THE HOPE

OF MILLIONS

GSK has a proud tradition – Devoted to innovationand access, we offer cures, solutions and hope. Westrive, on a daily basis, to fight suffering and to providehealth and comfort to millions. As long as there arepeople in the world who are in need, we will find away to help them. It is with great pride that GSK leavesthis mark on people’s lives, enabling them to

CONTENTS

Corporate Information

Vision & Mission

Strategic Priorities

Ethical Conduct

Values and Behaviours

History of GlaxoSmithKline

The World of GlaxoSmithKline

Building Pathways of HopeCSR at GlaxoSmithKline

GSK Pakistan Success Stories

Product Launches

Highlights of the Year

Environment, Health & Safety

Global Manufacturing & Supply (GMS)

Human Resource Development

Our Flagship Products

Awards for Excellence

Directors’ Profiles

Board & Management Committees

Directors’ Report to Shareholders

Chairman / Chief Executive’s Review

Financial Performance at a Glance

Statement of Value Added

Key Operating & Financial Data

Balance Sheet Analysis

Profit and Loss Account Analysis

Financial Statements 2009

Statement of Compliance with theCode of Corporate Governance

Review Report to the Members on Statementof Compliance with Best Practices of Codeof Corporate Governance

Auditors’ Report to the Members

Balance Sheet

Profit and Loss Account

Cash Flow Statement

Statement of Changes in Equity

Notes to and forming part of theFinancial Statements

Pattern of Shareholding

Categories of Shareholders

Shareholding Information

Notice of Annual General Meeting

Contact Details

Proxy Form

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Board of DirectorsMr. M. Salman BurneyChairman / Chief Executive

Mr. Tariq Iqbal KhanNon-Executive Director

Mr. Rafique DawoodNon-Executive Director

Mr. Shahid Mustafa QureshiLegal and Regulatory AffairsDirector

Dr. Muzaffar IqbalTechnical Director

Mr. Javed AhmedjeeDirector Finance and Logistics

Dr. Iffat YazdaniArea Director Asia Pacific ClinicalOperations.

Audit CommitteeMr. Rafique DawoodChairman

Mr. Tariq Iqbal KhanMember

Mr. M. Salman BurneyMember

Management CommitteeMr. M. Salman BurneyChairman / Chief Executive

Dr. Muzaffar IqbalTechnical Director

Mr. Shahid Mustafa QureshiLegal and Regulatory Affairs Director

Mr. Javed AhmedjeeDirector Finance and Logistics

Ms. Erum S. RahimDirector Marketing and BusinessDevelopment

Mr. Pervaiz Iqbal AwanSales Director

Mr. Maqbool ur RehmanSales Director

Mr. Sohail Matin Country Manager – ConsumerHealthcare

Dr. Atif Mirza Director Medical Services

Dr. Z. U. KhanHead of Quality

Haji Muhammad HanifHead of Procurement

Ms. Fariha SalahuddinHead of HR & OD

Company SecretaryMr. Shahid Mustafa Qureshi

Chief Financial OfficerMr. Javed Ahmedjee

BankersThe Royal Bank of ScotlandCitibank NAHabib Bank LimitedStandard Chartered Bank(Pakistan) LimitedHSBC Bank Middle EastLimited

AuditorsA. F. Ferguson & Co.Chartered Accountants

Legal AdvisorsRizvi, Isa, Afridi & AngellMandviwalla & ZafarOrr, Dignam & Co.Surridge & BeechenoVellani & Vellani

Registered Office35 - Dockyard Road,West Wharf,Karachi - 74000.Tel: 92 21 111-475-725(111-GSK-PAK)Fax: 92 21 2314898, 2311122Website: www.gsk.com.pk

CORPORATEINFORMATION

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The only pharmaceutical company tackling the three WHO

priority diseases: HIV/AIDS, tuberculosis and malaria

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GlaxoSmithKline’ s vision is exciting:

Our value system and operating principles providethe necessar y gu idance on how we wor k a tGlaxoSmithKline. The key to our success is our desireand passion to pursue GlaxoSmithKline’s vision. Wetake pride in our commitment to produce productsthat benefit patients and improves the quality ofpeople’s lives.

VISION

MISSION GlaxoSmithKline has a challenging and inspir ingmission:to advance the quality of human lives by enablingp e o p l e t o

This mission drives us in our purpose to developinnovative medicines and products that help millionsof people. We have a legacy of great science, and whatwe do helps people live healthier, happier lives aroundthe world, every single day.

the opportunity to make adifference to the lives ofbillions of people

VISION &

MISSION

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STRATEGICPRIORITIES

We are reducing risk by broadening and balancing ourportfolio, diversifying new product areas, while also fullycapturing opportunities for our products across all geo-graphic boundaries.

Deliver more products of valueTransforming R&D to ensure that we not only deliverthe current pipeline of new pharmaceuticals, vaccinesand Consumer Healthcare products, but that we arealso able to sustain this flow of new products for years

to come.

Building trustWe see building trust as a fundamental platform.Essentially, without trust, we don’t have a business.

Simplify the operating modelWe are simplifying our operating model to ensure that itis fit for purpose and able to support our business in themost efficient and effective way.

By focusing our business around our fivestrategic priorities, we’re confident that we canfulfill our promises to the world.

Grow a diversified global business

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Create a culture ofindividual empowerment

Empowerment is key to achieving our goals and weensure that our employees receive the tools andinspiration they need to make decisions with confidence

and accountability.

ETHICALCONDUCT

Our Ethical Compass Always Points to Fair PracticeWe are committed to creating a strong ethical culture at GSK.Putting patients first is the core principle of being an ethicalpharmaceutical company. Profit without principle is short lived.Our Code of Conduct sets out the fundamental standards to befollowed by staff in their everyday actions on behalf of GSK, andseeks to promote honest and ethical conduct. Our employees arecommitted to:

Conducting business with honesty, integrity, and in a professional manner.

Building relationship with customers and fellow employees which are based on trust.

Treating individuals with respect and dignity.

Becoming familiar and complying with legal requirements, Company policies and procedures.

Avoiding any activity that could involve or lead to involvement in any unlawful practices.

Avoiding actual or potential conflicts of interest with the Company or the appearancethereof, in all transactions.

Providing accurate and reliable information in records submitted and to respect theconfidential information of other parties.

Where permitted by local laws, promptly repor t to the Company any breach of laws orregulations, ethical principles or company policies that come to attention. Cooperate fully inany audit, enquiry, review or investigations by the Company.

Facilitate External Auditors in audits and provide required information in a timely manner.

Managers to ensure that all their employees receive guidance, trainings and communication onethical behavior and legal compliance relevant to their duties for the Company.

The Company maintains policies regarding preventing Corrupt Practices & MaintainingStandards of Documentation.

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Our values keepus focused, and we holdsteadfast to them.Respect for PeoplePatient FocusedTransparencyIntegrity

OUR VALUES

OUR BEHAVIOURS

We undertake ourquest with...

Flexible ThinkingContinuous Improvement

Customer DrivenDeveloping People

Enable & Drive ChangeBuilding Relationships

VALUES &

BEHAVIOURS

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GSK is the best placeto work due to its

professional and friendlywork environmentwith equal growth

opportunities for everyemployee.

BESTPEOPLEBESTPLACEBESTWORK

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By empowering individuals

and holding them accountable

for delivery of departmental

objectives, GSK has built a

performance based culture.

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 withindividual entrepreneurs of the 1800s. Their pioneering efforts laid the groundworkfor growth in the different companies that, over the years, were to lead to today’sGlaxoSmithKline.

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

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1995

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2001

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John K. Smith opens adrugstore in Philadelphia

Thomas Beechamlaunches Beecham’s pills in England

Burroughs Wellcome &Company was founded

SmithKline & Co.acquires French,Richards & Company

SmithKline & Beechammerge

Glaxo is registered byJoseph Nathan & Companyas a trademark for dried milk

Glaxo & Wellcomemerge

SmithKline & Frenchbecomes researchfocused

GlaxoSmithKline

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THE WORLD

OF GSK

We currently makemore than 100prescriptionmedicines andvaccines

GSK employs over99,000 people in114 countries

Every second, GSKdistributes more than32 doses of vaccines

Over 14,500employees workwithin R&D in manycountries around theworld

Over 150 projects inclinical development- one of the largestpipelines in theindustry

Our global HIV/AIDSeducation andprevention initiativesupports programs in21 countries

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GSK is the GlobalLeader inrespiratory,anti-virals andvaccines

We manufacture over4 billion packs peryear in 28,000 differentpresentations, whichare then supplied toover 160 markets

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GSK believes in mending lives and healing hearts

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Corporate Social Responsibility (CSR) at GSKCommunity interests are at the hear t of the GSKbusiness model. GSK provides donations, medicines,time and equipment, to non-profit organizations to helpimprove health and education. We support programsthat are innovative, sustainable, and bring real benefitsto those most in need.

Every member of the GSK family strives to contributetheir t ime , talents, and ideas to make a real andmeaningful contribution towards improving the qualityof human life. We cross borders and boundaries, sharewith, and learn from one another. We contribute tothe health and well being of people with enthusiasmand vigour.

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BUILDING

PATHWAYSOF HOPE

GSK PAKISTAN

CSR

INITIATIVES

GSK app roved a g r a n t o f £250 , 000 t o s uppo r t t h edevelopment of a Center of Nursing Excellence in Karachi in2008. This three-year project, in collaboration with the PakistanNational Forum on Women’s Health (PNF) and the PakistanNursing Council (PNC), aims at improving the quality ofnursing training to develop teaching capabilities of the nursingfaculty across Pakistan.

The Centre was formally inaugurated on 18 November 2008.The first batch of 31 students graduated in April 2009 and thesecond batch graduated in November 2009. It is estimated thata single well-trained nursing teacher could eventually impactthe care of approximately 40,000 patients each year byteaching an average of 100 new nurses. GSK will providefunding and support for the project for three years after whichit will become self-sustained.

HEALTH & SOCIAL DEVELOPMENTCenter of Nursing Excellence

SERVING FROM THE HEARTGSK Pakistan’s vision and mission subscribe to improving the quality of humanlife by enabling people to do more, feel better and live longer. Today, it is thelargest pharmaceutical company in the country and is proactively responding tothe changing operating environment, creating a balanced business model todeliver sustainable growth.

To implement its CSR program, GSK Pakistan maintains strong partnerships withnon-government organizations such as Pakistan National Forum on Women’sHealth (PNF), Concern for Children Trust, and The Trust for Health and MedicalSciences. The Company has been one of the largest corporate donors for theNational Commission for Human Development (NCHD).

The Islamabad-based Pakistan Centre for Philanthropy (PCP) awarded aCorporate Philanthropy Award Cer tificate to GSK Pakistan in 2008, inrecognition of its support for social development causes. According to the PCPrepor t, GSK is among the top 15 companies, and the only pharmaceuticalcompany leading corporate donations in Pakistan.

GSK supports various health, women and social development, education andrelief programs at the grassroot level. Some of the key initiatives include:

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The Trust for Health and Medical SciencesGSK supports the Trust for Health and Medical Sciences which has beenrunning a charitable clinic in the Landhi area of Karachi since the early1980s and charges a nominal fee for treating patients. Since 1983, aroundtwo million patients have been treated and the clinic has matured into alarge set up with multiple medical facilities. More than 90,000 patientsreceive medical attention annually, and the clinic has recently star tedtreatment and counseling for heroin addicts.

Concern for Children TrustThe Concern For Children (CFC) has been promoting preventive andprimary healthcare and education for children in Pakistan since 1997. WithGSK’s suppor t , CFC has set up three computer l i ter acy pro jectsfor low-income schools across Karachi. Approximately 8,000 children havebenefited from these facil it ies so far. CFC is developing a project inMohammadi – Machhar – Colony, a shanty settlement along the Karachi port.

A mother and child healthcare centre is also being set up to provideprimary, pre-natal, anti-natal services and health information and educationto 8,000-10,000 mothers and children each year. GSK has donated PKR 4million for this project, and also provides medicines for the free healthcarecamps organised by CFC in different parts of the country.

RELIEFInternally Displaced PersonsThe military operation against extremists in the Swat, Buner and LowerDir districts of the Malakand region of Nor th West Frontier Province(NWFP) forced more than 2.5 million people to flee their homes — thesecond biggest internal displacement in the world after Rwanda, accordingto the UN. GSK Pakistan has donated bulk stocks of necessary antibiotics,analgesic, painkillers, anti-diarrhoeal and skin ointments for primary andter tiary medical relief to the IDPs. Medicines worth PKR 8 million weredonated to the National Disaster Management Authority (NDMA), theNational Commission for Human Development (NCHD), Sarhad RuralSupport Programme (SRSP), and the Holy Family Hospital in Rawalpindi.

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GSK GLOBALCSR

Improving Healthcare Worldwide

GSK globally considers itself responsible for upholding values and ethical principles bycontributing to the environment, investing in the society at large, and engagingstakeholders at each step, while also being involved in various community programs.The company provides donations, medicines, time and equipment to non-profitorganizations to help improve health and education for under-ser ved people-supporting programs that are innovative, sustainable, and bring real benefits to thosemost in need.

As part of our commitment to the Global Allianceto eliminate Lymphatic Filariasis, we have donatedover one billion albendazole treatments to stop thetransmission of this disease. Our aim is to donateas much albendazole as required to treat the onebillion people in 83 countries, who are at risk fromthis disease.

Taking on the biggest killer : GSK is at the forefrontof the battle against malaria. Malaria kills over onemillion people a year worldwide, and we have beenworking on a malaria vaccine for over two decades.In par tnership with the PATH Malar ia VaccineInitiative, a non-profit research organization, we arenow close to creating the world’s first vaccine forthe disease. The Phase III trial of the RTS,S malariavaccine candidate started in Bagamoyo, Tanzania, inMay 2009.

INITIATIVES

Ever y year three mill ion people globally die ofdiarrhoeal disease, most of them being children. It’sone of the world’s biggest killers, yet also one of themost eas i ly preventable . To address th i s , wedeveloped PHASE; a simple hand-washing programwhich teaches children how to reduce the spread ofinfection.

In July 2009, we announced the creation of a newPositive Action for Children Fund. The Fund willmake £50 million ($80 million) available over tenyears to help prevent mother-to-child transmissionof HIV and to suppor t orphans and vulnerablechildren.

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SUCCESS

STORIES

GSK PAKISTAN

GSK leads the industry in value, volume and prescription marketshares. We are proud of our consistent performance.

VALUE

WE LEAD THE WAY IN PAKISTAN

VOLUME

OUR BRANDS STAND OUT FROM THE CROWD

GSK maintains the largest value share of the Pakistani Pharmaceutical Industry.

We are proud to have 3 of our brands in the top 10 products list by value share.

Our leading product by value is

Greatest percentage of industry volume share.

7 out of top 10 products by volume share, belong to the GSK family.

Leading Product by volume

PRESCRIPTION

GSK REIGNS OVER THE MARKET

Leaders in prescription share.

Panadol maintains its position as our leading prescription product.

4 of GSK’s brands make the top 10 list of prescribed products.

We’re making our mark on Pakistan

Source: Q4, 2009 - IMS - PKPIS2, 2009 - IMS - MIP

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GSK Successfully Launches The First Value Health

Franchise Brand: CipvalGSK crossed yet another milestone with the launch of CipVal (ciprofloxacin), itsfirst Value Health Portfolio Brand.

Augmentin Infant Drops: Another Welcome Addition to

the Augmentin FamilyThe launch of Augmentin Infant Drops gives GSK the unique advantage of introducingthe first and only co-amoxiclav drops formulation in Pakistan.

Axitra “All Star!”This year welcomed another addition in the GlaxoSmithKline Cardiovascular Portfoliowith the launch of Arixtra 7.5 mg.

Launch of Bactroban 5gm Cream & OintmentPower of an oral… Convenience of a topicalThe Dermatology portfolio continues to expand with the launch of Bactroban 5 gmcream and ointment.

PRODUCT

LAUNCHES

2009

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OF THE

HIGHLIGHTS

FINANCE AND LOGISTICS

YEAR

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“Simplify the Operating Model” is one of the GSK’s strategic priorities. The intent ofthis strategy is to simplify work. It helps remove structures and processes that slow usdown and distract us from focusing on the work which truly matters. Simplification infinance and logistics is achieved by increase in speed to access to information,eliminating duplication of activities across the business, standardization of process andsystems, and simplifying the complex systems and processes currently util ized.

In 2009, a number of initiatives have been implemented for Process Improvement,some of these include:

• Streamlined distributor ordering and payment timings

• Simplification and harmonization of the distribution transport network

• Implementation of goods warehousing practices at distribution

• Automation of customer claims

Fur ther, we have implemented the JD Edwards sys tem at GlaxoSmithK l inePharmaceuticals (Pr ivate) Ltd. (Former ly BMS Pakistan (Pvt.) Ltd. This includedpre-implementation, information gathering of existing systems, user training of JDEacross the company and Prototype/User Acceptance Testing, for the cutover to JDE.

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Clinical Operations of Pakistan recruited the highest number of subjects to date.

We had a successful CMD audit this year and were rated well.

Pakistan completed the country targets in all clinical trials well ahead of timelines.

Clinical Operations - Pakistan team were ranked 1st in Research and developmentsystems competition, which was held in Europe.

We have played a leading role by providing exper tise, sharing best practices anddelivered systems training to the other countries of the region. We were also invitedto share best recruitment practices in clinical trials.

Various members of clinical research team received numerous awards by performingextraordinarily, while competing with other countries involved in similar R&Dprojects. Excellent performance was highlighted in various forums and meetings.

RESEARCH AND DEVELOPMENT

CONSUMER HEALTHCARE

Macleans Freshmint was re-launched to revitalize the brand image with a newformulation and modern packaging.

This year Consumer Healthcare unveiled an aggressive outdoor campaign 'ProjectSmart Outdoor' on Iodex, Eno, Macleans & Horlicks. This activity involved billboards,shop fascias, floats, van branding and merchandising drive.

Horlicks experienced a line extension in its current portfolio with an addition of anew variant. The launch involved interactive and fun activities in collaboration withmany schools. This has contributed immensely to the growth of the brand.

Macleans won Consumer Choice Award for Best Toothpaste of the year 2009.

2009 has been a successful year for GSK Pakistan in the areas of Environment,Health, Safety & Sustainability, as we continue to march towards the aim ofZero Accidents, Zero Injuries and Zero Waste.

GSK ensures that all our operations are safe, the environment that wework in is protected and remains sustainable, and that the health of ouremployees is never compromised.

We have developed a ‘Behaviour based safety program’ called “LivingSafety”. The program provides a framework for assessing safe behavioursand the tools needed to improve the safety culture. The program hasbeen launched across all GSK manufacturing sites.

Emergency evacuation drills are conducted on a regular basis to ensurethe safety of our employees. GSK has also made a substantial investmentin firefighting equipment, with the purchase and installation fire waterengine pumps. In 2009, EHS conducted detailed Fire Risk Assessmentof its sites and employed the services of FM Global, to conductreviews of our fire safety standards. As a result of theirrecommendation, all GSK sites have installed seismicallyactivated gas shut-off valves.

Controlling Occupational Exposures to hazardous dust remained one ofthe priorities for the year 2009. Exposure monitoring is being conductedfor hazardous dust at all sites. Engineering controls are put in place toeliminate or reduce the exposure to acceptable levels.

Noise monitoring has been completed at the GSKP manufacturing sites,and based on the results; action plans are being developed to fur therreduce the noise level through Engineering and Administrative control.

GSK has launched an ambitious program on Machinery Safety called as“Zero Access Guarding”. The purpose is to protect employees working onmachinery from intentional or inadver tent access to the moving andhazardous parts of the equipments as access to the moving parts has beenthe largest cause of accidents in GMS. GSK selected 5 sites for the pilotstudy and F-268 was one of them. 23 facilitators were trained worldwideand 3 of them are from GSK Pakistan.

GSK sites have Effluent Treatment Plant (ETP) and the treated effluent complies with National EnvironmentalQuality Standards (NEQS) for Liquid Industrial Effluents. The air emissions from GSK sites are regularly monitored,and all emission sources are found to be far below the concentration of air pollutants as prescribed by theNational Environmental Quality Standards (NEQS) for Industrial Gaseous Emissions.

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HEALTH &

ENVIRONMENT

SAFETY (EHS)

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GlaxoSmithKline’s Global Manufacturing and Supply capabilities in Pakistan comprises of the best qualityprocesses and procedures associated with the production and supply of full-scale commercialmanufacturing. The GMS mission is to ensure a secure source of supply of high quality products, tocomply with customer expectations and regulatory requirements and to have cutting edge practices andperformance.

Our penicillin factory at F268 Site, is a state of the art facility. The focus is always in producing the bestproducts, which meet the highest quality standards. Strict rules and guidelines provide us with a systemof processes, procedures and documentation to ensure safety and quality within the factory.

MANUFACTURING

GLOBAL

& SUPPLY (GMS)

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QUALITY MANAGEMENT SYSTEM (QMS)

Simplification & Standardization

QUALITY BLITZ - an initiative to enhance the learnings of Quality ManagementSystems, with a focus on its better understanding and implementation ofcritical policies was conducted at all sites over a period of 6 weeks.

Work on Lab Efficiency Project continued at all sites - transforming thelaboratory operations to improve the Ways of Working, efficiency andproductivity in the laboratories.

Quality is at the heart of all activities that support discovery,supply and marketing of our products to our patients andcustomers. Quality is critical to building trust with societyand, therefore, to our future business success.Andrew Witty (CEO GSK)

Pharma Operations Bench Marking of Solids(POBOS)workshop - a global initiative was conducted at F-268 site byRPS OE Consultants to identify opportunities for productivityand efficiency through simplification and standardization.

Low cost automation initiatives progressed at all the sites toimprove product quality, productivity and process efficiency.

The Spirit of GSKAt GSK, we believe that our employees are our most powerful asset. They lead GSKwith their strengths and are empowered to ensure GSK’s success.

Our employees embody characteristics that create a culture of respect, trust andintegrity. We come together in a shared mission, with true passion and a sense ofpurpose. They have confidence in themselves, and a belief in each other. We believe inperformance with integrity, coupled with entrepreneurial spirit, a focus on innovation,a sense of urgency, and a passion for achievement.

We are proud to promote an open culture, encouraging employees to be themselvesand giving their ideas a chance to flourish. We strive to provide our employees thefreedom and suppor t they need to achieve their full potential and do great thingseveryday.

RESOURCE

HUMAN

DEVELOPMENT

LEARNGROWBE INSPIRED

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Best Place, Best People & Best Work

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In 2009, GlaxoSmithKline’s HR Team excelled even further at building and promoting aculture that supports employee initiatives, productivity, emphasizes empowerment andthe on-going development of an advanced workforce.

We are proud to be the recipient of the following prestigious awards:

Recruitment DriveTalent Review and Succession Planning discussionsLeadership Development ProgramProactive Total Reward ManagementChange Management Programs

Employers’ Federation of Pakistan - Human Resource ManagementExcellence Award - Multinational Category 2009Employers’ Federation of Pakistan - Award in Industrial Relations 2009Pakistan Society of Human Resource Management (PSHRM) “Best Placeto Work Award 2008”

Key Learning Statistics 2009

Total Participants for both internal / external courses 751Total Number of Courses conducted 32Total Training Days 51Total Training Hours 256Learning Hours per employee 9.95

FLAGSHIP

PRODUCTS

OUR

We are one of the world’s leading producers ofprescription medicines, vaccines, and consumer

healthcare products.

Our products make a real difference to globalhealthcare. GSK is on the cutting edge of

discovering and developing new andinnovative medicines.

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Pharmaceutical ProductsOur pharmaceutical products include treatment forasthma, chronic hepatitis B, depression, heart failure,

GI disorders and cancers.

VaccinesMore than 1 billion doses of GSK vaccines weredistributed worldwide in 2008,protecting against illnesses such ashepatitis A and B, typhoid, influenza,chickenpox, whooping cough, and tetanus.

Consumer Health ProductsWe bring dental health care products, over the

counter medicines, and nutritional drinks to millionsof people.

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Our commitment is to develop innovative products rapidly and

to find new ways to help people receive the medicines they need

for a better life

AWARDS FOR

EXCELLENCE

At GSK, we strive for excellence in everything that wedo, and we are thrilled that a number of our peershave recognized our efforts. The Awards for Excellencelook behind the headlines for evidence of the impact ofa program.

They are a statement of the fact that the products andservices GSK provides are valuable and stand up toindependent scrutiny. They are testament that GSKPakistan has shown innovation, creativity and sustainedcommitment to its vision, and that we do so withRespect for People , Transparency and Integr ity.

We are proud to be a recipient of a number of theseawards.

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Best Corporate Report Award 2008This year, GlaxoSmithKline Pakistan achieved third position in the Chemical& Fer tilizer sector in the Best Corporate Repor t Award competition jointlyadjudicated by the Institute of Char tered Accountants of Pakistan (ICAP) andInstitute of Cost and Management Accountants of Pakistan (ICMAP). Thisaward recognizes the best annual repor ts of companies in terms of accuracy,transparency, usefulness and speed of financial and other disclosures made forall stakeholders along with its presentation and ability to convey corporateobjectives. The BCR award was presented by the Governor State Bank ofPakistan, Mr. Salim Raza, and was received on behalf of GSK Pakistan by our

Finance Director, Mr. Javed Ahmedjee.

Corporate Social Responsibility (CSR)GSK was awarded the “CSR National Excellence Award-2009” by

Help International Welfare Trust (HIWT), in recognition of our values,effor ts and committed support in the community.

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ConsumerMacleans was awarded the “Consumer Choice Award for Best Toothpaste”of the year.

Human ResourcesAt a recent award ceremony held by the Employers Federation of Pakistan,GlaxoSmithKline Pakistan was awarded with the “HRM Excellence Award 2009”in the multinational category. GSK Pakistan received the highest score on HR andIndustr ial Relations practices out of the 30 companies that par ticipated. Thejudges commented that they were impressed with GSK Pakistan’s approach ofensuring that their employees are provided with the best of service and havingachieved outstanding business results in designing and implementing innovativeHR initiatives.

Best Performance Award EnvironmentGSK received the “Environment Excellence Award” in 2009, a recognition byan independent authority of GSK’s commitment to Environmental, Health,Safety and Sustainability.

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PROFILES

DIRECTORS’

Mr. Tariq Iqbal KhanMr. Tariq Iqbal Khan is the Chairman / Managing Director of National Investment Trust. Hehas more than 40 years of rich and diversified experience in the areas of Finance,Accounting, Capital Market, Corporate Sector, Company Law, Tax, etc. He is founderDirector of Islamabad Stock Exchange and has also been its President from 1995 to1998. He has also served as member, Tax Policy and Co-ordination in Central Boardof Revenue and later joined Securities and Exchange Commission of Pakistan as aCommissioner and officiated as acting Chairman in 2000. He has a vast anddiversified Board Room experience of Banks, Financial Sector, Fertilizer, Chemical andEnergy Sectors etc. Mr. Khan is a Fellow member of the Institute of Char tered

Accountants, Pakistan.

Mr. Rafique DawoodMr. Rafique Dawood is the Chairman and Director of Dawood Islamic Bank,1st Dawood Investment Bank, Dawood Power (Private) Limited and B.R.R. (Private)Limited, (the Manager of B .R.R. Guardian Modaraba). Apar t from the groupcompanies, he is also on the Board of GSK Pakistan Limited and Pioneer CementLimited.

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Mr. M. Salman BurneyMr. M. Salman Burney joined SmithKline Beecham as Director Marketing & Sales in1992 and was appointed Managing Director of SmithKline Beecham in 1997. He hasbeen the CEO of GlaxoSmithKline Pakistan since the SmithKline Beecham’s mergerw i t h G l a x o We l l c o m e i n 2 0 0 1 . H e a l s o h a s R e g i o n a l m a n a g e m e n tresponsibility for Iran & Afghanistan.

Mr. Javed Ahmedjee

Mr. Shahid Mustafa QureshiMr. Shahid Mustafa Qureshi is the Director and Company Secretary ofGlaxoSmithKline Pakistan Limited. He is also responsible for Legal, Corporate Affairs,Industrial Relations, Administration and Regulatory functions of the Company.

Mr. Javed Ahmedjee is the Chief Financial Officer of the Company and also responsiblefor Distribution and Institutional Sales. A Fellow member of the Institute of CharteredAccountants of Pakistan possessing over 15 years post qualification experience insenior management positions in financial and manufacturing sectors. He believes inperformance as a business partner, to add shareholder value, with the highest degreeof integrity and consistency. With his proven capability of dealing with diverse andadver se s i tuat ions , he ef fect ive ly manages teams, engaging per sonnel in a

constant and continuous endeavor of simplifying the operating model.

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Dr. Iffat YazdaniDr. Iffat Yazdani joined SK&F Pakistan as Medical Director in 1986 and has worked indiverse roles of increasing seniority in Medical Services and R&D, gaining broadexperience and managing large teams. In 2004, Dr. Iffat was responsible for establishingGSK Pakistan as a pioneer of Phase II / III clinical trials within the MENA region. In2007, she became Area Director for Clinical Operations AP/CHINDIA and RegionalSpecialist for Infectious disease. She has strong interpersonal, communication andnegotiation skills with constant interaction with Medicine Development Centre in theUS and interfaces with 100 personnel across AP/CHK / India.

Dr. Muzaffar IqbalDr. Muzaffar Iqbal joined GSK in 1987. He was appointed Technical DirectorGlaxoWellcome in 1998. He is currently Area Technical Director responsible formanufacturing and supply functions in Pakistan and Bangladesh. He worked as a SeniorResearch Associate at Washington University, St. Louis, Missouri, USA before joiningGSK. He has a PhD degree in Chemistr y and an MS degree in Manufactur ing

Leaders Programme from Cambridge University, UK.

BOARD &

MANAGEMENT

COMMITTEES

Audit CommitteeThe Audit Committee assists the Board in the effective discharge of its responsibilitiesfor corporate governance and financial reporting. The Audit Committee comprises ofthree members of which two are non-executive directors. The committee meets atleast four times in a year. It reviews the internal control systems including financial andoperational controls, accounting systems and reporting structure are adequate andeffective.

Management CommitteeThe Management Committee comprises of the Functional Heads to ensure smoothoperations of the Company, strategic business planning, decision making and overallmanagement of the Company. It also ensures adequacy of operational, administrativeand financial controls.

Risk Management & Compliance BoardRisk management & Compliance Board comprises of the Functional Heads and a fulltime compliance officer. It reviews significant risks affecting the business, includingfinancial, operational and legal compliance r isks. It oversees and ensures theidentification and implementation of internal control to mitigate significant risks. TheBoard monitors the various compliance initiatives and promotes risk managementand compliance culture in the Company.

Environment Health & Safety CommitteeThe Environment Health & Safety Committee is chaired by the respective SiteHeads. It ensures operations are fully compliant with the EHS practices as outlined byregulatory control and corporate. It appraises the major EHS projects and monitorstheir implementation and also identifies risk conditions, organizes training programs toeducate employees for EHS issues.

Vision TeamVision team at GSK gives input for alignment of the GSK strategy and futuristicobjectives. It primarily reviews line capacities at the various sites over the long termperspective focusing on capacity constraints, potential for export markets, productinitiatives and new packaging requirements.

32

DIRECTORS’

REPORT TO

SHAREHOLDERS

The Board of Directors of GlaxoSmithKline PakistanLimited is pleased to present the annual report and theCompany's audited financial statements for the yearended December 31, 2009.

The directors' report is prepared under section 236 ofthe Companies Ordinance, 1984 and clause xix of theCode of Corporate Governance. This report is to besubmitted to the members at Sixty Third AnnualGeneral Meeting of the Company to be held onMarch 30, 2010.

The Board of Directors is pleased to propose a finalcash div idend of Rs. 5.0 per share amounting toRs. 853.4 million.

The Company achieved net sales of Rs. 14.7 billion,grew by 9.8% in 2009. Profit after tax this year wasRs. 933.9 million.

Holding companyAs at December 31, 2009, Setfirst Limited UK held134,453,588 shares of Rs. 10 each. Subsequent to thebalance sheet date, the shares held by Setfirst Limited,UK have been transferred to S.R. One InternationalB.V., Netherlands. The ultimate parent of the companycontinues to be GlaxoSmithKline plc, UK.

Pattern of ShareholdingThe Company shares are traded in Karachi and Lahorestock exchanges. The shareholding information as at

December 31, 2009 and other related information areset out on pages 83 to 85.

The Directors, CEO, Company Secretary and CFO,their spouses and minor children did not carry out anytrade in the shares of the Company.

Chairman / Chief Executive’s reviewThe Chairman / Chief Executive's review on pages 37to 39 deals with:• The performance of the Company during the year in

comparison to last year with reasons for variances• Effective cash management strategy• Significant plans and decisions• Future outlook, business risks and challenges

The directors of the Company endorse the contentsof the same.

Basic earnings per shareBasic earnings per share after taxation were Rs. 5.47(2008: Rs.11.46).

33

Profit for the year before taxation 1,567Taxation (633)Profit after taxation 934Un-appropriated profit brought forward 2,284Profit available for appropriation 3,218Appropriations:- Final dividend 2008 Rs. 7.0 per share (1,195)Un-appropriated profit carried forward 2,023

Rs. inmillionOperating results

Earnings Per Share & Price Earning Ratio

35

30

25

20

15

10

5

0

12

10

8

6

4

2

0

Rup

ees

Num

ber of Tim

es

Earnings per share Price earning ratio

8.6

10.6

17.5

9.8

16.2

9.8

19.6

11.5

6.6

5.5

20.9

20.0

2004 2005 2006 2007 2008 2009

Merger of GlaxoSmithKline

Pakistan Limited with

GlaxoSmithKline Pharmaceuticals

(Private) Limited (Formerly Bristol

Myers Squibb Pakistan (Private)

Limited)The Board of Directors of the Company has approvedthe merger plan with GlaxoSmithKline Pharmaceuticals(Pr ivate) Limited (Former ly Br istol Myers SquibbPakistan (Private) Limited). In an extraordinary generalmeeting of the company held on March 3, 2010,shareholders of the company have approved thescheme o f a r r angements for ama lgamat ion o fGlaxoSmithKline Pharmaceuticals (Private) Limited(Former ly Bristol Myers Squibb Pakistan (Private)Limited) with the Company.

Corporate and social responsibilityCorporate responsibility is an integral and embeddedpar t of the way GSK does bus iness and we arecommitted to connecting business decisions to ethical,social and environmental concerns. We are committedto playing a full par t in addressing the healthcarechallenges by taking an innovative, responsible andabove all, sustainable approach.

We work as partners with under-served communitiesand are also significant donors to numerous NGOs.

T h e C o m p a ny h a s s e t u p a n d s u p p o r t s t wocommunity trusts/ NGOs i.e. Concern for ChildrenTr ust (CFC ) and Tr ust for Hea l th and Medica lSciences, which work in the underserved communitiesof Landhi and Mohammadi (Machar) Colony in Karachi.

Var ious CSR initiatives of the year 2009 are fullycovered on page 12 to page 14.

Human Resource DevelopmentAs ever y year, in 2009, recruit ing , reta in ing anddeveloping our employees was critical to enhancingand sustaining our performance and reputation. Wecontinued to provide a fulfilling, healthy environmentwhere our employees could learn, grow and develop.This year, we followed the global framework of HighPerformance Behaviours, that formed the basis forperformance management and development activity.This enabled us to focus on developing the desiredbehaviours critical to achieving our strategic goals.

The Company was awarded with the “HRM ExcellenceAward 2009” in the Multinational Category by the

Employer s Federation of Pakistan. Out of the 30companies that participated, GSK Pakistan received thehighest score on HR and Industrial Relations practices.

This year, stakeholder feedback was included in theperformance management system which is the firststep towards a 360 degree appraisal system. GSK has afirm bel ief that empowerment is one of the keyingredients to its success. It means to trust people todo their job, by using good judgment, within a clearlydefined and understood framework of responsibility.Our success based on this philosophy indicates thatour employees have the highest level of integrity, senseof accountability and clarity regarding their role in theorganization.

DiversityGSK regards itself as an equal oppor tunity employerand firmly believes that treating people equally isessential to being an effective organization. This isachieved by creating a diver se culture , using ourrecruitment and selection process and by effectivelypromoting the impor tance of these values to all ourstaff.• Our flexible working policy enables employees to

maintain a positive work life balance.• The Mentor ing program gives employees an

oppor tunity to learn from and be guided by aseasoned and experienced colleague.

• The Recruitment of a diverse workforce ensuresthat all people within society are well representedand given equal oppor tunity to apply at all levels.

• High priority is placed on the development of ourkey talents via the succession planning process.

34

Sales per Employee 9

8

7

6

5

4

3

2

1

02004 2005 2006 2007 2008 2009

Rupees in m

illion

5.1

7.7

8.4

5.8

5.5

4.8

35

Environment, Health and Safety

(EHS)Our sense of responsibility for the Environment, Healthand Safety (EHS) i s at the h ighest leve l . GSK i scommitted to working towards designing a workplacethat minimizes work-related r isks to occupationalhealth and safety.

The Company has a dedicated EHS depar tment tooversee the implementation of EHS objectives andrepor ts to Executive management. As par t of ourgovernance responsibility, we conduct EHS audits ofour manufacturing sites, assessing the management ofkey risks and impacts and performance against ourglobal EHS standards.

GSK Pakistan's environmental targets are monitoredon a continuous basis and its impacts are identified andmanaged in line with required standards.

Statement of Ethics and BusinesspracticePerformance with integrity is central to operating atGSK. The Board of Directors of the Company hasadopted a statement of ethics and business practices.All employees are informed and aware of this and arerequired to observe these rules of conduct, in relationto business and regulations at all times.

Board of Directors meetings andattendanceThe Board of Directors met four times in 2009, witheach member attending as follows:

Name Meetings attendedMr. M. Salman Burney 4Mr. Tariq Iqbal Khan 1Mr. Rafique Dawood 4Mr. Shahid Mustafa Qureshi 4Mr. Javed Ahmedjee 4Dr. Muzaffar Iqbal 4Dr. Iffat Yazdani 3

Leave of absence was granted to the Directors whocould not attend some of the board meetings.

Audit CommitteeAn Audit Committee has been in existence sinceMay 2002. The committee consists of three members,of whom two are non-executive directors including thechairman of the committee. The terms of reference ofthe Committee have been determined by the Board ofDirectors in accordance with the guidelines provided

in the Listing Regulations and advised to the Committeefor compliance. The Committee held four meetingsduring the year.

An independent Internal Audit function repor ting tothe Board's Audit Committee reviews the financial andinternal repor ting process, the system of internalcontrol, the management of risks and the external andinternal audit process. The Internal Audit functionutilizes the ser vices of independent audit firms forcon t i nuou s r e v i ews o f i n t e r n a l con t ro l s a ndmanagement of risks.

Management CommitteeThe Management Committee comprises of 12 seniormembers who meet and discuss impor tant businessplans, issues and progress made in their functions.Significant matters to be put for th in the Board ared i s cus sed fo r onward approva l by the Board .

Risk Management and Compliance

Board (RMCB)The Risk Management and Compliance Board (RMCB)have been established, which comprises of the businessunit heads. The RMCBs oversee management of all risksthat are considered important for the business and alsopromote the culture of compliance in the company. Thecompany also has a full time Compliance officer.

AuditorsThe present auditors, Messrs A.F. Ferguson & Co.Chartered Accountants, retire and being eligible, offerthemselves for re-appointment. The Board of Directorsendorses recommendation of the Audit Committeefor their re-appointment as auditors of the Companyf o r t h e f i n a n c i a l y e a r e n d i n g D e c e m b e r 3 1 ,2010, at a fee to be mutually agreed.

Subsequent eventsNo material changes or commitments affecting thefinancial position of the Company have occurredbetween the end of the financial year of the Companyand the date of this report.

KarachiMarch 03, 2010

Value of investments of provident

and gratuity fundsThe Company maintains retirement benefits plans forour employees. Value of investments of provident andgratuity funds, based on their un-audited accounts as onDecember 31, 2009 (audit in progress) is as follows:

2009Rupees ‘000

Provident fund 1,175,338Gratuity fund 548,591

Corporate and financial reporting

framework

a. The f i n a n c i a l s t a t emen t s p r ep a r ed by t h emanagement of the Company present fairly, its stateof affairs, the result of its operations, cash flows andchanges in equity.

b. Proper books of account of the Company have beenmaintained.

c. Appropr ia te account ing po l i c ies have beenconsistently applied in preparation of financialstatements and accounting estimates are based onreasonable and prudent judgment.

d. The financial statements are prepared in accordancewith International Financial Reporting Standards, asapplicable in Pakistan.

e. The Company maintains a sound internal controlsystem, which gives reasonable assurance against anymaterial misstatement or loss. The internal controlsy s tem i s regu l a r ly rev iewed . Th i s has beenformalized by the Board's Audit Committee and isupdated as and when needed.

f. There are no significant doubts upon the Company'sability to continue as a going concern.

g. There has been no material departure from the bestpractices of Corporate Governance as detailed in thelisting regulations.

h. The key operating and financial data for the six yearsis set out on pages 42 to 43.

36

By order of the Board

M. Salman BurneyChairman / Chief Executive

Javed AhmedjeeChief Financial Officer

68%

32%

Investment in funds

37

REVIEW

CHAIRMAN/

CHIEF EXECUTIVE’S

I am pleased to present the Annual report of the Company for the financial year ended December 31, 2009.

Overview of Economy & MarketEconomic conditions in Pakistan remained challengingduring 2009. The Government has taken measures toaddress the country's macro economic imbalancesand curtail inflation, to lay the foundations of sustainableand broad based economic growth.

The Pharmaceutical industry in Pakistan is howeverexperiencing unprecedented challenges. The currencydevaluation and inflation, coupled with restrictivepricing, has contributed to declining margins andprofitability. Though the Government has given someprice increases on certain products in the last quarterof the previous year, however their impact is notbroad based and significant enough to improve thesituation.

In 2009, the market grew by approximately 15.5%.GSK Pakistan continued to retain its position as thelargest research based pharmaceutical company interms of value, prescription, and volume shares. Outof top 20 products, 9 are manufactured and sold byGlaxoSmithKline.

Review of Operating ResultsTotal turnover for the year grew by 9.8% (Rs.1.3billion) to Rs 14.7 billion. Excluding large governmenttenders, underlying sales grew by 14.9%. Within thecore pharmaceutical por tfolio, there were strongperformances from Antibiotics, Cardiovascular,Respirator y, Dermatology, Analgesics and GastroIntestinal brands, with all achieving double digitgrowth.

The Consumer Health Care business grew by 28.2%to Rs 298.6 million, with Eno and Iodex being themain growth drivers.

Export sales maintained a positive trend and achieveddouble digit sales growth to Rs. 390.4 million.

Gross margins in this year at 24.1%, declined by 4.7%

compared to last year. Margins have been adverselyaffected due to the long-standing price freeze onmajority of the products since 2001, increases in rawand packaging prices both locally and internationally,the continuous weakening of the rupee againstforeign currencies particularly the US Dollar and alsoescalation of fuel, power and uti l it ies costs. Thecompany absorbed these negative impacts to anextent through good sales growth, simplification andrationalization initiatives undertaken in manufacturingand commercial operations.

Sell ing, marketing and distr ibution expenses atRs. 1673.8 million increased by 26.0%. The increaseover last year mainly reflected increased investment incore and new brands and increased freight cost dueto rising oil prices and sales growth.

Administrative expenses at Rs. 588.8 million increasedby 13.2%. The increase was less than the general levelof inf lat ion, which impacted employment cost ,traveling and accommodation. Increases in trainingexpenses for employee development and increasedlegal costs also contributed to expense growth.

Net Sales

16000

14000

12000

10000

8000

6000

4000

2000

02004 2005 2006 2007 2008 2009

Rupees in m

illion

1340

3

1471

9

1061

1

1008

8

9417

8867

Other operating income was recorded at Rs. 436.6million, primarily comprising of investment income ofRs. 354.9 million. Overall, the increase in incomestood at Rs. 0.3 million (excluding gain on sale ofKorangi land last year). The investment income hasdeclined by 8.9% as surplus funds reduced due todiv idend payout and increase in cost of doingbusiness. This was par tly offset by higher interestrates earned on investments.

Net profit after tax for the year was Rs. 933.9 million.Excluding the impact of the land sale in 2008, thedecrease in profit is to the tune of 16%.

The Company continues to use strong cash flows tomake the required levels of investments in businessnecessary, to sustain long term growth. During thisyear, capital expenditure was Rs 494.2 million (2008:Rs. 475.0 mill ion) mainly spent on expansion ofwarehouse, offices, plant upgradation and vehicles.

The Company has surplus funds of Rs. 2,384.1 millionas at December 31, 2009 showing a decline ofRs. 340.8 million as against last year mainly due todividend payment and decrease in profitability. Thesefunds are primarily invested in bank deposits, T-billsand PIBs. With efficient fund management strategiesin place, the Company does not face any liquiditycrisis as rigorous cash flow forecasting is done alongwith active investment management to achieveoptimum returns by making efficient placements interm deposits . A robust r isk-aver se strategy isfollowed, whereby investments are only made ingovernment securities and high credit-rated banks.

The Company has maintained its history of goodreturn and payout to shareholders. The Board ofDirectors in its meeting held on March 03, 2010proposed a final cash dividend of Rs. 5.0 (2008: Rs.7.0) per share.

O ve r t h e l a s t f e w ye a r s , p a yo u t a s we l l a sshareholder value has increased significantly as aresult of Company's sustained business success. TheCompany's market capitalization has increased overthe last 5 years from Rs. 15.8 bill ion in 2004 toRs. 18.6 billion as at December 31, 2009.

Future outlook and ChallengesWe h ave m a d e g o o d p r o g r e s s i n o u r s a l e sperformance, actively focusing on developing thenew p roduc t p i pe l i ne and a t t he s ame t imemaintaining growth of mature brands to create valuefor our shareholder s and to provide new and

affordable healthcare solutions to patients. A numberof new products in the area of oncology, respiratoryand anti-bacterial are under registration and launch.

Our operating results remain under pressure due tovolatility in the rupee currency and inflation. Theindustry is heavily price controlled and the last acrossthe board price increase was given in 2001. This lackof a general price increase poses a greater risk onthe future profitability of the business allowing noroom to counterbalance rising costs. We request theGovernment to take immediate steps to improve thepricing policy and to allow price increase across theboard to support the industry.

The Company's commitment towards improvinghealthcare in Pakistan par ticular ly, in the area ofpreventive healthcare & vaccines remains integral and

38

Profit after tax

2000

1800

1600

1400

1200

1000

800

600

400

200

02004 2005 2006 2007 2008 2009

Rupees in m

illion

1471

1814

1665

1671

1955

934

Capital Expenditure

700

600

500

400

300

200

100

02004 2005 2006 2007 2008 2009

Rupees in m

illion

172

265

472

646

475

494

39

explicit. GSK is the world's leading developer andmanufacturer of vaccines, and hopes to partner withthe Government in protect ing people againstpreventable diseases.

The pharmaceutical industry in Pakistan has greatpotential for growth. However, its sustained successdepends on a regulatory environment which is ableto balance the interests of this research basedindustry, with the need for affordable healthcare.

Intellectual propertyIntellectual proper ty is a key business asset for ourCompany and the effective legal protection of ourin te l lec tua l proper ty i s c r i t i ca l in ensur ing areasonable return on investment in researching andcommercializing new treatments.

Dur ing recent year s , Pak istan has made someprogress in this regard, by updating its IPR laws to thelevels required by global conventions. At a practicallevel however, much more needs to be done todiscourage both piracy and counterfeiting. Effectiveimplementation will protect consumers, as well asindustry and will also lead to a quality and research-oriented culture which is vital for the future progressof this industry.

AcknowledgementI would like to recognize the enormous contributionof our employees in ach iev ing the Companyobjectives. The GSK spirit continues to form part ofour value system that drives our success. On behalfof the Board. I would also appreciate the continuoussupport of our valued customers and shareholdersand we look forward to deliver successful results infuture to the best of our abilities

KarachiMarch 03, 2010

M. Salman BurneyChairman / Chief Executive

40

PERFORMANCEFINANCIAL

AT A GLANCE

2009 2008

Rupees in million

Net Sales 14,719.1 13,403.2

Gross Profit 3,545.7 3,855.6

Operating Profit 1,581.1 3,077.9

Profit before Taxation 1,566.7 3,001.0

Taxation 632.8 1,045.8

Profit after Taxation 933.9 1,955.2

Dividend - cash* 853.4 1,621.4

- per share - Rs. 5.0 9.5

Paid-up Capital 1,706.7 1,706.7

* Represents final dividend @ Rs. 5.0 per share amounting to Rs. 853.4 million proposed by the Board of Directorssubsequent to the year end.

Gross and Operationg Profit

4000

3500

3000

2500

2000

1500

1000

500

02004 2005 2006 2007 2008 2009

Rupees in m

illion

Gross Profit Operating Profit

3506

2148

3846

2708

3867

2651

3952

2670

3856

3078

3546

1581

Payout to Shareholders1750

1500

1250

1000

750

500

250

02004 2005 2006 2007 2008 2009

Rupees in m

illion

Cash Dividend Bonus Shares

612

146 87

421

8 1092

273

1280

341

1621

0 853

0

The statement below shows the amount of revenue generated by the Company during the year and the way this revenuehas been distributed.

41

OF VALUE

STATEMENT

ADDED

* Represents final dividend @ Rs. 5.0 per share amounting to Rs. 853.4 million proposed by the Board of Directorssubsequent to the year end.

Revenue GeneratedTotal revenue 15,186,134 100.0 14,703,021 100.0

Revenue Distributed

Bought-in-materials and Services 11,173,470 73.6 9,547,619 64.9Selling, Marketing and Distribution Expenses 1,673,809 11.0 1,328,925 9.1Administrative Expenses and Financial Charges 603,162 4.0 597,075 4.1

Income tax 632,791 4.2 1,045,853 7.1Worker's funds and Central research fund 138,585 0.9 208,355 1.4Sales tax 30,387 0.2 20,007 0.1

To Government 801,763 5.3 1,274,215 8.6

Cash dividend* 853,359 5.6 1,621,383 11.0

To Shareholders 853,359 5.6 1,621,383 11.0

Retained in the Business 80,571 0.5 333,804 2.3

15,186,134 100.0 14,703,021 100.0

2009 2008

Rupees ‘000 % %Rupees ‘000

Bought-in-materials & Services 73.6%Selling Marketing and Distribution Expenses 11.0%Administrative Expenses and Financial Charges 4.0%Government 5.3%Shareholders 5.6%Retained in the Business 0.5%

Revenue and its Disposal

0.5%5.6%

4.0%

11.0%

5.3%

73.6%

42

Assets employedFixed assets - property, plant and equipment 1,434 1,503 1,774 2,237 2,415 2.601Investments 407 192 96 347 172 169Long-term loans and deposits 55 47 43 61 69 67Net current assets 3,877 5,252 5,827 5,758 6,032 5,646

5,773 6,994 7,740 8,403 8,688 8,483Less: Non-current liabilitiesStaff retirement benefits - Staff gratuity 149 159 66 23 21 59Deferred taxation 76 97 137 262 312 320

225 256 203 285 333 379Net assets employed 5,548 6,738 7,537 8,118 8,355 8,104

Financed byIssued, subscribed and paid-up capital 874 1,092 1,365 1,707 1,707 1,707Reserves 4,674 5,646 6,172 6,411 6,648 6,397Shareholders' equity 5,548 6,738 7,537 8,118 8,355 8,104

Turnover and profitNet sales 8,867 9,417 10,088 10,611 13,403 14,719Gross profit 3,506 3,846 3,867 3,952 3,856 3,546Operating profit 2,148 2,708 2,651 2,670 3,078 1,581Profit before taxation 2,119 2,695 2,632 2,659 3,001 1,567Taxation 648 881 967 988 1,046 633Profit after taxation 1,471 1,814 1,665 1,671 1,955 934EBITDA 2,306 2,858 2,804 2,842 3,309 1,848Dividend including bonus shares* 757 1,092 1,365 1621 1,621 853Sales per employee (Rs. in '000) 4,765 5,087 5,549 5,850 7,659 8,420

Rupees in million

2007 20092008200620052004

Return on Equity

30

25

20

15

10

5

02004 2005 2006 2007 2008 2009

Percentage

26.5

26.9

22.1

20.6

23.4

11.5

Debtors Turnover & Inventory Turnover70

60

50

40

30

20

10

0

28

24

20

16

12

8

4

02004 2005 2006 2007 2008 2009

Num

ber

of D

ays N

umber of D

ays

Debtors Turnover Inventory Turnover

2.2

50

1.9

54

2.7

63 3.5

69 15.4

56 25.0

67

AND FINANCIALKEY OPERATING

DATA

43

CashflowsOperating Activities 1,788 1,721 1,765 1,497 (402) 1,090Investing Activities (469) (179) (220) (824) 572 (241)Financing Activities (508) (609) (869) (1,086) (1,698) (1,190)Changes in Cash equivalents 811 933 676 (413) (1,528) (341)Cash & equivalents - Year end 3,057 3,990 4,666 4,253 2,725 2,384

RatiosEarnings per share - Rs. 8.6 10.6 9.8 9.8 11.5 5.5Cash dividend per share* - Rs. 7.0 8.0 8.0 7.5 9.5 5.0Bonus shares (%) 20 25 25 25 - -Price earning ratio (times) 20.9 17.5 16.2 19.6 6.6 20.0Market value per share - year end - Rs. 181 186.3 157.9 192.4 75.9 109.3Market value per share - high - Rs. 236.5 240.3 215.8 210.0 200.0 143.8Market value per share - low - Rs. 176 162.1 148.0 151.1 75.9 75.0Break-up value per share-without surplus on revaluation - Rs. 63.5 61.7 55.2 47.6 48.9 47.5Break-up value per share-with surplus on revaluation - Rs. 63.5 61.7 55.2 47.6 48.9 47.5Market price to Book value with surplus (times) 2.9 3.0 2.9 4.0 1.6 2.3Market capitalization (Rs in million) 15,817 20,350 21,559 32,837 12,961 18,649Dividend payout (%) 51.5 60.2 82.0 97.0 83.0 91.3Dividend yield (%) 5.0 5.6 6.6 5.2 12.5 4.6Dividend cover ratio (times) 1.9 1.7 1.2 1.0 1.2 1.1Return on equity (%) 26.5 26.9 22.1 20.6 23.4 11.5Total assets turnover (times) 1.3 1.1 1.1 1.0 1.3 1.3Fixed assets turnover (times) 6.2 6.3 5.7 4.7 5.5 5.7Debtors turnover (days) 2.2 1.9 2.7 3.5 15.4 25.0Creditors turnover (days) 27 23 25 25 17 27Inventory turnover (days) 50 54 63 69 56 67Current ratio 4.6 5.1 4.4 4.3 4.1 3.2Acid test ratio 3.1 3.6 3.1 3.0 2.3 1.6Gross profit margin (%) 39.5 40.8 38.3 37.2 28.8 24.1EBITDA Margin to Sales (%) 26.0 30.4 27.8 26.8 24.7 12.6Net margin (%) 16.6 19.3 16.5 15.7 14.6 6.3

2007 20092008200620052004

Assets & Liabilities 7000

6000

5000

4000

3000

2000

1000

02004 2005 2006 2007 2008 2009

Rupees in m

illion

256

1742

5252

1503

203

1913

5827

1774

285

2645

5758

2237

333

2656

6032

2415

379

2837

5646

2601

225

1896

3877

1434

Non-current Liabilities Non- current Assets

Net Current Assets Property, plant and equipment

Current Ratio6

5

4

3

2

1

02004 2005 2006 2007 2008 2009

Num

ber of times

4.6

5.1

4.4

4.3

4.1

3.2

* Represents final dividend @ Rs. 5.0 per share amounting to Rs. 853.4 million proposed by the Board of Directors subsequent tothe year end.

Rupees in million

44

SHEET

BALANCE

ANALYSIS Vertical Analysis Balance Sheet (%)

Share Capital & Reserves 80.8 81.5 79.8 79.9 78.6 73.7

Non Current Liabilities 3.3 3.1 2.1 2.8 3.1 3.4

Current Liabilites 15.9 15.4 18.1 17.3 18.3 22.9

Total Equity and Liabilites 100.0 100.0 100.0 100.0 100.0 100.0

Non Current Assets 27.6 21.1 20.3 26.0 25.0 25.8

Current Assets 72.4 78.9 79.7 74.0 75.0 74.2

Total Assets 100.0 100.0 100.0 100.0 100.0 100.0

Horizontal Analysis Balance Sheet (%)

Share Capital & Reserves 21.0 21.4 11.9 7.7 2.9 (3.0)

Non Current Liabilities (11.8) 13.8 (20.7) 40.4 16.8 13.8

Current Liabilites 3.8 16.5 33.8 3.5 10.0 30.2

Total Equity and Liabilites 16.5 20.4 14.2 7.6 4.5 3.6

Non Current Assets 24.4 (8.1) 9.8 38.3 0.4 6.8

Current Assets 13.8 31.3 15.4 (0.1) 6.0 2.5

Total Assets 16.5 20.4 14.2 7.6 4.5 3.6

2007 20092008200620052004

Change from preceding year

45

ACCOUNT

PROFIT & LOSS

ANALYSIS

Vertical Analysis Profit & Loss Account (%)

Net sales 100.0 100.0 100.0 100.0 100.0 100.0

Cost of sales 60.5 59.2 61.7 62.8 71.2 75.9

Gross profit 39.5 40.8 38.3 37.2 28.8 24.1

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

Administrative expenses 4.0 3.7 4.3 4.6 3.9 4.1

Other operating expenses 1.8 2.4 2.2 2.1 1.6 0.9

Other operating income 2.1 3.7 4.9 6.0 9.6 3.0

Operating profit 24.2 28.8 26.3 25.1 23.0 10.7

Financial charges 0.3 0.1 0.2 0.1 0.6 0.1

Profit before taxation 23.9 28.6 26.1 25.0 22.4 10.6

Taxation 7.3 9.4 9.6 9.3 7.8 4.3

Profit after taxation 16.6 19.3 16.5 15.7 14.6 6.3

Horizontal Analysis Profit & Loss Account (%)

Net sales 9.5 6.2 7.1 5.2 26.3 9.8

Cost of sales 8.3 3.9 11.7 7.0 43.4 17.0

Gross profit 11.2 9.7 0.5 2.2 (2.4) (8.0)

Selling, marketing and distribution expenses (3.8) (13.1) 16.7 15.0 9.7 26.0

Administrative expenses (28.4) 3.1 20.7 11.4 6.8 13.3

Other operating expenses 23.8 44.2 (1.3) 0.9 (7.1) (33.2)

Other operating income 86.1 86.2 41.7 28.8 100.3 (65.9)

Operating profit 38.0 26.1 (2.1) 0.7 15.3 (48.6)

Financial charges 222.2 (55.2) 46.2 (36.8) 541.7 (81.8)

Profit before taxation 36.9 27.1 (2.3) 1.0 12.9 (47.8)

Taxation 24.1 36.0 9.8 2.2 5.9 (39.5)

Profit after taxation 43.4 23.3 (8.2) 0.4 17.0 (52.2)

2007 20092008200620052004

Change from preceding year

46

We want to improve the quality of human life and contribute

towards a better future for all

47

FINANCIAL STATEMENTS 2009

This statement is being presented to comply with the Code of Corporate Governance contained in the listingregulations 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 Companyhas applied the principles contained in the Code as follows:

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

2. The directors have confirmed that none of them is serving as a director in more than ten listed companiesincluding this company, except for Mr. Tariq Iqbal Khan representing NIT, who has been specifically exemptedby the Securities and Exchange Commission of Pakistan for holding directorship in more than ten listed companies.

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

4. The Company has a vision/mission statement and overall corporate strategy. All Policies of the Company aregoverned 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 thedirectors and employees of the Company.

6. No casual vacancy occurred in the Board of Directors during the year ended December 31, 2009.

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

8. The meetings of the Board were presided over by the Chairman and the Board met at least once in everyquarter. Written notices of the Board meetings, along with the agenda were circulated 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 corporatebodies. The Board had previously arranged an orientation course of the Code of Corporate Governance forits directors to apprise them of their role and responsibilities. Further, the Booklet on Code of CorporateGovernance as published by the Securities and Exchange Commission of Pakistan have been circulated amongstthe directors on the Board.

STATEMENT OF COMPLIANCE WITH THE CODE OFCORPORATE GOVERNANCEFOR THE YEAR ENDED DECEMBER 31, 2009

48

11. The directors' report for this year has been prepared in compliance with the requirements of the Code andfully 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 ofthe Board.

13. The directors, CEO and executives do not hold any interest in the shares of the Company other than thatdisclosed 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 arenon-executive directors including the chairman of the committee.

16. There exists an effective internal audit function within the Company.

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

18. The statutory auditors of the Company have confirmed that they have been given satisfactory rating under theQuality Control Review Program of the Institute of Chartered Accountants of Pakistan, that they or any of thepartners of the firm, their spouses and minor children do not hold shares of the Company and that the firmand all its partners are in compliance with International Federation of Accountants (IFAC) guidelines on codeof 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 servicesexcept in accordance with the listing regulations and the auditors have confirmed that they have observed IFACguidelines in this regard.

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

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

KarachiMarch 03, 2010

49

M. Salman BurneyChairman / Chief Executive

REVIEW REPORT TO THE MEMBERS ON STATEMENT OFCOMPLIANCE WITH BEST PRACTICES OF CODE OFCORPORATE GOVERNANCE

We have reviewed the Statement of Compliance with the Best Practices contained in the Code of CorporateGovernance prepared by the Board of Directors of GlaxoSmithKline Pakistan Limited to comply with the ListingRegulation 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 thecompany. Our responsibility is to review, to the extent where such compliance can be objectively verified, whetherthe Statement of Compliance reflects the status of the company's compliance with the provisions of the Code ofCorporate Governance and report if it does not. A review is limited primarily to inquiries of the company personneland 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 internalcontrol systems sufficient to plan the audit and develop an effective audit approach. We have not carried out anyspecial review of the internal control system to enable us to express an opinion as to whether the Board's statementon 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 thecompany to place before the board of directors for their consideration and approval related party transactionsdistinguishing between transactions carried out on terms equivalent to those that prevail in arm's length transactionsand transactions which are not executed at arm's length price recording proper justification for using such alternateprice 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 partytransactions by the Board of Directors and placement of such transactions before the audit committee. We havenot carried out any procedures to determine whether the related party transactions were undertaken at arm's lengthprice or not.

Based on our review, nothing has come to our attention which causes us to believe that the Statement of Compliancedoes not appropriately reflect the company's compliance, in all material respects, with the best practices containedin the Code of Corporate Governance as applicable to the company for the year ended December 31, 2009.

A. F. Ferguson & Co.Chartered Accountants

KarachiMarch 03, 2010

50

AUDITORS’ REPORT TO THE MEMBERS

We have audited the annexed balance sheet of GlaxoSmithKl ine Pakistan Limited as atDecember 31, 2009 and the related profit and loss account, cash flow statement and statement of changes in equitytogether with the notes forming part thereof, for the year then ended and we state that we have obtained all theinformation and explanations which, to the best of our knowledge and belief, were necessary for the purposes ofour audit.

It is the responsibility of the company's management to establish and maintain a system of internal control, andprepare and present the above said statements in conformity with the approved accounting standards and therequirements of the Companies Ordinance, 1984. Our responsibility is to express an opinion on these statementsbased on our audit.

We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards requirethat we plan and perform the audit to obtain reasonable assurance about whether the above said statements arefree of any material misstatement. An audit includes examining, on a test basis, evidence supporting the amountsand disclosures in the above said statements. An audit also includes assessing the accounting policies and significantestimates made by management, as well as, evaluating the overall presentation of the above said statements. Webelieve 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 CompaniesOrdinance, 1984;

(b) in our opinion:

(i) the balance sheet and profit and loss account together with the notes thereon have been drawn up inconformity with the Companies Ordinance, 1984, and are in agreement with the books of account andare further in accordance with accounting policies consistently applied except for the change as statedin note 2.1.1 of these financial statements, with which we concur;

(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 inaccordance 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 balancesheet, profit and loss account, cash flow statement and statement of changes in equity together with the notesforming part thereof conform with approved accounting standards as applicable in Pakistan, and, give theinformation required by the Companies Ordinance, 1984, in the manner so required and respectively give atrue and fair view of the state of the company's affairs as at December 31, 2009 and of the profit, its cashflows and changes in equity for the year then ended; and

(d) no Zakat was deductible at source under the Zakat and Ushr Ordinance, 1980.

A. F. Ferguson & Co.Chartered Accountants

KarachiMarch 03, 2010

Name of Engagement Partner: Syed Fahim ul Hasan 51

BALANCE SHEETAS AT DECEMBER 31, 2009

Note

2009 2008

Rupees ‘000

SHARE CAPITAL AND RESERVESShare capital 3 1,706,718 1,706,718

Reserves 4 6,397,381 6,648,173 8,104,099 8,354,891

NON-CURRENT LIABILITIES

Staff retirement benefit - staff gratuity 5 58,894 20,802Deferred taxation 6 320,435 312,270

379,329 333,072CURRENT LIABILITIES

Trade and other payables 7 2,524,426 1,867,275Taxation - provision less payments - 70,387

2,524,426 1,937,662 2,903,755 2,270,734

CONTINGENCIES AND COMMITMENTS 8

11,007,854 10,625,625

52

Javed AhmedjeeChief Financial Officer

M. Salman BurneyChairman / Chief Executive

Note

2009 2008

Rupees ‘000

NON-CURRENT ASSETS

Fixed assets - property, plantand equipment 9 2,600,814 2,415,255

Long-term loans to employees 10 61,299 61,666

Long-term deposits 7,027 6,788

Investments 11 168,687 171,855 2,837,827 2,655,564

CURRENT ASSETS

Stores and spares 12 129,239 116,084Stock-in-trade 13 4,061,840 3,494,054Trade debts 14 996,915 1,016,968Loans and advances 15 91,315 119,242Trade deposits and prepayments 16 87,754 93,377Accrued return 21,503 80,596Refunds due from government 17 15,436 15,468Other receivables 18 129,156 153,864Taxation - payments less provision 252,744 -Investments 11 644,889 155,511Cash and bank balances 19 1,739,236 2,724,897

8,170,027 7,970,061

11,007,854 10,625,625

The annexed notes 1 to 38 form an integral part of these financial statements.

53

M. Salman BurneyChairman / Chief Executive

Javed AhmedjeeChief Financial Officer

PROFIT AND LOSS ACCOUNTFOR THE YEAR ENDED DECEMBER 31, 2009

Note

2009 2008

Rupees ‘000

Net sales 20 14,719,132 13,403,224

Cost of sales 21 (11,173,470) (9,547,619)

Gross profit 3,545,662 3,855,605

Selling, marketing and distribution expenses 22 (1,673,809) (1,328,925)

Administrative expenses 23 (588,814) (520,216)

Other operating expenses 24 (138,585) (208,355)

Other operating income 25 436,615 1,279,790

Operating profit 1,581,069 3,077,899

Financial charges 26 (14,348) (76,859)

Profit before taxation 1,566,721 3,001,040

Taxation 27 (632,791) (1,045,853)

Profit after taxation 933,930 1,955,187

Other comprehensive income

Fair value gain / (loss) onavailable-for-sale investments 15,356 (17,259)

Deferred tax (5,375) 6,041

9,981 (11,218)

Total comprehensive income 943,911 1,943,969

Earnings per share 28 Rs. 5.47 Rs. 11.46

The annexed notes 1 to 38 form an integral part of these financial statements.

54

M. Salman BurneyChairman / Chief Executive

Javed AhmedjeeChief Financial Officer

Note

2009 2008

Rupees ‘000

CASH FLOWS FROM OPERATING ACTIVITIES

Cash generated from operations 29 2,083,606 633,333Staff gratuity paid (40,384) (44,827)Taxes paid (953,131) (982,457)Decrease / (increase) in long-term loans to employees 367 (7,911)(Increase) / decrease in long-term deposits (239) 20Net cash from / (used in) operating activities 1,090,219 (401,842)

CASH FLOWS FROM INVESTING ACTIVITIES

Fixed capital expenditure (494,178) (475,032)Proceeds from sale of operating assets 53,573 907,993Investments encashed 175,000 100,000Return on investments - PIBs 24,172 39,200Net cash (used in) / from investing activities (241,433) 572,161

CASH FLOWS FROM FINANCING ACTIVITIES

Dividend paid (1,189,558) (1,698,167)

Net decrease in cash and cash equivalents (340,772) (1,527,848)

Cash and cash equivalents at the beginning of the year 2,724,897 4,252,745

Cash and cash equivalents at the end of the year 30 2,384,125 2,724,897

The annexed notes 1 to 38 form an integral part of these financial statements.

CASH FLOW STATEMENTFOR THE YEAR ENDED DECEMBER 31, 2009

55

M. Salman BurneyChairman / Chief Executive

Javed AhmedjeeChief Financial Officer

STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED DECEMBER 31, 2009

Balance at January 1, 2008 1,706,718 1,409 375,572 (1,150) 3,999,970 2,035,122 8,117,641

Final dividend for the year ended December 31, 2007@ Rs 7.50 per share - - - - - (1,280,039) (1,280,039)

Interim dividend for the year ended December 31, 2008@ Rs 2.50 per share - - - - - (426,680) (426,680)

Profit after taxation for the year ended December 31, 2008 - - - - - 1,955,187 1,955,187

Fair value loss on available-for-sale investments - - - (11,218) - - (11,218)

Total compehensive income for the yearended December 31, 2008 - - - (11,218) - 1,955,187 1,943,969

Balance at December 31, 2008 1,706,718 1,409 375,572 (12,368) 3,999,970 2,283,590 8,354,891

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 - - - - - 933,930 933,930

Fair value gain onavailable-for-sale investments - - - 9,981 - - 9,981

Total compehensive income for the yearended December 31, 2009 - - - 9,981 - 933,930 943,911

Balance at December 31, 2009 1,706,718 1,409 375,572 (2,387) 3,999,970 2,022,817 8,104,099

The annexed notes 1 to 38 form an integral part of these financial statements.

ShareCapital

Total

Sharepremium

Reservearising on

amalgamation

Fair valuereserve

Generalreserve

Unappr-opriated

profit

C A P I T A L R E S E R V E

Rupees ‘000

56

M. Salman BurneyChairman / Chief Executive

Javed AhmedjeeChief Financial Officer

NOTES TO AND FORMING PART OF THE FINANCIALSTATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2009

1. THE COMPANY AND ITS OPERATIONS

The company is incorporated in Pakistan as a limited liability company and is listed on the Karachi and LahoreStock Exchanges. It is engaged in manufacturing and marketing of research based ethical specialities, otherpharmaceutical, 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 applicablein 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, theprovisions 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 accountingestimates. It also requires management to exercise its judgement in the process of applying the company'saccounting policies. The matters involving a higher degree of judgement or complexity, or areas whereassumptions and estimates are significant which have been disclosed in the relevant notes to the financialstatements are:

i) Provision for retirement benefitsii) Impairment of property, plant and equipmentiii) Provision for obsolete and slow moving stockiv) Provision for doubtful receivablesv) 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 policiesthat would have effect on the amounts recognised in the financial statements.

2.1.1 Changes in accounting policies and disclosures

(a) New and amended standards adopted by the company

The company has adopted the following new and amended IFRSs as of January 1, 2009:

- IAS 1 (Revised), 'Presentation of financial statements', issued in September 2007 revises the existingIAS 1 and requires presentation of transactions with owners in the statement of changes in equity and

57

with non-owners in the other comprehensive income statement. The revised standard requires anentity to opt for presenting such transactions either in a single statement of comprehensive incomeor in an income statement and a separate statement of comprehensive income. The company hasapplied IAS 1 (Revised) from January 1, 2009 and elected to present one performance statement(i.e. the profit and loss account). However, since there are no non-owner changes in equity there isno impact of such revised standard on these financial statements. Comparative information has beenre-presented so that it also is in conformity with the revised standard. The change in accounting policyhas resulted in recognition of gains on revaluation of available-for-sale investments in other comprehensiveincome. Otherwise the change only impacts presentation aspects and there is no impact on earningsper share.

- IFRS 7 'Financial instruments: Disclosures', introduces new disclosures relating to financial instruments.The new disclosures are included in Note 34 of these financial statements. As the change in accountingpolicy only impacts presentation aspects, there is no impact on earnings per share.

- IFRS 8 'Operating segments' replaces IAS 14 and requires a 'management approach', under whichsegment information is presented on the same basis as that used for internal reporting purposes. Thecompany has no reportable segments under IFRS 8. However, certain disclosures as required underIFRS 8 have been included in note 20 of these financial statements. As the change in accounting policyonly impacts presentation aspects, there is no impact on earnings per share.

(b) Standards, amendments and interpretations to existing standards that are not yet effective and have notbeen early adopted by the company.

The following standards and amendments to existing standards have been published and are mandatoryfor the company's accounting periods beginning on or after January 1, 2010:

Effective datefor periods beginning

- IFRIC 17 - Distribution of non-cash assets to owners July 1, 2009

- IAS 27 (Revised) - Consolidated and separate financial statements July 1, 2009

- IFRS 3 (Revised) - Business combinations July 1, 2009

- IAS 38 (Amendment) - Intangible assets April 1, 2009

- IFRS 5 - Measurement of non-current assets

(or disposal groups) classified as held-for-sale April 1, 2009

- IAS 1 (Amendment) - Presentation of financial statements April 1, 2009

- IFRS 2 (Amendments) - Group cash-settled and share-

based payment transactions April 1, 2009

2.2 Overall valuation policy

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

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

58

2.3 Staff retirement benefits

2.3.1 Defined benefit plan

The company operates approved funded gratuity schemes for all its permanent employees.

Contributions to the funded gratuity schemes are based on actuarial recommendations. The latest actuarialvaluations of the schemes were carried out as at December 31, 2009 using the Projected Unit Credit Method.

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

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

2.3.2 Defined contribution plan

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

2.4 Compensated absences

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

2.5 Provisions

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

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

2.7 Fixed assets - property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation / amortisation and impairmentlosses except freehold land and capital work-in-progress which are stated at cost.

59

Depreciation is charged using the straight line method whereby the cost of an asset less estimated residualvalue, if not insignificant, is written off over its estimated useful life. Depreciation / amortisation on assets ischarged at the normal rates from the month of addition to the month of disposal. Cost of leasehold land isamortised equally over the period of the lease.

Maintenance and normal repairs are charged to income as and when incurred. Also assets costing up toRs. 25 thousand are charged to income. Major renewals and improvements are capitalised and the assets soreplaced, if any, are retired.

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

2.8 Impairment

The carrying values of assets are reviewed for impairment when events or changes in circumstances indicatethat the carrying value may not be recoverable. If any such indication exists and where the carrying valuesexceed the estimated recoverable amount, the assets or cash-generating units are written down to theirrecoverable amount and the resulting impairment is charged to profit and loss account.

2.9 Investments

Available-for-sale

Securities intended to be held for an indefinite period of time, which may be sold in response to needs forliquidity 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 subsequentlyrecognised at fair value.

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

Held-to-maturity

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

2.10 Stores and spares

These are valued at lower of cost using moving average method and estimated recoverable amount. Items intransit are valued at cost comprising invoice value plus other charges incurred thereon. Provision is made foritems which are obsolete and slow moving.

2.11 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 tradediscounts. Cost of work-in-process and finished goods include cost of raw and packing materials, direct labourand related production overheads.

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

60

Net realisable value signifies the estimated selling price in the ordinary course of business less cost of completionand cost necessarily to be incurred in order to make the sale.

2.12 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.

2.13 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 anddeposit accounts and short-term investments maturing within three months of the balance sheet date.

2.14 Foreign currency translation

Foreign currency transactions are recorded into Pak Rupee using the exchange rates prevailing at the datesof the transactions. Monetary assets and liabilities in foreign currency are translated into Pak Rupee at the ratesof 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 presentationcurrency.

2.15 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.

2.16 Financial assets and liabilities

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

2.17 Dividend

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

61

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

62

2009 2008

Rupees ‘000

2009 2008

2009 2008

Rupees ‘000

3. SHARE CAPITAL

Authorised share capital

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

Issued, subscribed and paid-up capital

Ordinary shares of Rs. 10 each

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

26,951,523 26,951,523 Shares allotted for consideration other than cash 269,515 269,515

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

170,671,844 170,671,844 1,706,718 1,706,718

3.1 As at December 31, 2009 and 2008 Setfirst Limited, UK and its nominees held 134,453,588 shares. Subsequentto the balance sheet date, the shares held by Setfirst Limited, UK have been transferred to S.R. One InternationalB.V., Netherlands. The ultimate parent of the company is GlaxoSmithKline plc, UK.

4. RESERVES

Capital reserves Share premium 1,409 1,409 Reserve arising on amalgamation 375,572 375,572

376,981 376,981

Fair value reserve - note 4.1 (2,387) (12,368)General reserve 3,999,970 3,999,970Unappropriated profit 2,022,817 2,283,590

6,397,381 6,648,173

4.1 This represents deficit arising on revaluation of available-for-saleinvestments as follows:

Deficit on revaluation (3,672) (19,028)Deferred tax 1,285 6,660

(2,387) (12,368)5. STAFF RETIREMENT BENEFIT - staff gratuity

5.1 Movement in liability

Opening balance 20,802 23,192 Charge for the year - note 5.5 78,476 42,437 Payments to the fund (40,384) (44,827)

Closing balance 58,894 20,802

5.2 Balance sheet reconciliation

Present value of defined benefit obligation 726,452 641,237 Fair value of plan assets (523,103) (446,759)

203,349 194,478

Unrecognised actuarial loss (144,455) (173,676)

58,894 20,802

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

Balance at January 1 641,237 574,654Current service cost 41,892 37,842Interest cost 95,570 57,511Actuarial (gain) / loss (6,008) 23,432Benefits paid (46,239) (52,202)

Balance at December 31 726,452 641,237

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

Balance at January 1 446,759 529,756Expected return on plan assets 66,289 52,916Actuarial gain / (loss) 15,910 (128,538)Employer's contributions 40,384 44,827Benefits paid (46,239) (52,202)

Balance at December 31 523,103 446,759

2009 2008

Rupees ‘000

63

5.5 Charge for the year

Current service cost 41,892 37,842 Interest cost 95,570 57,511 Expected return on plan assets (66,289) (52,916)Recognition of actuarial loss 7,303 -

78,476 42,437

5.6 Actual return / (deficit) on plan assets 82,199 (75,622)

5.7 Principal actuarial assumptions

Expected return on plan assets (% per annum) 12.75 15Expected rate of increase in salaries (% per annum) 12.75 15Discount factor used (% per annum) 12.75 15Retirement age (years) 60 60 Average remaining working life of employees (years) 10 15

As per actuarial recommendation, the expected return on plan assets was determined by considering theexpected risk adjusted returns available on the assets underlying the current investment policy.

5.8 Plan assets

Plan assets are comprised of the following:

- Equity and Mutual Funds 26.93 27.44- Bonds 52.40 67.71- Others 20.67 4.85

100.00 100.00

5.9 For the year ending December 31, 2010 expected contribution to funded gratuity schemes is Rs. 80.07 million.

5.10 Comparison for five years

Fair value of plan assets 523,103 446,759 529,756 372,849 240,920Present value of defined benefit obligation (726,452) (641,237) (574,654) (482,634) (428,947)

Deficit (203,349) (194,478) (44,898) (109,785) (188,027)

Experience (gain) / loss on plan assets (15,910) 128,538 (47,104) (8,910) (11,846)

Experience (gain) / loss on plan liabilities (6,008) 23,432 25,082 23,080 11,884

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

2009%

2008%

64

2007 2005

Rupees ‘000

200620082009

2009 2008

Rupees ‘000

2009 2008

Rupees ‘000

6. DEFERRED TAXATION

Credit balance arising in respect of:- Accelerated tax depreciation allowances 360,103 344,717

Debit balances arising in respect of:- Provision for staff gratuity 17,339 6,347- Provision for doubtful debts 4,640 1,405- Provision for slow moving and obsolete stock 9,116 6,455- Provision for slow moving and obsolete stores and spares 1,852 5,945- Provision for doubtful refunds due from government 5,436 5,635- Loss on revaluation of available-for-sale investments 1,285 6,660 39,668 32,447

320,435 312,270

7. TRADE AND OTHER PAYABLES

Creditors- Associated companies 878,641 -- Others 149,870 84,473

Bills payable- Associated companies 53,814 403,213- Others 26,812 61,643

Royalty and technical fee payable- Associated company 150,575 116,077- Others 7,656 30,616

Accrued liabilities 910,891 858,467Advances from customers 174,769 142,256Contractors' earnest / retention money 5,009 6,597Taxes deducted at source and payable to statutory authorities 9,364 7,871Workers' Profits Participation Fund - note 7.1 1,269 -Workers’ Welfare Fund 53,292 68,052Central Research Fund 15,825 30,315Unclaimed dividend 38,554 33,409Payable to Provident Fund 8,984 9,462Others 39,101 14,824

2,524,426 1,867,2757.1 Workers' Profits Participation Fund

Opening (asset) / liability (3,205) 7,801Allocation for the year – note 24 84,474 116,795

81,269 124,596Interest on funds utilised in company's business – note 26 - 282

81,269 124,878Amounts paid to the Fund (80,000) (128,083)Closing liability / (asset) 1,269 (3,205)

65

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

66

8. CONTINGENCIES AND COMMITMENTS

8.1 Contingencies

Claims against company not acknowledged as debt amounted to Rs. 316.52 million (2008: Rs. 306.48 million).

8.2 Commitments

Commitments for capital expenditure outstanding as at December 31, 2009 amounted to Rs. 452.42 million(December 31, 2008: Rs. 103.31 million).

9. FIXED ASSETS - property, plant and equipment

Operating assets 9.1 2,343,264 2,242,144Capital work-in-progress 9.4 257,550 173,111

2,600,814 2,415,255

9.1 Operating assets

2009 2008

Rupees ‘000

Note

Rupees 000

Additions/(disposals)/(write offs)*

Cost as atJanuary 1,

2009

Cost as atDecember 31,

2009

Accumulateddepreciation/Amortisation

as at January 1,2009

Depreciation/Amortisationfor the period(on disposals)/(on write offs)*

Accumulateddepreciation/

Amortisation asat December 31,

2009

Impairmentloss as at

December 31,2009

Net Bookvalue as at

December 31,2009

Annual rate ofdepreciation/Amortisation

%

Freehold land 174 - 174 - - - - 174 -

Leasehold land 27,162 - 27,162 8,308 975 9,283 - 17,879 2.5 to 10

Buildings on freehold land 68,855 - 66,494 30,421 951 30,383 16,669 19,442 2.5

(2,361) (989) Buildings on leasehold land 738,317 39,210 777,498 185,118 17,342 202,449 26,581 548,468 2.5

(29) (11)

Plant and machinery 2,272,134 240,257 2,407,411 982,660 134,239 1,033,223 27,827 1,346,361 5 to 10

(104,980) (83,676)

Furniture and fixtures 117,653 9,704 117,897 65,972 7,555 64,377 296 53,224 10

(9,410) (9,117) (50) * (33) *

Vehicles 307,680 81,217 326,100 115,590 50,550 126,263 - 199,837 25 (61,271) (39,662)

(1,526) * (215) *

Office equipments 479,939 39,351 515,495 305,860 55,314 357,567 49 157,879 10 to 33.33 (2,435) (2,247)

(1,360) * (1,360) *

December 31, 2009 4,011,914 409,739 4,238,231 1,693,929 266,926 1,823,545 71,422 2,343,264 (180,486) (135,702)

(2,936) * (1,608) *

December 31, 2008 3,659,024 578,867 4,011,914 1,617,530 231,041 1,693,929 75,841 2,242,144 (148,714) (96,900) (77,263) * (57,742) *

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

Freehold land 174 - - 174 - - - - 174

Leasehold land 27,162 8,308 - 18,854 - - (975) - 17,879

Buildings on freehold land 68,855 30,421 18,042 20,392 - (1,372) (951) 1,373 19,442

Buildings on leasehold land 738,317 185,118 23,645 529,554 39,210 (18) (17,342) (2,936) 548,468

Plant and machinery 2,272,134 982,660 34,052 1,255,422 240,257 (21,304) (134,239) (14,698) 1,346,361

20,923 Furniture and fixtures 117,653 65,972 102 51,579 9,704 (293) (7,555) (230) 53,224

(17) * 36

Vehicles 307,680 115,590 - 192,090 81,217 (21,609) (50,550) - 199,837 (1,311) *

Office equipments 479,939 305,860 - 174,079 39,351 (188) (55,314) (49) 157,879 - *

4,011,914 1,693,929 75,841 2,242,144 409,739 (44,784) (266,926) (17,913) 2,343,264

(1,328) * 22,332

Accumulateddepreciation /amortisation

Cost Impairmentloss

NBV Cost ofadditionsduringthe year

Cost lessaccumulateddepreciationof disposals /write offs*duringthe year

Depreciation /Amortisation for the year

(Charge) /Reversal

of impairmentloss ondisposalsduringthe year

NBV as atDecember 31,

2009As at January 1, 2009

Rupees 000

67

68

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

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

Description

Plant & Machinery 3,099 2,307 792 318 Tender M/s. Ganatra Salvaging, B-37 SITE, Karachi

1,606 515 1,091 800 " "

1,198 957 241 193 " "

730 585 145 50 " "

558 484 74 57 " "

515 438 77 35 " "

402 308 94 41 " "

185 114 71 1 " "

170 46 124 17 " "

125 46 79 30 " "

Office Equipment 184 133 51 2 Tender M/s. Projector Point, 4th Floor, Tawakkal Centre

Saddar, Karachi

Furniture & Fixture 210 153 57 17 Tender Imran Ahmed, House # 219 Sector 35/B,

Korangi # 4, Karachi

Vehicles 1,389 174 1,215 1,259 Company policy Mr. Ghulam Sarwar - Ex - Executive

1,198 898 300 299 " Mr. Tariq Rasheed Dar - Executive

1,060 724 336 850 " Mr. Abdul Samad - Executive

995 746 249 246 " Mr. Pervaiz Iqbal Awan - Executive

849 637 212 212 " Dr. Gohar Nayab - Executive

849 637 212 212 " Mr. Zahid Ali Jafferi - Executive

647 211 436 300 " Mr. Qiaser Aziz - Ex- Employee

615 276 339 420 " Mr. Mushtaq Ali Ansari - Ex - Employee

464 348 116 160 " Mr. Badre Munir - Ex - Employee

1,725 404 1,321 1,035 " Ms. Fahim Sultana - Ex - Executive

1,123 482 641 360 " Mr. Ehtesham ul Haq - Ex - Executive

1,005 281 724 600 " Mr. Ahmed Jamal Qudsi - Ex - Executive

1,005 391 614 486 " Mr. Javed Akhtar - Ex - Executive

1,005 328 677 660 " Mr. Nasir Ali Khan - Ex - Executive

969 330 639 645 " Mr. Jamil Akhtar - Ex - Executive

969 359 610 576 " Mr. Jawed Hussain - Ex - Executive

849 637 212 212 " Mr. Anwer Mukhtar - Executive

849 637 212 212 " Mr. Ghulam Sarwar - Executive

652 163 489 480 " Mr. Muhammad Saeed - Ex - Executive

651 224 427 685 " Ms. Nida Zubair - Executive

620 276 344 551 " Mr. Jawad Gill - Executive

620 296 324 545 " Mr. Rizwan Ahmed Khokhar - Executive

619 464 155 155 " Mr. Najib Uddin - Executive

480 135 345 288 " Mr. Tariq Masood Alam - Ex - Employee

464 348 116 235 " Mr. Khalil Ahmed - Ex - Employee

464 274 190 400 " Mr. Nadir Magsi - Ex - Employee

4,200 1,313 2,887 4,650 Insurance Claim EFU General Insurance Limited

969 421 548 921 " "

Sale proceeds

Particulars of purchaser Mode of disposal

Book value

Accumulateddepreciation

Cost

Rupees ‘000

Description

8,994 7,494 1,500 2,400 Tender M/s. Honda Quaideen, 233-A -

2 P.E.C.H.S, Karachi

3,510 3,090 420 825 " Muhammad Asghar - House

No.17, Floor No.5,

Camble Street, Burns Road, Karachi

1,172 879 293 892 " Mr. Nouman Baig - 89-J, Block II,

Khalid Bin Waleed Road, Karachi

1,059 215 844 977 " Mr. Faisal Abdul Aziz - C-30, Block 9,

Gulshan e Iqbal, Karachi

1,035 776 259 788 " Muhammad Yousuf - 9, Block 92, Sector 11/F,

New Karachi

983 737 246 769 " Mr. Zahid Qadri - R-536, Sector 15A/4,

Buffer Zone, Karachi

849 637 212 705 " Mr. Sajjad Ahmed - House No. 791,

Defence Phase 1, Malir Cantt., Karachi

639 394 245 402 " Muhammad Farooq - A-5, Al Suleman Arcade,

Jacob Lines , Karachi

609 385 224 552 " "

560 420 140 506 " "

560 420 140 531 " "

609 415 194 530 " Mr. Sajid Hasan Khan - B-1, Crecsent Arcade,

Sector 5K, North Karachi

609 385 224 536 " "

513 385 128 355 " "

509 382 127 374 " "

509 382 127 336 " "

464 348 116 387 " "

560 420 140 526 " Mr. Aftab Ahmed - House No. D/84, Cantt.

Bazaar Area, Malir Cantt., Karachi

509 382 127 362 " Mr. Adnan Hassan Khan - A-908, Block 12,

F.B.Area, Gulberg, Karachi

464 348 116 356 " "

509 382 127 358 " Mr. Rehan Mithani - D-87/1, Clifton 7, Karachi

509 382 127 360 " Mr. Zeeshan Ali Khan - 69-D,

P.E.C.H.S., Block 2, Karachi 509

509 382 127 375 " "

464 301 163 421 " Muhammad Yousuf - House no. 706 / 218,

Muhalla Fatima Jinnah Colony, New Town, Karachi

464 348 116 267 " Mr. Intikhab Ahmad - A/115, Block No. 1,

F.B.Area, Sharifabad, Karachi

464 348 116 402 " Mr. Mir Khatam Khan - C-30, III-N, Block II,

K.B.W. Road, P.E.C.H.S. Karachi

464 348 116 452 " Muhammad Javed - Babar Filling Station,

E-35/A, S.I.T.E., Karachi

Sale proceeds

Particulars of purchaser Mode of disposal

Book value

Accumulateddepreciation

Cost

Rupees ‘000

69

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

70

9.4 Capital work-in-progress

Civil work 103,453 33,031Plant and machinery 106,491 124,238Furniture and fixtures 7,337 937Office equipments 24,701 7,081Advances to suppliers 15,568 7,824

257,550 173,111

10. LONG-TERM LOANS TO EMPLOYEES

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

Balance at January 1 4,166 2,267 88,334 94,767 1,726 624 84,948 87,298Disbursements 2,772 2,499 41,878 47,149 6,682 2,462 46,577 55,721Repayments (4,271) (1,658) (39,474) (45,403) (4,242) (819) (43,191) (48,252)Balance at December 31 2,667 3,108 90,738 96,513 4,166 2,267 88,334 94,767Current portion included in note 15 (1,533) (118) (33,563) (35,214) (2,966) (1,312) (28,823) (33,101)

1,134 2,990 57,175 61,299 1,200 955 59,511 61,666

10.1 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 monthlyinstallments depending upon the type of the loan. These loans are interest free except certain loans whichcarry interest ranging from 5% to 8% per annum (2008: 5% to 8% per annum). All loans are secured againstthe retirement fund balances.

The maximum aggregate amount of loans due from executives at the end of any month during the year wasRs. 4.75 million (2008: Rs. 5.06 million).

Rupees ‘000

ExecutivesNon-

interestbearing

Interestbearing

Non-interestbearing

Total ExecutivesNon-

interestbearing

Interestbearing

Non-interestbearing

Total

2009 2008

2009 2008

Rupees ‘000

2009 2008

Rupees ‘000

Note

Other Employees Other Employees

11. INVESTMENTS

Available-for-sale

Pakistan Investment Bonds 11.1 168,687 327,366

Held-to-maturity

Treasury bills 11.2 644,889 - 813,576 327,366

Less: short term 644,889 155,511 168,687 171,855

71

11.1 These are held by company's banker for safe custody. The yield on these bonds is 12.25% per annum andthese bonds will mature in May 2011.

11.2 These are held by company's banker for safe custody. The yield on these bills is 12.42% per annum and thesebills will mature in January 2010.

12. STORES AND SPARES

Stores and spares 134,529 133,071Less: Provision for slow moving and obsolete items - note 12.1 5,290 16,987

129,239 116,084

12.1 Stores and spares of Rs. 11.78 million (2008: Nil) have been written off against the provision during the year.

13. STOCK-IN-TRADE

Raw and packing materials including in transit Rs. 401.9 million (2008: Rs. 542.3 million) 1,550,739 1,763,245

Work-in-progress 245,411 201,425

Finished goods including in transit Rs. 143.0 million (2008: Rs. 84.66 million) 2,452,874 1,659,565

4,249,024 3,624,235Less: Provision for slow moving, obsolete and damaged items - note 13.3 187,184 130,181

4,061,840 3,494,054

13.1 Stock-in-trade includes Rs. 50.31 million (2008: Rs. 40.73 million) and Rs. 106.47 million (2008: Rs. 113.41million) held with Pharmatec Pakistan (Private) Limited and Al-Ghazi Distributors (Private) Limited respectively.

13.2 The above balances include items costing Rs. 196 million (2008: Rs. 353 million) valued at net realisable valueof Rs. 159 million (2008: Rs. 317 million).

13.3 Stocks of Rs. 32.76 million (2008: Rs. 37.92 million) have been written off against the provision during the year.

2009 2008

Rupees ‘000

2009 2008

Rupees ‘000

14. TRADE DEBTS

Considered good GSK Trading Services Limited - Associated company 11,542 5,076 Others 985,373 1,011,892Considered doubtful 15,760 4,604

1,012,675 1,021,572Less: Provision for doubtful debts 15,760 4,604

996,915 1,016,968

14.1 The maximum aggregate amount due from the related party at the end of any month during the year wasRs. 14.75 million (2008: Rs. 12.53 million).

14.2 Trade debts of Rs. 0.44 million (2008: Rs. 0.12 million) have been written off against the provision during the year.

15. LOANS AND ADVANCES - considered good

Loans due from employees - note 10 35,214 33,101Advances to employees 25,373 20,206 Advances to suppliers 30,728 65,935

91,315 119,242

16. TRADE DEPOSITS AND PREPAYMENTS

Trade deposits 57,238 53,762Prepayments 16,816 21,139Margins held with banks 13,700 18,476

87,754 93,377

17. REFUNDS DUE FROM GOVERNMENT

Custom duty and sales tax considered good 15,436 15,468 considered doubtful 18,465 18,465

33,901 33,933Less: Provision for doubtful receivables 18,465 18,465

15,436 15,468

18. OTHER RECEIVABLES

Due from related parties

- Associated companies 18.1 82,355 57,470 - Pension Fund 18.2 31,212 83,712 - Workers' Profits Participation Fund 7.1 - 3,205

113,567 144,387Claims recoverable from suppliers 7,956 2,917Others 7,633 6,560

129,156 153,864

2009 2008

Rupees ‘000

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

2009 2008

Rupees ‘000

Note

72

73

18.1 Due from associated companies

GlaxoSmithKline Services Unlimited, UK 18,429 36,185GlaxoSmithKline Export Limited, UK 14,051 -GlaxoSmithKline Pharmaceuticals (Private) Limited, Pakistan 41,437 -GlaxoSmithKline Limited, Bangladesh 8,377 8,377GSK Services Corporation, UK 61 -GlaxoSmithKline Limited Biologicals, Belgium - 12,606SB R&D Upper Merion, USA - 302

82,355 57,470

18.2 This represents amount receivable from pension fund on discontinuation of the pension scheme in 2007. Thepension fund will be wound up after the assets of the Fund have been realised and the liabilities have beensettled.

18.3 The maximum aggregate amount due from related parties at the end of any month during the year wasRs. 113.57 million (2008: Rs. 144.39 million).

19. CASH AND BANK BALANCES

With banks on deposit accounts 1,545,001 2,630,000 on PLS savings accounts 130,384 50,502 on current accounts 59,074 40,800Cash and cheques in hand 4,777 3,595

1,739,236 2,724,897

19.1 At December 31, 2009 the rates of mark-up on PLS savings accounts and on term deposit accounts were5% to 5.5% (2008: 5%) and 10.82% to 11.35% (2008: 10% to 15%) per annum respectively.

20. NET SALES

Gross sales Local 14,669,361 13,397,423 Export 390,370 289,640

15,059,731 13,687,063 Less: Commissions, returns, discounts and rebates 310,212 263,832 Sales tax 30,387 20,007

14,719,132 13,403,224

20.1 Sales values of pharmaceutical and consumer products amount to Rs. 14.42 billion and Rs. 0.30 billion (2008:Rs. 13.17 billion and Rs. 0.23 billion) respectively.

2009 2008

Rupees ‘000

2009 2008

Rupees ‘000

2009 2008

Rupees ‘000

20.2 Sales of major product categories i.e. antibiotics, vaccines and dermatologicals during the year amounted toRs. 5.99 billion, Rs. 1.55 billion and Rs. 1.31 billion (2008: Rs. 5.03 billion, Rs. 1.86 billion and Rs. 1.13 billion)respectively.

20.3 The company sells its products through a network of three distribution channels involving various distributors/sub-distributors and also directly to Government and other institutions. Sales to only one distributor exceed10 percent of the net sales during the year, amounting to Rs. 1.5 billion (2008: Rs. 1.38 billion).

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

2009 2008

Rupees ‘000

74

21. COST OF SALES

Raw and packing materials consumed 7,108,891 4,912,391Manufacturing charges to third party 136,211 115,585Stores and spares consumed 31,814 20,166Salaries, wages and other benefits - note 21.1 887,668 827,758Fuel and power 238,002 218,633Rent, rates and taxes 4,191 2,421Royalty and technical fee 157,754 152,256Insurance 48,995 38,146Repairs and maintenance 94,139 96,987Training expenses 127 1,567Travelling and entertainment 11,647 9,294Vehicle running 9,723 10,835Depreciation / amortisation 167,483 141,214Impairment charge 17,913 14,541Provision for slow moving and obsolete stock - raw and packing materials 13,857 18,569Provision for slow moving and obsolete stores and spares 80 805Canteen expenses 72,184 62,648Laboratory expenses 29,378 25,738Communication and stationery 7,699 8,093Security expenses 7,366 4,597Other expenses 20,535 21,221

9,065,657 6,703,465Opening stock of work-in-process 201,425 118,537Closing stock of work-in-process (245,411) (201,425)Cost of goods manufactured 9,021,671 6,620,577Opening stock of finished goods 1,659,566 1,250,190Purchase of finished goods 2,989,569 3,344,404Provision for slow moving, obsolete and damaged stock - finished goods 75,901 59,674

13,746,707 11,274,845

Closing stock of finished goods (2,452,874) (1,659,565)Cost of samples shown under selling, marketing

and distribution expenses - sales promotion (120,363) (67,661) 11,173,470 9,547,619

21.1 Salaries, wages and other benefits include Rs. 38.04 million and Rs. 22.54 million (2008: Rs. 22.44 million andRs. 21.19 million) in respect of defined benefit plan and contributory provident fund respectively.

22. SELLING, MARKETING AND DISTRIBUTION EXPENSES

Salaries, wages and other benefits - note 22.1 & 22.2 612,538 484,198Sales promotion 470,436 374,776Advertising 118,682 70,059Handling, freight and transportation 163,783 128,507Travelling and entertainment 120,831 104,079Depreciation / amortisation 31,298 28,339Vehicle running 34,164 33,611Publication and subscriptions 21,513 15,775Fuel and power 14,814 10,419Communication 13,417 15,172Provision for doubtful debts 11,600 1,824Repairs and maintenance 10,796 12,711Insurance 9,448 8,562Printing and stationery 9,370 7,532Security expenses 7,944 7,682Rent, rates and taxes 2,581 5,912Canteen expenses 1,013 880Training expenses 1,060 1,107Other expenses 18,521 17,780

1,673,809 1,328,925

22.1 Salaries, wages and other benefits include Rs. 27.85 million and Rs. 16.61 million (2008: Rs. 16.17 million andRs. 15.17 million) in respect of defined benefit plan and contributory provident fund respectively.

22.2 Salaries, wages and other benefits include staff severance cost of Rs. 29 million (2008: Nil).

23. ADMINISTRATIVE EXPENSES

Salaries, wages and other benefits - note 23.1 & 23.2 301,647 239,959Depreciation / amortisation 68,145 61,488Communication 33,567 27,082Training expenses 28,529 16,397Travelling and entertainment - note 23.3 14,264 18,980Legal and professional charges 28,181 15,743Repairs and maintenance 19,317 33,787Donations - note 23.4 14,572 22,452Printing and stationery 13,086 12,641Auditors’ remuneration - note 23.5 11,784 11,312Vehicle running 11,390 14,568Security expenses 11,209 8,376Publication and subscriptions 8,418 7,863Rent, rates and taxes 5,817 8,985Insurance 4,199 4,935Canteen expenses 4,171 4,406Other expenses - note 23.6 10,518 11,242

588,814 520,216

2009 2008

Rupees ‘000

2009 2008

Rupees ‘000

75

23.1 Salaries, wages and other benefits include Rs. 12.59 million and Rs. 7.67 million (2008: Rs. 3.83 million and Rs.6.58 million) in respect of defined benefit plan and contributory provident fund respectively.

23.2 Salaries, wages and other benefits include staff severance cost of Rs. 12.6 million (2008: Nil).

23.3 These are net of recovery from related party of Rs. 1.80 million (2008: Rs. 1.39 million).

23.4 Donations

Donations include a sum of Rs. 386 thousand (2008: Rs. 440 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 andMr. Shahid Mustafa Qureshi, Director, are the trustees.

23.5 Auditors' remuneration

Audit fee 3,000 2,750Fee for review of half yearly financial statements, special certifications and others 5,110 3,260Taxation services 2,774 4,491Out-of-pocket expenses 900 811

11,784 11,312

23.6 These are net of recovery from related party of Rs. 75.50 million (2008: Rs. 71.59 million).

24. OTHER OPERATING EXPENSES

Workers' Profits Participation Fund - note 7.1 84,474 116,795Workers' Welfare Fund 38,286 61,246Central Research Fund 15,825 30,314

138,585 208,355

25. OTHER OPERATING INCOME

Income from financial assets Return on PIBs 22,296 37,619 Return on Treasury Bills 75,616 7,056

Income on savings and deposit accounts 256,976 344,761 354,888 389,436

Income from non-financial assets Gain on disposal of operating assets 29,793 857,078

Others Scrap sales 17,768 15,816 Insurance commission 16,056 12,761 Service fee on clinical trial studies 6,975 3,418 Others 11,135 1,281

436,615 1,279,790

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

2009 2008

Rupees ‘000

76

2009 2008

Rupees ‘000

26. FINANCIAL CHARGES

Exchange loss - net 3,329 67,400Bank charges 11,019 8,749Interest on Workers' Profits Participation Fund – note 7.1 - 282Amortisation of premium on investments - 428

14,348 76,859

27. TAXATION

Current - for the year 670,000 990,000 - prior years (40,000) -

Deferred 2,791 55,853 632,791 1,045,853

27.1 Relationship between tax expense and accounting profit

Profit before taxation 1,566,721 3,001,040

Tax at the applicable rate of 35% 548,352 1,050,364Tax effect of exempt income - (295,210)Reversal of prior years provision (40,000) -Tax effect of other than temporary differences 21,186 58,657Effect of final tax regime 103,253 232,042

632,791 1,045,853

28. EARNINGS PER SHARE

Profit after taxation 933,930 1,955,187

Weighted average number of outstanding shares 170,672 170,672

Basic earnings per share Rs. 5.47 Rs. 11.46

28.1 A diluted earnings per share has not been presented as the company did not have any convertible instrumentsin issue as at December 31, 2009 and 2008 which would have any effect on the earnings per share if theoption to convert is exercised.

2009 2008

Rupees ‘000

77

2009 2008

Rupees ‘000

29. CASH GENERATED FROM OPERATIONS

Profit before taxation 1,566,721 3,001,040

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

Depreciation / amortisation 266,926 231,041Return on investments - PIBs (22,296) (37,619)Impairment charge 17,913 14,541Gain on disposal of operating assets (29,793) (857,078)Provision for staff gratuity 78,476 42,437Amortisation of (discount) / premium on investments (967) 428

310,259 (606,250)

Profit before working capital changes 1,876,980 2,394,790

Effect on cash flow due to working capital changes

(Increase) / decrease in current assets

Stores and spares (13,155) (8,885)Stock-in-trade (567,786) (1,216,879)Trade debts 20,053 (900,121)Loans and advances 27,927 (38,203)Trade deposits and prepayments 5,623 (9,029)Accrued return on term deposits 57,218 27,674Refunds due from government 32 (570)Other receivables 24,708 224,207

(445,380) (1,921,806)

Increase in trade and other payables 652,006 160,349

206,626 (1,761,457)

2,083,606 633,333

30. CASH AND CASH EQUIVALENTS

Cash and bank balances - note 19 1,739,236 2,724,897Short term investments - Treasury bills - note 11 644,889 -

2,384,125 2,724,897

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

78

Rupees ‘000

2009 2008

Chief Executive

2009 2008 2009 2008

Directors Executives

31. REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES

The aggregate amount charged in these financial statements for remuneration of the Chief Executive, Directorsand Executives are as follows:

Managerial remuneration 13,040 11,091 14,555 10,345 161,004 144,703Bonus and SARs 15,156 16,467 10,461 10,279 72,344 43,430Retirement benefits 3,010 1,880 3,651 1,919 40,548 24,882House rent 4,854 4,125 5,887 4,210 65,376 54,593Utilities 1,079 917 1,308 936 14,528 12,132Medical expenses 102 29 182 137 4,964 3,957Others 938 698 713 517 5,912 3,243

38,179 35,207 36,757 28,343 364,676 286,940

Number of person (s) 1 1 3 4 146 127

In addition to the above, fee to two non-executive Directors during the year amounted to Rs. 60 thousand(2008: Rs. 52.5 thousand).

The Chief Executive, Executive Directors and certain executives are also provided with free use of companymaintained 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 totax), payable to Chief Executive, Directors and certain executives, amounting to Rs. 5.42 million, Rs. 3.53 millionand Rs. 9.59 million (2008: Rs. 4.24 million, Rs. 4.66 million and Rs. 4.68 million) respectively. These are grantedevery year and are payable on completion of qualifying period of service. They are linked with the share valueof ultimate parent company, GlaxoSmithKline plc, UK.

32. TRANSACTIONS WITH RELATED PARTIES

Relationship Nature of transactions

Holding Company: Dividend paid 941,175 1,344,536

Associated companies: a. Royalty paid 134,166 96,577

b. Purchase of goods 4,454,339 3,766,212c. Sale of goods 99,038 68,884d. Recovery of expenses from related parties 82,850 73,568e. Service to associated company 35,895 -f. Service fee on clinical trial studies 6,975 3,418g. Donations 386 540

Staff retirement funds: a. Expense charged for retirement benefit plans 125,303 85,377

b. Payments to retirement benefit plans 87,689 77,212c. Receipts from retirement benefit plans 52,500 240,000

Key management personnel: a. Salaries and other employee benefits 129,605 106,722

b. Post employment benefits 13,656 8,539c. Sale of assets 246 1,703

2009 2008

Rupees ‘000

79

32.1 The related parties balances as at December 31, 2009 are included in the respective notes to the financialstatements. These are settled in the ordinary course of business. The receivables and payables are mainlyunsecured in nature and bear no interest.

33. RUNNING FINANCE UNDER MARK-UP ARRANGEMENTS

The facilities for running finance available from various banks amounted to Rs. 560 million(2008: Rs. 560 million). The rate of mark-up ranges from one month KIBOR plus 1.75% to three month KIBORplus 1.70% (2008: from 6% to three month KIBOR plus 0.5%). 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 (2008: Rs 10 million).These facilities carry mark-up at 1% (2008: 1%) above the State Bank of Pakistan Export Refinance rate perannum.

The facilities for opening letters of credit and guarantees as at December 31, 2009 amounted to Rs. 2.38 billion(2008: Rs. 2.17 billion) of which unutilised balances at the year end amounted to Rs. 1.46 billion (2008: Rs.1.49 billion).

34. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES

34.1 Financial assets and liabilities

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

Financial assetsLoans and advances 118 2,990 3,108 60,469 58,309 118,778 121,886Deposits - - - 57,238 7,027 64,265 64,265Trade debts - - - 996,915 - 996,915 996,915Accrued return on investments and bank deposits - - - 21,503 - 21,503 21,503Other receivables - - - 129,156 - 129,156 129,156Cash and bank balances 1,675,385 - 1,675,385 63,851 - 63,851 1,739,236Investments PIBs - 168,687 168,687 - - - 168,687 Treasury Bills 644,889 - 644,889 - - - 644,889December 31, 2009 2,320,392 171,677 2,492,069 1,329,132 65,336 1,394,468 3,886,537December 31, 2008 2,837,325 172,810 3,010,135 1,396,645 67,499 1,464,144 4,474,279

Financial liabilitiesTrade and other payables - - - 2,271,127 - 2,271,127 2,271,127 December 31, 2009 - - - 2,271,127 - 2,271,127 2,271,127December 31, 2008 - - - 1,618,781 - 1,618,781 1,618,781

On balance sheet date gapDecember 31, 2009 2,320,392 171,677 2,492,069 (941,995) 65,336 (876,659) 1,615,410December 31, 2008 2,837,325 172,810 3,010,135 (222,136) 67,499 (154,637) 2,855,498

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

Rupees ‘000

Maturityup tooneyear

Maturityafter

one year

Total Maturityup to one

year

Maturityafter

one year

Total

TotalInterest bearing Non-interest bearing

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

80

34.2 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 marketinterest rates. As at December 31, 2009, the company's interest bearing financial assets amounted to Rs. 2.5billion and if interest rates on these net assets had been 300 basis points higher / lower with all other variablesheld constant, post-tax profit for the year and equity would have been higher / lower by Rs. 45 million andRs. 41 million respectively. Therefore, the management believes that the company is not materially exposedto interest rate changes.

(ii) Currency risk

Foreign currency risk arises mainly where receivables and payables exist in foreign currency due to transactionswith foreign undertakings. Net payables exposed to foreign currency risk as at December 31, 2009 amountto Rs. 662 million (2008: Rs. 465 million). The liability is mainly denominated in US Dollars and at December31, 2009, if the Pakistan Rupee had weakened / strengthened by 5% against the US Dollar with all othervariables held constant, post-tax profit for the year would have been higher / lower by Rs. 19 million.

(b) Credit risk

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

Trade debts 996,915 1,016,968Loans, advances and other receivables 336,810 405,048Investments 813,576 327,366Bank balances 1,734,459 2,721,302

3,881,760 4,470,684

Trade debts of the company are not exposed to significant credit risk as the company trades with credit worthythird parties. Trade debts of Rs. 220.91 million are past due of which Rs. 15.76 million have been impaired.Past due but not impaired balances include Rs. 12.59 million outstanding for more than three months.

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

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

2009 2008

Rupees ‘000

81

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

(c) Liquidity risk

Liquidity risk reflects the company's inability in raising funds to meet commitments. The company managesliquidity risk by maintaining sufficient cash and balances with banks in deposit accounts and the availability offinancing through banking arrangements. As at December 31, 2009 there is no maturity mismatch betweenfinancial assets and liabilities that expose the company to liquidity risk.

35. CAPITAL RISK MANAGEMENT

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

36. DIVIDEND

The Board of Directors in its meeting held on March 03, 2010 proposed a cash dividend of Rs. 5 per share(2008: Rs. 7 per share) amounting to Rs. 0.85 billion (2008: Rs. 1.19 billion).

37. SIGNIFICANT EVENT

In an extraordinary general meeting of the company held on March 03, 2010 the shareholders of the companyhave approved the scheme of arrangements for amalgamation of GlaxoSmithKline Pharmaceuticals (Private)Limited (Formerly Bristol Myers Squibb Pakistan (Private) Limited) with the company.

38. DATE OF AUTHORISATION FOR ISSUE

These financial statements were approved and authorised for issue on March 03, 2010 by the Board of Directorsof the company.

82

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

M. Salman BurneyChairman / Chief Executive

Javed AhmedjeeChief Financial Officer

Form 34PATTERN OF SHAREHOLDING

999 1 100 45,3441,258 101 500 381,370

894 501 1000 619,1301,109 1001 5000 2,596,069

267 5001 10000 1,871,636105 10001 15000 1,287,60756 15001 20000 973,57435 20001 25000 802,12212 25001 30000 325,3099 30001 35000 300,0377 35001 40000 266,630

14 40001 45000 591,3817 45001 50000 334,6324 50001 55000 212,354

10 55001 60000 587,6652 60001 65000 121,9191 65001 70000 65,8125 70001 75000 362,9062 75001 80000 156,3561 80001 85000 80,3511 95001 100000 95,7062 105001 110000 213,9292 115001 120000 235,4381 125001 130000 125,3101 140001 145000 143,1502 155001 160000 313,7723 195001 200000 595,3471 200001 205000 200,1571 255001 260000 259,5571 260001 265000 261,4001 305001 310000 309,7431 415001 420000 417,1181 480001 485000 484,6721 605001 610000 606,9471 665001 670000 666,5451 705001 710000 707,9761 5945001 5950000 5,945,8811 6230001 6235000 6,233,4211 6415001 6420000 6,419,9831 134450001 134455000 134,453,588

4,822 170,671,844

SHARESHOLDING

ToFromNUMBER OF

SHAREHOLDERS

TOTAL SHARES HELD

83

CATEGORIES OF SHAREHOLDERS

1 Individuals 2,181 4,661,135 2.732 Investment Companies 4 2,139 0.003 Insurance Companies 1 1 0.004 Joint Stock Companies 11 19,863 0.015 Financial Institutions 2 4,762 0.006 Associated Company 1 134,453,588 78.787 Central Depository Company (b) 2,617 31,499,993 18.468 Others (see below) 5 30,363 0.02

4,822 170,671,844 100.00

Others:i Mohsin Trust 1 17,283 0.01ii The Al-Malik Charitable Trust 1 2,718 0.00iii Securities Exchange Commission of Pakistan 1 1 0.00iv Punjabi Saudagar Co-operative Society 1 218 0.00v 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 holdersas per Central Depository Company of Pakistan as at December 31, 2009

1 Individuals 2,498 7,049,550 4.132 Investment Companies 23 2,027,481 1.193 Insurance Companies 12 7,575,179 4.444 Joint Stock Companies 59 420,143 0.255 Financial Institutions 9 13,985,592 8.196 Modarabas 3 34,012 0.027 Foreign Companies 4 72,796 0.048 Others (see below) 9 335,240 0.20

2,617 31,499,993 18.46

Others:i The Aga Khan University Foundation 1 23,200 0.01ii The Pakistan Memon Educational & Welfare Society 1 41,897 0.03iii Trustees Kandawala Trust 1 44,657 0.03iv Trustees Saeeda Amin WAKF 1 45,000 0.03v Trustees Mohammad Amin WAKF Estate 1 75,000 0.04vi Managing Committee Karachi Zorthosti Banu Mandal 1 18,956 0.01vii Trustees Mrs. Khorshed H. Dinshaw & Mr. Hosh 1 35,437 0.02viii Trustees D.N.E. Dinshaw Charity Trust 1 48,093 0.03ix Centre for Development of Social Service 1 3,000 0.00

9 335,240 0.20

84

a)

Sr.No.

Categories of Shareholders SharesHeld

Percentage(%)

Number ofShareholders

Sr.No.

Categories of Shareholders SharesHeld

Percentage(%)

Number ofShareholders

SHAREHOLDING INFORMATION

Holding Company:

Setfirst Limited U.K. 1 134,453,588

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

Investment Corporation of Pakistan 1 320National Bank of Pakistan (Trustee Department) 1 12,653,429

Directors, CEO and their spouses and minor children:

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

Executives 5 4,378

Public sector companies and corporation :

Banks, Development Finance Institutions,Non-Banking Finance Institutions, InsuranceCompanies, Modarabas and Mutual Funds 53 11,048,213

Shareholders holding 10% or more voting interest :

Setfirst Limited U.K. 1 134,453,588

No. ofShares Held

Number ofShareholder

Categories of Shareholders

2%

8%

7%

4%

79%

Holding Company 79%Individuals 7%Insurance Companies 4%Financial Institutions 8%Others 2%

Distribution of Shares

85

NOTICE OF ANNUAL GENERAL MEETING

Notice is hereby given that the SIXTY-THIRD Annual General Meeting of the Shareholders of the Company willbe held at the Beach Luxury Hotel, Karachi at 11:00 a.m. on Tuesday, March 30, 2010 to transact the followingbusiness:

1. (a) To receive and adopt the Repor t of the Directors and the Accounts for the year endedDecember 31, 2009 and the Auditors' Report thereon;

(b) To approve the payment of a dividend.

2. To appoint Auditors and fix their remuneration.

3. To approve an increase in the author ised share capital of GlaxoSmithKline Pakistan Limited toRs. 5,000,000,000 by the creation of 250 million ordinary shares of Rs.10/= each.

By Order of the Board

Karachi Shahid Mustafa QureshiMarch 08, 2010 Director / Secretary

Notes:

1. The Share Transfer Books of the Company will be closed from March 23, 2010 to March 30, 2010 (bothdays inclusive) for the purpose of determining the entitlement for the payment of Dividend.

2. A member entitled to attend and vote at the Meeting may appoint another member as his/her Proxy toattend, speak and vote at the Meeting on his/her behalf. Instrument appointing Proxy must be deposited atthe 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.

3. The shareholders are requested to notify the Share Registrars of the Company if there is any change intheir address.

86

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

A. For Attending the Meeting:

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

ii) In case of corporate entity, the Board of Directors' resolution/power of attorney with specimen signatureof 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 ingroup account and their registration details are uploaded as per the Regulations, shall submit the proxyform as per the above requirement.

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

iii) Attested copies of CNIC or the passport of the beneficial owners and the proxy shall be furnished withthe 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 signatureshall be submitted (unless it has been provided earlier) along with proxy form to the Company.

87

88

CONTACT

DETAILS

Karachi

35, Dockyard Road,West Wharf, Karachi - 74000Tel: (92-21) 32315478 - 82Fax: (92 - 21) 32311120UAN: 111-475-725

F-268, S.I.T.E.Near Labour Square,Karachi - 75700Tel: (92 - 21) 32570665 - 69Fax: (92 - 21) 32572613

Lahore

18.5 Km., Ferozepur Road,P.O.Box No. 244Tel: (92 - 42) 5811931 - 35Fax: (92 - 42) 5820821

DISTRIBUTION /

SALES OFFICE

Karachi

F-268, S.I.T.E.,Near Labour Square,Karachi - 75700Tel: (92 - 21) 32564355 - 65Fax: (92 - 21) 32570119

94, Deh Landhi,Karachi - 75120Tel: (92 - 21) 35015040 - 44Fax: (92 -21) 35015515

Sukkur

Plot No. 77/80, Block B,Friends Cooperative Housing Society,Akhuwat Nagar, Airport Road.Tel: (92 - 71) 5630668, 5630144Fax: (92 - 71) 5630755

Multan

Islam-ud-din House, Mehmood Kot,Bosan Road.Tel: (92 - 61) 6222061-63Fax: (92 - 61) 6222064

Lahore

Cordeiro House,Plot No. 27, Kot Lakhpat Industrial Estate,Kot Lakhpat.Tel: (92 - 42) 5111061- 64Fax: (92 - 42) 5111065

Islamabad

Aleem House, Plot No. 409,Sector I-9, Industrial Area.Tel: (92 - 51) 4435701 - 03Fax: (92 - 51) 4433706

Peshawar

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