Making a difference to lives across the World

With every minute of every new day of every new year we are reaching out to humanity To provide hope and inspire change, to research and invent, to give back to communities and take a part of them with us, to fight diseases and empower individuals, and to make this world a better, more safer place for our children and for the generations to come. So they can also

do more, feel better, live longer!

Contents
2 3 4 5-6 7 8 9 10 - 12 13 14 15 - 16 17 - 18 19 - 20 21 - 24 25 - 26 27 - 31 32 - 34 35 36 37 - 38 41 - 42 43 44 45 - 46 47 48 49 50 - 77 78 79 80 81 - 82 83 84 Corporate information Our mission Our vision GSK's commitment to innovation The spirit of GSK History of GSK Did you know? Serving from the heart GSK's Global Community Partnerships What it takes to be a leader... Highlights of the year Our Products Best place, best people & best work Board of Directors Excellence Awards 2008 Directors' Report to Shareholders Chairman/Chief Executive's Review Financial Performance at a Glance Statement of Value Added Key Operating & Financial Data Statement of Compliance with the Code of Corporate Governance Review report to the members on statement of compliance with best practices of Code of 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 the Financial Statements Pattern of Shareholding Categories of Shareholders Shareholding Information Notice of Annual General Meeting Contact Details Form of Proxy

01 - 02

Corporate information
BOARD OF DIRECTORS
Mr. Mr. Mr. Mr. Dr. Mr. Dr. M. Salman Burney Tariq Iqbal Khan Rafique Dawood Shahid Mustafa Qureshi Muzaffar Iqbal Javed Ahmedjee Iffat Yazdani
Chairman / Chief Executive Non-Executive Director Non-Executive Director Legal and Regulatory Affairs Director Technical Director Director Finance, IT and Logistics Area Director Asia Pacific Clinical Operations

AUDIT COMMITTEE
Mr. Rafique Dawood Mr. Tariq Iqbal Khan Mr. M. Salman Burney
Chairman Member Member

MANAGEMENT COMMITTEE
Mr. M. Salman Burney Dr. Muzaffar Iqbal Mr. Shahid Mustafa Qureshi Mr. Javed Ahmedjee Ms. Erum S. Rahim Mr. Pervaiz Iqbal Awan Mr. Maqbool ur Rehman Mr. Sohail Matin Dr. Atif Mirza Dr. Z. U. Khan Haji Muhammad Hanif Ms. Fariha Salahuddin
Chairman / Chief Executive Technical Director Legal and Regulatory Affairs Director Director Finance, IT and Logistics Director Marketing and Business Development Sales Director Sales Director Country Manager - Consumer Healthcare Director Medical Services Head of Quality Head of Procurement Head of HR & OD

COMPANY SECRETARY
Mr. Shahid Mustafa Qureshi

AUDITORS
A. F. Ferguson & Co. Chartered Accountants

CHIEF FINANCIAL OFFICER
Mr. Javed Ahmedjee

LEGAL ADVISORS
Rizvi, Isa, Afridi & Angell Mandviwalla & Zafar Orr, Dignam & Co. Surridge & Beecheno Vellani & Vellani

CHIEF INTERNAL AUDITOR
Mr. Abdul Samad

BANKERS
Citibank NA Habib Bank Limited HSBC Bank Middle East Ltd. Standard Chartered Bank (Pakistan) Ltd. The Royal Bank of Scotland

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

Making a difference to lives across the World

Our mission

Our quest is to improve the quality of human life by enabling people to

At a glance - our mission and global activities
GSK has a challenging and inspiring mission: to advance the quality of human lives by enabling people to do more, feel better and live longer. With a rich heritage stretching back to the 18th century, GSK has a wealth of experience and expertise in the advancement of human health. Five of its scientists have won the Nobel Prize for medicine in the past 70 years. , GSK supplies one quarter of the world s vaccines, produces market leading prescription medicines on which millions of healthcare professionals and their patients rely, and has a range of household name consumer brands.

03 - 04

Our vision

GlaxoSmithKline's vision is exciting :

the opportunity to make a difference to the lives of billions of people.
Our value system and operating principles provide the necessary guidance on how we work at GlaxoSmithKline. The key to our success is our desire and passion to pursue GlaxoSmithKline's priorities - expressed by our business drivers. We are aware that the work we do improves quality of people's lives. We take pride in this and in our commitment to produce products that benefit patients. Our success in meeting this challenge depends on people at GlaxoSmithKline. Doing their jobs with commitment to this vision, enthusiasm for and alignment with GlaxoSmithKline's priorities, and an unmatched sense of urgency.

While new medicines and products may originate in our international laboratories, bringing those medicines and products to patients requires the combined efforts of everyone else in the Company. Our manufacturing staff for example, turns chemicals into medicines that can be used easily and effectively, while our marketing and sales staff introduces those products to doctors for the benefit of their patients. All of us have a responsibility to engage in this quest and to successfully deliver our promise.

Making a difference to lives across the World

GSK's commitment to innovation
Over 15,000 people work in R&D at GSK

The research and development of new medicines and vaccines is critical to our future. Being at the forefront of scientific knowledge is at the heart of what we do
GSK spends £8 million (US$14 million) on research and development each day - that's around £300,000 (US$562,000) every hour.

GSK's product pipeline is maturing rapidly and is one of the largest in the industry A decade ago, GSK conducted 500,000 screening tests each year to identify potential new compounds. This figure is now more than 65 million a year

more writt th an 1,10 en for 0 GSK prescript ion produ cts s are

Every Minut e...

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GSK spends more tha ind new medicines f 62 (US$ 5 ,00 0) to

is tribute d by GSs of vaccines are K

E very D ay...

more than 200 million people around the world use a GSK brand toothbrush or toothpaste

.. ear . v E ery Yoduce 9 billion tumsd an pr
le ts ies a our f ctorbillion P adol tabaste an tablets, 6 on tubes of toothp 600 milli

05 - 06

Our ambition A better future for all
There are so many life-threatening diseases for which there are no treatments, or where treatments could be significantly improved. Our work never stops.

Making a difference to lives across the world
Thanks to the medicines and vaccines developed by the pharmaceutical industry, many of the world's deadliest and most severe diseases, such as smallpox, diphtheria, scarlet fever and polio, have either been consigned to history or nearly eliminated. But the fight goes on. Today, pharmaceutical companies are leading the battle against AIDS, malaria and tuberculosis, and helping millions of people suffering from conditions such as asthma, diabetes and depression lead normal, healthy lives.

Therapies to fight disease on all fronts
GSK provides a wide range of pharmaceutical products to address many of the world's major healthcare needs. GSK also has leadership in four major therapeutic areas: anti-infectives, central nervous system (CNS), respiratory and gastro intestinal/metabolic, where its class-leading prescription medicines help alleviate the suffering of millions of people around the world.

Making a difference to lives across the World

The spirit of GSK
M ission
Improve the quality of human lives by enabling people to Do more, Feel better, Live longer

Strategies

Culture

global company Grow a diversified ucts of value Deliver more prod ing model Simplify the operat rment Individual empowe Build trust

ople as P sionate pe oc ed at P ient - f us with integrity er or P f man ce

Innovative thinking Engaging a nd develop ing others Leading peo ple Achieving ex cellence

Behaviours

About our company
Every single one of us as employees should have highest ethical standards and respect the values that we, GSK, stand for. These values mean being a team player, being respectful of others, valuing other people's views and their judgment. It means leading and being open and transparent.

07 - 08

History of GSK
ing 100 GSK celebrat es years of servic

cham, d French, Bee SmithKline an Glaxo, y names hKline; so man ome, GlaxoSmit el W lc to keep all ory, its hard d so much hist an ing at the et times. Y look it in mind at of makes you logo sometimes bright orange more than pany is about thin k this com or n aff d to or orks f it ca someone who w actually ad closely, its t. And if you re or f ge ing. pretty interest

At a glance
John K. Smith opens a drugstore in Philadelphia

1830 1891 1989

Thomas Beecham launches , Beecham s Pills in England

1842 1906 1995

Burroughs Wellcome & Company was founded

1880 1929 2001

SmithKline & Co. acquires French, Richards & Company

Glaxo is registered by Joseph Nathan & Company as a trademark for dried milk

SmithKline & French becomes research focused

SmithKline & Beecham merge

Glaxo & Wellcome merge

GlaxoSmithKline

Making a difference to lives across the World

Did you know?
The only pharmaceutical company tackling the three:

GlaxoSmithKline globally.. .

HIV/Aids, tuberculosis and malaria

WHO Priority diseases
of medicines and healthcare products manufactured yearly

Fourbillionpacks
working to discover new drugs

Over15,000people 65million
vaccines supplied by GSK More than

, Aquarteroftheworld s 100countries
benefit from our humanitarian product donations

compounds screened every year

09 - 10

Serving from the heart
GSK is proud to say that corporate citizenship is integrated at all levels of our work, from ethical research and development, environment protection and sound marketing activities to community support and development. We have onboard a global team of determined and dedicated professionals who want to make the world a better, healthier, happier place. GSK Pakistan has always responded with emergency relief measures during times of natural disasters in the country. GSK was one of the largest corporate donors in the relief activities during the earthquake of October 2005. In the recent earthquake in Baluchistan, GSK sent consignments of necessary medicines and vaccines to Ziarat and adjoining affected areas. GSK Pakistan is also involved in organizing year round awareness activities, medical camps, sponsorships and supporting several welfare organizations. The Pakistan Centre for Philanthropy (PCP) has awarded a Corporate Philanthropy Award Certificate in 2008 to GlaxoSmithKline Pakistan in recognition of its philanthropic support for social development causes in Pakistan.

The award is based on the findings of PCP's corporate philanthropy survey that provides the basis for ranking 546 publicly listed companies for their philanthropy. According to the PCP rankings GSK has been listed among the top 25 companies and the only pharmaceutical company leading corporate giving in Pakistan. GlaxoSmithKline has supported various health, women and child development, education, and relief programmes at grass root level. Some of which includes the following:

Making a difference to lives across the World

Education
Financial Assistance to National Commission for Human Development The National Commission for Human Development (NCHD) was a step initiated by the Government of Pakistan to conceive innovative strategies for social reformation with a focus on sustainable human development (through education, adult literacy, reducing population growth rate, capacity building, improving infant/maternal mortality rates etc).

GSK P k a is tan h as provid ed a gran of £144,0 t 00 to the NCHD' “P s r ary im H althcare e Ex tension P ogramm r making G e” SK the la rgest cor porate donor to this cause .

Relief
Baluchistan Earthquake-October 2008 GlaxoSmithKline Pakistan provided emergency relief medicines and vaccines worth approximately Rs. 3.3 million to the victims of earthquake that devastated many districts, especially Ziarat, in Baluchistan in October 2008. Asian Earthquake-2005 In the time of need and despair during the Asian Earthquake 2005, which heavily affected the northern part of the country, GSK Pakistan had been quick to respond to the calamity affected areas of Kashmir and NWFP with Rs. 20 million worth of antibiotics, analgesics and topical anti-bacterial supplies. A donation of up to 350,000 doses of Hepatitis A vaccine: Havrix Junior was given to health authorities to cope with arising health concerns in the wake of the earthquake. The total value of the medicines and vaccines that GSK contributed to the disaster relief effort totals about US$ 6.5 million (around Rs. 400 million) making GSK one of the largest corporate donors for earthquake relief in Pakistan. The UK head office also provided continued support and administrative assistance to route aid. In alliance with Concern for Children (CFC) a crisis team was also formed which contributed in the general relief work. They also provided healthcare support through volunteers who were sent forward to get directly involved through a particular relief operation based at Garhi Dupatta, a town near Muzaffarabad. GSK Pakistan employees also donated a minimum of a day's salary for the relief efforts.

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Health & social development
Center of Nursing Excellence - PNF In 2008, GSK approved a grant of £ 250,000 to support the development of a 'Center of Nursing Excellence' in Karachi. This three year project, in collaboration with the Pakistan National Forum on Women's Health (PNF) aims at improving and strengthening the quality of nursing education in the country through an extensive training programme that develops the teaching capabilities of the highest potential nursing faculty from across Pakistan. These teachers once trained would have a multiplied beneficial effect within their community. It is estimated that a single well trained nursing teacher imparting knowledge to a hundred new nurses, would eventually impact the care of approximately 40,000 patients every year. GSK will provide funding and support for the project for three years after which the Centre will become fully self-sustaining. The pilot batch of nursing instructors was recruited in October 2008 and their classes have started. Concern for Children Trust Concern for Children (CFC), established in 1997, aims to promote the health and welfare of the children of Pakistan with special focus on preventive and primary healthcare, education, infrastructure, maintenance and support and to create general awareness about various child healthcare issues. With SmithKline Beecham's support CFC has set up three computer literacy projects with low-income schools across Karachi. Approximately 8000 children have benefited from these facilities so far. Currently, CFC is engaged in developing a project in Mohammadi (Machhar) Colony-a shanty settlement along the city port. A desperately needed 'mother and child' healthcare centre is also being set up there to provide primary, pre-natal and anti-natal services and health information/education. Approximately eight to ten thousand mothers and children annually are expected to be reached through this. A sum of about Rs. 4 million is donated by GSK Pakistan for this purpose. GSK also provides medication in the free healthcare camps organized by CFC in different parts of the country.

The Trust for Health and Medical Sciences The Trust for Health and Medical Sciences is working since 1980. Its initial venture was a charitable clinic in Landhi. It operates with a staff of nine members, of which two are qualified doctors. The service is provided at a paltry fee of Rs.15 for adults and Rs.5 for children. The clinic's operational costs are covered by the Trust, which is supported generously by GSK. The clinic, since 1983, has treated around two million patients and has matured into a large set-up with multiple medical facilities. A total of over 90,000 patients receive medical attention from the medical facility annually. Recently, the clinic has also commenced a programme to counter drug abuse, especially the treatment of heroin addicts. They are regularly being given medicines and also being carefully counseled.

Making a difference to lives across the World

GSK's Global Community Partnerships
Global Community Partnerships (GCP) is the global charitable programme of GlaxoSmithKline Group of Companies that works with partner organizations in the developed and developing worlds to help improve the health and education of under-served communities. It does so through the traditional areas of funding, product donations and expertise while also aiming to build strategic partnerships that result in mutual benefit for all involved. Some of the GCP initiatives include: a. The Global Alliance to Eliminate Lymphatic Filariasis (LF)-also known as elephantiasis- of which GSK is a founder member and provided grants of almost £ 1 million and staff expertise to support the coalition-building, planning, training and communication activities of the Global Alliance to eliminate LF.

b. Personal Hygiene and Sanitation Education (PHASE), a simple handwashing programme for school children that saves lives. Initiated by GSK in 1998 after identifying personal hygiene and sanitation as a neglected health education priority, PHASE is transforming personal hygiene and sanitation by taking a holistic approach to healthcare, education, community development, water and sanitation. c. International Programme of HIV Education “Positive Action Programme”, focused on HIV education, care and community support.

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What it takes to be a leader...
GlaxoSmithKline Pakistan—Some vital statistics about its standing in the country's pharmaceutical industry:

Leaders in ...
Value share Volume share Rx share 11.39% 18.33% 13.11%

Leading top 2 brands in value
Rs. 2 billion Rs. 1 billion

Leading brand in Volume Leading brand in Rx

Value: 7 brands in top 20 Volume: 6 brands in top 10 Rx: 5 brands in top 10
Source: IMS Qtr. 3, 2008, PKPI SEM1, 2008

Making a difference to lives across the World

Highlights of the year
Financial Performance Total turnover has risen to Rs.13.4 billion Profit before tax of Rs. 3,001 million EPS of Rs.11.46 for this year Operational Excellence (OE) Installation of Fastest Tube Filling & Cartoning Machines Advancements in improved product quality, productivity and integrity Environment, Health and Safety (EHS) Baseline studies for respiratory free operation Low-cost engineering solutions (glove box) was installed and 40% reduction in OEL level was observed Business Continuity Plan desktop exercise conducted at all sites A training package in Urdu language on GMP and EHS was prepared and all staff trained during 2008 Environment Excellence Award (AEEA 2008) and EHS Excellence Award was received Quality Management System (QMS) QLE workshop was organized and about 130 participants attended these workshops for effective implementation of the QMS Research and Development Conducted 19 Phase-II & III studies in therapeutic areas of Oncology, Neurosciences, Psychiatry, Metabolic and Hematology Certificate of Recognition and Gold Awards to team members were given by CMD and Region 1st Position in poster competition in “International Clinical Operations, Community of Practice Meeting”, Bangkok Consumer Healthcare Sensodyne Total Care and Sensodyne Gentle Mouthwash, two new products with unique formulation, were successfully launched Eno was given a new and vibrant look with modern shrink sleeve packaging. Over one thousand shops across Pakistan were branded Horlicks was revived with an exciting 360 degree campaign around 'Taller, Stronger and Sharper' claim for growing children. Around 50,000 students from 200 schools nationwide participated in the South Asian Horlicks Wizkids competition Best place, Best people & Best work Learning Team conducted the Learning Fair in 4 different cities: Lahore, Islamabad, Multan and Karachi offering a diverse range of courses for employees' development and learning exposure HR Team visited 14 Universities in our Recruitment Drive to identify the right talent for our Management. A new initiative titled “Mentoring” was launched by the HR team, to provide guidance and assistance for developing talent International Day of Disability was celebrated to promote diversity at GSK Key Learning Statistics : 2008 Total no. of courses conducted: 195 Total participants: 2896 Learning hours per employee: 85

15 - 16

Marketing Highlights
The beginning of 2008 saw the launch of ArixtraTM, the first in a new class of Antithrombotics; a pentasaccharide that selectively inhibits factor Xa, a key step in the clotting cascade, and offers prophylactic therapy to Orthopaedic Surgeons for 80% of patients at risk of developing Venous Thromboembolism. In treating Acute Coronary Syndromes, ArixtraTM is offering cardiac surgeons an option to save lives of millions of patients in cardiac emergencies.

The launch of this key portfolio asset marked the beginning of a new era in base prevention as the vaccine is the first of its kind in the market and combines 6 antigens in one. The vaccine provides protection against six deadly diseases, Diphtheria, Tetanus, Pertussis, Polio, Hepatitis B and Haemophilis Influenza type B.

Initiatives
Value Health Card The Value Health Card (VHC)—an innovative patient assistance and compliance programme designed to provide direct savings to patients on a host of GSK medicine—was launched as GlaxoSmithKline Pakistan's corporate social responsibility initiative in 2008. Issued solely through doctors' prescription, the VHC is Pakistan's first patient assistance programme aimed at providing access to quality medicines to those who cannot afford them at standard retail prices. Currently the VHC provides savings on selected GSK medicines for Asthma, Benign Prostatic Hyperplasia, Anxiety & Depression, Epilepsy, Diabetes, Parkinson's disease and Chronic Hepatitis B treatment.

Making a difference to lives across the World

Anti-virals

Antibiotics
Antidiarrhoeals

Cardi o -vas cular s
Cough /Cold

Central Nervous Syste m

Analgesics

Onco logy

inal Gastro - intest & Metabolic

r / Ea Eye

Consumer Health care

Respiratory

nes a i V cc

17 - 18

a H ematinics it & V amins

D matolog er icals
Others

s intic thelm An

Making a difference to lives across the World

Best place, best people & best work

holding iduals and ering indiv f By empow delivery o built ntable for , GSK has them accou ctives mental obje depart . ing culture a perform

Both the quality and depth of work constantly challenge you to use your creativity and innovation and therefore, encourage you to exercise your thinking ability at all times.

tra kes me go on an ex One thing which ma bly GSK is invaria mile here is that rding grooming and rewa geared towards their employees.
I have found GSK to be a place for innovative wor k and I am excited to be a part of GSK. GSK may be one of the best examples of Divers ity & Inclusiveness. Its wor k environment lives to its motto of enabling people to do more, feel better and live longer.

19 - 20

faith held by seniors in Empowerment and level of entiates GSK from the their sub-ordinates differ rthermore, our global and rest of the companies. Fu K the brand also makes GS local prestige attached to . a successful organization

culture ost every mental vors of alm fla nd develop GSK has learning a norms are excellent ees. GSK providing its employ s, focusing es for ployees' need opportuniti modate em accom flexible to lan ce. and life ba work
GSK is the best place to work due to its professional & friendly work environment with equal growth opportunities for every performing employee.

The experien ce to be gain ed by working company of th in a is size and co mplexity is in You get expo valuable. sure in many varied areas with a chance along to observe be st practices.

GSK is a place where success is based on a commitment to discovery and innovation, going beyond what's expected to find new ways of bringing benefits to all our stakeholders.

Making a difference to lives across the World

Board of Directors
Mr. M. Salman Burney
M. Salman Burney joined SmithKline Beecham as Director Marketing & Sales in 1992 and was appointed Managing Director of SmithKline Beecham in 1997. He is the CEO of GlaxoSmithKline Pakistan since SmithKline Beecham's merger with GlaxoWellcome in 2001. He also has Regional management responsibility for Iran & Afghanistan.

21 - 22

Dr. Iffat Yazdani

tan as joined SK&F Pakis Dr. Iffat Yazdani worked in 1986 and has Medical Director y in increasing seniorit in diverse roles of ining broad and R&D, ga Medical Services large teams. e and managing experienc ible for respons In 2004, Iffat was of tan as a pioneer lishing GSK Pakis estab MENA e al trials within th Phase II / III clinic region.

Tariq Iqbal Khan, Chairm an/Managing Director, National Invest ment Trust has matching credentials with his outstanding performance as M.D./C hairman NIT. He is a founder Director of Isla mabad Stock Exchange. He has served as Member Tax policy and Co-ordinatio n in Central Board of Revenue and later join ed Securities and Exchange Commission of Pakistan as a Commissioner and offi ciated as acting Chairman in 200 0.

Mr. Tariq Iqbal Khan

Dr. Muzaffar

Rafique Dawood is the Chairman and Director of Dawood Isla mic Bank, Win Power (Pvt.) Limited and B.R.R. Investments (Private) Limited, (the manager of B.R.R. Guardian Modaraba). Apart from the group companies, he is also on the board of GSK Pak istan Limited and Pioneer Cement Limited .

Mr. Rafique Dawood

K in 1987. Iqbal joined GS Dr. Muzaffar l Director Area Technica ly He is currently ring and supp r manufactu . He responsible fo ngladesh kistan and Ba functions in Pa ciate at Research Asso nior worked as a Se uis, Missouri, iversity, St. Lo Washington Un has a PhD ining GSK. He ee in USA before jo d an MS degr istry an degree in Chem me from ram g Leaders Prog Manufacturin ersity, UK. iv Cambridge Un

Iqbal

Mr. Shahid Mustafa Qu

reshi

hi with the merger Shahid Mustafa Qures m and SmithKline Beecha of Glaxo Wellcome Affairs, al, Corporate was appointed the Leg ation and rial Relations, Administr Indust or/ Company Regulatory Affairs Direct n. Secretary of GSK Pakista

Javed Ahmedjee is a fellow membe r of the Institute of Chart ered Accountants of Pakistan with ov er 14 years experie nce in senior managem ent positions in fin ancial and manufacturin g sectors. He has remained associa ted with the com pany for more than nine ye ars and is presen tly working as Direc tor Finance, IT & Logistics for Pakistan, Iran and Afghanistan .

Mr. Javed Ahmed

jee

Excellence Awards 2008

GSK named the “Best Place to work -2008”
An annual independent survey compiled by a leading HR consultancy in Pakistan in association with the Pakistan Society for Human Resource Management, has identified GlaxoSmithKline Pakistan as a great place to work. GSK Pakistan has received the highest score out of the 20 companies that participated in the survey, which included leading multinationals as well as local companies from various industries. Companies were judged by an independent research team and panel of experts in four categories, including sense of belonging, growth opportunities, level of commitment and alignment, suggesting that we remain a very attractive employer. GSK Pakistan had previously received

“The most preferred pharmaceutical company”

award, which was based on the results of face to face interviews with more than 10,000 final year students from various universities across Pakistan. We are proud to announce that there has been yet another addition this year—we have been recognized as the Best Place to Work, which signifies that our employees are motivated by the opportunities provided and value the culture of trust and empowerment.

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25th Corporate Excellence Award

The Management Association of Pakistan honored GlaxoSmithKline Pakistan Limited with a '25th Corporate Excellence Award' for demonstrating excellence in corporate management. The Award was received by Mr. Salman Burney, Chairman / Chief Executive, GSK Pakistan.

Taxpayers Excellence Award 2009
GSK Pakistan wins compliance recognition. GlaxoSmithKline Pakistan Limited once again remained consistent in receiving the 'Taxpayers Excellence Award 2009'. The award recognizes the excellence of tax payers in achieving high standards in tax payments compliance, transparency and reporting among over 700 companies. Mr. Javed Ahmedjee, Director Finance proudly received the award on behalf of GSK Pakistan.

Consumer Choice Award
Consumer Choice Award—introduced by Consumer Association of Pakistan, is a platform to hear the voice of consumers and to recognize the efforts of various leading brands. This award is decided on the basis of a survey conducted by volunteers and voting through CAP website. Macleans won the award for the second consecutive year. Mr. Sohail Matin, Country Manager - Consumer Healthcare received the award on behalf of GSK Pakistan.

Making a difference to lives across the World

Directors' Report to Shareholders
The Board of Directors of GlaxoSmithKline Pakistan Limited is pleased to present the annual report and the Company's audited financial statements for the year ended December 31, 2008. The directors' report is prepared under section 236 of the Companies Ordinance, 1984 and clause xix of the Code of Corporate Governance. This report is to be submitted to the members at Sixty Second Annual General Meeting of the Company to be held on March 31, 2009. Operating result Profit for the year before taxation Taxation Profit after taxation Un-appropriated profit brought forward Profit available for appropriation Appropriations: - Final dividend 2007 Rs. 7.5 per share - Interim dividend 2008 Rs. 2.5 per share Un-appropriated profit carried forward (1,280.0) (426.7) 2,283.6 Rs. in million 3,001.0 1,045.8 1,955.2 2,035.1 3,990.3

The Board of Directors is pleased to propose a final cash dividend of Rs. 7.0 per share amounting to Rs. 1,194.7 million. The Company achieved net sales of Rs. 13.4 billion, growing by 26.3% in 2008. Profit after tax in this year was Rs. 1,955 million, an increase of 17.0% from 2007. Holding company As at December 31, 2008, Setfirst Limited UK and its nominees held 134,453,588 shares of Rs. 10 each. The ultimate parent of the company is GlaxoSmithKline plc, UK. Pattern of Shareholding: The Company shares are traded in Karachi and Lahore stock exchanges. The shareholding information as at December 31, 2008 and other related information are set out on pages 78 to 80. The Directors, CEO, Company Secretary and CFO, their spouses and minor children did not carry out any trade in the shares of the Company.

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Chairman / Chief Executive's review The Chairman / Chief Executive's review on pages 32 to 34 deals with: • The performance of the Company during the year in comparison to last year with reasons for variances • Significant plans and decisions • Future outlook and Challenges The directors of the Company endorse the contents of the same. Basic earnings per share Basic earnings per share after taxation were Rs. 11.46 (2007: Rs. 9.79). Corporate and social responsibility
Earnings per Share & Price Earning Ratio
12 10 8 Rupees 6 4
31.9 20.9 10.6 17.5 16.2 19.6 11.5

35 30 25 20 15 10
6.0 8.6 9.8 9.8 6.6

GSK Pakistan strives to be valued corporate citizens no matter where we do business. We have always shown strong commitment and support for public health and awareness initiatives and have championed many social causes. Our strong commitment to the community is reflected in various charitable projects in Pakistan where GSK in line with its CSR vision has partnered with NGOs like Pakistan National Forum on Women's Health (PNF), Concern for Children Trust and The Trust for Health and Medical Sciences. GSK has been a significant corporate donor to National Commission for Human Development (NCHD).

Number of Times

2 0

5 0

2003

2004

2005

2006

2007

2008

Earnings per share

Price earning ratio

GSK Pakistan has always responded in a timely manner with emergency relief during times of natural disasters in the country. GSK Pakistan is also involved in organizing year round awareness activities, medical camps, sponsorships and supporting several welfare organizations. We have onboard a global team of determined and dedicated professionals who want to make the world a better, healthier, happier place.
Sales per Employee
8 7 6
Rupees in million

The Pakistan Centre for Philanthropy (PCP) has awarded a Corporate Philanthropy Award Certificate in 2008 to GlaxoSmithKline Pakistan in recognition of its philanthropic support for social development causes in Pakistan. Human resource development Attracting and retaining the best people is critical to enhancing and sustaining any company's performance. GSK Pakistan aims to build aspirations, endeavor capabilities and provide a fulfilling, healthy environment where our employees can learn, grow and develop.

5 4 3 2 1
4.1 4.8 5.1 5.5 5.8 7.7

0
2003 2004 2005 2006 2007 2008

GSK's HR function contributes to organizational performance by aligning people and processes in line with GSK's strategic policy and mission whilst recognizing the importance of human knowledge, skills and competencies. All our Learning and Development interventions are guided by the GSK Leadership Framework which entails a set of high performance behaviors designed to facilitate improvement. It helps to improve organizational performance, builds organizational capability and also guidance for individual development. Due to our commitment to people, GSK Pakistan was recently awarded with the “Best Place to Work 2008” award by the Pakistan Society for Human Resource Management. This signifies that our employees are motivated by the opportunities provided and value the culture of trust and empowerment.

Diversity GSK is an equal opportunity employer. At GSK, our commitment to diversity includes a range of initiatives that assist our employees to work in an understanding, flexible and creative environment that promotes an open culture: • • • • Flexible working policy enables employees to maintain a positive work life balance. The Mentoring program gives employees an opportunity to learn from a more experienced colleague. The Recruitment of diverse workforce ensures that all people within society are represented. High priority is placed on the development of key talent via succession planning.

Environment, Health and Safety (EHS) Environment, Health and Safety (EHS) is a key element of corporate responsibility for GSK and holds high priority. GSK is committed to working towards designing a workplace that minimizes work-related risks to occupational health and safety. GSK Pakistan was honoured with EHS Excellence Award by Employer's Federation of Pakistan during 2008. Further, F-268 site has achieved a Certificate for completing 1 Million hours without Lost Time Injury and Illness during 2008. Low cost engineering solutions for dispensing of active materials was developed and installed at West Wharf. Baseline studies of Powder handling operations were carried out at West Wharf and F-268 to make the operation Respirator Free by 2010. Health and Safety Week was celebrated at West Wharf Site in October 2008. Business Continuity Plan desktop exercise was conducted at all GSK Sites. A training package on GMP and EHS was prepared in Urdu language and all the staff were trained during 2008. Environmental targets are monitored on a continuous basis. Environmental impacts are identified and managed through waste management.

Statement of ethics and business practices Performance with integrity is central to operating at GSK. The Board of Directors of the Company has adopted a statement of ethics and business practices. All employees are informed and aware of this and are required to observe these rules of conduct in relation to business and regulations.

29 - 30

Board of Directors meetings and attendance The Board of Directors met five times in 2008, with each member attending as follows: Name of directors Mr. M. Salman Burney Mr. Tariq Iqbal Khan Mr. Rafique Dawood Mr. Shahid Mustafa Qureshi Dr. Muzaffar Iqbal Mr. Ghulam Mustafa Aziz* Mr. Javed Ahmedjee Dr. Iffat Yazdani Meetings attended 5 2 4 5 4 2 None None

* Mr. Javed Ahmedjee was appointed as Director with effect from October 22, 2008 to fill the casual vacancy arisen by the resignation of Mr. Ghulam Mustafa Aziz from the Board. Leave of absence was granted to the Directors who could not attend some of the board meetings.

Audit Committee An Audit Committee has been in existence since May 2002. The committee consists of three members, of whom two are non-executive directors including the chairman of the committee. The terms of reference of the Committee have been determined by the Board of Directors in accordance with the guidelines provided in the Listing Regulations and advised to the Committee for compliance. The Committee held four meetings during the year. An independent Internal Audit function reporting to the Board's Audit Committee reviews risks and controls across the organization, and utilizes the services of independent audit firms for continuous reviews of internal controls and management of risks.

Management Committee The Management Committee comprises of 12 senior members who meet and discuss important business plans, issues and progress made in their functions. Significant matters to be put forth in the Board are discussed for onward approval by the Board.

Auditors The present auditors, A.F. Ferguson & Co. Chartered Accountants, retire and being eligible, offer themselves for re-appointment. The Board of Directors endorses recommendation of the Audit Committee for their re-appointment as auditors of the Company for the financial year ending December 31, 2009, at a fee to be mutually agreed.

Subsequent events No material changes or commitments affecting the financial position of the Company have occurred between the end of the financial year of the Company and the date of this report.

Making a difference to lives across the World

Value of investments of provident and gratuity funds The Company maintains retirement benefits plans for their employees. Value of investments of provident and gratuity funds based on their un-audited accounts as on December 31, 2008 (audit in progress) was as follows:

36%

2008 Rupees '000 Provident fund Gratuity fund 991,049 553,007

Investment in funds
Provident Fund

64%

Gratuity Fund

Corporate and financial reporting framework a. b. c. d. e. The financial statements, prepared by the management of the Company, present fairly its state of affairs, the result of its operations, cash flows and changes in equity. Proper books of account of the Company have been maintained. Appropriate accounting policies have been consistently applied in preparation of financial statements and accounting estimates are based on reasonable and prudent judgment. The financial statements are prepared in accordance with International Financial Reporting Standards, as applicable in Pakistan. The Company maintains a sound internal control system which gives reasonable assurance against any material misstatement or loss. The internal control system is regularly reviewed. This has been formalized by the Board's Audit Committee and is updated as and when needed. There are no significant doubts upon the Company's ability to continue as a going concern. There has been no material departure from the best practices of Corporate Governance as detailed in the listing regulations. The key operating and financial data for the six years is set out on pages 37 to 38.

f. g. h.

By order of the Board

M. Salman Burney
Karachi February 23, 2009

Chairman / Chief Executive

Javed Ahmedjee
Director

31 - 32

Chairman/Chief Executive ,s Review
It gives me immense pleasure to present the Annual Report of your Company for the financial year ended December 31, 2008. Overview of Economy & Market The last year was a challenging one which witnessed a sharp downturn in Pakistan's economy due to domestic turbulence and linkages with global economic downturn. The economy saw a substantial hike in domestic inflation, slow down in economic growth and a very substantial devaluation of the rupee against major currencies. It is gratifying to note that the new government has taken effective steps to stabilize the economy by tackling the substantial domestic deficit as well as the external deficit. Whilst this is reassuring for the future the pharmaceutical industry has been very adversely impacted by both inflationary trends as well as devaluation which eroded gross margins. The government has to date not allowed any across the board adjustment to product prices and this remains a matter of very serious concern for the future of this industry. Pharmaceutical industry in Pakistan is very competitive and challenging, with over 500 companies operating in a highly genericised market. During 2008 the pharma market grew by approximately 11%. Our company retained its leading position in terms of value, prescription, and volume shares. Out of the top fifteen products in the industry, nine are manufactured and sold by your company. Review of Operating Results As mentioned above, inflation and devaluation have had a substantially negative effect on operating margins. Your company sought to off-set these negative impacts as far as possible through sales growth and an improved product mix. I am pleased to advise that aggregate turnover for the year grew by Rs 2.8 billion (+26.3%) to Rs. 13.4 billion. Vaccines, Antibiotics, Dermatology, Analgesics, Gastro Intestinal and Cardiovascular portfolios achieved double digit growth during the year. A substantial contribution to this growth was from our polio vaccine business where we were able to obtain large tenders in competitive bidding. New products launched in recent years have also gained momentum and contributed in the growth. The export business grew by 13.0% to Rs 289.6 million. Major export markets included Afghanistan, Sri Lanka and Syria. The Consumer Healthcare business showed a strong performance during the year, achieving net sales of Rs. 233 million, an increase of Rs. 93 million (+66.3%). This reflected a restructuring of sales & distribution arrangements undertaken last year. New product launches and brand revitalizing have resulted in overall improvement in the health of the business and future prospects. The Animal Health portfolio maintained positive trend and achieved double digit sales growth to Rs 110 million.
14000 12000 10000 Rupees in million 8000 6000 4000
10088 10611 13403 2008 8867 8101 9417

Net Sales

2000 0

2003

2004

2005

2006

2007

Making a difference to lives across the World

As mentioned earlier, gross margins during the year came under serious pressure. Rising inflation and severe Rupee devaluation together with a price freeze since 2001 have significantly eroded margins which have declined from 37.2 % in 2007 to 28.8 % this year. This decline in margins is directly attributable to the following factors: • Rising raw and packaging material cost due to: - International price increase in response to an unprecedented commodity price hike, - Increase in local prices of virtually all inputs and materials due to inflation, and - Continuous weakening of Rupee against major currencies mainly USD. • Escalation of fuel, power and utilities cost. • Lower margins on tender business. Despite high inflationary pressures and rising POL prices the company managed to control its Selling, Marketing and Distribution expenses at Rs. 1,329 million i.e. an increase of Rs. 118 million or +9.8% only. Administrative expenses stood at Rs. 520 million increasing by 6.9%. Other Operating Income at Rs. 1,280 million, increased by Rs. 640 million primarily due to a gain on sale of Land in Korangi amounting to Rs. 843.5 million. Income from funds decreased to Rs. 389 million or 10.2% mainly due to reduction in surplus funds which resulted in lower interest income. This was mitigated to some extent by an increase in interest rates in the latter part of the year. The Profit after tax was Rs. 1,955 million while earnings per share for the year were recorded at Rs.11.46, higher by 17.0% as compared to last year. Excluding gain on sale of Korangi Land, the earnings per share would have been Rs.6.51, lower by 33.5% compared to corresponding year. The Company continues to use its strong cash flows to make the required levels of investments in business necessary to sustain long term growth. Capital expenditure in this year was Rs. 475 million (2007: Rs. 646 million) mainly spent on facility improvement and rationalization, up-gradation of plant and machinery and purchase of vehicles.
Profit after tax Capital Expenditure

2000 1800 1600 1400 1200 1000 800 600 400
247

700 600 500 400 300 200

Rupees in million

Rupees in million

1471

1814

1665

1671

1026

1955

172

265

472

646

0
2004 2005 2006 2007 2008 2003 2004 2005 2006 2007 2008

475

200

100 0

2003

The Cash position as on December 31, 2008 was Rs. 2,725 million reflecting a decline of Rs.1,528 million mainly due to enhanced final dividend payment for 2007 and an interim dividend for 2008. Working capital also increased mainly on account of inventory and receivables on Government tenders. The company has maintained a history of good return & payout to shareholders. The Board of Directors in its meeting held on February 23, 2009 proposed a final cash dividend of Rs. 7.00 (2007: Rs 7.50) per share. This is in addition to an interim cash dividend for Rs. 2.50 declared for half year 2008. The year saw unprecedented volatility and a decline in the stock market. The overall stock market capitalization decreased during the year by 57%, which also impacted your company's market capitalization. As of December 31, 2008 this stood at Rs.12.96 billion.

33 - 34

Future Outlook and Challenges The company is committed to respond to the challenges of the operating environment and continues to seek opportunities to drive growth in our existing portfolio. The company has a good pipeline of innovative new medicines together with the sustained availability of existing products, many of which are the most cost effective treatment options available to doctors and patients. The company's commitment towards improving healthcare in Pakistan particularly in the area of preventive healthcare & vaccines remains integral and explicit. GSK is the world's leading developer and manufacturer of vaccines, and hopes to partner with the government in protecting people against preventable diseases. The pharmaceutical industry is now facing a very serious challenge to manage business operations in a highly inflationary environment without general price relief. The rising trend in local and imported raw and packaging material costs, coupled with the continuous weakening of Rupee and soaring domestic inflation have put tremendous pressure on the profitability of your company despite all initiatives taken for cost containment and improvement in manufacturing / commercial operations. This is clearly unsustainable for any business and a general price increase across the board is now inevitable for business survival. The criticality of the issue has been highlighted to the government and we urge the government to take immediate steps to address the issue. In the last quarter of the year, price increases on certain loss making products have been granted, but this has a small impact and the prices of the majority of pharmaceutical products remain unchanged since 2001. There is an urgent need for the government to address this issue. The pharmaceutical industry in Pakistan has great potential for growth. However, its sustained success depends on a regulatory environment which is able to balance the interests of this research based industry, with the need for affordable healthcare. Intellectual Property The protection of intellectual capital and property is important to ensure returns for the very substantive costs of researching and commercializing new treatments. In the recent past Pakistan has made some progress in this regard, by updating its IPR laws to the levels required by global conventions. At a practical level however, much more needs to be done to discourage both piracy and counterfeiting. Effective implementation will protect consumers, as well as industry and also lead to a quality and research-oriented culture which is vital for the future progress of this industry. Acknowledgment I particularly want to thank our talented and dedicated team, who responded in a positive and constructive way to the many challenges we have faced during the year. They are our best assets and represent the brand leadership that GSK stands for. At GlaxoSmithKline, best people do their best work and produce phenomenal results. On behalf of the Board I would like to acknowledge our team's efforts, as well as the support of our customers and shareholders, and we look forward to meeting their expectations to the best of our abilities. Throughout the year, industrial relations remained cordial and GSK is committed to maintain a good working environment where employees contribute their best as a team reflecting a common spirit.

M. Salman Burney
Karachi. February 23, 2009

Chairman / Chief Executive

Making a difference to lives across the World

Financial Performance at a Glance
2008 2007 Rs in million 10,610.9 3,952.1 2,670.1 2,658.5 988.0 1,670.5 1,280.0 7.5 341.3 1,706.7

Net Sales Gross Profit Operating Profit Profit before Taxation Taxation Profit after Taxation Dividend - cash* - per share* - Rs. - issue of bonus shares Paid-up Capital

13,403.2 3,855.6 3,077.9 3,001.0 1,045.8 1,955.2 1,621.4 9.5 1,706.7

* Includes final dividend @ Rs. 7.0 per share amounting to Rs. 1,194.7 million proposed by the Board of Directors subsequent to the year end.

Gross and Operating Profit
4000 3500 3000 2500 2000 1500 1000
3152 1557 3506 2148 3846 2708 3867 2651 3952 2670 3856 3078

Payout to Shareholders
1750 1500 1250 1000 750 500
121 146 1092 1280 1621

Rupees. in million
510 612 874 218 273 341 0

Rupees. in million

500 0

250 0

2003

2004

2005

2006

2007

2008

2003

2004

2005

2006

2007

2008

Gross Profit

Operating Profit

Cash Dividend

Bonus Shares

35 - 36

Statement of Value Added
The statement below shows the amount of revenue generated by the Company during the year and the way this revenue has been distributed:
2008 Rupees ‘000 Revenue Generated Total revenue Revenue Distributed Bought-in-materials and Services Selling, Marketing and Distribution Expenses Administrative Expenses and Financial Charges Income tax Workers' funds and Central research fund Sales tax To Government Cash dividend* Issue of bonus shares To Shareholders 9,547,619 1,328,925 597,075 1,045,853 208,355 20,007 1,274,215 1,621,383 1,621,383 64.9 9.1 4.1 7.1 1.4 0.1 8.6 11.0 11.0 6,658,753 1,210,818 498,271 988,018 223,912 12,957 1,224,887 1,280,039 341,344 1,621,383 59.1 10.8 4.4 8.8 2.0 0.1 10.9 11.4 3.0 14.4 14,703,021 100.0 11,263,254 100.0 % 2007 Rupees ‘000 %

Retained in the Business

333,804 14,703,021

2.3 100.0

49,142 11,263,254

0.4 100.0

* Includes final dividend @ Rs. 7.0 per share amounting to Rs. 1,194.7 million proposed by the Board of Directors subsequent to the year end.

2.3% 11.0%

Revenue and its Disposal
8.6% 4.1%

64.9%

9.1%

Bought-in-materials & Services Selling Marketing and Distribution Expenses Administrative Expenses and Financial Charges Government Shareholders Retained in the Business

64.9% 9.1% 4.1% 8.6% 11.0% 2.3%

Key Operating
2003 2004 2005 2006 Rupees in million
1,503 192 47 5,252 6,994 1,774 96 43 5,827 7,740

2007

2008

Assets employed Fixed assets - property, plant and equipment Investments - available for sale Long-term loans and deposits Net current assets 1,461 63 3,316 4,840 Less: Non-current liabilities Staff retirement benefits - Staff gratuity Deferred taxation Net assets employed Financed by Issued, subscribed and paid-up capital Reserves Surplus on revaluation of fixed assets Shareholders' equity Turnover and profit Net sales Gross profit Operating profit Profit before taxation Taxation Profit after taxation Dividend including bonus shares* Sales per employee (Rs. in '000) 8,101 3,152 1,557 1,548 522 1,026 631 4,112 8,867 3,506 2,148 2,119 648 1,471 757 4,765 9,417 3,846 2,708 2,695 881 1,814 1,092 5,087 10,088 3,867 2,651 2,632 967 1,665 1,365 5,549 10,611 3,952 2,670 2,659 988 1,671 1621 5,850 13,403 3,856 3,078 3,001 1,046 1,955 1,621 7,659 728 3,854 3 4,585 874 4,674 5,548 1,092 5,646 6,738 1,365 6,172 7,537 1707 6,411 8,118 1707 6,648 8,355 198 57 255 4,585 149 76 225 5,548 159 97 256 6,738 66 137 203 7,537 23 262 285 8,118 21 312 333 8,355 1,434 407 55 3,877 5,773 2,237 347 61 5,758 8,403 2,415 172 69 6,032 8,688

Retun on Equity

30 25 Number of Days 20 15 10 Percentage

18 16 14 12 10 8 6 4 2 0

Debtors Turnover & Inventory Turnover

70 60 50 40 30 20 Number of Days

26.5

26.9

22.1

20.6

23.4

22.4

15.4

5 0

3.7

2.2

1.9

2.7

3.5

51

50

54

63

69

56

10 0

2003

2004

2005

2006

2007

2008

2003

2004

2005

2006

2007

2008

Debtors Turnover
* Note: Dividend includes final dividend amounting to Rs. 1,195 million proposed by the Board of Directors subsequent to the year-end.

Inventory Turnover

37 - 38

& Financial Data
2003 2004 2005 2006 2007 2008
Ratios Earnings per share - Rs. Cash dividend per share * - Rs. Bonus shares (%) Price earning ratio (times) Market value per share - year end - Rs. Market value per share - high - Rs. Market value per share - low - Rs. Break-up value per share-without surplus on revaluation-Rs. Break-up value per share-with surplus on revaluation-Rs. Market price to Book value with surplus (times) Market capitalization (Rs in million) Dividend payout (%) Dividend yield (%) Return on equity (%) Total assets turnover (times) Fixed assets turnover (times) Debtors turnover (days) Inventory turnover (days) Current ratio Acid test ratio Gross profit margin (%) Net margin (%) 6.0 7.0 20 31.9 191.1 244.8 77.0 62.9 63.0 3.0 13,916 61.5 4.7 22.4 1.4 5.6 3.7 51 4.2 2.6 38.9 12.7 8.6 7.0 20 20.9 181.0 236.5 176.0 63.5 63.5 2.9 15,817 51.5 5.0 26.5 1.3 6.2 2.2 50 4.6 3.1 39.5 16.6 10.6 8.0 25 17.5 186.3 240.3 162.1 61.7 61.7 3.0 20,350 60.2 5.6 26.9 1.1 6.3 1.9 54 5.1 3.6 40.8 19.3 9.8 8.0 25 16.2 157.9 215.8 148.0 55.2 55.2 2.9 21,559 82.0 6.6 22.1 1.1 5.7 2.7 63 4.4 3.1 38.3 16.5 9.8 7.5 25 19.6 192.4 210.0 151.1 47.6 47.6 4.0 32,837 97.0 5.2 20.6 1.0 4.7 3.5 69 4.3 3.0 37.2 15.7 11.5 9.5 6.6 75.9 200.0 75.9 48.9 48.9 1.6 12,961 83.0 12.5 23.4 1.3 5.5 15.4 56 4.1 2.3 28.8 14.6

* Includes final dividend @ Rs. 7.0 per share amounting to Rs. 1,194.7 million proposed by the Board of Directors subsequent to the year end.

Assets & Liabilities

7000 6000 5000 Rupees in million 4000 3000 2000

Current Ratio

6 5 4 3 2 1 Number of times

1913

333

3316

3877

5252

5827

5758

2656

6032

2415

1524

1461

1896

1434

1742

1503

1774

2645

2237

255

225

256

203

285

4.6

5.1

4.4

4.3

0

4.2

4.1

1000

0
2004 2005 2006 2007 2008

2003

2004

2005

2006

2007

2008

2003

Non-current Liabilities Net Current Assets

Non-current Assets Property, plant and equipment

Financial Statements 2008

39 - 40

Making a difference to lives across the World

Statement of Compliance with the Code of Corporate Governance
for the year ended December 31, 2008 This statement is being presented to comply with the Code of Corporate Governance contained in the listing regulations of Karachi and Lahore Stock Exchanges for the purpose of establishing a framework of good governance, whereby a listed company is managed in compliance with the best practices of corporate governance. The Company has applied the principles contained in the Code as follows: 1. The Company encourages representation of independent non-executive directors and representation of minority interests on its Board of Directors. At present, the Board includes two non-executive directors one of whom represents minority shareholders' interests. The directors have confirmed that none of them is serving as a director in more than ten listed companies including this company, except for Mr. Tariq Iqbal Khan representing NIT, who has been specifically exempted by the Securities and Exchange Commission of Pakistan for holding directorship in more than ten listed companies. All the resident directors of the Company are registered as taxpayers and none of them has defaulted in payment of any loan to a banking company, a DFI or a NBFI or, being a member of Stock Exchange, has been declared as a defaulter by that Stock Exchange. The Company has a vision/mission statement and overall corporate strategy. All policies of the Company are governed by the “Corporate Governance Charter” which has been approved by the Board. The Company has prepared a “Statement of Ethics and Business Practices” which has been signed by all the directors and employees of the Company. One casual vacancy occurred in the Board of Directors during the year ended December 31, 2008. The powers of the Board have been duly exercised and decisions on material transactions, including appointment and determination of remuneration and terms and conditions of employment of CEO and other executive directors have been taken by the Board, and significant matters are documented by a resolution passed by the Board. The meetings of the Board were presided over by the Chairman and the Board met at least once in every quarter. Written notices of the Board meetings, along with the agenda were circulated at least seven days before the meetings. The minutes of the meetings were appropriately recorded and circulated. The Board has approved appointments of CFO and Head of Internal Audit, including their remuneration and terms and conditions of employment, as determined by the CEO.

2.

3.

4. 5. 6. 7.

8.

9.

10. All the directors on the Board are fully conversant with their duties and responsibilities as directors of corporate bodies. The Board had previously arranged an orientation course of the Code of Corporate Governance for its directors to apprise them of their role and responsibilities. Further, the Booklet on Code of Corporate Governance as published by the Securities and Exchange Commission of Pakistan has been circulated amongst the directors on the Board. 11. The directors' report for this year has been prepared in compliance with the requirements of the Code and fully describes the salient matters required to be disclosed.

41 - 42

12. The financial statements of the Company were duly endorsed by the CEO and CFO before the approval of the Board. 13. The directors, CEO and executives do not hold any interest in the shares of the Company other than that disclosed in the pattern of shareholding. 14. The Company has complied with all the material corporate and financial reporting requirements of the Code. 15. The Audit Committee has been in existence since May 2002. It comprises three members, of whom two are non-executive directors including the chairman of the committee. 16. 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 and final results of the Company as required by the Code. The terms of reference of the committee have been formed and advised to the committee for compliance. 18. The statutory auditors of the Company have confirmed that they have been given satisfactory rating under the Quality Control Review Program of the Institute of Chartered Accountants of Pakistan, that they or any of the partners of the firm, their spouses and minor children do not hold shares of the Company and that the firm and all its partners are in compliance with International Federation of Accountants (IFAC) guidelines on code of ethics as adopted by the Institute of Chartered Accountants of Pakistan. 19. The statutory auditors or the persons associated with them have not been appointed to provide other services except in accordance with the listing regulations and the auditors have confirmed that they have observed IFAC guidelines in this regard. 20. We confirm all other material principles contained in the Code have been complied with.

Karachi February 23, 2009

M. Salman Burney Chairman / Chief Executive

Review report to the members on Statement of Compliance with best practices of Code of Corporate Governance
We have reviewed the Statement of Compliance with the Best Practices contained in the Code of Corporate Governance prepared by the Board of Directors of GlaxoSmithKline Pakistan Limited to comply with the Listing Regulation No. 37 of the Karachi Stock Exchange and chapter XIII of Lahore Stock Exchange where the company is listed. The responsibility for compliance with the Code of Corporate Governance is that of the Board of Directors of the company. Our responsibility is to review, to the extent where such compliance can be objectively verified whether the Statement of Compliance reflects the status of the company ,s compliance with the provisions of the Code of Corporate Governance and report if it does not. A review is limited primarily to inquiries of the company personnel and review of various documents prepared by the company to comply with the Code. As part of our audit of financial statements we are required to obtain an understanding of the accounting and internal control systems sufficient to plan the audit and develop an effective audit approach. We have not carried out any special review of the internal control system to enable us to express an opinion as to whether the Board’s statement on internal controls covers all controls and the effectiveness of such internal controls. Based on our review, nothing has come to our attention which causes us to believe that the Statement of Compliance does not appropriately reflect the company ,s compliance, in all material respects, with the best practices contained in the Code of Corporate Governance as applicable to the company for the year ended December 31, 2008.

A. F. Ferguson & Co. Chartered Accountants Karachi February 23, 2009

43 - 44

Auditors’ Report to the Members
We have audited the annexed balance sheet of GlaxoSmithKline Pakistan Limited as at December 31, 2008 and the related profit and loss account, cash flow statement and statement of changes in equity together with the notes forming part thereof, for the year then ended and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit. It is the responsibility of the company’s management to establish and maintain a system of internal control, and prepare and present the above said statements in conformity with the approved accounting standards and the requirements of the Companies Ordinance, 1984. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of any material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the above said statements. An audit also includes assessing the accounting policies and significant estimates made by management, as well as, evaluating the overall presentation of the above said statements. We believe that our audit provides a reasonable basis for our opinion and, after due verification, we report that: (a) in our opinion, proper books of account have been kept by the company as required by the Companies Ordinance, 1984; (b) in our opinion: i) the balance sheet and profit and loss account together with the notes thereon have been drawn up in conformity with the Companies Ordinance, 1984, and are in agreement with the books of account and are further in accordance with accounting policies consistently applied;

ii) the expenditure incurred during the year was for the purpose of the company’s business; and iii) the business conducted, investments made and the expenditure incurred during the year were in accordance with the objects of the company; (c) in our opinion and to the best of our information and according to the explanations given to us, the balance sheet, profit and loss account, cash flow statement and statement of changes in equity together with the notes forming part thereof conform with approved accounting standards as applicable in Pakistan, and , give the information required by the Companies Ordinance, 1984, in the manner so required and respectively give a true and fair view of the state of the company’s affairs as at December 31, 2008 and of the profit, its cash flows and changes in equity for the year then ended; and (d) in our opinion Zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980), was deducted by the company and deposited in the Central Zakat Fund established under section 7 of that Ordinance.

A.F. Ferguson & Co.
Chartered Accountants Karachi February 23, 2009

Balance Sheet
as at December 31, 2008 2008 Note SHARE CAPITAL AND RESERVES Share capital Reserves 3 4 1,706,718 6,648,173 8,354,891 1,706,718 6,410,923 8,117,641 Rupees ‘000 2007

NON-CURRENT LIABILITIES Staff retirement benefit - staff gratuity Deferred taxation 5 6 20,802 312,270 333,072 23,192 262,458 285,650

CURRENT LIABILITIES Trade and other payables Taxation 7 1,867,275 70,387 1,937,662 1,698,374 62,844 1,761,218

CONTINGENCIES AND COMMITMENTS

8

10,625,625

10,164,509

M. Salman Burney
Chairman / Chief Executive

Javed Ahmedjee
Chief Financial Officer

45 - 46

2008 Note NON-CURRENT ASSETS Fixed Assets - property, plant and equipment Long-term loans to employees Long-term deposits Investments - available-for-sale 11 9 10 2,415,255 61,666 6,788 171,855 Rupees ‘000

2007

2,236,720 53,755 6,808 346,824

CURRENT ASSETS Stores and spares Stock-in-trade Trade debts Loans and advances Trade deposits and prepayments Accrued return Refunds due from government Other receivables Investments - available-for-sale Cash and bank balances

12 13 14 15 16 17 18 11 19

116,084 3,494,054 1,016,968 119,242 93,377 80,596 15,468 153,864 155,511 2,724,897 7,970,061 10,625,625

107,199 2,277,175 116,847 81,039 84,348 109,851 14,898 378,071 98,229 4,252,745 7,520,402 10,164,509

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

M. Salman Burney
Chairman / Chief Executive

Javed Ahmedjee
Chief Financial Officer

Profit and Loss Account
for the year ended December 31, 2008 2008 Note Net sales Cost of sales Gross profit Selling, marketing and distribution expenses Administrative expenses Other operating expenses Other operating income Operating profit Financial charges Profit before taxation Taxation Profit after taxation 27 26 22 23 24 25 20 21 Rupees ‘000 13,403,224 (9,547,619) 3,855,605 (1,328,925) (520,216) (208,355) 1,279,790 3,077,899 (76,859) 3,001,040 (1,045,853) 1,955,187 10,610,882 (6,658,753) 3,952,129 (1,210,818) (486,721) (223,912) 639,415 2,670,093 (11,550) 2,658,543 (988,018) 1,670,525 2007

Earnings per share

28

Rs. 11.46

Rs. 9.79

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

M. Salman Burney
Chairman / Chief Executive

Javed Ahmedjee
Chief Financial Officer

47 - 48

Cash Flow Statement
for the year ended December 31, 2008 2008 Note CASH FLOWS FROM OPERATING ACTIVITIES Cash generated from operations Staff gratuity paid Taxes paid Increase in long-term loans to employees Decrease in long-term deposits Net cash (used in) / generated from operating activities 29 633,333 (44,827) (982,457) (7,911) 20 (401,842) 2,512,355 (91,020) (906,476) (17,969) 1,496,890 Rupees ‘000 2007

CASH FLOWS FROM INVESTING ACTIVITIES Fixed capital expenditure Proceeds from disposal of operating assets Investments purchased Investments encashed Return received on investments Net cash generated from / (used in) investing activities (475,032) 907,993 100,000 39,200 572,161 (646,101) 36,385 (346,394) 100,000 32,147 (823,963)

CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid Net decrease in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year 19 (1,698,167) (1,527,848) 4,252,745 2,724,897 (1,086,652) (413,725) 4,666,470 4,252,745

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

M. Salman Burney
Chairman / Chief Executive

Javed Ahmedjee
Chief Financial Officer

Statement of Changes in Equity
for the year ended December 31, 2008
SHARE CAPITAL CAPITAL RESERVE Share premium Reserve For issue arising on of bonus amalgamation* shares Fair value reserve General reserve Unappropriated profit Total Rupees ‘000 Balance at January 1, 2007 Final dividend for the year ended December 31, 2006 @ Rs. 8 per share Transfer to reserve for issue of bonus shares Issue of 1 bonus share for every 4 shares held Profit after taxation for the year ended December 31, 2007 Surplus on revaluation of available-for-sale investments Balance at December 31, 2007 Final dividend for the year ended December 31, 2007 @ Rs 7.50 per share Interim dividend for the year ended December 31, 2008 @ Rs 2.50 per share Profit after taxation for the year ended December 31, 2008 Deficit on revaluation of available-for-sale investments Balance at December 31, 2008 1,706,718 1,409 375,572 (11,218) (11,218) 8,354,891 (426,680) (426,680) (1,280,039) (1,280,039) (1,092,300) (1,092,300) 1,365,374 1,409 375,572 (3,648) 3,999,970 1,798,241 7,536,918

-

-

-

341,344

-

-

(341,344)

-

341,344

-

-

(341,344)

-

-

-

-

-

-

-

-

-

-

1,670,525

1,670,525

1,706,718

1,409

375,572

-

2,498

-

-

2,498 8,117,641

(1,150) 3,999,970 2,035,122

-

-

-

-

-

-

1,955,187

1,955,187

(12,368) 3,999,970 2,283,590

* This includes exchange loss on issue of shares amounting to Rs. 9 thousand.

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

M. Salman Burney
Chairman / Chief Executive

Javed Ahmedjee
Chief Financial Officer

49 - 50

Notes to and forming part of the Financial Statements
For the year ended December 31, 2008 1. THE COMPANY AND ITS OPERATIONS The company is incorporated in Pakistan as a limited liability company and is listed on the Karachi and Lahore Stock Exchanges. It is engaged in manufacturing and marketing of research based ethical specialities, other pharmaceutical, animal health and consumer products. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these financial statements are set out below. 2.1 Basis of preparation Statement of compliance These financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board as are notified under the Companies Ordinance, 1984, provisions of and directives issued under the Companies Ordinance, 1984. In case requirements differ, the provisions or directives of the Companies Ordinance, 1984 shall prevail. Critical accounting estimates and judgements The preparation of financial statements in conformity with approved accounting standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the company's accounting policies. The matters involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant which have been disclosed in the respective notes to the financial statements are: i) ii) iii) iv) v) Provision for retirement benefits Impairment of property, plant and equipment Provision for obsolete and slow moving stock Provision for doubtful receivables Taxation

Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. There have been no critical judgments made by the company's management in applying the accounting policies that would have effect on the amounts recognised in the financial statements.

Notes to and forming part of the Financial Statements

Recent accounting developments Interpretations effective in 2008 IFRIC 11, 'IFRS 2 - Group and treasury share transactions', (effective for annual periods beginning on or after March 1, 2007) provides guidance on how share-based transactions involving group companies are accounted for in the stand-alone financial statements of the subsidiary companies. The interpretation is not expected to have any impact on the company's financial statements. IFRIC 14, 'IAS 19 - The limit on a defined benefit asset, minimum funding requirements and their interaction' is mandatory for the company's accounting periods beginning on or after January 1, 2008. The interpretation provides guidance on assessing the limit in IAS 19 on the amount of the surplus that can be recognised as an asset. It also explains how the retirement benefit asset or liability may be affected by a statutory or contractual minimum funding requirement. This interpretation does not have any impact on the company's financial statements, as the company has a deficit in funded gratuity scheme and is not subject to any minimum funding requirements. Standards and amendments to the published approved accounting standards that are relevant but not yet effective Following accounting standards, amendments and interpretations to approved accounting standards have been published that are mandatory for company's accounting periods beginning on or after the dates mentioned below: IFRS 7, 'Financial instruments: Disclosures', introduces new disclosures relating to financial instruments. The standard shall be applicable on accounting periods beginning on or after July 1, 2008. Adoption of the standard will only impact the format and extent of disclosures presented in the financial statements. IFRS 8, 'Operating segments' replaces IAS 14 and requires a 'management approach', under which segment information is presented on the same basis as that used for internal reporting purposes. The new standard will be effective from January 1, 2009. The management is reviewing the implications on the company's financial statements' presentation. IAS 1, 'Presentation of financial statements', issued in September 2007 revises the existing IAS 1 and requires apart from changing the names of certain components of financial statements, presentation of transactions with owners in the statement of changes in equity and with non-owners in the comprehensive income statement. The revised standard will be effective from January 1, 2009 and it will impact mainly the presentation of the financial statements. 2.2 Overall valuation policy These financial statements have been prepared under the historical cost convention except as otherwise disclosed in the accounting policies below.

51 - 52

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 actuarial valuations of the schemes were carried out as at December 31, 2008 using the Projected Unit Credit Method. Cumulative net unrecognised actuarial gains and losses at the beginning of the year which exceed 10% of the greater of the present value of the obligations and the fair value of respective fund’s assets are amortised over the average remaining working life of the employees. Retirement benefits are payable to employees on completion of prescribed qualifying period of service under gratuity 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 period in 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 past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. 2.6 Taxation

2.6.1 Current The charge for current taxation is based on taxable income at the current rates of taxation after taking into account tax credits and rebates available, if any, and taxes paid under the final tax regime. 2.6.2 Deferred Deferred tax is accounted for using the balance sheet liability method on all temporary differences arising between tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax liability is generally recognised for all taxable temporary differences and deferred tax asset is recognised to the extent that it is probable that taxable profits will be available against which the deductible temporary differences, unused tax losses and tax credits can be utilised. Deferred tax is charged or credited in the profit and loss account except for deferred tax arising on revaluation of investments which is charged or credited directly to equity.

Notes to and forming part of the Financial Statements
2.7 Fixed assets - property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation / amortisation and impairment losses except freehold land and capital work-in-progress which are stated at cost. Depreciation is charged using the straight line method whereby the cost of an asset less estimated residual value, if significant, is written off over its estimated useful life. Depreciation / amortisation on assets is charged at the normal rates from the month of addition to the month of disposal. Cost of leasehold land is amortised equally over the period of the lease. The assets' residual values and useful lives are reviewed and adjusted, if appropriate, at each balance sheet date. Maintenance and normal repairs are charged to income as and when incurred. Also assets costing up to Rs. 25 thousand are charged to income. Major renewals and improvements are capitalised and the assets so replaced, if any, are retired. Gains and losses on disposal of fixed assets are included in income currently. 2.8 Impairment The carrying values of assets are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets or cash-generating units are written down to their recoverable 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 for liquidity or changes in the interest rates, are classified as available-for-sale. Available-for-sale investments are initially recognised at fair value plus transaction cost and subsequently recognised at fair value. Gains and losses arising from changes in fair value are recognised in equity under fair value reserve. 2.10 Stores and spares These are valued at lower of cost using moving average method and estimated recoverable amount. Items in transit are valued at cost comprising invoice value plus other charges incurred thereon. Provision is made for items which are obsolete and slow moving. 2.11 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.

53 - 54

Cost of raw and packing materials comprise of purchase price including directly related expenses less trade discounts. Cost of work-in-process and finished goods include cost of raw and packing materials, direct labour and related production overheads. Net realisable value signifies the estimated selling price in the ordinary course of business less cost of completion and 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 cash flow statement, cash and cash equivalents comprise of cash and cheques in hand and in transit, balances with banks on current and deposit accounts and running finance under mark-up arrangements. 2.14 Foreign currency translation Foreign currency transactions are recorded into Pak Rupee using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities in foreign currency are translated into Pak Rupee at the rates of exchange prevailing at the balance sheet date. Exchange gains and losses are included in income currently. The financial statements are presented in Pak Rupee, which is the company's functional and presentation currency. 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 given or received respectively. These are subsequently measured at fair value, amortised cost or cost as the case may be. 2.17 Dividend Dividend is recognised as a liability in the period in which it is declared.

Notes to and forming part of the Financial Statements
2008 3. SHARE CAPITAL Authorised share capital 250,000,000 Ordinary shares of Rs. 10 each 2,500,000 2,500,000 Rupees ‘000 2007

Issued, subscribed and paid-up capital Ordinary shares of Rs. 10 each 2008 5,386,825 26,951,523 138,333,496 170,671,844 2007 5,386,825 26,951,523 138,333,496 170,671,844 Shares allotted for consideration paid in cash Shares allotted for consideration other than cash Shares allotted as bonus shares 53,868 269,515 1,383,335 1,706,718 53,868 269,515 1,383,335 1,706,718

3.1 As at December 31, 2007 and 2008 Setfirst Limited, UK and its nominees held 134,453,588 shares. The ultimate parent of the company is GlaxoSmithKline plc, UK. 4. RESERVES Capital reserves Share premium Reserve arising on amalgamation Fair value reserve - note 4.1 General reserve Unappropriated profit 2008 Rupees ‘000 1,409 375,572 376,981 (12,368) 3,999,970 2,283,590 6,648,173 4.1 This represents deficit arising on revaluation of available-for-sale investments as follows: 2008 Deficit on revaluation Deferred tax 2007 (1,769) 619 (1,150) 1,409 375,572 376,981 (1,150) 3,999,970 2,035,122 6,410,923 2007

Rupees ‘000

(19,028) 6,660 (12,368)

55 - 56

2008 5. 5.1 STAFF RETIREMENT BENEFIT - staff gratuity Movement in liability Balance at January 1 Charge for the year - note 5.4 Payments to the fund Balance at December 31 5.2 Balance sheet reconciliation as at December 31 Present value of defined benefit obligation Less: Fair value of plan assets Unrecognised actuarial loss 5.3 Movement in the present value of defined benefit obligation and fair value of plan assets 641,237 446,759 194,478 (173,676) 20,802 23,192 42,437 (44,827) 20,802 Rupees ‘000

2007

66,057 48,155 (91,020) 23,192

574,654 529,756 44,898 (21,706) 23,192

5.3.1 The movement in the present value of defined benefit obligation during the year is as follows: Balance at January 1 Current service cost Interest cost Prior years' service cost Actuarial loss Benefits paid Balance at December 31 5.3.2 The movement in the fair value of plan assets during the year is as follows: Balance at January 1 Expected return on plan assets Actuarial (loss) / gain Employer's contributions Benefits paid Balance at December 31 5.4 Charge for the year Current service cost Interest cost Expected return on assets Recognition of prior years' service cost 37,842 57,511 (52,916) 42,437 34,596 48,528 (37,473) 2,504 48,155 529,756 52,916 (128,538) 44,827 (52,202) 446,759 372,849 37,473 47,104 91,020 (18,690) 529,756 574,654 37,842 57,511 23,432 (52,202) 641,237 482,634 34,596 48,528 2,504 25,082 (18,690) 574,654

Notes to and forming part of the Financial Statements
2008 Rupees ‘000 5.5 Actual (deficit) / return on plan assets 5.6 Principal actuarial assumptions Expected return on plan assets (% per annum) Expected rate of increase in salaries (% per annum) Discount factor used (% per annum) Retirement age (years) 15 15 15 60 10 10 10 60 (75,622) 84,577 2007

As per actuarial recommendation, the expected return on plan assets was determined by considering the expected risk adjusted returns available on the assets underlying the current investment policy. 2008 % 27.44 67.71 4.85 100.00 2007 % 48.17 29.78 22.05 100.00

5.7 Plan assets Plan assets are comprised of the following: Equity and Mutual Funds Bonds Others

5.8 For the year ending December 31, 2009 expected contribution to funded gratuity schemes is Rs. 78.48 million. 2008
446,759 (641,237) (194,478)

5.9 Comparison for five years
Fair value of plan assets Present value of defined benefit obligation Deficit

2007
529,756 (574,654) (44,898)

2006
Rupees ‘000 372,849 (482,634) (109,785)

2005
240,920 (428,947) (188,027)

2004
218,087 (373,435) (155,348)

Experience loss /(gain) on plan liabilities Experience loss /(gain) on plan assets

23,432 128,538

25,082 (47,104)

23,080 (8,910)

11,884 (11,846)

(20,026) (6,932)

57 - 58

2008 6. DEFERRED TAXATION Credit balance arising in respect of: Accelerated tax depreciation allowances 344,717 Rupees ‘000

2007

289,326

Debit balances arising in respect of: Provision for staff gratuity Provision for doubtful debts Provision for slow moving and obsolete stock Provision for slow moving and obsolete stores and spares Provision for doubtful refunds due from government Deficit on revaluation of investments 6,347 1,405 6,455 5,945 5,635 6,660 32,447 312,270 7. TRADE AND OTHER PAYABLES Creditors Bills payable Associated companies Others 403,213 61,643 858,467 146,693 142,256 6,597 7,871 68,052 30,315 33,409 9,462 14,824 1,867,275 7.1 212,689 76,212 1,006,798 122,777 60,909 15,257 2,533 7,801 54,256 26,854 24,857 14,586 1,698,374 84,473 72,845 7,077 886 6,987 5,664 5,635 619 26,868 262,458

Accrued liabilities Royalty and technical fee payable - note 7.1 Advances from customers Contractors' earnest / retention money Taxes deducted at source and payable to statutory authorities Workers' Profits Participation Fund - note 18.2 Workers' Welfare Fund Central Research Fund Unclaimed dividend Payable to Provident Fund Others

This includes balance due to Glaxo Group Limited, UK, an associated company amounting to Rs. 116.08 million (2007: Rs. 96.6 million).

Notes to and forming part of the Financial Statements

8.

CONTINGENCIES AND COMMITMENTS

8.1 Contingencies a) Claims against company not acknowledged as debt amounted to Rs. 306.48 million (2007: Rs. 289.03 million). Taxation In finalising the company's assessments for the years 1999 - 2000 through 2002 - 2003 (accounting years ended December 31, 1998 through 2001) the Deputy Commissioner of Income Tax (DCIT) made additions to income raising tax demands of Rs 74.85 million. Such additions were made on the contention that the company had allegedly paid excessive amounts for importing raw materials. Upon company's appeals, the Commissioner of Income Tax (Appeals) (CITA) had maintained the addition to income for assessment years 1999 - 2000 and 2000 - 2001 (accounting years ended December 31, 1998 and 1999) while the addition made in assessment year 2001 - 2002 (accounting year ended December 31, 2000) was deleted. The company and the department had filed respective appeals with the Income Tax Appellate Tribunal (ITAT). During the year ITAT has set aside the additions to income for assessment years 1998 - 2000 through 2002 - 2003 and remanded all additions to the Assessing Officer for fresh consideration. In finalising the assessment of former Smith Kline & French of Pakistan Limited for the assessment year 2002 - 2003 (accounting year ended December 31, 2001), the DCIT had made addition to income raising tax demands of Rs. 4.4 million. Such addition was made on the contention that the company had allegedly paid excessive amount for importing raw materials. Upon company's appeal, the CITA had maintained the addition to income against which the company had filed an appeal with the ITAT. During the year ITAT has set aside the assessment order for denovo consideration by the Assessing Officer. 8.2 Commitments Commitments for capital expenditure outstanding as at December 31, 2008 amounted to Rs. 103.31 million (December 31, 2007: Rs. 69.51 million).

b)

Note 9. FIXED ASSETS - property, plant and equipment Operating assets Capital work-in-progress 9.1 9.4

2008 Rupees ‘000 2,242,144 173,111 2,415,255

2007 1,959,774 276,946 2,236,720

59 - 60

9.1 Operating assets
Cost as at January 1, 2008 Additions / (disposals) / (write offs)* Cost as at Accumulated Depreciation / December 31, depreciation / Amortisation 2008 amortisation for the year / as at (on disposals) / January 1, (on write offs)* 2008 Accumulated depreciation / amortisation as at December 31, 2008 Impairment Net Book value Rate of loss as at as at depreciation December 31, December 31, / 2008 2008 amortisation %

Rupees ‘000 Freehold land 174 174 174 -

Leasehold land

52,937

(25,775)

27,162

14,169

1,653 (7,514)

8,308

-

18,854

2.5 to 10

Buildings on freehold land

70,747

531 (2,423)

68,855

30,328

946 (853)

30,421

18,042

20,392

2.5

Buildings on leasehold land

733,214

20,201 (15,098) *

738,317

172,448

16,672 (4,002) *

185,118

23,645

529,554

2.5

Plant and machinery

2,019,515

356,241 2,272,134 (66,629) (36,993) *

951,171

113,412 (52,232) (29,691) *

982,660

34,052

1,255,422

5 to 10

Furniture and fixtures

108,698

15,323 (729) (5,639) *

117,653

65,492

6,615 (729) (5,406) *

65,972

102

51,579

10

Vehicles

242,086

117,177 (51,583)

307,680

105,747

43,840 (33,997)

115,590

-

192,090

25

Office equipments

431,653

69,394 (1,575) (19,533) *

479,939

278,175

47,903 (1,575) (18,643) *

305,860

-

174,079

10 to33.33

December 31, 2008

3,659,024

578,867 4,011,914 (148,714) (77,263) *

1,617,530

231,041 1,693,929 (96,900) (57,742) *

75,841

2,242,144

December 31, 2007

2,955,016

788,892 (84,884)

3,659,024

1,507,579

172,362 1,617,530 (62,411)

81,720

1,959,774

Notes to and forming part of the Financial Statements

9.2 Reconciliation of opening and closing Net Book Value (NBV)
Cost Accumulated depreciation / amortisation Impairment loss NBV Cost of additions during the year (Charge) / NBV as at Cost less Depreciation / Reversal of December 31, accumulated Amortisation impairment loss / 2008 depreciation for on disposals** / of disposals / the year on write offs * write offs * during the year

As at January 1, 2008

Rupees ‘000 Freehold land 174 174 -

-

-

-

174

Leasehold land

52,937

(14,169)

-

38,768

-

(18,261)

(1,653)

-

18,854

Buildings on freehold land

70,747

(30,328)

-

40,419

531

(1,570)

(946)

(19,612) 1,570 **

20,392

Buildings on leasehold land

733,214

(172,448)

(27,156)

533,610

20,201

(11,096) * (16,672)

633 2,878 *

529,554

Plant and machinery

2,019,515

(951,171)

(54,148)

1,014,196

356,241

(14,397) (113,412) (7,302) *

4,298 10,630 ** 5,168 *

1,255,422

Furniture and fixtures

108,698

(65,492)

(180)

43,026

15,323

(233) * (17,586)

(6,615)

11 67 * -

51,579

Vehicles

242,086

(105,747)

-

136,339

117,177

(43,840)

192,090

Office equipments

431,653

(278,175)

(236)

153,242

69,394

(47,903) (890) *

129 107 *

174,079

December 31, 2008

3,659,024 (1,617,530)

(81,720)

1,959,774

578,867

(51,814) (231,041) (19,521) *

(14,541) 12,200 ** 8,220 *

2,242,144

61 - 62

9.3 Detail of operating assets sold The details of operating assets sold, having net book value in excess of Rs. 50,000 each are as follows:
Description Cost Accumulated depreciation Book value Sale proceeds Mode of disposal Particulars of purchaser

Rupees ‘000 Leasehold land 25,775 7,514 18,261 879,304 Negotiation M/s. Getz Pharma (Private) Limited 29-30 / 27, Korangi Industrial Area Karachi M/s. Atco Laboratories Limited, B-18, SITE, Karachi - do - do Ms. Talat Naseer - Ex - Director Mr. Mushahid Raza - Ex - Executive Mr. Yahya Zakaria - Executive Mr. Abid Ali - Ex - Executive Ms. Erum Shakir Rahim - Executive Mr. Qaiser Jamal - Ex - Executive Mr. Amjad Aqeel - Executive Mr. Ghulam Mustafa Aziz - Ex - Director Mr. Tariq Iqbal - Executive Dr. Khawar Saeed - Executive Mr. Nasir Ali Khan - Executive Mr. Ahmed Jamal Qudsi - Executive Mr. Adil Aziz - Ex - Executive Mr. Imran Ayub Khan - Ex - Executive Mr. Mujeeb-ur-Rehman - Ex - Executive Mr. Kashif Saleem - Executive Mr. Salman Sabir - Ex - Executive Mr. Muhammad Ali Zahid - Executive Mr. Shabbir Gadriwala - Executive Mr. Shahid Farooqui - Executive Mr. Anwar Ayaz Khan - Executive Mr. Abdul Rauf - Executive Mr. Azam Ali Burney - Executive Mr. Muhammad Hanif - Executive Ms. Zulekha Soorma - Ex - Executive Mr. Siraj Lawai - Ex - Executive Mr. Jamil Alvi - Ex - Executive Mr. Asim Yaseen - Ex - Executive

Plant and machinery

4,617 515 515

1,885 54 54 732 336 376 485 697 737 704 394 465 496 594 594 594 594 594 594 605 637 637 637 637 637 637 634 127 226 464 420

2,732 461 461 552 667 627 513 298 246 235 485 414 383 255 255 255 255 255 255 244 212 212 212 212 212 212 211 493 394 155 140

1,938 216 216 685 510 780 320 243 246 235 775 725 800 212 212 216 212 212 212 295 212 675 212 212 212 212 211 372 500 248 140

Tender " " Company policy " " " " " " " " " " " " " " " " " " " " " " " " " " "

Vehicles

1,284 1,003 1,003 998 995 983 939 879 879 879 849 849 849 849 849 849 849 849 849 849 849 849 849 845 620 620 619 560

Notes to and forming part of the Financial Statements
Description Cost Accumulated depreciation Book value Sale proceeds Mode of disposal Particulars of purchaser

Rupees ‘000 Vehicles 560 560 560 560 513 464 464 1,195 639 623 420 420 420 420 385 139 348 837 298 436 140 140 140 140 128 325 116 358 341 187 140 140 140 325 88 210 88 564 400 367 Company policy " " " " " " Tender " " Mr. Jalis Ahmed - Ex - Executive Mr. Tariq Alvi - Executive Mr. Aijaz Ali Naseer - Executive Mr. Muhammad Ilyas - Executive Mr. Noman Ayub - Ex - Employee Mr. Waseem Abidi - Ex - Executive Mr. Abdus Salam - Ex - Employee Mr. Wasim Mirza, A-32, Block 10/A, Gulshan-e-Iqbal, Karachi Mr. Tariq Ajmeri, 877-2, Azizabad, F.B.Area, Karachi Mr. Muhammad Abid Baig, E-7, Hamid Square, Block-3, Gulshan-e-Iqbal, Karachi - do Mr. Malik Abdul Khaliq, A-19, Block I, North Nazimabad, Karachi - do - do - do - do - do - do - do Mr. Faisal Abdul Aziz, C-30, Block-9, Gulshan-e-Iqbal, Karachi Mr. Nadeem ur Rehman, E-14, KDA Centre, View Apartment Sector, 15-A Buffer Zone, Karachi - do Mr. Farrukh Amjad Shah, R-25, Sector 5L, North Karachi, Karachi - do Mr. Ovais Gaziani, A1/149, Block 18, Gulshan-e-Iqbal, Karachi - do - do - do - do Mr. Akber Khan, Plot # 1229, Ghousia Colony, Main University Road, Karachi Mr. Raihan Hassan, L-76, Block 9, Federal B. Area, Karachi Mr. Muhammad Yameen, Shop #17, Farukh Height, Bahadurabad, Karachi

623 560 560 464 464 464 464 464 464 555 550

436 420 420 348 348 348 348 348 348 416 385

187 140 140 116 116 116 116 116 116 139 165

356 437 429 327 313 327 329 346 343 358 327

" " " " " " " " " " "

464 513 464 513 464 464 464 464 513 509 509

325 359 325 385 325 325 348 348 385 357 382

139 154 139 128 139 139 116 116 128 152 127

273 301 311 306 265 295 314 317 285 310 310

" " " " " " " " " " "

63 - 64

Description

Cost

Accumulated depreciation

Book value

Sale proceeds

Mode of disposal

Particulars of purchaser

Rupees ‘000 Vehicles 464 464 464 464 464 339 348 348 325 325 125 116 116 139 139 327 251 327 260 276 Tender " " " " Mr. Muhammad Yameen, Shop #17, Farukh Height, Bahadurabad, Karachi Mr. Muhammad Islam Khan, E-92, Block R, North Nazimabad, Karachi - do Mr. Nawaz Ahmed, 1725/5316, Tipu Sultan Road, Karachi Mr. Muhammad Khalil, L-36 Malir Homes, Near Anwar Bloch Hotel, Malir City, Karachi Mr. Zulfiqar Ali, A-5, Survey # 102, Al-Karim Society, Green Town, Karachi - do Mr. Rehan Mithani, D-87/1, Clifton 7, Karachi - do Mr. Muhammad Kashif Ghafoor, Dw-11, F.M.Dispensary Road, Opposite KPT Sports Complex, Karachi - do -

464 464 464 464 464

325 325 348 348 348

139 139 116 116 116

306 321 304 312 346

" " " " "

464

348

116

286

"

2008 9.4 Capital Work-in-progress Civil work Plant and machinery Furniture and fixtures Office equipments Advances to suppliers Rupees ‘000 33,031 124,238 937 7,081 7,824 173,111 10. LONG-TERM LOANS TO EMPLOYEES - secured, considered good

2007

95,865 170,747 841 9,493 276,946

10.1 Reconciliation of the carrying amount of loans to executives and other employees:
2008
Executives Non interest bearing Other employees interest Non bearing interest bearing Total Executives Non interest bearing

2007
Other employees interest Non bearing interest bearing Total

Rupees ‘000 Balance at January 1 Disbursements Repayments Balance at December 31 Current portion included in note 15 1,726 6,682 (4,242) 4,166 (2,966) 1,200 624 2,462 (819) 2,267 (1,312) 955 84,948 46,577 (43,191) 88,334 (28,823) 59,511 87,298 55,721 (48,252) 94,767 (33,101) 61,666 704 2,404 (1,382) 1,726 (1,187) 539 1,625 59 (1,060) 624 (333) 291 59,802 63,879 (38,733) 84,948 (32,023) 52,925 62,131 66,342 (41,175) 87,298 (33,543) 53,755

Notes to and forming part of the Financial Statements

10.2 The loans have been given in accordance with the terms of employment for purchase of house, motor car, motor cycle, computer and for the purpose of staff welfare and are repayable in 12 to 60 equal monthly installments depending upon the type of the loan. These loans are interest free except certain loans which carry interest ranging from 5% to 8% per annum (2007: 5% to 8% per annum). All loans are secured against the retirement fund balances. The maximum aggregate amount of loans due from executives at the end of any month during the year was Rs. 5.06 million (2007: Rs. 3.00 million).

2008 11. INVESTMENTS - available-for-sale Pakistan Investment Bonds - note 11.1 Less: Current portion Rupees ‘000 327,366 155,511 171,855

2007

445,053 98,229 346,824

11.1 Pakistan Investment Bonds are held by company's banker for safe custody. The yield on these bonds is 13.88% to 15.01% per annum and these bonds will mature between May 2009 to May 2011.

2008 12. STORES AND SPARES Stores and spares Less: Provision for slow moving and obsolete items Rupees ‘000 133,071 16,987 116,084 13. STOCK-IN-TRADE Raw and packing materials including in transit Rs. 542.26 million (2007: Rs. 263.01 million) Work-in-process Finished goods including in transit Rs. 84.66 million (2007: Rs. 136.01 million)

2007

123,381 16,182 107,199

1,763,245 201,425

998,302 118,537

1,659,565 3,624,235

1,250,190 2,367,029 89,854 2,277,175

Less: Provision for slow moving and obsolete items

130,181 3,494,054

65 - 66

13.1 Stock-in-trade includes Rs. 40.73 million (2007: Rs. 16.41 million) and Rs. 113.41 million (2007: Rs. 80.08 million) held with Pharmatec Pakistan (Private) Limited and Al-Ghazi Distributors (Private) Limited respectively. 13.2 The above balances include items costing Rs. 352.92 million (2007: Rs. 42.66 million) valued at net realisable value of Rs. 317.20 million (2007: Rs. 35.46 million).

2008 14. TRADE DEBTS Considered good GSK Trading Services Limited - Associated company Others Considered doubtful 5,076 1,011,892 4,604 1,021,572 Less: Provision for doubtful debts 4,604 1,016,968 Rupees ‘000

2007

9,125 107,722 2,903 119,750 2,903 116,847

14.1 The maximum aggregate amount due from related party at the end of any month during the year was Rs. 12.53 million (2007: Rs. 12.81 million). 2008 Rupees ‘000 15. LOANS AND ADVANCES - considered good Loans due from employees - note 10.1 Advances to employees Advances to suppliers 33,101 20,206 65,935 119,242 16. TRADE DEPOSITS AND PREPAYMENTS Trade deposits Prepayments Balances held in margin accounts against letters of credit 53,762 21,139 18,476 93,377 68,829 15,519 84,348 33,543 17,575 29,921 81,039 2007

Notes to and forming part of the Financial Statements

2008 17. REFUNDS DUE FROM GOVERNMENT Custom duty and sales tax considered good considered doubtful 15,468 18,465 33,933 Less: Provision for doubtful receivables 18,465 15,468 18. OTHER RECEIVABLES Due from related parties - note 18.1 Associated companies GlaxoSmithKline Services Unlimited, UK GlaxoSmithKline Limited, Bangladesh GlaxoSmithKline Limited Biologicals, Belgium GlaxoSmithKline Export Limited, UK GSK Services Corporation, UK SB R&D Upper Merion, USA Retirement benefit funds Due from Provident Fund Due from Pension Fund - note 18.3 Others Due from Workers' Profits Participation Fund - note 18.2 3,205 144,387 Claims recoverable from suppliers Others 2,917 6,560 153,864 83,712 36,185 8,377 12,606 302 Rupees ‘000

2007

14,898 18,465 33,363 18,465 14,898

24,335 6,871 1,024 1,419 8,224

593 323,712

366,178 4,644 7,249 378,071

18.1 The maximum aggregate amount due from related parties at the end of any month during the year was Rs. 144.39 million (2007: Rs. 366.18 million).

67 - 68

2008 18.2 Workers' Profits Participation Fund Opening liability Allocation for the year - note 24 Rupees ‘000 (7,801) (116,795) (124,596) Interest on funds utilised in company's business - note 26 (282) (124,878) Amounts paid to the Fund Closing asset / (liability) 128,083 3,205

2007

(11,339) (142,802) (154,141) (419) (154,560) 146,759 (7,801)

18.3 This represents amount receivable from pension fund which arose in 2007 on discontinuation of the pension scheme. The pension fund will be wound up after the assets of the Fund have been realised and the liabilities have been settled. 2008 19. CASH AND BANK BALANCES With banks on deposit accounts on PLS savings accounts on current accounts Cash and cheques in hand 2,630,000 50,502 40,800 3,595 2,724,897 4,150,000 72,967 24,689 5,089 4,252,745 Rupees ‘000 2007

19.1 At December 31, 2008 the rates of mark-up on PLS savings accounts and on term deposit accounts were 5% (2007: 0.5% to 2.75%) and 10% to 15% (2007: 7.75% to 11.6%) per annum respectively.

2008 20. NET SALES Gross sales Local Export 13,397,423 289,640 13,687,063 Less: Commissions, returns, discounts and rebates Sales tax 263,832 20,007 13,403,224 Rupees ‘000

2007

10,528,472 256,330 10,784,802 160,963 12,957 10,610,882

Notes to and forming part of the Financial Statements
2008 2007 Rupees ‘000 4,912,391 115,585 20,166 827,758 218,633 2,421 152,256 38,146 96,987 1,567 9,294 10,835 141,214 14,541 18,569 805 62,648 25,738 8,093 4,597 21,221 6,703,465 Opening stock of work-in-process Closing stock of work-in-process Cost of goods manufactured Opening stock of finished goods Purchase of finished goods Provision for slow moving and obsolete stock - finished goods Closing stock of finished goods Cost of samples shown under selling, marketing and distribution expenses - sales promotion 59,674 11,274,845 (1,659,565) (67,661) 9,547,619 53,138 7,985,512 (1,250,190) (76,569) 6,658,753 118,537 (201,425) 6,620,577 1,250,190 3,344,404 4,074,237 99,996 21,980 651,229 165,032 8,439 128,463 47,621 92,831 2,362 9,404 8,611 103,387 (1,241) 8,765 (648) 50,681 19,538 7,838 4,273 20,496 5,523,294 188,306 (118,537) 5,593,063 1,255,365 1,083,946

21. COST OF SALES Raw and packing materials consumed Manufacturing charges to third party Stores and spares consumed Salaries, wages and other benefits Fuel and power Rent, rates and taxes Royalty and technical fee Insurance Repairs and maintenance Training expenses Travelling and entertainment Vehicle running Depreciation / amortisation Impairment charge / (reversal) Provision for slow moving and obsolete stock - raw and packing materials Provision for / (reversal of) slow moving and obsolete stores and spares - net Canteen expenses Laboratory expenses Communication and stationery Security expenses Other expenses

69 - 70

21.1 21.2

Salaries, wages and other benefits include staff severance cost of Rs. 41.19 million (2007: Nil). Salaries, wages and other benefits include Rs. 22.44 million and Rs. 21.19 million (2007: Rs. 29.07 million and Rs. 19.03 million) in respect of defined benefit plan and contributory provident fund respectively.

2008 2007 Rupees ‘000 22. SELLING, MARKETING AND DISTRIBUTION EXPENSES Salaries, wages and other benefits Handling, freight and transportation Advertising Sales promotion Travelling and entertainment Vehicle running Depreciation / amortisation Canteen expenses Rent, rates and taxes Training expenses Fuel and power Publication and subscriptions Insurance Repairs and maintenance Printing and stationery Communication Security expenses Provision for doubtful debts Other expenses 484,198 128,507 70,059 374,776 104,079 33,611 28,339 880 5,912 1,107 10,419 15,775 8,562 12,711 7,532 15,172 7,682 1,824 17,780 1,328,925 509,837 86,844 66,727 303,519 101,478 28,649 21,412 635 6,617 1,974 9,580 13,108 6,905 8,206 6,617 14,484 7,143 2,186 14,897 1,210,818

22.1

Salaries, wages and other benefits include Rs. 16.17 million and Rs. 15.17 million (2007: Rs. 16.60 and Rs. 13.37 million) in respect of defined benefit plan and contributory provident fund respectively.

Notes to and forming part of the Financial Statements
2008 2007 Rupees ‘000 23. ADMINISTRATIVE EXPENSES Salaries, wages and other benefits Depreciation / amortisation Repairs and maintenance Vehicle running Travelling and entertainment - note 23.2 Canteen expenses Rent, rates and taxes Training expenses Publication and subscriptions Insurance Printing and stationery Legal and professional charges Auditors’ remuneration - note 23.3 Donations - note 23.4 Communication Security expenses Other expenses - note 23.5 239,959 61,488 33,787 14,568 18,980 4,406 8,985 16,397 7,863 4,935 12,641 15,743 11,312 22,452 27,082 8,376 11,242 520,216 264,758 47,563 29,622 9,872 7,195 2,918 6,500 16,754 5,843 4,536 10,095 15,361 9,627 21,568 20,940 4,417 9,152 486,721

23.1 Salaries, wages and other benefits include Rs. 3.83 million and Rs. 6.58 million (2007: Rs. 2.25 million and Rs. 6.47 million) in respect of defined benefit plan and contributory provident fund respectively.

23.2 These are net of recovery from related party of Rs. 1.39 million (2007: Nil).

71 - 72

23.3 Auditors' remuneration Audit fee Fee for review of half yearly financial statements, special certifications and others Taxation services Out-of-pocket expenses

2008 2007 Rupees ‘000 2,750 3,260 4,491 811 11,312 2,500 4,385 2,034 708 9,627

23.4 Donations Donations include a sum of Rs. 440 thousand and Rs. 100 thousand (2007: Rs. 653 thousand and Rs. 892 thousand) paid to Concern for Children Trust, B/63, Estate Avenue, S.I.T.E, Karachi and Trust for Health & Medical Sciences, Beecham Road, Laiqabad, Landhi, Karachi respectively in which Mr. Muhammad Salman Burney, Chairman / Chief Executive and Mr. Shahid Mustafa Qureshi, Director, are the trustees. 23.5 These are net of recovery from related party of Rs. 71.59 million (2007: Rs. 78.87 million). 2008 2007 Rupees ‘000 116,795 61,246 30,314 208,355 25. OTHER OPERATING INCOME Income from financial assets Return on investments Income on deposit accounts Income on receivable from pension fund Income from non-financial assets Gain on disposal of other operating assets - note 25.1 Others Scrap sales Insurance commission Service fee on clinical trial studies Others 37,619 351,817 34,800 398,105 154,212 142,802 54,256 26,854 223,912

24.

OTHER OPERATING EXPENSES Workers' Profits Participation Fund - note 18.2 Workers' Welfare Fund Central Research Fund

857,078

23,676

15,816 12,761 3,418 1,281 1,279,790

9,724 14,736 3,944 218 639,415

25.1 This includes Rs. 843.46 million in respect of disposal of leasehold land, net of selling expenses of Rs. 17.59 million, as disclosed in note 9.3.

Notes to and forming part of the Financial Statements
2008 2007 Rupees ‘000 67,400 8,749 282 428 76,859 27. TAXATION Current - for the year - prior years Deferred 990,000 55,853 1,045,853 27.1 Relationship between tax expense and accounting profit Profit before taxation Tax at the applicable rate of 35% Tax effect of exempt income Tax effect of other than temporary differences Effect of final tax regime Effect of prior years' tax 3,001,040 1,050,364 (295,210) 58,657 232,042 1,045,853 28. EARNINGS PER SHARE Profit after taxation Number of ordinary shares outstanding at the end of year (in thousands) Basic earnings per share 1,955,187 1,670,525 2,658,543 930,490 3,125 68,403 (14,000) 988,018 877,946 (14,000) 124,072 988,018 2,036 8,386 419 709 11,550

26.

FINANCIAL CHARGES Exchange loss - net Bank charges Interest on Workers' Profits Participation Fund - note 18.2 Amortisation of premium on investments

170,672 Rs. 11.46

170,672 Rs. 9.79

28.1 A diluted earnings per share has not been presented as the company did not have any convertible instruments in issue as at December 31, 2007 and 2008 which would have any effect on the earnings per share if the option to convert is exercised.

73 - 74

29.

CASH GENERATED FROM OPERATIONS Profit before taxation Add / (Less): Adjustments for non-cash charges and other items Depreciation / amortisation Return on investments Impairment charge / (reversal) Gain on disposal of operating assets Provision for staff gratuity Amortisation of premium on investments Profit before working capital changes Effect on cash flow due to working capital changes (Increase) / Decrease in current assets Stores and spares Stock-in-trade Trade debts Loans and advances Trade deposits and prepayments Accrued return on term deposits Refunds due from government Other receivables Increase in trade and other payables

2008 2007 Rupees ‘000 3,001,040 2,658,543

231,041 (37,619) 14,541 (857,078) 42,437 428 (606,250) 2,394,790

172,362 (34,800) (1,241) (23,676) 48,155 709 161,509 2,820,052

(8,885) (1,216,879) (900,121) (38,203) (9,029) 27,674 (570) 224,207 (1,921,806) 160,349 (1,761,457) 633,333

(42,203) (81,768) (32,150) (16,450) (7,928) 82,631 24,532 (328,655) (401,991) 94,294 (307,697) 2,512,355

30.

REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES The aggregate amounts charged in the financial statements for remuneration of the Chief Executive, Directors and Executives are as follows:
Chief Executive 2008 2007 2008
Rupees in‘000

Directors 2007 2008

Executives 2007

Managerial remuneration Bonus Retirement Benefits House rent Utilities Medical expenses Others Number of person( s)

11,091 16,467 1,880 4,125 917 29 698 35,207 1

9,923 13,367 2,037 3,742 831 116 601 30,617 1

10,345 10,279 1,919 4,210 936 137 517 28,343 4

14,745 13,363 3,286 6,164 1,370 216 788 39,932 4

144,703 43,430 24,882 54,593 12,132 3,957 3,243 286,940 127

111,333 50,784 23,601 43,348 9,633 3,134 2,498 244,331 111

In addition to the above, fee to two non-executive Directors during the year amounted to Rs. 52.5 thousand (2007: Rs.52.5 thousand).

Notes to and forming part of the Financial Statements
The Chief Executive, Executive Directors and certain executives are also provided with free use of company maintained cars and certain items of fixtures and household furniture in accordance with the company policy. Bonus includes Share Appreciation Rights (SARs) and other share options to be settled in cash, payable to Chief Executive, Directors and certain executives, amounting to Rs. 4.24 million, Rs. 4.66 million and Rs. 4.68 million (2007: Rs. 7.61 million, Rs. 4.59 million and Rs. 8.48 million) respectively. These are granted every year and are payable on completion of qualifying period of service. They are linked with the share value of ultimate parent company, GlaxoSmithKline plc, UK. 31. TRANSACTIONS WITH RELATED PARTIES Relationship
Holding Company: Associated companies:

Nature of transactions
Dividend paid a. Royalty paid b. Purchase of goods c. Sale of goods d. Recovery of expenses from related party e. Service fee on clinical trial studies f. Donations

2008 2007 Rupees ‘000
1,344,536 96,577 3,766,212 68,884 73,568 3,418 540 85,377 86,846 860,503 58,693 2,174,456 53,200 78,873 3,944 1,545 86,797 (193,604)

Staff retirement funds:

Expense charged for retirement benefit plans Payments from / (to) retirement benefit plans

Key management personnel: a. Salaries and other employee benefits b. Post employment benefits c. Sale of assets Other Payments made to Workers' Profits Participation Fund 128,083 146,759 106,722 8,539 1,703 106,271 8,889 305

The related parties balances as at December 31, 2008 are included in the respective notes to the financial statements.

32.

RUNNING FINANCE UNDER MARK-UP ARRANGEMENTS The facilities for running finance available from various banks amounted to Rs. 560 million (2007: Rs. 560 million). The rate of mark-up ranges from 6% to three month KIBOR plus 0.5% (2007: from one month KIBOR plus 0.5% 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 (2007: Rs 10 million). These facilities carry mark-up at 1% (2007: 1%) above the State Bank of Pakistan Export Refinance rate per annum. The facilities for opening letters of credit and guarantees as at December 31, 2008 amounted to Rs. 2.17 billion (2007: Rs. 1.72 billion) of which unutilised balances at the year end amounted to Rs. 1.49 billion (2007: Rs. 960.6 million).

75 - 76

33.

FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES Financial assets and liabilities

Interest bearing Maturity up to one year Financial assets Loans and advances to employees Deposits Investments Trade debts Accrued return on investments and bank deposits Other receivables Cash and bank balances December 31, 2008 December 31, 2007 Financial liabilities Trade and other payables December 31, 2008 December 31, 2007 1,312 155,511 955 171,855 2,267 327,366 Maturity after one year Total

Non-inerest bearing Maturity up to one year Rupees ‘000 Maturity after one year Total

Total

31,789 72,238 1,016,968

60,711 6,788 -

92,500 79,026 1,016,968

94,767 79,026 327,366 1,016,968

2,680,502 2,837,325 4,321,529

172,810 347,115

2,680,502 3,010,135 4,668,644

80,596 150,659 44,395 1,396,645 754,161

67,499 60,272

80,596 150,659 44,395 1,464,144 814,433

80,596 150,659 2,724,897 4,474,279 5,483,077

1,618,781 1,618,781 1,546,021

-

1,618,781 1,618,781 1,546,021

1,618,781 1,618,781 1,546,021

The effective mark-up rates for the financial assets and liabilities are mentioned in respective notes to the financial statements. (i) Interest rate risk management Interest risk arises from the possibility that changes in interest rate will affect the value of financial instruments. The company does not expect to be materially exposed to interest rate changes. (ii) Credit risk management Credit risk represents the accounting loss that would be recognised at the reporting date if counterparts failed to perform as contracted. Trade debts, including receivable from Government of Pakistan, exposed to credit risk as at December 31, 2008 amounted to Rs. 1.02 billion (2007: Rs. 116.85 million). The company does not have significant exposure to any individual customer. To reduce exposure to credit risk the company applies credit limits to its customers. (iii) Foreign exchange risk management Foreign currency risk arises mainly where receivables and payables exist due to transactions with foreign undertakings. Payables exposed to foreign currency risk included in bills payable as at December 31, 2008 amounted to Rs. 464.86 million (2007: Rs. 288.90 million).

Notes to and forming part of the Financial Statements
(iv) Liquidity risk management Liquidity risk reflects the company's inability in raising funds to meet commitments. The company manages liquidity risk by maintaining sufficient cash and balances with banks in deposit accounts and the availability of financing through banking arrangements. (v) Fair values of financial instruments The carrying values of all the financial instruments reported in the financial statements approximate their fair values. 34. CAPITAL RISK MANAGEMENT The company's objectives when managing capital are to safeguard the company's ability to continue as a going concern so that it can continue to provide adequate returns for shareholders and benefits for other stakeholders and to maintain an optimal return on capital employed. The current capital structure of the company is equity based with no financing through borrowings. 35. CAPACITY AND PRODUCTION The capacity and production of the company's plants are indeterminable as these are multi-product and involve varying processes of manufacture. 36. DIVIDEND The Board of Directors in its meeting held on February 23, 2009 proposed a cash dividend of Rs. 7.00 per share (2007: Rs. 7.50 per share) amounting to Rs. 1.19 billion (2007: Rs. 1.28 billion). 37. CORRESPONDING FIGURES Corresponding figures have been reclassified wherever necessary for the purpose of better presentation of the financial statements. However, no material reclassifications have been made. 38. DATE OF AUTHORISATION FOR ISSUE These financial statements were approved and authorised for issue on February 23, 2009 by the Board of Directors of the company.

M. Salman Burney
Chairman / Chief Executive

Javed Ahmedjee
Chief Financial Officer

77 - 78

Form 34

Pattern of Shareholding
Number of Shareholders
924 1,167 817 1,030 260 105 57 35 11 12 8 13 10 4 9 2 1 4 4 3 1 2 1 2 2 1 1 2 2 1 1 1 1 1 1 1 1 1 1 1 1 1 4,503

From
1 101 501 1001 5001 10001 15001 20001 25001 30001 35001 40001 45001 50001 55001 60001 65001 70001 75001 80001 85001 95001 100001 105001 115001 125001 135001 155001 195001 205001 250001 260001 290001 395001 480001 535001 665001 705001 5945001 6230001 6415001 134450001

Shareholding

to

Total Shares Held
40,127 341,583 545,094 2,374,798 1,826,238 1,297,648 991,701 794,024 295,916 388,730 303,933 548,764 478,374 209,126 531,165 121,919 65,812 292,812 311,581 241,851 89,806 193,084 103,906 215,888 235,438 125,310 136,093 313,772 397,463 206,157 251,400 260,257 294,743 397,518 484,672 537,747 666,545 707,976 5,945,881 6,233,421 6,419,983 134,453,588 170,671,844

100 500 1000 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 55000 60000 65000 70000 75000 80000 85000 90000 100000 105000 110000 120000 130000 140000 160000 200000 210000 255000 265000 295000 400000 485000 540000 670000 710000 5950000 6235000 6420000 134455000

Categories of Shareholders
a)

Sr. No.
1 2 3 4 5 6 7 8

Categories of Shareholders
Individuals Investment Companies Insurance Companies Joint Stock Companies Financial Institutions Associated Company Central Depository Company (b) Others (see below)

Number of Shareholders
2,221 4 1 11 2 1 2,258 5 4,503 1 1 1 1 1 5

Shares Held
4,823,601 2,139 1 19,863 5,862 134,453,588 31,336,427 30,363 170,671,844 17,283 2,718 1 218 10,143 30,363

Percentage (%)
2.83 0.00 0.00 0.01 0.00 78.78 18.36 0.02 100.00 0.01 0.00 0.00 0.00 0.01 0.02

Others: i ii iii iv v Mohsin Trust The Al-Malik Charitable Trust Securities Exchange Commission of Pakistan Punjabi Saudagar Co-operative Society The Anjuman Wazifa Sadat-o-Momineen Pakistan

b)

Categories of Account holders and Sub-Account holders as per Central Depository Company of Pakistan as at December 31, 2008

Sr. No.
1 2 3 4 5 6 7 8

Categories of Shareholders
Individuals Investment Companies Insurance Companies Joint Stock Companies Financial Institutions Modarabas Foreign Company Others (see below)

Number of Shareholders
2,142 21 13 56 13 4 1 8 2,258 1 1 1 1 1 1 1 1 8

Shares Held
6,791,494 2,194,024 7,592,830 418,133 13,935,244 87,287 5,375 312,040 31,336,427 75,000 45,000 44,657 41,897 18,956 35,437 48,093 3,000 312,040

Percentage (%)
3.98 1.29 4.45 0.24 8.17 0.05 0.00 0.18 18.36 0.04 0.03 0.03 0.02 0.01 0.02 0.03 0.00 0.18

Others: i Trustees Mohammad Amin WAKF Estate ii Trustees Saeeda Amin WAKF iii Trustees Kandawala Trust iv The Pakistan Memon Educational & Welfare Society v Managing Committee Karachi Zorthosti Banu Mandal vi Trustees Mrs. Khorshed H. Dinshaw & Mr. Hosh vii Trustees D.N.E. Dinshaw Charity Trust viii Centre for Development of Social Service

79 - 80

Shareholding Information
Categories of Shareholders
Holding Company : Setfirst Limited U.K. N.I.T & I.C.P : Investment Corporation of Pakistan National Bank of Pakistan (Trustee Department) Directors, CEO and their spouses and minor children: Mr. M. Salman Burney Mr. Shahid Mustafa Qureshi Dr. Muzaffar Iqbal Mr. Rafique Dawood Dr. Iffat Yazdani Executives Public sector companies and corporation : Banks, Development Finance Institutions, Non-Banking Finance Institutions, Insurance Companies, Modarabas and Mutual Funds Shareholders holding 10% or more voting interest : Setfirst Limited U.K. 1 134,453,588 1 1 1 1 1 5 3,125 3 1 1 335 2,378 2 3 320 12,653,429 1 134,453,588

Number of Shareholders

No. of Shares Held

54

11,169,013

8% 4% 7%

2%

Distribution of Shares
Holding Company Individuals Insurance Compnaies Financial Institutions Others 79% 7% 4% 8% 2%

79%

Notice of Annual General Meeting
Notice is hereby given that the SIXTY-SECOND Annual General Meeting of the Shareholders of the Company will be held at the Beach Luxury Hotel, Karachi at 11:00 a.m. on Tuesday, March 31, 2009 to transact the following business: 1. (a) To receive and adopt the Report of the Directors and the Accounts for the year ended December 31, 2008 and the Auditors' Report thereon; (b) To approve the payment of a dividend. 2. To appoint Auditors and fix their remuneration.

By Order of the Board

Karachi March 09, 2009

Shahid Mustafa Qureshi Director/Secretary

Notes: 1. The Share Transfer Books of the Company will be closed from March 25, 2009 to March 31, 2009 (both days 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 to attend, speak and vote at the Meeting on his/her behalf. Instrument appointing Proxy must be deposited at the Office of the Share Registrars of the Company at 513, Clifton Centre, Khayaban-eRoomi, 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 in their address.

81 - 82

4. CDC Account Holders will further have to follow the under mentioned guidelines as laid down in Circular No. 1 of 2000 dated January 26, 2000 issued by the Securities and Exchange Commission of Pakistan. a) For Attending the Meeting: i) In case of individuals, the account holder or sub-account holder and/or the person whose securities are in group account and their registration details are uploaded as per the Regulations, shall authenticate his/her identity by showing his/her original National Identity Card (NIC) or original passport at the time of attending the meeting.

ii) In case of corporate entity, the Board of Directors' resolution/power of attorney with specimen signature of the nominee shall be produced (unless it has been provided earlier) at the time of the meeting. b) For Appointing Proxies: i) In case of individuals, the account holder or sub-account holder and/or the person whose securities are in group account and their registration details are uploaded as per the Regulations, shall submit the proxy form as per the above requirement.

ii) The proxy form shall be witnessed by two persons whose names, addresses and NIC numbers shall be mentioned on the form. iii) Attested copies of NIC or the passport of the beneficial owners and the proxy shall be furnished with the proxy form. iv) The proxy shall produce his/her original NIC or original passport at the time of the meeting. v) In case of corporate entity, the Board of Directors' resolution/power of attorney with specimen signature shall be submitted (unless it has been provided earlier) along with proxy form to the Company.

Contact Details
Factories
Karachi 35, Dockyard Road, West Wharf, Karachi-74000 Tel: (92-21) 2315478-82, 2316071-73 Fax: (92-21) 2311120, 2314898 UAN: 111-475-725 F-268, S.I.T.E. Near Labour Square, Karachi-75700 Tel: (92-21) 2570665 - 69, 2564355 - 65 Fax: (92-21) 2572613, 2564373 Lahore 18.5 km, Ferozepur Road, P.O. Box No. 244 Tel: (92-42) 5811931-35 Fax: (92-42) 5820821

Distribution / Sales offices
Karachi F/268, S.I.T.E., Near Labour Square, Karachi-75700 Tel: (92-21) 2564355-65, 2570665-69, 2574120-23, 2572200 and 2564366 Fax: (92-21) 2570119 94, Deh Landhi, Karachi-75120 Tel: (92-21) 5015040- 44 Fax: (92-21) 5015515 Sukkur Plot No. 77/80, Block-B, Friends Cooperative Housing Society, Akwut Nagar, Airport Road, Tel: (92-71) 5630668, 5630144 and 5632177 Fax: (92-71) 5630755 Multan Islam-ud-din House, Mehmood Kot, Bosan Road Tel: (92-61) 6222061-63 and 6221730-33 Fax: (92-61) 6222064 Lahore Cordeiro House, Plot No. 27, Kot Lakhpat Industrial Estate, Kot Lakhpat, Tel: (92-42) 5111061-64 and 5111066-69 Fax: (92-42) 5111065 and 5111067 Islamabad Aleem House, Plot No, 409, Sector 1-9, Industrial Area Tel: (92-51) 4435701-03, 4435695 and 4435589 Fax: (92-51) 4433706 and 4433708 Peshawar D’ Souza House, Nasirpur, Near Abid Flour Mills, G.T. Road Tel: (92-91) 2261451-52 and 2650115-16 Fax: (92-91) 2261457

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