appropriated profit brought forward 2,023 Significant plans and decisions. Transfer to Amalgamation reserve (4) Future outlook, business risks and challenges Profit available for appropriation 3,076 Appropriations: The directors of the Company endorse the contents of the - Final dividend 2009 Rs. 5.00 per share (853) same. Un-appropriated profit carried forward 2,223 Basic earnings per share The Board of Directors is pleased to propose a final cash Basic earnings per share after taxation were Rs. 5.08 (2009: dividend of Rs. 4.0 per share (2009: Rs. 5.0 per share) and Rs.5.22). also issue of 15 bonus shares for every 100 shares held (15%). Earnings Per Share & Price Earning Ratio

Net sales grew by 8.9%* during the year to Rs. 18.9 billion. Profit after tax in this year was Rs 1.1 billion.

Holding company As at December 31, 2010, S.R. One International B.V., Netherlands held 160,180,718 shares of Rs. 10 each. The ultimate parent of the company continues to be GlaxoSmithKline plc, UK.

Earnings per share Price earning ratio

* The corresponding figures of GSKPPL are included from January 30, 2009 to December 31,2009 and SLPPL are included from July 22, 2009 to December 31,2009. For comparison purposes growth % ages used for revenues and expenditure are shown and calculated on a like to like basis (covering the same period last year i.e. January 1, 2009 to December 31, 2009).

34 Corporate and social responsibility award by Engage HR in association with the Pakistan Corporate social responsibility (CSR) is an integral and Society for Human Resource Management (PSHRM). embedded part of the way GSK does business. GSK CSR philosophy aims to support programmes that are Sales per Employee innovative, long lasting and which produce tangible benefits to the communities in which GSK operates.

During the year GlaxoSmithKline Pakistan was one of the first pharmaceutical companies to respond to the healthcare needs of the flood victims, by urgently and proactively donating medicines and through contributions. Since the beginning of August GSK has partnered with a number of organisations, working in all flood-affected areas to provide shelter, clean water, healthcare and food. GSK employees have contributed through salary donations, volunteering with Pakistan Medical Association (PMA) for packing of relief bags and in kind donations. GlaxoSmithKline Pakistan remains committed to continually assessing the situation across the affected regions and responding to needs of the Environment, Health and Safety (EHS) victims of this national tragedy. GSK is committed to maintain the standards of Environment, Health and Safety (EHS) at the highest The Company has also setup and supports two community level. The company has a dedicated EHS department to trusts/ NGOs ie Concern for Children Trust (CFC) and oversee the implementation of EHS objective and reports Trust for Health and Medical Sciences, which work in the to Executive management. As part of our governance underserved communities of Muhammdi (Machar) Colony responsibility, we conduct EHS audits of our manufacturing and Landhi in Karachi. sites, assessing the management of key risks and impacts and performance against our global EHS standards. Various CSR initiatives of the year 2010 are fully covered on page 20 to Page 24. Key Highlights of the year 2010 are: The company has received the “Annual Environment Human resource development Excellence Award” from the National Forum for The environment and culture at GSK revolves around Environment and Health , an independent NGO incorporating and continuously implementing the GSK advocating environmental-friendly practices , spirit which is to ‘do more, feel better and live longer’. healthcare and safety. Recruiting, retaining and developing our employees are critical to enhancing and sustaining our performance and Energy reduction has been identified as a key objective reputation. We continue to provide a fulfilling, healthy for the business. GSK is committed to continuous environment where our employees can learn, grow and improvement in energy consumption as part of develop. sustainability initiatives. We have eliminated the use of The concept of Empowerment is further supported by the Ozone depleting substance from aerosol formulation. values that are incorporated at GSK. We have also achieved 5.2% reduction in energy consumption at West Wharf site and 2% and 4.8% water During the year Learning Fair has been conducted in consumption reduction at West Wharf and F-268 sites four different cities offering a diverse range of courses for respectively. employees’ development and learning exposure. During the year “Glove box” isolator was installed Recruitment/Campus Drive was also conducted at various to ensure that factory workers are not prone to the universities and colleges to attract talent and create hazards of pharmacological active dust while handling branding for GSK. the hazardous materials. In this year, GSK Pakistan has received “Best Place to Work”

35 This year, machinery safety standards were also over 9 years and for his valuable inputs and contribution taken to the next level with the launch of zero access over this period. The board would also like to welcome initiative in order to eliminate any machinery related Mr. Hussain Lawai and look forward to his contribution to risks present to the operators thereby improving the the board of the Company. overall occupational health and safety of the workers. Reportable Injury and Illness Rate (RIIR) target of 0.45 Audit Committee for 2010 achieved at all the sites. An Audit Committee has been in existence since May 2002. The committee consists of three members, of whom two GSK has waste water treatment plant present at all are non-executive directors including the chairman of the sites to comply with the legal requirement of National committee. The terms of reference of the Committee have Environmental Quality Standards (NEQS). We have been determined by the Board of Directors in accordance achieved 8.3% and 37% reduction in hazardous waste with the guidelines provided in the Listing Regulations and generation at F-268 and Korangi sites respectively. advised to the Committee for compliance. The Committee held four meetings during the year. Statement of ethics and business practice Performance with integrity is central to operating at GSK. An independent Internal Audit function reporting to the The Board of Directors of the Company has adopted a Board’s Audit Committee reviews the financial and internal statement of ethics and business practices. All employees reporting process, the system of internal control, the are informed and aware of this and are required to management of risks and the external and internal audit observe these rules of conduct in relation to business and process. The internal Audit functions utilizes the services of regulations. independent audit firm for continuous reviews of internal Board of Directors meetings and attendance controls and management of risks. . The Board of Directors met six times in 2010, with each member attending as follows: Management Committee The Management Committee comprises of 9 senior members who meet and discuss important business plans, Name Meetings attended issues and progress made in their functions. Significant matters to be put forth in the Board are discussed for Mr. M. Salman Burney 6 onward approval by the Board. Mr. Tariq Iqbal Khan 1 Mr. Hussain Lawai 1 Risk Management and Compliance Board (RMCB) Mr. Rafique Dawood 6 Risk Management and Compliance Board (RMCB) have Mr. Shahid Mustafa Qureshi 6 been established which comprises of the business unit Mr. Javed Ahmedjee 5 heads. The RMCBs actively oversee management of all risks Dr. Muzaffar Iqbal 5 that are considered important for their respective business Dr Iffat Yazdani 2 units. Each business unit must periodically review the significant risks facing their businesses. This review should Leave of absence was granted to the Directors who could include identifying operational risks, legal compliance not attend some of the board meetings. risks and risks to the achievement of strategic goals and objectives. The company also has a full time compliance officer. Board Changes Mr. Hussain Lawai was appointed as a member of the Auditors Board of Directors of GlaxoSmithKline Pakistan Limited The present auditors, Messrs A.F. Ferguson & Co. Chartered Accountants, retire and being eligible, offer themselves with effect from 27th August 2010 to fill the casual vacancy for re-appointment. The Board of Directors endorses created by the resignation of Mr. Tariq Iqbal Khan. recommendation of the Audit Committee for their re- appointment as auditors of the Company for the financial The Board would like to record their appreciation and year ending December 31, 2011, at a fee to be mutually thanks to Mr. Tariq Iqbal Khan for serving on the board for agreed.

36 Contribution to National Exchequer Corporate and financial reporting framework During the year the Company has paid Rs 1.957 billion a. The financial statements, prepared by the management ( 2009: Rs.1.860 billion) to Government treasury on account of the Company, present fairly its state of affairs, the of Income Tax, Sales Tax, Customs Duty and Federal Excise result of its operations, cash flows and changes in Duty equity.

Subsequent events b. Proper books of account of the Company have been Subsequent to the year end honourable High Court of Sindh maintained. sanctioned scheme of arrangement for amalgamation of Stiefel Laboratories Pakistan (Private) Limited (SLPPL) with c. Appropriate accounting policies have been consistently the company, effective from July 1, 2010. This has been applied in preparation of financial statements and accounted for as an adjusting event and consequently accounting estimates are based on reasonable and SLPPL has been amalgamated with the company in these prudent judgements. financial statements. d. The financial statements are prepared in accordance Value of investments of provident and gratuity funds with International Financial Reporting Standards, as The Company maintains retirement benefits plans for their applicable in Pakistan. employees. Value of investments of provident, and gratuity funds based on their un-audited accounts as on December e. The Company maintains a sound internal control 31, 2010 (audit in progress) were as follows: system which gives reasonable assurance against any material misstatement or loss. The internal control Investment in funds system is regularly reviewed. This has been formalized by the Board’s Audit Committee and is updated as and when needed.

72% f. There are no significant doubts upon the Company’s ability to continue as a going concern.

g. There has been no material departure from the best practices of Corporate Governance as detailed in 28% the listing regulations.

h. The key operating and financial data for the six years is set out on pages 43 to 44.

2010 Rupees ’000

Provident fund 1,460,418 Gratuity fund 577,924

By order of the Board

Javed Ahmedjee M. Salman Burney Chief Financial Officer Chairman/Chief Executive

Karachi March 07, 2011

37 Chairman/Chief Executive’s review

I am pleased to present the Annual report of your Company for the financial year ended December 31, 2010.

Overview of Economy & Market These amalgamations give rise to new growth Pakistan’s economy came under stress in the aftermath opportunities and also market access to fast growing of the worst flood in the history of the country. The therapeutic areas, a broader product portfolio, rehabilitation of wide spread damage to agricultural crop, optimization in capacity utilization, and other synergies livestock and infrastructure along with crippling power arising from economies of scale. crisis remains a major challenge. However, continued foreign assistance along with fiscal reforms, increased Celebrating Ten Years foreign remittances, improved agricultural productivity GlaxoSmithKline Pakistan proudly celebrated its first in the wheat crop and higher spending on reconstruction decade of success and achievements marked by a journey maintained moderate growth in the economy, but with of introducing truly innovative medicines and delivering high inflation. products of value. GSK Pakistan has remained true to its values, and focused on its mission to improve the quality The Pharmaceutical industry in Pakistan continues to of human life by enabling people to “Do More, Feel Better face significant challenges. Rising inflation and currency and Live Longer” by providing access to affordable and depreciation coupled with a highly restrictive pricing policy innovative medicines, whilst sustaining a successful on pharmaceuticals create a challenging environment business for its shareholders. with the industry being adversely impacted by declining margins and profitability. Though the Government has Business Review given some hardship price increase on a few products the Sales performance continued to reflect sustained impact is not significant enough to improve the overall growth in 2010, despite the logistical issues faced from situation. The company continues to evaluate cost saving environmental challenges such as the devastation and initiatives to curtail the impact of rising cost of doing infrastructure damage caused by wide spread floods business, but the need for a price adjustment for inflation coupled with the adverse security situation. and a less restrictive pricing policy is now urgent. Net sales grew by 8.9%* during the year to Rs 18.9 billion. The Pakistan pharma market grew by approximately Underlying Pharma sales growth (excluding the large 13% in 2010. Your Company retained its position as vaccine tenders), was recorded at 13.5%*. Within the the largest research based pharmaceutical company Pharmaceutical business, the Antibiotics, Dermatology, in Pakistan in terms of value, prescription and volume. Analgesics, Cardiovascular and CNS portfolios achieved Out of top 20 products in the Pharmaceutical industry, double digit growth during the year. 8 are manufactured and sold by your Company which is unparalleled in the industry. Net Sales Legal Merger The schemes of arrangement for amalgamation of GlaxoSmithKline Pharmaceuticals (Private) Limited (GSKPPL), (formerly Bristol Myers Squibb (Pakistan) Limited) and also Stiefel Laboratories Pakistan Private Limited (SLPPL) with your Company have been sanctioned by the honorable High Court of Sindh dated March 17, 2010 and January 22, 2011 respectively. The amalgamation is against 25.74 million and 11.65 million shares of your company for GSKPPL and SLPPL respectively. These consolidated financial statements are presented giving effect to the legal merger of GSKPPL and SLPPL with the Company. The effective dates of the mergers are January 01, 2010 and July 01, 2010 respectively.

* The corresponding figures of GSKPPL are included from January 30, 2009 to December 31,2009 and SLPPL are included from July 22, 2009 to December 31,2009. For comparison purposes growth % ages used for revenues and expenditure are shown and calculated on a like to like basis (covering the same period last year i.e. January 1, 2009 to December 31, 2009).

38 A number of milestone achievements contributed to consistent cash dividend payouts, new capital investments, the Company’s success during the year. Augmentin, our and increased cost of doing business due to inflation and ‘blockbuster’ brand achieved the feat of becoming the devaluation, partly offset by higher interest rates. first brand to achieve Rs. 3 billion sales in the history of Pakistan’s pharmaceutical industry. The integrated Derma Net profit after tax for the year was Rs. 1.1 billion. business grew by 18.2%*, and now operates under the Stiefel brand umbrella. In terms of innovative products, Profit after tax two key launches – Cervarix, a vaccine for cervical cancer, and Tykerb, a treatment for certain types of breast cancers have helped GSK to offer novel life saving options to doctors and patients.

The momentum of legacy brands and other existing operations was maintained alongside the smooth and successful integration of new acquired businesses within the Company.

The Consumer Health Care Business grew strongly by 21.5% to Rs. 1.8 billion, as a result of brand innovation and enhanced consumer marketing. Panadol, Actifed, Eno and Horlicks were the main growth drivers. Cash Flows & Capital Expenditure Cash generated from operations during the year was at Rs. Export sales also achieved double digit growth during the 2.4 billion increasing by Rs. 1.1 billion from last year, mainly year with sales of Rs 594.7 million represented by major reflecting initiatives taken for working capital reduction. export markets such as Afghanistan and Srilanka. The surplus funds as at December 31, 2010 at Rs. 3.5 billion, increased by Rs. 845.0 million from last year mainly Gross margins for this year at 25.7% declined from last year due to reduction in working capital (including change of due to factors already highlighted in the past years such as trade terms of newly acquired businesses) partly offset by (a) long standing price freeze on the majority of products, dividend payouts and tax payments. (b) rupee devaluation and rising domestic inflation and (c) continuous escalation in fuel, power and utilities costs. The company invests its surplus funds in a mix of sovereign The above negative impacts have been offset to a limited investments and high credit rated bank deposits to extent by price increases obtained on a few loss making maintain a risk averse optimum interest yielding portfolio. products and also by cost savings initiatives undertaken in Effective liquidity management is in place through sound manufacturing operations. cash management strategies and active investment management in bank deposits, treasury bills and PIBs. Selling, marketing and distribution expenses stood at Liquidity risk is managed by maintaining sufficient cash and Rs. 2.3 billion. The expenses under this head increased by balances with banks in deposit accounts and short term 15.4%* mainly due to general inflation and freight cost investments. The Company maintains strong relationships on account of rising oil prices and sales volumes, coupled with its banks and constantly evaluates cash management with increased promotional investments in new and core and trade solutions to improve its investment and banking brands in particular the Consumer portfolio. operations. The Company continued to use its strong cash flows to make the required levels of investments in Administrative expenses were recorded at Rs. 826.2 business necessary to sustain long term growth. million. The impact of inflation was partially offset by cost reduction efforts in non core areas through rationalization During this year capital expenditure was Rs. 789.9 million initiatives and synergies in newly acquired businesses. (2009: Rs. 514.9 million) mainly spent on plant up- gradations and integrations, expansion and upgradation Other operating income was recorded at Rs. 397.7 million of warehousing and purchase of vehicles. decreasing by Rs. 66.0 million mainly due to a decline in investment income on lower average surplus funds outstanding during the year. This was attributable to

39 Capital Expenditure Regulatory Agency in line with previous Cabinet decisions in this regard. A modern and efficient Regulatory Authority would be needed to provide the legal regulatory structure framework essential for the growth of a quality industry in line with global standards and is also essential for the maintenance of manufacturing export standards. An early decision in this regard is being pursued. The Company’s commitment towards improving healthcare in Pakistan particularly in the area of preventive healthcare & vaccines remains integral and explicit. GSK Dividends is the world’s leading developer and manufacturer of The Company has maintained its history of providing vaccines, and hopes to partner with the government in good returns and payouts to its shareholders. The Board of protecting people against preventable diseases. Directors in its meeting held on March 07, 2011 proposed The pharmaceutical industry in Pakistan has great potential a cash dividend of Rs. 4.0 (2009: Rs. 5.0) per share and also for growth. However, its sustained success depends on issue of 15 bonus shares for every 100 shares held (15%). a regulatory environment which is able to balance the interests of this research based industry, and the need for Over the last few years, payout as well as shareholder value affordable healthcare. have been maintained as a result of Company’s sustained business growth. Intellectual property Intellectual property is a key business asset for our Future outlook and Challenges company and the effective legal protection of our Our operating environment remains under pressure on intellectual property is critical in ensuring a reasonable various fronts. However, we continue to focus on growth return on investment in research and commercialization of and strengthening our diversified product portfolio. We new treatments. are also actively engaged in developing a new products pipeline, so as to ensure a balanced business for the future, During the recent years Pakistan has made some progress creating value for our shareholders and providing new and in this regard, by updating its IPR laws to the levels required affordable healthcare solutions to patients. by global conventions but many gaps remain. At a practical level much more needs to be done to A number of new and innovative research based discourage both piracy and counterfeiting. Effective pharmaceutical products are under registration and implementation will protect both consumers and the launch. industry; and also lead to a quality and research-oriented culture which is vital for the future progress of this industry. In the Consumer Business, we have plans to invest further in developing our leading and competitive brands to Acknowledgment ensure that the business segment grows to potential. Your Company has emerged successfully through this year’s many challenges. This would not have been Pressure on margins due to devaluation of the rupee possible without the passion, resilience and commitment coupled with soaring inflation remains an area of serious of the GSK Pakistan team. On behalf of the Board; I concern. The industry is too pervasively price controlled would like to recognize the valuable contribution and and the last general price adjustment was given in 2001. strong commitment of all our employees in achieving Without a general price increase, there will be a serious the Company’s objectives. I would also appreciate risk on the future viability and profitability of the business the continuous support of our valued customers and as there is no further room to counterbalance rising costs shareholders and we look forward to delivering successfully through cost cutting initiatives. in the future.

We request the Government to take immediate steps to review and approve a pricing policy and allow a general price increase to safeguard the future of this industry.

The devolution of the functions of the Ministry of Health following the 18th Constitutional amendment has raised M. Salman Burney significant concerns on the future Regulatory framework Chairman / Chief Executive for governing this industry. It is the unanimous view of Karachi the industry’s associations as well as your Company that March 07, 2011 there is an urgent need to immediately set up a Drug

40 Financial Performance at a Glance

2010 2009 Rupees in million

Net Sales 18,916 16,754

Gross Profit 4,853 4,239

Operating Profit 1,952 1,751

Profit before Taxation 1,931 1,706

Taxation 874 665

Profit after Taxation 1,057 1,041

Dividend - cash* 832.2 853.4 - per share - Rs. 4.0 5.0

Issue of bonus shares* 312.1 –

Paid-up Capital 1,964.1 1,706.7

* Represents final cash dividend @ Rs. 4.0 per share and also issue of bonus shares @ 15% proposed by the Board of Directors subsequent to the year end.

Payout to Shareholders

Gross Profit Cash Dividend Operating Profit Bonus Shares

41 Statement of Value Added The statement below shows the amount of revenue generated by the Company during the year and the way this revenue has been distributed:

2010 2009 Rs. 000 % Rs. 000 % Revenue Generated Total revenue 19,381,633 100.0 17,278,364 100.0

Revenue distributed Bought-in-materials and Services 13,030,513 67.2 11,544,102 66.8 Selling, Marketing and Distribution Expenses 1,533,503 7.9 1,188,789 6.9 Administrative Expenses and Financial Charges 471,097 2.4 538,718 3.1

Income tax 874,341 4.5 665,289 3.9 Worker’s funds and Central research fund 171,143 0.9 151,802 0.9 Sales tax 67,746 0.3 60,798 0.4 To Government 1,113,230 5.7 877,889 5.2

Salaries,Wages and other benefits 2,150,226 11.1 2,073,122 12.0 To Employees 2,150,226 11.1 2,073,122 12.0

Donations 25,681 0.1 14,453 0.1 To Society 25,681 0.1 14,453 0.1

Cash dividend* 832,240 4.3 853,359 4.9 To Shareholders 832,240 4.3 853,359 4.9

Retained in the Business 225,143 1.3 187,932 1.0

19,381,633 100.0 17,278,364 100.0

* Represents final cash dividend @ Rs. 4.0 per share proposed by the Board of Directors subsequent to the year end.

42

2005 2006 2007 2008 2009 2010 (Rs. in million) Assets employed Fixed assets - property, plant and equipment 1,503 1,774 2,237 2,415 3,830 4,190 Goodwill – – – – 956 956 Investments 192 96 347 172 169 – Long-term loans and deposits 47 43 61 69 73 85 Net current assets 5,252 5,827 5,758 6,032 6,057 6,101 6,994 7,740 8,403 8,688 11,085 11,332 Less: Non-Current Liabilities Staff retirement benefits - Staff gratuity 159 66 23 21 73 115 Deferred taxation 97 137 262 312 418 417 256 203 285 333 491 532 Net assets employed 6,738 7,537 8,118 8,355 10,594 10,800 Financed by Issued, subscribed and paid-up capital 1,092 1,365 1,707 1,707 1,707 1,964 Reserves 5,646 6,172 6,411 6,648 8,887 8,836 Shareholders’ Equity 6,738 7,537 8,118 8,355 10,594 10,800

Turnover and profit Net sales 9,417 10,088 10,611 13,403 16,754 18,916 Gross profit 3,846 3,867 3,952 3,856 4,239 4,853 Operating profit 2,708 2,651 2,670 3,078 1,751 1,952 Profit before taxation 2,695 2,632 2,659 3,001 1,706 1,932 Taxation 881 967 988 1,046 665 874 Profit after taxation 1,814 1,665 1,671 1,955 1,041 1,058 EBTIDA 2,858 2,804 2,842 3,309 2,061 2,324 Cash Dividend including bonus shares* 1,092 1,365 1,621 1,621 853 1,144 Sale per Employee (Rs. in ‘000) 5,087 5,549 5,850 7,659 9,585 9,388 Note: - Figures for 2009 and 2010 include financial data of GloxoSmithKline Pharmaceutical (Private) Limited (GSKPPL) (formaly Bristol Myers Squibb Pakistan (Private) Limited) and Stiefel Laboratories Pakistan (Private) Limited (SLPPL).

- Figures for 2009 of GSKPPL are included from January 30, 2009 to December 31, 2009 and SLPPL are included from July 22, 2009 to December 31, 2009.

Debtors Turnover & Inventory Turnover

Debtors Turnover Inventory Turnover

43

2005 2006 2007 2008 2009 2010 (Rs. in million)

Cashflows Operating Activities 1,721 1,765 1,497 (402) 1,348 2,433 Investing Activities (179) (220) (824) 572 (262) (739) Financing Activities (609) (869) (1,086) (1,698) (1,189) (849) Changes in Cash equivalents 933 676 (413) (1,528) (103) 845 Cash & equivalents - Year end 3,990 4,666 4,253 2,725 2,693 3,538

Ratios Earnings per share Rs. 10.6 9.8 9.8 11.5 5.2 5.1 Cash dividend per share* Rs. 8.0 8.0 7.5 9.5 5.0 4.0 Bonus shares* % 25 25 25 - - 15 Price earning ratio Times 17.5 16.2 19.6 6.6 20.9 17.4 Market value per share - year end Rs. 186.3 157.9 192.4 75.9 109.3 88.2 Market value per share - high Rs. 240.3 215.8 210.0 200.0 143.8 89.5 Market value per share - low Rs. 162.1 148.0 151.1 75.9 75.0 86.3 Break-up value per share Rs. 61.7 55.2 47.6 48.9 50.9 51.9 Break-up value per share-with surplus on revaluation Rs. 61.7 55.2 47.6 48.9 50.9 51.9 Market price to Book value with surplus Times 3.0 2.9 4.0 1.6 2.1 1.7 Market capitalization Rs.in million 20,350 21,559 32,837 12,961 18,649 17,321 Dividend payout % 60.2 82.0 97.0 83.0 91.3 108.1 Dividend yield % 5.6 6.6 5.2 12.5 4.6 6.2 Dividend cover ratio Times 1.7 1.2 1.0 1.2 1.1 0.9 Return on equity % 26.9 22.1 20.6 23.4 9.8 9.8 Total assets turnover Times 1.1 1.1 1.0 1.3 1.2 1.3 Fixed assets turnover Times 6.3 5.7 4.7 5.5 4.4 4.5 Debtors turnover Days 1.9 2.7 3.5 15.4 25.5 15.7 Creditors turnover Days 23 25 25 17 33 34 Inventory turnover Days 54 63 69 56 66 68 Current ratio 5.1 4.4 4.3 4.1 2.8 2.7 Acid test ratio 3.6 3.1 3.0 2.3 1.5 1.5 Gross profit % 40.8 38.3 37.2 28.8 25.3 25.7 EBITDA Margin to Sales % 30.4 27.8 26.8 24.7 12.3 12.3 Net profit % 19.3 16.5 15.7 14.6 6.2 5.6

* Represents final cash dividend @ Rs 4.0 per share and also issue of bonus shares @ 15% proposed by the Board of Directors subsequent to the year end.

44 Vertical Analysis

Balance Sheet Analysis (%) 2005 2006 2007 2008 2009 2010

Share Capital and Reserves 81.5 79.8 79.9 78.6 73.4 72.5 Non Current Liabilities 3.1 2.1 2.8 3.1 3.4 3.6 Current Liabilities 15.4 18.1 17.3 18.3 23.2 23.9 Total Equity and Liabilities 100.0 100.0 100.0 100.0 100.0 100.0 Non Current Assets 21.1 20.3 26.0 25.0 34.8 35.1 Current Assets 78.9 79.7 74.0 75.0 65.2 64.9 Total Assets 100.0 100.0 100.0 100.0 100.0 100.0

Profit and Loss Account Analysis (%)

Net sales 100.0 100.0 100.0 100.0 100.0 100.0

Cost of sales 59.2 61.7 62.8 71.2 74.7 74.3

Gross profit 40.8 38.3 37.2 28.8 25.3 25.7

Selling, marketing and distribution expenses 9.6 10.4 11.4 9.9 11.6 12.2

Administrative expenses 3.7 4.3 4.6 3.9 5.1 4.4

Other operating expenses 2.4 2.2 2.1 1.6 0.9 0.9

Other operating income 3.7 4.9 6.0 9.6 2.8 2.1

Operating profit 28.8 26.3 25.1 23.0 10.5 10.3

Financial charges 0.1 0.2 0.1 0.6 0.3 0.1

Profit before taxation 28.6 26.1 25.0 22.4 10.2 10.2

Taxation 9.4 9.6 9.3 7.8 4.0 4.6

Profit after taxation 19.3 16.5 15.7 14.6 6.2 5.6

Note: - Figures for 2009 and 2010 include financial data of GloxoSmithKline Pharmaceutical (Private) Limited (GSKPPL) (formaly Bristol Myers Squibb Pakistan (Private) Limited) and Stiefel Laboratories Pakistan (Private) Limited (SLPPL).

- Figures for 2009 of GSKPPL are included from January 30, 2009 to December 31, 2009 and SLPPL are included from July 22, 2009 to December 31, 2009.

45 Horizontal Analysis

Balance Sheet Analysis (%) Change from preceeding year 2005 2006 2007 2008 2009 2010

Share Capital and Reserves 21.4 11.9 7.7 2.9 26.8 1.9 Non Current Liabilities 13.8 (20.7) 40.4 16.8 47.4 8.4 Current Liabilities 16.5 33.8 3.5 10.0 72.7 6.4 Total Equity and Liabilities 20.4 14.2 7.6 4.5 35.8 3.2 Non Current Assets (8.1) 9.8 38.3 0.4 89.3 4.0 Current Assets 31.3 15.4 (0.1) 6.0 18.0 2.7 Total Assets 20.4 14.2 7.6 4.5 35.8 3.2

Profit and Loss Account Analysis (%) Change from preceeding year

Net sales 6.2 7.1 5.2 26.3 25.0 12.9

Cost of sales 3.9 11.7 7.0 43.4 31.1 12.4

Gross profit 9.7 0.5 2.2 (2.4) 10.0 14.5

Selling, marketing and distribution expenses (13.1) 16.7 15.0 9.7 46.7 18.1

Administrative expenses 3.1 20.7 11.4 6.8 63.7 (2.9)

Other operating expenses 44.2 (1.3) 0.9 (7.1) (26.9) 12.5

Other operating income 86.2 41.7 28.8 100.3 (63.8) (14.2)

Operating profit 26.1 (2.1) 0.7 15.3 (43.1) 11.5

Financial charges (55.2) 46.2 (36.8) 541.7 (41.6) (55.6)

Profit before taxation 27.1 (2.3) 1.0 12.9 (43.2) 13.2

Taxation 36.0 9.8 2.2 5.9 (36.4) 31.4

Profit after taxation 23.3 (8.2) 0.4 17.0 (46.8) 1.6

46

Statement of Compliance with the Code of Corporate Governance for the year ended December 31, 2010

This statement is being presented to comply with the Code of Corporate Governance contained in the listing regulations of Karachi and Lahore Stock Exchanges for the purpose of establishing a framework of good governance, whereby a listed company is managed in compliance with the best practices of corporate governance. The Company has applied the principles contained in the Code as follows:

1. The Company encourages representation of independent non-executive directors and representation of minority interests on its Board of Directors. At present the Board includes two non-executive directors one of whom represents minority shareholders’ interests.

2. The directors have confirmed that none of them is serving as a director in more than ten listed companies including this company.

3. All the resident directors of the Company are registered as taxpayers and none of them has defaulted in payment of any loan to a banking company, a DFI or a NBFI or, being a member of Stock Exchange, has been declared as a defaulter by that Stock Exchange.

4. The Company has a vision/mission statement and overall corporate strategy. All policies of the Company are governed by the “Corporate Governance Charter” which has been approved by the Board.

5. The Company has prepared a “Statement of Ethics and Business Practices” which has been signed by the directors and employees of the Company.

6. One casual vacancy occurred in the Board of Directors during the year which was filled in as per law.

7. The powers of the Board have been duly exercised and decisions on material transactions, including appointment and determination of remuneration and terms and conditions of employment of CEO and other executive directors have been taken by the Board, and significant matters are documented by a resolution passed by the Board.

8. The meetings of the Board were presided over by the Chairman and the Board met at least once in every quarter. Written notices of the Board meetings, along with the agenda were circulated at least seven days before the meetings. The minutes of the meetings were appropriately recorded and circulated.

9. There was no new appointment of CFO or Company Secretary during the year.

10. All the directors on the Board are fully conversant with their duties and responsibilities as directors of corporate bodies. The Board had previously arranged an orientation course of the Code of Corporate Governance for its directors to apprise them of their roles and responsibilities. Further, the Booklet on Code of Corporate Governance as published by the Securities and Exchange Commission of Pakistan was circulated amongst the directors on the Board.

49 11. The directors’ report for this year has been prepared in compliance with the requirements of the Code and fully describes the salient matters required to be disclosed.

12. The financial statements of the Company were duly endorsed by the CEO and CFO before the approval of the Board.

13. The directors, CEO and executives do not hold any interest in the shares of the Company other than that disclosed in the pattern of shareholding.

14. The Company has complied with all the corporate and financial reporting requirements of the Code.

15. The Audit Committee has been in existence since May 2002. It comprises three members, of whom two are non- executive directors including the chairman of the committee.

16. The Board has outsourced the internal audit function to Ford Rhodes Sidat Hyder & Co. who are considerad suitably qualified and experienced for the purpose and are conversant with the policies and procedures of the company and they are involved in the internal audit function on a full time basis.

17. The meetings of the audit committee were held at least once in every quarter prior to approval of interim and final results of the Company as required by the Code. The terms of reference of the committee have been formed and advised to the committee for compliance.

18. The statutory auditors of the Company have confirmed that they have been given satisfactory rating under the Quality Control Review Program of the Institute of Chartered Accountants of Pakistan, that they or any of the partners of the firm, their spouses and minor children do not hold shares of the Company and that the firm and all its partners are in compliance with International Federation of Accountants (IFAC) guidelines on code of ethics as adopted by Institute of Chartered Accountants of Pakistan.

19. The statutory auditors or the persons associated with them have not been appointed to provide other services except in accordance with the listing regulations and the auditors have confirmed that they have observed IFAC guidelines in this regard.

20. The related party transactions have been placed before the audit committee and approved by the Board of Directors alongwith pricing methods. The transactions were carried out on terms equivalent to those that prevail in the arm’s length transactions.

21. We confirm all other material principles contained in the Code have been complied with.

Karachi M. Salman Burney March 07, 2011 Chairman / Chief Executive

50 Review Report to the Members on Statement of Compliance with Best Practices of Code of Corporate Governance

We have reviewed the Statement of Compliance with the Best Practices contained in the Code of Corporate Governance prepared by the Board of Directors of GlaxoSmithKline Pakistan Limited to comply with the Listing Regulation No. 35 of the Karachi and Lahore Stock Exchanges where the company is listed.

The responsibility for compliance with the Code of Corporate Governance is that of the Board of Directors of the company. Our responsibility is to review, to the extent where such compliance can be objectively verified, whether the Statement of Compliance reflects the status of the company's compliance with the provisions of the Code of Corporate Governance and report if it does not. A review is limited primarily to inquiries of the company personnel and review of various documents prepared by the company to comply with the Code.

As part of our audit of financial statements we are required to obtain an understanding of the accounting and internal control systems sufficient to plan the audit and develop an effective audit approach. We have not carried out any special review of the internal control system to enable us to express an opinion as to whether the Board's statement on internal controls covers all controls and the effectiveness of such internal controls.

Further, Sub-Regulation (xiii a) of Listing Regulation 35 notified by Karachi and Lahore Stock Exchanges require the company to place before the board of directors for their consideration and approval related party transactions distinguishing between transactions carried out on terms equivalent to those that prevail in arm's length transactions and transactions which are not executed at arm's length price recording proper justification for using such alternate price mechanism. Further, all such transactions are also required to be separately placed before the audit committee. We are only required and have ensured compliance of requirement to the extent of approval of related party transactions by the Board of Directors and placement of such transactions before the audit committee. We have not carried out any procedures to determine whether the related party transactions were undertaken at arm's length price or not.

Based on our review, nothing has come to our attention which causes us to believe that the Statement of Compliance does not appropriately reflect the company's compliance, in all material respects, with the best practices contained in the Code of Corporate Governance as applicable to the company for the year ended December 31, 2010.

A. F. Ferguson & Co. Chartered Accountants

Karachi March 07, 2011

51 Auditors’ Report to the Members

We have audited the annexed balance sheet of GlaxoSmithKline Pakistan Limited as at December 31, 2010 and the related profit and loss account, cash flow statement and statement of changes in equity together with the notes forming part thereof, for the year then ended and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit. It is the responsibility of the company's management to establish and maintain a system of internal control, and prepare and present the above said statements in conformity with the approved accounting standards and the requirements of the Companies Ordinance, 1984. Our responsibility is to express an opinion on these statements based on our audit. We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of any material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the above said statements. An audit also includes assessing the accounting policies and significant estimates made by management, as well as, evaluating the overall presentation of the above said statements. We believe that our audit provides a reasonable basis for our opinion and, after due verification, we report that: (a) In our opinion, proper books of account have been kept by the company as required by the Companies Ordinance, 1984; (b) In our opinion: (i) the balance sheet and profit and loss account together with the notes thereon have been drawn up in conformity with the Companies Ordinance, 1984, and are in agreement with the books of account and are further in accordance with accounting policies consistently applied ; (ii) the expenditure incurred during the year was for the purpose of the company's business; and (iii) the business conducted, investments made and the expenditure incurred during the year were in accordance with the objects of the company; (c) In our opinion and to the best of our information and according to the explanations given to us, the balance sheet, profit and loss account, cash flow statement and statement of changes in equity together with the notes forming part thereof conform with approved accounting standards as applicable in Pakistan, and, give the information required by the Companies Ordinance, 1984, in the manner so required and respectively give a true and fair view of the state of the company's affairs as at December 31, 2010 and of the profit, its cash flows and changes in equity for the year then ended; and (d) In our opinion, Zakat deductible of source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980), was deducted by the company and deposited in the Central Zakat Fund established under section 7 of the Ordinance.

A. F. Ferguson & Co. Chartered Accountants

Karachi March 07, 2011 Name of Engagement Partner: Syed Fahim ul Hasan

52 Balance Sheet as at December 31, 2010 Restated Restated Note 2010 2009 2008 Rupees '000

SHARE CAPITAL AND RESERVES Share capital 5 1,964,118 1,706,718 1,706,718

Reserves 6 8,835,696 8,886,768 6,648,173 10,799,814 10,593,486 8,354,891 NON-CURRENT LIABILITIES

Staff retirement benefits 7 115,240 72,885 20,802 Deferred taxation 8 416,452 417,669 312,270 531,692 490,554 333,072 CURRENT LIABILITIES

Trade and other payables 9 3,429,292 3,103,045 1,770,158 Provisions 10 131,001 236,934 97,117 Taxation - provision less payments - - 70,387 Short-term borrowings - running finance - 4,520 - Mark-up accrued - 2,369 - 3,560,293 3,346,868 1,937,662 4,091,985 3,837,422 2,270,734 CONTINGENCIES AND COMMITMENTS 11

14,891,799 14,430,908 10,625,625

M. Salman Burney Javed Ahmedjee Chairman / Chief Executive Chief Financial Officer

53 Restated Restated Note 2010 2009 2008 Rupees '000

NON-CURRENT ASSETS

Fixed assets - property, plant and equipment 12 4,189,996 3,829,588 2,415,255

Intangible 13 955,742 956,045 -

Long-term loans to employees 14 73,590 61,299 61,666

Long-term deposits 11,871 12,347 6,788

Investments 15 - 168,687 171,855 5,231,199 5,027,966 2,655,564 CURRENT ASSETS

Stores and spares 16 150,632 142,065 116,084 Stock-in-trade 17 4,312,535 4,543,689 3,494,054 Trade debts 18 295,762 1,328,457 1,016,968 Loans and advances 19 144,267 94,848 119,242 Trade deposits and prepayments 20 96,234 106,224 93,377 Interest accrued 19,443 22,522 80,596 Refunds due from government 21 17,534 3,050 15,468 Other receivables 22 290,056 111,196 153,864 Taxation - payments less provision 623,410 352,849 - Investments 15 901,955 644,889 155,511 Cash and bank balances 23 2,808,772 2,053,153 2,724,897 9,660,600 9,402,942 7,970,061

14,891,799 14,430,908 10,625,625

The annexed notes 1 to 43 form an integral part of these financial statements.

M. Salman Burney Javed Ahmedjee Chairman / Chief Executive Chief Financial Officer

54 Profit and Loss Account For the year ended December 31, 2010

Restated 2010 2009 Note Rupees’ 000

Net sales 24 18,916,191 16,753,873

Cost of sales 25 (14,063,242) (12,514,592)

Gross profit 4,852,949 4,239,281

Selling, marketing and distribution expenses 26 (2,301,516) (1,949,079)

Administrative expenses 27 (826,236) (850,868)

Other operating expenses 28 (171,143) (151,802)

Other operating income 29 397,696 463,693

Operating profit 1,951,750 1,751,225

Financial charges 30 (20,026) (44,645)

Profit before taxation 1,931,724 1,706,580

Taxation 31 (874,341) (665,289)

Profit after taxation 1,057,383 1,041,291

Other comprehensive income

Fair value gain on available-for-sale investments 3,544 15,356

Deferred tax thereon (1,240) (5,375) 2,304 9,981

Total comprehensive income 1,059,687 1,051,272

Earnings per share 32 Rs.5.08 Rs. 5.22

The annexed notes 1 to 43 form an integral part of these financial statements.

M. Salman Burney Javed Ahmedjee Chairman / Chief Executive Chief Financial Officer

55 Cash Flow Statement For the year ended December 31, 2010

Restated Note 2010 2009 Rupees’ 000

CASH FLOWS FROM OPERATING ACTIVITIES

Cash generated from operations 33 3,647,883 2,417,330 Financial charges paid (2,369) (14,477) Staff retirement benefits paid (53,016) (45,073) Taxes paid (1,147,359) (1,011,671) (Increase) / decrease in long-term loans to employees (12,291) 367 Decrease in long-term deposits 476 865 Net cash from operating activities 2,433,324 1,347,341

CASH FLOWS FROM INVESTING ACTIVITIES

Fixed capital expenditure (789,884) (514,950) Proceeds from sale of operating assets 34,278 54,660 Investments encashed - 175,000 Return on investments - PIBs 16,275 24,171 Net cash used in investing activities (739,331) (261,119)

CASH FLOWS FROM FINANCING ACTIVITIES

Dividend paid (849,019) (1,189,558)

Net increase / (decrease) in cash and cash equivalents 844,974 (103,336)

Cash and cash equivalents at the beginning of the year 2,693,522 2,724,897 Cash and cash equivalents acquired through business combinations - notes 3 & 4 - 71,961 Cash and cash equivalents at the end of the year 34 3,538,496 2,693,522

The annexed notes 1 to 43 form an integral part of these financial statements.

M. Salman Burney Javed Ahmedjee Chairman / Chief Executive Chief Financial Officer

56 Statement of Changes in Equity For the year ended December 31, 2010

Share C A P I T A L R E S E R V ES Fair value General Unappropriated Total capital Share Reserve Issue of reserve reserve profit premium arising on shares - amalgamation Notes 3&4 Rupees '000

Balance at January 1, 2009 1,706,718 1,409 375,572 - (12,368) 3,999,970 2,283,590 8,354,891 Amalgamation of former GlaxoSmithKline Pharmaceuticals (Private) Limited (GSK PPL) - Note 3 - - 1,579,721 257,400 - - - 1,837,121 Amalgamation of former Stiefel Laboratories Pakistan (Private) Limited (SLPPL) - Note 4 - - 428,422 116,483 - - - 544,905 Final dividend for the year ended December 31, 2008 @ Rs. 7.00 per share ------(1,194,703) (1,194,703) Profit after taxation for the year ended December 31, 2009 ------1,041,291 1,041,291 Profit of GSKPPL and SLPPL for the period prior to effective date of legal amalgamation transferred to capital reserve - Note 2.16 - - 107,361 - - - (107,361) - Fair value gain on available-for-sale investments - - - - 9,981 - - 9,981 Total comprehensive income for the year ended December 31, 2009 - - 107,361 - 9,981 - 933,930 1,051,272 Balance at December 31, 2009 1,706,718 1,409 2,491,076 373,883 (2,387) 3,999,970 2,022,817 10,593,486 Final dividend for the year ended December 31, 2009 @ Rs. 5.00 per share ------(853,359) (853,359) Issuance of 25,740,000 ordinary shares to the qualifying shareholders of former GlaxoSmithKline Pharmaceuticals (Private) Limited - Note 3 257,400 - - (257,400) - - - - Profit after taxation for the year ended ended December 31, 2010 ------1,057,383 1,057,383 Profit of SLPPL for the period prior to effective date of legal amalgamation transferred to capital reserve - Note 2.16 - - 3,843 - - - (3,843) Fair value gain on available-for-sale investments - - - - 2,304 - 2,304

Total comprehensive income for the year ended December 31, 2010 - - 3,843 - 2,304 - 1,053,540 1,059,687

Balance at December 31, 2010 1,964,118 1,409 2,494,919 116,483 (83) 3,999,970 2,222,998 10,799,814

The annexed notes 1 to 43 form an integral part of these financial statements.

M. Salman Burney Javed Ahmedjee Chairman / Chief Executive Chief Financial Officer

57 Notes to and forming part of the Financial Statements For the year ended December 31, 2010

1. THE COMPANY AND ITS OPERATIONS

The company is incorporated in Pakistan as a limited liability company and is listed on the Karachi and Lahore Stock Exchanges. It is engaged in manufacturing and marketing of research based ethical specialties, other pharmaceutical, animal health and consumer products.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these financial statements are set out below.

2.1 Basis of preparation

Statement of compliance

These financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board as are notified under the Companies Ordinance, 1984, provisions of and directives issued under the Companies Ordinance, 1984. In case requirements differ, the provisions or directives of the Companies Ordinance, 1984 shall prevail.

Critical accounting estimates and judgements

The preparation of financial statements in conformity with the IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the company's accounting policies. The matters involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant which have been disclosed in the relevant notes to the financial statements are:

i) Provision for retirement benefits ii) Impairment of non-current assets iii) Provision for obsolete and slow moving stock iv) Provision for doubtful receivables v) Taxation

Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

There have been no critical judgments made by the company's management in applying the accounting policies that would have effect on the amounts recognised in the financial statements.

2.2 Change arising from standards, interpretations and amendments to published approved accounting standards that are effective in the current year

New standards, amendments and interpretations that are mandatory for accounting periods beginning on or after January 1, 2010 are considered not to be relevant or to have any significant effect on the company’s financial reporting and operations.

2.3 Overall valuation policy

These financial statements have been prepared under the historical cost convention except as otherwise disclosed in the accounting policies below.

58 Notes to and forming part of the Financial Statements

2.4 Staff retirement benefits

2.4.1 The company operates following defined benefit plans:

- Approved funded gratuity schemes for its permanent employees; and

- Approved funded pension scheme only for management employees of former GlaxoSmithKline Pharmaceuticals (Private) Limited.

Contributions to the gratuity and pension schemes are based on actuarial recommendations. The latest actuarial valuations of the schemes were carried out as at December 31, 2010 using the Projected Unit Credit Method.

Cumulative net unrecognised actuarial gains and losses at the beginning of the year which exceed 10% of the greater of the present value of the obligations and the fair value of respective fund’s assets are amortised over the average remaining working life of the employees.

Retirement benefits are payable to employees on completion of prescribed qualifying period of service under the schemes.

2.4.2 The company also operates approved contributory provident funds for all its permanent employees.

2.5 Compensated absences

The company provides for compensated absences of its employees on unavailed balance of leave in the period in which the leave is earned.

2.6 Taxation

2.6.1 Current

The charge for current taxation is based on taxable income at the current rates of taxation after taking into account tax credits and rebates available, if any, and taxes paid under the final tax regime.

2.6.2 Deferred

Deferred tax is accounted for using the balance sheet liability method on all temporary differences arising between tax bases of assets and liabilities and their carrying amounts. Deferred tax liability is generally recognised for all taxable temporary differences and deferred tax asset is recognised to the extent that it is probable that taxable profits will be available against which the deductible temporary differences, unused tax losses and tax credits can be utilised. Deferred tax is charged or credited in the profit and loss account except for deferred tax arising on revaluation of available for sale investments which is recognised in other comprehensive income.

2.7 Provisions

Provisions are recognised when the company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount can be made.

59 2.8 Fixed assets - property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation / amortisation and accumulated impairment.

Depreciation is charged using the straight line method whereby the carrying value of an asset less estimated residual value, if not insignificant, is written off over its estimated remaining useful life. Depreciation / amortisation on assets is charged from the month of addition to the month of disposal. Cost of leasehold land is amortised over the period of the lease.

Maintenance and normal repairs are charged to income as and when incurred. Major renewals and improvements are capitalised and the assets so replaced, if any, are retired.

Gains and losses on disposal of fixed assets are included in income currently.

2.9 Impairment

The carrying values of assets are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. If any such indication exists, assets or cash-generating units are tested for impairment. Cash-generating units to which goodwill is allocated are also tested for impairment annually. Where the carrying values of assets or cash-generating units exceed the estimated recoverable amount, these are written down to their recoverable amount and the resulting impairment is charged to profit and loss account.

Impairment is reversed only if there has been a change in estimates used to determine recoverable amounts and only to the extent that the revised recoverable amount does not exceed the carrying values that would have existed, had no impairments been recognised, except impairment of goodwill which is not reversed.

2.10 Goodwill

Goodwill is stated at cost less impairments.

Goodwill represents excess of consideration transferred over the fair value of the interest acquired in the net assets of an entity. After initial recognition, it is carried at cost less accumulated impairment, if any.

Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash- generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other non financial assets of the unit. Impairment tests are based on risk-adjusted future cash flows discounted using appropriate discount rates. These future cash flows are based on business forecasts and are therefore inherently judgemental. Future events could cause the assumptions used in these impairment tests, as set out in note 13, ‘Intangible’, to change with a consequent adverse effect on the future results of the company.

2.11 Investments

Available-for-sale

Securities intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in the interest rates, are classified as available-for-sale.

Available-for-sale investments are initially recognised at fair value plus transaction cost and subsequently recognised at fair value.

Gains and losses arising from changes in fair value are recognised in other comprehensive income.

Held-to-maturity

These are investment with fixed or determinable payments and fixed maturity with the company having postitive intent and ability to hold to maturity. These are stated at amortised cost.

60 Notes to and forming part of the Financial Statements

2.12 Stores and spares

These are valued at lower of cost, determined using moving average method, and estimated recoverable amount. Items in transit are valued at cost comprising invoice value plus other charges incurred thereon. Provision is made for items which are obsolete and slow moving.

2.13 Stock-in-trade

These are valued at the lower of cost and net realisable value except goods-in-transit which are stated at cost. Cost is determined using first-in first-out method.

Cost of raw and packing materials comprise of purchase price including directly related expenses less trade discounts. Cost of work-in-process and finished goods include cost of raw and packing materials, direct labour and related production overheads.

2.14 Trade debts

Trade debts are valued at the invoice value. Provision is made against debts considered doubtful of recovery. Bad debts are written off when considered irrecoverable.

2.15 Cash and cash equivalents

Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of the cash flow statement, cash and cash equivalents comprise of cash and cheques in hand, balances with banks on current, savings and deposit accounts, short-term investments and short-term borrowings under running finance,maturing within three months of the balance sheet date.

2.16 Business combination

The company accounts for business combinations involving entities or businesses under common control using predecessor value method. The financial statements present the results as if both the combining businesses were always combined from the later of the earliest period presented and the date when both the combining businesses came under common control. Accordingly, the financial statements incorporate the assets and liabilities at the values on which these were included in the consolidated financial statements of the highest entity having common control on the above date and the results of operations therefrom.

2.17 Foreign currency translation

Foreign currency transactions are recorded into Pak Rupee using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities in foreign currency are translated into Pak Rupee at the rates of exchange prevailing at the balance sheet date. Exchange gains and losses are included in income currently.

The financial statements are presented in Pak Rupee, which is the company's functional and presentation currency.

61 2.18 Revenue recognition

Sales are recorded on despatch of goods to customers and in case of export when the goods are shipped.

Returns on deposits and investments are recognised on accrual basis.

2.19 Financial assets and liabilities

All financial assets and liabilities are initially measured at cost which is the fair value of the consideration given or received respectively. These are subsequently measured at fair value, amortised cost or cost as the case may be.

2.20 Dividend

Dividend is recognised as a liability in the period in which it is approved.

2.21 Share based payment

Cash settled share based payments provided to employees are recorded as liability in the financial statements at the fair value.

62 Notes to and forming part of the Financial Statements

3. AMALGAMATION OF GLAXOSMITHKLINE PHARMACEUTICALS (PRIVATE) LIMITED (GSKPPL) FORMERLY BRISTOL-MYERS SQUIBB PAKISTAN (PRIVATE) LIMITED WITH THE COMPANY

GlaxoSmithKline Pharmaceuticals (Private) Limited (GSKPPL) was incorporated as a private limited company for the manufacture and sale of pharmaceutical products.

Under a scheme of arrangement for amalgamation of GSKPPL with the company sanctioned by the honourable High Court of Sindh (the Scheme) on March 17, 2010, effective January 1, 2010 GSKPPL has been amalgamated with the company and the company issued 25.74 million shares to former shareholders of GSKPPL, i.e. 25.74 ordinary shares of the company for every 1 share of GSKPPL, for transfer of and vesting in, the whole of their undertaking and businesses to the company.

GlaxoSmithKline plc, UK became ultimate parent of GSKPPL on January 30, 2009. GlaxoSmithKline plc, UK is also the ultimate parent of the company.

3.1 The fair values of assets and liabilities at the acquisition date, when GlaxoSmithKline plc, UK became ultimate parent of GSK PPL were as follows:

Rupees '000 Non-Current assets Fixed assets - property, plant and equipment 992,118 Goodwill 955,742 Long term deposits 1,422 1,949,282

Current assets Stores and spares 14,003 Stock-in-trade 312,904 Trade debts 282,285 Trade deposits and prepayments 33,886 Staff retirement benefits 7,699 Taxation - payments less provision 42,756 Cash and bank balances 11,535 705,068 Total assets 2,654,350 Non-Current Liabilities Deferred taxation (97,905)

Current liabilities Trade and other payables (584,243) Short term running finance (135,081) (719,324) Total liabilities (817,229)

Net assets acquired by the company 1,837,121

63 4. AMALGAMATION OF STIEFEL LABORATORIES PAKISTAN (PRIVATE) LIMITED (SLPPL) WITH THE COMPANY

Stiefel Laboratories Pakistan (Private) Limited (SLPPL) was incorporated as a private limited company for manufacture, import and marketing of dermatological products.

Under a scheme of arrangement for amalgamation of SLPPL with the company sanctioned by the honourable High Court of Sindh (the Scheme) on January 22, 2011, effective July 1, 2010 SLPPL has been amalgamated with the company and the company is to issue 11.65 million shares to former shareholders of SLPPL, i.e. 144.52 ordinary shares of the company for every 1 share of SLPPL, for transfer of and vesting in, the whole of their undertaking and businesses to the company.

GlaxoSmithKline plc, UK became ultimate parent of SLPPL on July 22, 2009. GlaxoSmithKline plc, UK is also the ultimate parent of the company.

4.1 The fair values of assets and liabilities at the acquisition date, when GlaxoSmithKline plc, UK became ultimate parent of SLPPL, were as follows: Rupees '000 Non-Current assets Fixed assets - property, plant and equipment 303,767 Intangible 498 Long term deposits 5,002 309,267 Current assets Stock-in-trade 105,840 Trade debts 42,917 Loans and advances 867 Trade deposits and prepayments 30,311 Taxation - payments less provision 39,172 Cash and bank balances 195,507 414,614 Total assets 723,881

Non-Current Liabilities Deferred taxation (7,193) Staff retirement benefits (4,180) (11,373)

Current liabilities Trade and other payables (167,603) Total liabilities (178,976)

Net assets acquired by the company 544,905

64 Notes to and forming part of the Financial Statements

2010 2009 5. SHARE CAPITAL Rupees ’000

Authorised share capital

2010 2009 500,000,000 250,000,000 Ordinary shares of Rs. 10 each 5,000,000 2,500,000

Issued, subscribed and paid-up capital

Ordinary shares of Rs. 10 each 2010 2009

5,386,825 5,386,825 Shares allotted for consideration paid in cash 53,868 53,868

52,691,523 26,951,523 Shares allotted for consideration other than cash 526,915 269,515

138,333,496 138,333,496 Shares allotted as bonus shares 1,383,335 1,383,335

196,411,844 170,671,844 1,964,118 1,706,718

5.1 As at December 31, 2010 S.R. One International B.V., Netherlands and its nominees held 160,180,718 shares (2009: 134,453,588 shares). During the year, the shares held by Setfirst Limited, UK have been transferred to S.R. One International B.V., Netherlands. The ultimate parent of the company is GlaxoSmithKline plc, UK.

Restated 2010 2009 Rupees ’000 6. RESERVES

Capital reserves Share premium 1,409 1,409 Reserve arising on amalgamation 2,494,919 2,491,076 Issue of shares 116,483 373,883 2,612,811 2,866,368

Fair value reserve - note 6.1 (83) (2,387) General reserve 3,999,970 3,999,970 Unappropriated profit 2,222,998 2,022,817 8,835,696 8,886,768

6.1 This represents deficit arising on revaluation of available-for-sale investments as follows: 2010 2009 Rupees ’000

Deficit on revaluation (128) (3,672) Deferred tax Thereon 45 1,285 (83) (2,387)

65 Gratuity funds Pens ion fund Restated Restated 2010 2009 2010 2009 Rupees ’000 Rupees ’000 7. STAFF RETIREMENT BENEFITS

7.1 Movement in liability / (asset)

Opening balance 72,885 20,802 (13,467) - Liability / (asset) acquired through business combinations - notes 3 & 4 - 2,319 - (5,838) Charge / (Reversal) for the year - note 7.5 95,371 94,837 (5,388) (7,629) Payments to the fund (53,016) (45,073) - - Closing balance 115,240 72,885 (18,855) (13,467)

7.2 Balance sheet reconciliation

Present value of defined benefit obligation 940,478 883,550 67,850 58,593 Fair value of plan assets (635,425) (641,827) (111,558) (100,610) 305,053 241,723 (43,708) (42,017)

Unrecognised actuarial (loss) / gain (189,813) (168,838) 24,853 28,550 115,240 72,885 (18,855) (13,467)

7.3 Movement in the present value of defined benefit obligation during the year is as follows:

Balance at January 1 883,550 641,237 58,593 - Liability assumed through business combinations - notes 3 & 4 - 137,417 - 46,316 Current service cost 55,976 54,323 2,343 2,715 Interest cost 109,927 107,475 8,203 6,947 Actuarial loss / (gain) 19,796 (6,992) 1,246 4,812 Benefits paid (128,771) (49,910) (2,535) (2,197) Balance at December 31 940,478 883,550 67,850 58,593

7.4 Movement in the present value of plan assets during the year is as follows:

Balance at January 1 641,827 446,759 100,610 - Asset acquired through business combinations - notes 3 & 4 - 118,535 - 95,039 Expected return on plan assets 81,486 75,990 14,085 14,256 Actuarial (loss) / gain (12,133) 5,380 (602) (6,488) Employer's contributions 53,016 45,073 - - Benefits paid (128,771) (49,910) (2,535) (2,197) Balance at December 31 635,425 641,827 111,558 100,610

7.5 Charge / (reversal) for the year

Current service cost 55,976 54,323 2,343 2,715 Interest cost 109,927 107,475 8,203 6,947 Expected return on plan assets (81,486) (75,990) (14,085) (14,256) Recognition of actuarial loss / (gain) 10,954 9,029 (1,849) (3,035) 95,371 94,837 (5,388) (7,629)

7.6 Actual return on plan assets 69,353 81,370 13,483 7,768

66 Notes to and forming part of the Financial Statements

Gratuity funds Pension fund Restated Restated 2010 2009 2010 2009 Rupees ’000 Rupees ’000 7.7 Principal actuarial assumptions

Expected return on plan assets (% per annum) 14.50 12.75 - 14.00 14.50 14.00 Expected rate of increase in salaries (% per annum) 14.50 12.75 - 14.00 14.50 14.00 Discount factor used (% per annum) 14.50 12.75 - 14.00 14.50 14.00 Retirement age (years) 60 60 60 60 Average remaining working life of employees (years) 10 - 13 10 - 13 14 14

Expected return on plan assets has been determined considering the expected risk adjusted returns available on the assets underlying the current investment policy. Gratuity funds Pension fund 2010 2009 2010 2009 % % % % 7.8 Plan assets

Plan assets are comprised of the following: - Equity and mutual funds 16.11 21.95 - - - Bonds 52.21 51.42 95.06 98.75 - Others 31.68 26.63 4.94 1.25 100.00 100.00 100.00 100.00

7.9 For the year ending December 31, 2011 expected contribution to funded gratuity schemes is Rs. 110.08 million. No contribution is expected to be paid to funded pension scheme.

7.10 Comparison for five years

Gratuity fund 2010 2009 2008 2007 2006 Rupees '000

Fair value of plan assets 635,425 641,827 446,759 529,756 372,849 Present value of defined benefit obligation (940,478) (883,550) (641,237) (574,654) (482,634) Deficit (305,053) (241,723) (194,478) (44,898) (109,785)

Experience (loss) / gain on plan assets (12,133) 5,380 128,538 (47,104) (8,910) Experience loss / (gain) on plan liabilities 19,796 (6,992) 23,432 25,082 23,080

Pension fund

Fair value of plan assets 111,558 100,610 Present value of defined benefit obligation (67,850) (58,593) Surplus / (Deficit) 43,708 42,017

Experience (loss) / gain on plan assets (602) (6,488) Experience loss / (gain) on plan liabilities 1,246 4,812

7.11 Information given in note 7 is primarily based on actuarial advice.

67 Restated 2010 2009 Rupees ’000 8. DEFERRED TAXATION Credit balance arising in respect of accelerated tax depreciation allowances 481,094 466,770 Debit balances arising in respect of: - Provision for retirement benefits 29,736 21,004 - Provision for doubtful debts 8,995 6,325 - Provision for slow moving and obsolete stock 17,571 13,019 - Provision for slow moving and obsolete stores and spares 2,711 2,031 - Provision for refunds due from government doubtful of recovery 5,584 5,437 - Loss on revaluation of available-for-sale investments 45 1,285 64,642 49,101 416,452 417,669 9. TRADE AND OTHER PAYABLES Creditors - Associated companies 932,909 961,723 - Others 297,963 196,370 Bills payable - Associated companies 41,242 95,950 - Others 33,086 53,983 Royalty and technical fee payable - Associated company 247,136 233,897 - Others 79,346 60,247 Accrued liabilities 1,429,335 1,124,821 Advances from customers 185,682 174,769 Contractors' earnest / retention money 11,836 5,009 Taxes deducted at source and payable to statutory authorities 15,919 10,772 Workers' Profits Participation Fund - note 9.1 24,119 10,102 Workers’ Welfare Fund 53,635 58,559 Central Research Fund 19,512 17,159 Unclaimed dividend 42,894 38,554 Payable to provident fund - 8,984 Others 14,678 52,146 3,429,292 3,103,045 9.1 Workers' Profits Participation Fund Opening liability / (asset) 10,102 (3,205) Liability assumed through business combinations - notes 3 & 4 - 32,049 Allocation for the year – note 28 105,150 91,686 115,252 120,530 Interest on funds utilised in company's business – note 30 136 - 115,388 120,530 Amounts paid to the Fund (91,269) (110,428) Closing liability 24,119 10,102 10. PROVISIONS

Restructuring cost - note 10.2 131,001 236,934 10.1 Reconciliation of provisions Balance as at January 1 236,934 97,117 Charge for the year - note 10.2.1 257,218 235,424 Payments during the year (363,151) (95,607) Balance as at December 31 131,001 236,934

68 Notes to and forming part of the Financial Statements

10.2 The amount represents costs incurred due to planned restructuring of GlaxoSmithKline Pharmaceuticals (Private) Limited and Stiefel Laboratories Pakistan (Private) Limited, consequent to amalgamation with the company. The full amount is expected to be utilised in the coming year.

10.2.1 This includes severance cost of Rs. 127.82 million (2009 : Rs. 58.82 million) reimbursed by an associated company.

11. CONTINGENCIES AND COMMITMENTS Restated 11.1 Contingencies2010 2009 Rupees '000 (a) Claims against the company not acknowledged as debt 310,822 323,521

(b) Income Tax

(i) In prior years, while finalising the company’s assessments for the years 1999-2000 through 2002-2003 (accounting years ended December 31, 1998 through 2001) the Assessing Officer (AO) had made additions to income raising tax demands of Rs. 73.6 million. Such additions were made on the contention that the company had allegedly paid excessive amount for importing certain raw materials. Upon company's appeal, the Commissioner of Inland Revenue (Appeals) (CIRA) had maintained the addition to income for assessment years 1999-2000 and 2000- 2001 (accounting years ended December 31, 1998 and 1999) while the additions made in assessment years 2001-2002 and 2002-2003 (accounting years ended December 31, 2000 and 2001) were deleted. In respect of assessment years 1999-2000 and 2000-2001 the company, and in respect of assessment years 2001-2002 and 2002-2003, the department, had filed respective appeals with the Income Tax Appellate Tribunal (ITAT).

All the above assessments were set aside by ITAT for fresh consideration by the AO during the year ended December 31, 2008. During the current year, assessment orders for the above years have been passed by the AO and additions of same amounts as described above have been made. The company has filed appeals with CIRA.

(ii) In prior years, while finalising the assessment of former Smith Kline & French of Pakistan Limited for the assessment year 2002-2003 (accounting year ended December 31, 2001), the Assessing Officer (AO) had made addition to income raising tax demands of Rs. 4.03 million. Such addition was made on the contention that the company had allegedly paid excessive amount for importing certain raw materials. Upon company's appeal, the CIRA had maintained the addition to income against which the company had filed an appeal with the ITAT.

The above assessment was set aside by ITAT for fresh consideration by the AO during the year ended December 31, 2008. During the current year, assessment order for the above year has been passed by the AO and addition of same amount as described above has been made. The company has filed appeal with CIRA.

(iii) During the year, while amending the assessment of the company for the tax years 2005, 2006, 2007 and 2008 (accounting year ended December 31, 2004, 2005, 2006 and 2007) the Assessing Officer (AO) has made additions to income raising tax demands totalling Rs. 151.15 million. Such additions were made on the contention that the company had allegedly paid excessive amount for importing certain raw materials and in respect of royalty. The company has filed appeal with CIRA in respect of above tax years.

(iv) In prior years, while finalising the assessment of former GlaxoSmithKline Pharmaceuticals (Private) Limited (GSKPPL) formerly Bristol-Myers Squibb Pakistan (Private) Limited for assessment years 1989-1990 to 2002-2003 (accounting years ended December 31, 1989 through 2002) the Assessing Officer (AO) had made additions to income raising tax demands of Rs. 314.10 million on the contention that the company had allegedly paid excessive amounts for importing certain raw materials. CIRA also maintained the additions. On GSKPPL's appeals, the additions made by the AO were deleted by ITAT. Later, the department filed appeals against the decision of ITAT in the High Court of Sindh (the High Court).

69 In October 2007, the High Court awarded its verdict for the assessment years 1989-1990 and 1990-1991 in favour of the tax department confirming tax demands of Rs. 11.99 million. However, the decisions in respect of the department's appeals for the assessment years 1991-1992 through 2002-2003 are still pending in the High Court for which the net aggregate tax liability, if such cases are decided against the company, will be Rs. 302.11 million.

The company has filed an appeal in the Supreme Court of Pakistan against the above decision of the High Court and a leave to appeal has been granted to the company. The company through its legal counsel has also filed review petition before the High Court in this regard.

The management is confident that the ultimate decisions in the above cases will be in favour of the company, hence provision has not been made in respect of the aforementioned additional tax demands.

11.2 Commitments

Commitments for capital expenditure outstanding as at December 31, 2010 amounted to Rs. 607.81 million (2009: Rs. 475.63 million). Restated Note 2010 2009 Rupees ’000 12. FIXED ASSETS - property, plant and equipment

Operating assets 12.1 3,367,436 3,407,310 Capital work-in-progress 12.4 822,560 422,278 4,189,996 3,829,588 12.1 Operating assets Cost as at Additions / Cost as at Accumulated Depreciation / Accumulated Impairment Net Book Annual rate of January 1, (disposals) / December 31, depreciation / Amortisation depreciation / loss as at value as at deprecia- 2010 (write offs) */ 2010 amortisation for the year amortisation December 31, December 31, tion / Restated Acquired as at (on disposals) / as at 2010 2010 amortisation through business January 1, (write offs) * December 31, % combinations2010 2010 notes 3 & 4** Restated Rupees '000 Freehold land 174 - 174 - - - - 174 -

Leasehold land 385,452 - 385,452 9,283 6,766 16,049 - 369,403 2.5 to 10

Buildings on freehold land 66,494 105 66,599 30,383 835 31,218 19,062 16,319 2.5

Buildings on leasehold land 1,113,540 32,983 1,146,513 208,244 25,234 233,474 26,581 886,458 2.5 (10) (4) Plant and machinery 2,717,113 139,148 2,811,132 1,062,251 200,254 1,226,595 41,259 1,543,278 5 to 10 (45,129) (35,910) Furniture and fixtures 155,719 31,002 182,386 65,817 10,519 72,201 7,971 102,214 10 (4,335) (4,135)

Vehicles 372,680 126,779 436,340 129,201 69,189 166,389 - 269,951 25 (63,119) (32,001)

Office equipments 541,863 59,585 592,215 361,566 59,037 411,709 867 179,639 10 to 33.33 (9,233) (8,894)

December 31, 2010 5,353,035 389,602 5,620,811 1,866,745 371,834 2,157,635 95,740 3,367,436 (121,826) (80,944)

December 31, 2009 4,011,914 425,102 5,353,035 1,693,929 310,126 1,866,745 78,980 3,407,310 - Restated (185,032) (135,702) (2,936) * (1,608) * 1,103,987**

70 Notes to and forming part of the Financial Statements

12.1.1 Leasehold land includes land with a net book value of 18.45 million on provisional allotment from Punjab Industrial Estates Development and Management Company.

12.2 Reconciliation of opening and closing Net Book Value (NBV)

Cost Accumulated Impairment NBV Cost of Cost less Depreciation / (Charge) / NBV as at depreciati on / loss additions accumulated Amortisation Reversal of December 31, amortisation during depreciation for the impairment loss 2010 As at January 1, 2010 the year of disposals year on disposals Restated during during the the year year Rupees '000

Freehold land 174 - - 174 - - - - 174

Leasehold land 385,452 9,283 - 376,169 - - (6,766) - 369,403

Buildings on freehold land 66,494 30,383 16,669 19,442 105 - (835) (2,393) 16,319

Buildings on leasehold land 1,113,540 208,244 26,581 878,715 32,983 (6) (25,234) - 886,458

Plant and machinery 2,717,113 1,062,251 27,827 1,627,035 139,148 (9,219) (200,254) (14,925) 1,543,278 1,493 Furniture and fixtures 155,719 65,817 7,854 82,048 31,002 (200) (10,519) (173) 102,214 56

Vehicles 372,680 129,201 - 243,479 126,779 (31,118) (69,189) - 269,951

Office equipments 541,863 361,566 49 180,248 59,585 (339) (59,037) (818) 179,639

5,353,035 1,866,745 78,980 3,407,310 389,602 (40,882) (371,834) (18,309) 3,367,436 1,549

71 12.3 Details of operating assets sold Details of operating assets sold, having net book value in excess of Rs. 50,000 each are as follows:

Description Cost Accumulated Book Sale Mode of Particulars of purchaser depreciation value proceeds disposal Rupees ' 000 Plant and machinery 27,859 21,469 6,390 6,390 Negotiation Akhai Pharmaceuticals (Private) Limited, 103 - K, Block-2, P.E.C.H.S, Shahra-e-Quaideen, Karachi " 910 435 475 135 Tender Shahzad and Sons 3-D 21/15, Near Gole Market, North Nazimabad, Karachi " 588 218 370 112 " Mushtaq Ahmed and Sons 89, Timber Market, Landhi, Karachi " 568 317 251 187 " Shakoor Brothers Plot No. SA-6, ST-4, Sector-27, Korangi Industrial Area, Karachi." Office equipment 8,018 7,834 184 185 Negotiation Akhai Pharmaceuticals (Private) Limited, 103 - K, Block-2, P.E.C.H.S, Shahra-e-Quaideen, Karachi. " 135 78 57 163 Insurance EFU General Insurance Limited Claim " 53 3 50 65 " " " 53 3 50 65 " "

Furniture and fixture 3,405 3,344 61 61 Negotiation Akhai Pharmaceuticals (Private) Limited, 103 - K, Block-2, P.E.C.H.S, Shahra-e-Quaideen, Karachi.

Vehicles 3,045 1,167 1,878 1,000 Company Mr. Mahmood Tahir - Ex-executive Policy " 1,391 301 1,090 900 " " " 1,263 968 295 330 " " " 4,200 1,641 2,559 2,520 " Mr. Pervaiz Iqbal Awan - Executive " 1,879 206 1,673 1,879 " Dr. Gohar Nayab - Executive " 1,840 390 1,450 578 " Mr. Saleem Ansari - Ex-executive " 1,429 356 1,073 765 " Mr. Muhammad Asim - Executive " 1,429 356 1,073 540 " Mr. Muhammad Khalid - Ex-executive " 1,429 402 1,027 750 " Mr. Ahad Sharif - Ex-executive " 1,043 318 725 372 " Mr. Arif Ahmed Shah - Ex-executive " 1,043 318 725 360 " Mr. Azfar Ghauri Ex - executive " 996 316 680 840 " Mr. Azhar Hussain - Ex-executive " 1,036 363 673 420 " Mr. Muhammad Hayat Khan - Ex-executive " 1,014 380 634 608 " Mr. Zahid Ali Jaffri - Ex-executive " 1,014 428 586 630 " Mr. Shahid Farooqui - Ex-executive " 886 336 550 280 " Mr. Sheikh Abdul Waheed - Executive " 886 336 550 725 " Mr. G. A. Jaffary - Ex-executive " 936 386 550 320 " Mr. Iqbal Naseem - Ex-executive " 725 283 442 700 " Mr. Sanjay Gajria - Executive " 597 189 408 140 " Mr. Amjad Ali - Ex-employee " 646 242 404 420 " Mr. Syed Tahir Jalil Azeemi - Ex-employee " 931 574 357 290 " Dr. Amad Subhani - Ex-executive " 636 298 338 685 " Mr. Muhammad Hafeez - Executive

72 Notes to and forming part of the Financial Statements

Description Cost Accumulated Book Sale Mode of Particulars of purchaser depreciation value proceeds disposal Rupees ' 000

Vehicles 940 642 298 280 Company Ms. Sabeen Saad - Ex-executive Policy " 1,169 877 292 292 " Mr. Zafarullah Khan - Executive " 619 330 289 220 " Mr. Atta ul Qadoos - Ex-employee " 421 133 288 216 " Mr. Fahim Siddiqui - Ex-employee " 421 133 288 210 " Mr. Saqib Iftikhar - Ex-employee " 652 367 285 675 " Mr. Talal Ahmed - Executive " 652 387 265 625 " Mr. Imran Amin - Executive " 926 664 262 280 " Mr. Hassan Yousaf - Ex-executive " 652 407 245 326 " Ms. Shahida Javed Ex - executive " 620 386 234 248 " Mr. Taufeeq Ahmed - Ex-executive " 930 697 233 280 " Mr. Imran ul Haq - Ex-executive " 919 689 230 280 " Mr. Shoukat Ali Siddiqui - Ex-executive " 879 659 220 220 " Mr. Muhammad Ali Shah - Ex-executive " 879 659 220 220 " Mr. Shahrukh Hafeez - Ex-executive " 849 637 212 212 " Mr. Mohi-ul-Islam - Executive " 849 637 212 212 " Mr. Naeem Baig - Executive " 620 416 204 615 " Ms. Ayesha Muharram - Executive " 401 221 180 120 " Mr. Shamraiz Khan - Ex-employee " 401 221 180 120 " Mr. Ashraf Javaid - Ex-employee " 401 221 180 126 " Mr. Tariq Mahmood - Ex-employee " 400 220 180 130 " Mr. Mubeen Ahmad - Ex-executive " 714 535 179 178 " Mr. Qaiser Ghani Jangua - Executive " 464 289 175 182 " Mr. Mukhtiar Baig - Ex-executive " 401 227 174 120 " Mr. Salman Saeed - Ex-executive " 464 296 168 168 " Mr. Altaf Hussain Butt - Ex-employee " 609 457 152 152 " Mr. Kaleem Ahmed - Executive " 560 420 140 140 " Mr. Jamaluddin - Executive " 560 420 140 140 " Mr. Tariq Jangua - Executive " 555 416 139 139 " Mr. Imran Haider Raza - Executive " 464 341 123 186 " Mr. Mian Jan Badshah - Executive " 454 340 114 120 " Mr. Ilyas Farooq - Ex-employee " 1,315 986 329 375 Tender Mr. Mohammad Akram Malik, House No. N-573, Samanabad, Near Qayyum Park, Lahore. " 1,849 376 1,473 1,849 Insurance EFU General Insurance Limited Claim " 1,414 177 1,237 1,414 " " " 1,319 433 886 1,319 " " " 655 194 461 455 " " " 1,309 982 327 700 " "

73 Restated 2010 2009 12.4 Capital work-in-progress Note Rupees ’000

Civil work 324,180 210,198 Plant and machinery 417,687 178,543 Furniture and fixtures 17,655 9,169 Office equipments 75,460 24,701 Advances to suppliers 20,157 32,246 855,139 454,857

Less: Provision for impairment 32,579 32,579 822,560 422,278 13. INTANGIBLE

Goodwill 3.1 & 13.1 955,742 955,742 Software licences - 303 955,742 956,045 13.1 Goodwill

Goodwill is allocated to cash generating units to which it relates, which are tested for impairment in line with note 2.9.

The recoverable amount of cash generating unit is the higher of value in use or fair value less cost to sell. Value in use is calculated as the net present value of the projected cash flows discounted at risk-adjusted discount rate.

Details relating to the discounted cash flow model used in the impairment test are as follows:

GlaxoSmithKline Pharmaceuticals (Private) Limited

Valuation basis Value in use

Key assumptions Sales growth rates Profit margins Discount rate

Determination of assumptions Growth rates are internal forecasts based on both internal and external market information and past performance.

Cost reflects past experience, adjusted for inflation and expected changes.

Discount rate is parimarily based on weighted average cost of capital.

Terminal growth rate 4% Period of specific projected 5 Years cash flows Discount rate 18.40%

The valuation indicates sufficient headroom such that a reasonably possible change to key assumptions is unlikely to result in an impairment of the related goodwill.

74 Notes to and forming part of the Financial Statements

14. LONG-TERM LOANS TO EMPLOYEES

Reconciliation of the carrying amount of loans to executives and other employees:

2010 2009 Executives Other employees Total Executives Other employees Total Non- Interest Non- Non- Interest Non- interest bearing interest interest bearing interest bearing bearing bearing bearing Rupees ‘000 Balance at January 1 2,667 3,108 90,738 96,513 4,166 2,267 88,334 94,767 Disbursements 6,044 1,315 71,404 78,763 2,772 2,499 41,878 47,149 Repayments (3,156) (1,448) (52,788) (57,392) (4,271) (1,658) (39,474) (45,403) Balance at December 31 5,555 2,975 109,354 117,884 2,667 3,108 90,738 96,513 Current portion included in note 19 (2,371) (1,651) (40,272) (44,294) (1,533) (118) (33,563) (35,214) 3,184 1,324 69,082 73,590 1,134 2,990 57,175 61,299

14.1 These loans have been given in accordance with the terms of employment for purchase of house, motor car, motor cycle, computer and for the purpose of staff welfare and are repayable in 12 to 60 equal monthly installments depending upon the type of the loan. These loans are interest free except certain loans which carry interest ranging from 5% to 8% per annum (2009: 5% to 8% per annum). All loans are secured against the retirement fund balances.

The maximum aggregate amount of loans due from executives at the end of any month during the year was Rs. 5.64 million (2009: Rs. 4.75 million). Note 2010 2009 Rupees ’000 15. INVESTMENTS

Available-for-sale

Pakistan Investment Bonds 15.1 172,231 168,687

Held-to-maturity

Treasury bills 15.2 729,724 644,889 901,955 813,576 Less: short term 901,955 644,889 - 168,687

15.1 These are held by company's banker for safe custody. The yield on these bonds is 13.37% per annum (2009: 12.25% per annum) and these bonds will mature in May 2011.

15.2 These are held by company's banker for safe custody. The yield on these bills ranges from 13.12% to 13.16% per annum (2009: 12.42% per annum) and these bills will mature in March 2011. Restated 2010 2009 Rupees ’000 16. STORES AND SPARES

Stores and spares 158,378 147,905 Less: Provision for slow moving and obsolete items - note 16.1 7,746 5,840 150,632 142,065

75 16.1 Stores and spares of Rs. 520 thousand (2009: Rs. 11.78 million) have been written off against the provision during the year. Restated 2010 2009 Rupees ’000 17. STOCK-IN-TRADE

Raw and packing materials including in transit Rs. 323.86 million (2009: Rs. 441.99 million) 1,590,899 1,794,766

Work-in-progress 394,146 301,944

Finished goods including in transit Rs. 310.63 million (2009: Rs. 153.44 million) 2,609,148 2,647,191 4,594,193 4,743,901 Less: Provision for slow moving, obsolete and damaged items - note 17.3 281,658 200,212 4,312,535 4,543,689

17.1 Stock-in-trade includes Rs. 40.10 million (2009: Rs. 50.31 million), Rs. 79.73 million (2009: Nil) and Rs. 47.14 million (2009: Nil) held with Pharmatec Pakistan (Private) Limited, Vikor Enterprises (Private) Limited and Akhai Pharmaceuticals (Private) Limited, respectively.

17.2 Stock-in-trade includes items costing Rs. 899.90 million (2009: Rs. 196 million) valued at net realisable value of Rs. 762.84 million (2009: Rs. 159 million).

17.3 Stocks of Rs. 91.128 million (2009: Rs. 32.76 million) have been written off against the provision during the year.

Restated 2010 2009 Rupees ’000 18. TRADE DEBTS

Considered good GSK Trading Services Limited - Associated company 15,580 11,542 Others 280,182 1,316,915

Considered doubtful 29,741 16,829 325,503 1,345,286

Less: Provision for doubtful debts 29,741 16,829

295,762 1,328,457

18.1 The maximum aggregate amount due from the related party at the end of any month during the year was Rs. 18.83 million (2009: Rs. 14.75 million).

18.2 Trade debts of Rs. 1.15 million (2009: Rs. 0.44 million) have been written off against the provision during the year.

76 Notes to and forming part of the Financial Statements

Restated Note 2010 2009 Rupees ’000 19. LOANS AND ADVANCES - considered good

Loans due from employees - note 14 44,294 35,214 Advances to employees 27,244 25,648 Advances to suppliers 72,729 33,986

144,267 94,848

20. TRADE DEPOSITS AND PREPAYMENTS

Trade deposits 69,591 69,923 Prepayments 23,738 21,730 Margins held with banks 2,905 14,571

96,234 106,224

21. REFUNDS DUE FROM GOVERNMENT

Custom duty and sales tax - considered good 17,534 3,050 - considered doubtful 18,464 18,464 35,998 21,514 Less: Provision for doubtful receivables 18,464 18,464 17,534 3,050

22. OTHER RECEIVABLES

Due from related parties - Associated companies 22.1 214,858 40,918 - GSK Pakistan Limited senior staff pension fund - 31,212 - BMS Pakistan (Private) Limited management staff pension fund 7.1 18,855 13,467 233,713 85,597 Claims recoverable from suppliers 13,622 7,956 Receivable against sale of fixed assets 6,636 - Others 36,085 17,643 290,056 111,196

22.1 Due from associated companies

GlaxoSmithKline Services Unlimited, UK 57,266 18,429 GlaxoSmithKline Export Limited, UK 15,235 14,051 GlaxoSmithKline Limited, Bangladesh 8,377 8,377 GSK Services Corporation, UK - 61 Stiefel Laboratories (Pte) Limited, Singapore 128,614 - Stiefel Laboratories Limited, US 5,366 -

214,858 40,918

77 22.2 The maximum aggregate amount due from related parties at the end of any month during the year was Rs. 214.86 million (2009: Rs. 113.57 million). Restated 2010 2009 Rupees ’000 23. CASH AND BANK BALANCES

With banks on deposit accounts 2,475,000 1,750,743 on PLS savings accounts 254,580 134,120 on current accounts 74,176 163,383 Cash and cheques in hand 5,016 4,907 2,808,772 2,053,153

23.1 At December 31, 2010 the rates of mark-up on PLS savings accounts and on term deposit accounts were 5% to 6.5% (2009: 5% to 5.5%) per annum and 11.30% to 12.05% (2009: 10.82% to 11.35%) per annum respectively.

Restated 2010 2009 Rupees ’000 24. NET SALES

Manufactured goods Gross sales Local 16,391,285 13,794,994 Export 585,963 440,466 16,977,248 14,235,460 Less: Commissions, returns, discounts and rebates 165,176 182,026 Sales tax47,295 43,539 16,764,777 14,009,895 Trading goods Gross sales Local 2,320,634 2,950,708 Export 8,754 3,126 2,329,388 2,953,834 Less: Commissions, returns, discounts and rebates 157,523 192,597 Sales tax20,451 17,259 2,151,414 2,743,978 18,916,191 16,753,873

24.1 Sales values of pharmaceutical and consumer products amount to Rs. 17.15 billion and Rs. 1.77 billion (2009: Rs. 15.30 billion and Rs. 1.46 billion) respectively.

24.2 Sales of major product categories i.e. antibiotics, dermatologicals and vaccines during the year amounted to Rs. 7.92 billion, Rs. 2.47 billion and Rs. 848.23 million (2009: Rs. 7.16 billion, Rs. 1.65 billion and Rs. 1.60 billion) respectively.

24.3 Company sells its products through a network of distribution channels involving various distributors / sub- distributors and also directly to government and other institutions. Sales to one distributor (2009: one distributor) exceed 10 percent of the net sales during the year, amounting to Rs. 1.94 billion (2009: Rs. 1.68 billion).

78 Notes to and forming part of the Financial Statements

Restated 2010 2009 Rupees '000 25. COST OF SALES Raw and packing materials consumed 8,931,872 8,262,577 Manufacturing charges to third party 201,508 146,038 Stores and spares consumed 41,658 36,670 Salaries, wages and other benefits - note 25.1 1,032,729 970,490 Fuel and power 367,376 287,673 Rent, rates and taxes 2,702 5,204 Royalty and technical fee 154,028 157,754 Insurance 66,865 50,559 Repairs and maintenance 125,375 116,333 Training expenses 3,038 127 Travelling and entertainment 11,154 9,174 Vehicle running 14,524 14,749 Depreciation / amortisation 254,859 208,963 Impairment charge 18,309 58,050 Provision for slow moving and obsolete stock - raw and packing materials 91,794 84,874 Provision for slow moving and obsolete stores and spares 2,426 80 Canteen expenses 77,077 72,629 Laboratory expenses 33,686 32,484 Communication and stationery 10,673 9,254 Security expenses 12,532 9,032 Stock written off 30,803 4,352 Other expenses 32,904 30,355 11,517,892 10,567,421 Opening stock of work-in-process 301,944 201,425 Closing stock of work-in-process (394,146) (301,944) Cost of goods manufactured 11,425,690 10,466,902 Opening stock of finished goods 1,580,625 685,183 13,006,315 11,152,085 Closing stock of finished goods (1,615,963) (1,580,625) Cost of samples shown under selling, marketing and distribution expenses - sales promotion expenses (104,696) (78,356) 11,285,656 9,493,104 Trading goods Opening stock of finished goods 1,066,566 974,383 Purchase of finished goods 2,500,151 3,099,777 3,566,717 4,074,160 Closing stock of finished goods (993,185) (1,066,566) Provision for slow moving, obsolete and damaged stock - finished goods 217,844 55,901 Cost of samples shown under selling, marketing and distribution expenses - sales promotion (13,790) (42,007) 2,777,586 3,021,488 14,063,242 12,514,592

79 25.1 Salaries, wages and other benefits include Rs. 42.79 million and Rs. 28.80 million (2009: Rs. 43.22 million and Rs. 25.82 million) in respect of defined benefit plan and contributory provident fund respectively. Restated 2010 2009 Rupees '000 26. SELLING, MARKETING AND DISTRIBUTION EXPENSES

Salaries, wages and other benefits - note 26.1 768,013 760,290 Sales promotion 693,572 525,826 Advertising 172,787 131,983 Handling, freight and transportation 227,529 150,627 Travelling and entertainment 166,151 156,290 Depreciation / amortisation 44,340 32,199 Vehicle running 42,093 44,330 Publication and subscriptions 20,408 21,537 Fuel and power 23,461 14,848 Communication 20,100 18,038 Provision for doubtful debts 14,066 17,564 Repairs and maintenance 24,132 12,205 Insurance 14,396 11,035 Printing and stationery 13,174 10,157 Security expenses 9,259 7,944 Rent, rates and taxes 9,900 6,521 Canteen expenses 1,716 1,060 Training expenses 4,173 1,175 Bad debts written off - 141 Other expenses 32,246 25,309 2,301,516 1,949,079

26.1 Salaries, wages and other benefits include Rs. 35.5 million and Rs. 24.15 million (2009: Rs. 34.50 million and Rs. 20.14 million) in respect of defined benefit plan and contributory provident fund respectively.

Restated 2010 2009 Rupees '000 27. ADMINISTRATIVE EXPENSES

Salaries, wages and other benefits - note 27.1 349,484 342,342 Depreciation 72,938 69,159 Communication 37,644 34,321 Training expenses 12,062 28,529 Travelling and entertainment - note 27.2 23,632 19,375 Legal and professional charges 27,974 34,255 Repairs and maintenance 27,620 21,164 Donations - note 27.3 25,681 14,453 Printing and stationery 15,662 13,689 Auditors’ remuneration - note 27.4 11,863 11,784 Vehicle running 17,243 13,194 Security expenses 14,957 11,229 Publication and subscriptions 12,195 8,638 Rent, rates and taxes 7,113 6,339 Insurance 6,759 4,618 Canteen expenses 8,402 4,361 Restructuring cost 257,218 235,424 Less: recovery from associated undertaking - note 10.2.1 (127,823) (58,824) 129,395 176,600 Other expenses - note 27.5 25,612 36,818 826,236 850,868

80 Notes to and forming part of the Financial Statements

27.1 Salaries, wages and other benefits include Rs. 11.69 million and Rs. 11.21 million (2009: Rs. 9.49 million and Rs. 8.35 million) in respect of defined benefit plans and contributory provident fund respectively.

27.2 These are net of recovery from related party of Rs. 985 thousand (2009: Rs. 1.80 million).

27.3 Donations include a sum of Rs. 537 thousand (2009: Rs. 386 thousand) paid to Concern for Children Trust, B/63, Estate Avenue, S.I.T.E, Karachi in which Mr. Muhammad Salman Burney, Chairman / Chief Executive and Mr. Shahid Mustafa Qureshi, Director, are the trustees.

2010 2009 Rupees '000 27.4 Auditors' remuneration

Audit fee 3,900 3,000 Fee for review of half yearly financial statements, special certifications and others 3,578 5,110 Taxation services 3,485 2,774 Out-of-pocket expenses 900 900 11,863 11,784

27.5 These are net of recovery from related party of Rs. 75.88 million (2009 : Rs. 75.50 million)

Restated 2010 2009 Rupees '000 28. OTHER OPERATING EXPENSES

Workers' Profits Participation Fund - note 9.1 105,150 91,686 Workers' Welfare Fund 46,481 43,281 Central Research Fund 19,512 16,835 171,143 151,802

29. OTHER OPERATING INCOME

Income from financial assets Return on PIBs 16,141 22,296 Return on Treasury Bills 68,045 75,616 Income on savings and deposit accounts 238,167 268,378 Discount on investments - 965 322,353 367,255

Income from non-financial assets Gain on disposal of operating assets 1,581 26,334

Others Scrap sales 18,818 18,614 Insurance commission 13,647 16,107 Service fee on clinical trial studies 6,634 6,975 Liabilities no longer required written back 31,000 16,081 Others 3,663 12,327 397,696 463,693

30. FINANCIAL CHARGES

Exchange loss - net 5,058 14,660 Bank charges 14,832 13,139 Interest on Workers' Profits Participation Fund – note 9.1 136 - Mark-up on short term loan - 16,846 20,026 44,645

81 Restated 2010 2009 Rupees '000 31. TAXATION

Current - for the year 864,298 722,067 - prior years 12,500 (42,349) Deferred (2,457) (14,429) 874,341 665,289

31.1 Relationship between tax expense and accounting profit

Profit before taxation 1,931,724 1,706,580

Tax at the applicable rate of 35% 676,103 597,303 Prior years' adjustment 12,500 (42,349) Effect of final tax regime 129,217 89,149 Tax effect of other than temporary differences 56,521 21,186

874,341 665,289

32. EARNINGS PER SHARE

Profit after taxation 1,057,383 1,041,291

Shares outstanding for the whole year 170,672 170,672

Shares issued under the Scheme of Amalgamation of GSKPPL - Note 3 25,740 23,681

Shares to be issued under the Scheme of Amalgamation of SLPPL - Note 4 11,648 5,242

Weighted average number of outstanding shares 208,060 199,595

Basic earnings per share Rs. 5.08 Rs. 5.22

32.1 A diluted earnings per share has not been presented as the company did not have any convertible instruments in issue as at December 31, 2010 and 2009 which would have any effect on the earnings per share if the option to convert is exercised.

82 Notes to and forming part of the Financial Statements

Restated 2010 2009 Rupees '000 33. CASH GENERATED FROM OPERATIONS

Profit before taxation 1,931,724 1,706,580

Add / (less): Adjustments for non-cash charges and other items

Depreciation / amortisation 372,137 310,321 Return on investments - PIBs (16,141) (22,296) Impairment charge 18,309 58,050 Gain on disposal of operating assets (1,581) (26,334) Provision for staff retirement benefits 89,983 87,208 Financial charges - 16,846 Amortisation of discount on investments - (965) 462,707 422,830 Profit before working capital changes 2,394,431 2,129,410

Effect on cash flow due to working capital changes

(Increase) / decrease in current assets

Stores and spares (8,567) (11,978) Stock-in-trade 231,154 (630,891) Trade debts 1,032,695 13,713 Loans and advances (49,419) 25,261 Trade deposits and prepayments 9,990 51,350 Accrued return on term deposits 2,945 56,199 Refunds due from government (14,484) 12,418 Other receivables (166,836) 56,135 1,037,478 (427,793)

Increase / (decrease) in current liabilities Provisions (105,933) 139,817 Trade and other payables 321,907 575,896 1,253,452 287,920 3,647,883 2,417,330 34. CASH AND CASH EQUIVALENTS

Cash and bank balances- note 23 2,808,772 2,053,153 Short term investments - Treasury bills - note 15 729,724 644,889 Short-term borrowings - running finance - (4,520) 3,538,496 2,693,522

83 35. REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES

The aggregate amount charged in these financial statements for remuneration of the Chief Executive, Directors and Executives are as follows: Chief Executive Directors Executive 2010 2009 2010 2009 2010 2009 (Rupees in “000)

Managerial remuneration 13,401 11,878 14,800 13,562 238,363 161,004 Severance - - - - 252,218 41,600 Bonus and SARs 16,533 16,318 12,032 11,454 84,990 72,344 Retirement benefits 3,130 3,010 3,802 3,651 53,273 40,548 House rent 5,482 4,854 6,660 5,887 88,107 65,376 Utilities 1,218 1,079 1,480 1,308 19,579 14,528 Medical expensss 133 102 216 182 8,922 4,964 Others 528 938 1,999 713 15,449 5,912 40,425 38,179 40,989 36,757 760,901 406,276

Number of person (s) 1 1 3 3 213 146

In addition to the above, fee to three (2009:two) non-executive Directors during the year amounted to Rs. 135 thousand (2009: Rs. 60 thousand).

Chief Executive, Executive Directors and certain executives are also provided with free use of company maintained cars and certain items of fixtures and household furniture in accordance with the company policy.

Bonus includes Share Appreciation Rights (SARs) and other share options to be settled in cash (subject to tax), payable to Chief Executive, Directors and certain executives, amounting to Rs. 7.61 million, Rs. 3.11 million and Rs. 8.12 million (2009: Rs. 5.42 million, Rs. 3.53 million and Rs. 9.59 million) respectively. These are granted every year and are payable on completion of qualifying period of service. They are linked with the share value of ultimate parent company, GlaxoSmithKline plc, UK.

36. TRANSACTIONS WITH RELATED PARTIES 2010 2009 Rupees '000 Relationship Nature of transactions

Holding Company: Dividend paid 672,268 941,175

Associated companies: a. Purchase of goods 4,152,353 4,454,339 b. Sale of goods 115,790 99,038 c. Royalty paid 88,496 134,166 d. Recovery of expenses from related parties 74,699 82,850 e. Service fee on clinical trial studies 6,634 6,975 f. Donations 537 386 g. Severance cost reimbursement 127,823 - Staff retirement funds: a. Expense charged for retirement benefit plans 154,140 125,303 b. Payments to retirement benefit plans 126,160 87,689 c. Receipts from retirement benefit plans 31,212 52,500 Key management personnel: a. Salaries and other employee benefits 138,967 129,605 b. Post employment benefits 12,945 13,656 c. Sale of assets 292 246 d. Legal / professional fee 12,000 -

84 Notes to and forming part of the Financial Statements

36.1 Balances of related parties as at December 31, 2010 are included in the respective notes to the financial statements. These are settled in the ordinary course of business. The receivables and payables are mainly unsecured in nature and bear no interest.

37. RUNNING FINANCE UNDER MARK-UP ARRANGEMENTS

Facilities for running finance available from various banks amounted to Rs. 350 million (2009: Rs. 1.06 billion). Rate of mark-up ranges from one month KIBOR plus 1.25% to three month KIBOR plus 0.50% (2009: from one month KIBOR plus 1.75% to three month KIBOR plus 1.70%). The arrangements are secured by way of pari-passu charge against hypothecation of company's stock-in-trade and book debts.

The facilities for export refinance available from various banks amounted to Rs. 10 million (2009: Rs. 10 million). These facilities carry mark-up at 1% (2009: 1%) above the State Bank of Pakistan Export Refinance rate per annum.

The facilities for opening letters of credit and guarantees as at December 31, 2010 amounted to Rs. 2.16 billion (2009: Rs. 2.38 billion) of which unutilised balances at the year end amounted to Rs. 1.28 billion (2009: Rs. 1.46 billion).

38. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES

38.1 Financial assets and liabilities

All the financial assets of the company, except PIBs classified as available for sale investments, are categorised as loans and receivables and all the financial liabilities are categorised as financial liabilities measured at amortised cost. The carrying values of all financial assets and liabilities approximate their fair values.

Interest bearing Non-interest bearing Total Maturity up Maturity Total Maturity up Maturity Total to one after one to one after one year year year year Rupees '000 Financial assets

Loans and receivables Loans and advances 1,651 1,324 2,975 69,887 72,266 142,153 145,128 Deposits - - - 69,591 11,871 81,462 81,462 Trade debts - - - 295,762 - 295,762 295,762 Accrued return on investments and bank deposits - - - 19,443 - 19,443 19,443 Other receivables - - - 290,056 - 290,056 290,056 Cash and bank balances 2,729,580 - 2,729,580 79,192 - 79,192 2,808,772 Available for sale PIBs 172,231 - 172,231 - - - 172,231 Held to maturity Treasury Bills 729,724 - 729,724 - - - 729,724 December 31, 2010 3,633,186 1,324 3,634,510 823,931 84,137 908,068 4,542,578 December 31, 2009 2,526,135 171,677 2,697,812 1,755,530 70,656 1,826,186 4,523,998

Financial liabilities Trade and other payables - - - 3,154,544 - 3,154,544 3,154,544 December 31, 2010 - - - 3,154,544 - 3,154,544 3,154,544 December 31, 2009 4,520 - 4,520 2,982,384 - 2,982,384 2,986,904

On balance sheet date gap December 31, 2010 3,633,186 1,324 3,634,510 (2,330,613) 84,137 (2,246,476) 1,388,034 December 31, 2009 2,521,615 171,677 2,693,292 (1,226,854) 70,656 (1,156,198) 1,537,094

The effective mark-up rates for the financial assets and liabilities are mentioned in respective notes to the financial statements.

85 38.2 Financial Risk Management

(a) Market risk

(i) Interest rate risk

Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in the market interest rates. As at December 31, 2010 the company does not have any borrowings. Further out of Rs. 3.63 billion interest bearing financial assets of Rs. 3.46 billion are on fixed interest rates, hence management believes that the company is not materially exposed to interest rate changes.

(ii) Currency risk

Foreign currency risk arises mainly where receivables and payables exist in foreign currency due to transactions with foreign undertakings. Net payables exposed to foreign currency risk as at December 31, 2010 amount to Rs. 1.02 billion (2009: Rs. 689.17 million). The liability is mainly denominated in US Dollars and at December 31, 2010, if the Pakistan Rupee had weakened / strengthened by 5% against the US Dollar with all other variables held constant, post-tax profit for the year would have been higher / lower by Rs. 51.08 million (2009: Rs. 34.46 million).

(b) Credit risk

Credit risk represents the accounting loss that would be recognised at the reporting date if counterparts failed to perform as contracted. The analysis of maximum exposure to credit risk resulting from each class of financial assets is as follows:

2010 2009 Rupees ’000

Trade debts 295,762 1,328,457 Loans, advances, deposits and other receivables 536,089 356,586 Investments 901,955 813,576 Bank balances 2,803,756 2,048,246 4,537,562 4,546,865

Trade debts of the company are not exposed to significant credit risk as the company trades with credit worthy third parties. Trade debts of Rs. 108.77 million (2009: Rs. 220.91 million) are past due of which Rs. 29.74 million (2009: Rs. 15.76 million) have been impaired. Past due but not impaired balances include Rs. 5.61 million (2009: Rs. 12.59 million) outstanding for more than three months.

Deposits, loans, advances and other receivables include loans and advances recoverable from employees that are secured against their retirement benefits.

86 Notes to and forming part of the Financial Statements

Investments represent Pakistan Investment Bonds (PIBs) and treasury bills. PIBs are backed by the Government of Pakistan and therefore have very low credit risk. The treasury bills are of short term nature and therefore have a low credit risk.

Bank balances represent low credit risk as they are placed with banks having good credit rating assigned by credit rating agencies.

(c) Liquidity risk

Liquidity risk reflects the company's inability in raising funds to meet commitments. The company manages liquidity risk by maintaining sufficient cash and balances with banks in deposit accounts and the availability of financing through banking arrangements. As at December 31, 2010 there is no maturity mismatch between financial assets and liabilities that expose the company to liquidity risk.

39. CAPITAL RISK MANAGEMENT

The company's objectives when managing capital are to safeguard the company's ability to continue as a going concern so that it can continue to provide adequate returns for shareholders and benefits for other stakeholders and to maintain an optimal return on capital employed. The current capital structure of the company is equity based with no financing through borrowings.

40. CAPACITY AND PRODUCTION

The capacity and production of the company’s plants are indeterminable as these are multi-product and involve varying processes of manufacture.

41. RESTATEMENTS

Consequent to amalgamation of GSKPPL and SLPPL as described in notes 3 and 4, respectively, corresponding figures for 2009 have been restated in these financial statements in accordance with the requirements of International Accounting Standard - 1 'Presentation of Financial Statements'.

87 Further, provisions have been disclosed separately which were previously reported in trade and other payables. Following is the effect of restatement.

Balance Sheet As at December 31, 2009 Restatement on Balances as amalgamation previously Restatement of GSKPPL and reported of provisions SLPPL notes 3 & 4 Total Rupees ‘000 ASSETS NON-CURRENT ASSETS

Fixed assets - property,plant and equipment 2,600,814 - 1,228,774 3,829,588 Intangible - - 956,045 956,045 Long-term loans to employees 61,299 - - 61,299 Long-term deposits 7,027 - 5,320 12,347 Investments 168,687 - - 168,687 2,837,827 - 2,190,139 5,027,966 CURRENT ASSETS

Stores and spares 129,239 - 12,826 142,065 Stock-in-trade 4,061,840 - 481,849 4,543,689 Trade debts 996,915 - 331,542 1,328,457 Loans and advances 91,315 - 3,533 94,848 Trade deposits and prepayments 87,754 - 18,470 106,224 Interest accrued 21,503 - 1,019 22,522 Refunds due from goverment 15,436 - (12,386) 3,050 Other receivables 129,156 - (17,960) 111,196 Taxation - payments less provision 252,744 - 100,105 352,849 Investments 644,889 - - 644,889 Cash and bank balances 1,739,236 - 313,917 2,053,153 8,170,027 - 1,232,915 9,402,942 TOTAL ASSETS 11,007,854 - 3,423,054 14,430,908

EQUITY AND LIABILITIES SHARE CAPITAL AND RESERVES

Share capital 1,706,718 - - 1,706,718 Reserves 6,397,381 - 2,489,387 8,886,768 8,104,099 - 2,489,387 10,593,486 LIABILITIES NON - CURRENT LIABILITIES

Staff retirement benefits 58,894 - 13,991 72,885 Deferred taxation 320,435 - 97,234 417,669 379,329 - 111,225 490,554 CURRENT LIABILITIES

Trade and other payables 2,524,426 (43,110) 621,729 3,103,045 Provisions - 43,110 193,824 236,934 Short-term borrowings - running finance - - 4,520 4,520 Mark-up accrued - - 2,369 2,369 2,524,426 - 822,442 3,346,868

TOTAL EQUITY AND LIABILITIES 11,007,854 - 3,423,054 14,430,908

88 Notes to and forming part of the Financial Statements

Profit and loss account For the year ended December 31, 2009 Restatement on amalgamation Balances as of GSK PPL previously Reclassifia- and SLPPL - reported tions notes 3 & 4 Total Rupees ‘000 Net sales 14,719,132 - 2,034,741 16,753,873 Cost of sales (11,173,470) - (1,341,122) (12,514,592) Gross profit 3,545,662 - 693,619 4,239,281 Selling, marketing and distribution expenses (1,673,809) 29,000 (304,270) (1,949,079) Administrative expenses (588,814) (29,000) (233,054) (850,868) Other operating expenses (138,585) - (13,217) (151,802) Other operating income 436,615 - 27,078 463,693 Operating profit 1,581,069 - 170,156 1,751,225 Financial charges (14,348) - (30,297) (44,645) Profit before taxation 1,566,721 - 139,859 1,706,580 Taxation (632,791) - (32,498) (665,289) Profit after taxation 933,930 - 107,361 1,041,291

Other comprehensive income Fair value gain on available-for-sale investments 15,356 - - 15,356 Deferred tax thereon (5,375) - - (5,375) 9,981 - - 9,981 Total comprehensive income 943,911 - 107,361 1,051,272

42. SUBSEQUENT EVENTS

The Board of Directors in its meeting held on March 7, 2011:

a) proposed a cash dividend of Rs. 4.0 per share (2009 : Rs.5.0 per Share) amounting to Rs. 0.83 billion (2009: Rs 0.85 billion) and proposed transfer of Rs. 310.68 million (2009 : Nil) from reserve arising on amalgamation and Rs. 1.41 million (2009:Nil) from share premium account to ” reserve for bonus shares” for issuance of fifteen bonus shares for every hundred shares held (2009:Nil) subject to the approval of the company in the forthcoming annual general meeting of the company: and

b) approved the allotment of 11,648,312 ordinary shares of GlaxoSmithKline Pakistan Limited to the qualifying shareholder of former Stiefel Laboratories Pakistan (Private) Limited as detailed in note 4.

43. DATE OF AUTHORISATION FOR ISSUE

These financial statements were approved and authorised for issue by the Board of Directors of the company on March 07, 2011.

M. Salman Burney Javed Ahmedjee Chairman / Chief Executive Chief Financial Officer

89 Form 34 Pattern of Shareholding

NUMBER OF SHAREHOLDING TOTAL SHARES HELD SHAREHOLDERS From To

1,008 1 100 44,823 1,271 101 500 389,487 899 501 1000 631,679 1,125 1001 5000 2,619,527 269 5001 10000 1,884,126 108 10001 15000 1,310,173 56 15001 20000 972,024 37 20001 25000 843,213 11 25001 30000 297,622 6 30001 35000 199,469 10 35001 40000 380,864 16 40001 45000 682,486 6 45001 50000 285,771 4 50001 55000 213,733 9 55001 60000 526,964 2 60001 65000 121,919 1 65001 70000 65,812 4 70001 75000 291,051 2 75001 80000 156,356 2 80001 85000 162,851 1 95001 100000 95,706 2 105001 110000 213,929 2 115001 120000 235,438 1 125001 130000 125,310 1 135001 140000 138,648 1 140001 145000 143,150 3 155001 160000 469,607 1 160001 165000 164,619 2 195001 200000 397,463 1 200001 205000 200,157 1 255001 260000 259,557 1 260001 265000 261,400 1 415001 420000 417,118 1 480001 485000 484,672 1 575001 580000 576,052 1 580001 585000 581,554 1 605001 610000 606,947 1 705001 710000 707,976 1 1250001 1255000 1,252,894 1 1290001 1295000 1,294,866 1 3155001 3160000 3,158,249 1 5945001 5950000 5,945,881 1 6415001 6420000 6,419,983 1 25725001 25730000 25,727,130 1 134450001 134455000 134,453,588 4,876 196,411,844

90 Categories of Shareholders a)

Sr. Categories of Number of Shares Percentage No. ShareholdersShareholdersHeld (%)

1 Individuals 2,145 4,389,505 2.23 2 Investment Companies 4 1,992 0.00 3 Insurance Companies 1 1 0.00 4 Joint Stock Companies 10 19,855 0.01 5 Financial Institutions 2 4,762 0.00 6 Associated Companies 3 160,193,588 81.56 7 Central Depository Company (b) 2,706 31,771,778 16.18 8 Others (see below) 5 30,363 0.02 4,876 196,411,844 100.00

Others: i Mohsin Trust 1 17,283 0.01 ii The Al-Malik Charitable Trust 1 2,718 0.00 iii Securities Exchange Commission of Pakistan 1 1 0.00 iv Punjabi Saudagar Co-operative Society 1 218 0.00 v The Anjuman Wazifa Sadat-o-Momineen Pakistan 1 10,143 0.01 5 30,363 0.02 b) Categories of Account holders and Sub-Account holders as per Central Depository Company of Pakistan as at December 31, 2010

Sr. Categories of Number of Shares Percentage No. ShareholdersShareholdersHeld (%)

1 Individuals 2,597 7,463,111 3.80 2 Investment Companies 19 1,786,860 0.91 3 Insurance Companies 11 7,575,179 3.86 4 Joint Stock Companies 51 402,107 0.20 5 Financial Institutions 12 14,096,869 7.18 6 Modarabas 3 33,012 0.02 7 Foreign Companies 3 75,297 0.04 8 Others (see below) 10 339,343 0.17 2,706 31,771,778 16.18

Others: i The Aga Khan University Foundation 1 23,200 0.01 ii The Pakistan Memon Educational & Welfare Society 1 42,000 0.02 iii Trustees Kandawala Trust 1 44,657 0.02 iv Trustees Saeeda Amin WAKF 1 45,000 0.02 v Trustees Mohammad Amin WAKF ESTATE 1 75,000 0.04 vi Managing Committee Karachi Zorthosti Banu Mandal 1 18,956 0.01 vii Trustees Mrs. Khorshed H. Dinshaw & Mr. Hosh 1 35,437 0.02 viii Trustees D.N.E. Dinshaw Charity Trust 1 48,093 0.03 ixCentre for Development of Social Service 1 3,000 0.00 xTrustee A Saadat & Co. Employees Gratuity Fund 1 4,000 0.00 10 339,343 0.17

91 Shareholding Information

Categories of Shareholders Number of No. of Shareholder Shares Held

Holding Company:

S.R. One International B.V., Netherlands 2 160,180,718 SmithKline Beecham Nominee Ltd. 1 12,870

N.I.T. & I.C.P:

Investment Corporation of Pakistan 2 320 National Bank of Pakistan (Trustee Department) 3 6,575,843

Directors, CEO and their spouses and minor children:

Mr. M. Salman Burney 1 3,125 Mr. Shahid Mustafa Qureshi 1 3 Dr. Muzaffar Iqbal 1 1 Mr. Rafique Dawood 1 1 Dr. Iffat Yazdani 1 335

Executives 4 2,043

Public sector companies and corporation :

Banks, Development Finance Institutions, Non-Banking Finance Institutions, Insurance 51 16,997,809 Companies, Modarabas and Mutual Funds

Shareholders holding 10% or more voting interest :

S.R. One International B.V., Netherlands 2 160,180,718

82%

Distribution of Shares Holding Company 82% Individuals 6% Insurance Companies 4% Financial Institutions 7% Others 1%

6% 1% 4% 7%

92 Notice of Annual General Meeting

Notice is hereby given that the SIXTY-FOURTH Annual General Meeting of the Shareholders of the Company will be held at the Beach Luxury Hotel, Karachi at 11:00 a.m. on Wednesday, April 20, 2011to transact the following business:

1. (a) To receive and adopt the Report of the Directors and the Accounts for the year ended December 31, 2010 and the Auditors' Report thereon;

(b) to approve the payment of a dividend.

2. To appoint Auditors and fix their remuneration.

3. To elect ten (10) Directors of the Company as fixed by the Board for a term of three years commencing from May 7, 2011 in accordance with the provisions of Section 178(1) of the Companies Ordinance 1984. Retiring Directors are Mr. M. Salman Burney, Mr. Shahid Mustafa Qureshi, Mr. Javed Yousuf Ahmedjee, Dr. Muzaffar Iqbal, Mr. Rafique Dawood, Mr. Husain Lawai and Dr. Iffat Yazdani.

The retiring directors are eligible for re-election.

4. To consider and if thought fit to capitalize a sum of Rs. 312.09 million out of the capital reserves of the Company for the issuance of 31,208,977 bonus shares in the proportion of fifteen ordinary shares for every one hundred ordinary shares held by the Members of the Company as on April 13, 2011.

By Order of the Board

Karachi Shahid Mustafa Qureshi March 29, 2011 Director/Company Secretary

A Statment as required by Section 160(1)(b) of the Companies Ordinance 1984 in respect of the special business to be considered at the meeting is being sent to the Members, along with a copy of this notice.

Notes:

1. The Share Transfer Books of the Company will be closed for the purpose of determining the entitlement for the payment of Final Dividend and for determining the entitlement for the issuance of bonus shares from April 13, 2011 to April 20, 2011 (both days inclusive). Transfers received at the Office of the Share Registrars of the Company at 516, Clifton Centre, Khayaban-e-Roomi, Kehkashan, Block-5 Clifton, Karachi-75600 at the close of business on April 12, 2011 will be treated in time for the purposes of entitlement to the transferees.

2. Article 66 of the Articles of Association of the Company states “The Members in General Meeting shall elect the Directors from amongst persons who, not being ineligible in accordance with section 178 of the Ordinance, offer themselves for election as Directors in accordance with this Article. Any person claiming to be eligible who desires to offer himself for election shall, whether he is a retiring Director or not, file with the Company not later than fourteen days before the date of the General Meeting at which Directors are to be elected, a notice that he, being eligible, intends to offer himself for election as a Director at that meeting and that he consents to act as a Director if elected”.

3. A member entitled to attend and vote at the Meeting may appoint another member as his/her Proxy to attend, speak and vote at the Meeting on his/her behalf. Instrument appointing Proxy must be deposited at the Office of the Share Registrars of the Company at 516, Clifton Centre, Khayaban-e-Roomi, Kehkashan, Block – 5, Clifton, Karachi-75600 not less than 48 hours before the time of the Meeting.

93 4. The shareholders are requested to notify the Company if there is any change in their address.

5. CDC Account Holders will further have to follow the under mentioned guidelines as laid down in Circular No. 1 of 2000 dated January 26, 2000 issued by the Securities and Exchange Commission of Pakistan.

A. For Attending the Meeting:

i) In case of individuals, the account holder or sub-account holder and/or the person whose securities are in group account and their registration details are uploaded as per the Regulations, shall authenticate his/her identity by showing his/her original Computerized National Identity Card (CNIC) or original passport at the time of attending the meeting.

ii) In case of corporate entity, the Board of Directors’ resolution/power of attorney with specimen signature of the nominee shall be produced (unless it has been provided earlier) at the time of the meeting.

B. For Appointing Proxies:

i) In case of individuals, the account holder or sub-account holder and/or the person whose securities are in group account and their registration details are uploaded as per the Regulations, shall submit the proxy form as per the above requirement.

ii) The proxy form shall be witnessed by two persons whose names, addresses and CNIC numbers shall be mentioned on the form.

iii) Attested copies of CNIC or the passport of the beneficial owners and the proxy shall be furnished with the proxy form.

iv) The proxy shall produce his/her original CNIC or original passport at the time of the meeting.

v) In case of corporate entity, the Board of Directors’ resolution/power of attorney with specimen signature shall be submitted (unless it has been provided earlier) along with proxy form to the Company.

94 Factories and Distribution / Sales Offices

FACTORIES DISTRIBUTION / SALES OFFICE Karachi Karachi 35, Dockyard Road, Estate Avenue, West Wharf, Karachi - 74000 B-63, 65 S.I.T.E Tel: (92-21) 32315478 - 82 Karachi Fax: (92 - 21) 32311120 Tel: (92 - 21) 32561200-07 UAN: 111-475-725 Fax: (92 - 21) 32564908

F-268, S.I.T.E. Sukkur Near Labour Square, Plot No. 77/80, Block B, Karachi - 75700 Friends Cooperative Housing Society, Tel: (92 - 21) 32570665 - 69 Akhuwat Nagar, Airport Road. Fax: (92 - 21) 32572613 Tel: (92 - 71) 5630668, 5630144 Fax: (92 - 71) 5631665 Plot # 5, Sector 21 Korangi Industrial Area Multan Karachi - 74900 Fax: (92 - 21) 35015800 Islam-ud-din House, Mehmood Kot, UAN: 111-000-267 Bosan Road. Tel: (92 - 61) 6222061-63 Lahore Fax: (92 - 61) 6222064

18.5 Km., Ferozepur Road, Lahore P.O.Box No. 244 Tel: (92 - 42) 5811931 - 35 Cordeiro House, Fax: (92 - 42) 5820821 Plot No. 27, Kot Lakhpat Industrial Estate, Kot Lakhpat. Tel: (92 - 42) 35111061- 64 Fax: (92 - 42) 35111065

Islamabad Aleem House, Plot No. 409, Sector I-9, Industrial Area. Tel: (92 - 51) 4433589, 4433598 Fax: (92 - 51) 4433706

Peshawar D’ Souza House, Nasirpur, Near Abid Flour Mills, G. T. Road. Tel: (92 - 91) 2261451-52 Fax: (92 - 91) 2261457

95 Form of Proxy GlaxoSmithKline Pakistan Limited

I/We ______of ______, being a Member of GlaxoSmithKline Pakistan Limited holding ______ordinary shares, HEREBY APPOINT ______of ______, another member of the Company, failing him/her ______of ______as my/our proxy in my/our absence to attend and to vote and act for me/us and on my/our behalf at the Annual General Meeting of the Company to be held at the Beach Luxury Hotel, Karachi on Wednesday, April 20, 2011 and at any adjournment thereof. As witness my/our hand(s) this _____ day of ______2011. Signed in the presence of:

(Signature of Witness 1) (Signature of Witness 2) Ten Rupees Name of witness: Name of witness: Revenue Stamp CNIC No.: CNIC No.:

Address Address

(Name in Block Letters) Signature of Shareholder Folio No. Notes: 1. The Member is requested: (a) to affix Revenue Stamp of Rs. 10/- at the place indicated above; (b) to sign in the same style of signature as is registered with the Company; (c) to write down his/her Folio Number. 2. For the appointment of the above proxy to be valid, this instrument of proxy must be received at the Office of the Share Registrars of the Company at 516, Clifton Centre, Khayaban-e-Roomi, Kehkashan, Block – 5, Clifton, Karachi- 75600, at least 48 hours before the time fixed for the Meeting. 3. Any alteration made in this instrument of proxy should be initialed by the person who signs it. 4. In the case of joint holders, the vote of the senior who tenders a vote whether in person or by proxy will be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority will be determined by the order in which the names stand in the Register of Members. 5. The Proxy must be a Member of the Company. For CDC Account Holders / Corporate Entities In addition to the above, the following requirements have to be met: (i) The proxy form must be witnessed by two persons whose names, addresses and CNIC numbers shall be mentioned on the form. (ii) Attested copies of CNIC or the passport of the beneficial owners and of the Proxy must be furnished with the proxy form. (iii) The Proxy must produce his original CNIC or original passport at the time of the Meeting. (iv) In case of corporate entities, the Board of Directors’ resolution/power of attorney and specimen signature must be submitted (unless it has been provided earlier) alongwith proxy forms to the Share Registrars. AFFIX CORRECT POSTAGE Gangjees Registrar Services (Pvt.) Ltd. 516, Clifton, Khayaban-e-Roomi, Kahkeshan, Block-5, Clifton, Karachi-75600