GSK Annual Report 2010

Do more, feel better, live longer
GlaxoSmithKline
Annual Report 2010
GSK Annual Report 2010

Contents
Business review P08–P57
Business review
2010 Performance overview 08
Research and development 10
Pipeline summary 12
Products, competition and intellectual property 14
Regulation 18
Manufacturing and supply 19 Business review
World market 20 This discusses our financial and non-financial activities,
GSK sales performance 21 resources, development and performance during 2010
Segment reviews 22 and outlines the factors, including the trends and the
Responsible business 29 principal risks and uncertainties, which are likely to
Financial review 2010 34 affect future development.
Financial position and resources 41
Financial review 2009 47 Governance and remuneration
Risk factors 53 This discusses our management structures and
governance procedures. It also sets out the
Governance and remuneration P58–P101
Governance and remuneration remuneration policies operated for our Directors and
Our Board 58 Corporate Executive Team members.
Our Corporate Executive Team 60
Governance and policy 64 Financial statements
Dialogue with shareholders 69 The financial statements provide a summary of the
Internal control framework 71 Group’s financial performance throughout 2010 and its
Committee reports 74 position as at 31st December 2010. The consolidated
Remuneration policy 84 financial statements are prepared in accordance with
Director terms and conditions 91 IFRS as adopted by the European Union and also IFRS as
Director and Senior Management remuneration 94 issued by the International Accounting Standards Board.
Directors’ interests 96
Directors’ interests in contracts 101 Shareholder information
This includes the full product development pipeline and
discusses shareholder return in the form of dividends
and share price movements.
Financial statements P102–P191
Financial statements
Directors’ statement of responsibilities 102
Independent Auditors’ report 103
Financial statements 104
Notes to the financial statements 109
Financial statements of GlaxoSmithKline plc
prepared under UK GAAP 188
Shareholder information P192–P212
Shareholder information
Quarterly trend 192
Five year record 200
Product development pipeline 203
Share price and dividends 207
Nature of trading market 208
Annual General Meeting 208 Underlying sales growth excludes pandemic products,
Investor relations and Registrar 208 Avandia and Valtrex. See page 21.
Taxation information for shareholders 210
Glossary of terms 211 CER% represents growth at constant exchange rates.
Index 212 Sterling % or £% represents growth at actual exchange
rates. See page 21.
The calculation of results before major restructuring
is described in Note 1 to the financial statements,
‘Presentation of the financial statements’.

01
We exist to improve the

quality of human life by
enabling people to do more,
feel better and live longer.
We work by respecting people,
maintaining our focus on the patient
and consumer whilst operating with
both integrity and transparency.
We are looking to deliver shareholder
value through growth of a diversified
and global business, by delivering
more products of value, simplifying
our operating model and by running
our business responsibly.
What follows is our report to
shareholders for 2010. Progress we
have made in the year can also be
seen by visiting our website:
www.gsk.com/corporatereporting
Notice regarding limitations on Director Liability under English Law

Under the UK Companies Act 2006, a safe harbour limits the liability of Directors in respect of statements in and omissions from the Report of the Directors contained on pages 8 to
101. Under English law the Directors would be liable to the company, but not to any third party, if the Report of the Directors contains errors as a result of recklessness or knowing
misstatement or dishonest concealment of a material fact, but would not otherwise be liable.
Report of the Directors
Pages 8 to 101 inclusive comprise the Report of the Directors that has been drawn up and presented in accordance with and in reliance upon English company law and the liabilities
of the Directors in connection with that report shall be subject to the limitations and restrictions provided by such law.
Website
GlaxoSmithKline’s website www.gsk.com gives additional information on the Group. Notwithstanding the references we make in this Annual Report to GlaxoSmithKline’s
website, none of the information made available on the website constitutes part of this Annual Report or shall be deemed to be incorporated by reference herein.
Cautionary statement regarding forward-looking statements
The Group’s reports filed with or furnished to the US Securities and Exchange Commission (SEC), including this document and written information released, or oral statements
made, to the public in the future by or on behalf of the Group, may contain forward-looking statements. Forward-looking statements give the Group’s current expectations or
forecasts of future events. An investor can identify these statements by the fact that they do not relate strictly to historical or current facts. They use words such as ‘anticipate’,
‘estimate’, ‘expect’, ‘intend’, ‘will’, ‘project’, ‘plan’, ‘believe’ and other words and terms of similar meaning in connection with any discussion of future operating or financial
performance. In particular, these include statements relating to future actions, prospective products or product approvals, future performance or results of current and
anticipated products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, and financial results. The Group undertakes no obligation to update any
forward-looking statements, whether as a result of new information, future events or otherwise.
Forward-looking statements involve inherent risks and uncertainties. The Group cautions investors that a number of important factors, including those in this document, could
cause actual results to differ materially from those contained in any forward-looking statement. Such factors include, but are not limited to, those discussed under ‘Risk factors’
on pages 53 to 57 of this Annual Report.

02
GSK at a glance
We are one of the world’s leading Our 2010 numbers

research-based pharmaceutical and
healthcare companies. We are £28.4bn 32.1p
committed to improving the quality Turnover Earnings per share
of human life by enabling people

to do more, feel better and live longer. 53.9p
Earnings per share before
65p
Dividend per share
How we do it major restructuring
GSK has focused its business on the delivery of three strategic
priorities, which aim to increase growth, reduce risk and Group sales
improve GSK’s long-term financial performance:
s 'ROWADIVERSIlEDGLOBALBUSINESS 1 US Pharmaceuticals: £7.6bn 7
6
s $ELIVERMOREPRODUCTSOFVALUE 2 Europe Pharmaceuticals: £6.5bn 5 1
s 3IMPLIFY'3+SOPERATINGMODEL
3 Consumer Healthcare: £5.0bn
Where we do it 4 Emerging Markets
GSK is a global organisation with offices in over 100 countries
Pharmaceuticals: £3.6bn
and major research centres in the UK, USA, Belgium and China. 4
Our shares are listed on the London and New York Stock 5 Asia Pacific/Japan
Exchanges and our corporate head office is in Brentford, UK. Pharmaceuticals: £3.1bn
6 ViiV Healthcare: £1.6bn 2
3
7 Other: £1.0bn
Research & development Consumer Healthcare
c.30 £3.96bn 20% No.1

A peer-leading In 2010, we spent £3.96bn Growth of Horlicks Sensodyne has been the
pipeline with around in R&D before major in India in 2010. world’s fastest growing
30 late-stage assets. restructuring, or 14% toothpaste brand over
of our total sales. the last 5 years.
We are one of the world’s
biggest investors in R&D and are
the biggest private sector funder
of R&D in the UK.
10
10 new compounds and
14%
We are committed to
c.1bn
Units of Lucozade,
2
New Consumer Healthcare
vaccines starting phase III improving returns in R&D, Ribena and Horlicks Research and Innovation
clinical trials since the start aiming to increase our manufactured in centres opened in China
of 2010. estimated return the UK every year. and India.
on investment in
this area to 14%.
Vaccines Emerging markets
1.4bn
Doses of our vaccines
24%
Of total GSK turnover
supplied to 179 countries from emerging markets,
around the world in 2010. by the broader definition
(Pharmaceutical and
Consumer Healthcare
turnover in all markets
excluding USA, Western
Europe, Canada, Japan,
Australia and New Zealand).

03
GSK at a glance
A global company

411
2
6 35
32 3
2
3 22
7 3 2
3 2
2
3 7 5 4
6
2
5 4
3 6
2
3
2

2
Sites with over

100 employees:
Biologicals
Corporate
Consumer Healthcare
GMS
Pharmaceuticals
Research and Development
96,500 5% 3

Employees. Share of world Leading presence in
pharmaceutical market. Consumer Healthcare
(Source: IMS Health) global categories: OTC,
Oral Care, Nutritionals
GSK’s business model Responsible business

A balanced, synergistic business, with multiple growth drivers Malaria vaccine
supporting a core pharmaceutical R&D operation. Potentially the first malaria vaccine with phase III trials ongoing in
7 African countries.
300 million
Commitment to supply 300m doses of Synflorix at a reduced price
to developing countries over the next decade through the AMC
financing mechanism.
5-year commitment
To treat school age children in Africa at risk of intestinal worms.

Leader
GSK ranked first in both Access to Medicine Indexes in 2008
Core and 2010.
Pharmaceutical
2050
R&D
Target date for value chain, from raw materials to product disposal,
to be carbon neutral.
To find out more visit us at


04
Chairman & CEO summary

Dear Shareholder GSK is also a business built on strong values and a deep
commitment to operating with integrity. In 2010 we have taken
Over the last two and a half years we have been implementing a further steps to make our company more responsive, more flexible
strategy to transform our business model to address the significant and more open to society’s expectations.
challenges our industry faces as payers search for ever more cost-
effective healthcare, and demand escalates for new and better Increasing returns to shareholders
medicines. This is being done with the direct aim of enhancing returns In 2010 we were able to fund returns to shareholders, bolt-on
to our shareholders and improving the lives of patients and consumers. acquisitions and the significant increase in legal settlements whilst
reducing net debt by £0.6 billion.
To achieve this we have substantially re-engineered GSK’s business
through major restructuring and a more rigorous approach to Adjusted 2010 net cash inflow before legal matters was £8.8
capital allocation. The effects of these changes in 2010 were billion, up 9%. Cash outflow for legal settlements was £2 billion.
masked to some degree by specific events. Reported sales, for
GSK remains financially very strong. We increased our dividend by
example, were impacted by generic competition to Valtrex, and
7% to 65p in 2010 and our priority is to deliver further growth in
reduced sales from Avandia and pandemic related products.
the dividend. Since 2005, dividends have increased each year with
Meanwhile earnings were impacted by the significant charge we
average growth of 8% over the five-year period. We have
took to help resolve long-standing legal matters. This belies the
also started a new long-term share buy-back programme to
good progress we have made to execute our strategy and which
enhance returns to shareholders, with buy-backs of £1-2 billion
is evident in diversified underlying sales growth and the increasing
expected in 2011.
potential of our pipeline. We believe GSK is becoming a more
balanced, synergistic business with a lower risk profile and the
option for significant potential upside from the pipeline.
Sir Christopher Gent Andrew Witty

Chairman Chief Executive Officer

05
Chairman & CEO summary
Continuing focus on return on investment Operating a values-based business with integrity

Our drive for change, and to improve returns on investment Continuing to run our business in a responsible way is also central
through restructuring and effective capital allocation, continued to to the changes we have made at GSK.
make progress during the year. In 2010, we continued progress in our significant commitment to
Reinvestment of costs saved through our restructuring programme work on neglected tropical diseases. Our candidate malaria vaccine
has enabled us to diversify and strengthen GSK’s sales base. To is progressing through phase III trials in Africa. If all goes well, this
date, £1.7 billion of cost has been extracted from the business and will be the first ever vaccine against malaria, with the potential
we are on track to deliver £2.2 billion of annual savings by 2012. to save the lives of millions of children and infants in Africa. We
also announced that we will donate enough of our albendazole
We have taken cost out from lower returning activities and medicine to protect all school-aged children in Africa against
reinvested it in key growth areas such as Emerging Markets, intestinal worms. Intestinal worms cause more ill health in
Vaccines and Consumer Healthcare. 2010 reported sales for these school-aged children than any other infection, so this will have
businesses were up 22%, 15% and 5% respectively. a major positive health impact.
This is helping to reduce GSK’s dependency on sales of products Improving the environmental sustainability of our business is also
generated in ‘white pills/western markets’†. Sales from these a priority and we have launched a new set of ambitious targets.
markets and products have decreased from 40% in 2007, to 25%

Our goal is to reduce the environmental impact of our whole value
in 2010. Over time, this should help to reduce the adverse impact chain, from raw materials to product disposal, and to be carbon
of patent expirations on the Group. neutral by 2050.
Delivering diversified underlying sales growth We are continuing to work towards resolving a number of long-
In 2010, reported sales fell 1%, impacted by the continued standing legal matters. There is no doubt that the scale of legal
effect of generic competition to Valtrex, the rapid loss of sales provisioning that has been required is significant. However, we
of Avandia following regulatory decisions in the Autumn and a continue to believe that it is in the Group’s best interests to resolve
difficult comparison with the prior year which included significant this inherent unpredictability and reduce GSK’s overall litigation
sales of pandemic products. exposure. These legal cases underline just how important it is for
However, underlying sales growth (sales excluding these 3 us to be led by our values in everything we do.
factors) was up 4.5%. This growth was achieved despite the Changes to the Board
ongoing impacts of US healthcare reform and EU government In September we announced that Julian Heslop will retire as CFO
austerity measures and is testament to the strength of the rest of at the end of March and be replaced by Simon Dingemans, who
our portfolio. joined the company as CFO-designate in January 2011.
In 2011, we expect underlying sales momentum to continue and

We would like to thank Julian for his dedicated service to GSK as
translate into sustainable reported growth in 2012. CFO and a member of the Board over the last six years – his integrity,
Increasing pipeline potential diligence and outstanding technical ability have ensured that GSK has
Reforming R&D to improve returns on investment has been a key remained financially strong during a period of significant economic
element of the strategy we are implementing. We saw further turmoil. Simon’s appointment as CFO will bring valuable new
evidence that this strategy is making progress during 2010. experience and capability to support us in implementing our strategy.
GSK now has a peer-leading portfolio of around 30 opportunities Conclusion

in phase III and registration. This portfolio is diverse with 5 There is no doubt that our operating environment remains
biopharmaceuticals and 5 vaccines in addition to NCEs. It is also challenging and that the pharmaceutical industry is undergoing
highly innovative with more than 20 assets not currently available a period of intense change. However, we believe that GSK is well
for any indication. One such asset – Benlysta – is potentially the placed to succeed in this environment.
first new treatment for lupus in 50 years and is currently being Our journey to create a more balanced, synergistic business
considered for approval by regulators in the USA and Europe. with increasing pipeline potential is progressing well and in
Importantly, we are delivering sustained progress, with 10 NCEs and accomplishing this we would like to recognise the significant
contribution of our employees and our many partners. We remain
new vaccines entering phase III since the start of 2010. By the end
of 2012, we expect phase III data on around 15 assets, including confident that we can generate increased value for shareholders
potential new treatments for type 1 and 2 diabetes, several rare as well as deliver better outcomes to patients and consumers.
diseases and multiple cancer types.
We have made fundamental changes to how we allocate our
R&D expenditure, directing it to our late stage pipeline; reducing
cost and risk through externalising parts of early-stage discovery;
dismantling infrastructure; and terminating development in areas
with low financial and scientific return. Our target remains to
deliver a rate of return for GSK’s R&D of around 14%. We are
the only pharmaceutical company to have explicitly set such a Sir Christopher Gent Andrew Witty
challenging target. Chairman Chief Executive Officer
† See page 21.

06
Discover the world of GSK
We have chosen ten case studies from

2010 that demonstrate the progress we
have made against our strategic priorities.
Each of these stories can be viewed online

07
Our strategy
Since 2008, we have focused our business around the delivery

of three strategic priorities, which aim to increase growth,
reduce risk and improve our long-term financial performance:
Grow a diversified global business Our plans
We are diversifying our business to create a more balanced product portfolio and move away s$RIVEGROWTHINTHEPHARMACEUTICAL
from a reliance on traditional ‘white pills/western markets’*. Sales generated from these business in our core markets
markets and products have decreased from 40% in 2007, to 25% in 2010. Over time this s&ULlLTHEPOTENTIALOFEmerging
should help to reduce the adverse impact of patent expirations on the Group. Markets
We expect to generate future sales growth by strengthening our core pharmaceuticals business s%XPANDOURBUSINESSIN*APAN
and supplementing it with increased investment in growth areas such as Emerging Markets,
vaccines, Japan, dermatology and Consumer Healthcare. Sales in Emerging Markets were up s"UILDOURLEADERSHIPINDERMATOLOGY
22%, vaccines up 15%, Japan up 14%, dermatology up 6% (on a pro-forma basis excluding s'ROWTHE6ACCINESAND#ONSUMER
2010 acquisitions) and Consumer Healthcare up 5% for 2010. Healthcare businesses

Deliver more products of value Our plans
With the aim of sustaining an industry-leading pipeline of products that deliver value for s&OCUSONTHEBESTSCIENCE
healthcare providers, we have been focusing on improving rates of return and delivering the s$IVERSIFYTHROUGHEXTERNALISATION
best science in our R&D organisation. This has required a multi-faceted approach. For example
we have increased the level of externalisation of our research, taken difficult decisions around s2E PERSONALISE2$
pipeline progressions and focused on disease areas where we believe the prospects for s&OCUSONRETURNONINVESTMENT
successful registration and launch of differentiated medicines are greater.
We have one of the largest and most diverse development pipelines in the industry with
approximately 30 late-stage assets. The vast majority of these programmes address unmet
medical need and importantly nearly two-thirds are new chemical entities or new vaccines.
Simplifying the operating model Our plans

s%VOLVEOURCOMMERCIALMODEL

As our business continues to change shape, it is essential that we transform the operating
model to reduce complexities, improve efficiencies and reduce cost. Through our global s2E SHAPEMANUFACTURING
restructuring programme, we have removed £1.7 billion of cost since 2008 and are on track
to deliver our target of £2.2 billion of annual savings by 2012. These savings have been s3TREAMLINEOURPROCESSES
extracted from our developed country sales and marketing, support functions, R&D and s2EDUCEWORKINGCAPITAL
manufacturing infrastructure and reinvested in higher returning activities such as Emerging
Markets, vaccines and Consumer Healthcare.
Outlook
Whilst our operating environment remains challenging, we have made significant progress
through restructuring and a rigorous returns-based approach to capital allocation. We expect
underlying sales momentum (sales excluding Valtrex, Avandia and pandemic related products)
to continue in 2011 and to translate into reported growth in 2012 at constant exchange rates,
despite further anticipated pricing reductions in the USA and Europe.
The US patent for compositions containing the combination of active substances in Seretide/
Advair expired during 2010, but various patents over the Diskus delivery device exist in the USA
for a number of years up to 2016. The outlook for the timing and impact of entry of ‘follow-on’
competition is uncertain. GSK has not been notified of any acceptance by the US FDA of an
application for a ‘follow-on’ product that refers to Seretide/Advair and contains the same active
ingredients (as would be expected to precede the introduction of such a product), and is not able
to predict when this may occur or when any such ‘follow-on’ product may enter the US market.
Other products may experience generic competition in advance of the stated patent expiry as a
result of settlement of patent proceedings. See Note 44, ‘Legal proceedings’, pages 178 to 185.
GSK has a peer-leading development pipeline, with over 20 assets not currently on the market
for any indication. By the end of 2012, we expect Phase III data on around 15 additional assets.
With improvements in our net debt position, we are increasing returns to shareholders. We
increased GSK’s dividend in 2010 and our priority is to deliver further growth in the dividend.
We also have commenced a new long-term share buy-back programme.
We remain confident that we can generate increased value for shareholders as well as deliver
better outcomes to patients and consumers.
* See page 21. GSK Annual Report 2010

08
2010 performance overview

Our strategies Our measures Our progress in 2010
We have focused the business We use a number of measures We made good progress during the year, with a number
around the delivery of three to track our progress against of notable successes:
strategic priorities. the strategic priorities over the
medium to long term. These
include the following:
Grow a diversified s Performance of core s Excluding pandemic products, Avandia and Valtrex,
pharmaceuticals and underlying pharmaceutical (including vaccines) sales*
global business vaccines businesses were £21.1 billion and grew 4% in the year.
Broadening and balancing our
s Diversification of sales s Sales from ‘white pills/western markets’† fell from 40% of
portfolio and moving away from
turnover in 2007 to 25% in 2010
a reliance on ‘white pills/western
markets’†. s Contribution of Emerging s Sales in our Emerging Markets pharmaceutical business
Markets to our overall grew by 22% to more than £3.6 billion and now represent
sales and growth 15% of pharmaceutical turnover.
s Growth of Consumer s Sales in our Consumer Healthcare business grew by 5% to

Healthcare business £5.0 billion and now represent 17.6% of Group turnover.
s Build our leadership position s Dermatology sales grew on a pro-forma basis (excluding
in dermatology 2010 acquisitions) by approximately 6% to nearly
£1.1 billion, representing nearly 4% of Group turnover.
s Expansion of Japanese business s Sales in GSK Japan grew 14% to nearly £2.0 billion.
s We received approvals for four new compounds.
s Build biopharmaceutical portfolio s Arzerra recorded sales of £26 million on its first full year on
the US market and was launched in Europe. Benlysta filed
for approval in both the USA and Europe.
s Contribution to sales of new s New products launched since 2007 (excluding flu

Deliver more products pandemic vaccines) grew 36% and contributed 7% of
products of value pharmaceutical sales in 2010.
Transforming R&D to ensure s Number of reimbursable product s We received six product approvals in the USA and EU
we not only deliver the current approvals and filings since the start of 2010
pipeline but are also able to
s Seven assets are currently filed with regulators.
sustain the flow of products
for years to come. s Sustaining late-stage pipeline s We maintained around 30 assets in phase III and
registration, with ten new chemical entities and new
vaccines entering phase III since the start of 2010.
s Enhanced R&D productivity and s Our objective is to increase our estimated rate of return for
increased externalisation for R&D from around 11% to 14%.
Drug Discovery s During 2010 we signed eight new collaborations to
increase the external nature of our discovery, giving
54 external discovery engines to complement our 38
Discovery Performance Units.
Simplifying the s Delivery of major restructuring s We have achieved annual cost savings of £1.7 billion and
programme remain on track to reach £2.2 billion of annualised savings
operating model by 2012.
Simplifying our operating model
s Reduce working capital s Working capital reduced by £1.3 billion in 2010 (including
to ensure that it is fit for purpose
£600 million of cash from lower pandemic receivables).
and able to support our business
in the most cost efficient way.
* The calculation of underlying sales growth is described on page 21.

† See page 21.
09
2010 performance overview
Key performance indicators

Turnover
£bn CER growth %‡
2010 28.4 (1)
In 2010, reported sales were down
2009 28.4 3
1% but underlying sales growth (sales
2008 24.4 (3)
excluding pandemic products, Avandia
2007 22.7 2
and Valtrex) was 4.5%.
2006 23.2 9
Earnings per share before major restructuring*

pence CER growth %#
Earnings per share in 2010 was adversely
2010 53.9 (59)
impacted by legal costs of £4,001 million
2009 121.2 2
(2009 – £591 million). Excluding legal
2008 104.7 (9)
costs, EPS before major restructuring was
2007 99.1 10
120.7 pence, 11% down on 2009.
2006 95.5 19
Free cash flow +

£m
The reduced level of free cash flow
2010 4,486
in 2010 reflected the higher legal
2009 5,254
settlements in the year. Free cash

2008 4,679
flow before legal settlements was
2007 3,857
£6,533 million (2009 – £5,508 million).
2006 2,623
2005 4,664
Total shareholder return
150
125
100
75
30/12/05 29/12/06 31/12/07 31/12/08 31/12/09 31/12/10
GlaxoSmithKline Total Return Index

GlaxoSmithKline Pharma Peers Return Index ‡
FTSE 100 Total Return Index
‡ This index includes Abbott Labs, Amgen, AstraZeneca, Bristol Myers Squibb,
Eli Lilly, Johnson & Johnson, Merck, Novartis, Pfizer, Roche Holdings and
Sanofi-Aventis.
Reflects £4bn legal charge.
# The calculation of CER growth is described on page 21.
* The calculation of results before major restructuring is described in Note 1 to the

financial statements, ‘Presentation of the financial statements’.
+ The calculation of free cash flow is described on page 44.

10
Research and development

Research and development – Pharmaceuticals Each DPU develops a business plan with specific deliverables and
GSK R&D has built one of the strongest, broadest pipelines of investment covering multiple years. The plans also include areas
potential new medicines in the industry. We believe the pipeline of opportunity for collaborations with external organisations that
has the potential to deliver value to patients and payers and could enhance a DPU’s deliverables and return. These can include
improve rates of financial return on our R&D investment. collaborations with large and small companies and academia. Our
Appropriately progressing our pipeline products safely and internal R&D expertise gives us a strong basis in identifying and
efficiently to deliver innovative new medicines for patients is the forming these collaborations, which in drug discovery are typically
primary goal of our R&D function. in-licensing or option-based collaborations.
The development of new products typically is a long, expensive The Discovery Investment Board (DIB) reviews the business plans of
and uncertain process, and it is not possible to predict which each DPU. The DIB is responsible for revising the plans, identifying
compounds in development will succeed or fail. The risks inherent areas for improvement and monitoring DPU delivery against agreed
in the R&D process are described more fully in the ‘Risk factors’ targets and investment. Membership of the DIB comprises senior
section, under ‘Risk that R&D will not deliver commercially R&D and commercial management and external individuals with
successful new products’. relevant expertise including life science investment experience and
understanding of payer perspectives. It is chaired by the SVP of
GSK allocates its R&D investment with reference to the potential Medicines Discovery and Development.
returns available from its target therapeutic markets and the
technical and commercial risks associated with products in No individual DPU has annual expenditure of more than 10% of
the pipeline. Those factors are reviewed at each phase of the the total annual R&D expenditure.
development process and are central in the decision to proceed to Delivering these medicines to patients
the next stage. Costs incurred at each stage are carefully managed A compound that advances into late-stage development (typically
to maximise the likely future return consistent with the Group’s after Phase IIa) will undergo much larger scale studies in humans
overall objective of increasing its IRR from its R&D activities from to investigate its efficacy and safety further. At the same time, we
its current level, estimated in 2009 to be around 11%, to 14%. work at optimising both the compound’s physical properties and
The returns generated are, however, primarily determined by the its formulation so that it can be produced and delivered efficiently
eventual commercial impact of new products as they achieve and in sufficient quantities through the manufacturing process. We
regulatory approval and are launched. then convert the results of these activities into a regulatory file for
This projected rate of return includes products launched from submission to regulatory agencies.
1st January 2007 and compounds in phases IIb and III of the Medicines Development Teams (MDTs) are small units of six to ten
development process. The calculation is based on actual sales people who have responsibility for a compound through the later
from 2007 to 2009 and forecast sales for the relevant products stages of development to filing with the regulatory agencies. There
up to 2030, adjusted to reflect expected failure rates, which are are around 30 assets in late-stage development, comprising more
broadly in line with standard industry failure rates. The cost base than 50 individual projects.
used in this calculation comprises an estimate of attributable
R&D costs and actual and projected milestone payments where GSK also actively seeks out opportunities to add products to its
appropriate. Estimated profit margins, capital investment and late-stage portfolio through relationships with other companies.
working capital requirements are factored into the calculation, For late-stage assets, these typically take the form of in-licensing
based on our historical performance. or co-promotion arrangements and are most likely to be aligned to
existing areas of therapy expertise or investment.
Details of the full product development pipeline, made up of both
pharmaceutical and vaccine assets, are set out on pages 203 to 206 The Product Management Board (PMB), assesses the technical,
and on our website and the performance of marketed products is commercial and investment case for each project to progress in
discussed in detail under ‘Financial review 2010’ on pages 34 to 40. development. The PMB is co-chaired by the Chairman, R&D and the
President, North America Pharmaceuticals, and includes the heads
Discovering potential medicines of each pharmaceutical region and global manufacturing.
Our early stage R&D (drug discovery) seeks to identify the biological
targets involved with the development of diseases, and then to Projects are reviewed by the PMB at certain key decision points:
create small molecules or biopharmaceuticals that interact with ’Commit to Medicine Development’, ‘Commit to Phase III’ and ‘Commit
these disease targets. The wealth of scientific discoveries in recent to File and Launch’. Funding is generally allocated up to the next key
years has made it essential that we are highly selective in where we decision point, typically between two and four years ahead. The PMB
invest our drug discovery resources; focusing resources on those also carries out an annual late-stage funding review, where investment
areas most likely to deliver significant medical advances and returns in all projects is reviewed, adjusted if necessary and prioritised.
on investment. No individual late-stage project has incurred annual expenditure of
We conducted a re-evaluation of the advances and discoveries in more than 10% of the total annual R&D expenditure.
global biomedical science. This led us to exit areas of research we Governance
judged unlikely to provide sufficient scientific and therefore financial R&D decisions are overseen by a number of boards. The oversight
returns. We have also tried to create an entrepreneurial environment of strategic issues and overall budget management across R&D is
in drug discovery pursuing the best scientific opportunities whether owned by the R&D Executive team (RADEX). DIB and PMB control
internal or external. We created Discovery Performance Units (DPUs), investment decisions in early and late stage R&D as described above.
which are groups of between 5-70 scientists, with each group
focusing on one particular disease or pathway and responsible for The Scientific Advisory Board (SAB) is chaired by the SVP Medicines
driving discovery and development of potential new medicines Discovery and Development and includes a number of external
through to early stage clinical trials (up to the completion of Phase scientific experts. The SAB reviews and challenges the science
lla). There are now nearly 40 DPUs. underlying development programmes and provides advice on
related issues to the PMB at the key investment points.
11
GSK’s Chief Medical Officer, as Chair of the Global Safety Board, is The Biologicals Scientific Committee (BSC) defines the overall R&D

ultimately accountable for oversight of all major decisions regarding and new product licensing strategy for our vaccines business.
patient safety. The Global Safety Board is responsible internally It is chaired by the Biologicals President and includes heads of
for approving pivotal studies and investigating any issues related our vaccines R&D, disease areas, clinical, epidemiology, business
to patient safety arising during the development programme and development and other departments as members. The BSC
post-launch. Information from GSK clinical trials is widely and easily assesses high potential vaccine in-licensing opportunities, decides
available at the Clinical Study Register on GSK’s website and at on exploratory projects and in-licensing opportunities and also
www.clinicaltrials.gov. endorses target product profiles before the start of early vaccine
projects. In addition the BSC aligns R&D, clinical and commercial
Diseases of the developing world
plans for early projects and is responsible for prioritising exploratory,
Continued investment in research into diseases of the developing research and early vaccine projects.
world is essential if there is to be a long-term improvement in
the health of people who live in these regions. As part of our The Development Review Committee (DRC) oversees the late
response to this challenge, we operate a drug discovery unit development vaccine portfolio including strategy, project prioritisation
based at Tres Cantos (Spain), which focuses on malaria and and resource allocation. The DRC is chaired by the head of Global
tuberculosis. We are adapting our business model to pursue an Vaccine Development and its membership includes the heads of
open innovation strategy for R&D for diseases of the developing clinical research, global industrial operations, global commercial

world. Elements of this new approach include: being more open centre of excellence, R&D, industrialisation and medical.
with our intellectual property; being more open with our resources; After launch, post marketing studies are set up to assess
and being more open with our data and compounds. Additional vaccination programmes and to monitor vaccine safety.
R&D sites in the USA and the UK are focused on the development
of new medicines to treat HIV/AIDS and drug resistant bacteria, In 2010 two distinct R&D groups were formed for vaccines to
while vaccine research is conducted in Rixensart (Belgium). provide specific focus for prophylactics and for our Antigen Specific
Cancer Immunotherapeutic (ASCI) portfolio. A new Global Vaccine
Through these R&D efforts, we are addressing the prevention and Development organisation was created pulling together our clinical
treatment of all three of the World Health Organization’s (WHO) and late development R&D organisations. It has allowed us to give
priority infectious diseases. a clear focus to projects through Vaccine Development Leaders who
have overall responsibility for the development of a particular project.
Vaccines R&D
We are active in the fields of vaccine research, development and Animals and research
production and have a portfolio of over 30 vaccines approved for For ethical, regulatory and scientific reasons, research using animals
marketing. We have over 1,600 scientists devoted to discovering remains a small but vital part of research and development of new
innovative vaccines that contribute to the health and well-being medicines and vaccines. We only use animals where there is no

of people of all generations around the world. The discovery and alternative and constantly strive to reduce the numbers used.
development of a new vaccine is a complex process requiring long- We are committed to maintaining high standards for the humane
term investment and, with more than 20 vaccines in development, care and treatment of all laboratory animals and undertake internal
we have one of the strongest vaccine pipelines in the industry. and external review to assure these standards.
Traditionally vaccines have been used to ward off illness; our
vaccine division is working now to develop immunotherapeutics The vast majority of the experimental methods do not use animals.
aimed at educating the patient’s immune system to identify and We are actively engaged in research to develop and validate more
attack cancer cells in a highly specific manner. tests that either avoid the use of animals or reduce the numbers
needed. When animals are used, all due measures are taken to
Vaccine discovery involves many collaborations with academia and prevent or minimise pain and distress.
the biotech industry to identify new vaccine antigens which are
then expressed in yeast, bacteria or mammalian cells and purified We understand that use of animals for research purposes
to a very high level. This is followed by formulation of the clinical commands a high level of public interest. Our statement on
lots of the vaccine. This may involve mixing antigens with selected ‘The care and ethical use of animals in research’, our views on
GSK novel proprietary adjuvant systems, which are combinations of use of non-human primates and details of our voluntary decision
selected adjuvants designed to elicit the most appropriate immune not to use great apes (chimpanzees), together with further
response to a specific antigen. The right combination of antigen information and reports, are available on our website.
and adjuvant system can help the body mobilise the most effective
immunological pathway, which is designed to provide maximum Research and development – Consumer Healthcare
protection against specific diseases in targeted populations. The continuous creation and development of innovative products
keeps our brands relevant, vibrant and valuable. Our portfolio
Once formulated, the candidate vaccine is evaluated from a safety
spans three major categories: OTC medicines, Oral healthcare
and efficacy perspective through the different phases of preclinical
and Nutritional healthcare. For our major brands, dedicated R&D
testing, then through the clinical trials involving healthy individuals.
teams, including regulatory, partner with and work alongside their
These will range from safety analysis in a small group of volunteers
commercial brand team colleagues in office-free hub environments
in phase I, dose adjustment and proof of concept in phase II, to
that foster collaboration and fast decision-making. Hubs have
large-scale safety and efficacy analysis in phase III. The results
quickly become a preferred way of working at our Innovation
obtained during clinical trials and data regarding the development
Centres in Weybridge, UK, and Parsippany, USA, and we have
of a quality and large-scale production process and facilities are then
expanded this model to China and India.
combined into a regulatory file which is submitted to the authorities
in the countries where the vaccine will be made available. We have a full and diverse product development pipeline. Our key
late stage projects include novel technologies, new combinations
and superior formulations.

12
Pipeline summary
We have a full and diverse product development Key:
pipeline. All our projects comprising new Phase III

chemical entities, biological entities or vaccines, Large comparative study
(compound versus
new combinations and new indications for placebo and/or established
existing compounds that are in Phase III, have treatment) in patients to
been filed for approval or have been recently establish clinical benefit
and safety.
approved are highlighted here. The most
Filed
advanced status is shown and includes 2010
Following successful
and 2011 approvals in the USA and EU. Phase III trials, we file the
product for approval by the
regulatory authorities.
Approval
Only when approval is
granted can we begin to
market the medicine or
vaccine.
10 6 5
Our full pipeline is on
pages 203 to 206 and
on our website.
assets moved approvals in assets terminated
into Phase III USA or EU from Phase III
development
IPX066†, for Parkinson’s Tyverb/Tykerb, for Avandamet XR,
disease first line therapy for for type 2 diabetes
hormone receptor positive
1120212†, a MEK Avandia + statin,
breast cancer (USA/EU)
inhibitor, for metastatic for type 2 diabetes
melanoma Arzerra, for refractory
almorexant, for
chronic lymphocytic
2118436, a BRaf inhibitor, primary insomnia
leukaemia (EU)
for metastatic melanoma
New generation flu
Revolade/Promacta,
573719 + vilanterol†, vaccine, for influenza
for idiopathic
a combination drug prophylaxis
thrombocytopaenic
for COPD
purpura (EU) Simplirix, for genital
1605786†, for herpes prophylaxis
Duodart/Jalyn, a fixed
Crohn’s disease
dose combination drug
Zoster vaccine, for the for benign prostatic
prevention of shingles hyperplasia (USA/EU)
2402968†, for Duchenne Votrient, for renal
muscular dystrophy cell cancer (EU)
migalastat HCI†, for Prolia, for post-
Fabry disease menopausal osteoporosis
(EU)
1349572†, an integrase
inhibitor, for HIV and as
a fixed dose combination
with Epzicom/Kivexa
2696273†, for adenosine
deaminase severe
combined immune
deficiency
†
In-licence or other alliance relationship with a third party
To find out more visit us at

www.gsk.com

13
Pipeline summary
Therapeutic area Compound Indication Phase III Filed Approved

Biopharmaceuticals albiglutide† type 2 diabetes s
Arzerra† chronic lymphocytic leukaemia, first line therapy
and use in relapsed patients s
Arzerra† diffuse large B cell lymphoma (relapsed patients) s
Arzerra† follicular lymphoma (refractory & relapsed patients) s
otelixizumab† type 1 diabetes s
Benlysta† systemic lupus erythematosus s
denosumab† bone metastatic disease s
Arzerra† chronic lymphocytic leukaemia (refractory patients) s
Prolia† hormone ablative/chemotherapy bone loss in prostate
cancer patients s
Prolia† postmenopausal osteoporosis s
Cardiovascular & metabolic darapladib† atherosclerosis s
Infectious diseases Relenza† treatment of influenza s
Neurosciences IPX066† Parkinson’s disease s
Horizant† restless legs syndrome s

Trobalt/Potiga
(retigabine/ezogabine)† epilepsy – partial seizures s
Oncology 1120212† metastatic melanoma s
2118436 metastatic melanoma s
Votrient ovarian cancer, maintenance therapy s
Revolade/Promacta† chronic liver disease induced thrombocytopaenia s
Revolade/Promacta† hepatitis C induced thrombocytopaenia s
Tyverb/Tykerb breast cancer, adjuvant therapy s
Tyverb/Tykerb gastric cancer s
Tyverb/Tykerb head & neck squamous cell carcinoma (resectable disease) s
Votrient renal cell cancer, adjuvant therapy s
Votrient sarcoma s
Votrient + Tyverb/Tykerb inflammatory breast cancer s
Avodart reduction in the risk of prostate cancer s
Duodart/Jalyn benign prostatic hyperplasia - fixed dose combination s
Revolade/Promacta† idiopathic thrombocytopaenic purpura s

Tyverb/Tykerb breast cancer, first line therapy s
Votrient renal cell cancer s
Respiratory & 573719 COPD s
immuno-inflammation 573719 + vilanterol† COPD s
vilanterol (642444)† COPD s
1605786 (CCX282)† Crohn’s disease s
Relovair
(vilanterol† + 685698) asthma s
Relovair
(vilanterol† + 685698) COPD s
Paediatric vaccines Mosquirix malaria prophylaxis (plasmodium falciparum) s
Nimenrix (MenACWY-TT) neisseria meningitis groups A, C, W & Y disease s
prophylaxis
MenHibrix (Hib-MenCY-TT) neisseria meningitis groups C & Y & haemophilus
influenzae type b disease prophylaxis s
Other vaccines Flu vaccine seasonal influenza prophylaxis s
s
Zoster herpes zoster prevention

Flu (pre-) pandemic pre-pandemic & pandemic influenza prophylaxis s
Pumarix pandemic influenza prophylaxis s
Antigen Specific Cancer MAGE-A3 treatment of melanoma s
Immunotherapeutic (ASCI) MAGE-A3 treatment of non-small cell lung cancer s
Rare diseases 2402968† Duchenne muscular dystrophy s
2696273† adenosine deaminase severe combined immune
deficiency s
migalastat HCl† Fabry disease s
Dermatology tazarotene foam acne vulgaris s
Duac low dose acne vulgaris s
calcipotriene mild to moderate plaque psoriasis s
itraconazole tablets onychomycosis s
Veltin acne vulgaris s
HIV 1349572† HIV infections s
1349572† + abacavir
sulphate + lamivudine HIV infections s
†
In-licence or other alliance relationship with a third party
14
Products, competition and intellectual property

Pharmaceutical products Intellectual property
Our principal pharmaceutical products are currently directed to nine Intellectual property is a key business asset for our company,
main therapeutic areas. A description of the products is on pages and the effective legal protection of our intellectual property
15 to 16 and an analysis of sales by therapeutic area, is on page 35. (via patents, trademarks, registered designs, copyrights and
domain name registrations) is critical in ensuring a reasonable
Competition return on investment in R&D.
Our principal pharmaceutical competitors range from small to large
pharmaceutical companies often with substantial resources. Some Trademarks
of these companies are: All of GSK’s commercial products are protected by registered
trademarks in major markets. There may be local variations,
s!BBOTT,ABORATORIES
for example, in the USA the trademark Advair covers the same
s!MGEN product sold in the EU as Seretide. Trademark protection may
s!STRA:ENECA generally be extended as long as the trademark is used by
s"RISTOL -YERS3QUIBB renewing it when necessary. GSK’s trademarks are important for
maintaining the brand identity of its products. GSK enforces its
s%LI,ILLY
trademark rights to prevent infringements.
s*OHNSON*OHNSON
s-ERCK Patents
s.OVARTIS It is our policy to try to obtain patents on commercially important,
protectable inventions discovered or developed through our R&D
s0lZER
activities. Patent protection for new active ingredients is available
s2OCHE(OLDINGS in major markets and patents can also be obtained for new drug
s3ANOl !VENTIS formulations, manufacturing processes, medical uses and devices
for administering products. Although we may obtain patents for
Pharmaceuticals may be subject to competition from other products
our products, this does not prevent them from being challenged
during the period of patent protection and, once off patent, from
before they expire. Further, the grant of a patent does not mean
generic versions. The manufacturers of generic products typically
that the issued patent will necessarily be held valid and enforceable
do not incur significant research and development or education
by a court. If a court determines that a patent we hold is invalid,
and marketing development costs and consequently are able to
non infringed or unenforceable, it will not protect the market
offer their products at considerably lower prices than the branded
from third party entry prior to patent expiry. Significant litigation
competitors. As a research and development based company we
concerning such challenges is summarised in Note 44 to the
will normally seek to achieve a sufficiently high profit margin and
financial statements, ‘Legal proceedings’.
sales volume during the period of patent protection to repay the
original investment, which is generally substantial, and to generate The life of a patent in most countries is 20 years from the filing
profits and fund research for the future. Competition from generic date. However the long development time for pharmaceutical
products generally occurs as patents in major markets expire. products may result in a substantial amount of this patent life being
Increasingly patent challenges are made prior to patent expiry, used up before launch. In some markets (including the USA and
claiming that the innovator patent is not valid and/or that it is Europe) it is possible to have some of this lost time restored and this
not infringed by the generic product. Following the loss of patent leads to variations in the amount of patent life actually available for
protection, generic products rapidly capture a large share of the each product we market. Further, certain countries provide a period
market, particularly in the USA. of data or market exclusivity that prevents a third party company
from relying on our clinical trial data to enter the market with its
We believe that remaining competitive is dependent upon the
copy for the period of exclusivity.
discovery and development of new products that deliver value to
healthcare providers and improved outcomes for patients, together The patent expiry dates for our significant products are in the
with effective marketing of existing products. following table. Dates provided are for expiry of patents in the
USA and major European markets on the active ingredient,
Within the pharmaceutical industry, the introduction of new
unless otherwise indicated, and include extensions of patent
products and processes by our competitors may affect pricing or
term, including for paediatric use in the USA, where available.
result in changing patterns of product use. There is no assurance
The patents on vaccines relate to vaccine compositions.
that products will not become outmoded, notwithstanding patent
or trademark protection. In addition, increased government
and other pressures for physicians and patients to use generic
pharmaceuticals, rather than brand-name medicines, may increase
competition for products.

15
Pharmaceutical products

Products Compounds Indication(s) Major Patent expiry dates
competitor brands USA EU
Respiratory
Veramyst fluticasone furoate rhinitis Nasacort 2021 2023
Flixotide/Flovent fluticasone propionate asthma/COPD Qvar, Singulair expired expired
(compound) (compound)
2011-2016 expired
(Diskus device) (Diskus device)
2013-2025 2012-2017
(HFA-device/ (HFA-device/
formulation) formulation)
Seretide/Advair* salmeterol xinafoat/ asthma/COPD Singulair, Symbicort, expired 20131
fluticasone propionate Spiriva, Asmanex, Pulmicort, (combination) (combination)
Foster 2011-2016 expired

2013-2025 2012-2017
(HFA-device/ (HFA-device/
formulation) formulation)
Serevent salmeterol xinafoate asthma/COPD Foradil, Spiriva expired expired
(compound) (compound)
2011-2016 expired
NA 2012-2019
(HFA-device/
formulation)
Anti-virals
Relenza zanamivir influenza Tamiflu 2013 2014
Valtrex valaciclovir genital herpes, coldsores, Famvir expired expired
shingles

Zeffix/Epivir-HBV lamivudine chronic hepatitis B Hepsera 2013 2012
(use) (use)
Central nervous system

Lamictal lamotrigine epilepsy, bipolar disorder Keppra, Dilantin expired expired
Imigran/Imitrex sumatriptan migraine Zomig, Maxalt, Relpax expired expired
Requip ropinirole Parkinson’s disease, Mirapex expired expired
restless legs syndrome
Requip XL ropinirole Parkinson’s disease Mirapex 2012† 2011
(formulation) (use)
Seroxat/Paxil paroxetine depression, various Effexor, Cymbalta, expired expired
anxiety disorders Lexapro
Treximet sumatriptan and naproxen migraine Zomig, Maxalt, Relpax 20171 NA
(combination
and use)
Wellbutrin SR bupropion depression Effexor, Cymbalta, expired expired
Lexapro
Cardiovascular and urogenital

Arixtra fondaparinux deep vein thrombosis, Lovenox, Fragmin expired expired
pulmonary embolism Innohep
Avodart dutasteride benign prostatic hyperplasia Proscar, Flomax, finasteride 20151 2017
Coreg CR carvedilol phosphate mild-to-severe heart failure, Toprol XL 2016† NA
hypertension, left ventricular (formulation)
dysfunction post MI
Fraxiparine nadroparin deep vein thrombosis, Lovenox, Fragmin expired expired
pulmonary embolism Innohep
Lovaza omega-3 acid ethyl esters very high triglycerides Tricor 20171 NA
(formulation)
* See Outlook on page 7 for details of uncertainty on the timing of follow-on competition.
† Generic competition possible in 2011.
16
Pharmaceutical products
Products Compounds Indication(s) Major Patent expiry dates

competitor brands USA EU
Anti-bacterials
Augmentin amoxicillin/clavulanate common bacterial generic products expired expired
potassium infections
Oncology
Arzerra ofatumumab refractory chronic MabThera/Rituxan pending pending
lymphocytic leukaemia
Hycamtin topotecan ovarian cancer, small cell Doxil, Gemzar expired 2011
lung cancer, cervical cancer
Promacta/ eltrombopag idiopathic thrombocytopenic Nplate 2021 2021
Revolade purpura
Tykerb/Tyverb lapatanib advanced and metastatic Herceptin 2020 2023
breast cancer in HER2
positive patients
Votrient pazopanib metastatic renal cell carcinoma Sutent, Nexavar, Afinitor 2021 2021
Vaccines
Boostrix diphtheria, tetanus, acellular booster vaccination Adacel 2017 2017
pertussis
Infanrix/Pediarix diphtheria, tetanus, pertussis, diphtheria, tetanus, pertussis, Pentacel, Pediacel, 2017 2014
polio, hepatitis B (HepB), polio, hepatitis B (HepB), Pentaxim, Pentavac
inactivated antigens
Cervarix HPV 16 & 18 virus like particles human papilloma virus Gardasil (Silgard) 2020 2020
(VLPs), AS04 adjuvant (MPL + type 16 & 18
aluminium hydroxide)
Fluarix split inactivated influenza virus seasonal influenza Vaxigrip, Mutagrip, Fluzone, 2022 2022
subtypes A and type B antigens Influvac, Aggripal, Fluad
FluLaval split inactivated influenza virus seasonal influenza Vaxigrip, Mutagrip, Fluzone, none none
subtypes A and type B antigens Influvac, Aggripal, Fluad
Pandemrix derived split inactivated A(H1N1)v2009 influenza Focetria, Celvapan, emerflu 2014 2014
influenza virus antigen, prophylaxis
A503 adjuvant
Prepandrix derived split inactivated influenza prophylaxis Aflunov 2014 2014
influenza virus antigen,
A503 adjuvant
Synflorix conjugated pneumococcal invasive pneumococcal Prevenar (Prevnar) NA 2021
polysaccharide disease
HIV
Combivir lamivudine and zidovudine HIV/AIDS Truvada, Atripla 20121 2013
(combination) (combination)
Epivir lamivudine HIV/AIDS Truvada, Atripla expired expired
Epzicom/Kivexa lamivudine and abacavir HIV/AIDS Truvada, Atripla 2016 2016
(combination) (combination)
Lexiva fosamprenavir HIV/AIDS Prezista, Kaletra, Reyataz 2017 2019
Selzentry maraviroc HIV/AIDS Isentress, Intelence, Prezista 2021 2021
Trizivir lamivudine, zidovudine HIV/AIDS Truvada, Atripla 2016 2016
and abacavir (combination) (combination)
1 See Note 44 to the financial statements, ‘Legal proceedings’

17
Consumer Healthcare products

Brand Products Application Markets Competition
Oral healthcare
Aquafresh toothpastes, toothbrushes, prevention of caries, gum global Colgate-Palmolive’s Colgate,
mouthwashes disease and bad breath Procter & Gamble’s Crest
Sensodyne toothpastes, toothbrushes prevention of dental global Colgate-Palmolive sensitivity
sensitivity toothpastes
Biotene mouthwash, gel treat dry mouth many markets none
Polident denture adhesive, to improve comfort of global Fixodent
Poligrip denture cleanser fitted dentures and to
Corega clean dentures
OTC medicines
Panadol tablets, capulets, infant drops paracetamol-based treatment global, except USA Nurofen

of headache and joint pain,
fever, cold symptoms
NicoDerm, gum, patch, mini lozenge, treatment of nicotine global Novartis’ Nicotinell,
NiQuitin CQ, original lozenge withdrawal as an aid to retailers’ own brands
and Nicabate. quitting smoking
Also Nicorette
(USA only)
Nutritional healthcare
Lucozade energy and sports drinks energy and hydration UK, Ireland, some various sports drinks
other markets
Horlicks malted, milk-based drinks nutrition UK, Ireland, India Ovaltine, Milo
and foods
Ribena blackcurrant juice-based vitamin C-delivering UK, Ireland, some Robinsons
drink health drink other markets

Consumer Healthcare competition
GSK holds leading positions in all its key consumer product areas. Worldwide it is the second largest in OTC medicines and the
third largest in Oral healthcare. In Nutritional healthcare it holds the leading position in the UK, Ireland and India.
The environment in which the Consumer Healthcare business operates has become ever more challenging:
sCONSUMERSAREDEMANDINGBETTERQUALITYBETTERVALUEANDIMPROVEDPERFORMANCE
sRETAILERSHAVECONSOLIDATEDANDGLOBALISEDWHICHHASSTRENGTHENEDTHEIRNEGOTIATIONPOWER
sCYCLETIMESFORINNOVATIONHAVEREDUCED
The main competitors include the major international companies Colgate-Palmolive, Johnson & Johnson, Procter & Gamble, Unilever
and Pfizer. In addition, there are many other smaller companies that compete with GSK in certain markets.
The major competitor products in OTC medicines are:
sINTHE53!-ETAMUCILLAXATIVE 0EPCIDINDIGESTION ANDPRIVATELABELSMOKINGCONTROLPRODUCTS
sINTHE5+,EMSIPCOLDREMEDY .UROFENAND!NADINANALGESICS AND.ICORETTEAND.ICOTINELLSMOKINGCONTROLTREATMENTS

In Oral healthcare the major competitors are Colgate-Palmolive’s Colgate and Procter & Gamble’s Crest.
In Nutritional healthcare the major competitors to Horlicks are Ovaltine and Milo malted food and chocolate drinks. Competitors to
Ribena are primarily local fruit juice products, while Lucozade competes with other energy drinks.

18
Regulation
Regulation – Pharmaceuticals Regulation – Consumer Healthcare
Region and country-specific laws and regulations are major The consumer healthcare industry is subject to national regulation
factors in determining whether a product may be successfully comparable to that for prescription medicines for the testing,
developed and approved. They define the information needed to approval, manufacturing, labelling and marketing of products.
evaluate the safety and efficacy of pharmaceutical products, as High standards of technical appraisal frequently involve a lengthy
well as governing their testing, approval, manufacturing, labelling approval process before a new product may be launched.
and marketing. There is an increasing level of co-operation and
GSK Consumer Healthcare continues to gain centralised regulatory
exchange of information among the major regulatory authorities
approvals for over-the-counter products. Since the 2009 history-
encompassing development plans, data to support product
making first for the OTC industry when the European Medicines
registration, post-marketing safety information and inspections.
Agency granted centralised approval of the weight loss medicine
Although the evaluation of benefit and risk continue to be alli which has now been granted approval in more than 50
paramount considerations for the approval of a new drug in countries; a line extension chewable product has also been granted
the USA, there is enhanced focus by the FDA on the safety of centralised approval. Additionally, GSK Consumer Healthcare has
medicines from approval through the post-marketing phase of embraced the principle of centralised applications and has achieved
the product. In 2010 the FDA announced four strategic priorities GSK’s first pan-Gulf Cooperation Council approvals for alli and
for the next five years: advance regulatory science and innovation, Niquitin in 2010, permitting launch across all seven markets of the
strengthen the safety and integrity of the global supply chain, Gulf region.
strengthen compliance and enforcement activities to support
public health; and address the unmet public health needs of Value for money
special populations. We will be engaged in these key areas Payers around the world are concerned about the cost of
of interest. healthcare and the pricing of medicines. The requirement to
In Europe, new regulations aimed at strengthening the safety satisfy healthcare purchasers on value for money is becoming
monitoring of medicines have now been agreed by EU legislators an additional hurdle for product acceptance over and above the
and will be implemented from 2011. Discussions continue on draft regulatory tests of safety, efficacy and quality.
legislation on improving citizens’ access to reliable information on
medicines, and on strengthening EU laws to protect citizens from
Price controls
the threats posed by fake medicines. The European Medicines In many countries the prices of pharmaceutical products are
Agency (EMA) and the Heads of National Medicines Agencies controlled by law. Governments may also influence prices through
(HMA) both published five-year strategic plans during 2010; these their control of national healthcare organisations, which may bear
were aimed mainly at strengthening the operation of the existing a large part of the cost of supplying medicines to consumers.
EU regulatory network. The EU Commission published a report on Recent government healthcare reforms in countries such as France,
the operation of the EMA in preparation for a potential legislative Spain and Germany may restrict pricing and reimbursement.
proposal for changes to the regulatory framework by 2014, and
also continued with its review of the regulation of Clinical Trials in Currently in the USA, there are no government price controls over
Europe – this review is expected to conclude in 2012. private sector purchases, but federal law requires pharmaceutical
manufacturers to pay prescribed rebates on certain drugs to
The regulatory environment in Emerging Markets and Asia-Pacific be eligible for reimbursement under several state and federal
continues to evolve, with a number of countries continuing to healthcare programmes. In 2010, the US President and Congress
develop their regulatory review systems. We actively participate passed the Affordable Care Act (ACA) to reform the US healthcare
in a number of specific regional and national regulatory system to drive down cost, improve quality and increase access
initiatives, which provide opportunities for meaningful scientific to millions of Americans without health insurance. These reforms
and regulatory dialogue between industry, agencies and other have the potential to create positive changes in the US healthcare
stakeholders. We continue to include broader sets of patient system and expand access to our products. However, the ACA
populations from a number of these countries in medicine also increased prescribed rebates under government-run
development programmes in order to increase global patient access programmes and changed the balance between private and
to new innovative medicines, and optimise regulatory approvals. public sector purchases.
Despite passage of the ACA, the pressure to control healthcare
costs will continue into 2011 and beyond. Issues such as cross-
border trade, the acceleration of generics to market, comparative
effectiveness research, and pharmaceutical pricing will continue to
be part of the ongoing healthare debate in the USA. Fortunately,
we are positioned to be a constructive contributor to these debates
since there has been increased recognition that chronic disease
is the primary driver of healthcare spending and pharmaceutical
products deliver important interventions that help hold down
healthcare costs.

19
Manufacturing and supply

GSK’s manufacturing covers Pharmaceutical, Consumer Healthcare Vaccine manufacturing

and Vaccines. Vaccine manufacturing, which is managed separately from GMS,
Pharmaceutical Global Manufacturing and Supply (GMS) is an integral part of the Biologicals business, and is particularly
complex as it requires the use of innovative technologies and living
More than 27,000 people work in GMS across our network of
micro-organisms. Comprehensive quality assurance and quality
77 sites in 32 countries. GMS supports the commercial ambition
control procedures are in place to ensure the vaccine’s quality and
of GSK by delivering quality medicines and consumer products to
safety. Due to their biological nature, individual health authorities
patients and customers around the world.
may subject vaccines to a second control to guarantee the highest
The scale of manufacturing in GSK is huge, with the manufacture quality standards.
of over 4 billion packs per year in 28,000 different presentations
GMS supports GSK’s commercial ambition to deliver quality
(including tablets, creams/ointments, inhalers, injections, liquids
medicines and consumer healthcare products to patients and
and steriles), which are then supplied to over 150 markets. Over
consumers around the world.
£4.1 billion was spent by GMS on production in 2010.
GMS operates a procurement operation on behalf of the Group.
We spend over £2 billion annually with external suppliers,
purchasing active ingredients, chemical intermediates, packaging

components and part-finished and finished products.
During 2010, as our internal customers sought every opportunity
to grow their businesses, we focused on the cost-competitive
supply of quality product to meet their ambitions. We worked
diligently to leverage our network of sites and contractors to give
us built-in flexibility to sustain future growth and adapt to emerging
commercial business models. In an increasingly rigorous external
regulatory environment, we have continued to leverage technology
in support of process understanding, control, and capability.
Our Pharmaceutical Launch and Global Supply sites work closely
with R&D’s development teams to ensure that the right technical
competencies are in place to support rapid and successful new
product introduction. These sites serve as the focal point for
developing and introducing new secondary manufacturing
technologies. The Primary supply sites in our Pharmaceutical Launch

and Global Supply division supply high quality, competitively priced
bulk actives and focus on improvements in primary technologies
and processes. The sites in our Antibiotics and Emerging Markets
supply division focus on manufacturing products in the late stage
of their life cycle, allowing GSK to compete more effectively in all
its markets.
Consumer Healthcare manufacturing
Most of Consumer Healthcare Manufacturing is also managed
by GMS apart from our Coleford site which is managed directly
by Nutritional healthcare.
Our Consumer Healthcare sites deliver high-quality, competitively
priced products and support rapid new product introduction in a
highly innovative and competitive business. New technologies have
become a fundamental platform for driving innovation, lowering
costs and providing flexibility in operations.

We are continuously improving and embedding new ways of
working that are simplifying the business and achieving greater
efficiencies. It is our focus on customer service, including support
for new product launches, our strong compliance culture, our
commitment to health, safety and the environment, and our
commitment to developing our people that have delivered strong
results for GSK even as the external environment has become
more demanding.

20
World market – pharmaceuticals

The global recession caused by the international financial crisis
World market –
Value % of
continued to impact the world’s economies during 2010. Although top six therapeutic classes £bn total
many countries and industry sectors saw some improvement over
2009, significant growth remained elusive and the recovery was Central nervous system 76 16
fragile at best. Cardiovascular 69 15
Antineoplastic/Immunomodulatory 63 13
Following its 22% rise in 2009, the FTSE 100 Index achieved more
Alimentary tract and metabolic 57 12
modest gains in 2010, at 9%. In the USA, the Dow Jones Industrial
Anti-infectives (bacterial,
Average rose by 11%. Stock exchanges across Europe recorded
viral and fungal) excluding vaccines 49 10
mixed performances, with the 16% rise in Germany contrasting
Respiratory 33 7
with losses of 17% and 13% in Spain and Italy respectively.
In Asia, the Chinese stock market posted an annual decline of (Note: data based on 12 months to 30th September 2010)
almost 15% and the Nikkei in Japan one of 3%.
The debt crisis in Greece spread to other economies such as Data for market share and market growth rates are GSK estimates
Spain, Portugal, Italy, Ireland and Romania. As we moved towards based on the most recent data from independent external sources
the end of the year, many governments introduced austerity including IMS Health, and where appropriate, are valued in Sterling
measures to complement the fiscal stimulus initiatives of 2009. at relevant exchange rates.
These cuts, which in some cases were both severe and rapid,
were implemented across education, healthcare and other public
services. Each government took a different approach to healthcare
with specific pricing cuts being applied to selected medicines and
vaccines. These measures affected the pharmaceutical industry
to varying degrees depending on each company’s exposure
to the areas impacted. At the same time, 2010 also saw the
implementation of healthcare reform in the USA with associated
discounts and price cuts for the pharmaceutical industry.
Global pharmaceutical sales in 2010 were £476 billion, compared
with £468 billion in 2009.
World market by Value % of

geographic region £bn total
USA 194 41
Europe 129 27
Rest of World 153 32
Emerging markets 67 14
Asia Pacific 20 4
Japan 52 11
Canada 13 3
Total 476 100
Market growth on a CER basis was USA 4.2%, Europe 3% and

Rest of World 8.2%.

21
GSK sales performance

GSK delivered underlying sales growth (excluding pandemic related products, Avandia and Valtrex) for 2010 of 4.5% despite the ongoing

impacts of EU government austerity measures and US healthcare reform which reduced sales by approximately £380 million.
Commentary on GSK’s segmental sales performance uses the performance measures set out below.
Underlying sales growth
Underlying sales growth excludes the sales of pandemic products, Avandia and Valtrex. Management believes this measure assists
shareholders in gaining a clearer understanding of the Group’s sales performance and prospects because of the size and nature of the
loss of sales from these products. A reconciliation to Group and pharmaceutical turnover is as follows:
2010 2009 Growth

£m £m CER%
Group turnover 28,392 28,368 (1.2)

Avandia, Valtrex and pandemic products (2,285) (3,668)
Underlying Group turnover 26,107 24,700 4.5
2010 2009 Growth

£m £m CER%
Pharmaceutical turnover 23,382 23,694 (2)

Avandia, Valtrex and pandemic products (2,285) (3,668)
Underlying pharmaceutical turnover 21,097 20,026 4
Sales of these products by segment were:
Emerging Asia Pacific/ Other trading

USA Europe Markets Japan and unallocated Total
2010 £m £m £m £m £m £m
Pandemic products 44 494 227 462 86 1,313

Avandia 237 88 42 24 49 440
Valtrex 252 68 28 176 8 532

Emerging Asia Pacific/ Other trading
USA Europe Markets Japan and unallocated Total
2009 £m £m £m £m £m £m
Pandemic products 324 737 89 331 122 1,603

Avandia 425 171 76 41 58 771
Valtrex 942 160 26 152 14 1,294
White pills/western markets

White pills/western markets refers to sales of tablets and simple injectables (excluding biopharmaceuticals and vaccines) in North America
and Europe.
CER growth
In order to illustrate underlying performance, it is the Group’s practice to discuss its results in terms of constant exchange rate (CER)
growth. This represents growth calculated as if the exchange rates used to determine the results of overseas companies in Sterling had
remained unchanged from those used in the previous year. CER% represents growth at constant exchange rates. £% represents growth
at actual exchange rates.
All commentaries in this Report are presented in terms of CER unless otherwise stated.

22
US pharmaceuticals segment review

2009 We have been making continued efforts to change the company’s
2010 (restated) Growth model to improve levels of openness and transparency. For example
£m £m CER%
in 2008, we voluntarily stopped all corporate political contributions,
Turnover 7,648 8,578 (11) and in 2009, we became the first company to report voluntarily
Operating profit 5,043 5,933 (16) payments to healthcare professionals in the USA on a named,
individual basis for speaking and consulting services.
We are emerging from a period of significant patent expirations, In 2011 the US business is implementing a new system for
and are making good progress to transform our US business model evaluating and compensating our professional sales representatives.
and operations to meet current and future challenges. Under the new programme, bonuses to sales representatives
who work directly with customers will no longer be based on
Sales in the USA were down 11% to £7.6 billion, primarily due
achievement of individual sales targets. Instead, they will be
to the impact of generic competition to Valtrex, a significant
assessed on scientific and business knowledge, feedback from
reduction in sales of pandemic related products and lower sales of
customers in their region, including demonstration of the company’s
Avandia. Underlying sales (excluding pandemic related products,
values, and overall performance of the business unit they support.
Avandia and Valtrex) were up 3% in the USA during the year
This programme will be fully implemented in July 2011.
despite the discontinuation of GSK’s promotion of Boniva, the
sale of Wellbutrin XL and the impact of US healthcare reform Consistent with our values of integrity and transparency, we have
across the product range. Underlying growth was driven by strong also sharpened the focus of our support for continuing medical
performances from a number of our promoted medicines, including education (CME). For example, we implemented a system where
Flovent (up 8%), Ventolin (up 16%), Boostrix (up 51%), Avodart we limit grant applications to approximately 20 academic medical
(up 5%), Lovaza (up 17%) and our oncology products (up 13%). centres and national-level professional medical associations. All
New products launched since 2007 (excluding flu pandemic CME providers that we support must be directly accredited by
vaccines) grew 29% and contributed 8% of 2010 sales. a recognised accrediting body, and we now only fund CME by
not-for-profit providers.
The reduced turnover was partially offset by lower SG&A costs
reflecting savings from the restructuring programme and a receipt Although the US healthcare and business environment is
for the exclusive promotion rights to Boniva for 2010. Operating challenging, it also presents opportunities for companies that can
profit declined by 16%. deliver truly innovative medicines to the market. Since 2007, we
have launched more than 20 new products in the US market.
In the USA, the healthcare market is changing radically and rapidly.
In 2011, we look forward to a regulatory decision on Benlysta,
A significant proportion of healthcare costs continue to be paid by
which if approved will be the first new treatment for Lupus in the
federal and local governments. Large pharmacy benefit managers
last 50 years. Overall we believe the improvements we are making
and health plans dominate the private market. Physicians are
to our cost structure and how we operate are enabling us to
consolidating their practices into medical centers, group practices
compete more effectively in the evolving marketplace.
and integrated delivery networks. Hospitals are consolidating
too, with 500 fewer now than there were just three years ago. Our Research Triangle Park campus in North Carolina, USA,
Payers are demanding higher quality care with lower costs and are is a home to a number of business functions.
increasingly linking reimbursement with improved health outcomes.
Implementation of landmark healthcare reform legislation in the
USA also began during the year. As a result, in January 2010,
Medicaid drug rebates increased from 15% to 23% and were
extended to include Medicaid managed care plans and new
formulations of existing products. Also in January, eligibility for
certain government drug pricing programs was expanded to
include additional hospitals and health centers.
In response to these evolving market conditions, we are making
fundamental changes to our US operations to ensure that we
deliver the value our customers – patients, healthcare providers
and payers – demand. These changes are enabling us to more
effectively meet customer needs and expectations, better deploy
our resources and support an evolving, more specialised product
portfolio. For example, the majority of our US pharmaceuticals sales
representatives now have either customer-centred or portfolio-
focused responsibilities, rather than product specific responsibilities.
These changes have enabled us to increase the productivity of
our sales force while reducing its size by approximately 25% since
2008. Most importantly, our new customer-centric model aligns
with our customers’ desire to work with us as a business-to-
business partner.

23
Europe pharmaceuticals segment review

2009 As we enter 2011, the continuing pressure on cost and the

2010 (restated) Growth change to a value-based medicine approach (where in addition
£m £m CER%
to demonstration of safety and efficacy, governments or their
Turnover 6,548 7,087 (6) agencies assess medicines for the value they deliver to their
Operating profit 3,744 3,993 (4) healthcare system) makes the development of effective dialogue
with governments, regulators and payers across Europe absolutely
vital. Within our business we continue to place emphasis on being
Our European pharmaceutical business delivered solid performance
able to demonstrate the cost effectiveness of GSK products and to
in 2010, despite significant government led austerity measures
deliver new medicines and vaccines that address unmet medical
and price cuts.
need and also have demonstrable value. Much of our work is
Although reported sales were down 6% to £6.5 billion, underlying targeted on building evidence on the cost effectiveness of our
performance (excluding pandemic related products, Avandia and medicines when compared to current treatments. For example,
Valtrex) was flat. This was a creditable performance as it includes in the UK we have agreed an innovative pricing agreement with
approximately £150 million sales impact from government price the National Institute for Clinical Excellence (NICE) for our
cuts. It was driven by the introduction of new products and growth advanced kidney cancer medicine, Votrient. If Votrient is not
from other products in our portfolio. Despite likely continued as effective as sunitinib, the current standard of care, in the
government pricing pressure in 2011, this strong product portfolio comparative trials which are currently underway, we have

gives us confidence in future performance of this business. offered a future financial rebate.
We introduced five new products in 2010. A particular highlight
was Duodart, our treatment combination of Avodart and
tamsulosin for benign prostatic hyperplasia. Other recently
introduced brands such as Avamys, Requip Modutab, Tyverb,
Volibris and Wellbutrin all achieved double digit growth.
Our major product, Seretide for asthma and COPD, while impacted
by the price cuts, achieved sales of £1.6 billion, up 2% whilst
maintaining its leadership position in the respiratory market. We
continue to bring the benefits of this product to more patients
across Europe. Our portfolio of vaccines also contributed to growth
with Synflorix, a pneumococcal conjugate vaccine, winning several
national tenders and increasing sales by 38% to £43 million.
To manage our operating costs, the business has also delivered

improvements in efficiency. Close control of our operating expenses
delivered savings in excess of 10% and our programme to reduce
the diversity of cartons, labels and leaflets used across our range
of medicines delivered further savings. As part of this initiative
we will reduce 35 different formats of tablet blister packs to just
3 by 2013.
An 11% reduction in SG&A costs, reflecting savings from the
restructuring programme, helped to limit the decline in operating
profit to 4%.
Our commitment to work with communities across Europe
to support greater access and to build trust with stakeholders
continues. An example is a project in Bulgaria to promote
awareness for vaccines among vulnerable ethnic minority groups
through collaboration between the health mediators, general
practitioners and the representatives of the regional health

inspectorates. The initiative facilitates the access of these groups to
the national healthcare system, focusing on prevention and health
awareness. A particular benefit from this work in 2010 was an
improved rate of immunisation in this group which in turn reduced
the impact from an outbreak of measles.

24
Emerging Markets pharmaceuticals segment review

2009 We continue to introduce flexible pricing strategies. The work is at
2010 (restated) Growth an early stage, however the results of some of our initiatives so far
£m £m CER%
are promising. For example, we significantly reduced prices of some
Turnover 3,556 2,895 22 of GSK’s newest and most innovative products, including Avodart,
Operating profit 1,271 948 31 Avamys and Cervarix, with the aim of increasing affordability and
volumes sold in middle income countries.
Our Emerging Markets pharmaceutical business continues to For the least developed countries (LDCs), last year we established a
perform very strongly with sales up 22% to £3.6 billion in 2010. new Developing Countries and Market Access business unit.
Underlying growth in these markets (excluding pandemic related This new unit has a dedicated focus on expanding access to our
products, Avandia and Valtrex) was 20%. This is the second medicines and vaccines to more of the 700 million people who
consecutive year following the introduction of GSK’s strategic live in the world’s poorest countries. It has the added benefit of
initiatives that the Emerging Markets business has outgrown helping us build sustainable GSK businesses in those parts of the
pharmaceutical market growth in this region, estimated at 15%. developing world where we currently have little or no presence.
It is responsible for implementing our pricing policy where we are
We delivered particularly strong performances in Latin America
capping the prices of our patented medicines in LDCs to 25% of
which grew 44% and in China and the CIS, which grew 21%
the Western price, and reinvesting 20% of our profits from
and 20% respectively. In addition, we produced growth across
medicines sold in these countries back into the same countries’
all three sectors of the Emerging Markets business – Innovative
healthcare infrastructure.
brands (new patent protected products), Classic brands
(non-patent protected) and Vaccines. During the year, we were also pleased to announce the signing
of the Advance Market Commitment (AMC) for pneumococcal
Our Innovative brands business showed consistent performance
vaccines with the Global Alliance for Vaccines and Immunisation
in 2010, with sales growth of 16% to approximately £1.1 billion.
(GAVI), providing 300 million doses of Synflorix over
Sales of respiratory medicine, Seretide, were over £300 million,
10 years at a reduced price, to protect children in the poorest
and grew 16%, with particularly strong performances in key
countries across the world against invasive pneumococcal disease.
markets including China.
Our Classic brands business also continues to go from strength
to strength with sales growth of 18% to £1.6 billion, including
continued double-digit growth of Augmentin after 30 years on
the market. Vaccine sales were up 38% to £927 million, with
pandemic flu products and pneumococcal vaccine Synflorix
performing particularly well. Excluding pandemic flu vaccines,
sales grew 14%.
Turnover by main business sector
1 Vaccines (26%)
1 3
2 Innovative brands (30%)

2
3 Classic brands (44%)
3
Emerging Markets pharmaceuticals operating profit increased by

31% on a turnover increase of 22%, reflecting strong Synflorix and
pandemic vaccine sales, together with the benefit of acquisitions,
partially offset by increased SG&A investment across the region.
Operational highlights for the year include a number of new
strategic alliances. We strengthened our footprint in key
emerging markets through a number of business acquisitions,
including Laboratorios Phoenix, a leading Argentinian Classic
brands business. A number of vaccine production alliances were
also concluded during the year including an alliance with JSC
Binnopharm, a Russian pharmaceutical manufacturer, to enable
the local secondary manufacture of a number of key GSK vaccines
in Russia.

25
Asia Pacific/Japan pharmaceuticals segment review

2009 GSK Japan delivered another very strong year, with sales up 14%

2010 (restated) Growth to £1,959 million. Underlying sales growth, excluding pandemic
£m £m CER%
products, Valtrex and Avandia, was 6%. This growth was driven
Turnover 3,102 2,628 9 primarily by Adoair (Seretide/Advair), up 17%, and contributions
Operating profit 1,730 1,352 15 from newly launched products such as Cervarix, Avolve/Avodart
and Xyzal, partially offset by a Paxil sales decline of 11%, and
declines in the mature respiratory products Flixotide/Flovent down
In 2010, sales in Asia Pacific grew 1% to £1.1 billion. Excluding
18%, and Serevent, down 26%, which in part reflected biennial
the sales of pandemic related products, Avandia and Valtrex,
price reductions.
underlying growth in Asia Pacific was 8% which benefitted from
the acquisitions of Stiefel’s dermatology portfolio and UCB’s Asian Our vaccine franchise has become an important pillar for the
business. Strong performances were also delivered from Avamys company in Japan. Arepanrix became one of only two flu vaccines
(up 80%), Tykerb (up 20%), Seretide (up 5%) and vaccines ever allowed for import into Japan when it received regulatory
(up 8% excluding flu pandemic). approval in January 2010. Cervarix has had a strong launch in Japan
Operating profit for Asia Pacific improved 4% to £0.5 billion, with 2010 sales of £57 million. The product was also recognised as
reflecting improved sales of Synflorix and Cervarix and the one of the three vaccines that would receive public funding from
favourable impact of product mix on cost of goods, partially the Japanese government from 2011 onwards.

offset by lower sales of Relenza. Operating profit for Japan increased by 20% to £1.2 billion,
The middle income countries in the Asia Pacific region have been reflecting higher Cervarix and pandemic vaccine sales and the
at the centre of GSK’s flexible pricing initiatives. For example as favourable impact of product mix on cost of goods, partially offset
part of our innovative pricing model, monthly sales of our Cervarix by lower sales of Relenza.
vaccine have increased by approximately six times in the Philippines During the year, GSK Japan received approvals for six compounds,
following a 60% price reduction. Similarly, in Indonesia and including Revolade and Xyzal, and one new indication, Botox
Vietnam we have introduced equivalent pricing strategies for this for spasticity. In addition, oral pulmonary arterial hypertension
vaccine which has resulted in a more than six-fold increase in the treatment, Volibris, was launched during the year.
number of women vaccinated. Cervarix is now the number one
human papillomavirus vaccine in South East Asia, with Malaysia GSK Japan established a rare diseases development centre in
securing the region’s first ever tender for the product during the April 2010 to accelerate delivery of medicines for rare diseases
year. Synflorix is also growing well, delivering sales of £12 million. for which treatment is not yet available. As part of this initiative,
GSK increased investment in Japan by investing in Japan Chemical
The year also saw important strategic alliances signed with major Research, a company with leading technology to manufacture
local pharmaceutical companies including Dong-A in South Korea bio-pharmaceuticals.

and Savipharm in Vietnam.
Japanese pipeline potential
1
0
Approvals Pending Potential
in 20101 approval filings
20122
1
Includes 4 New Chemical Entities
2
Includes New Chemical Entities, line extensions, new promotions or
re-formulations

26
ViiV Healthcare segment review

2009 Improving paediatric care of HIV
2010 (restated) Growth

£m £m CER%
Turnover 1,556 1,605 (3)
Operating profit 851 1,071 (21)
ViiV Healthcare celebrated its first anniversary in November 2010.

The business was established by GSK and Pfizer as an independent
company focused on delivering advances in clinical outcomes
and enhancing the quality of life for people living with HIV. The
company’s unique structure and wide portfolio of 10 available
medicines, provides financial stability and the investment capital
required to take a sustainable, long-term view of the
HIV market.
Overall, sales of HIV products by ViiV Healthcare were down 3%
to £1.6 billion in 2010. Sales of former Pfizer products Celsentri/
Selzentry and Viracept (combined sales of £118 million) and
growth from Epzicom/Kivexa (up 1% to £555 million) partially
offset reductions in the sales from other established HIV products
including Trizivir (down 28% to £144 million), Combivir (down
16% to £363 million), Lexiva/Telzir (down 12% to £155 million)
and Epivir (down 12% to £115 million) which continue to be
impacted by uptake of newer alternative products.
Strong growth for Celsentri/Selzentry compared with 2009 was
supported by the wide acceptance of genotypic testing across
Europe, increasing first-line use in the USA and country launches
in Poland, Romania, Australia, Japan and Mexico. Upward trends In 2010, as part of its commitment to address major unmet needs
in Epzicom/Kivexa sales reflected the role of nucleoside reverse in HIV, ViiV Healthcare formed key partnerships with the Elizabeth
transcriptase inhibitors (NRTIs) as a mainstay of treatment in HIV. Glaser Pediatric AIDS Foundation and amFAR to improve care of
As part of the strategic focus on International markets (all countries paediatric HIV and prevent mother to child transmission (MTCT)
excluding Europe and North America), ViiV Healthcare established of the virus, which is the fourth Millennium Development Goal.
new independent local operating companies in several important The Positive Action for Children Fund gave more than £3 million
geographies and opened regional hubs in Asia Pacific, CIS and to community projects to support mothers and children affected
Latin America in 2010. As a result, revenue in the International by HIV and to prevent MTCT. A further request for proposals at
region grew by 22%. the end of the year expanded the Fund’s reach and scope.
ViiV Healthcare operating profits decreased 21% primarily as
a result of US healthcare reform and higher SG&A and R&D
costs partially offset by a one-time royalty settlement. The higher
SG&A costs were primarily due to the amortisation of acquired
intangible assets.
2010 also saw great progress in building a late-stage pipeline.
In October, Shionogi-ViiV Healthcare announced the start of
their Phase III development programme for the novel integrase
inhibitor S/GSK1349572 (‘572), with a further Phase III trial for
fixed dose combination ‘572-Tri (‘572+Epzicom/Kivexa) initiated
in February 2011.
ViiV Healthcare is committed to supporting the communities most
affected by the HIV epidemic. One way the company does this is by
developing innovative approaches to improve access to medicines.
For example, in July 2010, ViiV Healthcare was the first company to
make its entire current and future anti-retroviral portfolio available
to generic manufacturers through royalty-free voluntary licences.
These cover all of the least developed, low income countries
and sub-Saharan Africa, the 69 countries where 80% of people
with HIV live. Similarly, the not-for-profit pricing policy has been
expanded to these 69 countries. During the year, ViiV Healthcare
also launched the Positive Action Southern Initiative in the USA
to reduce healthcare disparities among communities with the
greatest needs.

27
Consumer Healthcare segment review

2009 During the year, we opened a new bottle manufacturing plant at

2010 (restated) Growth our Coleford, UK factory for Nutritional Healthcare, enabling us
£m £m CER%
to mould Lucozade and Ribena bottles, formulate the drinks and
Turnover 5,010 4,674 5 fill the bottles, all at one plant. The bottle-forming facility moulds
Operating profit 1,043 931 8 1 billion PET bottles per year from plastic chips. This investment
eliminates over 2,400 road-haulage trips of more than 110 miles
from our former bottle supplier.
Consumer Healthcare sales grew 5% to £5 billion in 2010,
significantly ahead of Consumer Healthcare market growth We recently announced our intention to accelerate growth
estimated to be approximately 2%. We delivered growth in all of and focus our Consumer Healthcare business around a portfolio
the three categories in which we operate – Oral healthcare (up of ‘Priority’ brands and the emerging markets. These two
6%), Over-the-Counter (OTC) Medicines (up 3%) and Nutritional dimensions represent around 90% of our current Consumer
healthcare (up 9%). Healthcare sales base. We intend to divest the remaining 10%
of sales (£500 million) which mostly consist of European and
Europe sales were level with last year with sales of £2.0 billion
American non-core OTC brands. Our aim is to divest these products
as growth in Oral healthcare and Nutritional healthcare was offset
by late 2011, subject to interest and realising appropriate value
by a decline in OTC sales. The business in the USA grew 1% to
for shareholders. We expect to use the proceeds to fund increased
£1.0 billion, led by Oral healthcare.

returns to shareholders.
Growth was particularly strong in the rest of the world which grew
Finally, as part of our objective to deliver a sustainable business
13% to £2.0 billion. In the Indian sub-continent we continued to
the largest array of solar panels in North America now powers our
deliver new innovations for the Horlicks brand while launching
regional distribution centre in York, Pennsylvania. Almost 11,000
three ‘Priority’ brands – Lucozade, Sensodyne and Breathe Right,
door-sized solar panels cover a rooftop that is equivalent to eight
resulting in combined sales growth of 20%. In China, we delivered
football fields, generating 3,400,000 kWhr per year. This solar array
sales growth of 20% through expanded consumer availability for
will eliminate nearly 1,800 tonnes of carbon dioxide emissions per
Fenbid, Contac and Bactroban, strong uptake from newly launched
year, a load on the environment that would take 15,000 mature
Lucozade and continued good performance from other products
trees to absorb.
including Sensodyne, Breathe Right and denture care brands.
To accelerate research and innovation in these key emerging
11,000 solar panels cover the rooftop of GSK’s Consumer
markets, we opened an Oral Healthcare Research Centre in
Healthcare regional distribution centre in York, Pennsylvania
Gurgaon, India, and an Innovation Centre in Beijing, China. The
Middle East, Africa and Pakistan markets together delivered sales
growth of 18%, largely through strong Panadol and Eno sales
growth. South America grew sales by 16%, also led by strong

Panadol and Eno consumption, with lower growth in Japan and
Australia/New Zealand of 4% and 6%, respectively.
Oral healthcare grew 6% to £1.6 billion, led by a strong
performance from Sensodyne, which continued as the fastest-
growing toothpaste in the world, a position it has held for the
last 5 years. This is a remarkable record for a brand in its 50th
year. Following our 2010 launch in India, we now market
Sensodyne in 124 countries. However, Aquafresh sales declined
slightly. Biotene, the dry mouth treatment acquired in 2008,
grew strongly.
OTC medicines recorded sales of £2.5 billion, up 3%. A good
performance from smoking control products was helped by the
new tax on tobacco in Japan and substantial sales in Brazil for a
government-funded smoking cessation initiative. In addition to
supplying products for Brazil’s initiative, we have provided training

on smoking cessation to 1,400 clinics across the country. Panadol,
the leading paracetamol analgesic outside the USA, delivered
strong sales growth, helped by the roll-out of Panadol Advance
with Optizorb technology that dissolves five times faster than
regular paracetamol tablets.
Dermatology products grew 8% to £256 million but respiratory
tract products declined 6% to £380 million.
Nutritional healthcare grew 9% to £952 million, led by Horlicks,
with more modest growth from Ribena and Lucozade.
Operating profit increased 8% on a turnover increase of 5%,
reflecting efficiencies of scale in SG&A costs, which grew more
slowly than sales.

28
Pharmaceutical research and development review

In 2010, Group R&D expenditure before major restructuring was Focusing on returns in pharmaceutical R&D
£3,964 million (2009 – £3,951 million) representing 14.0% of total We have been making fundamental changes to how we allocate
turnover (2009 – 13.9%). The company expects R&D costs before our pharmaceutical R&D investment: terminating development
major restructuring as a percentage of turnover to remain around in areas with low scientific and financial return; dismantling
14% in 2011. infrastructure; reducing cost and risk through externalising parts
We are delivering sustained asset progression with 10 new of early-stage discovery and directing investment to our late stage
chemical entities and new vaccines entering Phase III since the start pipeline. Progress in 2010 included:
of 2010. Seven assets are filed with regulators. Five projects have s )NEARLYWEANNOUNCEDOURINTENTIONTOCEASE
been terminated from Phase III development, as listed on page 12, discovery research into certain areas of neurology, such as
because of adverse trial results or feedback from regulators. By pain and depression, and instead concentrate activities in
the end of 2012, we expect Phase III data on around 15 additional neurodegenerative and neuroinflammatory diseases where
assets, including treatments for type 1 and type 2 diabetes, rare we feel the prospects for successful registration and launch of
diseases and multiple cancer types. differentiated medicines are greater. This change led us to exit
Our pharmaceuticals R&D segment comprises R&D activities for the five R&D centres. In two of the largest of these – Verona, Italy
pharmaceuticals business, excluding vaccines, Consumer Healthcare and Zagreb, Croatia – the operations were transferred to
and other local and central costs. The table below analyses the external groups thereby preserving the majority of jobs.
Group R&D expenditure by these categories. s 7EHAVESUCCESSFULLYOUT LICENSEDANDSPUNOFFSOMEOFTHE
early stage neurology assets in the UK through deals with
2010 2009 2008
£m £m £m Convergence Pharmaceuticals and Proximagen Group.
Pharmaceuticals - direct project costs 1,432 1,489 1,209 s 4HROUGHTHESECHANGESANDOTHERACTIONSWEHAVEACHIEVEDA
(excl. vaccines) - indirect costs 959 1,056 844 reduction in our footprint of 29% since 2006.
- unallocated costs 563 474 490
s 7ECONTINUETOINCREASETHEEXTERNALNATUREOFOURDISCOVERY
Pharmaceuticals R&D 2,954 3,019 2,543 activities. During 2010 we signed eight new collaborations to
In-market pharmaceutical access novel discovery, giving us a total of 54 external discovery
development 147 81 40 engines to complement our 38 DPUs.
Vaccines 533 524 369 s 7EHAVESTREAMLINEDTHERESOURCINGOFOURCLINICALTRIALSCONTRACT
Corporate and other costs 172 177 304 research organisations, reducing this from over 100 to just two
3,806 3,801 3,256 suppliers. While this provides savings in terms of economies of
Consumer Healthcare 158 150 114 scale, it will also ensure consistency and rigour in clinical trials
around the globe.
R&D before major restructuring 3,964 3,951 3,370
Major restructuring 493 155 170 s 7ECOMBINEDOUR-OLECULAR$ISCOVERY2ESEARCH-$2 AND
Preclinical Development (PCD) in 2010 to create an end-to-end
Total R&D 4,457 4,106 3,540 scientific and technical platform supporting the discovery and
development efforts. The remit of this group remains to create
The proportion of pharmaceuticals R&D investment made in the
the materials and knowledge that enable our R&D to take ideas,
late-stage portfolio continues to grow from 56% of the direct and
generate hypotheses and test them in preclinical and clinical
indirect costs in 2006 to 61% in 2010.
settings and ultimately launch new medicines.
Sales of new pharmaceutical products launched since 2007
Other developments in pharmaceutical R&D
(excluding pandemic flu vaccines) grew by 36% to £1,727 million
in 2010 and represented 7% of total pharmaceutical sales. GSK Rare Diseases was created in 2010 to enable us to focus
on this specialised area of drug discovery and development.
2010 2009 Growth Opportunities in new treatments for rare diseases are growing
£m £m CER% as increased scientific (including genetic) understanding allows
Veramyst 193 142 33 researchers to identify which rare diseases are most likely to
Cervarix 242 187 26 respond to therapeutic intervention. We signed two significant new
Coreg CR 157 161 (3) rare disease alliances this year: with Amicus, for the treatment of
Lamictal XR 68 18 >100 Fabry disease, and Fondazione Telethon to research and develop
novel stem-cell derived treatments to address rare genetic disorders,
Requip XL 148 123 22
using gene therapy carried out on a patient’s own stem cells.
Rotarix 235 282 (18)
These new agreements demonstrate our approach to seeking out
Synflorix 221 73 >100
innovative medicines that add value for both patients and payers.
Treximet 56 55 2
Tykerb 227 169 34 This year, we also made progress on our commitment to encourage
Others 180 52 >100 new research into neglected tropical diseases. Our research centre
in Tres Cantos, Spain, released the results of our year-long screening
1,727 1,262 36
of more than two million compounds in GSK’s chemical library to
seek out those that could inhibit the malaria parasite, P. falciparum.
Investment and pipeline progress in 2010
We have made all of this data publically available online. More than
Globally, over 13,000 people work in R&D, with many of these 80% of the 13,500 molecule structures released are proprietary to
based in our major R&D centres in the UK, USA, Belgium and China. GSK, and therefore the information released is entirely new to the
Over 11,000 people work in pharmaceuticals R&D. In the course of research community.
2010 we managed over 150 projects with trials in humans.

29
Responsible business
Creating a successful and sustainable Research and innovation

In undertaking our research and in innovating we may explore and
business is about more than financial apply new technologies and will constructively engage stakeholders
results. We place great importance not on any concerns that may arise. We will ensure that our products
are subject to rigorous scientific evaluation and testing for safety,
just on what we achieve but on how effectiveness and quality. We will comply with or exceed all
we achieve it. Running a responsible, regulations and legal standards applicable to the research and
development of our products. Read more on page 11.
values-based business is embedded in
Products and customers
our strategy We will promote our products in line with high ethical, medical and
scientific standards and will comply with all applicable laws and
regulations. Read more on page 18.
We are working hard to build a culture in which our decisions
are guided by our values: Caring for the environment
We will operate in an environmentally responsible manner
s #OMMITTOTRANSPARENCY
through systematic management of our environmental impacts,
s 3HOWRESPECTFORPEOPLE measurement of our performance and setting challenging

s !LWAYSDEMONSTRATETHEHIGHESTINTEGRITYINour conduct performance targets. We will improve the efficiency of all our
s "EPATIENTFOCUSED activities to minimise material and energy use and waste generated.
We aim to find opportunities to use renewable materials and to
We know that the research and development, manufacture and recycle our waste. Read more on page 32.
sale of our products can raise ethical issues, and we aim to be
open about how we tackle them. We understand how important Employment practices
it is to communicate with our stakeholders, seeking to understand We will treat our employees with respect and dignity, encourage
their views and being transparent about any setbacks we have diversity and ensure fair treatment through all phases of
experienced as well as the progress we have made. employment. We will provide a safe and healthy working
environment, support employees to perform to their full potential
For example, our commitment to putting patients first means we and take responsibility for the performance and reputation of the
are focusing on improving access to our medicines and vaccines for business. Read more on page 33.
all patients irrespective of where they live and their ability to pay.
We believe this is the right thing to do and that it will contribute to Human rights
sustainable business growth. We are committed to upholding the UN Universal Declaration of
Human Rights, the OECD guidelines for Multi-National Enterprises

Ultimately we believe that responsible business is good for society and the core labour standards set out by the International Labour
and good for GSK. It helps us to operate efficiently, to gain the Organization. We expect the same standards of our suppliers,
trust of our stakeholders, to create the products that patients and contractors and business partners working on GSK’s behalf. Read
healthcare payers really need and to foster the right conditions for more in our CR Report.
expansion of our business.
Leadership and advocacy
Read about our approach and performance on responsible business We will establish our own challenging standards in corporate
issues including access to medicines, research and business ethics responsibility, appropriate to the complexities and specific needs
and the environment at www.gsk.com/responsibility. Our of our business, building on external guidelines and experience.
2010 Corporate Responsibility Report (CR Report) will be published We will share best practice and seek to influence others, while
on 21st March 2011. remaining competitive in order to sustain our business. Read
more in our CR Report.
Our Principles
Engagement with stakeholders
Our principles sum up our approach to responsible business and are
We want to understand the concerns of those with an interest
underpinned by our values. They provide guidance for employees
in corporate responsibility issues. We will engage with a range
on the standards to which GSK is committed.
of stakeholders and will communicate openly about how we
Access to medicines are addressing CR issues, in ways that aim to meet the needs of
We will continue to research and develop medicines to treat different groups while allowing us to pursue legitimate business
diseases of the developing world. We will find sustainable goals. Read more in our CR Report.
ways to improve access to medicines for disadvantaged people,
Community investment
and will seek partnerships to support this activity. Read more
We will make a positive contribution to the communities in which
on page 30.
we operate, and will invest in health and education programmes
Standards of ethical conduct and partnerships that aim to bring sustainable improvements to
We expect employees to meet high ethical standards in all aspects under-served people in the developed and developing world. Read
of our business, by conducting our activities with honesty and more on page 30.
integrity, adhering to our corporate responsibility principles, and
complying with applicable laws and regulations. Read more
on page 33.

30
Improving access to medicines Our work with communities

Access to healthcare in the developing world We invest in community partnership programmes that seek to
There are no easy solutions to the challenge of providing improve access to medicines and healthcare to improve the lives of
sustainable access to healthcare in developing countries. Poverty people across the world. We aim to make a real difference to these
is the single biggest barrier. In many countries people do not have communities by working with our partners to find innovative solutions
enough food, access to a clean water supply, hospitals or clinics to healthcare challenges. We believe that business has an important
in which to receive treatment and healthcare professionals to care role to play in society and we strive to leverage our resources in a
for them. way that delivers shared value to our communities and business. We
partner with and support organisations whose goals and objectives
We are committed to playing a full part in addressing the reflect our mission of improving the quality of human life.
healthcare challenges of the developing world by taking an
innovative, responsible and, above all, sustainable approach. GSK Our global community investment in 2010 was £222 million.
is making a vital contribution to developing country healthcare This compares with £163 million in 2009 on a like-for-like basis.
through action in a number of areas including: preferential pricing This increase is due to expansion of our US patient assistance
of our anti-retrovirals; tiered pricing of our vaccines and medicines; programme, scale up of our donation of albendazole for the
investing in R&D that targets diseases particularly affecting the lymphatic filariasis (LF) programme, a donation of H1N1 vaccine
developing world (see page 11); being flexible with our IP; pursuing to the World Health Organization, plus increased grants for HIV
an open innovation strategy; community investment activities and and AIDS and the 20% reinvestment initiative for LDCs. Our
partnerships that foster effective healthcare and capacity building 2010 giving comprised product donations of £147 million, cash
(see page 31); and seeking innovative partnerships and solutions. giving of £53 million, in-kind donations of £4 million plus costs
We cover our contribution to improving access to medicines of £18 million to manage and deliver community programmes in
extensively in our Corporate Responsibility Report. almost 100 countries. The product donations include £100 million
for GSK’s patient assistance programmes, £17 million worth of
We were a clear leader in both Access to Medicines (ATM) albendazole for the LF programme and £9 million for humanitarian
Indexes published by the ATM Foundation in 2008 and 2010. product donations. Since 2008 our product donations have been
We will continue to build on our product, pricing and partnership valued at cost (average cost of goods) rather than wholesale price
commitments to help improve healthcare in the developing (WAC) as this is a more accurate reflection of the cost to GSK.
world. In 2010 we further expanded our commitments to the UN We believe we are the first pharmaceutical company to adopt this
defined list of Least Developed Countries (LDCs) by establishing practice. For comparative purposes the total value of donations in
a Developing Countries and Market Access operating unit with a 2010 using WAC for products would be £564 million compared
focus on the LDCs to broaden patient access to GSK medicines with £467 million in 2009.
and to help build our presence in other developing countries.
We do not operate a single charitable foundation for our
While much has been achieved, a significant increase in resources community investment programmes, but have a number of
from the global community is still needed to support R&D and to country-based foundations and their 2010 grants are included
provide access to the resultant medicines and vaccines. Sustainable in the investment total.
progress will only be made if the significant barriers that stand
in the way of better access to healthcare are tackled as a shared Our cash giving was targeted primarily at health and education
responsibility by all sectors of global society – governments, initiatives as follows:
international agencies, charities, academic institutions, the
5
pharmaceutical industry and others.
1 Health (52%)
Access to medicines in the developed world 2 Education (16%)
Programmes in the USA 3 Arts and Culture (3%) 1
4
We are working to provide access to medicines for people 4 Environment (3%)
3
with limited financial resources and without prescription
5 Other (26%)
medicine insurance.
2
For uninsured Americans who do not qualify for Medicare or
Medicaid, GSK and ten other pharmaceutical companies created
Global health programmes
Together Rx Access, a programme for qualified individuals
offering reductions in the pharmacy cost on more than 300 In developing countries millions of people continue to suffer and
medicines. In addition, GSK offers several patient assistance die from preventable or treatable diseases. Our global health
programmes to help low-income or uninsured Americans have programmes are designed to improve health and quality of life
access to GSK’s oncology and specialty products, vaccines and for people in these communities through provision of medicines,
prescription drugs. GSK’s patient assistance programmes provided education and advocacy, and investment in disease prevention
products to over 452,000 patients during 2010. and healthcare infrastructure. Our global programmes are
long-term commitments and designed to be scaleable, replicable
Programmes in other countries and sustainable.
We have also introduced Orange Cards providing discounts on
certain GSK prescription medicines for eligible patients in a number By working in partnership, with NGOs and leading health
of other countries. The nature of the discounts varies between organisations, we believe it is possible to achieve significant and
countries and the ways in which the healthcare systems operate. long-lasting improvements in healthcare. This section highlights
our major health programmes.

31
Eliminating lymphatic filariasis (LF) Local programmes

Our effort to eliminate LF, one of the world’s most disabling diseases, We support communities in the many different markets in
continued in close partnership with the governments of countries which we operate. Our programmes are designed to fit local
where the disease is endemic, the World Health Organization and circumstances and cultures and aligned with an overall goal of
over 40 partner organisations. As a founding partner and leader in supporting access to medicines and healthcare. Local community
this effort, we are committed to donating as much of the anti- priorities vary from community to community and population to
parasitic drug albendazole as required to reach the one billion population, but there are often common challenges to address,
people at risk in over 80 countries. In 2010, 556 million albendazole whether in terms of a particular health need or the human or
treatments were donated to 26 countries. We have donated almost institutional capacity required to effectively tackle those needs.
two billion albendazole treatments since the global elimination
In the UK, we contributed £5.4 million in 2010 to our continuing
programme started in 2000.
programme of charitable activities supporting over 80 organisations
Positive Action on HIV/AIDS in health, medical research, science education, the arts and the
When Positive Action was created in 1992 it was the first environment. This included the UK IMPACT awards scheme which
pharmaceutical company programme of its kind to support provides small charities with grants and consulting support for their
communities affected by HIV and AIDS. Now under the auspices work in addressing the health needs of local communities.
of ViiV Healthcare, the new HIV-focused company, the programme Programmes in North America at a national and local level

targets its funds towards community-focused projects that reach focused on improving public education in the areas of science and
those most affected by HIV, particularly in marginalised or vulnerable mathematics, and increasing access to healthcare for children and
populations. Positive Action works with these communities to enable the homeless. GSK’s IMPACT Awards recognise organisations that
them to tackle stigma and discrimination, to test innovations in have significantly improved the health of their local communities
education, care and treatment and to deliver greater involvement of in Philadelphia and in Research Triangle Park, North Carolina. Total
those living with HIV. Our Positive Action for Children Fund launched funding for our North American programmes was $18 million.
in 2009 to make £50 million available over 10 years to help prevent
mother-to-child transmission of HIV and to support orphans and In Argentina the Pro Mujer programme works with low-income
vulnerable children. It supported 12 projects in 2010. At the end of women who do not have access to affordable financial services or
2010, the latest call for proposals was made broadening the reach healthcare and provides access to small loans to set up their own
and scope of its response for babies and children affected by HIV. businesses as well as training and affordable healthcare services.
The GlaxoSmithKline African Malaria Partnership GSK returned the CommunityMark for excellence in community
The African Malaria Partnership is our programme to alleviate the investment.
mortality and suffering malaria brings to affected communities Further information about GSK grants and programmes are
in Africa. In 2010 four new malaria grants were awarded for available on www.gsk.com.

community programmes to provide health education to affected
populations and to train community health workers. The Employee involvement
partnerships are: Save the Children (UK) in Kenya; Family Health Our employees are encouraged to contribute to their local
International in Ghana; African Medical and Research Foundation communities through employee volunteering schemes. Support
(AMREF) in Tanzania; and Planned Parenthood Federation of Nigeria. includes employee time, cash donations to charities where
employees volunteer and matching gift programmes.
Humanitarian product donations
Working with our non-profit partners, AmeriCares, Direct Relief Through the US GSK Matching Gift Program, we matched
International, MAP International, Interchurch Medical Assistance 12,000 employee gifts at a value of $3 million in 2010 plus over
and Project HOPE, we supported humanitarian relief efforts and $1 million to the United Way campaign. GSK’s GIVE programme
community healthcare in over 90 countries. provided grants of over $367,000 to 365 organisations where US
employees volunteered and £205,000 to 150 UK-based non-profit
We responded to the healthcare needs of the many communities organisations via the GSK Making a Difference programme.
affected by disasters, including the devastating earthquake that
struck Haiti in January 2010, GSK donated supplies of medicines In 2009, our Group-wide volunteer initiative was launched to give
valued at over £1 million. Included in these shipments were every GSK employee one paid day off each year to volunteer for a
significant volumes of antibiotics as well as respiratory and good cause. In 2010 this continued with employees supporting a
diabetes treatments. Our consumer division provided a range wide range of charities and projects including work in local schools,
of products, including toothpastes, antacids, pain relievers and shelters for the homeless, community gardens, nursing homes and
vitamins. During the cholera outbreak we responded to a further aiding communities affected by natural disasters.
specific request for antibiotics and donated £250,000 to the The GSK PULSE Volunteer Partnership launched in 2009 enables
British Red Cross to support the deployment of a mass sanitation GSK employees to make a difference to communities and patients
unit serving more than 50,000 people living in temporary relief in need around the world. Volunteers work full-time with one of
camps. Following the earthquake in Chile, in response to an our partner non-profit or non-governmental organisations (NGOs).
urgent request we supplied 95,000 doses of Hepatitis A vaccine, Through this experience, volunteers address a clear NGO need,
antibiotics and more than 6,000 dental hygiene kits. while developing their own leadership capabilities. During 2009
In Pakistan we provided medicines from local stocks for the and 2010, PULSE deployed 116 volunteers in 33 countries to work
thousands of people affected by the flooding. We also made cash with 42 NGOs. Volunteers continue to receive their full GSK salary
donations amounting to £170,000, including a contribution to during their three to six month assignment. In 2010, this figure,
the World Food Programme to support emergency food supply. along with the operating costs for managing the programme,
represented a total in-kind donation of £2.4 million.
The total value of our international humanitarian product
donations was £9 million at average cost.

32
Environmental sustainability A central fund to finance energy saving projects has accelerated
We are committed to integrating environmental sustainability progress since 2007. In 2010 we completed 188 projects, which
into our business, especially conserving resources and addressing will avoid around 52,000 tonnes of greenhouse gas emissions
climate change. We see this as an opportunity as well as a a year.
responsibility. We are also increasing investment in on-site generation of
Strategy and plans renewable energy, supported by a renewable energy fund created
in 2010. GSK Consumer Healthcare installed North America’s
We revised our environmental sustainability strategy in 2010,
largest roof mounted solar photo voltaic system at its regional
building on the strategy originally introduced in 2001. The new
distribution centre in York, Pennsylvania. It will save nearly 1,800
strategy recognises our impacts across the entire value chain, from
tonnes of carbon dioxide emissions per year.
raw materials to the disposal of our products. Our objective is to
benefit the environment, engage employees in tackling key issues GSK’s global operations were certified to Carbon Trust Standard in
and benefit GSK financially – potentially saving £100 million a year 2010, the first company to achieve this recognition of excellence in
by 2020 through reduced energy, materials and distribution costs. carbon management for all global operations.
Analysis of GSK’s impacts shows that we need to concentrate in Water
three main areas: Water is a particularly important natural resource, and we recognise
s CARBONDIOXIDEANDOTHEREMISSIONSTHATCONTRIBUTETO that GSK can play a positive role in managing it more sustainably.
climate change We endorsed the United Nations CEO Water Mandate in 2009.
s WATERUSE In 2010 we reduced water consumption by almost 500 million litres

despite significant business growth in our vaccines manufacturing
s ENVIRONMENTALSTEWARDSHIPWHICHCOVERSTHEUSEOFMATERIALS business. Net water consumption fell by 1.6% per £1 of sales, a
generation of waste and pollution. cumulative reduction of 15.7% since 2006, exceeding our target
We have set ambitious goals for key impacts, including a 25% of 10%.
reduction in our carbon footprint, a 20% reduction in water use We also exceeded our targets for improving the quality of
across the value chain and zero waste to landfill, all by 2020. The waste water.
targets are detailed in our Corporate Responsibility report.
Environmental stewardship
Climate change and energy We aim to use materials efficiently and safely, minimising waste
Our long-term vision is for our entire value chain to be carbon and pollution and avoiding harm to people and the environment.
neutral by 2050. This very ambitious target means that there
will be no net greenhouse gas emissions from manufacturing, Increasing the efficiency with which we use materials is a priority.
distributing, using and disposing of our products, including Our long-term aspiration is to achieve 5% mass efficiency by
sourcing raw materials. 2020 for new pharmaceutical products transferred from R&D
to manufacturing. This is about five times the typical level in the
We need to act beyond our own operations because 40% of our pharmaceutical industry and will reduce input materials and
carbon footprint stems from our supply chain and a further 40% waste by 80%. The average mass efficiency for new products
derives from propellants when customers use our inhalers. This was during the 2006-2010 period has reached 3.3%.
confirmed by a global carbon footprint review of our entire value
chain, carried out for the first time in 2010. Improvements in the efficiency of solvent use also reduced the
amount of volatile organics released to air by 12.8% per £1 of
GSK’s carbon footprint (million tonne CO2e per annum) sales in 2010, cumulatively 35.8% since 2006.
45
Packaging provides further opportunities to conserve resources
3
and in 2010 we began to implement the sustainable packaging
1
1 Materials/supply chain (5.66) strategy developed in 2009. We also began to update our green
1 packaging guide for designers and managers. In 2010, the US
2
2 Product use (5.50)
3
3 Production and operations (2.65)
American Institute of Chemical Engineers presented its Industrial
Practice Award in Sustainable Engineering to our operational
4 Distribution (0.18)
sustainability team for its work embedding sustainability into
5 Product end of life (0.03)
R&D and manufacturing.
2
Environmental management
We met our goal of eliminating the use of chlorofluorocarbons We manage environmental issues (as well as occupational health
(CFCs) in our products by the end of 2010. This has reduced and safety) using a management system aligned with recognised
greenhouse emissions associated with our inhaler products international standards. Each business is accountable for its own
from 24 million tonnes of carbon dioxide equivalents in 1998 sustainability plans and performance. Our central audit group
to approximately 4.7 million tonnes in 2010. We have research includes environmental issues in its routine audits of our sites
programmes under way to find ways to further reduce the impacts and business processes. We are working increasingly closely with
from these products. suppliers and contract manufacturers to reduce environmental
impacts from the supply chain.
In 2010 we reduced energy consumption for operations and
transport by 5.5% and greenhouse gas emissions by 5.8% relative You can read more about our environmental performance and
to sales. The cumulative reduction for 2006-2010 is 9.1% for energy other aspects of sustainability in our Corporate Responsibility
and 10.7% for emissions. This is below our target of 20%, mainly Report at: www.gsk.com.
because progress was slow in the early years of the five-year period.
33
Ethical conduct Performance and reward

We are committed to creating a strong ethical culture at GSK. The performance and development planning process means
We do this by emphasising our values, developing robust policies, employees have business-aligned objectives and behavioural
recruiting and engaging the right people and equipping them goals. Our reward systems are geared to promote high
with the information they need to make ethical decisions. performance and help to attract and retain the best people.
Putting patients first is the core principle of being an ethical Performance-based pay, bonuses and share-based equity plans
pharmaceutical company. align employee interests with business targets.
Our Code of Conduct sets out fundamental standards for all Communication and employee involvement
employees. It is supported by the Employee Guide to Business Our communication channels are designed to keep employees
Conduct which helps employees make ethical decisions and informed, engaged and involved in activities across all areas of
emphasises GSK’s key values: our organisation. We encourage two-way, open and honest
communication with employees, and in 2010 we launched a
s #OMMITTOTRANSPARENCY
new updated global intranet portal, ConnectGSK.
s 3HOWRESPECTFORPEOPLE
Feedback and monitoring mechanisms are part of every major
s !LWAYSDEMONSTRATETHEHIGHESTINTEGRITYINYOURCONDUCT communication event, and Q&A and feedback facilities are a

s "EPATIENTFOCUSED core feature of our web communications channels. In 2010
we also introduced ‘Idea Engine’, an online tool which allows
We stress our commitment to performance with integrity. This employees to submit ideas and recommendations.
means that all employees must understand our values and what
we stand for as well as the policies and procedures that underpin As our business evolves, there will be changes that affect
our approach. employees and we remain committed to consulting on these
changes via a number of internal consultation forums and
Our internal compliance systems are designed to identify and discussions with the European Employee Consultation Forum
address breaches of our codes and reinforce GSK’s values. There and similar bodies in countries where this is national practice.
is continual external pressure to enhance these systems and our
compliance oversight and audits are helping to drive this change. Employee numbers by region 1
We fully investigate suspected breaches and take appropriate
3
disciplinary action, including dismissal where appropriate.
1 USA (17,555)
1
In 2010 we reviewed and strengthened our approach to
preventing, detecting and addressing bribery and corruption. 2 Europe (39,910)
2
We launched a dedicated anti-bribery and corruption unit which 3 Rest of World (38,996)
3

will ensure we take a consistent approach across GSK and
strengthens our monitoring capability.
2
Also, we introduced a Third Party Code of Conduct which applies Inclusion and diversity
to all GSK suppliers. This sets out the standards we expect
We are committed to employment policies free from discrimination
suppliers to meet and covers ethical conduct; labour practices,
against existing or potential employees on the grounds of race,
environmental, health and safety standards; and management.
colour, religion or belief, gender, sexual orientation, gender identity
To help suppliers understand how to interact appropriately with
or expression, age, national origin, genetic make-up, disability or
GSK staff, the Code includes key principles from our Employee
chronic health conditions. GSK is committed to offering people
Guide to Business Conduct such as our policy on receiving gifts.
with disabilities access to the full range of recruitment and career
Our due diligence process for potential acquisitions takes account of opportunities. Every effort is made to retain and support employees
ethical risks and we integrate our ethics and compliance requirements who become disabled while working at GSK. For more details on
as standard practice in newly acquired businesses. We seek to enter diversity measures, see our Corporate Responsibility Report.
into joint ventures with organisations that share our values.
Healthy and safe high performance
Our employees To meet our mission and strategy, Employee Health and
Performance initiatives focus on the health factors that enable

Recruitment, talent management and leadership develoment employees to perform at the highest level by sustaining energy
In 2010, like every year, recruiting, retaining and developing and engagement. The programmes developed to deliver this
our employees were critical to enhancing and sustaining our health strategy range from the traditional – such as immunisations,
performance and reputation. Proactive talent acquisition initiatives smoking control and weight management – to cutting-edge
underpin our ability to attract specialist and leadership talent programmes in the areas of team and personal resilience,
externally. Our assessment process is aligned to a core set of ergonomics and Energy for Performance. These programmes,
competencies, of which ethics and integrity are central. available in many languages, are designed to address the root
We need good succession plans, not just for senior roles but for causes of excessive work pressure and low energy and engagement
all our critical positions across the organisation. We maintain a at work and at home. They are complemented by our commitment
robust leadership strategy to identify and develop our highly skilled to flexible thinking about the way we deliver our work that enables
leadership cadre and use a systematic, disciplined approach to employees to do their best work in an environment that helps
leadership development, providing tools and programmes to help them integrate their work and personal lives. For more details on
leaders master skills needed to meet customer, employee and the scope and impact of these programmes, see our Corporate
investor expectations. In 2010, we provided training to nearly 8,000 Responsibility Report.
GSK leaders worldwide and also developed new programmes for
future senior leaders and senior executives.

34
Financial review 2010

Pharmaceutical turnover Respiratory
All growth rates included in the review of turnover are at constant Respiratory sales increased 3% to £7.2 billion.
exchange rates (CER) unless otherwise stated. The calculation Seretide/Advair sales grew 2% to £5.1 billion, with strong growth
of underlying turnover is described on page 21. Sterling growth in Japan, up 17% to £246 million and Emerging Markets, up
rates may be found in the tables of pharmaceutical turnover by 16% to £328 million. Sales in the USA were level at £2.6 billion
therapeutic areas on page 35 and by geographic segment below. and grew 2% in Europe to £1.6 billion.
Pharmaceutical turnover declined 2% to £23.4 billion. Excluding Several other respiratory products delivered growth including
pandemic products, Avandia and Valtrex, underlying turnover Avamys/Veramyst, up 33% to £193 million, Ventolin, up 8%
increased by 4%. to £522 million and Flovent, up 2% to £804 million.
Segmental analysis Anti-virals

The turnover reported in the table below represents sales invoiced Anti-virals decreased 56% to £1.1 billion.
by GSK’s local entity to its customers in the local market plus Relenza sales were £121 million (2009 – £720 million), down 84%,
co-promotion income within each market. against the previous year where significant government pandemic
orders were received. Valtrex sales declined 60% to £532 million
2010 2009 Growth*
£m £m
reflecting generic competition in the USA and Europe.
CER% £%
USA 7,648 8,578 (11) (11) Central nervous system (CNS)

Europe 6,548 7,087 (6) (8) CNS sales decreased 8% to £1.8 billion.
Emerging Markets 3,556 2,895 22 23 The majority of GSK’s CNS franchise is impacted by generic
Asia Pacific/Japan 3,102 2,628 9 18 competition in the USA. The Wellbutrin decline of 39% primarily
ViiV Healthcare 1,566 1,605 (3) (2) reflected the sale of Wellbutrin XL in the USA to Biovail in the
Other 962 901 (1) 7 second quarter of 2009.
23,382 23,694 (2) (1) Cardiovascular and urogenital
* CER% represents growth at constant exchange rates. £% represents growth Cardiovascular and urogenital sales increased 11% to £2.6 billion,
at actual exchange rates. Turnover by quarter is given on pages 194 to 198. reflecting continued strong growth of key products such as Arixtra,
Sales in the USA declined 11% to £7.6 billion, primarily due to up 19% to £301 million, Avodart, up 18% to £629 million, and
generic competition to Valtrex, a significant reduction in sales of Lovaza, up 17% to £530 million.
pandemic related products and lower sales of Avandia. Excluding Metabolic
these products, underlying turnover grew 3%, despite the Metabolic sales decreased 44% to £0.7 billion.
discontinuation of GSK’s promotion of Boniva, the sale of Wellbutrin
XL in May 2009, and the impact of US healthcare reform across Avandia product sales declined by 44% to £440 million. On
the product range. New products (excluding pandemic vaccines) 23rd September 2010 the European Medicines Agency suspended
launched since 2007 grew 29% and contributed 8% of 2010 sales. marketing authorisation for all rosiglitazone containing products,
including Avandia, and the US Food and Drug Administration
Europe pharmaceuticals sales declined 6% to £6.5 billion, primarily announced additional measures to ensure the benefits of Avandia
due to the impact of a significant reduction in sales of pandemic continue to outweigh its risks, including a Risk Evaluation and
related products, generic competition to Valtrex and lower sales Mitigation Strategy (REMS) programme. As a result, GSK expects
of Avandia. Excluding these products, underlying sales were flat, global sales of rosiglitazone containing products, including Avandia,
reflecting the impact of government austerity measures. to be minimal in the future.
Emerging Markets pharmaceutical sales grew 22% to £3.6 billion, Oncology and emesis
with strong growth across most product categories and also
Oncology and emesis sales increased 9% to £0.7 billion.
helped by pandemic related product sales of £227 million
(2009 – £89 million). Asia Pacific/Japan pharmaceutical sales grew Tyverb/Tykerb, up 34% to £227 million, grew strongly in all
9% to £3.1 billion. Excluding pandemic related products, Valtrex segments. Newly launched oncology products Votrient, Arzerra
and Avandia, underlying sales grew 20% in Emerging Markets and and Promacta delivered sales of £38 million, £31 million and
7% in Asia Pacific/Japan. £31 million, respectively.
Pharmaceutical turnover by therapeutic area Vaccines

Total vaccine sales grew 15% to £4.3 billion, including £1.2 billion
Pharmaceutical turnover declined by 2% in 2010 as the impact
of pandemic vaccine sales (2009 – £883 million). Excluding flu
of generic competition to Valtrex, lower Avandia and pandemic
pandemic vaccine sales, growth was 10%. Several new vaccines
product sales was partly offset by growth of key products such as
contributed to this growth including Synflorix, more than doubling
Seretide/Advair, Avamys/Veramyst, Avodart, Lovaza, Tyverb/Tykerb,
to £221 million, Boostrix, up 29% to £181 million and Cervarix,
Ventolin and the vaccines franchise.
up 26% to £242 million. Sales of Hepatitis vaccines grew 7%
to £720 million, Infanrix/Pediarix grew 8% to £700 million and
seasonal flu sales grew 14% to £241 million. Rotarix sales were
down 18% to £235 million, as the product continues to recover
market share lost following its temporary suspension from several
markets earlier in the year.

35
Pharmaceutical turnover by therapeutic area 2010

Total USA Europe Emerging Markets Rest of World
Therapeutic area/ 2010 2009 Growth 2010 Growth 2010 Growth 2010 Growth 2010 Growth
major products £m £m CER% £% £m CER% £% £m CER% £% £m CER% £% £m CER% £%
Respiratory 7,238 6,977 3 4 3,394 1 2 2,149 – (2) 616 19 21 1,079 4 14
Avamys/Veramyst 193 142 33 36 69 – 1 56 27 24 31 >100 >100 37 94 >100
Flixonase/Flonase 164 171 (5) (4) 37 37 37 40 (7) (7) 39 11 11 48 (30) (27)
Flixotide/Flovent 804 775 2 4 431 8 9 159 (9) (11) 48 38 41 166 (10) (1)
Seretide/Advair 5,139 4,977 2 3 2,604 – – 1,601 2 – 328 16 19 606 10 21
Serevent 201 236 (16) (15) 64 (12) (12) 98 (16) (16) 2 (33) (33) 37 (23) (16)
Ventolin 522 477 8 9 179 16 17 142 (3) (5) 112 19 20 89 (2) 10
Zyrtec 82 75 4 9 – – – – – – 14 – – 68 5 11
Anti-virals 1,086 2,416 (56) (55) 370 (68) (68) 109 (73) (73) 223 (3) (1) 384 (44) (39)
Hepsera 128 114 6 12 – – – 1 – – 58 10 14 69 2 10
Relenza 121 720 (84) (83) 43 (69) (69) 6 (97) (97) 1 (97) (97) 71 (80) (79)
Valtrex 532 1,294 (60) (59) 252 (73) (73) 68 (56) (58) 28 8 8 184 2 11
Zeffix 233 217 4 7 13 (24) (24) 26 (10) (10) 136 17 18 58 (5) 4
Central nervous 1,753 1,870 (8) (6) 505 (23) (22) 540 (4) (6) 223 17 17 485 (2) 7

system
Imigran/Imitrex 212 266 (21) (20) 75 (39) (39) 85 (10) (11) 5 – – 47 2 12
Lamictal 504 500 1 1 257 (4) (4) 143 (6) (7) 57 23 19 47 42 52
Requip 233 209 11 11 44 69 69 137 2 (1) 3 50 50 49 2 14
Seroxat/Paxil 482 523 (12) (8) 27 (36) (36) 82 (15) (17) 73 (3) (4) 300 (9) (2)
Treximet 56 55 2 2 55 2 – – – – – – – 1 – –
Wellbutrin 81 132 (39) (39) 24 (73) (73) 39 33 30 13 30 30 5 (25) 25
Cardiovascular 2,570 2,298 11 12 1,571 10 11 610 7 5 134 25 24 255 23 33
and urogenital
Arixtra 301 254 19 19 177 25 26 99 8 4 10 43 43 15 18 36
Avodart 629 530 18 19 337 5 6 175 22 18 33 50 50 84 90 >100
Coreg 171 172 (1) (1) 170 (1) (1) – – – – – – 1 – –
Fraxiparine 222 229 (2) (3) – – – 154 (9) (11) 55 29 31 13 (7) (7)
Lovaza 530 450 17 18 528 17 18 – – – – – – 2 – –
Vesicare 114 104 9 10 113 8 9 – – – – – – 1 – –
Volibris 46 19 >100 >100 – – – 40 >100 >100 1 – – 5 >100 >100
Metabolic 678 1,181 (44) (43) 238 (59) (59) 166 (38) (40) 91 (24) (24) 183 (17) (11)
Avandia products 440 771 (44) (43) 237 (45) (44) 88 (48) (49) 42 (43) (45) 73 (32) (26)

Bonviva/Boniva 78 255 (69) (69) – (100) (100) 64 (26) (28) 2 – – 12 22 33
Anti-bacterials 1,396 1,457 (4) (4) 75 (28) (27) 536 (14) (16) 609 10 10 176 1 7
Augmentin 625 667 (6) (6) 11 (76) (76) 240 (17) (19) 291 15 14 83 10 17
Oncology and 688 629 9 9 350 13 14 201 1 (1) 62 7 9 75 17 25
emesis
Arzerra 31 3 >100 >100 26 >100 >100 4 – – – – – 1 – –
Hycamtin 144 172 (16) (16) 83 (17) (17) 48 (17) (19) 7 17 17 6 (14) (14)
Promacta 31 13 >100 >100 25 92 92 5 – – – – – 1 – –
Tyverb/Tykerb 227 169 34 34 70 28 30 94 28 25 30 36 36 33 72 83
Votrient 38 1 >100 >100 33 >100 >100 4 – – – – – 1 – –
Vaccines 4,326 3,706 15 17 763 (7) (6) 1,681 (2) (4) 927 38 39 955 85 100
Boostrix 181 139 29 30 110 51 51 43 10 8 9 29 29 19 (16) –
Cervarix 242 187 26 29 13 >100 >100 116 (14) (16) 25 4 9 88 >100 >100
Fluarix, FluLaval 241 211 14 14 110 51 51 63 (8) (11) 40 (5) (5) 28 – 12
Flu Pandemic 1,192 883 31 35 1 (99) (99) 488 (6) (7) 226 >100 >100 477 >100 >100
Hepatitis 720 665 7 8 307 19 19 242 (6) (8) 88 8 10 83 15 26
Infanrix, Pediarix 700 649 8 8 146 8 9 429 8 6 50 13 11 75 3 17
Rotarix 235 282 (18) (17) 74 (4) (3) 38 (28) (28) 102 (22) (21) 21 (17) (13)
Synflorix 221 73 >100 >100 – – – 43 38 34 149 >100 >100 29 >100 >100

Dermatologicals 1,087 707 51 54 358 70 70 246 48 45 286 52 56 197 26 37
Bactroban 119 123 (3) (3) 51 (14) (14) 27 8 4 28 7 4 13 – 18
Dermovate 74 – – – – – – 19 – – 30 – – 25 – –
Duac 116 46 >100 >100 67 >100 >100 23 >100 >100 11 >100 >100 15 >100 >100
Soriatane 71 28 >100 >100 71 >100 >100 – – – – – – – – –
Zovirax 152 129 15 18 53 >100 >100 27 (10) (10) 26 9 13 46 (14) (8)
Other 994 848 16 17 24 53 41 310 9 6 385 37 38 275 – 6
21,816 22,089 (2) (1) 7,648 (11) (11) 6,548 (6) (8) 3,556 22 23 4,064 6 15
ViiV Healthcare
(HIV) 1,566 1,605 (3) (2) 660 (8) (8) 585 (5) (8) 146 35 39 175 7 16
Combivir 363 425 (16) (15) 143 (24) (24) 117 (21) (23) 63 22 29 40 (3) 5
Epivir 115 129 (12) (11) 40 (17) (17) 37 (22) (24) 18 31 38 20 – 5
Epzicom/Kivexa 555 546 1 2 210 (7) (6) 245 3 – 29 38 38 71 14 22
Lexiva 155 178 (12) (13) 80 (19) (19) 51 (15) (18) 13 86 86 11 – 10
Selzentry 80 1 >100 >100 34 – – 41 >100 >100 2 – – 3 – –
Trizivir 144 201 (28) (28) 73 (30) (30) 60 (26) (27) 4 (43) (43) 7 (13) (13)
23,382 23,694 (2) (1)
CER% represents growth at constant exchange rates. £% represents growth at actual exchange rates. Turnover by quarter is given in the financial record on pages 194 to 198.
36
Dermatologicals Results before major restructuring and

Dermatology sales were £1.1 billion, including heritage GSK total results
products and those acquired through business acquisitions, In October 2007 the Board approved the implementation of a
principally Stiefel in July 2009. The estimated sales growth in 2010 detailed formal plan for, and GSK announced, a significant new
for the business on a pro-forma basis, excluding 2010 acquisitions, Operational Excellence restructuring programme. A second formal
was approximately 6%. In addition, GSK’s heritage consumer plan, representing a significant expansion of the Operational
dermatology portfolio, reported within Consumer Healthcare, Excellence programme, was approved by the Board and announced
contributed sales of £256 million, up 8%. in February 2009. A further expansion was approved by the Board
ViiV Healthcare (HIV) and announced in February 2010.
Sales of HIV products by ViiV Healthcare were down 3% to The restructuring programme, comprising these detailed formal
£1.6 billion. Sales of the former Pfizer products Selzentry and plans, covers all areas of GSK’s business, including manufacturing,
Viracept, with combined sales of £118 million and growth from selling, R&D and infrastructure. With an estimated total cost of
Epzicom/Kivexa, up 1% to £555 million, were offset by reductions approximately £4.5 billion, the expanded programme is expected
in the sales from other HIV products including Trizivir, down 28% to deliver annual pre-tax savings of approximately £2.2 billion
to £144 million, Combivir, down 16% to £363 million and Epivir, by the time it is substantially complete in 2012. Approximately
down 12% to £115 million. 75% of these costs were incurred by 31st December 2010, and
approximately 20% are expected to be incurred in 2011 with the
Consumer Healthcare turnover balance in 2012. In total, approximately 75% of these costs are
expected to be cash expenditures and 25% are expected to be
Growth*
% of 2010 2009 accounting write-downs.
total £m £m CER% £%
Over-the-counter Uncertainties exist over the exact amount and timing of cash
medicines 49 2,456 2,339 3 5 outflows, as a result of potential future exchange rate
Oral healthcare 32 1,602 1,484 6 8 fluctuations and as many elements of the restructuring programme
Nutritional healthcare 19 952 851 9 12 are subject to employee consultation procedures, making it
difficult to predict with precision when these procedures will be
100 5,010 4,674 5 7 completed. However, the majority of the remaining cash payments
are expected to be made in 2011. Given the extent and cost of
* CER% represents growth at constant exchange rates. £% represents growth
the Operational Excellence restructuring programme, management
at actual exchange rates. Turnover by quarter is given on page 199.
believes it has a material impact on GSK’s operating results and on
Total Consumer Healthcare sales were up 5% to £5.0 billion, the manner in which GSK’s business is conducted. GSK presents
significantly exceeding market growth estimated by GSK to be the restructuring costs incurred solely as a direct result of the
approximately 2%. Sales in the Rest of World grew 13% to Operational Excellence restructuring programme, which in 2010
£2.0 billion, driven by strong growth in India and China, which amounted to £1,242 million before tax (2009 – £764 million),
grew by 19% and 18%, respectively. Europe sales were level in a separate column in the income statement titled ‘Major
with last year with sales of £2.0 billion and the business in the restructuring’.
USA grew 1% to £1.0 billion.
In addition to the restructuring costs of the Operational Excellence
OTC medicines programme, the major restructuring column in the income
OTC product sales grew 3% to £2.4 billion in 2010, driven by statement includes restructuring costs incurred solely as a direct
sales of Panadol, nicotine replacement therapy products and result of any restructuring programmes that follow, and relate to,
dermatology products, partly offset by lower respiratory tract material acquisitions where the operations of the acquired business
products and lower sales of alli. overlap extensively with GSK’s existing operations.
Oral healthcare The restructuring activities that follow, and relate to, such
Sales of Oral healthcare products rose 6% to £1.6 billion. Sensodyne acquisitions are of the same nature as those undertaken under
performed strongly and denture care sales also grew. Sales of Aquafresh the Operational Excellence programme and are also carried out
declined slightly. following a detailed formal plan. Management therefore considers
it appropriate to present the costs of these restructuring activities
Nutritional healthcare in the same manner. The restructuring costs incurred in 2010 as
Nutritional healthcare sales grew 9% to £1.0 billion, driven by the strong a direct result of the acquisition of Stiefel Laboratories, Inc. in
performance of Horlicks and growth in Lucozade sales. July 2009, were £103 million (2009 – £71 million). The
restructuring costs incurred as a direct result of the acquisition
of Reliant Pharmaceuticals Inc., the only other acquisition since
October 2007 that meets the criteria set out above, were all
charged and paid in 2008.

37
The Group’s results before the costs of the Operational Excellence Operating profit – total results

programme and acquisition-related restructuring programmes Total results include restructuring costs related to the Operational
meeting the criteria described above are also presented in a Excellence programme and the acquisitions of Reliant and Stiefel.
separate column in the income statement and are described as
‘Results before major restructuring’. This presentation, which 2010 2009 Growth
GSK intends to apply consistently to future major restructuring £m % £m % CER% £%
programmes that have a material impact on GSK’s operating Turnover 28,392 100 28,368 100 (1) –
results and on the manner in which GSK’s business is conducted,
Cost of sales (7,592) (26.7) (7,380) (26.0) 3 3
has been adopted to show clearly the Group’s results both
before and after the costs of these restructuring programmes. Selling, general
Management believes that this presentation assists shareholders and administration (13,053) (46.0) (9,592) (33.8) 36 36
in gaining a clearer understanding of the Group’s financial Research and
performance and in making projections of future financial development (4,457) (15.7) (4,106) (14.4) 8 9
performance, as results that include such costs, by virtue of their Other operating
size and nature, have limited comparative value. This presentation income 493 1.7 1,135 3.9
is also consistent with the way management assesses the Group’s Operating profit 3,783 13.3 8,425 29.7 (59) (55)
financial performance.

Only the restructuring costs incurred solely as a direct result of Cost of sales
the Operational Excellence programme and the restructuring Cost of sales increased to 26.7% of turnover (2009 – 26.0%)
programmes following the Reliant and Stiefel acquisitions have reflecting the impact of generic competition to higher margin
been reported in the major restructuring column in the income products in the USA (principally Valtrex), lower Avandia sales, US
statement. These restructuring costs principally have arisen from healthcare reforms and European austerity price cuts, and inventory
impairments to property, plant and equipment and the termination and other asset write-downs, partially offset by savings from the
of the employment contracts of staff made redundant as part of Operational Excellence programme and lower restructuring costs of
the restructuring activities. As set out in Note 7 to the financial £187 million (2009 – £285 million).
statements, ‘Major restructuring programme’, asset impairments Selling, general and administration
and staff redundancies together accounted for £753 million of the
SG&A costs as a percentage of turnover increased by 12.2
£1,348 million restructuring costs incurred in 2010 and reported in
percentage points to 46.0%. Excluding legal costs of £4,001
the major restructuring column.
million (2009 – £591 million), SG&A costs were 31.9% of
Any restructuring costs that do not arise solely as a direct result turnover (2009 – 31.7%). The increase of 0.2 percentage points
of the Operational Excellence programme and restructuring reflected a 1% Sterling (1% CER) increase in SG&A on a flat

programmes following, and relating to, acquisitions meeting sterling turnover growth. SG&A included restructuring costs of
the criteria described above continue to be reported in operating £665 million (2009 – £392 million), investment in growth markets
expenses within results before major restructuring. These costs and the full year impact of the acquisition of Stiefel partly offset by
included restructuring costs related to minor acquisitions and operational excellence savings in the USA and Europe and lower
£5 million of income in 2010 (2009 – £4 million cost) that related exchange losses on inter-company transactions. Advertising and
to restructuring activity initiated before the commencement of promotion declined 1%, selling and distribution increased 1%
the Operational Excellence programme. None of this restructuring and general and administration excluding legal increased 2%.
activity had a material impact on GSK’s operating results or on
the manner in which its business is conducted.
R&D expenditure was 15.7% of total turnover (2009 – 14.4%)
The remaining costs of £595 million in 2010 arose from reflecting an increase in expenditure of 9% sterling (8% CER)
miscellaneous expenditures incurred solely as a direct result on a flat sterling turnover growth. This included restructuring
of the restructuring programmes, including the termination of costs of £493 million (2009 – £155 million), ViiV Healthcare R&D
leases, accelerated depreciation, site closure costs and consultancy investments and lower intangible asset impairments of £126 million
and project management fees. No costs arising from GSK’s (2009 – £167 million) and savings from the Operational Excellence
ongoing operating activities have been reported in the major programme. In addition, the comparison to prior year was
restructuring column. unfavourably impacted by the one-off recognition of a recoverable

balance in 2009.
During the anticipated duration of the Operational Excellence
programme, GSK does not currently expect to incur any material Other operating income
restructuring costs except those related to that programme and Other operating income was £493 million (2009 – £1,135 million)
acquisitions meeting the criteria described above. If any further, primarily reflecting royalty income of £296 million (2009 –
unanticipated material restructuring costs were to arise during £296 million), income from the transfer to Genentech of the
this period, GSK would expect to include them also in the major exclusive promotion rights to Boniva in the USA, and asset disposals
restructuring column. of £134 million (2009 – £875 million), partially offset by equity
GSK’s operating profit, profit before taxation, taxation and profit investment impairments of £65 million (2009 – £135 million).
for the year are discussed below in terms of both total results, The 2009 income included the disposal of Wellbutrin XL, various
which include major restructuring costs, and results before asset disposals to Aspen Pharmacare, a royalty dispute settlement
major restructuring. gain of £78 million and the accounting gain of £296 million on
the creation of ViiV Healthcare.

38
Operating profit – total results Cost of sales

Operating profit after restructuring charges of £1,345 million Cost of sales increased to 26.1% of turnover (2009 – 25.0%)
(2009 – £832 million) for the year ended 31st December 2010 reflecting the impact of generic competition to higher margin
was £3,783 million, a decrease of 59% CER (a decrease of 55% products in the USA (principally Valtrex), lower Avandia sales,
in sterling terms) compared with 2009. Excluding legal costs of US healthcare reforms and European austerity price cuts, and
£4,001 million (2009 – £591 million), operating profit was inventory and other asset write-downs, partially offset by savings
£7,784 million an 18% decline in CER terms (14% in sterling from the Operational Excellence programme. The company
terms) principally reflecting a 1% decline in turnover, higher cost expects cost of sales as a percentage of turnover in 2011 to
of sales, higher R&D expenditure and lower other operating income. remain around 26%.
Profit before taxation – total results Selling, general and administration

SG&A costs as a percentage of turnover increased by 11.2 percentage
Net finance costs
points to 43.6%, primarily reflecting higher legal charges of £4,001
2010 2009 million (2009 – £591 million). See Note 29 to the financial statements,
Finance income £m £m
‘Other provisions’ for further details.
Interest and other finance income 102 67
Unwinding of discounts on assets 1 2 Excluding legal costs SG&A costs were 29.5% of turnover (2009 –
Fair value adjustments and hedges 13 1 30.3%). The decrease of 0.8 percentage points reflected a 3%
Sterling (2% CER) decline in expenditure compared with prior
116 70 year on a flat sterling turnover growth. The decline in expenditure
reflected operational excellence savings in the USA and Europe
Finance costs and lower exchange losses on inter-company transactions, partially
Interest costs (767) (770) offset by investment in growth markets and the full year impact of
Unwinding of discounts on liabilities (18) (11) the acquisition of Stiefel.
Fair value adjustments and hedges (21) (2)
Advertising and promotion declined 1%, selling and distribution
Other finance expense (25) –
declined 4% and general and administration excluding legal
(831) (783) declined 1%. Collectively these items accounted for a 2% decline
in total SG&A. The company expects SG&A costs excluding legal
Profit on disposal of interest in associates charges to be around 30.5% of turnover in 2011.
Profit on disposal of interest in associates was £8 million Research and development
(2009 – £115 million). The 2009 profit arose from the sale of R&D expenditure was 14.0% of total turnover (2009 – 13.9%)
5.7 million Quest shares. Subsequent to the 2010 year-end the reflecting flat expenditure on a flat sterling turnover growth.
Group sold its entire shareholding in Quest, which will give rise to This included savings from the Operational Excellence programme,
a pre-tax profit on disposal of associates in 2011 of approximately lower intangible asset impairments of £126 million (2009 –
£600 million (£250 million after tax). £167 million) and higher ViiV Healthcare R&D investment. The
Share of after tax profits of associates and joint ventures comparison to prior year was unfavourably impacted by the one-
The share of after tax profits of associates of £81 million off recognition of a recoverable balance in 2009. The company
(2009 – £64 million) arose principally from the Group’s holding expects R&D costs as a percentage of turnover to remain around
in Quest. 14% in 2011.
Profit before taxation – total results Other operating income

Taking account of net finance costs, the profit on disposal of Other operating income was £493 million (2009 – £1,135 million)
interest in associates and the share of profits of associates, total primarily reflecting royalty income of £296 million (2009 –
profit before taxation was £3,157 million compared with £296 million), income from the transfer to Genentech of the
£7,891 million in 2009, a 64% CER decline and a 60% exclusive promotion rights to Boniva in the USA, and asset disposals
sterling decline. of £134 million (2009 – £875 million), partially offset by equity
investment impairments of £65 million (2009 – £135 million).
Operating profit – results before major The 2009 income included the disposal of Wellbutrin XL, various
restructuring asset disposals to Aspen Pharmacare, a royalty dispute settlement
gain of £78 million and the accounting gain of £296 million on the
The results before major restructuring are set out below: creation of ViiV Healthcare. In 2011, the company expects other
operating income to be around £600 million, excluding the profit
2010 2009 Growth
£m % £m % CER% £%
arising on the proposed Consumer Healthcare divestments of
non-core OTC brands.
Turnover 28,392 100 28,368 100 (1) –
Cost of sales (7,405) (26.1) (7,095) (25.0) 4 4
Selling, general
and administration (12,388) (43.6) (9,200) (32.4) 35 35
Research and
development (3,964) (14.0) (3,951) (13.9) – –
Other operating
income 493 1.8 1,135 3.9
Operating profit 5,128 18.1 9,257 32.6 (48) (45)

39
Operating profit – results before major restructuring The lower tax charge for 2010 reflects higher legal charges of

Operating profit before major restructuring for the year ended 31st £4 billion (2009 – £0.6 billion).
December 2010 was £5,128 million, a 48% decline in CER terms The charge for taxation on total profits amounted to £1,304 million
(a decrease of 45% in sterling terms). Excluding legal costs of £4,001 and represented an effective tax rate of 41.3% (2009 – 28.2%).
million (2009 – £591 million), operating profit was £9,129 million,
an 11% decline in CER terms (a decrease of 7% in sterling terms) The charge for taxation on profit before major restructuring
principally reflecting a 1% decline in turnover, higher cost of sales, charges amounted to £1,544 million and represented an effective
higher R&D expenditure and lower other operating income partly tax rate of 34.3% (2009 – 28.0%). GSK currently expects
offset by reduced SG&A costs. Operating profit margin excluding legal a tax rate on 2011 profits excluding the profit on the disposal of
costs and other operating income was 30.4% in 2010. The company the Quest shareholding of around 27%. However, the tax due on
expects the operating profit margin excluding legal costs and other the profit realised on the disposal of the shareholding in Quest is
operating income to be around 1 percentage point lower in 2011. expected to increase the overall tax rate for 2011 to around 29.5%.
This excludes the effect of any tax that may arise on the proposed
Profit before taxation – results before major Consumer Healthcare divestments of non-core brands.
restructuring GSK continues to believe that it has made adequate provision for
Net finance costs the liabilities likely to arise from open assessments. The ultimate

liability for such matters may vary from the amounts provided and
2010 2009
Finance income £m £m is dependent upon the outcome of litigation proceedings and
negotiations with the relevant tax authorities.
Interest and other income 102 67
Unwinding of discounts on assets 1 2 Profit for the year
Fair value adjustments and hedges 13 1
2010 2009 Growth
116 70 £m £m CER% £%
Total profit after taxation

Finance costs
for the year 1,853 5,669 (71) (67)
Interest costs (767) (770) Total profit attributable to
Unwinding of discounts on liabilities (15) (8) shareholders 1,634 5,531 (75) (70)
Fair value adjustments and hedges (21) (2) Basic earnings per share (pence) 32.1p 109.1p (75) (71)
Other finance expense (25) – Basic earnings per ADS (US$) $1.00 $3.40
(828) (780) Results before major restructuring
profit after taxation for the year 2,961 6,283 (56) (53)

Net interest payable for the year was £712 million (2009 –
£710 million) and the company expects a similar charge in 2011. Results before major restructuring
profit attributable to shareholders 2,742 6,145 (59) (55)
Profit on disposal of interest in associate Adjusted earnings per share (pence) 53.9p 121.2p (59) (56)
Profit on disposal of interest in associates was £8 million (2009 – Adjusted earnings per ADS (US$) $1.67 $3.78
£115 million). The 2009 profit arose from the sale of 5.7 million Weighted average number
Quest shares. Subsequent to the 2010 year-end, GSK sold its of shares (millions) 5,085 5,069
entire shareholding in Quest, which will give rise to a pre-tax
profit on disposal of associates of approximately £600 million Diluted total earnings per share (pence) 31.9p 108.2p
(£250 million after tax). Diluted total earnings per ADS (US$) $0.99 $3.38
Diluted weighted average number
Share of after tax profits of associates and joint ventures of shares (millions) 5,129 5,108
The share of after tax profits of associates of £81 million
(2009 – £64 million) arose principally from the Group’s holding Total results including restructuring costs produced a basic EPS of
in Quest Diagnostics Inc. 32.1p compared with 109.1p in 2009. This was a 75% decline in
CER terms and a 71% decline in sterling terms. Excluding major
Profit before taxation – results before major restructuring
restructuring costs, EPS was 53.9p compared with 121.2p. This

Taking account of net finance costs, the profit on disposal of
was a 59% decline at CER and a 56% decrease in sterling terms.
interests in associates and the share of profits of associates, profit
The 3 percentage point currency benefit arose from the weakness
before tax before major restructuring was £4,505 million compared
of Sterling against most major international currencies compared
with £8,726 million in 2009, a 52% CER decline and a 48%
with last year, partly offset by the strengthening of Sterling against
decline in sterling terms.
the Euro.
Taxation charge Dividend
2010 2009 The Board has declared a fourth interim dividend of 19 pence per
£m £m share resulting in a dividend for the year of 65 pence, a 4 pence
UK corporation tax at the UK statutory rate 82 600 increase on the 61 pence per share for 2009. The equivalent
Less double taxation relief (156) (183) interim dividend receivable by ADR holders is 61.5296 cents per
ADS based on an exchange rate of £1/$1.6192. The ex-dividend
(74) 417
date was 9th February 2011, with a record date of 11th February
Overseas taxation 1,496 1,997
2011 and a payment date of 7th April 2011.
Current taxation 1,422 2,414
Deferred taxation (118) (192)
Taxation on total profits 1,304 2,222
40
Critical accounting policies A reconciliation of gross turnover to net turnover for the US
The consolidated financial statements are prepared in accordance pharmaceuticals business is as follows:
with IFRS, as adopted for use in the European Union, and also with 2009 2008
IFRS as issued by the IASB, following the accounting policies approved 2010 (restated) (restated)
£m % £m % £m %
by the Board and described in Note 2 to the financial statements,
‘Accounting principles and policies’. Management is required to Gross turnover 10,802 100 11,674 100 10,782 100
make estimates and assumptions that affect the amounts of assets,
Chargebacks (993) 9 (1,124) 10 (836) 8
liabilities, revenue and expenses reported in the financial statements.
Managed care, Medicare
Actual amounts and results could differ from those estimates.
Part D and GPO
The critical accounting policies adopted relate to the following areas: rebates (894) 8 (907) 8 (756) 7
s4URNOVER US government and
s4AXATION state programmes (742) 7 (542) 5 (470) 4
s,EGALANDOTHERDISPUTES Cash discounts (193) 2 (200) 2 (191) 1
Customer returns (179) 1 (172) 1 (118) 1
s0ROPERTYPLANTEQUIPMENT
Prior year adjustments 38 – 24 – 35 –
s'OODWILL Other items (191) 2 (175) 1 (192) 2
s/THERINTANGIBLEASSETS Total deductions (3,154) 29 (3,096) 27 (2,528) 23
s0ENSIONSANDOTHERPOST EMPLOYMENTBENElTS
Net turnover 7,648 71 8,578 73 8,254 77
Information on the judgements and estimates made in these areas
is given in Note 3 to the financial statements, ‘Key accounting Information relating to 2009 and 2008 has been restated following
judgements and estimates’. changes to the segmental reporting, as set out in Note 6 to the
financial statements, ‘Segment information’.
In respect of the Turnover accounting policy, the Group’s largest
business is US pharmaceuticals, and the US market has the most Rebates given under US government and state programmes
complex arrangements for rebates, discounts and allowances. have increased in the year as a result of the US healthcare reform
The following briefly describes the nature of the arrangements in amendments. The additional expense arising from the new
existence in the Group’s US pharmaceuticals business: legislation include Managed Medicaid Sales being discounted at
Fee-for-Service rates, an increase to the Basic Medicaid Rebate, a
s'3+HASARRANGEMENTSWITHCERTAININDIRECTCUSTOMERSWHEREBY new definition of Average Manufacturers Price and incremental
the customer is able to buy products from wholesalers at Consumer Price Index penalty on line extensions.
reduced prices. A chargeback represents the difference between
the invoice price to the wholesaler and the indirect customer’s The total accruals for rebates, discounts, allowances and returns
contractual discounted price. Accruals for estimating chargebacks in the US pharmaceuticals business were as follows:
are calculated based on the terms of each agreement, historical At 31st
experience and product growth rates At 31st December
December 2009
s#USTOMERREBATESAREOFFEREDTOKEYMANAGEDCAREANDGROUP 2010 (restated)
£m £m
purchasing organisations (GPO) and other direct and indirect
customers. These arrangements require the customer to achieve Chargebacks 50 41
certain performance targets relating to the value of product Managed care, Medicare Part D
purchased, formulary status or pre-determined market shares relative and GPO rebates 422 426
to competitors. The accrual for customer rebates is estimated based US government and state programmes 445 322
on the specific terms in each agreement, historical experience and Cash discounts 21 20
product growth rates Customer returns 254 192
Other 28 26
s4HE53-EDICAIDPROGRAMMEISASTATE ADMINISTEREDPROGRAMME
providing assistance to certain poor and vulnerable patients. In Total 1,220 1,027
1990, the Medicaid Drug Rebate Program was established to
reduce state and federal expenditure on prescription drugs. In The accrual for rebates to US government and state programmes
2010, the Patient and Affordable Care Act became law. GSK has increased as a result of the US healthcare reform implemented
participates by providing rebates to states. Accruals for Medicaid during 2010.
rebates are calculated based on the specific terms of individual
A monthly process is operated to monitor inventory levels at
state agreements using a combination of historical experience,
wholesalers for any abnormal movements. This process uses gross
product and population growth, anticipated price increases and
sales volumes, prescription volumes based on third party data
the impact of contracting strategies
sources and information received from key wholesalers. The aim of
s #ASHDISCOUNTSAREOFFEREDTOCUSTOMERSTOENCOURAGEPROMPT this is to maintain inventories at a consistent level from year to year
payment. These are accrued for at the time of invoicing and based on the pattern of consumption.
adjusted subsequently to reflect actual experience
On this basis, US pharmaceutical inventory levels at wholesalers
s 7HERETHEREISHISTORICALEXPERIENCEOFCUSTOMERRETURNS'3+ and in other distribution channels at 31st December 2010 were
records an accrual for estimated sales returns by applying historical estimated to amount to approximately one month of turnover.
experience of customer returns to the amounts invoiced, together This calculation uses third party information, the accuracy of which
with market related information such as stock levels at wholesalers, cannot be totally verified, but is believed to be sufficiently reliable
anticipated price increases and competitor activity. for this purpose.

41
Financial position and resources

Financial position Property, plant and equipment

2010 2009 GSK’s business is science-based, technology-intensive and highly
£m £m regulated by governmental authorities. The Group allocates
Assets significant financial resources to the renewal and maintenance of
Non-current assets its property, plant and equipment to minimise risks of interruption
Property, plant and equipment 9,045 9,374 of production and to achieve compliance with regulatory standards.
Goodwill 3,606 3,361 A number of its processes use chemicals and hazardous materials.
Other intangible assets 8,532 8,183 The total cost of the Group’s property, plant and equipment
Investments in associates and joint ventures 1,081 895 at 31st December 2010 was £18,895 million, with a net book
Other investments 711 454 value of £9,045 million. Of this, land and buildings represented
Deferred tax assets 2,566 2,374 £3,729 million, plant and equipment £3,144 million and assets in
Derivative financial instruments 97 68 construction £2,172 million. In 2010, GSK invested £1,038 million
Other non-current assets 556 583 in new and renewal property, plant and equipment. This is mainly
Total non-current assets 26,194 25,292 related to a large number of projects for the renewal, improvement
and expansion of facilities at various worldwide sites. Property is
Current assets mainly held freehold. New investment is financed from Group liquid

Inventories 3,837 4,064 resources. At 31st December 2010, GSK had capital contractual
Current tax recoverable 56 58 commitments for future expenditure of £377 million and operating
Trade and other receivables 5,793 6,492 lease commitments of £415 million. GSK believes that its facilities
Derivative financial instruments 93 129 are adequate for its current needs.
Liquid investments 184 268
Cash and cash equivalents 6,057 6,545 The Group observes stringent procedures and uses specialist skills
to manage environmental risks from these activities. Environmental
Assets held for sale 16 14
issues, sometimes dating from operations now modified or
Total current assets 16,036 17,570 discontinued, are reported under ‘Environmental sustainability’
Total assets 42,230 42,862 on page 32 and in Note 44 to the financial statements, ‘Legal
proceedings’.
Liabilities
Current liabilities Goodwill
Short-term borrowings (291) (1,471) Goodwill has increased during the year from £3,361 million at
Trade and other payables (6,888) (6,772) 31st December 2009 to £3,606 million. The increase primarily
Derivative financial instruments (188) (168) reflects the goodwill arising on the acquisition of Laboratorios

Current tax payable (1,047) (1,451) Phoenix S.A.I.C.yF. of £72 million and the impact of a
Short-term provisions (4,380) (2,256) strengthening of overseas currencies.
Total current liabilities (12,794) (12,118) Other intangible assets

Other intangible assets include the cost of intangibles acquired
Non-current liabilities
from third parties and computer software. The net book value
Long-term borrowings (14,809) (14,786)
of other intangible assets as at 31st December 2010 was
Deferred tax liabilities (707) (645)
£8,532 million (2009 – £8,183 million). The increase in 2010
Pensions and other post-employment benefits (2,672) (2,981) reflects additions of £252 million through business combinations,
Other provisions (904) (985) and currency movements, partly offset by the amortisation and
Derivative financial instruments (5) – impairment of existing intangibles.
Other non-current liabilities (594) (605)
Investments
Total non-current liabilities (19,691) (20,002)
GSK held investments, including associates and joint ventures,
Total liabilities (32,485) (32,120) with a carrying value at 31st December 2010 of £1,792 million
Net assets 9,745 10,742 (2009 – £1,349 million). The market value at 31st December 2010
was £2,688 million (2009 – £2,225 million). The largest of these
Equity
investments are in two associates: Quest Diagnostics Inc., which
Share capital 1,418 1,416
had a book value at 31st December 2010 of £494 million
Share premium account 1,428 1,368
(2009 – £410 million) and Aspen Pharmacare Holdings Limited
Retained earnings 4,779 6,321
which had a book value at 31st December 2010 of £397 million
Other reserves 1,262 900
(2009 – £372 million). The investments include equity stakes in
Shareholders’ equity 8,887 10,005 companies where the Group has research collaborations, which
Non-controlling interests 858 737 provide access to biotechnology developments of potential interest
and interests in companies that arise from business divestments.
Total equity 9,745 10,742
Derivative financial instruments: assets
GSK had both non-current and current derivative financial
instruments held at fair value of £190 million (2009 – £197 million).
The small decrease primarily reflects a decrease in net investment
hedging volumes.

42
Inventories Net debt decreased by £585 million due to the free cash flow
Inventory of £3,837 million has decreased by £227 million during generated by the company exceeding the amounts paid in
the year. The decrease reflects initiatives to reduce manufacturing dividends to shareholders and invested in new businesses.
cycle times and reduce stockholding days through more efficient Movements in net debt
use of inventory throughout the supply chain.
2010 2009
Trade and other receivables £m £m
Trade and other receivables of £5,793 million have decreased from Net debt at beginning of year (9,444) (10,173)
2009 reflecting the recovery of significant levels of H1N1 debt (Decrease)/increase in cash and bank overdrafts (642) 1,054
during the year and specific actions taken to reduce overdue and Cash inflow from liquid investments (91) (87)
other receivables as part of a Group initiative to reduce working Net increase in long-term loans – (1,358)
capital. These reductions were partly offset by a strengthening of Net repayment of short-term loans 1,290 102
year-end foreign exchange rates. Debt of subsidiary undertakings acquired (20) (9)
Derivative financial instruments: liabilities Exchange movements 61 1,041
Other movements (13) (14)
GSK held current and non-current derivative financial instruments
held at fair value of £193 million (2009 – £168 million current ) Net debt at end of year (8,859) (9,444)
relating primarily to hedging exchange on translation of currency
assets on consolidation. The small increase reflects marginally Total equity
higher currency volatility on the Euro, US dollar and Yen.
A summary of the movements in equity is set out below.
Trade and other payables
2010 2009
Trade and other payables amounting to £6,888 million have £m £m
increased from 2009, reflecting working capital initiatives to Total equity at beginning of year 10,742 8,318
extend supplier terms towards the Group’s 60-day term objective
Total comprehensive income for the year 2,086 4,996
and a strengthening of year-end foreign exchange rates.
Dividends to shareholders (3,205) (3,003)
Provisions Ordinary Shares issued 62 43
The Group carried deferred tax provisions and other short-term Changes in non-controlling interests – 338
and non-current provisions of £5,991 million at 31st December Put option over non-controlling interest – (2)
2010 (2009 – £3,886 million) in respect of estimated future Consideration received for shares transferred
liabilities, of which £4,000 million (2009 - £2,020 million) related by ESOP Trusts 17 13
to legal and other disputes. Provision has been made for legal and Ordinary Shares acquired by ESOP Trusts (16) (57)
other disputes, indemnified disposal liabilities and the costs of Share-based incentive plans 175 171
restructuring programmes to the extent that at the balance sheet Tax on share-based incentive plans 2 14
date a legal or constructive obligation existed and could be reliably Distributions to non-controlling interests (118) (89)
estimated.
Total equity at end of year 9,745 10,742
Pensions and other post-employment benefits
The Group accounts for pension and other post-employment At 31st December 2010, total equity had decreased from
arrangements in accordance with IAS 19. The deficits, net of £10,742 million at 31st December 2009 to £9,745 million.
surpluses before allowing for deferred taxation were £1,224 million The decrease arose principally from the increased provision for
(2009 – £1,745 million) on pension arrangements and £1,425 legal charges in the year.
million (2009 – £1,213 million) on unfunded post-employment Share purchases
liabilities. The pension liabilities decreased following an increase in In 2010, the Employee Share Ownership Plan (ESOP) Trusts acquired
asset values in the UK and the USA, deficit reduction contributions £16 million of shares in GSK plc (2009 – £57 million). Shares are
by the company and a decrease in the long-term inflation rate, held by the Trusts to satisfy future exercises of options and awards
partly offset by reductions in the rate used to discount UK pension under the Group share option and award schemes. A proportion
liabilities from 5.7% to 5.5% and the rate used to discount US of the shares held by the Trusts are in respect of awards where the
pension liabilities from 5.75% to 5.2%. rules of the scheme require GSK to satisfy exercises through market
In December 2010, the UK scheme purchased an insurance contract purchases rather than the issue of new shares. The shares held by
that will guarantee payment of specified pensioner liabilities. This the Trusts are matched to options and awards granted.
contract was valued at £0.7 billion at 31st December 2010. At 31st December 2010, the ESOP Trusts held 105 million
Net debt (2009 – 118 million) GSK shares against the future exercise of
2010 2009
share options and share awards. The carrying value of £845 million
£m £m (2009 – £1,138 million) has been deducted from other reserves.
Cash, cash equivalents and The market value of these shares was £1,308 million
liquid investments 6,241 6,813 (2009 – £1,554 million).
Borrowings – repayable within one year (291) (1,471)
Borrowings – repayable after one year (14,809) (14,786)
Net debt (8,859) (9,444)

43
GSK did not purchase any of its own shares in 2010 (2009 – £nil). Commitments in respect of loans and future interest payable

On 3rd February 2011, GSK announced that the company intends on loans are disclosed before taking into account the effect
to repurchase £1-2 billion of shares in 2011, depending on market of derivatives. The Group has entered into a number of
conditions and other factors. The exact amount and timing of research collaborations to develop new compounds with other
future purchases after 2011, and whether the shares will be held as pharmaceutical companies. The terms of these arrangements can
Treasury shares or be cancelled, will be determined by the company include upfront fees, equity investments, loans and commitments
and is dependent on market conditions and other factors. At 31st to fund specified levels of research. In addition, the Group will
December 2010, GSK held 474.2 million shares as Treasury shares often agree to make further payments if future ‘milestones’ are
(2009 – 474.2 million shares), at a cost of £6,286 million (2009 – achieved. As some of these agreements relate to compounds in
£6,286 million), which has been deducted from retained earnings. the early stages of development, milestone payments will continue
for a number of years if the compounds move successfully through
No shares were purchased in the period 1st January 2011 to
the development process. Generally the closer the product is to
3rd February 2011. In the period 4th February 2011 to
marketing approval the greater the possibility of success. The
24th February 2011 10.4 million shares were purchased at a
amounts shown above within intangible assets represent the
cost of £123.4 million.
maximum that would be paid if all milestones were achieved,
Commitments and contingent liabilities and include £8.6 billion of which relates to externalised projects
Financial commitments are summarised in Note 39 to the financial in the discovery portfolio. A number of new commitments were

statements, ‘Commitments’. Other contingent liabilities and made in 2010 under licensing and other agreements, including
obligations in respect of short and long-term debt are set out in arrangements with Amicus Therapeutics Inc., Amplimmune Inc.,
Note 31 to the financial statements, ‘Contingent liabilities’ and Apeiron Biologics AG, Fondazione Telethon, Isis Pharmaceuticals
Note 32 to the financial statements, ‘Net debt’. Inc. and Shionogi & Co. Limited.
Amounts provided for pensions and post-retirement benefits are In 2009, GSK reached an agreement with the trustees of the UK
set out in Note 28 to the financial statements, ‘Pensions and other pension schemes to make additional contributions over a five
post-employment benefits’. Amounts provided for restructuring year period, to eliminate the pension deficit identified at the
programmes and legal, environmental and other disputes are set 31st December 2008 actuarial funding valuation. The table above
out in Note 29 to the financial statements, ‘Other provisions’. shows this commitment but excludes the normal ongoing annual
funding requirement of approximately £130 million. For further
Contractual obligations and commitments information on pension obligations, see Note 28 to the financial
The following table sets out the Group’s contractual obligations and statements, ‘Pensions and other post-employment benefits’.
commitments at 31st December 2010 as they fall due for payment.
Contingent liabilities
Total Under 1 yr 1-3 yrs 3-5 yrs 5 yrs+
The following table sets out contingent liabilities, comprising

£m £m £m £m £m
Loans 14,997 259 4,158 2,407 8,173 discounted bills, performance guarantees, letters of credit and other
Interest on loans 10,312 755 1,394 1,097 7,066 items arising in the normal course of business, and when they are
Finance lease obligations 103 32 45 18 8 expected to expire.
Finance lease charges 16 5 8 3 – Total Under 1 yr 1-3 yrs 3-5 yrs 5 yrs+
Operating lease £m £m £m £m £m
commitments 415 123 119 57 116 Guarantees 110 64 1 1 44
Intangible assets 11,762 720 1,626 2,150 7,266 Other contingent liabilities 55 22 10 1 22
Property, plant & equipment 380 278 95 7 –
Business combinations 285 253 12 20 – Total 165 86 11 2 66
Investments 37 16 – 21 –
In the normal course of business, GSK has provided various
Purchase commitments 1,127 239 314 293 281
indemnification guarantees in respect of business disposals in which
Pensions 1,095 365 730 – – legal and other disputes have subsequently arisen. A provision is
Other commitments 242 110 78 49 5 made where an outflow of resources is considered probable and
Total 40,771 3,155 8,579 6,122 22,915 a reasonable estimate can be made of the likely outcome of the
dispute and this is included in Note 29 to the financial statements,

‘Other provisions’.
It is the Group’s policy to provide for the settlement costs of

asserted claims and environmental disputes when an outflow
of resources is considered probable and a reliable estimate may
be made. Prior to this point no liability is recorded. Legal and
environmental costs are discussed in ‘Risk factors’ on pages 53
to 57 and Note 44 to the financial statements, ‘Legal proceedings’.
GSK continues to believe that it has made adequate provision
for the liabilities likely to arise from open taxation assessments.
The ultimate liability for such matters may vary significantly from
amounts provided and is dependent upon the outcome of
litigation proceedings and negotiations with the relevant tax
authorities. This is discussed further in Note 14 to the financial
statements, ‘Taxation’.

44
Cash flow Free cash flow is used by GSK’s management for planning and
A summary of the consolidated cash flow is set out below. reporting purposes and in discussions with and presentations to
investment analysts and rating agencies. GSK’s free cash flow
2010 2009 measure is not defined in IFRS. This measure may not be directly
£m £m
comparable with similarly described measures used by other
Net cash inflow from operating activities 6,797 7,841 companies. A reconciliation of net cash inflow from operating
Net cash outflow from investing activities (1,868) (4,013) activities, which is the closest equivalent IFRS measure, to free
Net cash outflow from financing activities (5,571) (2,774) cash flow is shown below.
(Decrease)/increase in cash and bank overdrafts (642) 1,054 Reconciliation of free cash flow
Exchange adjustments 81 (158) 2010 2009
Cash and bank overdrafts at beginning of year 6,368 5,472 £m £m
Cash and bank overdrafts at end of year 5,807 6,368 Net cash inflow from operating activities 6,797 7,841
Purchase of property, plant and equipment (1,014) (1,418)
Cash and bank overdrafts at end of year Purchase of non-current intangible assets (621) (455)
comprise: Disposal of property, plant and equipment 92 48
Interest paid (775) (780)
Cash and cash equivalents 6,057 6,545
Interest received 107 90
Overdrafts (250) (177)
Dividends received from joint ventures and
5,807 6,368 associated undertakings 18 17
Distributions to non-controlling interests (118) (89)
The net cash inflow from operating activities after taxation paid
was £6,797 million, a decrease of £1,044 million over 2009 Free cash flow 4,486 5,254
reflecting higher legal settlements in the year partly offset by a
net working capital reduction. Investment appraisal
GSK has a formal process for assessing potential investment
The net cash outflow from investing activities was £1,868 million,
proposals in order to ensure decisions are aligned with the Group’s
a decrease of £2,145 million which primarily reflected lower
overall strategy. This process includes an analysis of the impact
business purchases during 2010 of £354 million. In 2009 business
of the project on earnings, its return on invested capital and an
purchases were £2,792 million, primarily Stiefel Laboratories, Inc.
assessment of the return based on discounted cash flows. The
In addition purchases of property, plant and equipment were lower
discount rate used to perform financial analysis is decided internally,
by £404 million in 2010.
to allow determination of the extent to which investments cover
Free cash flow the Group’s cost of capital. For specific investments the discount
Free cash flow is the amount of cash generated by the business rate may be adjusted to take into account country or other
after meeting its obligations for interest, tax and dividends paid to risk weightings.
non-controlling interests, and after capital expenditure on non- Capital expenditure and financial investment
current tangible and intangible assets.
Cash payments for tangible and intangible fixed assets amounted
£m to £1,635 million (2009 – £1,873 million). Disposals realised
6,000
£218 million (2009 – £404 million). Cash payments to acquire
equity investments of £279 million (2009 – £154 million) were
5,000 made in the year and sales of equity investments realised
5,254
£27 million (2009 – £59 million).
4,000 4,486
Future cash flow
3,000
The Group expects that future operating cash flow will be sufficient
2,000 to fund its operating and debt service costs, to satisfy normal levels
of capital expenditure, to meet obligations under existing licensing
1,000 agreements, to meet the expenditure arising from the major
restructuring programmes (the precise timing of which is uncertain)
0
outlined in Note 7 to the financial statements, ‘Major restructuring
2010 2009
programmes’ and to meet other routine outflows including tax and
Free cash flow was adversely impacted by legal settlements of dividends, subject to the ‘Risk factors’ discussed on pages 53 to 57.
£2,047 million (2009 – £254 million). Free cash flow excluding legal GSK may from time to time have additional demands for finance,
settlements was £6,533 million in 2010, compared with £5,508 such as for acquisitions and share repurchases. It has access to
million in 2009, the improvement reflecting the reduction in working other sources of liquidity from short and long-term capital markets
capital and lower expenditure on property, plant & equipment. and banks and other financial institutions, in addition to the cash
flow from operations, for such needs.

45
Payment policies Liquidity

Group companies are responsible for monitoring and managing As at 31st December 2010, our cash and liquid investments were
their working capital. The terms of sales collections and supplier held as follows:
payments reflect local commercial practice.
2010 2009
£m £m
In the UK, the company and each of its UK subsidiaries have
policies to ensure that suppliers are paid on time. In particular, Bank balances and deposits 5,660 5,206
the UK companies seek: US Treasury and Treasury repo
only money market funds 360 1,305
sTOSETTLETERMSOFPAYMENTWITHSUPPLIERSWHENAGREEINGTHE
Corporate debt instruments 10 10
terms of the transaction
Government securities 211 292
sTOENSURETHATSUPPLIERSAREMADEAWAREOFTHEAGREEDTERMS
of payment 6,241 6,813
sTOABIDEBYTHETERMSOFPAYMENT
Our centrally managed cash reserves amounted to £3.0 billion at
The policy permits arrangements for accelerated payment to 31st December 2010, all available within 3 months. This excludes
small suppliers. £0.9 billion centrally managed cash held by ViiV Healthcare, an

85% owned subsidiary. We also had $3.9 billion of undrawn
Payment performance committed facilities. As at that date we had short term overdrafts
At 31st December 2010, the average number of days’ payable and loans repayable within one year of £259 million. We had
outstanding represented by trade payables of the parent company net debt of £8.9 billion at 31st December 2010. The table below
was nil (2009 – nil) and in respect of the company and its UK summarises cash and gross debt after the effects of hedging.
subsidiaries in aggregate was 50 days (2009 – 44 days).
2010 2009
Treasury policies £m £m
GSK reports in Sterling and pays dividends out of Sterling profits. Cash and liquid investments 6,241 6,813
The role of Corporate Treasury is to manage and monitor our Gross debt – fixed (13,740) (13,706)
external and internal funding requirements and financial risks in – floating (1,358) (2,550)
support of our strategic objectives. Treasury activities are governed – non-interest bearing (2) (1)
by policies and procedures approved by the Board of Directors,
Net debt (8,859) (9,444)
most recently on 7th October 2010.
A Treasury Management Group (TMG) chaired by our Chief We manage our net borrowing requirements through a portfolio

Financial Officer, meets on a monthly basis to review treasury of long-term borrowings, including bonds, together with short-
activities. Its members receive management information relating term finance under a $10 billion commercial paper programme
to treasury activities. and $3.9 billion of committed facilities. The facilities were last
renewed in October 2010. We consider this level of committed
Capital management
facilities to be adequate given current liquidity requirements. For
GSK operates on a global basis, primarily through subsidiary further information on these facilities, see Note 32 to the financial
companies established in the markets in which we trade. With statements, ‘Net debt’. We also benefit from strong positive cash
significant levels of patent or trademark protection, our products flow from operating units.
compete largely on product efficacy or differentiation rather than
on price. Selling margins are sufficient to cover normal operating We have a European Medium Term Note programme of
costs and our operations are cash generative. £15 billion. At 31st December 2010, we had £8.3 billion of
notes in issue under this programme. We also have a US shelf
Operating cash flow is used to fund investment in research and registration statement. At 31st December 2010, we had
development of new products. It is also used to make the routine $10.1 billion (£6.5 billion) of notes in issue under this programme.
outflows of capital expenditure, tax, dividends, repayment of The TMG monitors the cash flow forecast on a monthly basis.
maturing debt and, to the extent determined by the Board,
share repurchases. In 2011, as part of a new long-term share The long-term borrowings mature at dates between 2012 and
buy-back programme and depending on market conditions and 2042. Our long-term debt ratings have remained stable since
other factors, we expect to re-purchase £1-2 billion of shares. February 2008. Currently we are rated A+ stable outlook by
Standard and Poor’s and A1 stable outlook by Moody’s Investors
Our policy is to borrow centrally using a variety of capital market Service ‘Moody’s’. Our short-term debt ratings are A-1 and P-1
issues and borrowing facilities to meet anticipated funding with Standard and Poor’s and Moody’s respectively.
requirements.
These borrowings, together with cash generated from operations,
are on-lent, contributed as equity to certain subsidiaries or used to
pay dividends and make acquisitions. GSK did not make any share
repurchases in 2010.
For further details see Note 41 to the financial statements ‘Financial
instruments and related disclosures’.

46
Maturity profile of gross debt

£m equivalent
3,000
2,500
2,000
1,500
1,000
500
2011 2012 2013 2014 2015 2016 2017 2018 2025 2033 2034 2038 2039 2042
GBP bonds EUR bonds USD bonds Other bank borrowings Leases
Treasury operations Interest rate risk management
The objective of treasury activity is to manage the post-tax net The policy on interest rate risk management limits the amount
cost or income of financial operations to the benefit of earnings. of floating rate interest payments to a prescribed percentage of
Corporate Treasury does not operate as a profit centre. We use trading profit.
a variety of financial instruments to finance our operations and
We use a series of interest rate swaps to re-denominate one of our
derivative financial instruments to manage market risks from
external borrowings into the interest rate coupon required by GSK.
these operations. These derivatives, principally comprising forward
The duration of this swap matches the duration of the principal
foreign currency contracts, interest rate and currency swaps,
instrument. Interest rate derivative instruments are accounted for
are used to swap borrowings and liquid assets into our required
as fair value or cash flow hedges of the relevant assets or liabilities.
currencies and to manage exposure to funding risks from changes
in foreign exchange and interest rates. Counterparty risk management
We do not hold or issue derivatives for speculative purposes. Our Our policy on counterparty risk management is to work with a select
treasury policies specifically prohibit such activity. All transactions group of relationship banks. Global counterparty limits are assigned
in financial instruments are undertaken to manage the risks arising to each of GSK’s banking and investment counterparties based on
from underlying business activities, not for speculation. long-term credit ratings from Moody’s and Standard and Poor’s.
Corporate Treasury’s usage of these limits is monitored daily by a
Foreign exchange management Corporate Compliance Officer (CCO) who operates independently
Foreign currency transaction exposures arising on internal and of Corporate Treasury. Any breach of these limits is reported to
external trade flows are not hedged. The exposure of overseas the CFO immediately. The CCO also monitors the credit rating of
operating subsidiaries to transaction risk is minimised by matching these counterparties and, when changes in ratings occur, notifies
local currency income with local currency costs. Corporate Treasury so that changes can be made to investment
levels or authority limits as appropriate. A full counterparty analysis is
For this purpose, our internal trading transactions are matched
presented to the TMG annually for approval.
centrally and we manage inter-company payment terms to reduce
foreign currency risk. Exceptional foreign currency cash flows are Financial assets and liabilities
hedged selectively under the management of Corporate Treasury.
An analysis of net debt is given in Note 32 to the financial
We manage the cash surpluses or borrowing requirements of statements, ‘Net debt’. An analysis of financial assets and liabilities
subsidiary companies centrally using forward contracts to hedge at carrying value and fair value is given in Note 41 to the financial
future repayments back into the originating currency. statements, ‘Financial instruments and related disclosures’.
We seek to denominate borrowings in the currencies of our We continue to benefit from strong positive cash flow from
principal assets and cash flows. These are primarily denominated operating activities. Our net debt has decreased in the year to
in US dollars, Euros and Sterling. Certain borrowings can be 31st December 2010, reflecting the benefits of our ongoing
swapped into other currencies as required. restructuring programme and the success of our working
Borrowings denominated in, or swapped into, foreign currencies capital initiatives.
that match investments in our overseas assets may be treated as a The financial assets and liabilities at 31st December 2010 are
hedge against the relevant assets. Forward contracts are also used representative of our treasury policies and strategies approved
in major currencies to reduce our exposure to our investment in by the Board of Directors, most recently on 7th October 2010.
overseas Group assets (see ‘Net Investment Hedges’ section of In 2010, GSK did not raise any debt in the Capital Markets or make
Note 41 for further details). The TMG reviews the ratio of any share repurchases.
borrowings to assets for major currencies.

47

In accordance with US SEC disclosure requirements, the following CNS

discussion compares results for the year to 31st December 2009 CNS sales decreased 44% to £1.9 billion.
with the results for the year to 31st December 2008.
The majority of GSK’s CNS franchise is impacted by generic
Financial information and the discussion that follows is presented competition in the USA. The Wellbutrin decline of 67% primarily
on the basis that GSK was organised and managed in 2009. reflected the sale of Wellbutrin XL in the USA to Biovail in the
second quarter of 2009.
Exchange
Cardiovascular and urogenital
The currencies that most influence the Group’s results remain the
US dollar, the Euro and the Japanese Yen. Cardiovascular and urogenital sales increased 8% to £2.3 billion.
During 2009, average Sterling exchange rates were weaker against Continued strong growth of key products such as Arixtra, up 29%
the US Dollar, the Euro and the Yen compared with 2008. 2009 to £254 million, Avodart, up 16% to £530 million, and Lovaza,
year-end Sterling exchange rates were stronger against all three up 31% to £450 million, were partly offset by generic competition
currencies compared with those at 31st December 2008. to Coreg.
Metabolic
Pharmaceutical turnover Metabolic sales decreased 14% to £1.2 billion.

All growth rates included in the review of turnover are at constant
exchange rates (CER) unless otherwise stated. Sterling growth Sales of Avandia, down 16% to £771 million, continued to decline
rates may be found in the tables of pharmaceutical turnover by across all regions. Bonviva/Boniva sales declined in the USA by 16%
therapeutic areas on page 48 and by geographic region on page 49. but grew in Europe and the Rest of the World.
Pharmaceutical turnover grew 2% to £23.7 billion. Pharmaceuticals Oncology and emesis

growth was helped by sales of pandemic products. On a regional Oncology and emesis sales increased 10% to £0.6 billion.
basis, the USA declined 13% reflecting continued erosion of several Tyverb/Tykerb, up 45% to £169 million, grew strongly in Europe
products due to generic competition. Strong performances were and the Rest of World following product approvals gained during
delivered in Europe, up 9%), Emerging Markets, up 20% and Asia 2008. Zofran declined 11% as a result of generic competition.
Pacific/Japan, up 16%. The sales contribution of Stiefel, which was
acquired on 22nd July 2009, totalled £248 million. Vaccines
Vaccine sales increased 30% to £3.7 billion.
Pharmaceutical turnover by therapeutic area Pandemic vaccine sales of £883 million were recorded during the
GSK turnover grew by 2% in 2009 as the impact of US generic year, most of which were delivered in the fourth quarter, as GSK
competition to a range of GSK’s products, lower Avandia sales and partnered with governments to respond to the H1N1 pandemic.

a declining HIV business was more than offset by strong growth of
key products such as Seretide/Advair, Avodart, Lovaza, Relenza and Sales of GSK’s new Synflorix vaccine totalled £73 million, reflecting
the vaccines franchise including the H1N1 pandemic vaccine. launches in several markets and the beginning of shipments to the
Brazilian Government as part of the 10-year, $1.5 billion agreement
Respiratory signed in August 2009. Other strong contributors to growth for
Respiratory sales increased 5% to £7.0 billion. the year included Boostrix, up 73% to £139 million, Cervarix, up
Seretide/Advair grew 5% to £5.0 billion, with especially strong 38% to £187 million and Rotarix, up 50% to £282 million. Partially
growth in Emerging Markets, up 21% to £276 million and offsetting these performances, sales of Infanrix/Pediarix fell 15%
Japan, up 79% to £195 million. Ventolin sales grew 26% to to £649 million, primarily as a result of the continued impact of
£477 million, driven by its performance in the USA where sales increased competition in the DTPa sector in the USA. Hepatitis
more than doubled to £153 million. Veramyst sales rose 72% vaccines sales also fell 11% to £665 million in part due to a
to £142 million. competitor product returning to the US market.
Anti-virals
Anti-virals increased 12% to £4.2 billion.
Relenza sales were £720 million in 2009 (2008 – £57 million)

reflecting the successful capacity expansion to meet government
orders across the world and a strong retail performance in Japan of
£191 million. Sales of Valtrex declined 8% to £1.3 billion as a result
of generic competition to the product in the USA which began in
November 2009.
Sales of HIV medicines totalled £1.6 billion, down 7% for the year.
Epzicom sales grew 8% to £546 million but this was more than
offset by declines across the rest of the portfolio. ViiV Healthcare,
the specialist HIV company established by GSK and Pfizer,
was officially launched on 3rd November 2009.

48
Pharmaceutical turnover by therapeutic area 2009

Total USA Europe Rest of World

Therapeutic area/ 2009 2008 Growth 2009 Growth 2009 Growth 2009 Growth
major products £m £m CER% £% £m CER% £% £m CER% £% £m CER% £%
Respiratory 6,977 5,817 5 20 3,323 3 22 2,201 3 11 1,453 14 30
Avamys/Veramyst 142 72 72 97 68 2 21 45 >100 >100 29 >100 >100
Flixonase/Flonase 171 186 (20) (8) 27 (56) (48) 43 (21) (17) 101 2 23
Flixotide/Flovent 775 677 – 14 396 5 25 178 (4) 2 201 (6) 9
Seretide/Advair 4,977 4,137 5 20 2,592 1 20 1,609 5 14 776 23 39
Serevent 236 263 (19) (10) 73 (14) 1 116 (18) (15) 47 (31) (15)
Ventolin 477 339 26 41 153 >100 >100 150 1 9 174 2 12
Zyrtec 75 38 58 97 – – – – – – 75 58 97
Anti-virals 4,150 3,206 12 29 1,897 – 19 1,074 16 26 1,179 32 56
HIV 1,605 1,513 (7) 6 716 (6) 12 635 (10) – 254 (3) 7
Agenerase, Lexiva 178 160 (4) 11 99 1 19 62 (8) 2 17 (13) 6
Combivir 425 433 (13) (2) 187 (12) 4 151 (17) (9) 87 (7) –
Epivir 129 139 (19) (7) 48 (13) 2 49 (24) (16) 32 (18) (6)
Epzicom/Kivexa 546 442 8 24 223 6 25 244 6 17 79 25 44
Trizivir 201 212 (17) (5) 104 (17) (2) 82 (21) (11) 15 – 7
Ziagen 105 106 (13) (1) 51 (4) 13 35 (14) (3) 19 (28) (24)
Valtrex 1,294 1,195 (8) 8 942 (9) 8 160 – 11 192 (13) 6
Relenza 720 57 >100 >100 137 >100 >100 212 >100 >100 371 >100 >100
Zeffix 217 188 (1) 15 17 (7) 13 29 (4) 7 171 – 17
Central nervous 1,870 2,897 (44) (35) 651 (69) (64) 574 (7) 2 645 4 25
system
Imigran/Imitrex 266 687 (65) (61) 123 (79) (78) 96 (8) – 47 (2) 15
Lamictal 500 926 (53) (46) 267 (68) (62) 154 (4) 5 79 6 16
Requip 209 266 (30) (21) 26 (78) (75) 138 (5) 4 45 16 45
Requip XL 123 43 >100 >100 32 >100 >100 89 >100 >100 2 – –
Seroxat/Paxil 523 514 (15) 2 42 (51) (47) 99 (21) (14) 382 (5) 19
Treximet 55 25 88 >100 55 84 >100 – – – – – –
Wellbutrin, Wellbutrin XL 132 342 (67) (61) 88 (76) (72) 30 50 67 14 (7) –
Cardiovascular and 2,298 1,847 8 24 1,415 8 28 583 3 14 300 18 32
urogenital
Arixtra 254 170 29 49 141 35 60 95 18 34 18 55 64
Avodart 530 399 16 33 319 11 32 148 13 25 63 51 62
Coreg 172 203 (29) (15) 171 (28) (15) – – – 1 (67) (67)
Fraxiparine 229 226 (7) 1 – – – 173 (10) (3) 56 6 17
Levitra 75 60 7 25 70 4 23 4 33 33 1 – –
Lovaza 450 290 31 55 448 31 55 – – – 2 100 100
Vesicare 104 71 24 46 104 24 46 – – – – – –
Volibris 19 2 >100 >100 – – – 18 >100 >100 1 – –
Metabolic 1,181 1,191 (14) (1) 581 (17) (2) 275 (15) (6) 325 (8) 6
Avandia products 771 805 (16) (4) 425 (17) (2) 171 (21) (14) 175 (9) 1
Avandia 462 512 (21) (10) 276 (22) (8) 67 (24) (18) 119 (18) (9)
Avandamet 268 256 (8) 5 122 (6) 12 99 (19) (11) 47 19 31
Bonviva/Boniva 255 237 (7) 8 155 (16) (1) 89 7 20 11 57 57
Anti-bacterials 1,592 1,429 2 11 173 (16) (1) 662 (4) 4 757 13 22
Augmentin 667 587 4 14 45 (22) (8) 295 – 8 327 14 23
Oncology and emesis 629 496 10 27 308 7 27 204 10 21 117 23 39
Hycamtin 172 140 7 23 100 4 23 59 10 20 13 20 30
Promacta 13 – – – 13 – – – – – – – –
Tyverb/Tykerb 169 102 45 66 54 (4) 15 75 62 79 40 >100 >100
Zofran 109 110 (11) (1) 9 >100 >100 52 (24) (17) 48 (5) 9
Vaccines 3,706 2,539 30 46 815 9 30 1,744 37 51 1,147 37 52
Boostrix 139 70 73 99 73 77 >100 40 38 54 26 >100 >100
Cervarix 187 125 38 50 4 – – 138 23 33 45 100 >100
Fluarix, FluLaval 211 215 (13) (2) 73 (27) (14) 71 (18) (9) 67 17 29
Flu pandemic 883 66 >100 >100 187 >100 >100 525 >100 >100 171 >100 >100
Hepatitis (Engerix/ 665 665 (11) – 257 (21) (7) 262 (8) – 146 2 15
Fendrix, Havrix, Twinrix)
Infanrix, Pediarix 649 682 (15) (5) 134 (47) (37) 406 (3) 8 109 5 17
Rotarix 282 167 50 69 76 >100 >100 53 14 23 153 33 49
Synflorix 73 – – – – – – 32 – – 41 – –
Other 1,063 959 1 11 17 – 6 364 7 13 662 (2) 10
23,446 20,381 1 15 9,180 (13) 3 7,681 9 18 6,585 16 32
Stiefel products 248 – –
23,714 2 16
CER% represents growth at constant exchange rates. £% represents growth at actual exchange rates.

49
Regional analysis Consumer Healthcare turnover

The turnover reported in the table below represents sales invoiced
% of 2009 2008 Growth*
by GSK’s local entity to its customers in the local market plus total £m £m CER% £%
co-promotion income within each market.
Over-the-counter
2009 2008 Growth* medicines 50 2,319 1,935 8 21
£m £m CER% £% alli 203 75 >100 >100
USA 9,180 8,894 (13) 3 Breathe Right 92 81 (1) 14
Europe 7,681 6,483 9 18 Cold sore franchise 96 89 (3) 8
Emerging Markets 2,973 2,290 20 30 Nicotine replacement therapy 339 299 (1) 13
Asia Pacific/Japan 2,700 1,918 16 41 Panadol franchise 393 324 10 21
Other trading ‡ 1,180 796 29 46 Tums 106 91 (1) 16
23,714 20,381 2 16 Oral healthcare 32 1,484 1,240 7 20

Aquafresh franchise 496 452 (1) 10
* CER% represents growth at constant exchange rates. £% represents growth
at actual exchange rates. Biotene 26 1 >100 >100
‡ Denture care 336 271 8 24

Including Stiefel
Sensodyne franchise 457 363 13 26
USA
Sales in the USA declined 13% to £9.2 billion, principally reflecting Nutritional healthcare 18 851 796 3 7
continued decline of Avandia (down 22%), competition to Lucozade 376 382 (3) (2)
Infanrix/Pediarix (down 47%), a return to market of a competitor Horlicks 255 204 17 25
to the Hepatitis franchise (down 21%) and generic competition to Ribena 160 161 (4) (1)
significant products such as Lamictal (down 68%), Imigran (down 100 4,654 3,971 7 18
79%), Valtrex (down 9%), Requip (down 78%) and Coreg (down
28%). In addition, Wellbutrin XL (down 82%), was sold to Biovail * CER% represents growth at constant exchange rates. £% represents growth
in Q2 2009. These declines were partly offset by significant sales at actual exchange rates.
of Relenza and pandemic vaccines, a doubling of Ventolin sales, Total Consumer Healthcare sales for the year rose 7% to
good growth of Lovaza (up 31%) and contributions from recently £4.7 billion, with growth in all regions and categories.
launched products such as Boostrix and Rotarix.
OTC medicines
Europe
OTC product sales grew 8% to £2.3 billion in 2009, driven by sales
Sales in Europe increased 9% to £7.7 billion with continued growth of Panadol (up 10% to £393 million) and alli, which more than

of Seretide and Relenza and particularly strong vaccines growth, doubled to £203 million, as a result of launches throughout Europe
driven by pandemic vaccine, offsetting the impact of generic which began in April 2009. Sales of nicotine replacement therapy
competition to a number of products and continued price cuts products declined by 1%.
from governments across the region.
Oral healthcare
Emerging Markets
Sales of Oral healthcare products rose 7% to £1.5 billion. Sensodyne
Sales in Emerging Markets increased 20% to £3.0 billion with performed strongly with sales up 13% to £457 million. Denture care
strong growth across the region and all therapeutic areas, helped sales grew 8% to £336 million. Sales of Aquafresh declined 1%, as a
by the acquisitions of the UCB and BMS businesses in different reduction in the US ‘white trays’ market offset growth of 5% in the US
countries of the region. Aquafresh toothpaste brands, which were helped by the launch of the
Asia Pacific/Japan new Iso-active product.
Sales in Asia Pacific/Japan grew 16% to £2.7 billion reflecting Nutritional healthcare
continued Seretide/Advair growth, strong Relenza sales, particularly Nutritional healthcare sales grew 3% to £0.9 billion, driven by the very
to the retail market in Japan, and strong vaccines growth. strong performance of Horlicks (up 17% to £255 million) partly offset
by a decline in Lucozade sales (down 3% to £376 million) which was
impacted by lower sales in the ‘impulse’ market of the UK market.

50
Results before major restructuring and Operating profit – total results

total results Total results include restructuring costs related to the Operational
In October 2007, GSK announced a significant new Operational Excellence programme and the acquisitions of Reliant and Stiefel.
Excellence restructuring programme. A second formal plan,
2009 2008 Growth
representing a significant expansion of the Operational Excellence
£m % £m % CER% £%
programme, was approved by the Board and announced in
February 2009. Turnover 28,368 100 24,352 100 3 16
Cost of sales (7,380) (26.0) (6,415) (26.3) 6 15
In addition to the costs of the Operational Excellence programme,
Selling, general
the major restructuring column in the income statement includes
restructuring costs incurred solely as a direct result of any
restructuring programmes that follow, and relate to, material Research and
acquisitions where the operations of the acquired business overlap development (4,106) (14.4) (3,681) (15.2) 1 12
extensively with GSK’s existing operations. Other operating
income 1,135 3.9 541 2.2
The acquisition of Stiefel Laboratories, Inc. in July 2009 was the
only acquisition that meets the criteria set out above. This is the Operating profit 8,425 29.7 7,141 29.3 4 18
only acquisition in 2009 where the costs incurred as a direct result
of a related restructuring programme has been included in the Cost of sales
major restructuring column. The restructuring costs expected to Cost of sales as a percentage of turnover reduced marginally to
be incurred as a direct result of this acquisition are estimated to 26.0% of turnover (2008 – 26.3%), principally reflecting the impact
be approximately £205 million, of which £71 million was charged of generic competition to higher margin products in the USA and
in 2009. The restructuring costs incurred as a direct result of changes to the product mix, offset by benefits from the restructuring
the acquisition of Reliant Pharmaceuticals Inc., the only other programme and lower restructuring costs of £285 million
acquisition since October 2007 that meets the criteria set out (2008 – £639 million).
above, were all charged and paid in 2008. Selling, general and administration
Only the restructuring costs incurred solely as a direct result of SG&A costs as a percentage of turnover increased by 2.4
the Operational Excellence programme and the restructuring percentage points to 33.8%. This included full year legal charges
programmes following the Reliant and Stiefel acquisitions have of £591 million (2008 – £611 million) and charges related
been reported in the major restructuring column in the income to the major restructuring programme of £392 million
statement. As set out in Note 7 to the financial statements, (2008 – £304 million). Excluding legal and restructuring
‘Major restructuring programme’, asset impairments and staff costs, SG&A costs were 30.3% of turnover (2008 – 27.7%).
redundancies together accounted for £574 million of the £835 This reflected investment in growth markets, the acquisition of
million restructuring costs incurred in 2009. The remaining costs Stiefel, increased pension costs, the donation of H1N1 product
of £261 million in 2009 arose from miscellaneous expenditures to WHO and exchange losses on inter-company transactions
incurred solely as a direct result of the restructuring programmes. (compared with exchange gains last year), partially offset by
No costs arising from GSK’s ongoing operating activities have the benefits of the current restructuring programme.
been reported in the major restructuring column.
For the latest position on Results before major restructuring and R&D expenditure was 14.4% (2008 – 15.2%) of total turnover,
total results see Results before major restructuring and total results which included £167 million of intangible asset write-offs
in the 2010 Financial review on page 36. (2008 – £85 million) partially offset by lower charges relating
to the major restructuring programme of £155 million
GSK’s operating profit, profit before taxation, taxation and profit
(2008 – £175 million) and a provision release due to reassessment
for the year are discussed below in terms of both total results,
of a receivable balance. Increased investment in vaccines R&D and
which include major restructuring costs, and results before
late stage pharmaceutical R&D were broadly offset by savings from
major restructuring.
the restructuring programme.
Other operating income
Other operating income was £1,135 million including gains from
asset disposals of £579 million (2008 – £293 million) primarily
reflecting the disposal of Wellbutrin XL and various assets to Aspen
Pharmacare, royalty income of £296 million (2008 – £307 million),
a royalty dispute settlement gain of £78 million, and a one-time
accounting gain of £296 million on the creation of ViiV Healthcare,
partially offset by equity investment impairments of £135 million.
Operating profit – total results
Total operating profit for the year was £8,425 million, an increase
of 4% CER and 18% in Sterling terms, compared with 2008. The
operating profit margin increased 0.4 percentage points reflecting
higher other operating income and broadly flat R&D expenditure,
partially offset by increases in cost of sales and SG&A.

51
Profit before taxation – total results Selling, general and administration

SG&A costs as a percentage of turnover increased by 2.2
Net finance costs
percentage points to 32.4%, including full year legal charges of
2009 2008 £591 million. The increase reflected investment in growth markets,
Finance income £m £m
the acquisition of Stiefel, increased pension costs, the donation
Interest and other finance income 67 321 of H1N1 product to WHO and exchange losses on inter-company
Unwinding of discounts on assets 2 1 transactions (compared with exchange gains last year), partially
Fair value adjustments and hedges 1 (9) offset by the benefits of the current restructuring programme.
70 313 Research and development
R&D expenditure was 13.9% (2008 – 14.4%) of total turnover,
Finance costs
which included £167 million of intangible asset write-offs
Interest costs (770) (829) (2008 – £85 million) partially offset by a provision release due
Unwinding of discounts on liabilities (11) (16) to reassessment of a receivable balance. Increased investment in
Fair value adjustments and hedges (2) 2 vaccines R&D and late-stage pharmaceutical R&D were broadly
(783) (843) offset by savings from the restructuring programme.

Other operating income
Profit on disposal of interest in associate Other operating income was £1,135 million including gains
Profit on disposal of interest in associate was £115 million as from asset disposals of £579 million (2008 – £293 million)
5.7 million shares from the Group’s holding in Quest Diagnostics primarily reflecting the disposal of Wellbutrin XL and various
Inc. were sold in the first quarter of 2009. assets to Aspen Pharmacare, royalty income of £296 million
(2008 – £307 million), a royalty dispute settlement gain of
Share of after tax profits of associates and joint ventures
£78 million, and a one-time accounting gain of £296 million
The share of after tax profits of associates of £64 million on the creation of ViiV Healthcare, partially offset by equity
(2008 – £48 million) arises principally from the Group’s holding investment impairments of £135 million. In 2009 other operating
in Quest. income and profit on disposal of associates amounted to
Profit before taxation – total results £1,250 million.
Taking account of net finance costs, the profit on disposal of Operating profit – results before major restructuring
interest in associates and the share of profits of associates, Operating profit before major restructuring for the year was
total profit before taxation was £7,891 million compared £9,257 million, a 1% CER decline, but up 12% in Sterling terms,
with £6,659 million in 2008, a 4% CER increase and a 19% compared with 2008. The operating profit margin was 32.6%
sterling increase.

compared with a 2008 margin of 33.9%. The decline in margin
was primarily due to generic competition in the USA which
Operating profit – results before major impacted cost of goods and increased investment to support the
restructuring Group’s diversification strategy which impacted SG&A, partly offset
The results before major restructuring are set out below: by a higher level of other operating income.
2009 2008 Growth Further information on operating profit before major restructuring
£m % £m % CER% £% is provided in Note 6, ‘Segment information’.
Turnover 28,368 100 24,352 100 3 16
Cost of sales (7,095) (25.0) (5,776) (23.7) 13 23
Selling, general
Research and
development (3,951) (13.9) (3,506) (14.4) 2 13
Other operating
income 1,135 3.9 541 2.2

Operating profit 9,257 32.6 8,259 33.9 (1) 12
Cost of sales
Cost of sales increased to 25.0% of turnover (2008 – 23.7%),
principally reflecting the impact of generic competition to higher
margin products in the USA and changes to the product mix, partly
offset by benefits from the restructuring programme.

52
Profit before taxation – results before major Profit for the year
restructuring
2009 2008 Growth
£m £m CER% £%
Net finance costs
2009 2008
Total profit after taxation
Finance income £m £m for the year 5,669 4,712 6 20
Interest and other income 67 321 Total profit attributable to
Unwinding of discounts on assets 2 1 shareholders 5,531 4,602 6 20
Fair value adjustments and hedges 1 (9) Basic earnings per share (pence) 109.1p 88.6p
Basic earnings per ADS (US$) $3.40 $3.28
70 313
Results before major restructuring
Finance costs profit after taxation for the year 6,283 5,551 – 13
Interest costs (770) (829) Results before major restructuring
Unwinding of discounts on liabilities (8) (11) profit attributable to shareholders 6,145 5,441 – 13
Fair value adjustments and hedges (2) 2 Adjusted earnings per share (pence) 121.2p 104.7p 2 16
Adjusted earnings per ADS (US$) $3.78 $3.87
(780) (838)
Weighted average number
of shares (millions) 5,069 5,195
Profit on disposal of interest in associate
Profit on disposal of interests in associates was £115 million as Diluted total earnings per share (pence) 108.2p 88.1p
5.7 million Quest shares were sold in the first quarter of 2009. Diluted total earnings per ADS (US$) $3.38 $3.26
Diluted weighted average number
Share of after tax profits of associates and joint ventures
of shares (millions) 5,108 5,226
The share of after tax profits of associates of £64 million
(2008 – £48 million) arises principally from the Group’s holding Total results including restructuring costs produced a basic EPS of
in Quest Diagnostics Inc. 109.1p compared with 88.6p in 2008. This was an 8% growth in
Profit before taxation – results before major restructuring CER terms and a 23% growth in sterling terms. Excluding major
restructuring costs, EPS was 121.2p compared with 104.7p.
Taking account of net finance costs, the profit on disposal of
interests in associates and the share of profits of associates, profit Dividend
before tax before major restructuring was £8,726 million compared The Board declared a fourth interim dividend of 18 pence per
with £7,782 million in 2008, a 1% CER decline but 12% increase share resulting in a dividend for the year of 61 pence; a four pence
in sterling terms. increase over the 57 pence per share for 2008.
Taxation
2009 2008
£m £m
UK corporation tax 417 289

Overseas taxation 1,997 1,589
Current taxation 2,414 1,878
Deferred taxation (192) 69
Taxation on total profits 2,222 1,947
The charge for taxation on total profits amounted to £2,222 million

and represented an effective tax rate of 28.2% (2008 – 29.2%).
The charge for taxation on profit before major restructuring
charges amounting to £2,443 million represents an effective tax
rate of 28.0% (2008 – 28.7%). The Group’s balance sheet
at 31st December 2009 included a tax payable liability of
£1,451 million and a tax recoverable asset of £58 million.
On 19th November 2009 the IRS conceded all asserted tax
deficiencies and penalties arising from its reclassification of an
inter-company financing arrangement from debt to equity
resulting in no additional tax cost to GSK.
For the latest position on Taxation see ‘Taxation’ in the Financial
review on page 39.

53
Risk factors
There are risks and uncertainties relevant to the Group’s business, There is also increasing pressure on healthcare budgets as the

financial condition and results of operations that may affect the average age of the population in developed markets increases and
Group’s performance and ability to achieve its objectives. The the absolute population in developing markets grows. Payers have
factors below are among those that the Group believes could therefore increasingly demanded greater incremental benefit from
cause its actual results to differ materially from expected and drugs before agreeing to reimburse suppliers at prices suppliers
historical results. There are other risks and uncertainties that consider appropriate. A failure to develop commercially successful
may affect the Group’s performance and ability to achieve its products or develop additional uses for existing products for any
objectives that are not currently known to the Group, or which of these reasons could materially and adversely affect the Group’s
are deemed immaterial. financial results.
The Group reviews and assesses significant risks on a regular basis Intellectual property protection
and has implemented an oversight programme to help ensure that
Competition from generic manufacturers
there is a system of internal control in place. This system includes
policies and procedures, communication and training programmes, The Group faces intense competition from manufacturers of
supervision and monitoring and processes for escalating issues to generic pharmaceutical products in all of its major markets. Generic
the appropriate level of senior management. Such a system helps products often enter the market upon expiration of patents or data
facilitate the Group’s ability to respond appropriately to risks and exclusivity periods for the Group’s products. Introduction of generic
products, particularly in the USA where the Group has its highest

to achieve Group objectives and helps ensure compliance with
applicable laws, regulations and internal policies. The Group’s turnover and margins, typically leads to a dramatic loss of sales
management of risks is further discussed on pages 71 to 73 and reduces the Group’s revenues and margins for its proprietary
‘Corporate Governance’. products. The Group had eleven pharmaceutical products with over
£500 million in annual global sales in 2010. Among these products
It is not possible, however, for the Group to implement controls are Augmentin, Lamictal IR, Ventolin, and Valtrex for which there
to respond to all the risks that it may face, and there can be no is generic competition in the USA and certain markets in Europe.
assurance that the steps the Group has taken to address certain risks In addition, as detailed on page 7, the timing and impact of entry
will manage these risks effectively or at all. The six principal risks that for a follow-on product to Seretide/Advair that contains the same
might affect GSK’s business are broken down in the following areas: active ingredients is uncertain.
Risk that R&D will not deliver commercially successful Generic drug manufacturers have also exhibited a readiness to
new products market generic versions of many of the Group’s most important
The Group operates in highly competitive markets. In the products prior to the expiration of the Group’s patents. Efforts may
pharmaceuticals and vaccines businesses, it faces competition from involve challenges to the validity or enforceability of a patent or
both proprietary products of large international manufacturers and assertions that their generic product does not infringe the Group’s
from producers of generic pharmaceuticals. Significant product patents. If the Group is not successful in defending an attack on its

innovations, technical advances or the intensification of price patents and maintaining exclusive rights to market one or more of
competition by competitors may materially and adversely affect its major products, particularly in the USA and Europe, the Group’s
the Group’s financial results. The Group cannot always predict financial results would be adversely affected. The expiration dates
the timing or impact of competitive products or their potential for patents for the Group’s major products and a description of
impact on sales of the Group’s products. In light of the competitive litigation settlements which may affect the dates on which generic
environment in which the Group operates, continued development versions of the Group’s products may be introduced are set out on
of commercially viable new products as well as the development of page 15. Legal proceedings involving patent challenges are set out
additional uses for existing products is critical to the Group’s ability in Note 44 to the financial statements, ‘Legal proceedings’.
to replace sales of older products that decline upon expiration of
Potential changes in intellectual property laws and
exclusive rights, and to increase overall sales.
regulations
Developing new products is a costly, lengthy and uncertain process. Proposals to change existing patent and data exclusivity laws and
A new product candidate can fail at any stage of the development regulations in major markets in which the Group sells its products
process, and one or more late stage product candidates could fail are a continuing feature of the political process in those countries.
to receive regulatory approval. These include proposals that could have the effect of making
New product candidates may appear promising in development prosecution of patents for new products more difficult and time
but, after significant investment of Group economic and human consuming or that could adversely affect the exclusivity period for
resources, may fail to reach the market or have only limited the Group’s products, including biological products. Should such
commercial success. This, for example, could be as a result of proposals be enacted, they may materially and adversely affect
efficacy or safety concerns, an inability to obtain necessary the Group’s financial results. For example, in 2010, as part of the
regulatory approvals, difficulty manufacturing or excessive comprehensive healthcare reform in the USA, new regulations
manufacturing costs, erosion of patent terms as a result of a for follow-on biologics were introduced that allow a sufficiently
lengthy development period, infringement of patents or other similar biologic to be able to rely on an innovator’s approval
intellectual property rights of others or an inability to differentiate following a 12-year data exclusivity period. In addition, the current
the product adequately from those with which it competes. administration in the USA has proposed reducing from 12 years to
Furthermore, health authorities such as the US FDA, the European seven the period of time pharmaceutical companies may keep their
Medicines Agency and the Japan Pharmaceuticals and Medicines products exclusive of generic competition.
Device Agency have increased their focus on safety and product
differentiation when assessing the benefit/risk balance of drugs,
which has made it more difficult for pharmaceutical products to
gain regulatory approval.

54
Risk factors
Weakness of intellectual property protection in certain In other instances, third parties may perform analyses of published
countries clinical trial results which, although not necessarily accurate

In some of the countries in which the Group operates, patent or meaningful, may raise questions regarding the safety of
protection may be significantly weaker than in the USA or the pharmaceutical products which may be publicised by the media
European Union. Some developing countries have reduced, and may result in product liability claims. The Group is currently a
or threatened to reduce, effective patent protection for defendant in a number of product liability lawsuits, including class
pharmaceutical products generally, or in particular therapeutic actions, that involve substantial claims for damages related to the
areas, to facilitate early competition within their markets from Group’s pharmaceutical products. Litigation, particularly in the
generic manufacturers. Any loss of patent protection, including USA, is inherently unpredictable. Class actions that sweep together
reducing the scope of patent rights or compulsory licensing (in all persons who were prescribed the Group’s products can inflate
which a government forces a manufacturer to license its intellectual the potential liability by the force of numbers. Claims for pain and
property to a competitor), could materially and adversely affect the suffering and punitive damages are frequently asserted in product
Group’s financial results in those markets. Absence of adequate liability actions and, if allowed, can represent potentially open
patent protection could limit the opportunity to rely on such ended exposure and thus could materially and adversely affect the
markets for future sales growth for the Group’s products. Group’s financial results.
Risk of substantial adverse outcome of litigation and Anti-trust litigation

government investigations In the USA, it has become increasingly common for patent
See Note 44 to the financial statements, ’Legal proceedings’, infringement actions to prompt claims that anti-trust laws have
for a discussion of proceedings and governmental investigations been violated during the initial prosecution of the patent or during
currently involving the Group which, if proven, could give rise to litigation involving the defence of that patent. Such claims by
civil and/ or criminal liabilities. Unfavourable resolution of these and direct and indirect purchasers and other payers are typically filed
similar future proceedings or investigations may have a material as class actions. The relief sought may include treble damages and
adverse effect on the Group’s financial condition and results of restitution claims. Damages in adverse anti-trust verdicts are subject
operations. The Group has made material provisions in 2010 and to automatic trebling in the USA. Similarly, anti-trust claims may be
prior years related to such legal proceedings and investigations, brought following settlement of patent litigation, alleging that such
which reduced its earnings. settlements are anti-competitive and in violation of anti-trust laws.
A successful anti-trust claim against the Group could materially and
In the future, the Group may also make additional significant adversely affect the Group’s financial results.
provisions related to legal proceedings and investigations which
would reduce its earnings. In many cases, the Group believes that it Sales and marketing regulation
is the practice of the plaintiff bar to claim damages in amounts that The Group operates globally in complex legal and regulatory
bear no reasonable relationship to the underlying harm allegedly environments that often vary among jurisdictions. The failure
caused by the Group’s products or its actions. Accordingly, it may to comply with applicable laws, rules and regulations in these
be potentially misleading for the Group to quantify, based on the jurisdictions may result in civil and criminal legal proceedings.
amount of damages claimed, its potential exposure to claims, As those rules and regulations change or as governmental
proceedings and investigations of the type described in Note 44 to interpretation of those rules and regulations evolve, prior conduct
the financial statements, ‘Legal proceedings’. may be called into question.
Recent insurance loss experience, including pharmaceutical In the USA, for example, the Group is responding to federal
product liability exposures, has increased the cost of, and reduced and state governmental investigations into pricing, marketing
the capacity of insurers to provide coverage for pharmaceutical and reimbursement of its prescription drug products. These
companies generally, including the Group. investigations could result in related restitution or civil litigation
on behalf of the federal or state governments, as well as related
In order to contain insurance costs in recent years, the Group has
proceedings initiated against the Group by or on behalf of
continued to adjust its coverage profile, accepting a greater degree
consumers and private payers. Such proceedings may result in
of un-insured exposure in some areas, and a lesser degree in others,
trebling of damages awarded or fines in respect of each violation of
in order to optimise the value of insurance markets. In addition,
law. Criminal proceedings may also be initiated against the Group.
where claims are made under insurance policies, insurers regularly
Any of these consequences could materially and adversely affect
reserve the right to deny coverage on various grounds.
the Group’s financial results.
Product liability litigation
Pre-clinical and clinical trials are conducted during the development
of potential products to determine the safety and efficacy of
products for use by humans following approval by regulatory
authorities. Notwithstanding the efforts the Group makes to
determine the safety of its products through regulated clinical trials,
unanticipated side effects may become evident only when drugs
and vaccines are introduced into the marketplace.

55
Risk factors
Governmental, payer and regulatory controls In addition, in some cases, the Group may voluntarily cease

Pricing marketing a product or face declining sales based on concerns
Pharmaceutical products are subject to price controls or pressures about efficacy or safety (for example, the decline in sales of
and other restrictions in many markets, including Japan, Germany, Avandia beginning in 2007 following publicity around questions
Spain, France and Italy. Some governments intervene directly in regarding risks associated with the product), whether or not
setting prices. scientifically justified, even in the absence of regulatory action.
The development of the post-approval adverse event profile for a
In addition, in some markets major purchasers of pharmaceutical product or the product class may materially and adversely affect the
products (whether governmental agencies or private health care Group’s financial results.
providers) have the economic power to exert substantial pressure
on prices or the terms of access to formularies. The Group cannot Risk of interruption of product supply
accurately predict whether existing controls, pressures or restrictions The manufacture of pharmaceutical products and their constituent
will increase or whether new controls, pressures or restrictions will materials requires compliance with good manufacturing practice
be introduced. Such measures may materially and adversely affect regulations. The Group’s manufacturing sites are subject to
the Group’s ability to introduce new products profitably and its review and approval by the FDA and other regulatory agencies.
financial results. Compliance failure by suppliers of key services and materials or the
Group’s own manufacturing facilities could lead to product recalls

For example, in the USA, where the Group has its highest margins and seizures, interruption of production and delays in the approvals
and the most sales for any country, there are no government price of new products pending resolution of manufacturing issues. Non-
controls over private sector purchases, but federal law requires compliance can also result in fines and disgorgement of profits.
pharmaceutical manufacturers to pay prescribed rebates on certain Any interruption of supply or the incurring of fines or disgorgement
drugs to be eligible for reimbursement under several state and could materially and adversely affect the Group’s financial results.
federal healthcare programmes, primarily Medicare and Medicaid.
Pricing pressures are likely to increase as the US government’s share Although the Group undertakes business continuity planning,
of national health spending continues to increase. Additionally, single sourcing for certain components, bulk active materials
due to passage of comprehensive health care reform in 2010, the and finished products creates a risk of failure of supply in the
US government’s role in providing or subsidising health insurance event of regulatory non-compliance or physical disruption at the
is expected to significantly expand in 2014, which indicates the manufacturing sites.
growing role and leverage the government will bring to bear on Unaffiliated third-party suppliers provide a number of goods
the Group’s rebate liability with respect to US federal programs. and services to the Group’s operations. Many of these services,
In recent years, a number of states have also proposed or for example, services provided by clinical research organisations
implemented various schemes to control prices for their low- to support development of key products, are very important to
the operations of the Group’s businesses. Materials provided by

income and senior citizens’ programmes, including increasing the
rebate liability of pharmaceutical companies, importation from third-party suppliers are necessary for the commercial production
other countries and bulk purchases of drugs. Given the new state of our products, including speciality chemicals, commodities and
mandates contained in the US health care reform law, which will components necessary for the manufacture and packaging of
increase the number of Medicaid eligible participants, and the many of the Group’s Pharmaceutical and Consumer Healthcare
economic pressures on state government budgets, pricing pressures products. While the Group does not believe that any of these
on the Group’s products are likely to increase. Any of these trends third-party relationships are individually significant in the context of
may materially and adversely affect the Group’s financial results. the overall Group, the failure of any third-party supplier to fulfil its
contractual obligations in a timely manner may result in delays or
Regulatory controls service interruptions, which may materially and adversely affect the
The Group must comply with a broad range of regulatory controls Group’s financial results.
on the testing, approval, manufacturing and marketing of many
of its pharmaceutical, vaccine and consumer healthcare products, Taxation and Treasury
particularly in the USA and countries of the European Union, that The Group’s effective tax rate is driven by rates of tax in jurisdictions
affect not only the cost of product development but also the time that are both higher and lower than that applied in the UK. In
required to reach the market and the uncertainty of successfully addition, many jurisdictions such as the UK, Belgium and the
doing so. As detailed on page 18 health authorities have increased USA currently offer regimes that encourage innovation and new
their focus on safety when assessing the risk/benefit balance of scientific endeavours by providing tax incentives, for example R&D
drugs in the context of not only initial product approval but also tax credits. Furthermore, given the scale and international nature
in the context of approval of additional indications and review of the Group’s business, intra-group transfer pricing is an inherent
of information regarding marketed products. Stricter regulatory tax risk as it is for other international businesses. Changes in tax
controls also heighten the risk of changes in product profile or laws or in their application with respect to matters such as transfer
withdrawal by regulators on the basis of post-approval concerns pricing, foreign dividends, controlled companies, R&D tax credits
over product safety, which could reduce revenues and result in or a restriction in tax relief allowed on the interest on intra-group
product recalls and product liability lawsuits. There is also greater debt, could increase the Group’s effective tax rate and materially
regulatory scrutiny, especially in the USA, on advertising and and adversely affect its financial results.
promotion and in particular on direct-to-consumer advertising.

56
Risk factors
The tax charge included in the financial statements is the Group’s Global political and economic conditions
best estimate of its tax liability but, until such time as audits by As described on page 20, many of the world’s largest economies,
tax authorities are concluded, there is a degree of uncertainty including the major markets in which the Group operates, and
regarding the final tax liability for the period. The Group’s policy is financial institutions have in the recent past faced extreme financial
to submit tax returns within the statutory time limits and engage difficulty, including a decline in asset prices, liquidity problems and
tax authorities to ensure that the Group’s tax affairs are as current limited availability of credit. Although many of these economies
as possible, and that any differences in the interpretation of tax have recovered in 2010, the economic recovery and its pace
legislation and regulation are resolved as quickly as possible. In proved uneven.
exceptional cases where matters cannot be settled by agreement
with tax authorities, GSK may have to resolve disputes through Continued economic weakness may have a material adverse effect
formal appeals or other proceedings. For example, the Canadian on the Group’s sales, results of operations, financial condition and
Tax Authorities are currently seeking leave to appeal a court ability to raise capital. Some of the Group’s businesses, including
decision in respect of transfer pricing as discussed in Note 14 to Pharmaceuticals and Consumer Healthcare, may be particularly
the financial statements, ‘Taxation’. sensitive to declines in consumer spending. In addition, further or
renewed declines in asset prices may result in a lower return on
The Group deals in high value transactions on a frequent basis the Group’s financial investments and may cause the value of the
which may result in an increased risk of financial loss due to the Group’s investments in its pension plans to decrease, requiring the
mismanagement of cash or entering into high risk positions on Group to increase its funding of those pension plans.
hedge transactions, any of which could materially and adversely
affect the Group’s financial results. The Group conducts a substantial portion of its operations outside
the UK. The Group’s management of foreign exchange rates is
discussed in Business review, ‘Foreign exchange management’
There are a number of further risks, which could affect the (see page 46). Fluctuations in exchange rates between Sterling
financial condition or results of the Group, as follows: and other currencies, especially the US dollar, the Euro and the
Anti-bribery and corruption Japanese Yen, could materially and adversely affect the Group’s
The Group’s extensive and increasing international operations financial results.
may give rise to possible claims of bribery and corruption. Failure The Group has no control over changes in inflation and interest
to comply with applicable legislation such as the US Foreign rates, foreign currency exchange rates and controls or other
Corrupt Practices Act and the recently enacted UK Bribery Act economic factors affecting its businesses or the possibility of
could expose the Group and senior officers to civil and criminal political unrest, legal and regulatory changes or nationalisation in
sanction, including fines, prosecution, potential debarment jurisdictions in which the Group operates.
from public procurement and reputational damage, all of which
could materially and adversely affect the Group’s financial results. The Group operates in a number of Middle Eastern and North
The compliance mechanisms and monitoring programmes that the African markets that subsequent to the year-end are experiencing
Group has in place may not adequately prevent or detect possible political unrest. These events may lead to business disruption and
violations under applicable anti-bribery and corruption legislation. liquidity problems that could adversely impact the Group’s results.
Risk from concentration of sales to wholesalers Environmental liabilities

In the USA, similar to other pharmaceutical companies, the Group The environmental laws of various jurisdictions impose actual and
sells its products through a small number of wholesalers in addition potential obligations on the Group to remediate contaminated
to hospitals, pharmacies, physicians and other groups. Sales to the sites. The Group has also been identified as a potentially
three largest wholesalers amounted to approximately 85% of the responsible party under the US Comprehensive Environmental
Group’s US pharmaceutical sales in 2010. At 31st December 2010, Response Compensation and Liability Act at a number of sites for
the Group had trade receivables due from these three wholesalers remediation costs relating to the Group’s use or ownership of such
totalling £890 million (31st December 2009 – £867 million). The sites. Failure to manage properly the environmental risks could
Group is exposed to a concentration of credit risk in respect of result in additional remedial costs that may materially and adversely
these wholesalers such that, if one or more are affected by financial affect the Group’s financial results. See Note 44 to the financial
difficulty, it could materially and adversely affect the Group’s statements, ‘Legal proceedings’, for a discussion of environmental
financial results. related proceedings in which the Group is involved.
Accounting standards
New or revised accounting standards, rules and interpretations
issued from time to time by the International Accounting Standards
Board could result in changes to the recognition of income and
expense that may materially and adversely affect the Group’s
financial results.
International Financial Reporting Standards changes in the market
valuation of certain financial instruments require gains and losses
under such instruments to be reflected in the Group’s reported
results before those gains or losses are actually realised. This
could have a significant impact on the income statement in any
given period. Accounting for deferred taxation on inter-company
inventory may give rise to volatility depending upon the Group
entity that owns the inventory.

57
Risk factors
Regulators regularly review the financial statements of listed Attraction and retention

companies for compliance with accounting and regulatory The Group relies heavily on recruiting and retaining talented
requirements. The Group believes that it complies with the employees with a range of skills to meet its objectives. The Group
appropriate regulatory requirements concerning its financial faces intense competition for qualified individuals, as the supply of
statements and disclosures. However, other companies have people with specific skills or in specific geographic regions may be
experienced investigations into potential non-compliance with limited, particularly given the Group’s plans to expand its operations
accounting and disclosure requirements that have resulted in Emerging Markets, Biologicals and Consumer Healthcare.
in restatements of previously reported results and sometimes
significant penalties. Any such investigation and required The inability to attract staff with specific technical and leadership
restatement could materially and adversely affect the Group’s skills, retain key employees or ensure effective succession planning
financial results. for critical positions may materially and adversely affect the Group’s
financial results.
Protection of electronic information and assets
Implementing the Group’s strategic priorities
The Group relies on critical and sensitive data, such as personally
identifiable information, trade secrets, intellectual property and The Group has established three strategic priorities: to grow a
corporate strategic plans. Security of this type of data is exposed diversified business, deliver more products of value, and simplify
to increasing external threats. The Group is also subject to various its operating model. The Group may not be able to implement its

standards for the protection of personally identifiable information. strategic priorities fully and, even if the Group is able to implement
Failure to implement appropriate safeguards to adequately protect its strategic priorities, the strategic priorities may not deliver the
against any unauthorised or unintentional access, acquisition, use, expected benefits.
modification, loss or disclosure of this critical or sensitive data may For example, the strategic priority to grow a diversified business
adversely affect the Group’s operations. involves expanding the Group’s business into Emerging Markets.
Alliances and acquisitions The Group’s pharmaceutical sales in Emerging Markets grew 22%
in 2010 to nearly £3.6 billion, and represented 15% of the Group’s
As part of the Group’s strategy to diversify into new product areas
2010 pharmaceutical turnover. There is no guarantee that the
and markets, the Group has grown, and expects to continue to
Group’s sales in Emerging Markets will continue to grow or that
grow, in part through acquisitions and business alliances. There
these markets will continue to experience relatively high growth
is intense competition for alliance and acquisition candidates
rates. Some emerging markets may be especially vulnerable to
in the pharmaceutical industry, and, as such, the Group may
the after-effects of the recent global financial crisis, or may have
be unable to make these deals on acceptable terms or at all.
very limited resources to spend on healthcare. Competition in
In acquiring or forming alliances with companies, the Group
these markets for staff with the skills and training suitable for
may assume significant debt, become subject to unknown or
employment at an enterprise such as the Group’s may be intense.
contingent liabilities or fail to realise the benefits expected from

In some emerging markets, the Group may be required to rely on
these transactions. For example, most pharmaceutical companies,
third party agents, which may put the Group at risk of liability, and
including those that the Group may consider acquiring, are
some emerging markets lack sufficient protection against crimes
involved in patent disputes, product liability litigation, government
such as counterfeiting. A failure to continue to expand its business
investigations and other legal proceedings whose outcome is
in emerging growth markets could materially and adversely affect
subject to considerable uncertainty. The assumption of debt or
the Group’s financial results.
unknown or contingent liabilities or the failure to realise the
expected benefits may materially and adversely affect the Group’s In addition, the Group is undertaking a restructuring programme
financial results. that has an estimated cost of approximately £4.5 billion and is
expected to deliver annual pre-tax savings of approximately
The process of integrating companies the Group may acquire
£2.2 billion by the time it is substantially complete in 2012. The
may result in disruption to the ongoing business as the effort of
Group may not be able to execute fully this transformation of
integrating organisations in different locations and with, among
its business. Furthermore, changes in the Group’s structure,
other things, differing systems and corporate cultures may divert
operations, revenues, costs or efficiency resulting from these
attention and resources, result in the loss of key employees or have
restructuring activities or other strategic initiatives could result in
other adverse consequences, any of which may materially and
higher than expected costs or other difficulties. Failure to realise the
adversely affect the Group’s financial results.
expected cost savings by the end of the restructuring programme

or to achieve and maintain a competitive cost base could materially
and adversely affect the Group’s financial results.

58
Our Board
Sir Christopher Gent Professor Sir Roy Anderson Larry Culp (Aged 47) Simon Dingemans (Aged 47)
(Aged 62) (Aged 63) Appointed on 1st July 2003. Appointed on 4th January 2011.
Appointed on 1st June 2004. Appointed on 1st October 2007. Non-Executive Director. Executive Director and Chief
Chairman. Non-Executive Director. Larry is President and Chief Financial Officer Designate.
Sir Christopher is a Non- Sir Roy is Professor of Infectious Executive Officer of Danaher Simon joined GSK from
Executive Director of Ferrari SpA Disease Epidemiology in the Corporation. Prior to joining Goldman Sachs where he
and was the Chief Executive Faculty of Medicine, Imperial Danaher, he held positions was a Managing Director and
Officer of Vodafone Group plc, College, London. He is a in Accenture, previously Partner. He has over 25 years
until his retirement in July 2003. member of the International Andersen Consulting. of experience in investment
He is a Non-Executive Director Advisory Board of Hakluyt & banking, including most recently
of Lehman Brothers Holdings Co. Ltd. and he is a Trustee of as leader of Goldman Sachs’
Inc, a member of KPMG’s the Natural History Museum, European M&A business and
Chairman’s Advisory Group, London. He is a fellow of the before that as head of UK
a Senior Adviser at Bain & Co. Royal Society and a Foreign Investment Banking.
and a member of the Advisory Associate Member of the
Board of Reform. Institute of Medicine at the US
National Academy of Sciences
and the French Academy of
Sciences. His former positions
include Rector of Imperial Sir Crispin Davis (Aged 61)
College and Chief Scientific Appointed on 1st July 2003.
Adviser at the Ministry of Non-Executive Director.
Defence in the UK. Sir Crispin is Chairman and
Director of StarBev Netherlands
BV, a member of Citigroup’s
Andrew Witty (Aged 46) Julian Heslop (Aged 57)
Global Advisory Board and
Appointed on 31st January 2008. Appointed on 1st April 2005.
serves on the Council of Oxford
Chief Executive Officer. Chief Financial Officer.
University. He was previously
Andrew was named Chief Julian joined Glaxo Wellcome
Chief Executive Officer of Reed
Executive Officer Designate as Financial Controller in April
Elsevier PLC, and prior to that
for GSK in October 2007 and 1998. In January 2001 he was
appointment, Chief Executive
was appointed Chief Executive appointed Senior Vice President,
of Aegis Group plc, which
Officer (CEO) on 21st May Operations Controller. Prior
he joined from Guinness plc,
2008. He joined the Group to joining the Group he held
where he was a member of
in 1985 and has held senior Dr Stephanie Burns senior finance roles at Grand
the main Board and Group
positions in Asia, Africa and (Aged 56) Metropolitan. Julian will retire
Managing Director of
the USA. Immediately prior to Appointed on 12th February as Chief Financial Officer and
United Distillers. In his earlier
being appointed CEO, Andrew 2007. Executive Director on 31st
career, he worked for Procter
was President, Pharmaceuticals Non-Executive Director. March 2011.
& Gamble, where he was
Europe, a position he held Stephanie is Chairman and President of the North
from January 2003. He is a Chief Executive Officer of Dow American Food Division.
Board Member of PhRMA and Corning Corporation and sits
President of European Federation on the US President’s Export
of Pharmaceutical Industries and Council. She is also the chair
Associations. He was appointed of the American Chemistry
as Lead Non-Executive Board Council, is an officer of the
Member for the Department Society of Chemical Industry,
of Business, Innovation and America Section, and on
Skills and as a Board Member the Board for the Society for
of the INSEAD Business School Women’s Health Research.
in January 2011 and is a Dr Burns holds a PhD in
member of the Prime Minister’s organic chemistry from Iowa
Business Advisory Group. He State University.
is a Member of the Singapore
Economic Development Board’s
International Advisory Council
and an Adviser to the Governor
of Guangzhou, China.
59
Our Board
Business review P08sn057

Sir Deryck Maughan Dr Daniel Podolsky Tom de Swaan (Aged 64)
(Aged 63) (Aged 57) Appointed on 1st January 2006.
Appointed on 1st June 2004. Appointed on 1st July 2006. Non-Executive Director.
Non-Executive Director. Non-Executive Director. Tom is Chairman of the
Sir Deryck is a Partner of Daniel is President of the Supervisory Board of
Kohlberg Kravis Roberts & Co, University of Texas Southwestern VanLanschot Bankiers, a member
a Non-Executive Director of Medical Center and holds the of the Board of Directors of
Thomson Reuters and BlackRock Phillip O’Bryan Montgomery, Jr., Zurich Financial Services and
Inc., as well as serving on the M.D. Distinguished Presidential a Non-Executive Director

Board of Directors of Lincoln Chair in Academic Administration, of KPMG’s Public Interest
Center. He was formerly and the Doris and Bryan Committee. He is also Vice
Chairman and Chief Executive Wildenthal Distinguished Chair in Chairman of the Supervisory
Officer of Citigroup International Medical Science. He is a member Board and Chairman of the Audit
and of Salomon Brothers Inc. of the Institute of Medicine of the Committee of Royal Ahold and a
US National Academy of Sciences. member of the Supervisory Board
of Royal DSM. He was previously
a member of the Managing
Board and Chief Financial
Officer of ABN AMRO.

James Murdoch (Aged 38)
Appointed on 20th May 2009.
Non-Executive Director.
James is Chairman and Chief
Executive, Europe and Asia of
News Corporation. He is also Dr Moncef Slaoui (Aged 51) Sir Robert Wilson
Non-Executive Chairman of Appointed on 17th May 2006. (Aged 67)
BSkyB, a member of the Board Chairman, Research & Appointed on 1st November
of News Corporation and Development. 2003.
Non-Executive Director of Moncef joined GSK Biologicals Non-Executive Director
Sotheby’s. He previously served in 1988 where he engineered & Senior Independent Director.
as Chief Executive Officer of the development of a Sir Robert is Non-Executive
BSkyB from 2003 to 2007 and robust vaccines pipeline and Chairman of BG Group plc.
was also Chairman and Chief subsequently led Worldwide He was previously Executive
Executive Officer of Star TV Business Development for Chairman of Rio Tinto plc until
from 2000 to 2003. pharmaceuticals before his his retirement in October 2003
appointment to lead R&D. and Chairman of The Economist

In June 2010 Moncef was Group between 2003 and 2009.
given overall responsibility for
GSK’s Oncology Business and
over the next twelve months
responsibility for GSK Biologicals
will also transition to him. He is
a member of the Board of the
Agency for Science, Technology
& Research (A*STAR) and has a
PhD in Molecular Biology and
Immunology from Université
Libre de Bruxelles.

60
Our Corporate Executive Team (CET)
John Clarke Julian Heslop

President, Consumer Healthcare Chief Financial Officer
John is responsible for the Julian became Chief Financial
Consumer Healthcare business Officer in April 2005. As head
which produces oral healthcare, of the finance function he is
over-the-counter and nutritional responsible for activities such as
healthcare products. He joined financial reporting and control,
Beecham in 1976 and was the tax and treasury, finance systems
Andrew Witty President of the Future Group Marc Dunoyer and insurance. He joined Glaxo
Chief Executive Officer before his current appointment Head of Rare Diseases Unit Wellcome as Financial Controller
Andrew was appointed Chief in January 2006. and Chairman of GSK Japan in April 1998. He will leave the
Executive Officer in May 2008. Marc was appointed Chairman CET when he retires from GSK at
He joined Glaxo UK in 1985. GSK Japan in January 2010 the end of March 2011.
During his career with the and in February 2010 to lead
company he has held the roles GSK’s rare diseases business
of Managing Director South from R&D to commercialisation.
Africa, Vice President and He joined the Group in 1999
General Manager Marketing and was previously President,
in the USA and Senior Vice Pharmaceuticals Japan from
President, Asia Pacific. He January 2000 until May
was appointed President, Deirdre Connelly 2008. He was President,
Pharmaceuticals Europe for President, North America Pharmaceuticals Asia Pacific/
GlaxoSmithKline in January 2003. Pharmaceuticals Japan from May 2008 until
Deirdre joined GSK in February Abbas Hussain
July 2010.
2009 after working at Eli Lilly President, Emerging Markets
and Company for 24 years. & Asia Pacific
She held a variety of positions Abbas joined GSK in June 2008
including sales professional, from Eli Lilly and Company,
General Manager of Puerto Rico, where he spent 20 years
Executive Director of Human overseeing markets throughout
Resources and most recently Europe, Africa/Middle East
President of US Operations. and Australasia.
Simon Bicknell
Senior Vice President, Eddie Gray
Governance, Ethics President,
and Assurance Pharmaceuticals Europe
Simon was appointed to Eddie became responsible
the role in January 2011. for the Group’s operations
He is responsible for risk in Europe in January 2008.
management, compliance He joined Beecham in 1988
and internal auditing. He and, prior to his current
Bill Louv
was formerly SVP, Company Simon Dingemans appointment, was Senior Vice
Senior Vice President,
Secretary & Corporate Chief Financial Officer Designate President and General Manager,
Core Business Services
Compliance Officer. Simon Simon was appointed Chief Pharmaceuticals UK.
& Chief Information Officer
joined the Corporate Financial Officer Designate on Bill was appointed Chief
Secretariat in 1984. He was 4th January 2011. He joined Information Officer in January
appointed Company Secretary GSK from Goldman Sachs where 2007. In addition to this role he
of GlaxoSmithKline plc in he was a Managing Director and was appointed to create and
May 2000 and combined Partner. He has over 25 years lead Core Business Services in
this position with his role as of experience in investment April 2010. He is responsible
Corporate Compliance Officer banking, including most recently for information technology
from April 2006 until his as leader of Goldman Sachs’ across GSK. Bill joined Glaxo
current appointment. European M&A business and in 1994 as Vice President,
before that as head of UK Medical Data Sciences. Prior to
Investment Banking. his current roles, Bill was Senior
Vice President, R&D Information
Technology.

61
Our Corporate Executive Team (CET)

Moncef Slaoui Patrick Vallance
Chairman, Research Senior Vice-President, Medicines
& Development Discovery and Development
Moncef leads the Group’s drug Patrick was appointed Senior
discovery and development Vice President, Medicines
activities as well as its Oncology Discovery and Development in
business. Over the next 12 July 2010. He is responsible for
months he will assume ensuring a flow of potential
David Pulman operational responsibility for Claire Thomas new medicines through the R&D

President, Global GSK biologicals. He joined Senior Vice President, pipeline from early discovery
Manufacturing and Supply the Group in 1988 and was Human Resources through to stage approval of
David is responsible for the a key player in building GSK’s Claire leads the global Human the medicine. Patrick joined
Global Manufacturing and vaccines pipeline. In 2003 he Resources (HR) function. GSK in 2006. Prior to that he
Supply organisation and was appointed Senior Vice Previously, she oversaw HR in was a clinical academic and led
Global Procurement. He joined President, Worldwide Business Pharmaceuticals International the Division of Medicines at
Glaxo in 1978. He has broad Development until his current and in Pharmaceuticals Europe. University College London.
experience of manufacturing appointment in June 2006. Claire joined the company
operations having previously led in 1996 and was appointed
the Primary Supply, European Director of Human Resources
manufacturing, North American for UK Pharmaceuticals in 1997.
manufacturing, Global Logistics Claire was honoured as an
and Manufacturing Strategy Outstanding European Woman
organisations. of Achievement in 2007.
Changes to the CET

Duncan Learmouth, Senior
Jean Stéphenne Vice President, Global
Chairman and President, Communications left the CET
Biologicals in August 2010 for a new
Jean has led GSK’s global role as Senior Vice President,
vaccines business since 1989. Developing Countries
Previously he was Vice President and Market Access. Phil
of Human Vaccines Research Dan Troy Thomson was appointed
David Redfern and Development and Senior Vice President, Global
Senior Vice President
Chief Strategy Officer Production. He joined the Communications in August
and General Counsel
David is responsible for company in 1974 as Head of 2010 and, although he is not
Dan joined GSK as Senior Vice
proactive exploration of new Bacterial and Viral Vaccines a member, is invited to attend
President and General Counsel
business opportunities, strategic production. Jean was named CET meetings as required.
in September 2008. Before
planning and dermatology. In Baron by King Albert II of the that he was a Partner at the Dan Phelan, Chief of Staff
addition to his current role he Belgians in 2000 in recognition Washington law firm Sidley stepped down from the CET
was appointed Chairman of of his leading contribution to Austin LLP and Chief Counsel in December 2010 to act as an
the Board of ViiV Healthcare R&D and industry in Belgium. for the FDA. From 2006–2007 advisor to the CEO in advance
Ltd. with effect from 1st April
he chaired the American of his eventual retirement
2011. He began his career
Bar Association’s Section of from GSK.
with GSK in 1994 in Corporate
Administrative Law, and was
Development before being
previously adjunct scholar at
appointed Finance Director of
the American Enterprise
Europe Pharmaceuticals in 1999.
Institute in Washington, DC.
He was appointed Area Director
for Central Europe in 2003 and
Northern Europe in 2005.

62
Corporate governance
Dear Shareholder
On behalf of the Board, I am pleased to present the Corporate Governance Report for 2010.
Review of 2010
Although our operating environment remains challenging, I believe that we made significant progress during 2010 in substantially
re-engineering GSK’s business through restructuring and a more rigorous approach to capital allocation. The effect of these changes
also became increasingly evident in 2010 through the delivery of diversified underlying sales growth, increasing pipeline potential
and improved cash generation before legal settlements. By becoming a more balanced, synergistic business with a broad and diverse
pipeline generating increasing potential, the Board believes that we can generate increased value for shareholders and deliver even
better outcomes to patients and consumers.
Corporate governance developments
2010 has seen a continuation of reviews and consultations aimed at examining and improving corporate governance arrangements,
predominantly in the light of the recent global financial crisis. GSK has been an active participant in debating the issues raised by these
consultations where they have been relevant to the long term interests of our shareholders. We have also taken the opportunity to review
our board practices and governance procedures against the standards contained in the Financial Reporting Council’s (FRC) updated UK
Corporate Governance Code (updated Code) published in June 2010, formerly the Combined Code on Corporate Governance (Combined
Code). Our review indicated that we are in a strong position to comply fully with its provisions and I will report formally on GSK’s
compliance with the updated Code next year.
Board role and effectiveness
As Chairman, my role primarily is to provide leadership to the Board, necessary to promote the success of the company and create value
for shareholders in the long term, while ensuring that sound effective corporate governance practices are embedded in the organisation
and its decision-making processes.
There are a number of ingredients that make up an effectively functioning board. GSK’s approach is set out in greater detail in the
following Report. A notable example of this in practice has been the exercise by the Audit & Risk Committee of the oversight powers
delegated to it by the Board. The decision to resolve the inherent unpredictability and reduce overall litigation exposure has been a core
focus for this Committee and the Board. The Audit & Risk Committee holds regular dialogue with executive management, who provide
updates on the progress being made to resolve outstanding legal matters. The Board acknowledges that the scale of the legal provisioning
required for 2010 has been significant, but continues to believe it is in the best long term interests of shareholders to resolve such matters.
As usual, we have conducted a rigorous evaluation to test the Board and its Committees’ effectiveness. I am pleased to note the FRC
endorsed in its updated Code the approach of externally facilitated board evaluations being undertaken at least every three years; an
approach that GSK has previously adopted. Details of the latest Board evaluation and the actions that have been identified and agreed
upon to drive standards of Board governance and performance can be found on page 68 of the Report.
Other areas of board practice that I would also like to particularly focus on here are business awareness, succession planning and
shareholder engagement, key areas where we have made good progress during 2010.
Business awareness and succession planning
Each year the Board seeks to further develop its knowledge and understanding of the business and to gain greater visibility of executive
talent and management succession. In 2010 the Board made several visits to some of the Group’s sites and met with key talent and senior
executives.
In March, the Board visited our Vaccines site in Wavre in Belgium to receive an update on the progress of our main vaccines business,
which continues to grow in terms of its contribution to the Group. This included specific briefings on three important vaccine
development programmes; namely MAGE-A3, Synflorix and Malaria. The Board was also very pleased to meet and thank GSK staff at
the site for the extraordinary efforts they had made to enable the Group to respond to the H1N1 pandemic in 2009.
In July, the Board visited GMS and R&D sites in Research Triangle Park and Zebulon in the United States. These visits included briefings with
several Discovery Performance Units, a tour of a pharmaceutical development pilot plant, together with workshops with senior executives.
The Board also held a reception with locally based executives and key talent.

63
GSK continues to target growth in Emerging Markets and has established an important new corporate hub for the Group in the Far East

in Singapore. During the summer, Abbas Hussain, President, Emerging Markets & Asia Pacific and a Corporate Executive Team (CET)
member, relocated to Singapore to be more centrally located in this region. In October, the Board held a joint strategy review meeting
with CET members in Singapore and was pleased to visit a GMS site and tour one of GMS’ production facilities and a pilot plant. The
Board also had a workshop on the results of GSK’s investment in green chemistry and continuous manufacture technology in Singapore,
which will contribute to the Group’s efforts to reduce costs and minimise our impact on the environment. The Board was also pleased to
have the opportunity to meet with local senior executives and key talent.
In addition to these planned visits, our Non-Executive Directors are encouraged to attend CET meetings and R&D related executive
meetings. This provides them with a good perspective of how management operates and gives a greater insight into key business
issues. It also provides a further opportunity for Board members to observe the skills, knowledge, integrity and behaviour of our senior
management cadre and key executive talent, whilst enabling our employees to give direct feedback to Board members.
Shareholder engagement
At GSK we value an open, constructive and effective interaction with our shareholders.
In particular, the CEO, CFO and I maintain an ongoing dialogue with institutional investors through a regular programme of meetings
which cover a range of issues.

During 2010, Andrew Witty attended over 60 one-on-one meetings with investors, covering over 50 separate funds. Julian Heslop
attended nearly 40 one-on-one meetings with investors, covering over 35 separate funds. In addition, both met with multiple additional
investors via group meetings and at broker conferences. I personally met a representative cross section of our shareholders during the
course of the year and am available to meet with shareholders on request along with other Board colleagues. Also, along with the
Remuneration Committee Chairman, the Head of Human Resources and the Company Secretary, I attended meetings with institutional
investors to specifically discuss remuneration policy and governance related matters, a process we conduct annually.
We believe this level and quality of engagement is key to ensuring that the Board and senior management understand our shareholders’
views and perspectives. On this theme, we welcome the introduction by the FRC of the Stewardship Code for Institutional Investors, a
code of good practice for major shareholders, which aims to further strengthen the quality of the engagement process between major
shareholders and the companies that they invest in.
At the company’s 2011 AGM all Board directors who are able to attend will be available, as usual, to meet with investors after the
meeting to discuss issues on a face-to-face basis.
Combined Code compliance statement

Throughout 2010, the company complied with the provisions and applied the Main Principles of Section 1 of the Combined Code,
except that Dr Stephanie Burns, Larry Culp and Tom de Swaan were unable to attend the company’s 2010 AGM. Dr Stephanie Burns
and Larry Culp were prevented from attending due to travel disruption caused by the ash clouds from the volcano in Iceland and
Tom de Swaan was required to chair a shareholder meeting of another public company on the same day. This resulted in a partial non-
compliance with code provision D.2.3.
Annual re-election of directors
GSK, like a number of other organisations and interested parties, expressed the view during the consultation period on updating the
Combined Code that the FRC’s proposal to mandate annual re-election of directors could be damaging. We feared that it could erode
the principle of the unitary Board, was likely to increase short-termism and could make it even more difficult to recruit new Board
members. Nevertheless, this change has been included as a new provision in the updated Code and the Board has agreed that each
Board member should stand for re-election at the 2011 AGM. We will monitor the effect of this provision over time.
The Corporate Governance Report that follows sets out how GSK complied with the provisions and applied the principles of the
Combined Code during the year. Shareholder information P192–P212
Sir Christopher Gent

Chairman

64
Governance and policy Board process

This section discusses GSK’s management structures and The Board is responsible for the long-term success of the company
governance procedures and together with the Remuneration and has the authority, and is accountable to shareholders, for
Report on pages 81 to 101, includes details of how the company ensuring that the Group is appropriately managed and achieves
applies and complies with the principles and provisions of the the strategic objectives it sets. The Board discharges those
Combined Code maintained by the FRC and with US laws and responsibilities through an annual programme of meetings which
regulations. includes the approval of overall budgetary planning and business
strategy. The Board reviews the Group’s internal controls and risk
The Board and Corporate Executive Team management policies and approves its governance structure and
The Directors are listed under ‘Our Board’ on pages 58 to 59 and code of conduct.
the members of the CET under ‘Our Corporate Executive Team’ on
pages 60 to 61. The Board appraises and approves major financing, investment and
licensing decisions in excess of defined thresholds. In addition, the
The Board is responsible for the Group’s system of corporate Board evaluates and monitors the performance of the Group as a
governance and is ultimately accountable for the Group’s activities, whole. This includes:
strategy, risk management and financial performance.
sENGAGINGAT"OARDMEETINGSWITHANDCHALLENGINGTHE#%/
Independence the other Executive Directors and members of the CET as
The Board considers all its Non-Executive Directors to be appropriate, on the financial and operating performance of GSK
independent in character and judgement and free from any and external issues material to the Group’s prospects
business or other relationship which could materially interfere
sEVALUATINGPROGRESSTOWARDSTHEACHIEVEMENTOFTHE'ROUPS
with the exercise of their judgement. The Chairman satisfied the
financial and business objectives and annual plans and the Non-
independence criteria on his appointment to the Board.
Executive Directors scrutinising the performance of management
At the date of publication and throughout 2010, a majority of the in meeting these objectives and plans, and
Board members, excluding the Chairman, were independent
sMONITORINGTHROUGHREPORTSRECEIVEDDIRECTLYORFROMVARIOUS
Non-Executive Directors.
committees, the significant risks facing the Group.
Chairman, CEO and Senior Independent Director
The Board has overall responsibility for succession planning for the
Sir Christopher Gent has chaired the company since 1st January CEO and the other Executive and Non-Executive Directors. The
2005 and was Chairman throughout 2010. His biographical Board has given the CEO broad authority to operate the business
details can be found on page 58. Andrew Witty is the CEO and his of the Group, and the CEO is accountable for, and reports to the
biographical details can be found on pages 58 and 60. Board on, the performance of the business. CET members make
The Chairman leads and manages the Board while the CEO regular presentations to the Board on their areas of responsibility.
manages the Group and implements the strategy and policies The Board Directors meet with all the CET members on an annual
adopted by the Board. The Chairman and the Chairmen of Board basis to discuss and develop proposals collectively in relation to the
Committees communicate regularly with the CEO and other CET Group’s strategy.
members. The division of responsibilities between the role of The Board met six times in 2010, with each member attending
Chairman and the CEO has been set out in writing, agreed by as follows:
the Board and appears in full in the Governance section of the
company’s website. Number of meetings
held whilst a Board Number of
The CEO is responsible for executive management of the Group member meetings attended
and is assisted by the CET. The CET meets at least 11 times per year
Sir Christopher Gent 6 6
and otherwise as necessary.
Andrew Witty 6 6
Under the terms of their engagement, the Chairman and each Julian Heslop 6 6
Non-Executive Director are expected to devote such time as is Dr Moncef Slaoui 6 6
necessary for the proper performance of their duties. Professor Sir Roy Anderson 6 6
Sir Robert Wilson was appointed Senior Independent Director Dr Stephanie Burns 6 6
(SID) on 20th May 2009, following Sir Ian Prosser’s retirement Larry Culp 6 5
from the Board on that date. His responsibilities include the annual Sir Crispin Davis 6 6
evaluation of the performance of the Chairman, the Board, its Sir Deryck Maughan* 6 4
Committees and Directors in collaboration with the Committee James Murdoch 6 6
Chairmen in those years when the process is internally facilitated. Dr Daniel Podolsky 6 6
He is also available as an additional point of contact on the Board Tom de Swaan 6 5
for shareholders. Sir Robert Wilson 6 6
* Sir Deryck was unable to attend two meetings for personal reasons. He
gave his comments to the Chairman on the matters to be discussed in
advance of both meetings.
In addition to the six scheduled meetings, the Board also met on a

quorate basis on three occasions.

65
Where Directors are unable to attend a Board or Committee The Board has an established procedure for handling situational

meeting, they communicate their comments and observations on conflicts of interest, which is in line with the best practice guidance
the matters to be considered via the Chairman of the Board or the issued by the General Counsel 100 Group and in accordance
relevant Board Committee Chairman for raising as appropriate at with the company’s Articles. It has authorised the Nominations
the relevant meeting. Attendance at meetings is considered as Committee to grant and review periodically, but in any event
part of the one-to-one meetings conducted by the Chairman annually, any potential or actual conflict authorisations. Directors
with each Director. are not counted in the quorum for the authorisation of their own
actual or potential conflicts. The Company Secretary minutes the
Business environment and personal development
consideration of any conflict. Authorisations granted are recorded
To ensure that the Board is kept up-to-date on important matters, by the Company Secretary in a register of conflict authorisations
including legal, governance and regulatory developments, which are noted by the Board at its next meeting.
presentations are made on a regular basis by both external and
internal advisers. On an ongoing basis, the Directors are responsible for informing
the Company Secretary of any new, actual or potential conflicts
Non-Executive Directors also gain greater insight and understanding that may arise or if there are any changes in circumstances that may
of the business and access to GSK employees through visits to affect an authorisation previously given. Even when provided with
Group operational facilities and attendance at various internal authorisation, a Director is not absolved from his or her statutory
management meetings, including CET, Research & Development

duty to promote the success of the company. If an actual conflict
Executive and Product Marketing Board meetings, on an ad hoc arises post authorisation, the Board will choose to exclude the
basis. Director from receipt of the relevant information and participation
A customised induction process is conducted by the Company in the debate, or suspend the Director from the Board, or, as a last
Secretary for each of the new Non-Executive Directors focusing resort, require the Director to resign.
on their particular experience and taking account of their different The Nominations Committee reviewed the register of conflict
backgrounds. A primary element of this process includes meeting authorisations in October 2010 and concluded that the
members of the CET informally on a collective and individual basis conflicts had been appropriately authorised and the process for
as appropriate, together with other senior executives, and visiting authorisation continues to operate effectively.
particular operational facilities of the Group.
Company Secretary
In addition, the Chairman meets with each Director annually on
The Company Secretary is responsible to the Board and is available
a one-to-one basis to discuss and agree their individual ongoing
to individual Directors in respect of Board procedures. Simon
training and development requirements.
Bicknell was Company Secretary until 31st December 2010
Independent advice and was Secretary to all of the Board Committees, except the
Remuneration Committee. Victoria Whyte, formerly Deputy

The Board recognises that there may be occasions when one or
more of the Directors feel it is necessary to take independent legal Company Secretary, was appointed Company Secretary with effect
and/or financial advice at the company’s expense. There is an from 1st January 2011. She was Secretary to the Remuneration
agreed procedure to enable them to do so. This is explained in the Committee during 2010 and acts as Secretary to all of the Board
Governance section of the company’s website. Committees since her appointment as Company Secretary. She
is a solicitor and a Fellow of the Institute of Chartered Secretaries
Indemnification of Directors and Administrators.
Qualifying third party indemnity provisions (as defined in section
234 of the Companies Act 2006) are in force for the benefit of the Board Committees
Directors and former Directors who held office during 2010. The Board has established a number of committees and
provides sufficient resources to enable them to undertake their
Directors’ conflicts of interest duties. Executive Directors are not members of the Audit &
Directors have a statutory duty to avoid a situation in which they Risk, Remuneration, Nominations or Corporate Responsibility
have, or can have, a direct or indirect conflict of interest or possible Committees, although they may be invited to attend meetings.
conflict of interest with the company. The duty applies in particular Each Director is a member of the Corporate Administration &
to the exploitation of any property, information or opportunity, Transactions and Finance Committees.
whether or not GSK could take advantage of it. The company’s
Articles of Association include a general power for the Board to

authorise such conflicts. There is no breach of duty if the relevant
matter has been so authorised in advance.

66
Corporate governance framework
*BOARD
(Chairman, 4 Executive Directors and 9
Independent Non-Executive Directors)
Audit & Risk Committee Remuneration Committee Nominations Committee

5 Independent 4 Independent Non-Executive 4 Independent Non-Executive Chief Executive
Non-Executive Directors Directors and the Chairman Directors and the Chairman Officer
Corporate Responsibility Finance Committee Corporate Administration

3 Independent Non-Executive Executive and Non-Executive & Transactions Committee CET
Directors and the Chairman Directors Directors, the Company
Secretary and CET Members
Key
Board Committees
Management Committee
* There have been 4 Executive Directors since the appointment of the Chief Financial Officer Designate on 4th January 2011
(there will be 3 Executive Directors following the retirement of the Chief Financial Officer on 31st March 2011).
Current membership of these Committees is shown in the table below.

Corporate
Audit & Risk Remuneration Nominations Responsibility
Sir Christopher Gent – M C C

Professor Sir Roy Anderson M – – –
Dr Stephanie Burns – – – M
Larry Culp – M M –
Sir Crispin Davis – C M –
Sir Deryck Maughan M – M –
James Murdoch – M – M
Dr Daniel Podolsky M – – M
Tom de Swaan C M – –
Sir Robert Wilson M – M –
Key: C = Chairman M = Member

67

Each Committee has written terms of reference which have been approved by the Board and are reviewed at least annually to ensure
that they comply with the latest legal and regulatory requirements and reflect best practice developments. The following is a summary
of the role and terms of reference of each Committee. The current full terms of reference of each Committee may be obtained from
the Company Secretary or the Governance section of the company’s website.
No of meetings Committee Report

Committee Role and Terms of Reference Membership comprises per year on page
Audit & Risk Reviews the financial and internal reporting process, Independent Non- *4 74-76
the external and internal audit processes, the system Executive Directors
of internal controls, and the identification and
management of risks. The Committee also proposes
to shareholders the appointment, re-appointment
and removal of the external auditors and is directly
responsible for their remuneration and oversight of
their work.

Remuneration Determines the terms of service and remuneration of Independent Non- *4 81-101
the Executive Directors and members of the Executive Directors
CET and, with the assistance of external and the Chairman
independent advisers, it evaluates and makes
recommendations to the Board on overall executive
remuneration policy that assists the long-term
success of the Group.
(The Chairman and the CEO are responsible for
evaluating and making recommendations to the Board
on the remuneration of Non-Executive Directors.)
Nominations Reviews the structure, size and composition Independent Non- *2 77
of the Board (including the skills, knowledge, Executive Directors
independence, experience and diversity) and and the Chairman
appointment of members to the Board and the
CET, and makes recommendations to the Board as

appropriate. The Committee monitors the planning
of succession to the Board and Senior Management.
The Committee also considers and if appropriate
authorises directors’ conflicts of interest.
Corporate Provides a Board-level forum for the regular review Independent Non- *3 78-80
Responsibility of external issues that have the potential for serious Executive Directors
impact upon the Group’s business and reputation. and the Chairman
The Committee is also responsible for oversight of
GSK’s worldwide donations and community support.
Finance Reviews and approves, on behalf of the Board, the Executive and Non- As necessary –
Annual Report and Form 20-F, and convening of the Executive Directors
AGM, together with the preliminary and quarterly
statements of trading results. It also approves
certain major licensing and capital transactions and
changes to the Group’s Investment Instrument and

Counterparty Limits.
Corporate Reviews and approves matters in connection with Executive and Non- As necessary –
Administration the administration of the Group’s business and Executive Directors,
& Transactions certain corporate transactions. CET members
and the Company
Secretary

68
Evaluation of the Board, Board Committees and Directors There was a high level of confidence in the performance of the
The Board decided in 2009 to undertake an externally facilitated CEO and a strong belief that the Board dynamics facilitated open,
evaluation process every three years, which has since become a honest and constructive discussion of issues. No major changes to
requirement within the UK Corporate Governance Code (updated the Board’s practices and procedures were deemed necessary.
Code). In the intervening period the review will be facilitated by the In terms of the implementation of action points from the previous
SID or the Chairman. The next externally facilitated evaluation will year, the Board:
be undertaken at the end of 2011.
sHADINCREASEDITSFOCUSON2$ACTIVITIESANDSUCCESSFULDELIVERY
A reminder of the form the Board evaluation reviews for 2008 and of the pipeline and was pleased with progress from R&D during
2009 had taken, together with the action points agreed is set out the year. Separately, on behalf of the Board, the Remuneration
below. Committee initiated discussions with management and
shareholders over the introduction of more strategically aligned
Method of evaluation Actions and areas of focus
performance criteria for the company’s long term incentive plans.
2008 Dr Long, Boardroom s5TILISE"OARDAND#OMMITTEE As a result of a successful conclusion to these discussions, the
Review, facilitated this time more effectively and grant of LTI options made in February 2011 was made with two
review facilitate further contribution additional performance criteria, one of which focuses on R&D
by Non-Executive Directors new product performance. For more details, please refer to the
s%NHANCECONTINUOUS Remuneration Report on pages 81 to 101

education process for Non- sHADSOUGHTASSISTANCEFROMTHE!UDIT2ISK#OMMITTEETOMORE
Executive Directors fully understand the Group’s key risks. This work is ongoing
s0ROVIDEGREATERVISIBILITY and the Board will continue to consider regular reports from
to executive talent and the Audit & Risk Committee during 2011, in advance of the
management succession Board’s annual review of the effectiveness of the company’s risk
planning process management next year
2009 Sir Robert Wilson, s)NCREASE"OARDTIMEDEVOTED
sWASPLEASEDWITHTHEOPERATIONBYTHE.OMINATIONS#OMMITTEE
Senior Independent to strategic discussion and
of the enhanced succession planning process. This had resulted
Director the indicators of success
in the appointment of the CFO Designate and positive progress
in the delivery of the R&D
was being made on the recruitment of new Board members to
pipeline
refresh the Board.
s$EVOTEMORETIMETO
focused consideration of the The Board agreed the following actions after discussion of the
company’s key risks on an evaluation report to ensure that it continues to improve the way in
ongoing basis which it operates:
s0ROVIDETHE"OARDWITHMORE sGIVENTHEFUNDAMENTALSTRATEGICCHALLENGESFACINGTHE
regular updates and insights pharmaceutical industry, the Board will seek to continue to
into the newly enhanced allocate more time on a regular basis to focus on strategic issues
management succession and the significant challenges facing the industry, with the direct
planning process aim of further enhancing returns to shareholders
2010 Board evaluation process sTOFURTHERENHANCEINFORMATIONmOWSBYPROVIDING"OARD
In accordance with established practice, the SID, Sir Robert members with a wider variety of external perspectives on the
Wilson, conducted the 2010 evaluation of the performance of company and the industry
the Chairman, the Board and its Committees and Directors in s 2$WILLCONTINUETOBEAMAJOREXPENSETOTHECOMPANYAND
collaboration with the Committee Chairmen. the Board will be seeking to assess the extent to which the new
The Board evaluation process included a one-to-one interview with policies implemented in recent years have added value
each Director. The topics discussed, which had been circulated to sTOCONTINUETOSUPPORT%XECUTIVE-ANAGEMENTONETHICAL
Directors in advance, included a variety of aspects associated with leadership within the Group.
Board effectiveness, including Board and Committee information
flows, handling of strategic issues, collective effectiveness and The Directors, led by the SID, also met separately, without the
exploration of ways to further improve the way in which the Board Chairman being present, to discuss the Chairman’s performance.
operates. They considered that his leadership, performance and overall
contribution were of a high standard. As a result of this high
The Chairman of each of the Board Committees undertook level of confidence shared by all Directors in Sir Christopher’s
separate evaluations and the outcome of each was reported to and Chairmanship of the Board, it was unanimously agreed to extend
discussed with the respective Committee and the Board. his appointment as Chairman for a period of five years with effect
Feedback from the overall evaluation process was provided in from 1st January 2011, subject to re-election by shareholders.
the form of a written report to the Board, which then debated its This would ensure continuity of leadership of the Board during a
findings. period when several Non-Executive Directors would be approaching
retirement after having served nine years on the Board.
The Board evaluation review concluded that the Board and its
Committees were operating effectively at a high level. The Board
continued to feel that it was receiving high quality information, in
a readily understandable format and on a timely basis in order to
fulfil its role.

69
Dialogue with shareholders Share capital and control

Financial results are announced on a quarterly basis and the Details of the company’s issued share capital and the number of
full-year results are included in the company’s Annual Report. shares held in Treasury as at 31st December 2010 can be found
The company produces an annual Summary which is sent to all in Note 33 to the financial statements, ‘Share capital and share
shareholders to advise them of the availability of the Annual Report premium account’. GSK’s shares are listed on the London Stock
and Notice of Meeting on www.gsk.com. Exchange and are also quoted on the New York Stock Exchange
(NYSE) in the form of American Depositary shares (ADS). Each ADS
The CEO and CFO give presentations on the half-year and full- represents two Ordinary Shares.
year results in face-to-face meetings with institutional investors,
analysts and the media which are also accessible via webcast and The holders of Ordinary Shares are entitled to receive dividends,
teleconference. After the release of the first and third quarterly when declared and the company’s Annual Report, attend and
results, the company holds webcast teleconferences for institutional speak at general meetings of the company, appoint proxies and
investors, analysts and the media. The quarterly results are also exercise voting rights.
made available on the Investors section of the company’s website. There are no restrictions on transfer, or limitations on the holding
The AGM takes place in London, and formal notification is sent of Ordinary Shares and no requirements to obtain prior approval
to shareholders at least one month in advance. At the Meeting, a for any transfers. No Ordinary Shares carry any special rights with

business presentation is made to shareholders and all Directors able regard to control of the company and there are no restrictions on
to attend are available, formally during the AGM, and informally voting rights. Major shareholders have the same voting rights per
afterwards, for questions. Committee Chairmen ordinarily attend share as all other shareholders. There are no known arrangements
the AGM to respond to shareholders’ questions. The entire Board under which financial rights are held by a person other than the
was in attendance at the company’s AGM in May 2010, save for holder of the shares and no known agreements on restrictions on
Dr Stephanie Burns and Larry Culp, who were prevented from share transfers or on voting rights.
attending due to travel disruption caused by the ash clouds from Shares acquired through GSK share plans rank equally with the
the volcano in Iceland, and Tom de Swaan who was required to other shares in issue and have no special rights. The trustees of
chair a shareholder meeting of another public company on the the company’s Employee Share Ownership Plan (ESOP) trusts have
same day. All resolutions at the AGM are decided on a poll as waived their rights to dividends on shares held by the ESOP trusts.
required by the company’s Articles of Association. The results of
the poll are announced to the London Stock Exchange and posted Change of control and essential contracts
on the Investors section of the company’s website. Details of the The company does not have contracts or other arrangements which
2011 AGM are set out in the section ‘Annual General Meeting’ individually are essential to the businesses, nor is it party to any
(see page 71) and the Notice of AGM is published on the Investors significant agreements that would take effect, alter or terminate
section of the company’s website. upon a change of control following a takeover bid.

To ensure that the Non-Executive Directors are aware of and The company does not have agreements with any Director or
understand the views of major shareholders about the company, Officer that would provide compensation for loss of office or
the Board has in place a briefing process, which is managed by employment resulting from a takeover, except that provisions of
the Chairman, focusing on sector-specific issues, as well as general the company’s share plans may cause options and awards granted
shareholder preferences. under such plans to vest on a takeover. Details of the termination
provisions in the company’s framework contracts for Executive
The Group’s Investor Relations department, with offices in London Directors are given on page 91.
and Philadelphia, acts as a focal point for contact with investors
throughout the year. Interests in voting rights
Other than as stated below, as far as the company is aware, there
The CEO, CFO and Chairman maintain a dialogue with institutional
are no persons with significant direct or indirect holdings in the
shareholders on performance, plans and objectives through a
company. Information provided to the company pursuant to the
programme of regular meetings. Since his appointment as CEO in
Financial Services Authority’s (FSA) Disclosure and Transparency
May 2008, Andrew Witty has undertaken an extensive ongoing
Rules (DTRs) is published on a Regulatory Information Service and
series of meetings with GSK’s institutional shareholders.
on the Investors section of the company’s website.
The Chairman meets regularly with institutional investors to

At 24th February 2011, the company had received notifications in
hear their views and discuss issues of mutual importance and
accordance with the FSA’s DTRs of the following notifiable interests
communicates the views of investors to the Board as a whole.
in the voting rights in the company’s issued share capital:
The SID is also available to shareholders.
The Chairman of the Remuneration Committee, the Chairman, No. of Percentage of issued
shares capital (%)*
the Senior Vice President, Human Resources and the Company
Secretary meet annually with major shareholders to discuss BlackRock, Inc. 291,516,314 5.62
executive remuneration policy and governance matters. Legal & General Group Plc 194,024,944 3.74
All Non-Executive Directors, including new appointees, are available * Percentage of Ordinary Shares in issue, excluding Treasury shares.
to meet with major shareholders if requested.
The company’s website provides access to current financial and
business information about the Group.

70
The Bank of New York Mellon is the Depositary for the company’s Share buy-back programme
ADS, which are listed on the NYSE. Ordinary Shares representing A £12 billion programme of share repurchases commenced in July
the company’s American Depositary Receipt program, which are 2007. Shares costing £6.2 billion were repurchased under this
managed by the Depositary, are registered in the name of BNY programme. No repurchases were made during 2009 or 2010. The
(Nominees) Limited. Details of the number of Ordinary Shares held company announced publicly on 3rd February 2011 that it intends
by the Depositary can be found on page 209. to commence a new long-term share buy-back programme and
The company has not acquired or disposed of any interests in expects to buy-back £1-2 billion of shares in 2011. In the period
its own shares during the period under review. Details of shares 4th February 2011 to 24th February 2011, 10.4 million shares
purchased in prior years, those cancelled, and those held as were purchased at a cost of £123.4 million. The programme covers
Treasury shares are disclosed in Note 33 to the financial statements purchases by the company of shares for cancellation or to be held
‘Share capital and share premium account’. as Treasury shares, in accordance with the authority renewed by
shareholders at the AGM in May 2010, when the company was
Directors and Officers authorised to purchase a maximum of just over 519 million shares.
The interests of Directors and Officers and their connected Details of shares purchased, those cancelled, and those held as
persons in the issued share capital of the company are given in the Treasury shares are disclosed in Note 33 to the financial statements
Remuneration Report (pages 81 to 101). ‘Share capital and share premium account’.
The rules about the appointment and replacement of Directors are The exact amount and timing of future purchases, and whether
contained in the company’s Articles of Association. The company’s the shares will be held as Treasury shares or cancelled, will be
Articles must be approved by shareholders in accordance with the determined by the company and is dependent on market conditions
legislation in force from time to time. and other factors.
The Articles provide that Directors may be appointed by an ordinary Donations to political organisations and political expenditure
resolution of the members or by a resolution of the Directors, With effect from 1st January 2009, to ensure a consistent approach
provided that, in the latter instance, a Director appointed in this to political contributions across the Group, GSK introduced a global
way retires at the first AGM following his appointment. policy to stop voluntarily all political contributions.
The Articles also provide that Directors should normally be subject 2010 2009 2008
to re-election at the AGM at intervals of three years or annually if Political donations to: £ £ £
they have held office for a continuous period of nine years or more. EU political organisations – – –
However, the Board has agreed that all Directors will seek either Non-EU political organisations
election or re-election in 2011 in accordance with the updated Code. comprising:
The company’s members may remove a Director by passing an USA – – 319,000
ordinary resolution of which special notice has been given, or by Canada – – 28,000
passing a special resolution. A Director may automatically cease to – – 347,000
be a Director if:
Notwithstanding the introduction of this policy, in accordance
sHESHERESIGNS with the Federal Election Campaign Act, the company continues
sHESHEOFFERSTORESIGNANDTHE"OARDACCEPTTHATOFFER to support a Political Action Committee (PAC) that facilitates
sALLOTHER$IRECTORSBEINGATLEASTTHREEINNUMBER REQUIREHIM voluntary political donations by eligible GSK employees. The PAC
her to resign. is not controlled by GSK. Decisions on the amount and recipients
of contributions are made by participating employees exercising
sHESHEISSUFFERINGFROMPHYSICALORMENTALILLHEALTH their legal right to contribute to pool their resources and make
sHESHEHASMISSED$IRECTORSMEETINGSFORACONTINUOUSPERIOD political contributions which are subject to strict limitations. In 2010
of six months without permission and the Board resolves that a total of £531,613 (£540,551 in 2009) was donated to political
he/she shall cease to be a Director organisations by the GSK PAC.
sHESHEBECOMESBANKRUPTORCOMPOUNDSWITHHISHERCREDITORS At the AGM in May 2001, shareholders first authorised the
generally company to make donations to EU political organisations and to
sHESHECEASESTOBEA$IRECTORBYVIRTUEOFTHE!RTICLESORTHE incur EU political expenditure, under the provisions of the Political
Companies Acts, or Parties, Elections and Referendums Act 2000, of up to £100,000
sHESHEISPROHIBITEDFROMBEINGA$IRECTORBYLAW each year. This authority has since been renewed annually. The
Companies Act 2006 requires companies to continue to obtain
Articles of Association shareholder approval before they can make donations to EU
The powers of the Directors are determined by UK legislation and political organisations or incur EU political expenditure.
the company’s Articles of Association, available on the Governance
section of GSK’s website. The Articles may be amended by a However, the company does not make and does not intend
special resolution of the members. The Directors may exercise all to make donations to political parties or independent election
the company’s powers provided that the Articles or applicable candidates, nor does it make any donations to EU political
legislation do not stipulate that any such powers must be exercised organisations or incur EU political expenditure.
by the members. The Directors have been authorised to issue and The definitions of political donations, political expenditure and
allot Ordinary Shares under current Article 9. The power under political organisations used in the legislation are very wide. In
Article 9 and the authority for the company to make purchases particular, the definition of EU political organisations may extend
of its own shares are subject to shareholder authorities which are to bodies such as those concerned with policy review, law reform,
sought on an annual basis at the AGM. Any shares purchased by the representation of the business community and special interest
the company may be cancelled or held as Treasury shares. groups such as those concerned with the environment, which the
company and its subsidiaries might wish to support.
71
As a result, the definitions may cover legitimate business activities Internal control framework

not in the ordinary sense considered to be political donations or The Board recognises its responsibility to present a balanced and
political expenditure. Such activities are not designed to support understandable assessment of the Group’s position and prospects.
any political party or independent election candidate. The authority
which the Board has sought annually is a precautionary measure to The Board has accountability for reviewing and approving the
ensure that the company and its subsidiaries do not inadvertently adequacy and effectiveness of internal controls operated by the
breach the legislation. Group, including financial, operational and compliance controls
and risk management. The Board has delegated responsibility for
Annual General Meeting such review to the Audit & Risk Committee (the Committee), which
The AGM will be held at 2.30pm on Thursday, 5th May 2011 receives regular reporting aligned with GSK’s Assurance Programme.
at The Queen Elizabeth II Conference Centre, Broad Sanctuary, It is the responsibility of management, through the CET, to
Westminster, London SW1P 3EE. The business to be transacted implement Board policies on risk and control. The CET is responsible
at the meeting will include: for identifying, approving, monitoring and enforcing key policies
that go to the heart of how the Group conducts business.
sReceiving and adopting GlaxoSmithKline’s 2010
Annual Report The internal control framework includes central direction, resource
allocation and risk management of the key activities of research and
sApproving the 2010 Remuneration Report

development, manufacturing, marketing and sales, legal, human
The Remuneration Report on pages 81 to 101 sets out the resources, information systems and financial practice. As part of
remuneration policies operated by GSK and disclosures on this framework, there is a comprehensive planning system with
Directors’ remuneration, including those required by the an annual budget approved by the Board. The results of operating
Companies Act 2006 and The Large and Medium-sized units are reported monthly and compared with the budget.
Companies and Groups (Accounts and Reports) Regulations Forecasts are prepared regularly during the year.
2008. A resolution will be proposed to approve the
Remuneration Report. The Group also has in place established procedures to identify and
consolidate reporting entities. The Group’s control activities include
sRetirement and re-election of Directors policies and practices covering appropriate authorisation and
Simon Dingemans, who was appointed before the AGM will approval of transactions, application of financial reporting standards
retire in accordance with the Articles and, being eligible, will and reviews of significant judgements and financial performance.
offer himself for election at the AGM. All the continuing Directors
will retire by rotation at the 2011 AGM and offer themselves Extensive financial, regulatory and operational controls, procedures
for re-election. and risk activities are reviewed by the Group’s internal auditors.
However, responsibility is clearly delegated to local business units,
sRe-appointment and remuneration of auditors supported by a regional management structure. These principles are

Resolutions will be proposed to authorise the Audit & Risk designed to provide an environment of central leadership coupled
Committee to re-appoint PricewaterhouseCoopers LLP as with local operating autonomy as the framework for the exercise of
auditors and to determine their remuneration. accountability and control within the Group.
sSpecial business The Group also attaches importance to clear principles and
The company will seek authority to: procedures designed to achieve appropriate accountability and
sMAKEDONATIONSTO%5POLITICALORGANISATIONSANDINCUR control. A Group policy, ‘Risk Management and Legal Compliance’,
EU political expenditure, capped at £100,000 mandates that business units establish processes for managing and
sALLOT/RDINARY3HARESINTHECOMPANY monitoring risks significant to their businesses and the Group.
sGIVETHE$IRECTORSAUTHORITYTODISAPPLYPRE EMPTIONRIGHTS The internal control framework also relies on the following
when allotting new shares in connection with rights issues mechanisms for overseeing and reporting risk and compliance issues.
or otherwise up to a maximum of 5% of the current issued
share capital and to purchase its own Ordinary Shares up to a
maximum of just under 10% of the current issued share capital
sEXEMPTTHEAUDITORSFROMHAVINGTOSTATETHENAMEOF
their senior statutory auditor for the company in GSK’s

Annual Report
sREDUCETHENOTICEREQUIREDTOCALLAGENERALMEETINGTONOT
less than 14 clear days.
Shareholders are entitled to appoint one or more proxies to attend
the AGM and to speak and vote on their behalf provided that,
in the event that a single shareholder appoints multiple proxies,
each proxy is appointed to exercise the rights attached to a
different share or shares held by that member.
Details on how to appoint or be appointed a corporate representative
or proxy can be found on page 208. The Notice of AGM will be
published on the Investors section of the company’s website.

72
Risk Oversight Audit

and & Risk
Compliance Committee
Council
Internal
audit Assurance
Business unit reporting reporting
reporting
Independent
Business External audit/ review of
Emerging Internal
control Business regulatory Incidents/ business unit
risk audit
infrastructure monitoring agency events and internal

management activity
outcome audit activity
GSK Risk Universe
Management Internal Assurance

audit
Risk Oversight and Compliance Council (ROCC) Corporate Ethics & Compliance (CEC)
The ROCC is a council of senior executives authorised by the Board The ROCC and the RMCBs are assisted by the CEC department,
to assist the Committee oversee the risk management and internal which is responsible for supporting the development and
control activities of the Group. Membership comprises several CET implementation of practices that facilitate employees’ compliance
members and some of the heads of departments with internal control, with laws and Group policy. The department provides assistance
risk management, assurance, audit and compliance responsibilities. to help employees meet high ethical standards and comply with
applicable laws and regulations and corporate responsibility.
The ROCC meets on a regular basis to review and assess significant
risks and their mitigation plans and provide oversight of internal The thrust of the Group’s compliance effort is due diligence in
controls to ensure compliance with applicable laws, regulations and preventing and detecting misconduct or non-compliance with law
internal GSK policies. The ROCC, responding to the Group policy or regulation and the promotion of ethical behaviour, compliance
referred to above, has provided the business units with a framework with all laws and regulations, corporate responsibility at all levels
for risk management and upward reporting of significant risks. and effective compliance systems.
Mitigation planning and identification of a manager with overall
GSK employees are encouraged to seek help and to report
responsibility for management of any given risk is a requirement.
concerns or suspected cases of misconduct without the fear of
Risk Management and Compliance Boards (RMCBs) retaliation. Employees can do this through line management or
RMCBs have been established in each of the major business units. via GSK’s integrity and confidential reporting lines managed by
Membership often comprises members of the senior executive CEC. All concerns and allegations are fairly and independently
team of the respective business unit, augmented by specialists investigated and disciplinary action, if applicable, is commensurate
where appropriate. The RMCBs oversee management of all risks with the issues presented.
that are considered important for their respective business units, The CEC department is managed by the Senior Vice President,
including those risks that are designated as significant to GSK Governance, Ethics and Assurance, who reports directly to the
as a whole, thus increasing the number of risks that are actively CEO. He chairs the ROCC and provides summary reports on the
managed across the Group. ROCC’s activities and the Group’s significant risks to the CET and
Each business unit and corporate function must periodically review the Committee on a regular basis. His direct reporting line to the
the significant risks facing their businesses. This review should Committee provides a mechanism for bypassing the executive
include identifying operational risks, legal compliance risks and risks management should the need ever arise.
to the achievement of strategic goals and objectives. The review
must occur at least annually and should be embedded within, and
aligned with, the annual planning process to ensure that significant
risks are identified with changes in management direction and the
external environment.

73
Assurance Assurance reporting

In 2009, an Assurance Programme was implemented to further Assurance reporting to the Committee follows a structured
enhance governance and provide an independent assessment programme integrating reporting from business units, Assurance
of governance, risk management and control processes for the and Internal Audit.
organisation. Within GSK this comprises four main elements:
Business units and corporate functions are required to present
Internal Audit reports annually to the ROCC and the Committee that detail their
GSK’s Internal Audit group has responsibility for independently risk management and compliance approach, providing a balanced
assessing the adequacy and effectiveness of the management of assessment of the status of internal controls over key risks, and
significant risk areas and reporting outcomes to the Committee highlighting any significant compliance issues. Managers must
in line with an agreed Assurance Plan. The internal audit group is oversee risks that are considered important for their respective
comprised of four principal teams focused in the following areas: business units, including those risks that are designated as significant
to the Group. Information regarding the controls in place to manage
s #OMMERCIALAND&INANCIAL these risks is provided to assure the Committee that these risks are
s )NFORMATION4ECHNOLOGY adequately managed within the internal control framework.
s -ANUFACTURINGINCLUDING%NVIRONMENTAL(EALTH3AFETYAND In addition, significant compliance issues and internal audit results are
escalated to the ROCC and the Committee at the earliest opportunity.

Sustainability)
s 2ESEARCHAND$EVELOPMENT Risk management
The Group’s risk management programme extends beyond legal
All internal audit activity is conducted by a single organisation
and regulatory issues and considers the Group’s overall strategy and
under the leadership of the Head of Audit & Assurance. The Head
changes in the external environment. Furthermore, risk management
of Audit & Assurance has a dual reporting line into the Senior Vice
principles are embedded within management practices and are part
President, Governance, Ethics and Assurance and the Committee
of the business strategy and objectives setting process.
Chairman. The global audit function allows for more holistic
assurance, consistency in approach, and independence in reporting. For details of risks affecting the Group, see ‘Risk factors’ on pages 53
This has helped eliminate overlaps, gaps and the potential for over/ to 57 and Note 44 to the financial statements, ‘Legal proceedings’.
under auditing.
Effectiveness of controls
Internal Audit undertakes a continuous process of risk assessment The internal control framework has been in operation for the
that contributes to the evolution of GSK’s audit strategies and whole of the year under review and continues to operate up to the
compilation and delivery of the audit schedule. This approach date of approval of this report. The system of internal controls is
allows Audit & Assurance to respond expeditiously to changes in designed to manage rather than eliminate the risk of not achieving

the business and risk environment and ensure that audit strategies business objectives, and can only provide reasonable and not
are fit-for-purpose. absolute assurance against material misstatement or loss.
When issues or control deficiencies are identified during The Committee receives reports on areas of significant risk to the
audit engagements, Internal Audit recommends processes for Group and on related internal controls. Following consideration
improvement. GSK managers develop corrective action plans to of these reports and those received via the Assurance framework,
address the causes of non-compliance and gaps in internal controls. the Committee reports annually to the Board on the effectiveness
Internal Audit tracks these plans to completion and reports results of controls.
to executive management and the Committee. Internal audit results
are also compiled and reported to the ROCC and the Committee as There are areas of the Group’s business where it is necessary to
detailed in the Assurance reporting section below. take risks to achieve a satisfactory return for shareholders, such
as investment in R&D and in acquiring new products or businesses.
To supplement the audit programme, Strategic Risk Evaluations In these cases, it is the Group’s objective to apply its expertise in
(SREs) are performed on significant issues facing GSK and are the prudent management rather than elimination of risk. The
conducted by our assurance teams in partnership with the business. Directors’ review relates to the company and its subsidiaries and
The approach is designed to evaluate risk areas and enable the does not extend to material associated undertakings, joint
development and implementation of appropriate mitigation plans. ventures or other investments.
During 2010 two new SREs were performed covering the areas
of change management and evaluation of risks associated with The Board, through the Committee, has reviewed the assessment
existing and proposed sales force incentive schemes. In addition, of risks and the internal control framework that operates in GSK
Audit & Assurance provided implementation support for the and has considered the effectiveness of the system of internal
2009 SREs which included acquisitions - due diligence and use of control in operation in the Group for the year covered by this
pseudoephedrine in GSK products. report and up to the date of its approval by the Board. The
process followed by the Board in reviewing the system of internal
controls accords with the guidance on internal control issued by
the Turnbull Committee.

74
Committee reports
Attendance at
Board Committees report regularly to the Board on the performance full meetings
of the activities they have been assigned. Members Committee member since during 2010
Audit & Risk Committee Report Mr Tom de Swaan 1st January 2006 6/6
(Chairman from
1st September 2006)
Professor Sir Roy 20th May 2009 6/6
Anderson
Sir Deryck Maughan 21st January 2005 5/6
Dr Daniel Podolsky 1st January 2007 6/6
Sir Robert Wilson 12th December 2003 6/6
Dear Shareholder The structure of the Committee’s meetings was changed during
During 2010, the Committee has focused on a number of 2009. Meetings have been split into two parts. Part one deals
with the more fundamental aspects of internal financial control
activities associated with and beyond its core financial internal

control responsibilities. and considers standing items, such as receiving reports from the
external auditors and Audit & Assurance. The entire Board is
The implementation of the new Assurance model at the end invited to attend part two of the meetings which usually considers
of 2009 involved the consolidation of each of the audit groups developments in the external risk environment, receives legal
into a new Audit & Assurance function which has enabled updates, new business unit and corporate function reports and
reporting to the Committee to be streamlined and helped to reports on the outcome of Strategic Review Evaluations and other
ensure that business unit risks and internal audit activity can topical issues.
be fully aligned.
In addition to the six scheduled meetings, the Committee also met
To reflect the Group’s strategy to expand further into the on a quorate basis on five occasions.
Emerging Markets, an Eastern hemisphere audit hub has
been established as a focus for audit activity in the Asia Other attendees at Committee meetings include:
Pacific region. s#%/
In response to the new UK Bribery Act a dedicated Anti- s#&/
Bribery and Compliance (ABAC) team has been established, s#HAIRMAN
which is part of Audit & Assurance. Further details of s'ENERAL#OUNSEL
GSK’s ABAC programme can be found on the Reports and
publications section of the company’s website. s(EADOF!UDIT!SSURANCE
s#OMPANY3ECRETARY
At the end of 2010, work commenced to assist the Board
further in reviewing, and the CET in understanding, the nature s#HAIRMAN2ESEARCH$EVELOPMENT
and extent of the risks GSK is taking in order to achieve its s#HIEF-EDICAL/FlCER
strategic objectives. This work will be ongoing as the FRC’s s(EADOF'OVERNANCE%THICSAND!SSURANCE
review of the Turnbull Guidance continues. I will report further s%XTERNAL!UDITORS
as this work progresses.
The Committee’s main responsibilities include:
I have continued to visit more of the Group’s operations to
help make the Committee more accessible to employees and s2
EVIEWINGTHECORPORATEACCOUNTINGANDlNANCIALREPORTING
senior management; to discuss the issues brought to the process
Committee by management; and meet more of the network s-ONITORINGTHEINTEGRITYOFTHElNANCIALSTATEMENTS
of Compliance Officers, on whom the Group relies, to oversee s% VALUATINGTHESYSTEMOFINTERNALCONTROLANDIDENTIFYINGAND
and drive compliance within GSK. managing risks, including in relation to the financial reporting
The Committee also continues to examine how to further process and the preparation of consolidated accounts
improve our approach to Audit & Assurance, as this is an s/
VERSEEINGACTIVITIESOFEACHOFTHE'ROUPSCOMPLIANCEANDAUDIT
ongoing initiative and further progress in this area will be functions and overseeing compliance with laws, regulations and
reported next year. ethical codes of practice.
The Committee’s oversight role requires it to address regularly the
relationships between management and the internal and external
auditors and understand and monitor the reporting relationships
Tom de Swaan and tiers of accountability between them.
Audit & Risk Committee Chairman

75
The Committee receives regular reports from members of the

CET and senior managers covering the key risk management and Scientific expertise
compliance activities of the Group, including those covering R&D, Professor Sir Roy s!WORLDRENOWNEDMEDICALSCIENTISTWITH
manufacturing, sales and marketing and corporate functions. Anderson advanced knowledge of infectious disease
Further details of the reporting framework to the Committee are epidemiology
set out on pages 71 to 73 ‘Internal control framework’.
s0ROFESSOROF)NFECTIOUS$ISEASE%PIDEMIOLOGY
In December 2009 the Committee’s terms of reference were in the Faculty of Medicine, Imperial College,
amended to reflect its role in overseeing the identification and London
management of risk under the new assurance-based audit s&ELLOWOFTHE2OYAL3OCIETY
framework referred to on page 73. At the same time
s&OREIGN!SSOCIATE-EMBEROFTHE)NSTITUTE
the name of the Audit Committee was changed to the Audit
of Medicine at the US National Academy
& Risk Committee.
of Sciences
Qualifications of Audit & Risk Committee members s&OREIGN!SSOCIATE-EMBEROFTHE&RENCH
Committee members, with the exception of Professor Sir Roy Academy of Sciences
Anderson and Dr Daniel Podolsky, bring considerable financial s&ORMER2ECTOROF)MPERIAL#OLLEGE,ONDON
and accounting experience to the Committee’s work. Members

s&ORMER#HIEF3CIENTIlC!DVISERATTHE-INISTRY
have past employment experience in either finance or accounting
of Defence in the UK
roles or comparable experience in corporate activities. Professor
Sir Roy Anderson and Dr Daniel Podolsky’s backgrounds as world
renowned medical scientists and researchers enable them to bring Dr Daniel Podolsky sA world renowned researcher with
scientific expertise to the Committee’s deliberations. advanced knowledge of underlying
mechanisms of disease and new therapies
for gastrointestinal disorders
Financial & accounting experience
s0RESIDENTOFTHE5NIVERSITYOF4EXAS
Mr Tom de Swaan s#HIEF&INANCIAL/FlCEROF!".!-2/UNTIL Southwestern Medical Center and Professor
31st December 2005 of Internal Medicine
s$ETERMINEDBYTHE"OARDTOBETHE!UDIT s-EMBER)NSTITUTEOF-EDICINEOFTHE53
Committee Financial Expert, as defined by the National Academy of Sciences
Sarbanes Oxley Act of 2002 (Sarbanes-Oxley)
s&ORMER-ALLINCKRODT0ROFESSOROF-EDICINE
s.ON %XECUTIVE$IRECTOROF+0-'S0UBLIC Harvard Medical School
Interest Committee

s&ORMER#HIEF!CADEMIC/FlCER0ARTNERS
Healthcare
Sir Deryck Maughan s!0ARTNEROF+OHLBERG+RAVIS2OBERTS#O
(KKR) and Chairman of KKR Japan
s&ORMER#HAIRMAN#%/OF#ITIGROUP
International and Vice Chairman of
Citigroup Inc.
s&ORMER#HAIRMANAND#O #HIEF%XECUTIVE
Officer of Salomon Smith Barney
s&ORMER#HAIRMANAND#HIEF%XECUTIVE
Officer of Salomon Brothers Inc.
Sir Robert Wilson s%CONOMISTANDFORMER.ON %XECUTIVE

Chairman of The Economist Group
s#HAIRMANOF"''ROUPPLC
s2ETIREDFROM2IO4INTOINWHEREHEHELD
Senior Management positions culminating in
his appointment as Executive Chairman

76
In 2010, the Committee worked to a structured programme of In evaluating the effectiveness of the audit process prior to making
activities, with standing items that the Committee is required to a recommendation on the re-appointment of the external auditors,
consider at each meeting, together with other matters focused to the Committee reviews the effectiveness of their performance
coincide with key events of the annual financial reporting cycle: against criteria which it agrees, in conjunction with management,
at the beginning of each year’s audit. As part of this process, the
External auditors reported on all critical accounting Committee considers feedback on the prior year’s external audit
policies, significant judgements and gathered through a survey facilitated by the auditors’ client service
practices used by the Group, alternative review team, which is independent of the engagement team that
accounting treatments which had been undertook the audit work. The survey seeks feedback from a
discussed with management and their number of sources, including certain members of the Board who
resultant conclusion, material written were involved in the audit process and the financial management
communications with management and team at corporate and business unit level.
any restrictions on access to information Before agreeing the audit fee proposed by the external auditors
CFO reported on the financial performance of the Committee considers cost comparisons to ensure that it is fair
the company and on technical financial and appropriate for GSK. There are no contractual obligations that
and accounting matters restrict the Committee’s capacity to recommend a particular firm
as external auditors to the Group. PricewaterhouseCoopers LLP

General Counsel reported on material litigation have remained in place as auditors since the Group’s inception in
Company Secretary reported on corporate governance and December 2000. Their performance has been reviewed annually by
& Corporate on the activities undertaken by the ROCC the Committee since that time.
Compliance Officer In making its assessment, the Committee considers papers which
Heads of audit and the majority of the Heads of these groups detail the relevant UK legislative, regulatory and professional
assurance and the reported on their audit scope, annual requirements relating to external auditors and evaluates
Group’s compliance coverage, audit resources and on the reports from the external auditors on their compliance with the
and audit groups results of audits conducted throughout requirements, on the safeguards that have been established and
the year on their own internal quality control procedures. Consideration
is also given by the Committee to the need to include the risk of
Company Secretary, reported on matters that affected the the withdrawal of the external auditors from the market in its risk
as Chairman of quality and timely disclosure of financial evaluation and planning. The external auditors are required to
the Disclosure and other material information to the rotate the audit engagement partner every five years. The current
Committee Board, to the public markets and to audit partner commenced his engagement on 1st January 2008
shareholders. This enabled the Audit & and is not subject to rotation until after the audit of GSK’s financial
Risk Committee to review the clarity and statements for 2012 has been concluded.
completeness of the disclosures in the
published annual financial statements, The Sarbanes-Oxley Act of 2002 prohibits the engagement of the
interim reports, quarterly and preliminary external auditors for the provision of certain services such as legal,
results announcements and other formal actuarial, internal audit outsourcing, financial information systems
announcements relating to financial design. Where the external auditors are permitted to provide non-
performance prior to approval by audit services, the Committee ensures that auditor objectivity and
the Board. independence are safeguarded by a policy requiring pre-approval by
the Committee for such services. These services may include audit,
The Committee, management, internal auditors and the full audit-related, tax and other services. Pre-approval is detailed as to
Board work together to ensure the quality of the company’s the particular service or categories of services, and is subject to a
corporate accounting and financial reporting. The Committee specific budget.
serves as the primary link between the Board and the external and There are guidelines which set out the Group’s policy on engaging
internal auditors. This facilitates the necessary independence from the external auditors to provide non-audit services, which include
management and encourages the external and internal auditors to ascertaining that: the skills and experience of the external auditors
communicate freely and regularly with the Committee. In 2010, make them a suitable supplier of the non-audit services; adequate
the Committee met both collectively and separately with the safeguards are in place so that the objectivity and independence of
external auditors and the Head of Audit & Assurance, and the the Group audit are not threatened or compromised; and the fee
Corporate Compliance Officer without members of management levels relative to the annual audit fee are within the limits set by
being present. the Committee.
External auditors’ appointment and fees The external auditors and management report regularly to the
The Committee has primary responsibility for making a Committee regarding the extent of services provided in accordance
recommendation to shareholders on the appointment, re- with this pre-approval and the fees for the services performed. The
appointment and removal of the external auditors by annually Committee may also pre-approve additional services on a case-by-
assessing the qualifications, expertise, resources and independence case basis. Expenditure on audit and non-audit services is set out in
of the external auditors and the effectiveness of the audit process. Note 9 to the financial statements, ‘Operating profit’.

77
Code of Conduct The succession process for the CFO focused on the need both for

The company also has a number of well-established policies, GSK to operate with creativity and continued financial discipline
including a Code of Conduct, which is available on its website, and and also to identify a candidate who would be able to bring
a help-line facility for the reporting and investigation of unlawful experience and capability to support our strategy to grow and
conduct. No waivers to the Code were made in 2010. diversify GSK’s business through organic means and bolt-on
acquisitions. The successful candidate would also be responsible for
Nominations Committee Report delivering further cost savings as part of our global restructuring
programme and implementing additional measures to simplify our
operational model. After considering potential external and internal
candidates, the Committee was pleased to recommend Simon
Dingemans to the Board, as the company’s CFO Designate.
Simon Dingemans was a Managing Director and Partner at
Goldman Sachs’ European M&A business and previously head
of UK Investment Banking. During his 25 years in investment
banking he built up relationships and offered strategic advice across
Sir Christopher Gent multiple industry sectors, including pharmaceuticals and consumer
Nominations Committee Chairman

healthcare. He had worked closely with GSK for many years and
Attendance at had helped establish ViiV Healthcare a new world-leading, specialist
full meetings HIV company.
Members Committee member since during 2010
The Board approved and announced the appointment of Simon
Sir Christopher Gent 9th December 2004 3/3 Dingemans in September 2010 and he then joined GSK in
(Chairman from January 2011.
1st January 2005)
The Committee also recommended the appointment of Dr Patrick
Larry Culp 28th March 2008 2/3
Vallance to the CET and as SVP, Drug Discovery and Medicines
Sir Crispin Davis 9th July 2009 3/3 Development with effect from 1st July 2010. He joined GSK in May
Sir Deryck Maughan 9th July 2009 2/3 2006 as Head of Drug Discovery. He has since transformed GSK’s
discovery engine to focus on therapy areas that are underpinned
Sir Robert Wilson 28th March 2008 3/3
by the most promising and mature science, and which offer fresh
In addition to the three scheduled meetings, the Committee also insights into diseases. In his new role, he assumed responsibility for
met on a quorate basis on two occasions. Medicines Development and will be responsible for ensuring that
GSK maintains a flow of potential new medicines through the R&D

Other attendees at Committee meetings: pipeline from early discovery through to late stage development.
s#%/ When recruiting Non-Executive Directors, the Committee considers
s(EADOF(UMAN2ESOURCES the particular skills, knowledge, independence, diversity and
s#OMPANY3ECRETARY experience that would benefit the Board most significantly for
each appointment. Broad selection criteria are used which focus on
sWHERERELEVANTAPPROPRIATEEXTERNALADVISERS
achieving a balance between the representation of European, UK,
The Nominations Committee’s (the Committee) main responsibilities US and Emerging Markets, and having individuals with CEO level
include proposing the appointment of Board and Committee experience and skills developed in various sectors and specialities.
members.
During 2010, particular focus continued to be placed upon
During 2010, the Committee’s main focus was on the succession recruiting a replacement for Dr Ronaldo Schmitz who retired from
process for the CFO and the search for new Non-Executive Directors the Board at the AGM in May 2009. The Committee has placed
to refresh the Board. an emphasis on candidates who are current or recently retired
CEOs, CFOs, Audit partners or who have other significant financial
When appointing new Executive Directors or CET members, the expertise and preferably an individual who brings increased diversity
Committee considers the skills, knowledge and experience required
to the Board’s composition and deliberations. Professional search

for the particular executive position. The Committee will consider agencies have been engaged who specialise in the recruitment of
potential external and internal candidates before recommending high calibre Non-Executive Directors. Dossiers of potential Non-
to the Board to approve the new appointment. All new Directors Executive appointees have been considered by the Committee and
offer themselves for election at the company’s next AGM. Their shortlisted for interview on merit and against objective criteria, after
appointments are announced publicly. considering their relevant qualifications. Positive progress has been
made on the recruitment of new Non-Executive Directors to refresh
the Board.

78
Remuneration Report GSK’s other CR Principles are discussed at least once every two
The Remuneration Report can be found on pages 81 to 101. years. The Committee also reviews and approves the Corporate
Responsibility Report.
Corporate Responsibility Committee Report
Work of the Committee during 2010
CR Principles Committee’s area of focus during 2010
Access to medicines Access to and pricing of

medicines in middle income and
least developed countries.
Standards of ethical conduct Embedding ethical values in the
organisation.
Research and innovation Policy on use of animals in
Sir Christopher Gent research and development.
Corporate Responsibility Committee Chairman Research integrity and
transparency.
Attendance at
Governance of research
full meetings
Members Committee member since during 2010 conducted by external suppliers
and collaborators.
Sir Christopher Gent 9th December 2004 4/4 R&D on treatments for rare
(Chairman from conditions and for diseases of the
1st January 2005) developing world.
Dr Stephanie Burns 6th December 2007 3/4 The potential of stem cell science
James Murdoch 20th May 2009 4/4 for regenerative medicines.
Employment practices Diversity and inclusion.
Dr Daniel Podolsky 1st July 2006 4/4
Leading and developing
Other attendees at Committee meetings: employees.
Employee relations including
s#%/
consultation arrangements.
s'ENERAL#OUNSEL
Realignment of the pay for
s(EADOF'OVERNANCE%THICSAND!SSURANCE
performance strategy.
s(EADOF'LOBAL#OMMUNICATIONS
Management of health and
s(EADOF#ORPORATE2ESPONSIBILITY
safety risks in manufacturing.
s#OMPANY3ECRETARY
s)NDEPENDENT%XTERNAL#ORPORATE2ESPONSIBILITY!DVISER Community investment Community partnerships and
investment.
Independent External Corporate Responsibility Adviser Humanitarian donations.
To augment GSK’s engagement with stakeholder opinion, in Caring for the environment Environmental sustainability
March 2009, Ms Sophia Tickell was appointed as an independent strategy.
external adviser to the Corporate Responsibility Committee (the Management of environment
Committee). Sophia Tickell is the co-founder and Director of risks in manufacturing.
Meteos, from which she directs the Pharma Futures Series, which Products and customers Disclosure of payments to
aims to align better societal and shareholder value. She also sits healthcare professionals.
on the Expert Review Committee of the Access to Medicines
Foundation and is a member of the European Healthcare Corporate responsibility is integrated into the management of
Innovation Leadership Network. GSK’s business. Throughout this Annual Report you will read of
Sophia Tickell attends meetings of the Committee and provides advances to ensure that GSK works as efficiently and effectively
independent advice and guidance on corporate and social as possible whilst ensuring that we always act responsibly.
responsibility matters to both the Chairman and CEO. For those interested in more detail we publish a comprehensive
Main responsibilities of the Committee Corporate Responsibility Report which is available on the
The main responsibilities of the Committee are set out on page company’s website.
67. The Committee has a rolling agenda and receives reports from
members of the CET and senior managers to ensure that progress
on meeting GSK’s Corporate Responsibility Principles is reviewed.
The Committee annually reviews progress on the following five
Corporate Responsibility (CR) Principles:
sACCESSTOMEDICINES
sSTANDARDSOFETHICALCONDUCT
sRESEARCHANDINNOVATION
sEMPLOYMENTPRACTICESAND
sCOMMUNITYINVESTMENT

79
US law and regulation Section 302: Corporate responsibility for financial reports

A number of provisions of US law and regulation apply to GSK Sarbanes-Oxley also introduced a requirement for the CEO and the
because the company’s shares are quoted on the NYSE in the form CFO to complete formal certifications, confirming that:
of ADS.
s T HEYHAVEEACHREVIEWEDTHE!NNUAL2EPORTAND&ORM &
NYSE rules
s B
ASEDONTHEIRKNOWLEDGEITCONTAINSNOMATERIALMISSTATEMENTS
In general, the NYSE rules permit the company to follow UK or omissions
corporate governance practices instead of those applied in the USA,
provided that the company explains any significant variations. This s BASEDONTHEIRKNOWLEDGETHElNANCIALSTATEMENTSANDOTHER
explanation is contained in the company’s Form 20-F filing, which financial information fairly present, in all material respects, the
can be accessed from the Securities and Exchange Commission’s financial condition, results of operations and cash flows as of the
(SEC) EDGAR database or via the company’s website. NYSE rules dates, and for the periods, presented in the Annual Report and
that came into effect in 2005 require the company to file annual Form 20-F
and interim written affirmations concerning the Audit & Risk
s THEYARERESPONSIBLEFORESTABLISHINGANDMAINTAININGDISCLOSURE
Committee and the company’s statement on significant differences
controls and procedures that ensure that material information is
in corporate governance.
made known to them, and have evaluated the effectiveness of

Sarbanes-Oxley Act of 2002 these controls and procedures as at the year-end, the results of
Following a number of corporate and accounting scandals in the such evaluation being contained in the Annual Report and
USA, Congress passed the Sarbanes-Oxley Act of 2002. Sarbanes- Form 20-F
Oxley is a wide ranging piece of legislation concerned largely with s THEYARERESPONSIBLEFORESTABLISHINGANDMAINTAININGINTERNAL
financial reporting and corporate governance. control over financial reporting that provides reasonable
As recommended by the SEC, GSK has established a Disclosure assurance regarding the reliability of financial reporting and
Committee. The Committee reports to the CEO, the CFO and to the preparation of financial statements for external purposes in
the Audit & Risk Committee. It is chaired by the Company Secretary accordance with generally accepted accounting principles
and the members consist of senior managers from finance, legal, s THEYHAVEDISCLOSEDINTHE!NNUAL2EPORTAND&ORM &ANY
compliance, corporate communications and investor relations. changes in internal controls over financial reporting during the
External legal counsel, the external auditors and internal experts period covered by the Annual Report and Form 20-F that have
are invited to attend its meetings periodically. It has responsibility materially affected, or are reasonably likely to affect materially,
for considering the materiality of information and, on a timely the company’s internal control over financial reporting
basis, determining the disclosure of that information. It has s THEYHAVEDISCLOSEDBASEDONTHEIRMOSTRECENTEVALUATIONOF
responsibility for the timely filing of reports with the SEC and the

internal control over financial reporting, to the external auditors
formal review of the Annual Report and Form 20-F. In 2010, the and the Audit & Risk Committee, all significant deficiencies
Committee met 6 times. and material weaknesses in the design or operation of internal
Sarbanes-Oxley requires that the Annual Report contains a controls over financial reporting which are reasonably likely
statement as to whether a member of the company’s Audit & Risk to affect adversely the company’s ability to record, process,
Committee is an Audit Committee Financial Expert as defined by summarise and report financial information, and any fraud
Sarbanes-Oxley. For a summary regarding the Board’s judgement (regardless of materiality) involving persons that have a significant
on this matter, refer to page 75. Additional disclosure requirements role in the company’s internal control over financial reporting.
arise under section 302 and section 404 of Sarbanes-Oxley in The Group has carried out an evaluation under the supervision
respect of disclosure controls and procedures and internal control and with the participation of the Group’s management, including
over financial reporting. the CEO and CFO, of the effectiveness of the design and
operation of the Group’s disclosure controls and procedures as
at 31st December 2010.
There are inherent limitations to the effectiveness of any system
of disclosure controls and procedures, including the possibility of
human error and the circumvention or overriding of the controls

and procedures. Accordingly, even effective disclosure controls and
procedures can only provide reasonable assurance of achieving
their control objectives.
The CEO and CFO expect to complete these certifications
and report their conclusions on the effectiveness of disclosure
controls and procedures on 4th March 2011, following which
the certificates will be filed with the SEC as part of the Group’s
Form 20-F.

80
Section 404: Management’s annual report on internal

control over financial reporting
In accordance with the requirements of section 404 of Sarbanes-
Oxley, the following report is provided by management in respect
of the Company’s internal control over financial reporting (as
defined in Rules 13a-15(f) and 15d-15(f) under the US Securities
Exchange Act of 1934):
s -ANAGEMENTISRESPONSIBLEFORESTABLISHINGANDMAINTAINING
adequate internal control over financial reporting for the Group.
Internal control over financial reporting is designed to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with IFRS
s -ANAGEMENTCONDUCTEDANEVALUATIONOFTHEEFFECTIVENESS
of internal control over financial reporting based on the
framework in Internal Control – Integrated Framework issued
by the Committee of Sponsoring Organisations of the Treadway

Commission
s 4HEREHAVEBEENNOCHANGESINTHE'ROUPSINTERNALCONTROLOVER
financial reporting during 2010 that have materially affected,
or are reasonably likely to affect materially, the Group’s internal
control over financial reporting
s -ANAGEMENTHASASSESSEDTHEEFFECTIVENESSOFINTERNALCONTROL
over financial reporting, as at 31st December 2010 and its
conclusion will be filed as part of the Group’s Form 20-F
s 0RICEWATERHOUSE#OOPERS,,0WHICHHASAUDITEDTHECONSOLIDATED
financial statements of the Group for the year ended 31st
December 2010, has also assessed the effectiveness of the
Group’s internal control over financial reporting under Auditing
Standard No. 5 of the Public Company Accounting Oversight
Board (United States). Their audit report will be filed with the
Group’s Form 20-F

81
Remuneration Report

Sir Crispin Davis
Remuneration Committee Chairman
Dear Shareholder
On behalf of the Board, I am pleased to present our Remuneration Report for 2010, for which we will be seeking your approval at our AGM in May.
Over the last few years, the Remuneration Committee (the Committee) has implemented a number of changes, including more tailored
benchmarking versus the market, and simplifying and aligning remuneration across the Corporate Executive Team. Throughout we have consulted
with shareholders and have been encouraged by the level of support.

As previewed last year, in 2010 our priority was to align more closely Executive remuneration with GSK’s strategic priorities, and to enhance our
governance practices. This report describes how we are progressing against these objectives.
Strategic alignment of long-term incentives
The Board has carried out a thorough review of GSK’s key strategic priorities, which are described on page 7 of the Annual Report. The
Board firmly believes achievement against these priorities will deliver strong long-term financial performance and shareholder value creation
on a sustainable basis.
Accordingly in 2010 we have moved to align long-term performance incentives more closely with the Group’s key strategic priorities. This
will help ensure senior management are fully focused on the right priorities, with incentives to deliver against them.
The long-term incentive awards we made in February 2011 were therefore based on four equally weighted performance measures which
directly link to the Group’s key strategic priorities and the overarching goal to deliver value to shareholders:
Key Strategic Priorities Long-Term Incentive Performance Measure

s'ROWADIVERSIlEDGLOBALBUSINESS ĺ s"USINESSDIVERSIlCATIONPERFORMANCE
s$ELIVERMOREPRODUCTSOFVALUE ĺ s2$NEWPRODUCTPERFORMANCE

s3IMPLIFYTHEOPERATINGMODEL ĺ s!DJUSTEDFREECASHmOW
s$ELIVERVALUETOSHAREHOLDERS ĺ s2ELATIVEtotal shareholder return (TSR)
The targets set out by the Committee are challenging and will require significant stretch performance. The targets for adjusted fREECASHmOW
and relative TSR are set out on page 88. However, given the very close linkage of the performance measures for business diversification and
2$ new product performance to our strategy, these targets are commercially very sensitive and will not be published at date of grant. We
will, though, update you regularly on the progress achieved during the performance period. The targets and outcomes for the awards will be
disclosed in full at the end of the performance period.
7EBELIEVETHECOMBINATIONOFTHESEFOURMEASURESAPPLIEDTOOUR0ERFORMANCE3HARE0LANAND$EFERRED!NNUAL"ONUS0LANWILLENSURETHAT
we have a balanced framework of targets which focus on each of our strategic objectives.
4HISYEARWASTHElRSTYEARTHATALL%XECUTIVESWEREELIGIBLETOPARTICIPATEINOUR$EFERRED!NNUAL"ONUS0LANWHICHWASINTRODUCEDIN
to encourage long-term shareholding and to drive shareholder returns. I am very pleased to report that take-up has been very positive.
Governance
Following on from the progress we reported in last year’s Remuneration Report, we are now pleased to report that all our continuing Executive
$IRECTORSCONTRACTSHAVESEVERANCETERMSOFONEYEARSBASESALARYONLY3IMILARLYTO!NDREW7ITTY$R-ONCEF3LAOUI#HAIRMAN2$HAS

voluntarily agreed to remove the contractual entitlement to bonus from his severance terms. The severance terms in the contract for Simon
$INGEMANSOURNEW#&/AREALSOBASEDONONEYEARSBASESALARY
)NORDERTOEFFECTIVELYMANAGERISKWEWILLCONTINUETOOPERATETHE@CLAWBACKMECHANISMINTRODUCEDINFORANNUALBONUSESANDLONG TERM
incentive awards should problems arise in the years after an award has been made. We have adapted UK pension arrangements in the light of new
pension tax legislation to continue to meet our long-standing commitments. However, the company will not offset any additional individual tax costs.
%ACHYEARWEREVIEWTHEMARKETCOMPETITIVENESSOF%XECUTIVE$IRECTORSBASESALARIESANDPACKAGESTAKINGINTOACCOUNTTHEPREVAILINGECONOMIC
conditions and the positioning and relativities of pay across the broader GSK workforce. As a result of that review, to ensure appropriate market
COMPETITIVENESSINTHECONTEXTOF$R-ONCEF3LAOUISENHANCEDROLEINCLUDINGTHETRANSITIONOFRESPONSIBILITYFOR"IOLOGICALSHEWILLRECEIVEAN
INCREASETOHISBASESALARY!NDREW7ITTYAND3IMON$INGEMANSWILLNOTRECEIVEANYINCREASEINBASESALARY
We believe that the changes we have made in recent years support the long-term success of the business and as such are in the best interests
of shareholders.
Sir Crispin Davis
1st March 2011

82
Remuneration Report
The Remuneration Committee In addition, Allen Powley (Senior Vice President, Corporate
Role of the Committee Compensation) and Judy Lynch (Senior Vice President, Benefits)
were also invited to some meetings as required.
The role of the Committee is to set the company’s remuneration
POLICYFOR%XECUTIVE$IRECTORSAND#ORPORATE%XECUTIVE4EAM#%4 With the exception of Victoria Whyte (Company Secretary and
members (together the Executives), so that GSK is able to recruit, Secretary to the Committee), no employees of the company are
retain and motivate its Executives. The policy is regularly reviewed involved in the conduct of Committee meetings.
to ensure that it is consistent with the company’s scale and scope
4HE#OMMITTEEHASACCESSTOEXTERNALADVICEASREQUIRED$ELOITTE
of operations, supports the business strategy and growth plans
LLP has been appointed by the Committee to provide it with
and helps drive the creation of shareholder value.
INDEPENDENTADVICEONEXECUTIVEREMUNERATION$URINGTHEYEAR
In setting remuneration policy and levels for the most senior $ELOITTE,,0PROVIDEDINDEPENDENTCOMMENTARYONMATTERSUNDER
executives, the Committee gives consideration to remuneration consideration by the Committee, and provided updates on best
policy and levels for the wider employee population of the Group, practice, legislative requirements and market practice.
as well as ensuring that remuneration is consistent with industry
$ELOITTE,,0ALSOPROVIDEDOTHERCONSULTINGTAXANDASSURANCE
and broader market norms.
services to GSK during the year, but did not provide advice on
Terms of reference executive remuneration matters other than for the Committee.
The Committee’s full terms of reference are available on the Towers Watson and Pay Governance provided additional market
company’s website. The terms of reference, which are reviewed data to the Committee.
annually, were revised in January 2011 in the light of best practice
and corporate governance developments. Commitment to shareholders
The Committee engages in regular dialogue with shareholders and
Governance
holds annual meetings with GSK’s largest investors to discuss and
The Board considers all of the members of the Committee to be take feedback on its remuneration policy, governance matters and
INDEPENDENT.ON %XECUTIVE$IRECTORSINACCORDANCEWITHTHE any key developments during the year. In particular, the Committee
Combined Code, with the exception of Sir Christopher Gent, discusses any significant changes to the policy or the measures
Chairman of the company, who was independent on appointment. used to assess performance.
The Committee met six times during 2010, with each member The annual meetings were held in November 2010, at which
attending as follows: 3IR#RISPIN$AVIS#OMMITTEE#HAIRMANSHAREDPROGRESSON
Attendance
at full
remuneration matters in the last 12 months and proposals for 2011
meetings as outlined on page 84. Sir Christopher Gent, Chairman, updated
Committee member during attendees on Corporate Governance developments.
Members since 2010
3IR#RISPIN$AVIS 1st July 2003 6/6

#HAIRMANFROMTH-AY
Sir Robert Wilson 1st January 2004 3/3
(to 25th March 2010)
Larry Culp* 1st January 2004 4/6
Sir Christopher Gent 1st January 2007 6/6
James Murdoch ST/CTOBER 6/6
Tom de Swaan** TH-AY 6/6
* Larry Culp was unable to attend two meetings for personal reasons. He
reviewed the papers and provided his views to the Committee Chairman
in advance of these meetings.

4OMDE3WAANISALSOTHE#HAIRMANOFTHE!UDIT2ISK#OMMITTEE
In addition to the six scheduled meetings, the Committee also

met on a quorate basis on three occasions, principally to approve
the formal grant and vesting of long-term incentive (LTI) awards in
accordance with GSK’s remuneration policy.
Andrew Witty (CEO) and Claire Thomas (Senior Vice President,
Human Resources) were invited to attend part of some meetings of
the Committee as required. No Executives or Committee attendees
are involved in any decision or are present at any discussion as to
their own remuneration.

83
Remuneration Report
A diary of the Committee’s key activities and matters addressed during 2010 is set out below:

Month Executives’ Remuneration Annual bonus Long-term incentive plans Governance and other matters
January Approve CET 2010 Set CEO 2010 bonus Annual Committee
remuneration, including objectives evaluation results
salaries of CEO, CFO and
#HAIRMAN2$ Review bonus plan Review remuneration report
arrangements for
#HAIRMAN2$ Review 2010 remuneration
budget
Review voting policy

guidelines on remuneration
February Review and approve 3ET030CASHmOWTARGET Approve remuneration

%XECUTIVE$IRECTORS report
and #%4BONUSES Approve 2007 PSP and Share
Option Plan vesting
Grant 2010 LTI awards to

%XECUTIVE$IRECTORS#%4AND
below
Approve deferred annual bonus

award elections
March Scope review of strategic Review voting policy

alignment of LTI performance guidelines on remuneration
measures

July Agree CFO retirement and Review progress Review of strategic alignment Review of general market
appointment packages against 2010 bonus of LTI performance measures developments (including
objectives pensions)
Grant interim 2010 LTI awards
October Agree CET 2011 salary Review CET 2010 Review of strategic alignment Annual Committee
review process bonus process of LTI performance measures assessment
November Annual meetings with Annual meetings with investors

investors
$ECEMBER Consider feedback from Consider new LTI performance Review tax change
annual meetings with targets framework implications for pension
investors on remuneration arrangements
policy
Review remuneration
benchmarking and
competitiveness below
CET level

84
Remuneration Report
Remuneration policy for 2011

The table below outlines the key elements of remuneration for 2011 for GSK’s Executives.
4HEREMUNERATIONSTRUCTUREOFALL#%4MEMBERSINCLUDING$R-ONCEF3LAOUIAND3IMON$INGEMANS#&/$ESIGNATE HASNOWBEEN
harmonised with that of Andrew Witty. As a result of this, since 2010, share options are normally no longer granted to any of the
CET members. Instead, CET members receive additional performance share awards and are also eligible to participate in GSK’s
$EFERRED!NNUAL"ONUS0LAN
To further improve the alignment of our Executive remuneration arrangements with GSK’s key strategic priorities and to incentivise
management to deliver long-term financial performance and shareholder value creation on a sustainable basis, two new business-
specific performance measures were introduced for the long-term incentive awards made to Executives in February 2011. This is
to ensure that there is a balanced framework of measures focusing on all of GSK’s strategic objectives. Further information on the
long-term incentive performance measures is outlined on pages 87 tO.
Fixed pay
Salary s3ALARYLEVELSREVIEWEDANNUALLYANDINmUENCEDBY%XECUTIVESROLEANDEXPERIENCE"ENCHMARKEDAGAINST
relevant comparator group(s)
Pension s&OR5+%XECUTIVESDElNEDCONTRIBUTIONPLANANDLEGACYlNALSALARYPLANSCLOSEDTONEWENTRANTSSINCE

2001). UK Executives participating in defined contribution plan benefit from company contributions of
20% of base salary, plus matched contribution of 5% of base salary
s&OLLOWINGCHANGESTO5+PENSIONTAXREGIMECHANGESMADETOARRANGEMENTSFOR5+%XECUTIVESTO
continue to meet long-standing commitments within this new regime – see page
s&OR53%XECUTIVES'3+OPERATESA53#ASH"ALANCE0LAN530LAN 53%XECUTIVESPARTICIPATINGIN53
Plan benefit from contributions of up to 38% of salary
Variable pay
Annual bonus s-AXIMUMBONUSOPPORTUNITYOF s-AJORITYOFBONUSBASEDONACHIEVEMENTOFlNANCIALTARGETS'ROUP

200% of salary profit before interest and tax and business unit operating profit)
s)NDIVIDUALPERFORMANCEAGAINSTPRE DETERMINEDPERSONALOBJECTIVES
s2$ SPECIlCKEYPERFORMANCEINDICATORSFOR2$EMPLOYEES
s@#LAWBACKn#OMMITTEEREVIEWSONGOINGlNANCIALIMPACTOFANYPRIOR
year activities and Executive’s role in them and may make appropriate
ADJUSTMENTSTOINDIVIDUALBONUSAWARDSTOREmECTCIRCUMSTANCES
$EFERRED s)NDIVIDUALSMAYELECTTOdefer up to s!WARDSVESTATENDOFTHREE YEARPERFORMANCEPERIODBASEDONFOUR

Annual 50% of any bonus earned equally weighted performance measures:
Bonus Plan - Business diversification performance
s$EFERREDBONUSESMAYBEMATCHED
2$NEWPRODUCTPERFORMANCE
up to one-for-one subject to
!DJUSTEDFREECASHmOW
performance
- Relative TSR
Performance For 2011, performance share awards s2ELATIVE432ISCALCULATEDONTWELVEMONTHAVERAGINGPERIODUSING

Share are as follows: comparator group comprising 10 pharmaceutical companies. 30% vests
Plan (PSP) % of at median, with 100% vesting for upper quartile performance
salary
s&ORbusiness diverSIlCATION2$NEWproduct measures and adjusted
s#%/ 500
FREECASHmOW 25% vests at threshold, rising to 100% for stretching
s#HAIRMAN2$ 500
performance exceeding set threshold by a specified margin
s#&/$ESIGNATE 350

85
Remuneration Report
Total remuneration benchmarking )TDECIDEDTHATTHEONLY%XECUTIVE$IRECTORTORECEIVEABASESALARY

The Committee reviews GSK’s total remuneration against INCREASETHISYEARSHOULDBE$R-ONCEF3LAOUI)NPARTICULARTHE
comparable companies on a regular basis, to ensure that Committee considered his package in the context of his enhanced
remuneration arrangements are structured appropriately to deliver role, including the transition of responsibility for Biologicals.
value for money for shareholders over the longer term and are The table immediately following sets out current base salaries and
competitive. The relevant comparator group(s) are now determined those proposed for 2011. Salary increases typically take effect from
for each individual Executive. 1st April each year.
For benchmarking purposes, total remuneration incorporates base
2010 base Effective date for 2011 base Effective date for %
salary, bonus and LTIs. When setting pay, the Committee also salary 2010 salary salary 2011 salary change
considers pension arrangements. Andrew Witty, CEO £1,000,000 1st April 2010 £1,000,000 1st April 2011 0
UK cross-industry comparator group Global pharmaceutical comparator group Julian Heslop, £525,000 1st April 2010 – – –
CFO*
AngloAmerican France Sanofi-Aventis 3IMON$INGEMANS – – £660,000 4th January 2011 –
#&/$ESIGNATE
AstraZeneca Switzerland Novartis

Barclays Roche Holdings $R-ONCEF3LAOUI 1st April 2010 $1,125,000 1st April 2011 15
#HAIRMAN2$
BG Group UK AstraZeneca

BHP Billiton USA Abbott Laboratories * Julian Heslop will retire from the Board on 31st March 2011
BP Amgen*
3IMON$INGEMANSJOINEDTHE"OARDONTH*ANUARY
British American Tobacco Bristol-Myers Squibb
$IAGEO Eli Lilly Variable pay
HSBC *OHNSON*OHNSON A significant proportion of GSK’s total remuneration package
Reckitt Benckiser Merck (approximately 75% – 85%) is variable. There is a particular
2OYAL$UTCH3HELL Pfizer emphasis on long-term share-based incentives, in order to closely
Rio Tinto align Executives’ interests with those of shareholders.
Standard Chartered The balance between the fixed (base salary) and variable (annual
Tesco bonus and LTI) elements of remuneration varies depending on
Unilever performance. The charts below show the anticipated mix between
Vodafone fixed and variable pay on an expected value basis under the
current remuneration policy, excluding pensions. The actual mix
!MGENISINCLUDEDFORBENCHMARKINGBUTSINCEHASNOTBEENINTHE
current TSR comparator group. may be higher or lower, depending on the performance of GSK
and the individual.

Base salary
Base salaries are set by reference to the relevant comparator
group at a level considered appropriate to secure and retain CEO 1
the talent needed to deliver GSK’s strategic priorities. Salary

levels are reviewed annually and are influenced by the 1 Salary
1
Executive’s role, experience and the pay environment. 2 Cash bonus
2
3 Deferred bonus including match
3 4 2
The Committee decides on an individual Executive basis whether
4 Performance shares
4
the primary pay comparator should be the global pharmaceutical
sector, the UK-based large cross-industry multinationals and/or
some other comparator group(s). 3
UK Global
Primary Comparator Group cross-industry pharmaceutical CFO Designate
1
Andrew Witty, CEO
1 Salary
1
Julian Heslop, CFO*
2 Cash bonus
2
3IMON$INGEMANS#&/$ESIGNATE
4
3
$R-ONCEF3LAOUI#HAIRMAN2$
4
2
* Julian Heslop will retire from the Board on 31st March 2011
3IMON$INGEMANSJOINEDTHE"OARDONTH*ANUARY
3
For 2011, the Committee considered the prevailing economic
CONDITIONSTHEMARKETCOMPETITIVENESSOFEACH%XECUTIVE$IRECTOR’s Chairman, R&D 1
package and the positioning and relativities of pay across the

broader GSK workforce. It agreed with Andrew Witty that his salary 1 Salary
1
would be held at 2010 levels. 2 Cash bonus
2
3 2
4
4

86
Remuneration Report
Safeguards and risk management

The Committee would not want to reward failure and views it as Group profit
before interest
important that incentive payouts are only made in circumstances
& tax
WHENPERFORMANCEOUTCOMEREmECTSGENUINEACHIEVEMENTAGAINST
the original targets. Stretching
financial
In addition, given the nature of GSK’s business and the targets
increased focus on risk within the Group, the Committee has Annual
taken a number of steps to ensure that the design of incentive Bonus Business unit
operating profit
arrangements underpins effective risk management. The Chairman
OFTHE!UDIT2ISK#OMMITTEEISAMEMBEROFTHE#OMMITTEE
ANDPROVIDESINPUTONTHE!UDIT2ISK#OMMITTEESREVIEWOFTHE
Group’s performance and oversight on any risk factors relevant to
remuneration matters considered by the Committee.
Individual objectives
Under the annual bonus, each year the Committee reviews the
ongoing financial impact of any prior year activities and the role
of individual Executives in such activities, and the Committee
For 2011, the majority of the annual bonus opportunity is based

may make appropriate adjustments to individual bonus awards on a formal review of performance against stretching financial
TOREmECTTHOSECIRCUMSTANCESTHE@CLAWBACKMECHANISM 4HE targets based on Group profit before interest and tax and business
Committee ensures that where there has been continuity of unit operating profit targets, with the remainder being based
Executive responsibility, between initiation of an adverse event and on achievements against specific individual objectives. There
its emergence as a problem, the adverse event should be taken is a significant weighting towards the financial performance
into account in assessing annual bonuses in the year the problem measures. The Committee has decided that profit should remain
is identified. Accordingly, charges for legacy legal matters were the key financial metric as one of the company’s Key Performance
excluded from the assessment of 2010 financial performance. Indicators. However, during 2011, the Committee intends to review
4HISREmECTSTHEVIEWof the Committee that current management the annual bonus plan to ensure the strategic alignment of GSK’s
was not responsible for these legal actions and that it should be short-term incentives.
supported in seeking to resolve these matters in the long term
!NNUALBONUSESARECALIBRATEDTOREmECTTHESTRETCHINGTARGETS
interests of shareholders.
which have been established to drive significant changes to GSK’s
Under the long-term incentive plans approved by shareholders BUSINESSMODEL4HEBONUSTHRESHOLDWILLBEOFTARGETWITH
INTHE#OMMITTEEMAYREDUCETHEGRANTORVESTINGLEVELS the maximum being payable for achievement of 110% of target.
if it determines that a participant has engaged in conduct which 4HEBONUSTHRESHOLDOFREmECTSTHESTRETCHINGNATUREOFTHE
is contrary to the legitimate expectations of the company for an bonus targets.
employee in the participant’s position.
Bonus targets for Andrew Witty are set by the Board in January
There are also further safeguards relating to each of the business- each year. In setting the objectives for Andrew Witty, the Board
specific performance measures under the long-term incentive focuses on the strategies that have been developed for the
plans which are outlined in detail on page . company, which are set out on page 7 of the Annual Report. For
reasons of commercial sensitivity, the specific objectives are kept
)NADDITIONFROMTHE#OMMITTEEDECIDEDTHATLONG TERM
confidential. Following the end of the financial year, the Board
incentive awards for good leavers should normally vest at the
reviews his performance generally and against the set objectives,
end of the original vesting period set at grant, rather than vesting
and the Committee then determines the bonus payable.
in the year of departure. This ensures continued alignment with
shareholders’ interests following cessation of employment. For the other Executives, Andrew Witty sets their objectives in
line with company strategy, and makes recommendations to the
Annual bonus
Committee regarding performance against those objectives at the
Annual bonus is designed to drive the achievement of GSK’s end of the year. These recommendations are then considered by
annual financial and strategic business targets and delivery the Committee when determining the level of bonuses payable.
of personal objectives.
"ONUSMEASURESFOR2$EMPLOYEESINCLUDING$R-ONCEF3LAOUI
&ORTHEON TARGETBONUSFORTHE%XECUTIVE$IRECTORSISGIVENIN are linked to the pipeline. A robust governance structure has been
the table below. ESTABLISHEDTOENSURETHATTHEBONUSPAYABLEFAIRLYREmECTS2$
On-target bonus as a % of base salary productivity and performance as well as performance against profit
Andrew Witty, CEO 125% targets. This process requires the review of progress against targets
3IMON$INGEMANS#&/$ESIGNATE 80% BYTHE2$"ONUS#OMPENSATION2EVIEW#OMMITTEEWHICH
includes Andrew Witty and the company’s two Non-Executive
$R-ONCEF3LAOUI#HAIRMAN2$ 85%
$IRECTORSWHOAREDESIGNATEDAS3CIENTIlC%XPERTS0ROFESSOR3IR
Maximum bonuses are set by reference to individual on-target 2OY!NDERSONAND$R$ANIEL0ODOLSKY4HE#OMMITTEEREVIEWED
bonus levels. There is a cap on bonus payments of 200% of the plan’s operation during the year and decided that it should
salary. This cap remains unchanged for 2011. Annual bonus is CONTINUEASTHEANNUALBONUSFOR2$4HE#OMMITTEEWILL
not pensionable. continue to keep its operation under review.

87
Remuneration Report
Long-term incentive plans The table below shows award levels in February 2011 for each

Awards are now made to Executives under the following %XECUTIVE$IRECTORINLINEWITHTHATPOLICY
long-term incentive plans, which were approved by shareholders
2011 2011 award level
ATTHE!'- award % of base salary
A $EFERRED!NNUAL"ONUS0LAN Andrew Witty, CEO 424,448 shares 500%

3IMON$INGEMANS shares 350%
(b) Performance Share Plan
#&/$ESIGNATE
From 2010, awards under the share option plan are no longer $R-ONCEF3LAOUI 147,521!$3 500%
granted to Executives. Instead, CET members receive additional #HAIRMAN2$
performance share awards and are also eligible to participate in
THE$EFERRED!NNUAL"ONUS0LAN Performance measures
Typically, awards are delivered to US resident executives in the form Following the appointment of Andrew Witty in 2008, the Board
OF!$3!WARDSAREDELIVEREDINTHEFORMOF/RDINARY3HARESTO carried out a thorough review of GSK’s key strategic priorities,
executives resident in the UK and other countries. All awards are which are described on page 7 of the Annual Report. The Board
made under plans which incorporate dilution limits consistent with firmly believes that the delivery of these objectives will transform
GSK into an organisation that can deliver long-term financial

guidelines provided by the Association of British Insurers. Current
estimated dilution from existing awards under all GSK employee performance and shareholder value creation on a sustainable
share plans made over the last 10 years are approximately 6.14% basis. Over the last few years, the focus of the Committee
OFTHECOMPANYSISSUEDSHARECAPITALATST$ECEMBER has been to improve the alignment of Executive remuneration
arrangements with these priorities to incentivise management
To provide a closer link between shareholder returns and payments to deliver these goals.
to the Executives, notional dividends are reinvested and paid out in
proportion to the shares deferred and vesting of awards. The value For awards made to Executives in February 2011, we have
of reinvested dividends is incorporated into the benchmarking of therefore introduced two new business-specific performance
award levels. MEASURESONBUSINESSDIVERSIlCATIONAND2$NEWPRODUCT
PERFORMANCE4HISISINADDITIONTOOURADJUSTEDFREECASHmOWand
Structure and performance measures relative TSR measures, and is in order to ensure that we have
a) Deferred Annual Bonus Plan a balanced framework of measures focusing on all of GSK’s
The Deferred Annual Bonus Plan encourages long-term strategic objectives, as outlined in the diagram below.
shareholding, discourages excessive risk taking and helps The awards, which will vest subject to performance at the end of
focus on GSK’s key strategic priorities. the three-year performance period beginning 1st January 2011

Starting from the 2010 bonus year, all CET members have been ANDENDINGONST$ECEMBERAREBASEDONFOUREQUALLY
eligible to participate in the plan. WEIGHTEDMEASURESBUSINESSDIVERSIlCATION2$NEWPRODUCT
ADJUSTEDFREECASHmOWANDRELATIVE432
Up to 50% of any annual bonus earned may be deferred for three
years. The company will match shares up to one-for-one depending
Strategy Remuneration
on the company’s performance against the measures outlined
below during the three-year performance period.
Key strategic LTI performance measures % of
b) Performance shares priorities: (over 3-year performance period) award
The Performance Share Plan ensures focus on the delivery of Grow a diversified
GSK’s strategic priorities and long-term shareholder returns Business diversification 25%
global business
relative to other pharmaceutical companies.
Deliver more
Under the Performance Share Plan, awards are made which vest R&D new product 25%
products of value
at the end of a three-year performance period subject to the
achievement of the company’s performance against the measures Simplify the
outlined below. Adjusted free cash flow 25%
operating model
There is an individual award limit on the maximum initial value of Deliver value
performance shares that may be granted to an individual in any Relative TSR 25%
to shareholders
one year. Other than in exceptional circumstances, the maximum
face value of performance shares that may be granted to an
individual in any one year will be six times base salary. $Etails of the performance measures, targets and the thresholds
for the 2011 long-term incentive awards are given in the following
table.

88
Remuneration Report
% of
Long-term incentive measures for 2011 awards award Vesting schedule for 2011 awards
Business diversification performance 25%

$UETOCOMMERCIALSENSITIVITYTARGETSFORBUSINESS
Incentivises growth of a global, diversified business DIVERSIlCATIONAND2$NEWPRODUCTMEASURESWILLBE
disclosed along with outcomes in the 2013 Remuneration
$ESIGNEDTOFOCUSONOURMAJORGROWTHAREAS6ACCINES Report.
Consumer Healthcare, Emerging Markets and Japan
EXCLUDING6ACCINES AND$ERMATOLOGYBUSINESSES Proportion of threshold Proportion of award
achieved available
Aggregate revenue target for four business divisions over Below threshold 0%
THREE YEARPERFORMANCEPERIODREmECTSSTRONGGROWTHAGAINST Threshold 25%
previous periods and above market growth. Maximum 100%
R&D new product performance 25%

The target for maximum performance (expressed as a
Recognises importance of R&D to future business growth percentage of the threshold) for these two measures is
shown below:
Revenue target based on New Product Sales to incentivise
Maximum expressed
BETTER2$PERFORMANCE Measure as % of threshold
New Products defined as products launched in performance Business

period and two preceding years. Therefore, for 2011-13 diversification 114%
PERFORMANCEPERIODPRODUCTSLAUNCHEDINYEARS WILL
be included in measurement. 2$NEWPRODUCT 122%
Aggregate three-year revenue target for 2011 awards for

.EW0RODUCT3ALESREmECTSGROWTHONHISTORICPERFORMANCE
Adjusted free cash flow 25% Three year

adjusted free
cash flow targets % vesting
Recognises importance of effective working capital Below threshold
and cash management Threshold 0%
£16.15 billion 25%
£16.65 billion 50%
Maximum £18.32 billion 75%
aBILLION 100%
Relative TSR 25% Proportion vesting

100%
Focuses on delivery of value to shareholders 100%
Relative TSR using a comparator group comprising 10 global 75% 80%

pharmaceutical companies.
With move to four complementary measures, relative TSR 55%

50%
now measured over three years in line with performance
period for all other performance measures.
25% 30%
4OMEASUREPERFORMANCEONASTABLEBASISANDBETTERREmECT
long-term nature of pharmaceutical industry, twelve-month
averaging period is used for relative TSR.
0%
11 10 9 8 7 6 5 4 3 2 1
TSR rank position Median performance Upper quartile
performance

89
Remuneration Report
The Board believes that the current strategic priorities are Pensions

fundamental long-term objectives. However, it recognises the Pensions provide an important tool for creating a long-term
possibility that these goals may evolve over time. Therefore the culture and loyalty.
Committee intends to review the long-term incentive performance
The Executives participate in GSK senior executive pension plans.
measures periodically to ensure that they remain appropriate.
The pension arrangements are structured in accordance with the
Inevitably measures linked directly to strategy are very sensitive. plans operated for Executives in the country in which they are
In particular, the Committee does not consider it appropriate LIKELYTORETIRE$ETAILSOFINDIVIDUALARRANGEMENTSFORTHE%XECUTIVE
TODISCLOSETHETARGETSFORBUSINESSDIVERSIlCATIONAND2$NEW $IRECTORSARESETOUTONPAGE100.
product performance at grant, as it may result in competitive harm.
New Executives to GSK will be eligible for either a defined
However, we are committed to fully disclosing the targets at the
contribution scheme or a cash balance pension plan. Existing
end of the performance period, together with details of the extent
obligations under defined benefit schemes in the UK will continue
to which the performance targets have been met. In addition, the
to be honoured.
Committee also commits to providing an update on achievement
to date against the targets during the performance period. a) UK pension arrangements
In addition to setting robust targets, the Committee has also The company currently operates a defined contribution plan,
implemented a number of safeguards to ensure that targets are and legacy final salary plans which are closed to new entrants.

met in a sustainable way and that any performance outcome Newly hired Executives in the UK will participate in the defined
REmECTSGENUINEACHIEVEMENTAGAINSTTHEORIGINALTARGETSAND contribution plan.
therefore value for shareholders. $URINGTHE5+'OVERNMENTANNOUNCEDASERIESOFCHANGESTO
5NDERTHEBUSINESSDIVERSIlCATIONAND2$NEWPRODUCTMEASURES pensions, which will initially impact the pensions of approximately
in the light of any significant event (including acquisitions and 80 people in GSK. The pension legislation will have significant
divestments), the Committee will review the target and payment negative consequences and the effectiveness of pensions will
scale and make any adjustments it considers appropriate to be much reduced. Pensions have been and continue to be an
maintain the integrity of the original targets. In addition, the important tool for creating a long-term culture and promoting
Committee reserves the right to reduce vesting levels if targets employee retention. Therefore the Committee has decided that
are achieved in a manner which undermines the overall health of existing pension promises be honoured and pensions above the
the business. new limits be delivered via GSK’s existing unfunded scheme.
The Committee will normally include the revenue from Executives participating in the defined contribution plan receive a
opportunistic events such as pandemics when assessing company contribution of 15%–20% of base salary depending on
PERFORMANCEUNDERTHEBUSINESSDIVERSIlCATIONAND2$NEW grade. They will also have the opportunity to receive up to a further
5% in matched contributions in line with the policy for all other

product measures. It is recognised that a successful response to
an event such as a pandemic can generate significant value for members of the pension plan.
shareholders. Such responses usually require supply capacity and/or The legacy final salary plans provide for up to two-thirds of final
other resource to be diverted from other products. However, before salary at age 60. For employees subject to the cap, benefits
including that revenue, the Committee must be satisfied that the in excess of the cap are currently provided through unfunded
decision to pursue the opportunistic revenue was clearly in the arrangements. Under the legacy final salary plans, actuarial
best interests of shareholder value creation and that otherwise the reduction factors apply where a participant leaves employment of
performance under the relevant measure was sufficiently positive. his/her own accord before the age of 60.
Ultimately, the Committee will expect management to have acted
in a way which enhanced shareholder value. If employment is terminated by the company other than for cause
then, in the same way as for all other members of the legacy final
Under the business diversification measure, where above market salary plans, the reduction factors will not apply.
growth has not been achieved at the end of a performance period,
the Committee will normally reduce the vesting levels. b) US pension arrangements
In the USA, GSK operates a US Cash Balance Plan which provides
)TISPARTOFTHE'ROUPSSTRATEGYTOINCREASETHERETURNONITS2$ for an annual contribution and interest on the sum accumulated in
INVESTMENT)FTHE2$NEWPRODUCTREVENUETARGETISACHIEVED
the cash balance plan but with no contractual promise to provide

but the Committee determines that insufficient progress has been specific levels of retirement income. The plan incorporates an
made during the measurement period in increasing the return on Executive Pension Credit for senior US executives. Contribution
2$INVESTMENTTHE#OMMITTEEMAYREDUCETHELEVELOFVESTING rates under the plan range from 15% to 38% of base salary
UNDERTHE2$NEWPRODUCTMEASURE depending on grade. All current senior US executives are eligible
5NDERTHEADJUSTEDFREECASHmOWMEASURETHETARGETMAYBE for the Executive Pension Credit.
ADJUSTEDFORMATERIALFACTORSWHICHCOULDDISTORTFREECASHmOW For capped employees in the USA, benefits above the cap are
as a performance measure. These will typically include exchange provided through an unfunded non-qualified plan.
rate movements and may also include legal and major taxation
settlements and special pension contributions, which could
materially distort this calculation. The impact of any acquisition
or divestment will be quantified and adjusted for after the
event. Major adjustments in the calculation will be disclosed
to shareholders.

90
Remuneration Report
Share ownership requirements Variable pay – performance periods ended

To align the interests of Executives with those of 31st December 2010
shareholders, Executives are required to build up and This section provides further details on performance
maintain significant holdings of shares in GSK over time. achieved under the company’s annual bonus and long-term
Current share ownership requirements (SOR) are set out in the incentive plans for performance periods that ended on
table below: 31st December 2010.
Share Ownership Requirement

Annual bonus
For 2010, the majority of the annual bonus was based on the
CEO 4 x base salary achievement of financial targets (based on Group profit before
Other Executive Directors 3 x base salary interest and tax and on business unit operating profit) and
CET members 2 x base salary individual performance. The achievement of additional operational
efficiency goals was also taken into account in determining the
Executives are required to continue to satisfy these shareholding 2010 annual bonus levels.
requirements for a minimum of twelve months following retirement
from the company to support the long-term nature of the business. The objectives set for the company for 2010 focused in particular
Shareholdings for the purpose of SOR as at 25th February 2011 on the continued development and launch of late stage
were: pipeline assets, delivery of commercial targets and execution of

restructuring programmes to simplify the operating model.
Holding of Holding of
Ordinary shares Ordinary shares Despite 2010 being a challenging year for GSK and the
for SOR purposes for SOR purposes % increase in
as at 31/12/09 as at 25/02/11* shareholding pharmaceutical industry due to the effect of generic competition
in the USA, the rapid loss of sales of Avandia following regulatory
Andrew Witty 91,472 226,199 147
decisions in the Autumn, US healthcare reform and significant
Julian Heslop 49,350 92,182 87
legacy litigation costs, management achieved key financial and
Simon Dingemans** – 40,000 –
strategic objectives, including:
Dr Moncef Slaoui 66,938 169,906 154
• d
elivering underlying sales growth (excluding pandemic
*
Shares to be sold for tax following the vesting of the 2008 PSP awards have
products, Avandia and Valtrex)
been excluded.
** The disclosure for Simon Dingemans is from the date he joined the Board on • strong sales performance in investment areas of the business,
4th January 2011. particularly Emerging Markets and Consumer Healthcare
Other remuneration elements • increasing R&D pipeline potential and achieving key milestones
The Executives participate in various all-employee share plans in in the transformation of R&D productivity, particularly in relation
either the UK or the USA. to the late stage R&D pipeline products
The ShareSave Plan and the ShareReward Plan are UK HM Revenue • s implification of GSK’s business model, improved cash
& Customs approved plans open to all UK employees and UK- generation, before legal settlements, and achievement of
based Executive Directors on the same terms. operational efficiencies.
ShareSave participants may save up to £250 a month from their Overall, the Committee took into account GSK’s success in
net salary for a fixed term of three years and at the end of the achieving the above objectives, as well as each individual’s
savings period they have the option to buy GSK shares at a performance, when determining the bonus awards for 2010.
discount of 20% of the market price set at the launch of each However, because management did not fully achieve the group
plan. Andrew Witty and Julian Heslop are ShareSave members, profit before interest targets that were set, bonuses were
and each contribute £250 a month into the Plan. This provides determined accordingly. Actual bonus payments for Executive
them both with the option to buy shares at the end of the three- Directors are shown on page 94 and ranged from 79% to
year savings period. 147% of base salaries as at 31st December 2010
(2009 – 115% to 200%).
ShareReward participants can contribute up to £125 a month
from their gross salary to purchase GSK shares and the company Annual bonus Annual bonus
2010 2009
matches the number of GSK shares bought each month under this 000 000 % change
arrangement. The shares are held in trust and if they are left there Andrew Witty £1,177 £2,000 (41)
for five years, they can be removed free of UK tax and national Julian Heslop £417 £602 (31)
insurance contributions. Andrew Witty, Julian Heslop and Simon
Dr Moncef Slaoui $1,434 $1,439 –
Dingemans each contribute £125 a month to buy shares under
the ShareReward Plan. The following Executive Directors elected to participate in the
The Executives also receive other benefits including healthcare Deferred Annual Bonus Plan in respect of 2010. Matching Awards
(medical and dental), personal financial advice and life assurance. may vest in February 2014, subject to their continued employment
The cash value of the benefits received by the Executive Directors and achievement of the long-term incentive performance measures
in 2010 is shown on page 94. Dr Moncef Slaoui normally resides outlined on page 87 of the report.
in the USA. He has been seconded to the UK for a two year
Executive % of total bonus Deferred Award Matching Award
period from 1st November 2010 to enable him to be closer
to GSK Biologicals as he assumes operational responsibility for Andrew Witty 32% 31,921 shares 31,921 shares
this business. Dr Moncef Slaoui 50% 18,756 ADS 18,756 ADS

91
Remuneration Report
Long-term incentive plans Executive Director terms and conditions

Performance share plan – Vesting of 2008 Awards Executive Director contracts
The Committee reviewed the performance criteria of the The policy set out below provides the framework for contracts for
performance share plan AWARDSGRANTEDTOTHE%XECUTIVE$IRECTORS %XECUTIVE$IRECTORS
in 2008, with the three-year performance period starting on
ST*ANUARYANDENDINGONST$ECEMBER4HE Notice period on 12 calendar months
company ranked at median position in the comparator group termination by
of 10 companies and therefore 35% of the awards vested. employing company or
The awards made to other senior executives in 2008 were executive
dependent in part on relative TSR performance and in part on EPS Termination payment 1 x annual salary
performance. The EPS portion of those awards did not vest. payable on termination
4HEVESTINGSCHEDULESFORTHEANDAWARDSARE
shown on page .
Vesting of LTIs Rules of relevant incentive plan, as
Share options – Vesting of 2008 Awards approved by shareholders
The share option awards granted to Executives in 2008 were based

Pension Based on existing arrangements and
on EPS performance. The performance conditions for the 2008 terms of relevant pension plan
awards were not met and, as a result, all these awards lapsed.
Non-compete clause 12 months from termination
$ETAILSOFSUBSISTINGOPTIONSANDTHEPERFORMANCECONDITIONS
notice date*
attached to each grant, are provided in the audited section of this
report. * The ability to impose a 12-month non-compete period (and a non-solicitation
restriction) on an Executive is considered important by the company in order
Historical vesting for GSK’s LTIs to have the ability to protect the Group’s intellectual property and staff. In light
GSK’s LTI performance conditions continue to be challenging as of this, the Committee believes that it would not be appropriate to provide for
is demonstrated by the table below. Relative TSR has been an mitigation in the contracts.
important part of the LTI measures for many years. This measure
has been retained under the current remuneration policy. )N!NDREW7ITTYAND$R-ONCEF3LAOUIAGREEDAN
amendment to their contractual terms to remove an entitlement
The following table shows the vesting levels of GSK’s performance to bonus as part of their termination package. The contracts for
share and share option awards to Executives since 2003. A new Executives will not normally include a bonus element in any
TSR vesting percentage of 0% indicates that GSK’s relative TSR termination payment.
performance was below the median of the comparator group for

that performance period. The terms of the new contracts seek to balance commercial
imperatives and best practice. Where the company considers it
Performance Share Share Option
Plan Plan
important that an individual does not work elsewhere during his
Vesting Vesting notice period, it may make a compensatory payment in respect of
under TSR under EPS bonus for the period of restraint.
Performance period measure % measure %
Julian Heslop is retiring early from the company on 31st March
2003 2004 - 2006 0 100
2011. Under the terms of his contract entered into in 2005, he
2004 2005 - 2007 38.47 100
is entitled to receive one year’s notice on termination and his
2006 2006 - 2008 0 50.7
payment will include one year’s annual salary and 12 months’
2007 35 0
on-target bonus.
2008 2008 - 2010 35 0
Average annual vesting 50.14 3IMON$INGEMANSJOINEDTHE"OARDONTH*ANUARYAS#&/
$ESIGNATEANDWILLBECOMETHE#&/ONST!PRILFOLLOWING
No award was made during 2005 due to a change in the award Julian Heslop’s retirement. In line with the company’s policy going
cycle. FORWARD3IMON$INGEMANSCONTRACTPROVIDESFORATERMINATION
payment based on one year’s base salary only.

92
Remuneration Report
4HEFOLLOWINGTABLESETSOUTTHEDETAILSOFTHE%XECUTIVE$IRECTORS 4HETERMSOFENGAGEMENTOF.ON %XECUTIVE$IRECTORSOTHERTHAN

service contracts: Sir Christopher Gent, are also set out in letters of appointment.
&ORALL.ON %XECUTIVE$IRECTORSTHEIRINITIALAPPOINTMENTANDANY
#URRENT$IRECTORS $ATEOFCONTRACT Effective date Expiry date
subsequent re-appointment are subject to election, and thereafter,
Andrew Witty* 18th June 2008 22nd May 2008 31st August 2024 periodic re-election by shareholders.
Julian Heslop 16th March 2006 1st April 2005 31st January 2014
4HELETTERSOFAPPOINTMENTFOR.ON %XECUTIVE$IRECTORSDONOT
3IMON$INGEMANS 8th September 2010 4th January 2011 30th April 2028
contain provision for notice periods or for compensation if their
$R-ONCEF3LAOUI
ST$ECEMBER ST$ECEMBER ST!UGUST

appointments are terminated.
* Andrew Witty’s contract was renewed in June 2008 following his appointment
The following table shows the date of the initial letter of
AS#%/ANDWASAMENDEDONTH&EBRUARYTOREmECTTHECHANGESTOHIS
severance terms outlined above. APPOINTMENTOFEACH.ON %XECUTIVE$IRECTOR

$R-ONCEF3LAOUISPREVIOUSCONTRACTDATEDTH-AYWASREPLACEDON
.ON %XECUTIVE$IRECTOR $ATEOFLETTEROFAPPOINTMENT
ST$ECEMBERTOREmECTTHECHANGESTOHISSEVERANCETERMSOUTLINED
above. Sir Christopher Gent 26th May 2004
No termination payments will be made in respect of any part of a Professor Sir Roy Anderson 28th September 2007
notice period extending beyond the contract expiry date. $R3TEPHANIE"URNS 12th February 2007
Larry Culp TH*UNE

Other entitlements 3IR#RISPIN$AVIS TH*UNE
In addition to the contractual provisions outlined above, in the 3IR$ERYCK-AUGHAN 26th May 2004
EVENTTHAT%XECUTIVE$IRECTORSSERVICEAGREEMENTSARETERMINATED James Murdoch TH&EBRUARY
by their employing company, the following will apply: $R$ANIEL0ODOLSKY 3rd July 2008
sINTHECASEOFOUTSTANDINGAWARDSUNDERTHE'LAXO3MITH+LINE Tom de Swaan ST$ECEMBER
Annual Investment Plan (which was closed to new deferrals Sir Robert Wilson TH*UNE
with effect from the first quarter of 2006) provided that their
agreement is terminated other than for cause, the executive Chairman and Non-Executive Directors’ fees
must exercise any Bonus Investment Rights within six months of The company aims to provide the Chairman and Non-Executive
termination to receive any deferred amounts, and any income $IRECTORSWITHFEESTHATARECOMPETITIVEWITHTHOSEPAIDBYOTHER
and gains; and companies of equivalent size and complexity subject to the limits
sINLINEWITHTHEPOLICYAPPLICABLETO53SENIOREXECUTIVES contained in GSK’s Articles of Association.
$R-ONCEF3LAOUIMAYBECOMEELIGIBLEATAFUTUREDATETO The Chairman’s fees are currently £540,000 per annum plus an
receive continuing medical and dental insurance after retirement. allocation of shares to the value of £135,000 per annum.
Following the merger, those participants in the legacy share option .ON %XECUTIVE$IRECTORS’FEESAPPLYINGATST$ECEMBER2010 are
schemes who elected to exchange their legacy options for options as follows:
over GSK shares received an additional cash benefit equal to 10%
of the grant price of the original option. This additional benefit was Per annum
triggered when the option was exercised or lapsed. To qualify for Standard annual cash retainer fee £75,000
this additional cash benefit, participants had to retain their options
until at least the second anniversary of the effective date of the Supplemental fees
merger. Following the payments made during 2010, there are no #HAIRMANOF!UDIT2ISK#OMMITTEE £80,000
further payments due under this arrangement.
3ENIOR)NDEPENDENT$IRECTOR
Outside appointments for Executive Directors and Scientific/Medical Experts £30,000
Any outside appointments are considered by the Nominations
#OMMITTEETOENSURETHEYWOULDNOTCAUSEACONmICTOFINTEREST Chairmen of the Remuneration and Corporate
and are then approved by the Chairman on behalf of the Board. Responsibility Committees* £20,000
It is the company’s policy that remuneration earned from such .ON %XECUTIVE$IRECTORUNDERTAKING £7,500
APPOINTMENTSMAYBEKEPTBYTHEINDIVIDUAL%XECUTIVE$IRECTOR intercontinental travel to meetings per meeting
Chairman and Non-Executive Directors * Sir Christopher Gent is the current Chairman of the Corporate Responsibility
Committee, but does not receive the additional fee listed above.
Terms and conditions
Sir Christopher Gent’s letter of appointment was dated
26th May 2004, under which it was agreed that he would serve
THECOMPANYAS$EPUTY#HAIRMANUNTILST$ECEMBERAND
from 1st January 2005 as Chairman until the conclusion of the
AGM following the third anniversary of his appointment. This was
extended for a further term of three years by mutual agreement,
WITHEFFECTFROMHISRE ELECTIONASA$IRECTORATTHE!'-HELD
on 21st May 2008. This has been further extended for a period
of five years subject to re-election with effect from 1st January
2011.(Further details are provided on page 68 of the Corporate
Governance Report).

93
Remuneration Report
4OREmECTTHEINCREASEDFOCUSWITHINTHECOMPANYONCOMPLIANCE TSR performance graph

and risk, GSK significantly enlarged the remit and responsibilities The following graph sets out the performance of the company
OFTHE!UDIT2ISK#OMMITTEEANDTHECOMMITMENTREQUIRED relative to the FTSE 100 Index of which the company is a
from Tom de Swaan, its Chairman. The company agreed that the constituent and to the pharmaceutical performance comparator
time requirement for his role as Committee Chairman moving from GROUPFROMST*ANUARYTOST$ECEMBER4HEGRAPH
approximately 30 days to approximately 80 days per annum should has been prepared in accordance with the Regulations as defined
BEREmECTEDTHROUGHANINCREASEINTHEFEESPAYABLE on page 101 and is not an indication of the likely vesting of awards
Following an independent review, the supplemental fee for the granted under any of the company’s incentive plans.
#HAIRMANOFTHE!UDIT2ISK#OMMITTEEWASINCREASEDFROM TSR performance
£30,000 per annum to £80,000 per annum with effect from
ST/CTOBER 150
Full details of the current Committee’s terms of reference and

'3+S!UDIT!SSURANCEMODELAREGIVENONPAGES71 to 76.
In recent years there has been an increase in the time commitment, 125
demands and responsibility placed on the role of a non-executive

director, and this has generally led to an increase in their fees. As a
RESULTOFTHESEDEVELOPMENTSINTHEMARKET.ON %XECUTIVE$IRECTOR
100
fees at GSK were independently reviewed during 2010. The
review highlighted that there was scope to increase Non-Executive
$IRECTORFEES(OWEVERINLIGHTOFTHECURRENTENVIRONMENTTHE
Board decided not to increase their fees at this time. They will 75
continue to be kept under review.
30/12/05 29/12/06 31/12/07 31/12/08 31/12/09 31/12/10
Exchange rate
GlaxoSmithKline Total Return Index
Fees that are paid in US dollars were converted at the following GlaxoSmithKline Pharma Peers Return Index
exchange rates: FTSE 100 Total Return Index
Exchange rate
$ATEOFAPPROVAL Period rate applied £1/US$
TH*ULY 01.10.04 – 31.03.08 US$1.8162

28th March 2008 n 53

RD$ECEMBER
n 53
01.01.10 – 31.12.10 US$1.6326
01.01.11 – 31.12.11 53
* 'IVENmUCTUATIONSINTHE3TERLING53DOLLAREXCHANGERATE, it was agreed that

WITHEFFECTFROMST/CTOBERTHEEXCHANGERATEWOULDBESETANNUALLY
based on the average daily rate for the last quarter of the year prior to
payment. The rate would be reviewed if exchange rates moved significantly
during the year.
Non-Executive Directors’ share allocation plan

4OENHANCETHELINKBETWEEN$IRECTORSANDSHAREHOLDERS'3+
REQUIRES.ON %XECUTIVE$IRECTORSTORECEIVEASIGNIlCANTPARTOF
their fees in the form of shares. At least 25% of the Non-Executive
$IRECTORSTOTALFEESEXCLUDINGTHE#HAIRMANAREPAIDINTHEFORM
OFSHARESOR!$3ANDALLOCATEDTOASHAREACCOUNT4HE.ON
%XECUTIVE$IRECTORSMAYALSOTAKETHEOPPORTUNITYTOINVESTPARTOR
all of the balance of their fees into the same share account.
4HESHARESOR!$3WHICHARENOTIONALLYAWARDEDTOTHE.ON
%XECUTIVE$IRECTORSANDALLOCATEDTOTHEIRINTERESTACCOUNTSARE
INCLUDEDWITHINTHE$IRECTORSINTERESTSTABLESONPAGE. The
ACCUMULATEDBALANCEOFTHESESHARESOR!$3TOGETHERWITH
notional dividends subsequently reinvested, are not paid out to
THE.ON %XECUTIVE$IRECTORSUNTILRETIREMENTFROMTHE"OARD5PON
RETIREMENTTHE.ON %XECUTIVE$IRECTORSWILLRECEIVEEITHERTHESHARES
OR!$3ORACASHAMOUNTEQUALTOTHEVALUEOFTHESHARESOR!$3
at the date of retirement or date of payment if later.

94
Remuneration Report
Annual remuneration
2010
Total Total
Fees and Other Annual annual Fees and Other Annual annual
salary benefits bonus remuneration salary benefits bonus remuneration
Footnote 000 000 000 000 000 000 000 000
Executive Directors
Andrew Witty a,b,c,e £1,000 £126 £1,177 £2,303 a a £2,000 £3,037
Julian Heslop a,b £525 £108 £417 £1,050 £507 £56 £602 £1,165
$R-ONCEF3LAOUI c,d,e $405 $1,434 $2,792 $865 $355 $
Non-Executive Directors
Professor Sir Roy Anderson £128 – – £128 £120 – – £120
3IR#RISPIN$AVIS £118 – – £118 £102 – – £102
Sir Christopher Gent £675 £2 – £677 £675 £5 – £680
James Murdoch f a – – £98 £54 – – £54
Tom de Swaan £177 £1 – £178 £133 – – £133

Sir Robert Wilson £128 – – £128 £116 – – £116
$R3TEPHANIE"URNS $146 – – $146 $188 – – $188
Larry Culp $135 – – $135 $188 – – $188
3IR$ERYCK-AUGHAN $147 – – $147 $188 – – $188
$R$ANIEL0ODOLSKY $208 – – $208 $245 – – $245
Former Directors
$R-ICHèle Barzach g – – – – £80 – – £80
Sir Ian Prosser h – – – – £48 £5 – £53
$R2ONALDO3CHMITZ h – – – – £37 £5 – £42
$R*EAN 0IERRE'ARNIER b – $118 – $118 – $5,885 – $5,885
Total remuneration £3,873 £574 £2,518 £6,965 a £4,160 £3,525 £11,578
Analysed as:
%XECUTIVE$IRECTORS £2,140 a £2,518 £5,153 a £373 £3,525 £
.ON %XECUTIVE$IRECTORS £1,733 £3 – £1,736 a £5 – £1,724
&ORMER$IRECTORS – £76 – £76 £165 £3,782 – a47
Total remuneration £3,873 £574 £2,518 £6,965 a £4,160 £3,525 £11,578
2EMUNERATIONFOR$IRECTORSONTHE53PAYROLLISREPORTEDIN$OLLARS$OLLARAMOUNTSAREINCLUDEDINTHETOTALSBASEDONCONVERSIONTO3TERLINGATTHEAVERAGEEXCHANGE
rates for each year.
a) Andrew Witty and Julian Heslop both participate in Salary Sacrifice schemes.
B &OLLOWINGTHEMERGERANDINORDERTOENCOURAGEEMPLOYEESTOCONVERTTHEIRNON SAVINGSRELATEDOPTIONSHELDOVERLEGACYSHARESOR!$3FOROPTIONSOVER
'LAXO3MITH+LINESHARESOR!$3EMPLOYEESWEREGRANTEDANADDITIONALCASHBENElTEQUALTOOFTHEGRANTPRICEOFTHEORIGINALOPTION4HISADDITIONALBENElT
known as the Exchange Offer Incentive, was only payable when the new option was exercised or lapsed underwater. To qualify for this additional cash benefit,
PARTICIPANTSHADTORETAINTHESEOPTIONSUNTILATLEASTTHESECONDANNIVERSARYOFTHEEFFECTIVEDATEOFTHEMERGER$URINGTHEYEAR!NDREW7ITTYRECEIVED
ana and*ULIAN(ESLOPRECEIVEDana $R*EAN 0IERRE'ARNIERRECEIVEDINASARESULTOFOPTIONSGRANTED
TOHIMINLAPSING.OFURTHERPAYMENTSWILLBEMADE
C !NDREW7ITTYAND$R-ONCEF3LAOUIHAVEELECTEDTOPARTICIPATEIN'3+S$EFERRED!NNUAL"ONUS0LANINRESPECTOFTHEIRBONUSES!NDREW7ITTYALSOPARTICIPATED
IN$R-ONCEF3LAOUIWASNOTELIGIBLETOPARTICIPATEINTHATYEAR
D $R-ONCEF3LAOUIISA.ON %XECUTIVE$IRECTOROFTHE!GENCYFOR3CIENCE4ECHNOLOGYAND2ESEARCH!
34!2 INRESPECTOFWHICHHERECEIVED
n DURINGWHICHISNOTINCLUDEDABOVE
e) /THERBENElTSINFOR!NDREW7ITTYAND$R-ONCEF3LAOUIHAVEBEENRESTATEDTOREmECt certain elements of remuneration no longer being deemed a benefit.
F *AMES-URDOCHWASAPPOINTEDTOTHE"OARDWITHEFFECTFROMTH-AY
G $R-ICHÒLE"ARZACHRECEIVEDFEESOF€NILn€ FROM'3+&RANCEFORHEALTHCARECONSULTANCYPROVIDED4HESEAREINCLUDEDWITHINFEESANDSALARYABOVE
h 3IR)AN0ROSSERAND$R2ONALDO3CHMITZRETIREDAS.ON %XECUTIVE$IRECTORSOFTHECOMPANYONTH-AYOn leaving the Board both Sir Ian Prosser and
$R2ONALDO3CHMITZRECEIVEDTHEACCUMULATEDBALANCEOFSHARESPREVIOUSLYAWARDEDUNDERTHE.ON %XECUTIVE$IRECTORSSHAREARRANGEMENTSBASEDONTHESHARE
price at the payment date. A final payment in respect of the balance for Sir Ian Prosser was made during 2010. Further details are as set out in the table on
page . These are not included within fees and salaries above.
.ONEOFTHEABOVE$IRECTORSRECEIVEDREIMBURSEMENTFOREXPENSESDURINGTHEYEARREQUIRINGSEPARATEDISCLOSUREASREQUIREDBYTHE2EGULATIONS

95
Remuneration Report
Non-Executive Directors’ fees

2010
Total Cash 3HARES!$3 Total Cash 3HARES!$3
Fees 000 000 000 000 000 000
Current Non-Executive Directors

Professor Sir Roy Anderson £128 a £32 £120 a £30
3IR#RISPIN$AVIS £118 – £118 £102 – £102
Sir Christopher Gent £675 £540 £135 £675 £540 £135
James Murdoch £98 – a £54 £40 £14
Tom de Swaan £177 £133 £44 £133 a £34
Sir Robert Wilson £128 a £32 £116 £87 a
$R3TEPHANIE"URNS $146 $73 $73 $188 $141 $47
Larry Culp $135 – $135 $188 $141 $47
3IR$ERYCK-AUGHAN $147 – $147 $188 $141 $47
$R$ANIEL0ODOLSKY $208 $52 $156 $245 $184 $61

Former Non-Executive Directors
Sir Ian Prosser – – – £48 £31 £17
$R2ONALDO3CHMITZ – – – £37 £26 £11
Total Remuneration £1,733 a £788 £1,804 £1,302 £502
4HETABLEABOVESETSOUTTHEREMUNERATIONRECEIVEDAS.ON %XECUTIVE$IRECTORSOFTHECOMPANY
.ON %XECUTIVE$IRECTORSAREREQUIREDTOTAKEATLEASTAPARTOFTHEIRTOTALFEESINTHEFORMOFSHARESALLOCATEDTOASHAREACCOUNTWHICHIS
not paid out until retirement from the Board (see page 3FORFURTHERDETAILS 4HETOTALVALUEOFTHESESHARESAND!$3ASATTHEDATEOF
award, together with the cash payment, forms their total fees, which are included within the Annual remuneration table under ‘Fees and
SALARY4HETABLEABOVESETSOUTTHEVALUEOFTHEIRFEESRECEIVEDINTHEFORMOFCASHANDSHARESAND!$3
4HETABLEBELOWSETSOUTTHEACCUMULATEDNUMBEROFSHARESAND!$3HELDBYTHE.ON %XECUTIVE$IRECTORSINRELATIONTOTHEIRFEESRECEIVED
AS"OARDMEMBERSASATST$ECEMBERTOGETHERWITHTHEMOVEMENTSINTHEIRACCOUNTSOVERTHEYEAR
.UMBEROFSHARESAND!$3

Allocated $IVIDENDS
Non-Executive Directors’ share arrangements ST$ECEMBER ELECTED reinvested Paid out ST$ECEMBER
Current Non-Executive Directors

Shares
Professor Sir Roy Anderson 5,730 2,585 305 – 8,620
3IR#RISPIN$AVIS 2,206 – 54,642
Sir Christopher Gent 53,025 11,006 – 66,740
James Murdoch 1,077 132 – 9,105
Tom de Swaan 3,605 471 – 13,028
Sir Robert Wilson 12,133 2,585 623 – 15,341
ADS
$R3TEPHANIE"URNS 272 – 7,352
Larry Culp 18,832 – 23,417
3IR$ERYCK-AUGHAN 16,678 867 – 21,462
$R$ANIEL0ODOLSKY 8,017 4,182 436 – 12,635
Former Non-Executive Directors

Shares
Sir Ian Prosser 1,240 – – 1,240 –

96
Remuneration Report
The table below sets out the settlement of former Non-Executive Directors’ share arrangements on their leaving the Board:
Value of Value of
Date of awards on awards on Payments Payments
Footnote leaving allocation leaving in 2009 in 2010
Sir Ian Prosser a,b 20.05.09 £382,142 £356,644 £343,525 £15,767
a) The changes in value of awards between allocation, leaving and subsequent payment are attributable to dividends reinvested and the change in the share price
for each award.
b) Awards to Sir Ian Prosser under the Non-Executive Directors’ share arrangements were partially settled in shares during 2009 with the balance of 1,240 shares
settled in 2010.
Directors’ interests
The following interests of the Directors of the company and their connected persons are shown in accordance with the FSA Listing Rules.
Shares ADS
24th February 31st December 1st January 24th February 31st December 1st January
Footnote 2011 2010 2010 2011 2010 2010
Executive Directors
Andrew Witty a,d 184,281 151,213 91,472 – – –
Simon Dingemans b 40,000 – – – – –
Julian Heslop a,d 76,900 76,254 49,350 – – –
Dr Moncef Slaoui c,d 59,622 59,133 60,948 37,883 18,459 592
Non-Executive Directors
Professor Sir Roy Anderson e 8,620 8,620 5,730 – – –
Dr Stephanie Burns e 44 44 44 7,418 7,418 5,161
Larry Culp e – – – 23,417 23,417 18,832
Sir Crispin Davis e 61,402 61,402 49,669 – – –
Sir Christopher Gent e 66,741 66,741 53,025 – – –
Sir Deryck Maughan e – – – 21,462 21,462 16,678
James Murdoch e 10,105 10,105 2,077 – – –
Dr Daniel Podolsky e – – – 12,635 12,635 8,017
Tom de Swaan e 13,028 13,028 8,952 – – –
Sir Robert Wilson e 21,470 21,470 18,262 – – –
One GlaxoSmithKline ADS represents two GlaxoSmithKline shares. The interests of the above-mentioned Directors at 24th February 2011 reflect the change between the
year-end and that date.
a) Includes shares purchased through the GlaxoSmithKline ShareReward Plan for Andrew Witty totalling 2,577 at 31st December 2010 (31st December 2009 –
2,216) and 2,628 shares at 24th February 2011 and Julian Heslop totalling 2,577 at 31st December 2010 (31st December 2009 – 2,216) and 2,628 shares
at 24th February 2011.
b) Simon Dingemans joined the Board on 4th January 2011.
c) Includes ADS purchased in the GlaxoSmithKline Stock Fund within the US Retirement Savings Plan and US Executive Supplemental Savings Plan.
d) The 2008 Performance Share Plan vesting conditions were approved on 24th February 2011, as detailed on page 91. However, the shares did not vest until
25th February 2011 and are not included in the totals above.
e) Includes shares and ADS received as part or all of their fees, as described under Non-Executive Directors’ share allocation plan on page 93. Dividends received on
these shares and ADS were converted to shares and ADS as at 31st December 2010.

97
Remuneration Report
Long-term Incentive plans

Share option plan awards
Options – Shares Granted
ST$ECEMBER ST$ECEMBER
Footnote $ATEOFGRANT Exercise period Grant price Number Lapsed
2010
Andrew Witty – – – –

Julian Heslop – – – – 304,350 585,050
$R-ONCEF3LAOUI – – – – 14,870 140,320
Options – ADS Granted

ST$ECEMBER ST$ECEMBER
$ATEOFGRANT Exercise period Grant price Number Lapsed
2010
$R-ONCEF3LAOUI a 22.02.10 22.02.13 – 22.02.20 37.32 1,100 321,735
a) 4HESEDETAILSINCLUDEACHANGETO$R3LAOUISCONNECTEDPERSON, who is also an employee of GSK.

&ORTHOSEOPTIONSOUTSTANDINGATST$ECEMBERTHEEARLIESTANDLATESTVESTINGANDLAPSEDATESFOROPTIONSABOVEANDBELOWTHE
market price for a GlaxoSmithKline share at the year-end are given in the table below.
Weighted average Vesting date Lapse date

Andrew Witty grant price Number earliest latest earliest latest
Options above market price at year-end: vested 15.26 28.03.11 22.02.16
Options below market price at year-end: vested 02.12.05 30.11.07 30.11.12 01.12.14
unvested 11.63 18.02.11 01.12.11 31.05.12 20.07.18
4OTALSHAREOPTIONSASATST$ECEMBER 12.62

Julian Heslop grant price Number earliest latest earliest latest
Options above market price at year-end: vested 28.03.11 22.02.16

Options below market price at year-end: vested 11.23 62,250 03.12.07 03.12.07 01.12.14 01.12.14
unvested 11.46 243,683 18.02.11 30.11.12 31.05.13 16.02.18
4OTALSHAREOPTIONSASATST$ECEMBER 13.41 585,050

Dr Moncef Slaoui grant price Number earliest latest earliest latest
Options above market price at year-end: vested 14.68 68,520 23.02.16 20.02.16
Options below market price at year-end: vested 11.58 71,800 02.12.05 03.12.07 03.12.12 01.12.14
4OTALSHAREOPTIONSASATST$ECEMBER 140,320
Options above market price at year-end: vested 25.07.16 17.02.17
unvested 44.75 18.02.11 18.02.11 16.02.18 16.02.18
Options below market price at year-end: unvested 33.45 17.02.12 21.02.13 20.02.20
4OTAL!$3OPTIONSASATST$ECEMBER 321,735

4HISINCLUDESTHOSESHAREOPTIONSHELDBY$R-ONCEF3LAOUISCONNECTEDPERSONWHOISALSOANEMPLOYEEOF'3+

98
Remuneration Report
'3+GRANTEDSHAREOPTIONSTO%XECUTIVE$IRECTORSONANANNUALBASISUNTIL4HE$IRECTORSHOLDTHESEOPTIONSUNDERTHEVARIOUSSHARE
option plans referred to in Note 42TOTHElNANCIALSTATEMENTS@%MPLOYEESHARESCHEMES.ONEOFTHE.ON %XECUTIVE$IRECTORSHADAN
interest in any option over the company’s shares.
The table below sets out, for share options granted in 2008, the performance periods, the performance targets and whether or not the
OPTIONSHAVEVESTEDATST$ECEMBER
Performance target
Vesting status Annualised growth Percentage of
Grant Footnote Performance period ATST$ECEMBER in EPS award vesting
February 2008 a 2008 – 2010 Unvested > RPI + 6% 100%

RPI + 5% 83%
RPI + 4% 67%
RPI + 3% 50%
< RPI + 3% 0%
a) The performance targets for these share options were not met, and as a result they lapsed on the third anniversary of the date of grant.
4HETABLEBELOWSETSOUTFORSHAREOPTIONSGRANTEDINRESPECTOFANDTHEPERFORMANCEPERIODANDTARGETS
Performance target
Vesting status Annualised growth Percentage of
Grant Performance period ATST$ECEMBER in EPS award vesting
&EBRUARYnOFAWARD n Unvested > RPI + 6% 100%

&EBRUARYnOFAWARD n Unvested RPI + 5% 85%
RPI + 4% 65%
RPI + 3% 30%
< RPI + 3% 0%
4HEHIGHESTANDLOWESTCLOSINGPRICESDURINGTHEYEARENDEDST$ECEMBERFOR'LAXO3MITH+LINESHARESWEREaANDa
RESPECTIVELY4HEHIGHESTANDLOWESTPRICESFOR'LAXO3MITH+LINE!$3DURINGTHEYEARENDEDST$ECEMBERWEREAND
RESPECTIVELY4HEMARKETPRICEFORA'LAXO3MITH+LINESHAREONST$ECEMBERWASaST$ECEMBERna ANDFORA
'LAXO3MITH+LINE!$3WASST$ECEMBERn 4HEPRICESONTH&EBRUARYWEREa11.78 per GlaxoSmithKline
share and $38.13PER'LAXO3MITH+LINE!$3
Performance Share Plan (PSP) awards
0ERFORMANCESHAREAWARDSAREMADETO%XECUTIVE$IRECTORSONANANNUALBASIS4HE$IRECTORSHOLDTHESEOPTIONSUNDERTHEVARIOUS030
plans referred to in Note 42 to the financial statements.
Vested
Andrew Witty – Shares
Unvested Market price Additional Unvested
at 31st Number price on shares by at 31st Number
$ECEMBER granted in date of Market Vested dividends $ECEMBER granted in
Performance period 2010 grant Number price Gain Lapsed reinvested 2010 2011
n – £14.88 33,781 a 408,238 62,735 1,106 – –

2008 – 2010 242,010 – £11.47 – – – – –
2008 – 2010 – £12.21 – – – – 3,388 –
n 476,146 – £10.51 – – – – 24,471 500,617 –
2010 – 2012 – 415,454 £12.04 – – – – 10,327 425,781 –
2011 – 2013 – – – – – – – – – 424,448
Vested
Julian Heslop – Shares
Unvested Market Additional Unvested
at 31st Number price on shares by at 31st
$ECEMBER granted in date of Market Vested dividends $ECEMBER
Performance period 2010 grant Number price Gain Lapsed reinvested 2010
n – £14.88 a 1,367 –
2008 – 2010 – £11.47 – – – – 5,805 118,743
n – £10.51 – – – – 10,278 210,260
2010 – 2012 – £12.04 – – – – 4,337 178,828

99
Remuneration Report
Dr Moncef Slaoui – ADS Vested

n – $58.00 27,454 $37.42 $1,027,342 52,748 – –

2008 – 2010 1 – $44.75 – – – 1,778 78,152 –
n 2,686 – $33.42 – – – 2,825 – –
n – $33.50 – – – – 3,618 73,422 –
2010 – 2012 – 133,247 – – – – 2,684 3,256 –
2011 – 2013 – – – – – – – – – 147,521
This includes those performance sharesHELDBY$RMoncef Slaoui’s connected person, who is also an employee of GSK. Lapses for
performance periods 2008 to 2011 relate to a change in connected person.
Simon Dingemans - Shares Vested

2011 – 2013 – – – – – – – – –
Under the terms of the PSP the number of shares actually vesting is determined following the end of the relevant measurement period
and is dependent on GSK’s performance during that period as described on pages 87 to . The Committee adjusted the comparator
GROUPBYREMOVING3CHERING 0LOUGHAND7YETHFOLLOWINGTHEIRDE LISTINGDURINGANDREVISEDTHEVESTINGSCHEDULEACCORDINGLY
For outstanding and future awards, TSR performance will be measured against the revised comparator group including GSK, as set
out below.
$IVIDENDSAREREINVESTEDONTHEPERFORMANCESHARESAWARDEDTO%XECUTIVESTHROUGHOUTTHEPERFORMANCEPERIODANDUPTOTHEDATEOF
the final award. The dividend reinvestment is calculated as of the dividend payment date. Under the terms of the PSP, US participants
MAYDEFERRECEIPTOFALLORPARTOFTHEIRVESTEDAWARDS4HETOTALGAINONVESTINGOF030AWARDSMADEBY%XECUTIVE$IRECTORSANDCONNECTED
persons is £1,575,333na
The following vesting schedules apply to PSP awards made in 2008.

TSR vesting schedule
Award % of Award Performance Period TSR rank with 12 other companies Percentage of award vesting
2008 100 2008 – 2010 1 100%

2 100%
3 87%
4 74%
5 61%
6 48%
Median 35%
Below median 0%
4HEFOLLOWINGVESTINGSCHEDULESAPPLYTO030AWARDSMADEINAND
TSR vesting schedule

Award % of Award Performance Period TSR rank with 10 other companies Percentage of award vesting
30 n 1 100%

30 n 2 100%
2010 30 2010 – 2012 3 100%
30 2010 – 2013 4 80%
5 55%
Median 30%
Below median 0%
!DJUSTEDFREECASHmOWVESTINGSCHEDULE
#ASHmOW4ARGETS
Award % of Award Performance Period £bn Percentage of award vesting
40 n 13.5 – 16.0 25% – 100%

2010 40 2010 – 2012 17.3 – 20.5 25% – 100%

100
Remuneration Report
Deferred Annual Bonus Plan Awards

$EFERRED!NNUAL"ONus Plan awards are made tO%XECUTIVE$IRECTORSANNUALLYBASEDONthe individual’s voluntary bonus deferral
election.4HETERMSOFTHE$EFERred Annual Bonus Plan are outlined on page 87.
Andrew Witty – Shares Vested

2010 – 2012 – 12.35 – – – – 616 –

2011 – 2013 – – – – – – – – – 31
Dr Moncef Slaoui - ADS Vested

2011 – 2013 – – – – – – – – – 18,756
Share Value Plan awards
Dr Moncef Slaoui – Shares and ADS 6ESTEDDEFERRED

Unvested Market Unvested
Plan year at 31st price on at 31st Number
$ECEMBER date of Market $ECEMBER granted in
grant Number price Gain 2010 2011
2007 510 $58.00 510 $37.32 – –

2008 640 $44.75 – – – 640 –
640 $33.42 – – – 640 –
2010 640 $37.32 – – – 640 –
2011 – $38.13 – – – – 2,450
!SAN%XECUTIVE$IRECTOR$R-ONCEF3LAOUIISNOTELIGIBLETORECEIVEAWARDSUNDERTHE3HARE6ALUE0LAN4HEAWARDSSHOWNABOVE
REmECTTHEHOLDINGSOF$R-ONCEF3LAOUISCONNECTEDPERSONANEMPLOYEEOF'3+4HEAWARDSARESUBJECTTOTHREE YEARVESTINGPERIODS
and vesting is contingent on continued employment with GSK.
Pension benefits
4HEACCRUEDANNUALPENSIONBENElTSANDTRANSFERVALUESFOR%XECUTIVE$IRECTORSINOFlCEONST$ECEMBERONRETIREMENTARESET
out below.
The Companies Act 2006 requires disclosure of the accrued benefit at the end of the year, the change in accrued benefit over the year, the
transfer value at both the beginning and end of the year and the change in the transfer value over the year. The FSA’s Listing Rules require
ADDITIONALDISCLOSUREOFTHECHANGEINTHEACCRUEDBENElTNETOFINmATIONANDTHETRANSFERVALUEOFTHISCHANGE0ENSIONSFORTHE%XECUTIVE
$IRECTORSHAVEBEENDISCLOSEDINTHECURRENCYINWHICHTHEPENSIONISPAYABLE
Accrued Change in
benefit at Accrued Change in Personal Transfer Transfer accrued Transfer value
31st benefit at accrued contributions value at value at Change benefit over of change
$ECEMBER ST$ECEMBER benefit made during ST$ECEMBER ST$ECEMBER in transfer year net in accrued
2010 over year the year 2010 value OFINmATION benefit*
Executive Directors *
000 000 000 000 000 000 000 000 000
Andrew Witty £446 a £51 £30 £6,272 a a £51 a
Julian Heslop £201 £222 £21 £16 £3,787 £5,308 £1,505 £21 £563
$R-ONCEF3LAOUI $187 $230 $43 – $1,101 $1,518 $417 $41 –
$R-ONCEF3LAOUI € €65 €6 – €647 € €42 €5 –
* These are shown net of contributions made by the individual.

!NDREW7ITTYAND*ULIAN(ESLOPPARTICIPATEINTHE'LAXO7ELLCOME$ElNED"ENElT0LANWITHANACCRUALRATEOFTHOFlNALPENSIONABLE
salary per annum. In 2000 all benefits accrued under the Glaxo Wellcome UK pension arrangements were augmented by the Trustees
OFTHEPLANSBYTOREmECTADISTRIBUTIONOFSURPLUS4HISAUGMENTATIONWILLAPPLYTOTHATELEMENTOF!NDREW7ITTYAND*ULIAN(ESLOPS
pension earnings before 31st March 2000.

101
Remuneration Report
The transfer values for Andrew Witty and Julian Heslop are Directors and Senior Management

calculated in accordance with pensions’ regulation and represent Further information is also provided on compensation and interests
the present value of potential payments under the pension plan. OF$IRECTORSAND3ENIOR-ANAGEMENTASAGROUP@THEGROUP
The actuarial assumptions for the calculation have changed since For this purpose, the group is defined as the Executive and
31ST$ECEMBERAND these changes have increased the .ON %XECUTIVE$IRECTORSANDMEMBERSOFTHE#%4&ORTHElNANCIAL
transferVALUESBYa6 (63% of increase) for Andrew Witty year 2010, the total compensation paid to members of the group
and £778,368 (52% of increase) for Julian Heslop. The balance of for the periods during which they served in that capacity was
the increase in transfer value is the result of the increased valuation £20,377,021, the aggregate increase in accrued pension benefits,
of the pension benefit accrued in the year and the reduced period NETOFINmATIONWASaANDTHEAGGREGATEPAYMENTTO
of service to the assumed retirement age. DElNEDCONTRIBUTIONSCHEMESWASa
$R-ONCEF3LAOUIISAMEMBEROFTHE53%XECUTIVE#ASH"ALANCE $URINGTHEMEMBERSOFTHEGROUPWEREGRANTED
Pension Plan. The plan provides for an Executive Pension Credit, SHAREOPTIONSAND!$3OPTIONSUNDERTHE3HARE/PTIONPlan,
under which GSK makes annual contributions calculated as a were awarded SHARESUNDERTHE$EFERRED!NNUALBonus
percentage of the executive’s base salary. GSK makes contributions Plan, SHARESAND!$3UNDERTHE0ERFORMANCE
at 38% of base pay. The fund increases at an interest rate set Share Plan, andNILSHARESAND!$3UNDERTHE3HARE6ALUE
annually in advance based on the 30 year US Treasury bond rate to 0LAN.ONOTIONALSHARESOR!$3WEREGRANTEDUNDERTHE$EFERRED

provide a cash sum at retirement. The plan has no entitlement to a Investment Award Plan in 2010. Members of the group were
spouse’s pension or to pension increases. awarded through the reinvestment of dividends with 131,316
4HETRANSFERVALUEORCASHSUMHASINCREASEDBYFOR shares and 40,260!$3INTHE0ERFORMANCE3HARE0LAN, 616 shares
$R-ONCEF3LAOUIOVERTHEYEARASARESULTOFFURTHERACCUMULATION in tHE$EFERRED!NNUAL"onus Plan and 5,521 notional shares in
of interest and contributions paid by the company. THE$EFERRED)NVESTMENT!WARD0LAN
$R-ONCEF3LAOUIWASANACTIVEPARTICIPANTINTHE"ELGIUM&ORTIS At 24th February 2011, the group (comprising 2 persons) owned
Plan until 31st May 2006. This plan is a defined benefit plan with shares and 57!$3CONSTITUTINGLESSTHAN1% of
a lump sum payable at normal retirement which is age 60 for the issued share capital of the company. The group also held, at
THEPLAN4HETRANSFERVALUEORCASHSUMOF$R-ONCEF3LAOUIS that date: options to purchase 6,452,022 shares and
plan has increased by €OVERTHEYEARASARESULTOFFURTHER !$34,747,585 shares and !$3AWARDEDUNDERTHE
accumulation of interest. 0ERFORMANCE3HARE0LANINCLUDINGTHOSESHARESAND!$3THATARE
vested and deferred; 1,350VESTEDANDDEFERRED!$3UNDERTHE
R-ONCEF3LAOUIISAMEMBEROFTHE532ETIREMENT3AVINGS0LAN
$ legacy SmithKline Beecham Mid-Term Incentive Plan; 13,510 shares
a 401k savings scheme open to all US employees and the Executive and 3,730!$3AWARDEDUNDERTHE3HARE6ALUE0LAN; 88,315 shares
Supplemental Savings Plan, a savings scheme open to executives AND!$3UNDERTHE$EFErred Annual Bonus Plan and 1,561

to accrue benefits above US government limits imposed on the NOTIONALSHARESAWARDEDUNDERTHE$EFERRED)NVESTMENT!WARD
Retirement Savings Plan. Contributions to both plans are invested Plan. These holdings were issued under the various executive share
in a range of funds and the value of the accumulated funds is paid option plans described in Note 42 to the financial statements,
at retirement. ‘Employee share schemes’.
$URINGCONTRIBUTIONSOFa WEREPAIDINTO
THESETWOSCHEMESBY'3+INRESPECTOF$R-ONCEF3LAOUI
Basis of preparation
The Remuneration Report has been prepared in accordance
Directors’ interests in contracts with the Companies Act 2006 and The Large and Medium-sized
Companies and Groups (Accounts and Reports) Regulations 2008
Except as described in Note 35 to the financial statements, ‘Related
(the Regulations) and meets the relevant requirements of the FSA
party transactions’, during or at the end of the financial year no
Listing Rules. In accordance with the Regulations, the following
$IRECTORORCONNECTEDPERSONHADANYMATERIALINTERESTINANY
sections of the Remuneration Report
contract of significance in relation to the Group’s business with a
ARESUBJECTTOAUDIT!NNUALREMUNERATION.ON %XECUTIVE$IRECTORS
Group company.
remuneration; Incentive plans – Share Options; Performance Share
Plan awards and their vesting criteria; Share Value Plan awards
and Pension benefits for which the opinion thereon is expressed

on page 187. The remaining sections are not subject to audit nor
are the pages referred to from within the audited sections.
The Remuneration Report has been approved by the Board of
$IRECTORSANDSIGNEDONITSBEHALFBY
Sir Crispin Davis

1st March 2011

102
Directors’ statement of responsibilities

Directors’ statement of responsibilities in relation sTHE"USINESSREVIEWSECTIONCONTAINEDINTHE!NNUAL2EPORT
to the Group financial statements includes a fair review of the development and performance of
the business and the position of the Group, together with a
The Directors are responsible for preparing the Annual Report, DESCRIPTIONOFTHEPRINCIPALRISKSANDUNCERTAINTIESTHATITFACES
the Remuneration Report and the Group financial statements in
accordance with applicable law and regulations. Disclosure of information to auditors
Company law requires the Directors to prepare financial statements The Directors in office at the date of this Report have each
for each financial year. Under that law the Directors are required confirmed that:
to prepare the Group financial statements in accordance with
International Financial Reporting Standards (IFRS) as adopted by the sSOFARASHEORSHEISAWARETHEREISNORELEVANTAUDITINFORMATION
European Union. In preparing the Group financial statements, the OFWHICHTHECOMPANYSAUDITORSAREUNAWAREAND
Directors have also elected to comply with IFRS, as issued by the sHEORSHEHASTAKENALLTHESTEPSTHATHEORSHEOUGHTTOHAVE
International Accounting Standards Board (IASB). Under company TAKENASA$IRECTORTOMAKEHIMSELFORHERSELFAWAREOFANY
law the Directors must not approve the Group financial statements RELEVANTAUDITINFORMATIONANDTOESTABLISHTHATTHECOMPANYS
unless they are satisfied that they give a true and fair view of the auditors are aware of that information.
state of affairs of the Group and of the profit or loss of the Group
This confirmation is given and should be interpreted in accordance
for that period.
WITHTHEPROVISIONSOF3ECTIONOFTHE#OMPANIES!CT
In preparing those financial statements, the Directors are required to:
Going concern basis
sSELECTSUITABLEACCOUNTINGPOLICIESANDTHENAPPLY
them consistently; 4HE"USINESSREVIEWONPAGESTOCONTAINSINFORMATIONON
the performance of the Group, its financial position, cash flows,
sMAKEJUDGEMENTSANDACCOUNTINGESTIMATESTHATAREREASONABLE
net debt position and borrowing facilities. Further information,
and prudent;
INCLUDING4REASURYRISKMANAGEMENTPOLICIESEXPOSURESTOMARKET
sSTATETHATTHE'ROUPlNANCIALSTATEMENTSCOMPLYWITH)&23AS ANDCREDITRISKANDHEDGINGACTIVITIESISGIVENIN.OTETOTHE
adopted by the European Union and IFRS as issued by the IASB, lNANCIALSTATEMENTS@&INANCIALINSTRUMENTSANDRELATEDDISCLOSURES
SUBJECTTOANYMATERIALDEPARTURESDISCLOSEDANDEXPLAINEDIN
the Group financial statements. !FTERMAKINGENQUIRIESTHE$IRECTORSHAVEAREASONABLE
EXPECTATIONTHATTHE'ROUPHASADEQUATERESOURCESTOCONTINUEIN
4HE$IRECTORSARERESPONSIBLEFORKEEPINGADEQUATEACCOUNTING OPERATIONALEXISTENCEFORTHEFORESEEABLEFUTURE&ORTHISREASON
RECORDSTHATARESUFlCIENTTOSHOWANDEXPLAINTHECOMPANYS they continue to adopt the going concern basis in preparing the
transactions and disclose with reasonable accuracy at any time financial statements.
the financial position of the Group and to enable them to ensure
that the Group financial statements and the Remuneration Report Internal control
comply with the Companies Act 2006 and Article 4 of the IAS
Regulation. They are also responsible for safeguarding the assets of 4HE"OARDTHROUGHTHE!UDIT2ISK#OMMITTEEHASREVIEWEDTHE
THE'ROUPANDHENCEFORTAKINGREASONABLESTEPSFORTHEPREVENTION ASSESSMENTOFRISKSANDTHEINTERNALCONTROLFRAMEWORKTHATOPERATES
and detection of fraud and other irregularities. in GSK and has considered the effectiveness of the system of internal
control in operation in the Group for the year covered by this report
The Group financial statements for the year ended 31st December and up to the date of its approval by the Board of Directors.
2010, comprising principal statements and supporting notes,
ARESETOUTIN@&INANCIALSTATEMENTSONPAGESTOOF The Combined Code
this report.
4HE"OARDCONSIDERSTHAT'LAXO3MITH+LINEPLCAPPLIESTHE-AIN
The responsibilities of the auditors in relation to the Group financial Principles of Section 1 of the Combined Code maintained by the
STATEMENTSARESETOUTINTHE)NDEPENDENT!UDITORSREPORTON FRC, as described in the Corporate Governance section on pages
page 103. TOANDHASCOMPLIEDWITHITSPROVISIONSEXCEPTASDISCLOSED
The Group financial statements for the year ended 31st December on page 63.
2010 are included in the Annual Report, which is published in hard- !SREQUIREDBYTHE&3!S,ISTING2ULESTHEAUDITORSHAVECONSIDERED
COPYPRINTEDFORMANDMADEAVAILABLEONTHECOMPANYSWEBSITE THE$IRECTORSSTATEMENTOFCOMPLIANCEINRELATIONTOTHOSEPOINTS
The Directors are responsible for the maintenance and integrity of the Combined Code which are specified for their review.
of the Annual Report on the website in accordance with UK
legislation governing the preparation and dissemination of financial Annual Report
statements. Access to the website is available from outside the UK,
The Annual Report for the year ended 31st December 2010,
where comparable legislation may be different.
comprising the Report of the Directors, the Remuneration Report,
Each of the current Directors, whose names and functions are listed the Financial statements and additional information for investors,
in the Corporate Governance section of the Annual Report 2010 has been approved by the Board of Directors and signed on its
CONlRMSTHATTOTHEBESTOFHISORHERKNOWLEDGE behalf by
sTHE'ROUPlNANCIALSTATEMENTSWHICHHAVEBEENPREPAREDIN
accordance with IFRS as adopted by the EU and IFRS as issued by
IASB, give a true and fair view of the assets, liabilities, financial
Chairman
position and profit of the Group; and
ST-ARCH

103
Independent Auditors’ report TOTHEMEMBERSOF'LAXO3MITH+LINEPLC

We have audited the Group financial statements of Opinion on other matter prescribed by the

'LAXO3MITH+LINEPLCFORTHEYEARENDEDST$ECEMBERWHICH Companies Act 2006
comprise the Consolidated income statement, the Consolidated
)NOUROPINIONTHEINFORMATIONGIVENINTHE$IRECTORS2EPORTFOR
statement of comprehensive income, the Consolidated balance
the financial year for which the Group financial statements are
sheet, the Consolidated statement of changes in equity, the
prepared is consistent with the Group financial statements.
#ONSOLIDATEDCASHmOWSTATEMENTANDTHERELATED.OTES
4HElNANCIALREPORTINGFRAMEWORKTHATHASBEENAPPLIEDINTHEIR
Matters on which we are required to report
preparation is applicable law and International Financial Reporting
Standards (IFRS) as adopted by the European Union.
by exception
We have nothing to report in respect of the following:
Respective responsibilities of directors and Under the Companies Act 2006 we are required to report to you if,
auditors in our opinion:
!SEXPLAINEDMOREFULLYINTHE$IRECTORSSTATEMENTOF
s C ERTAINDISCLOSURESOFDIRECTORSREMUNERATIONSPECIlEDBYLAWARE
responsibilities set out on page 102, the directors are responsible
not made; or
for the preparation of the Group financial statements and for being
satisfied that they give a true and fair view. Our responsibility is to s WEHAVENOTRECEIVEDALLTHEINFORMATIONANDEXPLANATIONSWE

AUDITANDEXPRESSANOPINIONONTHE'ROUPlNANCIALSTATEMENTS require for our audit.
in accordance with applicable law and International Standards on
Auditing (UK and Ireland). Those standards require us to comply 5NDERTHE,ISTING2ULESWEAREREQUIREDTOREVIEW
WITHTHE!UDITING0RACTICES"OARDS%THICAL3TANDARDSFOR!UDITORS s THEDIRECTORSSTATEMENTSETOUTONPAGE102, in relation to
This report, including the opinions, has been prepared for and only going concern;
FORTHECOMPANYSMEMBERSASABODYINACCORDANCEWITH#HAPTER s T HEPARTOFTHE#ORPORATE'OVERNANCE3TATEMENTRELATINGTOTHE
3 of Part 16 of the Companies Act 2006 and for no other purpose. COMPANYSCOMPLIANCEWITHTHENINEPROVISIONSOFTHE*UNE
We do not, in giving these opinions, accept or assume responsibility Combined Code specified for our review; and
for any other purpose or to any other person to whom this report
ISSHOWNORINTOWHOSEHANDSITMAYCOMESAVEWHEREEXPRESSLY s C ERTAINELEMENTSOFTHEREPORTTOSHAREHOLDERSBYTHE"OARDON
agreed by our prior consent in writing. DIRECTORSREMUNERATION
Other matters
Scope of the audit of the financial statements
We have reported separately on the parent company financial
An audit involves obtaining evidence about the amounts and STATEMENTSOF'LAXO3MITH+LINEPLCFORTHEYEARENDEDST
disclosures in the financial statements sufficient to give reasonable $ECEMBERANDONTHEINFORMATIONINTHE$IRECTORS

assurance that the financial statements are free from material Remuneration Report that is described as having been audited.
misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to The Company has passed a resolution in accordance with section
the GROUPSCIRCUMSTANCESANDHAVEBEENCONSISTENTLYAPPLIEDAND OFTHE#OMPANIES!CTTHATTHESENIORSTATUTORYAUDITORS
adequately disclosed; the reasonableness of significant accounting name should not be stated.
estimates made by the directors; and the overall presentation of the
financial statements.
Opinion on financial statements

In our opinion the Group financial statements: 0RICEWATERHOUSE#OOPERS,,0
s GIVEATRUEANDFAIRVIEWOFTHESTATEOFTHE'ROUPSAFFAIRSASAT Chartered Accountants and Statutory Auditors
31st December 2010 and of its profit and cash flows for the year ,ONDON
then ended; ST-ARCH
s H
AVEBEENPROPERLYPREPAREDINACCORDANCEWITH)&23ASADOPTED
by the European Union; and
s H
AVEBEENPREPAREDINACCORDANCEWITHTHEREQUIREMENTSOFTHE
Companies Act 2006 and Article 4 of the lAS Regulation.
Separate opinion in relation to IFRS as issued

by the IASB
!SEXPLAINEDINNOTETOTHE'ROUPlNANCIALSTATEMENTSTHE
Group in addition to complying with its legal obligation to apply
IFRS as adopted by the European Union, has also applied IFRS as
issued by the International Accounting Standards Board (IASB).
In our opinion the Group financial statements comply with IFRS as
issued by the IASB.

104
Consolidated income statement for the year ended 31st December 2010
2010
Results
BEFOREMAJOR -AJOR
restructuring restructuring Total
.OTES £m £m £m
Turnover 6 – 28,392

Cost of sales ) ) (7,592)
Gross profit ) 20,800
Selling, general and administration ) ) (13,053)
Research and development (3,964) (493) (4,457)
Other operating income 493 – 493
Operating profit 9 ) 3,783
Finance income 11 116 – 116

Finance costs 12 ) (3) (831)
Profit on disposal of interest in associates – 8
3HAREOFAFTERTAXPROFITSOFASSOCIATESANDJOINTVENTURES 13 – 81
Profit before taxation ) 3,157
4AXATION 14 ) 240 (1,304)
Profit after taxation for the year 2,961 ) 1,853
Profit attributable to non-controlling interests 219 – 219

Profit attributable to shareholders 2,742 ) 1,634
2,961 ) 1,853
Basic earnings per share (pence) 32.1p

Diluted earnings per share (pence) 31.9p
4HECALCULATIONOF@2ESULTSBEFOREMAJORRESTRUCTURINGISDESCRIBEDIN.OTE@0RESENTATIONOFTHEFINANCIALSTATEMENTS
Consolidated statement of comprehensive income for the year ended 31st December 2010
2010
£m
Profit for the year 1,853

%XCHANGEMOVEMENTSONOVERSEASNETASSETSANDNETINVESTMENTHEDGES 166
RecLASSIFICATIONOFEXCHANGEONLIQUIDATIONORDISPOSALOFOVERSEASSUBSIDIARIES (2)
4AXONEXCHANGEMOVEMENTS –
Fair value movements on available-for-sale investments 94
$EFERREDTAXONfair value movements on available-for-sale investments (25)
Reclassification of fair value movements on available-for-sale investments 1
$EFERREDTAXREVERSEDONREClassification of available-for-sale investments (3)
Fair value movements on cash flow hedges (8)
$EFERREDTAXONFAIRVALUEMOVEMENTSONCASHFLOWHEDGES 1
Reclassification of cash flow hedges to income statement 3
Fair value movement on subsidiary acquisition –
Cash flow hedge reclassified to goodwill 6
Actuarial losses on defined benefit plans (1)
$EFERREDTAXONACTUARIALMOVEMENTSINDEFINEDBENEFITPLANS 1
/THERCOMPREHENSIVEINCOMEEXPENSE FORTHEYEAR 233
Total comprehensive income for the year 2,086
Total comprehensive income for the year attributable to:

Shareholders 1,847
.ON CONTROLLINGINTERESTS 239
Total comprehensive income for the year 2,086

105
2009

Results Results
BEFOREMAJOR -AJOR BEFOREMAJOR -AJOR
restructuring restructuring Total restructuring restructuring Total
£m £m £m £m £m £m
– –

) ) ) ) (639) )
21,273 ) (639) 17,937
(9,200) (392) ) ) (304) )
) ) (4,106) ) ) )
– –
) ) 7,141
70 – 70 313 – 313
) (3) ) ) ) )
– – – –

64 – 64 –
) (1,123)
(2,443) 221 (2,222) (2,231) (1,947)
(614) ) 4,712
– 110 – 110

(614) ) 4,602
(614) ) 4,712
109.1p p
p p

2009
£m £m
4,712
(194) 1,017
(44)
19
42 (47)
(24)
– (34)
13 3
(6) 6
2 (3)
1 –
(6) –
– –
) (1,370)
441
(673) 117
4,996
4,670
101
4,996

106
Consolidated balance sheet as at 31st December 2010

2010 2009
.OTES £m £m
Non-current assets
Property, plant and equipment 17 9,045 9,374
Goodwill 3,606 3,361
Other intangible assets 19 8,532
)NVESTMENTSINASSOCIATESANDJOINTVENTURES 20 1,081
Other investments 21 711
$EFERREDTAXASSETS 14 2,566 2,374
Derivative financial instruments 41 97
Other non-current assets 22 556
Total non-current assets 26,194
Current assets
Inventories 23 3,837 4,064
#URRENTTAXRECOVERABLE 14 56
Trade and other receivables 24 5,793 6,492
Derivative financial instruments 41 93 129
,IQUIDINVESTMENTS 32 184
Cash and cash equivalents 6,057
Assets held for sale 26 16 14
Total current assets 16,036
Total assets 42,230
Current liabilities
Short-term borrowings 32 (291) (1,471)
Trade and other payables 27 (6,888) (6,772)
Derivative financial instruments 41 (188) )
#URRENTTAXPAYABLE 14 (1,047) )
Short-term provisions 29 (4,380) )
Total current liabilities (12,794) )
Non-current liabilities
,ONG TERMBORROWINGS 32 (14,809) )
$EFERREDTAXLIABILITIES 14 (707) )
Pensions and other post-employment benefits (2,672) )
Other provisions 29 (904) )
Derivative financial instruments 41 (5) –
Other non-current liabilities 30 (594) )
Total non-current liabilities (19,691) (20,002)
Total liabilities (32,485) (32,120)
Net assets 9,745 10,742
Equity
Share capital 33 1,418 1,416
Share premium account 33 1,428
Retained earnings 34 4,779 6,321
Other reserves 34 1,262 900
Shareholders’ equity 8,887
.ON CONTROLLINGINTERESTS 858 737
Total equity 9,745 10,742
!PPROVEDBYTHE"OARDONST-ARCH
Chairman

107
Consolidated statement of changes in equity for the year ended 31st December 2010
3HAREHOLDERSEQUITY

.ON
Share Share Retained Other controlling Total
capital premium earnings reserves Total interests equity
£m £m £m £m £m £m £m
!TST*ANUARY 1,266 9,603 307 9,910

Profit for the year – – 4,602 – 4,602 110 4,712
/THERCOMPREHENSIVEINCOMEEXPENSE FORTHEYEAR – – 121 ) 49 117
Distributions to non-controlling interests – – – – – (79) (79)
Dividends to shareholders – – (2,929) – (2,929) – (2,929)
Ordinary shares issued 2 60 – – 62 – 62
Ordinary shares purchased and cancelled (90) – (3,706) 90 (3,706) – (3,706)
Ordinary shares acquired by ESOP Trusts – – – (19) (19) – (19)
Ordinary shares transferred by ESOP Trusts – – – 10 10 – 10
Write-down of shares held by ESOP Trusts – – ) – – –
Share-based incentive plans – – 241 – 241 – 241

4AXONSHARE BASEDINCENTIVEPLANS – – (1) – (1) – (1)
!TST$ECEMBER 1,326 4,622 7,931 8,318
Profit for the year – – – 5,669
/THERCOMPREHENSIVEEXPENSE INCOMEFORTHEYEAR – – (663) 27 (636) (37) (673)
Distributions to non-controlling interests – – – – – ) (89)
Changes in non-controlling interests – – – – – 338
Put option over non-controlling interest – – – (2) (2) – (2)
Dividends to shareholders – – (3,003) – (3,003) – (3,003)
Ordinary shares acquired by ESOP Trusts – – – ) ) – (57)
Write-down of shares held by ESOP Trusts – – ) – – –
Share-based incentive plans – – 171 – 171 – 171
4AXONSHARE BASEDINCENTIVEPLANS – – 14 – 14 – 14
At 31st December 2009 1,416 6,321 900 737 10,742

Profit for the year – – 1,634 – 1,634 219 1,853
Other comprehensive income for the year – – 144 69 213 20 233
Distributions to non-controlling interests – – – – – ) (118)
Dividends to shareholders – – ) – ) – (3,205)
Ordinary shares acquired by ESOP Trusts – – – (16) (16) – (16)
Write-down of shares held by ESOP Trusts – – (292) 292 – – –
Share-based incentive plans – – – – 175
4AXONSHARE BASEDINCENTIVEPLANS – – 2 – 2 – 2
At 31st December 2010 4,779 1,262 9,745

108
Consolidated cash flow statement for the year ended 31st December 2010
2010 2009
.OTES £m £m £m
Cash flow from operating activities

0ROFITAFTERTAXATIONFORTHEYEAR 1,853 4,712
!DJUSTMENTSRECONCILINGPROFITAFTERTAXTOOPERATINGCASHFLOWS 36 6,778 4,343
Cash generated from operations 8,631
4AXATIONPAID (1,834) (1,704) )
.ETCASHINFLOWFROMOPERATINGACTIVITIES 6,797
Cash flow from investing activities

Purchase of property, plant and equipment (1,014) ) (1,437)
Proceeds from sale of property, plant and equipment 92 20
Purchase of intangible assets (621) ) (632)
Proceeds from sale of intangible assets 126 171
Purchase of equity investments (279) ) )
Proceeds from sale of equity investments 27 42
Purchase of businesses, net of cash acquired (354) (2,792) )
)NVESTMENTSINASSOCIATESANDJOINTVENTURES (61) (29) (9)
Decrease in liquid investments 91
Interest received 107 90 320
$IVIDENDSFROMASSOCIATESANDJOINTVENTURES 18 17 12
Proceeds from disposal of associates – –
.ETCASHOUTFLOWFROMINVESTINGACTIVITIES (1,868) (4,013) (1,149)
Cash flow from financing activities

Proceeds from own shares for employee share options 17 13 9
Shares acquired by ESOP Trusts (16) ) (19)
Issue of share capital 33 62 43 62
Purchase of own shares for cancellation – – (3,706)
Increase in long-term loans –
Increase in short-term loans 6 646
Repayment of short-term loans (1,296) ) (3,334)
.ETREPAYMENTOFOBLIGATIONSUNDERFINANCELEASES (45) ) )

Interest paid (775) ) (730)
Dividends paid to shareholders (3,205) (3,003) (2,929)
Distributions to non-controlling interests (118) ) (79)
Other financing cash flows (201) (109)
.ETCASHOUTFLOWFROMFINANCINGACTIVITIES (5,571) (2,774) )
$ECREASE INCREASEINCASHANDBANKOVERDRAFTS 37 (642)

%XCHANGEADJUSTMENTS 81 ) 1,103
#ASHANDBANKOVERDRAFTSATBEGINNINGOFYEAR 6,368 3,221
#ASHANDBANKOVERDRAFTSATENDOFYEAR 5,807
#ASHANDBANKOVERDRAFTSATENDOFYEARCOMPRISE
Cash and cash equivalents 6,057
Overdrafts (250) (177) )
5,807

109
Notes to the financial statements

1 Presentation of the financial statements 7ITHANESTIMATEDTOTALCOSTOFAPPROXIMATELYaBILLIONTHE

EXPANDEDPROGRAMMEISEXPECTEDTODELIVERANNUALPRE TAXSAVINGS
Description of business OFAPPROXIMATELYaBILLIONBYTHETIMEITISSUBSTANTIALLYCOMPLETE
'LAXO3MITH+LINEISAMAJORGLOBALHEALTHCAREGROUPWHICHIS IN'IVENTHEEXTENTANDCOSTOFTHE/PERATIONAL%XCELLENCE
engaged in the creation and discovery, development, manufacture programme, management believes it has a material impact on
ANDMARKETINGOFPHARMACEUTICALPRODUCTSINCLUDINGVACCINES '3+SOPERATINGRESULTSANDONTHEMANNERINWHICH'3+SBUSINESS
over-the-counter (OTC) medicines and health-related consumer is conducted. GSK presents the restructuring costs incurred
PRODUCTS'3+SPRINCIPALPHARMACEUTICALPRODUCTSINCLUDE SOLELYASADIRECTRESULTOFTHE/PERATIONAL%XCELLENCEPROGRAMME
medicines in the following therapeutic areas: respiratory, INASEPARATECOLUMNINTHEINCOMESTATEMENTTITLED@-AJOR
anti-virals including HIV, central nervous system, cardiovascular RESTRUCTURING
and urogenital, metabolic, anti-bacterials, oncology and emesis,
vaccines and dermatologicals. )NADDITIONTOTHERESTRUCTURINGCOSTSOFTHE/PERATIONAL%XCELLENCE
PROGRAMMETHEMAJORRESTRUCTURINGCOLUMNINTHEINCOME
Compliance with applicable law and IFRS statement includes restructuring costs incurred solely as a direct
The financial statements have been prepared in accordance with result of any restructuring programmes that follow, and relate to,
the Companies Act 2006, Article 4 of the IAS Regulation and material acquisitions where the operations of the acquired business
International Accounting Standards (IAS) and International Financial OVERLAPEXTENSIVELYWITH'3+SEXISTINGOPERATIONS

Reporting Standards (IFRS) and related interpretations, as adopted The restructuring activities that follow, and relate to, such
by the European Union. ACQUISITIONSAREOFTHESAMENATUREASTHOSEUNDERTAKENUNDER
THE/PERATIONAL%XCELLENCEPROGRAMMEANDAREALSOCARRIEDOUT
The financial statements are also in compliance with IFRS as issued
FOLLOWINGADETAILEDFORMALPLAN-ANAGEMENTTHEREFORECONSIDERS
by the International Accounting Standards Board.
it appropriate to present the costs of these restructuring activities
Composition of financial statements INTHESAMEMANNER4HEBILLIONaMILLION ACQUISITIONOF
The consolidated financial statements are drawn up in Sterling, the Reliant Pharmaceuticals in December 2007 and the $3.6 billion
FUNCTIONALCURRENCYOF'LAXO3MITH+LINEPLCANDINACCORDANCEWITH aBILLION ACQUISITIONOF3TIEFEL,ABORATORIESIN*ULYARE
IFRS accounting presentation. The financial statements comprise: the only acquisitions since October 2007 that meet the criteria set
out above and are the only acquisitions where the costs incurred
s #ONSOLIDATEDINCOMESTATEMENT as a direct result of a related restructuring programme have been
s #ONSOLIDATEDSTATEMENTOFCOMPREHENSIVEINCOME INCLUDEDWITHINTHEMAJORRESTRUCTURINGCOLUMN
s #ONSOLIDATEDBALANCESHEET 4HE'ROUPSRESULTSBEFORETHECOSTSOFTHE/PERATIONAL%XCELLENCE
s #ONSOLIDATEDSTATEMENTOFCHANGESINEQUITY programme and acquisition-related restructuring programmes
s #ONSOLIDATEDCASHmOWSTATEMENT meeting the criteria described above are also presented in a
Financial statements P102–P191s

s .OTESTOTHElNANCIALSTATEMENTS separate column in the income statement and are described as
2ESULTSBEFOREMAJORRESTRUCTURING4HISPRESENTATIONWHICH
Accounting convention '3+INTENDSTOAPPLYCONSISTENTLYTOFUTUREMAJORRESTRUCTURING
The financial statements have been prepared using the historical PROGRAMMESTHATHAVEAMATERIALIMPACTON'3+SOPERATINGRESULTS
cost convention, as modified by the revaluation of certain items, ANDONTHEMANNERINWHICH'3+SBUSINESSISCONDUCTEDHAS
as stated in the accounting policies. BEENADOPTEDTOSHOWCLEARLYTHE'ROUPSRESULTSBOTHBEFOREAND
AFTERTHECOSTSOFTHESERESTRUCTURINGPROGRAMMES-ANAGEMENT
Financial period
believes that this presentation assists investors in gaining a clearer
4HESElNANCIALSTATEMENTSCOVERTHElNANCIALYEARFROMST*ANUARY UNDERSTANDINGOFTHE'ROUPSlNANCIALPERFORMANCEANDIN
to 31st December 2010, with comparative figures for the financial MAKINGPROJECTIONSOFFUTURElNANCIALPERFORMANCEASRESULTSTHAT
YEARSFROMST*ANUARYTOST$ECEMBERANDWHERE include such costs, by virtue of their size and nature, have limited
APPROPRIATEFROMST*ANUARYTOST$ECEMBER comparative value. This presentation is also consistent with the way
Composition of the Group MANAGEMENTASSESSESTHE'ROUPSlNANCIALPERFORMANCE
!LISTOFTHESUBSIDIARYANDASSOCIATEDUNDERTAKINGSWHICHINTHE Any restructuring costs that do not arise solely as a direct result
opinion of the Directors, principally affected the amount of profit OFTHE/PERATIONAL%XCELLENCEPROGRAMMEANDRESTRUCTURING
ORTHENETASSETSOFTHE'ROUPISGIVENIN.OTE@0RINCIPAL'ROUP programmes following, and relating to, acquisitions meeting the
COMPANIES criteria described above continue to be reported in operating
Presentation of restructuring costs EXPENSESWITHINRESULTSBEFOREMAJORRESTRUCTURING
In October 2007, the Board approved the implementation of a
detailed formal plan for, and GSK announced, a significant new
/PERATIONAL%XCELLENCERESTRUCTURINGPROGRAMME!SECONDFORMAL
PLANREPRESENTINGASIGNIlCANTEXPANSIONOFTHE/PERATIONAL
%XCELLENCEPROGRAMMEWASAPPROVEDBYTHE"OARDANDANNOUNCED
IN&EBRUARY!FURTHEREXPANSIONWASAPPROVEDBYTHE"OARD
and announced in February 2010. This restructuring programme,
COMPRISINGTHESEDETAILEDFORMALPLANSCOVERSALLAREASOF'3+S
business, including manufacturing, selling, R&D and infrastructure.

110
1 Presentation of the financial statements 2 Accounting principles and policies

continued Consolidation
Accounting principles and policies The consolidated financial statements include:
The preparation of the financial statements in conformity with s THEASSETSANDLIABILITIESANDTHERESULTSANDCASHmOWSOFTHE
generally accepted accounting principles requires management to company and its subsidiaries, including ESOP Trusts
MAKEESTIMATESANDASSUMPTIONSTHATAFFECTTHEREPORTEDAMOUNTS
of assets and liabilities and disclosure of contingent assets and s THE'ROUPSSHAREOFTHERESULTSANDNETASSETSOFASSOCIATESAND
liabilities at the date of the financial statements and the reported JOINTVENTURES
AMOUNTSOFREVENUESANDEXPENSESDURINGTHEREPORTINGPERIOD The financial statements of entities consolidated are made up to
Actual results could differ from those estimates. 31st December each year.
The financial statements have been prepared in accordance Entities over which the Group has the power to govern the
WITHTHE'ROUPSACCOUNTINGPOLICIESAPPROVEDBYTHE"OARD financial and operating policies are accounted for as subsidiaries.
ANDDESCRIBEDIN.OTE@!CCOUNTINGPRINCIPLESANDPOLICIES 7HERETHE'ROUPHASTHEABILITYTOEXERCISEJOINTCONTROLTHE
Information on the application of these accounting policies, ENTITIESAREACCOUNTEDFORASJOINTVENTURESANDWHERETHE'ROUP
INCLUDINGAREASOFESTIMATIONANDJUDGEMENTISGIVENIN.OTE HASTHEABILITYTOEXERCISESIGNIlCANTINmUENCETHEYAREACCOUNTED
@+EYACCOUNTINGJUDGEMENTSANDESTIMATES7HEREAPPROPRIATE for as associates. The results and assets and liabilities of associates
comparative figures are reclassified to ensure a consistent ANDJOINTVENTURESAREINCORPORATEDINTOTHECONSOLIDATEDlNANCIAL
presentation with current year information. statements using the equity method of accounting.
Implementation of new accounting standards Interests acquired in entities are consolidated from the date the
7ITHEFFECTFROMST*ANUARY'3+HASIMPLEMENTED Group acquires control and interests sold are de-consolidated
)&232EVISED @"USINESSCOMBINATIONSAND)!32EVISED from the date control ceases.
@#ONSOLIDATEDANDSEPARATElNANCIALSTATEMENTSANDMINOR
Transactions and balances between subsidiaries are eliminated
amendments to a number of other accounting standards.
ANDNOPROlTBEFORETAXISTAKENONSALESBETWEENSUBSIDIARIES
IFRS 3 (Revised) and IAS 27 (Revised) have been implemented
until the products are sold to customers outside the Group.
prospectively, with no restatement of comparative information.
4HERELEVANTPROPORTIONOFPROlTSONTRANSACTIONSWITHJOINT
The revised accounting policy on business combinations is set out ventures and associates is also deferred until the products are sold
IN.OTE@!CCOUNTINGPRINCIPLESANDPOLICIESANDACQUISITIONS TOTHIRDPARTIES$EFERREDTAXRELIEFONUNREALISEDINTRA 'ROUPPROlT
DURINGTHEYEARAREDISCUSSEDIN.OTE@!CQUISITIONSAND ISACCOUNTEDFORONLYTOTHEEXTENTTHATITISCONSIDEREDRECOVERABLE
DISPOSALS4HEREVISIONSTO)!3HADNOIMPACTONTHECURRENT
Goodwill is capitalised as a separate item in the case of subsidiaries
period.
ANDASPARTOFTHECOSTOFINVESTMENTINTHECASEOFJOINTVENTURES
Parent company financial statements and associates. Goodwill is denominated in the currency of the
4HElNANCIALSTATEMENTSOFTHEPARENTCOMPANY'LAXO3MITH+LINE operation acquired.
plc, have been prepared in accordance with UK GAAP and with UK Where the cost of acquisition is below the fair value of the net
accounting presentation. The company balance sheet is presented assets acquired, the difference is recognised directly in the
ONPAGEANDTHEACCOUNTINGPOLICIESAREGIVENONPAGE income statement.
Business combinations
Business combinations are accounted for using the acquisition
accounting method. Identifiable assets, liabilities and contingent
liabilities acquired are measured at fair value at acquisition date.
The consideration transferred is measured at fair value and includes
the fair value of any contingent consideration. The costs of
acquisition are charged to the income statement in the period
in which they are incurred.
Where not all of the equity of a subsidiary is acquired the non-
controlling interest is recognised either at fair value or at the non-
CONTROLLINGINTERESTSSHAREOFTHENETASSETSOFTHESUBSIDIARYONA
CASE BY CASEBASIS#HANGESINTHE'ROUPSOWNERSHIPPERCENTAGE
of subsidiaries are accounted for within equity.

111
2 Accounting principles and policies continued Expenditure

%XPENDITUREISRECOGNISEDINRESPECTOFGOODSANDSERVICESRECEIVED
Foreign currency translation
when supplied in accordance with contractual terms. Provision is
&OREIGNCURRENCYTRANSACTIONSAREBOOKEDINTHEFUNCTIONALCURRENCY MADEWHENANOBLIGATIONEXISTSFORAFUTURELIABILITYINRESPECTOFA
OFTHE'ROUPCOMPANYATTHEEXCHANGERATERULINGONTHEDATEOF past event and where the amount of the obligation can be reliably
transaction. Foreign currency monetary assets and liabilities are ESTIMATED-ANUFACTURINGSTART UPCOSTSBETWEENVALIDATIONAND
RETRANSLATEDINTOTHEFUNCTIONALCURRENCYATRATESOFEXCHANGERULING THEACHIEVEMENTOFNORMALPRODUCTIONAREEXPENSEDASINCURRED
ATTHEBALANCESHEETDATE%XCHANGEDIFFERENCESAREINCLUDEDINTHE !DVERTISINGANDPROMOTIONEXPENDITUREISCHARGEDTOTHEINCOME
income statement. statement as incurred. Shipment costs on inter-company transfers
On consolidation, assets and liabilities, including related goodwill, are charged to cost of sales; distribution costs on sales to customers
OFOVERSEASSUBSIDIARIESASSOCIATESANDJOINTVENTURESARETRANSLATED AREINCLUDEDINSELLINGGENERALANDADMINISTRATIVEEXPENDITURE
INTO3TERLINGATRATESOFEXCHANGERULINGATTHEBALANCESHEETDATE Restructuring costs are recognised and provided for, where
The results and cash flows of overseas subsidiaries, associates and APPROPRIATEINRESPECTOFTHEDIRECTEXPENDITUREOFABUSINESS
JOINTVENTURESARETRANSLATEDINTO3TERLINGUSINGAVERAGERATESOF reorganisation where the plans are sufficiently detailed and well
EXCHANGE advanced, and where appropriate communication to those affected
%XCHANGEADJUSTMENTSARISINGWHENTHEOPENINGNETASSETSANDTHE HASBEENUNDERTAKEN

profits for the year retained by overseas subsidiaries, associates and Research and development
JOINTVENTURESARETRANSLATEDINTO3TERLINGLESSEXCHANGEDIFFERENCES
2ESEARCHANDDEVELOPMENTEXPENDITUREISCHARGEDTOTHEINCOME
arising on related foreign currency borrowings which hedge the
statement in the period in which it is incurred. Development
'ROUPSNETINVESTMENTINTHESEOPERATIONSARETAKENTOASEPARATE
EXPENDITUREISCAPITALISEDWHENTHECRITERIAFORRECOGNISINGANASSET
component of equity.
AREMETUSUALLYWHENAREGULATORYlLINGHASBEENMADEINAMAJOR
When translating into Sterling the assets, liabilities, results and MARKETANDAPPROVALISCONSIDEREDHIGHLYPROBABLE0ROPERTYPLANT
CASHmOWSOFOVERSEASSUBSIDIARIESASSOCIATESANDJOINTVENTURES and equipment used for research and development is capitalised
which are reported in currencies of hyper-inflationary economies, ANDDEPRECIATEDINACCORDANCEWITHTHE'ROUPSPOLICY
ADJUSTMENTSAREMADEWHEREMATERIALTOREmECTCURRENTPRICELEVELS
Environmental expenditure
Any loss on net monetary assets is charged to the consolidated
income statement. %NVIRONMENTALEXPENDITURERELATEDTOEXISTINGCONDITIONSRESULTING
from past or current operations and from which no current or
Revenue future benefit is discernible is charged to the income statement.
Revenue is recognised in the income statement when goods or The Group recognises its liability on a site-by-site basis when it can
SERVICESARESUPPLIEDORMADEAVAILABLETOEXTERNALCUSTOMERS BERELIABLYESTIMATED4HISLIABILITYINCLUDESTHE'ROUPSPORTIONOF

AGAINSTORDERSRECEIVEDTITLEANDRISKOFLOSSISPASSEDTOTHE the total costs and also a portion of other potentially responsible
customer, reliable estimates can be made of relevant deductions PARTIESCOSTSWHENITISPROBABLETHATTHEYWILLNOTBEABLETOSATISFY
and all relevant obligations have been fulfilled, such that the their respective shares of the clean-up obligation. Recoveries of
earnings process is regarded as being complete. reimbursements are recorded as assets when virtually certain.
Turnover represents net invoice value after the deduction of Legal and other disputes
discounts and allowances given and accruals for estimated future Provision is made for the anticipated settlement costs of legal or
rebates and returns. The methodology and assumptions used other disputes against the Group where an outflow of resources
TOESTIMATEREBATESANDRETURNSAREMONITOREDANDADJUSTED is considered probable and a reliable estimate can be made of
regularly in the light of contractual and legal obligations, historical THELIKELYOUTCOME)NADDITIONPROVISIONISMADEFORLEGALOR
TRENDSPASTEXPERIENCEANDPROJECTEDMARKETCONDITIONS-ARKET OTHEREXPENSESARISINGFROMCLAIMSRECEIVEDOROTHERDISPUTES
conditions are evaluated using wholesaler and other third- In respect of product liability claims related to certain products,
PARTYANALYSESMARKETRESEARCHDATAANDINTERNALLYGENERATED there is sufficient history of claims made and settlements to
INFORMATION6ALUEADDEDTAXANDOTHERSALESTAXESAREEXCLUDED ENABLEMANAGEMENTTOMAKEARELIABLEESTIMATEOFTHEPROVISION
from revenue. required to cover unasserted claims. In certain cases, an incurred
BUTNOTREPORTED)".2 ACTUARIALTECHNIQUEISUSEDTODETERMINE
Where the Group co-promotes a product and the third party
this estimate.
records the sale, the Group records its share of revenue as
co-promotion income within turnover. The nature of co-promotion The Group may become involved in legal proceedings, in respect of
activities is such that the Group records no costs of sales. whichITISNOTPOSSIBLETOMAKEARELIABLEESTIMATEOFTHEEXPECTED
Pharmaceutical turnover includes co-promotion revenue of financial effect, if any, that could result from ultimate resolution of
aMILLIONnaMILLIONnaMILLION the proceedings. In these cases, appropriate disclosure about such
cases would be included but no provision would be made. Costs
Royalty income is recognised in other operating income on
associated with claims made by the Group against third parties are
an accruals basis in accordance with the terms of the relevant
charged to the income statement as they are incurred.
licensing agreements.

112
2 Accounting principles and policies continued Leases

,EASINGAGREEMENTSWHICHTRANSFERTOTHE'ROUPSUBSTANTIALLY
Pensions and other post-employment benefits
ALLTHEBENElTSANDRISKSOFOWNERSHIPOFANASSETARETREATEDAS
The costs of providing pensions under defined benefit schemes are finance leases, as if the asset had been purchased outright.
CALCULATEDUSINGTHEPROJECTEDUNITCREDITMETHODANDSPREADOVER The assets are included in PP&E or computer software and the
THEPERIODDURINGWHICHBENElTISEXPECTEDTOBEDERIVEDFROM capital elements of the leasing commitments are shown as
THEEMPLOYEESSERVICESCONSISTENTWITHTHEADVICEOFQUALIlED obligations under finance leases. Assets held under finance leases
actuaries. Pension obligations are measured as the present value of are depreciated on a basis consistent with similar owned assets or
estimated future cash flows discounted at rates reflecting the yields the lease term if shorter. The interest element of the lease rental is
of high quality corporate bonds. included in the income statement. All other leases are operating
Pension scheme assets are measured at fair value at the balance leases and the rental costs are charged to the income statement on
sheet date. Actuarial gains and losses, differences between the a straight-line basis over the lease term.
EXPECTEDANDACTUALRETURNSOFASSETSANDTHEEFFECTOFCHANGES Goodwill
in actuarial assumptions, are recognised in the statement of
Goodwill is stated at cost less impairments. Goodwill is deemed to
comprehensive income in the year in which they arise.
have an indefinite useful life and is tested for impairment annually.
4HE'ROUPSCONTRIBUTIONSTODElNEDCONTRIBUTIONPLANSARE
7HERETHEFAIRVALUEOFTHEINTERESTACQUIREDINANENTITYSASSETS
charged to the income statement as incurred. The costs of other
LIABILITIESANDCONTINGENTLIABILITIESEXCEEDSTHECONSIDERATIONPAID
post-employment liabilities are calculated in a similar way to
THISEXCESSISRECOGNISEDIMMEDIATELYASAGAININTHEINCOME
defined benefit pension schemes and spread over the period
statement.
DURINGWHICHBENElTISEXPECTEDTOBEDERIVEDFROMTHEEMPLOYEES
services, in accordance with the advice of qualified actuaries. Other intangible assets
Employee share plans Intangible assets are stated at cost less provisions for amortisation
and impairments.
Incentives in the form of shares are provided to employees under
share option and share award schemes. ,ICENCESPATENTSKNOW HOWANDMARKETINGRIGHTSSEPARATELY
acquired or acquired as part of a business combination are
The fair values of these options and awards are calculated at their
AMORTISEDOVERTHEIRESTIMATEDUSEFULLIVESGENERALLYNOTEXCEEDING
GRANTDATESUSINGA"LACK 3CHOLESOPTIONPRICINGMODELANDCHARGED
20 years, using the straight-line basis, from the time they are
to the income statement over the relevant vesting periods.
available for use. The estimated useful lives for determining
The Group provides finance to ESOP Trusts to purchase company THEAMORTISATIONCHARGETAKEINTOACCOUNTPATENTLIVESWHERE
SHARESONTHEOPENMARKETTOMEETTHEOBLIGATIONTOPROVIDESHARES applicable, as well as the value obtained from periods of non-
WHENEMPLOYEESEXERCISETHEIROPTIONSORAWARDS#OSTSOFRUNNING EXCLUSIVITY!SSETLIVESAREREVIEWEDANDWHEREAPPROPRIATE
the ESOP Trusts are charged to the income statement. Shares held ADJUSTEDANNUALLY#ONTINGENTMILESTONEPAYMENTSARERECOGNISED
by the ESOP Trusts are deducted from other reserves. A transfer at the point that the contingent event becomes certain.
is made between other reserves and retained earnings over the Any development costs incurred by the Group and associated
vesting periods of the related share options or awards to reflect the WITHACQUIREDLICENCESPATENTSKNOW HOWORMARKETINGRIGHTS
ULTIMATEPROCEEDSRECEIVABLEFROMEMPLOYEESONEXERCISE are written off to the income statement when incurred, unless the
criteria for recognition of an internally generated intangible asset
Property, plant and equipment
AREMETUSUALLYWHENAREGULATORYlLINGHASBEENMADEINAMAJOR
Property, plant and equipment (PP&E) is stated at the cost of MARKETANDAPPROVALISCONSIDEREDHIGHLYPROBABLE
purchase or construction less provisions for depreciation and
impairment. Financing costs are capitalised within the cost of Acquired brands are valued independently as part of the fair value
qualifying assets in construction. of businesses acquired from third parties where the brand has a
value which is substantial and long-term and where the brands
Depreciation is calculated to write off the cost less residual value either are contractual or legal in nature or can be sold separately
OF00%EXCLUDINGFREEHOLDLANDUSINGTHESTRAIGHT LINEBASISOVER from the rest of the businesses acquired. Brands are amortised over
THEEXPECTEDUSEFULLIFE2ESIDUALVALUESANDLIVESAREREVIEWEDAND THEIRESTIMATEDUSEFULLIVESOFUPTOYEARSEXCEPTWHEREITIS
WHEREAPPROPRIATEADJUSTEDANNUALLY4HENORMALEXPECTEDUSEFUL considered that the useful economic life is indefinite.
LIVESOFTHEMAJORCATEGORIESOF00%ARE
The costs of acquiring and developing computer software for
&REEHOLDBUILDINGS TOYEARS INTERNALUSEANDINTERNETSITESFOREXTERNALUSEARECAPITALISED
,EASEHOLDLANDAND ASINTANGIBLElXEDASSETSWHERETHESOFTWAREORSITESUPPORTS
BUILDINGS ,EASETERMORTOYEARS ASIGNIlCANTBUSINESSSYSTEMANDTHEEXPENDITURELEADSTOTHE
Plant and machinery 10 to 20 years creation of a durable asset. ERP systems software is amortised over
&IXTURESANDEQUIPMENT TOYEARS seven years and other computer software over three to five years.
On disposal of PP&E, the cost and related accumulated depreciation

and impairments are removed from the financial statements
ANDTHENETAMOUNTLESSANYPROCEEDSISTAKENTOTHEINCOME
statement.

113
2 Accounting principles and policies continued Trade receivables

Trade receivables are carried at original invoice amount less any
Impairment of non-current assets
provisions for doubtful debts. Provisions are made where there is
The carrying values of all non-current assets are reviewed for EVIDENCEOFARISKOFNON PAYMENTTAKINGINTOACCOUNTAGEING
impairment when there is an indication that the assets might be PREVIOUSEXPERIENCEANDGENERALECONOMICCONDITIONS7HENATRADE
impaired. Additionally, goodwill, intangible assets with indefinite receivable is determined to be uncollectable it is written off, firstly
useful lives and intangible assets which are not yet available for use against any provision available and then to the income statement.
are tested for impairment annually. Any provision for impairment is
charged to the income statement in the year concerned. Subsequent recoveries of amounts previously provided for are
CREDITEDTOTHEINCOMESTATEMENT,ONG TERMRECEIVABLESARE
Impairments of goodwill are not reversed. Impairment losses discounted where the effect is material.
on other non-current assets are only reversed if there has been
a change in estimates used to determine recoverable amounts Trade payables
ANDONLYTOTHEEXTENTTHATTHEREVISEDRECOVERABLEAMOUNTSDO Trade payables are held at amortised cost which equates to nominal
NOTEXCEEDTHECARRYINGVALUESTHATWOULDHAVEEXISTEDNETOF VALUE,ONG TERMPAYABLESAREDISCOUNTEDWHERETHE
depreciation or amortisation, had no impairments been recognised. effect is material.
Investments in associates and joint ventures Cash and cash equivalents

)NVESTMENTSINASSOCIATESANDJOINTVENTURESARECARRIEDINTHE Cash and cash equivalents comprise cash in hand, current balances
CONSOLIDATEDBALANCESHEETATTHE'ROUPSSHAREOFTHEIRNETASSETS WITHBANKSANDSIMILARINSTITUTIONSANDHIGHLYLIQUIDINVESTMENTS
at date of acquisition and of their post-acquisition retained profits generally with maturities of three months or less. They are readily
or losses together with any goodwill arising on the acquisition. CONVERTIBLEINTOKNOWNAMOUNTSOFCASHANDHAVEANINSIGNIlCANT
RISKOFCHANGESINVALUE
Available-for-sale investments
,IQUIDINVESTMENTSANDOTHERINVESTMENTSARECLASSIlEDASAVAILABLE Borrowings
for-sale investments and are initially recorded at fair value plus All borrowings are initially recorded at the amount of proceeds
transaction costs and then remeasured at subsequent reporting received, net of transaction costs. Borrowings are subsequently
dates to fair value. Unrealised gains and losses on available-for-sale carried at amortised cost, with the difference between the
investments are recognised directly in other comprehensive income. proceeds, net of transaction costs, and the amount due on
Impairments arising from the significant or prolonged decline in fair redemption being recognised as a charge to the income statement
value of an equity investment reduce the carrying amount of the over the period of the relevant borrowing.
asset directly and are charged to the income statement.
Taxation
On disposal or impairment of the investments, any gains and #URRENTTAXISPROVIDEDATTHEAMOUNTSEXPECTEDTOBEPAID

losses that have been deferred in other comprehensive income APPLYINGTAXRATESTHATHAVEBEENENACTEDORSUBSTANTIVELYENACTED
are reclassified to the income statement. Dividends on equity by the balance sheet date.
investments are recognised in the income statement when the
'ROUPSRIGHTTORECEIVEPAYMENTISESTABLISHED%QUITYINVESTMENTS $EFERREDTAXISPROVIDEDINFULLUSINGTHELIABILITYMETHODON
ARERECORDEDINNON CURRENTASSETSUNLESSTHEYAREEXPECTEDTOBE TEMPORARYDIFFERENCESARISINGBETWEENTHETAXBASESOFASSETSAND
sold within one year. liabilities and their carrying amounts in the financial statements.
$EFERREDTAXASSETSARERECOGNISEDTOTHEEXTENTTHATITISPROBABLE
Purchases and sales of equity investments are accounted for on THATFUTURETAXABLEPROlTSWILLBEAVAILABLEAGAINSTWHICHTHE
the trade date and purchases and sales of other available-for-sale TEMPORARYDIFFERENCESCANBEUTILISED$EFERREDTAXISPROVIDED
investments are accounted for on settlement date. on temporary differences arising on investments in subsidiaries,
Inventories ASSOCIATESANDJOINTVENTURESEXCEPTWHERETHETIMINGOFTHE
reversal of the temporary difference can be controlled and it is
Inventories are included in the financial statements at the lower
probable that the temporary difference will not reverse in the
of cost (including raw materials, direct labour, other direct costs
FORESEEABLEFUTURE$EFERREDTAXISPROVIDEDUSINGRATESOFTAXTHAT
and related production overheads) and net realisable value. Cost
have been enacted or substantively enacted by the balance sheet
is generally determined on a first in, first out basis. Pre-launch
DATE$EFERREDTAXLIABILITIESANDASSETSARENOTDISCOUNTED
inventory is held as an asset when there is a high probability of
regulatory approval for the product. Before that point a provision

is made against the carrying value to its recoverable amount; the
provision is then reversed at the point when a high probability of
regulatory approval is determined.

114
2 Accounting principles and policies continued 3 Key accounting judgements and estimates
Derivative financial instruments and hedging In preparing the financial statements, management is required
$ERIVATIVElNANCIALINSTRUMENTSAREUSEDTOMANAGEEXPOSURETO TOMAKEESTIMATESANDASSUMPTIONSTHATAFFECTTHEAMOUNTSOF
MARKETRISKS4HEPRINCIPALDERIVATIVEINSTRUMENTSUSEDBY'3+ARE ASSETSLIABILITIESREVENUEANDEXPENSESREPORTEDINTHElNANCIAL
foreign currency swaps, interest rate swaps and forward foreign statements. Actual amounts and results could differ from those
EXCHANGECONTRACTS4HE'ROUPDOESNOTHOLDORISSUEDERIVATIVE ESTIMATES4HEFOLLOWINGARECONSIDEREDTOBETHEKEYACCOUNTING
financial instruments for trading or speculative purposes. JUDGEMENTSANDESTIMATESMADE
Derivative financial instruments are classified as held-for-trading and Turnover

are carried in the balance sheet at fair value. Derivatives designated 2EVENUEISRECOGNISEDWHENTITLEANDRISKOFLOSSISPASSEDTOTHE
as hedging instruments are classified on inception as cash flow customer, reliable estimates can be made of relevant deductions
hedges, net investment hedges or fair value hedges. and all relevant obligations have been fulfilled, such that the
earnings process is regarded as being complete.
Changes in the fair value of derivatives designated as cash flow
hedges are recognised in other comprehensive income to the Gross turnover is reduced by rebates, discounts, allowances and
EXTENTTHATTHEHEDGESAREEFFECTIVE)NEFFECTIVEPORTIONSARE PRODUCTRETURNSGIVENOREXPECTEDTOBEGIVENWHICHVARYBY
recognised in profit or loss immediately. Amounts deferred in other product arrangements and buying groups. These arrangements
comprehensive income are reclassified to the income statement with purchasing organisations are dependent upon the submission
when the hedged item affects profit or loss. of claims some time after the initial recognition of the sale. Accruals
are made at the time of sale for the estimated rebates, discounts
.ETINVESTMENTHEDGESAREACCOUNTEDFORINASIMILARWAYTOCASH
or allowances payable or returns to be made, based on available
flow hedges.
MARKETINFORMATIONANDHISTORICALEXPERIENCE
Changes in the fair value of derivatives designated as fair value
Because the amounts are estimated they may not fully reflect the
hedges are recorded in the income statement, together with the
lNALOUTCOMEANDTHEAMOUNTSARESUBJECTTOCHANGEDEPENDENT
changes in the fair value of the hedged asset or liability.
upon, amongst other things, the types of buying group and
Changes in the fair value of any derivative instruments that do not PRODUCTSALESMIX
qualify for hedge accounting are recognised immediately in the
4HELEVELOFACCRUALISREVIEWEDANDADJUSTEDREGULARLYINTHELIGHTOF
income statement.
CONTRACTUALANDLEGALOBLIGATIONSHISTORICALTRENDSPASTEXPERIENCE
Discounting ANDPROJECTEDMARKETCONDITIONS-ARKETCONDITIONSAREEVALUATED
Where the time effect of money is material, balances are discounted USINGWHOLESALERANDOTHERTHIRD PARTYANALYSESMARKETRESEARCH
to current values using appropriate rates of interest. The unwinding data and internally generated information. Future events could
of the discounts is recorded in finance income and finance costs. cause the assumptions on which the accruals are based to change,
which could affect the future results of the Group.
Taxation
#URRENTTAXISPROVIDEDATTHEAMOUNTSEXPECTEDTOBEPAIDAND
DEFERREDTAXISPROVIDEDONTEMPORARYDIFFERENCESBETWEENTHE
TAXBASESOFASSETSANDLIABILITIESANDTHEIRCARRYINGAMOUNTSAT
the rates that have been enacted or substantively enacted by the
balance sheet date.
4HE'ROUPHASOPENTAXISSUESWITHANUMBEROFREVENUE
authorities. GSK continues to believe that it has made adequate
PROVISIONFORTHELIABILITIESLIKELYTOARISEFROMOPENASSESSMENTS
7HEREOPENISSUESEXISTTHEULTIMATELIABILITYFORSUCHMATTERS
may vary from the amounts provided and is dependent upon the
OUTCOMEOFNEGOTIATIONSWITHTHERELEVANTTAXAUTHORITIESORIF
necessary, litigation proceedings.

115
3 Key accounting judgements and estimates Other intangible assets

continued Where intangible assets are acquired by GSK from third parties
THECOSTSOFACQUISITIONARECAPITALISED,ICENCESTOCOMPOUNDS
Legal and other disputes in development are amortised from the point at which they are
GSK provides for anticipated settlement costs where an outflow available for use, over their estimated useful lives, which may
of resources is considered probable and a reliable estimate may INCLUDEPERIODSOFNON EXCLUSIVITY%STIMATEDUSEFULLIVESARE
BEMADEOFTHELIKELYOUTCOMEOFTHEDISPUTEANDLEGALANDOTHER REVIEWEDANNUALLYANDIMPAIRMENTTESTSAREUNDERTAKENIFEVENTS
EXPENSESARISINGFROMCLAIMSAGAINSTTHE'ROUP occur which call into question the carrying values of the assets.
4HECOMPANYS$IRECTORSHAVINGTAKENLEGALADVICEHAVE Brands acquired with businesses are capitalised independently
ESTABLISHEDPROVISIONSAFTERTAKINGINTOACCOUNTTHERELEVANT WHERETHEYARESEPARABLEANDHAVEANEXPECTEDLIFEOFMORETHAN
facts and circumstances of each matter and in accordance with one year. Brands are amortised on a straight-line basis over their
accounting requirements. In respect of product liability claims ESTIMATEDUSEFULLIVESNOTEXCEEDINGYEARSEXCEPTWHERETHE
related to certain products there is sufficient history of claims made end of the useful economic life cannot be foreseen. Where brands
ANDSETTLEMENTSTOENABLEMANAGEMENTTOMAKEARELIABLEESTIMATE ARENOTAMORTISEDTHEYARESUBJECTTOANNUALIMPAIRMENTTESTS
of the provision required to cover unasserted claims. In certain Both initial valuations and valuations for subsequent impairment
CASESANINCURREDBUTNOTREPORTED)".2 ACTUARIALTECHNIQUEIS TESTSAREBASEDONESTABLISHEDMARKETMULTIPLESORRISK ADJUSTED

used to determine this estimate. The Group may become involved future cash flows discounted using appropriate interest rates.
in legal proceedings, in respect of whichITISNOTPOSSIBLETOMAKEA These future cash flows are based on business forecasts and are
RELIABLEESTIMATEOFTHEEXPECTEDlNANCIALEFFECTIFANYTHATcould THEREFOREINHERENTLYJUDGEMENTAL&UTUREEVENTSCOULDCAUSETHE
result from ultimate resolution of the proceedings. In these cases, assumptions used in these impairment reviews to change with a
appropriate disclosure about such cases would be included, but consequent adverse effect on the future results of the Group.
no provision would be made. At 31st December 2010 provisions
for legal and other disputes amounted to £4.0 billion Pensions and other post-employment benefits
(2009 – £2.0 billion). The costs of providing pensions and other post-employment
benefits are charged to the income statement in accordance
The ultimate liability for legal claims may vary from the amounts with IAS 19 over the period during which benefit is derived from
provided and is dependent upon the outcome of litigation THEEMPLOYEESSERVICES4HECOSTSAREASSESSEDONTHEBASISOF
proceedings, investigations and possible settlement negotiations. assumptions selected by management. These assumptions
The position could change over time and, therefore, there can be include future earnings and pension increases, discount rates,
no assurance that any losses that result from the outcome of any EXPECTEDLONGTERMRATESOFRETURNONASSETSANDMORTALITYRATES
LEGALPROCEEDINGSWILLNOTEXCEEDTHEAMOUNTOFTHEPROVISIONS ANDAREDISCLOSEDIN.OTE@0ENSIONSANDOTHERPOST EMPLOYMENT
REPORTEDINTHE'ROUPSlNANCIALSTATEMENTSBYAMATERIALAMOUNT BENElTS

Property, plant and equipment 4HEEXPECTEDLONGTERMRATESOFRETURNONBONDSAREDETERMINED
!SSETOUTIN.OTE@0ROPERTYPLANTANDEQUIPMENTTHECARRYING BASEDONTHEPORTFOLIOMIXOFINDEX LINKEDGOVERNMENTAND
values of property, plant and equipment are tested for impairment CORPORATEBONDS!NEQUITYRISKPREMIUMISADDEDTOTHIS
when there is an indication that the values of the assets might be for equities.
impaired. Impairment is determined by reference to the higher of
fair value less costs to sell and value in use, measured by assessing Discount rates are derived from AA rated corporate bond yields
RISK ADJUSTEDFUTURECASHmOWSDISCOUNTEDUSINGAPPROPRIATE EXCEPTINCOUNTRIESWHERETHEREISNODEEPMARKETINCORPORATE
interest rates. These future cash flows are based on business bonds where government bond yields are used. Sensitivity analysis
FORECASTSANDARETHEREFOREINHERENTLYJUDGEMENTAL&UTUREEVENTS ISPROVIDEDIN.OTE@0ENSIONSANDOTHERPOST EMPLOYMENT
could cause the assumptions used in these impairment tests to BENElTSBUTAREDUCTIONINTHEDISCOUNTRATEWOULDLEAD
change, with a consequent adverse effect on the future results TOANINCREASEINTHENETPENSIONDElCITOFAPPROXIMATELY
of the Group. £472 million and an increase in the annual pension cost of
APPROXIMATELYaMILLION4HESELECTIONOFDIFFERENTASSUMPTIONS
Goodwill could affect the future results of the Group.
Goodwill arising on business combinations is capitalised and
allocated to an appropriate cash generating unit. It is deemed
to have an indefinite life and so is not amortised. Annual

impairment tests of the relevant cash generating units are
PERFORMED)MPAIRMENTTESTSAREBASEDONESTABLISHEDMARKET
MULTIPLESORRISK ADJUSTEDFUTURECASHmOWSDISCOUNTEDUSING
appropriate interest rates. These future cash flows are based
ONBUSINESSFORECASTSANDARETHEREFOREINHERENTLYJUDGEMENTAL
Future events could cause the assumptions used in these
IMPAIRMENTTESTSASSETOUTIN.OTE@'OODWILLTOCHANGE
with a consequent adverse effect on the future results of
the Group.

116
4 New accounting requirements 5 Exchange rates

The following new and amended accounting standards and IFRIC 4HE'ROUPUSESTHEAVERAGEOFEXCHANGERATESPREVAILINGDURING
INTERPRETATIONSHAVEBEENISSUEDBYTHE)!3"ANDARELIKELYTOAFFECT the period to translate the results and cash flows of overseas
future Annual Reports, although, in their current forms, none SUBSIDIARIESJOINTVENTURESANDASSOCIATEDUNDERTAKINGSINTO
ISEXPECTEDTOHAVEAMATERIALIMPACTONTHERESULTSORlNANCIAL Sterling and period end rates to translate the net assets of
position of the Group. THOSEUNDERTAKINGS4HECURRENCIESWHICHMOSTINmUENCETHESE
TRANSLATIONSANDTHERELEVANTEXCHANGERATESWERE
An amendment to IAS 32 ‘Financial instruments: Presentation
n#LASSIlCATIONOFRIGHTSISSUESWASISSUEDIN/CTOBER
2010 2009
ANDWILLBEIMPLEMENTEDBY'3+FROMST*ANUARY4HE
amendment requires an issue of rights to acquire additional Average rates:
SHARESTOALLEXISTINGSHAREHOLDERSTOBERECOGNISEDINEQUITY £/US$ 1.55
regardless of the currency of the shares. £/Euro 1.16 1.12 1.26
£/Yen 136 146 192
4HE)!3"SANNUALIMPROVEMENTSPROJECTWASPUBLISHEDIN-AY
ANDMOSTOFTHECHANGESAREEFFECTIVEFROMST*ANUARY Period end rates:
4HEPROJECTMAKESMINORAMENDMENTSTOANUMBEROF3TANDARDS £/US$ 1.56 1.61 1.44
in areas including consolidation, business combinations and £/Euro 1.17 1.13 1.04
financial instruments. £/Yen 127 131
)!32EVISED @2ELATEDPARTYDISCLOSURESWASISSUEDIN.OVEMBER
ANDWILLBEIMPLEMENTEDBY'3+FROMST*ANUARY
The revised Standard clarifies the definition of a related party and
PROVIDESSOMEEXEMPTIONSFORGOVERNMENTRELATEDENTITIES
)&2)#@%XTINGUISHINGlNANCIALLIABILITIESWITHEQUITYINSTRUMENTS
WASISSUEDIN.OVEMBERANDWILLBEIMPLEMENTEDBY
'3+FROMST*ANUARY4HE)NTERPRETATIONADDRESSESTHE
accounting by an entity that issues equity instruments in order to
settle a financial liability in part or in full.
An amendment to IFRIC 14 ‘Pre-payments of a minimum
FUNDINGREQUIREMENTWASISSUEDIN.OVEMBERANDWILLBE
IMPLEMENTEDBY'3+FROMST*ANUARY4HEAMENDMENT
permits a voluntary prepayment of a minimum funding requirement

to be recognised as an asset.
The following new standards and interpretations have not yet been
endorsed by the EU:
)&23@&INANCIALINSTRUMENTSWASlRSTISSUEDIN.OVEMBER
and amended in October 2010 and will be implemented by GSK
FROMST*ANUARY4HE3TANDARDWILLEVENTUALLYREPLACE)!3
39 and covers the classification, measurement and derecognition
of financial assets and financial liabilities. The IASB intends to
EXPAND)&23TOADDNEWREQUIREMENTSFORIMPAIRMENTANDHEDGE
accounting and to become a complete replacement of IAS 39 by
the end of 2011.
!NAMENDMENTTO)&23@$ISCLOSURESn4RANSFERSOFlNANCIALASSETS
was issued in October 2010 and will be implemented by GSK from
ST*ANUARY4HEAMENDMENTREQUIRESADDITIONALDISCLOSURES
REGARDINGTHERISKEXPOSURESRELATINGTOTRANSFERSOFlNANCIALASSETS
!NAMENDMENTTO)!3@$EFERREDTAXRECOVERYOFUNDERLYING
ASSETSWASISSUEDIN$ECEMBERANDWILLBEIMPLEMENTED
BY'3+FROMST*ANUARY4HEAMENDMENTREQUIRESTHAT
THEDEFERREDTAXONNON DEPRECIABLEASSETSMEASUREDUSINGTHE
revaluation model should be calculated on a sale basis.

117
6 Segment information

GSK has revised its segmental information disclosures to reflect changes in the internal reporting structures with effect from
1st January 2010. ViiV Healthcare is now shown as a separate segment. Stiefel has been integrated with the GSK heritage dermatology
business and is reported within the relevant geographical pharmaceutical segments. The other trading and other unallocated
pharmaceuticals information has been combined. In addition, the responsibility for certain products in two small markets moved from
the pharmaceuticals business to Consumer Healthcare. Comparative information has been restated onto a consistent basis.
GSK’s operating segments are being reported based on the financial information provided to the Chief Executive Officer, who is regarded
as the ‘Chief Operating Decision Maker’ (CODM), and the responsibilities of the Corporate Executive Team (CET). Individual members
of the CET are responsible for geographic regions of the Pharmaceuticals business, ViiV Healthcare and for the Consumer Healthcare
business as a whole, respectively, before major restructuring. No geographic information is regularly provided to the CODM.
R&D investment is essential for the sustainability of the pharmaceutical businesses. However, for segment reporting, the USA, Europe,
Emerging Markets and Asia Pacific/Japan regional pharmaceutical operating profits exclude allocations of globally funded R&D as well
as central costs, principally corporate functions and unallocated manufacturing costs. GSK’s management reporting process allocates all
intra-Group profit on a product sale to the market in which that sale is recorded, and the profit analyses below have been presented on
that basis.

The Other trading and unallocated pharmaceuticals segment includes Canada, Puerto Rico, central vaccine tender sales and contract
manufacturing sales, together with costs such as vaccines R&D, central dermatology costs and central manufacturing costs not attributed to
other segments.
The Pharmaceuticals R&D segment (which excludes vaccines R&D) is the responsibility of the Chairman, Research & Development and is
therefore being reported as a separate segment.
Corporate and other unallocated costs and disposal profits include corporate functions, costs for legal matters, fair value movements on
financial instruments and investments and unallocated profits on asset disposals.
2009 2008
2010 (restated) (restated)
Turnover by segment £m £m £m
US pharmaceuticals 7,648 8,578 8,254

Europe pharmaceuticals 6,548 7,087 5,847
Emerging Markets pharmaceuticals 3,556 2,895 2,177
Asia Pacific/Japan pharmaceuticals 3,102 2,628 1,848

ViiV Healthcare 1,566 1,605 1,513
Other trading and unallocated pharmaceuticals 962 901 742
Pharmaceuticals turnover 23,382 23,694 20,381
Consumer Healthcare turnover 5,010 4,674 3,971
28,392 28,368 24,352
2009 2008
Pharmaceutical turnover by therapeutic area £m £m £m
Respiratory 7,238 6,977 5,817

Anti-virals 1,086 2,416 1,584
Central nervous system 1,753 1,870 2,897
Cardiovascular and urogenital 2,570 2,298 1,847
Metabolic 678 1,181 1,191
Anti-bacterials 1,396 1,457 1,301

Oncology and emesis 688 629 496
Vaccines 4,326 3,706 2,539
Dermatologicals 1,087 707 414
ViiV Healthcare (HIV) 1,566 1,605 1,513
Other 994 848 782
23,382 23,694 20,381
2010 2009 2008

Consumer Healthcare turnover by category £m £m £m
OTC medicines 2,456 2,339 1,935

Oral healthcare 1,602 1,484 1,240
Nutritional healthcare 952 851 796
5,010 4,674 3,971

118
6 Segment information continued

During 2010, US pharmaceuticals and ViiV Healthcare made sales to three wholesalers of approximately £2,561 million
(2009 – £2,760 million; 2008 – £2,460 million), £2,412 million (2009 – £2,710 million; 2008 – £2,710 million) and £1,642 million
(2009 – £1,680 million; 2008 – £1,980 million) respectively, after allocating final-customer discounts to the wholesalers.
2009 2008
Segment profit £m £m £m
US pharmaceuticals 5,043 5,933 5,461

Europe pharmaceuticals 3,744 3,993 3,229
Emerging Markets pharmaceuticals 1,271 948 837
Asia Pacific/Japan pharmaceuticals 1,730 1,352 1,016
ViiV Healthcare 851 1,071 1,005
Pharmaceuticals R&D (3,105) (3,082) (2,840)
Other trading and unallocated pharmaceuticals costs (783) (705) (110)
Pharmaceuticals operating profit 8,751 9,510 8,598
Consumer Healthcare operating profit 1,043 931 881
Segment profit 9,794 10,441 9,479
Corporate and other unallocated costs and disposal profits (4,666) (1,184) (1,220)
Operating profit before major restructuring 5,128 9,257 8,259
Major restructuring (1,345) (832) (1,118)
Total operating profit 3,783 8,425 7,141
Finance income 116 70 313
Finance costs (831) (783) (843)
Profit on disposal of interest in associate 8 115 –
Share of after tax profits of associates and joint ventures 81 64 48
Profit before taxation 3,157 7,891 6,659
Taxation (1,304) (2,222) (1,947)
Profit after taxation for the year 1,853 5,669 4,712
2009 2008
Depreciation and amortisation by segment £m £m £m
US pharmaceuticals 101 116 110

Europe pharmaceuticals 31 24 36
Emerging Markets pharmaceuticals 51 29 22
Asia Pacific/Japan pharmaceuticals 25 15 11
ViiV Healthcare 29 5 –
Pharmaceuticals R&D 262 280 267
Pharmaceuticals depreciation and amortisation 1,308 1,258 1,026
Consumer Healthcare depreciation and amortisation 66 63 52
Segment depreciation and amortisation 1,374 1,321 1,078
Corporate and other unallocated depreciation and amortisation 85 80 76
Depreciation and amortisation before major restructuring 1,459 1,401 1,154
Major restructuring 220 161 77
Total depreciation and amortisation 1,679 1,562 1,231

119

2009 2008
PP&E, intangible asset and goodwill impairment by segment £m £m £m
US pharmaceuticals – 1 1
Europe pharmaceuticals 1 7 2
Emerging Markets pharmaceuticals 1 – –
Asia Pacific/Japan pharmaceuticals 2 1 2
ViiV Healthcare – – –
Pharmaceuticals R&D 134 118 107
Pharmaceuticals impairment 267 251 142
Consumer Healthcare impairment 5 1 –
Segment impairment 272 252 142

Corporate and other unallocated impairment 4 23 52
Impairment before major restructuring 276 275 194
Major restructuring 89 57 197
Total impairment 365 332 391
2009 2008
PP&E, intangible asset and goodwill impairment reversals by segment £m £m £m
US pharmaceuticals – (1) –
Europe pharmaceuticals – – –
Emerging Markets pharmaceuticals – – –
Asia Pacific/Japan pharmaceuticals – – –
ViiV Healthcare – – –
Pharmaceuticals R&D (1) (1) (10)
Other trading and unallocated pharmaceuticals (4) (9) –

Pharmaceuticals impairment reversals (5) (11) (10)
Consumer Healthcare impairment reversals – – –
Segment impairment reversals (5) (11) (10)
Corporate and other unallocated impairment reversals – – (10)
Impairment reversals before major restructuring (5) (11) (20)
Major restructuring (14) – –
Total impairment reversals (19) (11) (20)

120

2009
2010 (restated)
Net assets by segment £m £m
US pharmaceuticals 616 1,049

Europe pharmaceuticals 1,031 1,567
Emerging Markets pharmaceuticals 1,840 1,508
Asia Pacific/Japan pharmaceuticals 1,057 982
ViiV Healthcare 832 835
Pharmaceuticals R&D 1,656 2,278
Other trading and unallocated pharmaceuticals 13,320 13,037
Pharmaceuticals net operating assets 20,352 21,256
Consumer Healthcare net operating assets 2,972 2,990
Segment net operating assets 23,324 24,246
Corporate and other unallocated operating net assets (6,682) (5,334)
Net operating assets 16,642 18,912
Net debt (8,859) (9,444)
Investments in associates and joint ventures 1,081 895
Derivative financial instruments (3) 29
Current and deferred taxation 868 336
Assets held for sale 16 14
Net assets 9,745 10,742
The other trading and unallocated pharmaceuticals segment includes assets for the centrally managed pharmaceutical and vaccine
manufacturing operations, the depreciation on which, totalling £616 million (2009 – £618 million; 2008 – £536 million) is recovered
through the standard cost of product charged to businesses.
Geographical information
The UK is regarded as being the Group’s country of domicile.
2009 2008
Turnover by location of customer £m £m £m
UK 1,820 1,864 1,636

USA 9,345 10,315 9,746
Rest of World 17,227 16,189 12,970
External turnover 28,392 28,368 24,352
2010 2009 2008

Turnover by location of subsidiary £m £m £m
UK 4,965 4,469 3,096

USA 13,072 13,711 12,925
Rest of World 21,220 19,661 15,977
Turnover including inter-segment turnover 39,257 37,841 31,998
UK 2,032 1,556 1,042

USA 3,717 3,395 3,114
Rest of World 5,116 4,522 3,490
Inter-segment turnover 10,865 9,473 7,646
UK 2,933 2,913 2,054

USA 9,355 10,316 9,811
Rest of World 16,104 15,139 12,487
External turnover 28,392 28,368 24,352

121

2010 2009 2008
Operating profit by location £m £m £m
UK 1,033 2,608 1,861

USA 420 2,337 1,951
Rest of World 2,330 3,480 3,329
Total operating profit 3,783 8,425 7,141
2009
2010
(restated)
Net operating assets by location £m
£m
UK 3,177 4,540
USA 4,235 3,168
Rest of World 9,230 11,204
Net operating assets 16,642 18,912

2009
2010
(restated)
Non-current assets by location £m
£m
UK 5,066 5,270
USA 6,972 6,863
Rest of World 10,372 9,847
Non-current assets 22,410 21,980
Non-current assets by location excludes amounts relating to other investments, deferred tax assets, derivative financial instruments,
pension assets, amounts receivable under insurance contracts and certain other non-current receivables.
7 Major restructuring programme

In October 2007, GSK announced a significant new Operational Excellence programme to improve the effectiveness and productivity

of its operations. A significant expansion of the Operational Excellence programme was approved by the Board and announced in
February 2009. A further expansion was approved by the Board and announced in February 2010, when total approved costs for the
implementation of the expanded programme were increased from £3.6 billion to approximately £4.5 billion, over the period from 2007
to 2012. Approximately 75% of these costs were incurred by 31st December 2010, and approximately 20% are expected to be incurred
in 2011 with the balance in 2012. In total, approximately 75% of these costs are expected to be cash expenditures and 25% are
expected to be asset write-downs. Uncertainties exist over the exact amount and timing of cash outflows as a result of potential future
exchange rate fluctuations and as many elements of the restructuring programme are subject to employee consultation procedures,
making it difficult to predict with precision when these procedures will be completed. However, the majority of the remaining cash
payments are expected to be made in 2011 and 2012. The programme remains on track to deliver total annual pre-tax savings of £2.2
billion by 2012, with savings realised across the business. Of the total restructuring costs of £1,345 million incurred in 2010, £1,242
million was incurred under the Operational Excellence programme in the following areas:
sCOSTSAVINGPROJECTSIN2$FOCUSEDPRIMARILYONTHESIMPLIlCATIONANDSTREAMLININGOFSUPPORTINFRASTRUCTUREINCLUDINGSOMESITE
rationalisations, principally Verona in Italy and Harlow and Tonbridge in the UK;
sTHEADOPTIONOFMORECUSTOMISEDSALESAPPROACHESLEADINGTOSTAFFREDUCTIONSINANUMBEROFSALESFORCESPRINCIPALLYINTHE53!
France and Italy;
sTHECLOSUREOFANUMBEROFMANUFACTURINGSITESINCLUDING$ARTFORDAND#RAWLEYINTHE5+GIVINGRISETOASSETWRITE DOWNSANDSTAFF

reductions; and
sPROJECTSTOSIMPLIFYORELIMINATEPROCESSESLEADINGTOSTAFFREDUCTIONSINADMINISTRATIVEANDSUPPORTFUNCTIONS
The remaining costs of £103 million were incurred during the year under the restructuring programme related to the integration of the
Stiefel Laboratories, Inc. business in the USA, following its acquisition in July 2009.

122
7 Major restructuring programme continued

The analysis of the costs incurred under these programmes in 2010, 2009 and 2008 is as follows:
Asset Staff Other
2010 impairment reductions costs Total
£m £m £m £m
Cost of sales (14) (58) (115) (187)

Selling, general and administration (17) (503) (145) (665)
Research and development (44) (117) (332) (493)
Effect on operating profit (75) (678) (592) (1,345)
Net finance expense (3)
Effect on profit before taxation (1,348)
Effect on taxation 240
Effect on earnings (1,108)
Asset Staff Other

£m £m £m £m
Cost of sales (41) (112) (132) (285)

Effect on operating profit (57) (517) (258) (832)
Effect on profit before taxation (835)
Effect on earnings (614)
Asset Staff Other

£m £m £m £m
Cost of sales (181) (370) (88) (639)

Effect on operating profit (197) (690) (231) (1,118)
Effect on profit before taxation (1,123)
Effect on earnings (839)
Asset impairments of £75 million (2009 – £57 million, 2008 – £197 million) and other net costs totalling £240 million
(2009 – £124 million, 2008 – £137 million) are non-cash items, principally accelerated depreciation. All other charges have been or will
be settled in cash and include the termination of leases, site closure costs, consultancy and project management fees.

123
7 Major restructuring programme continued

These restructuring costs are reported in the major restructuring column of the Income statement on page 104. Other income resulting
from minor restructuring activity initiated prior to October 2007 amounted to £5 million (2009 – £4 million cost, 2008 – £20 million).
This income/(cost) is reported within ‘Results before major restructuring’.
2010 2009 2008

The costs of the major restructuring programmes have arisen as follows: £m £m £m
Increase in provision for major restructuring programmes (see Note 29) (837) (487) (740)
Amount of provision reversed unused (see Note 29) 40 15 7
Impairments losses recognised (75) (57) (197)
Foreign exchange gain/(loss) recognised on liquidation of subsidiary – 44 (84)
Other non-cash charges (240) (168) (53)
Other cash costs (233) (179) (51)
Net finance expense (3) (3) (5)
Effect on profit before taxation (1,348) (835) (1,123)

Other non-cash charges are principally accelerated depreciation arising where asset lives have been shortened as a result of the major
restructuring programmes. Other cash costs include the termination of leases, site closure costs and consultancy and project
management fees.
8 Other operating income

2010 2009 2008
£m £m £m
Royalty income 296 296 307

Milestone income 7 90 11
Impairment of equity investments (65) (135) (63)
Disposal of equity investments 17 40 33
Disposal of other assets, asset rights and legal settlements 227 539 260
Gain recognised on creation of ViiV Healthcare – 296 –
Fair value movements on derivative financial instruments (6) (5) (10)

Other income 17 14 3
493 1,135 541
Royalty and milestone income is principally a core of recurring income from the out-licensing of intellectual property.

124
9 Operating profit
2010 2009 2008

The following items have been included in operating profit: £m £m £m
Employee costs (Note 10) 6,994 7,167 6,524

Advertising 971 923 805
Distribution costs 413 363 310
Depreciation of property, plant and equipment 1,146 1,130 920
Impairment of property, plant and equipment, net of reversals 186 149 256
Amortisation of intangible assets 533 432 311
Impairment of intangible assets and goodwill, net of reversals in 2008 160 172 115
Net foreign exchange losses/(gains) 60 163 (145)
Inventories:
Cost of inventories included in cost of sales 7,014 6,743 5,734
Write-down of inventories 305 276 298
Reversal of prior year write-down of inventories (66) (116) (118)
Operating lease rentals:
Minimum lease payments 136 160 143
Contingent rents 14 13 15
Sub-lease payments 7 6 1
Fees payable to the company’s auditor and its associates in relation to the Group (see below) 22.2 24.1 19.2
The reversals of prior year write-downs of inventories principally arise from the reassessment of usage or demand expectations prior to
inventory expiration.
2010 2009 2008

Fees payable to the company’s auditor and its associates £m £m £m
Audit of parent company and consolidated financial statements 2.0 2.0 1.6
Audit of accounts of the Group’s UK and overseas subsidiaries, pursuant to legislation 11.2 10.2 9.3
Other assurance services, pursuant to legislation, including attestation under s.404
of Sarbanes-Oxley Act 2002 3.3 3.0 2.9
Audit and assurance services 16.5 15.2 13.8

Other tax services 2.5 7.3 2.5
All other services, including regulatory, compliance and treasury related services 3.2 1.6 2.9
22.2 24.1 19.2
At 31st December 2010, the amount due to PricewaterhouseCoopers LLP and its associates for fees yet to be invoiced was £6.1 million,
comprising statutory audit £5.6 million, taxation services £0.2 million and other services £0.3 million.
2010 2009 2008

In addition to the above, fees paid in respect of the GSK pension schemes were: £m £m £m
Audit 0.4 0.4 0.4

Other services – – –

125
10 Employee costs

2010 2009 2008
£m £m £m
Wages and salaries 5,079 5,387 4,640

Social security costs 600 661 653
Pension and other post-employment costs, including augmentations (Note 28) 554 491 505
Cost of share-based incentive plans 179 179 241
Severance and other costs from integration and restructuring activities 582 449 485
6,994 7,167 6,524
In 2010, wages and salaries decreased by 7% in CER terms.

The Group provides benefits to employees, commensurate with local practice in individual countries, including, in some markets,
healthcare insurance, subsidised car schemes and personal life assurance.

2010 2009 2008
The average number of persons employed by the Group (including Directors) during the year: Number Number Number
Manufacturing 30,883 31,467 33,372

Selling, general and administration 53,778 53,183 52,115
Research and development 13,824 14,204 15,646
98,485 98,854 101,133
The average number of Group employees excludes temporary and contract staff. The numbers of Group employees at the end of each
financial year are given in the financial record on page 202. The average number of persons employed by GlaxoSmithKline plc in 2010
was nil (2009 – nil).
The compensation of the Directors and Senior Management (members of the CET) in aggregate, was as follows:
2010 2009 2008

£m £m £m
Wages and salaries 20 23 17

Social security costs 2 1 1

Pension and other post-employment costs 3 3 3
Cost of share-based incentive plans 11 4 12
36 31 33
11 Finance income
2010 2009 2008
£m £m £m
Interest income arising from:

cash and cash equivalents 58 46 107
available-for-sale investments 8 15 31
derivatives at fair value through profit or loss 24 (5) 159
loans and receivables 12 11 22
Realised gains on liquid investments – – 2
Fair value movements on derivatives at fair value through profit or loss 13 (3) 4
Net investment hedge ineffectiveness – 4 (13)
Unwinding of discounts on assets 1 2 1
116 70 313
All derivatives at fair value through profit or loss other than designated and effective hedging instruments (see Note 41, ‘Financial
instruments and related disclosures’) are classified as held-for-trading financial instruments under IAS 39. Interest income arising from
derivatives at fair value through profit or loss relates to swap interest income.

126
12 Finance costs
2010 2009 2008
£m £m £m
Interest expense arising on:

financial liabilities at amortised cost (767) (790) (664)
derivatives at fair value through profit or loss – 20 (165)
Fair value hedges:
fair value movements on derivatives designated as hedging instruments 26 (37) 92
fair value adjustments on hedged items (27) 38 (90)
Fair value movements on other derivatives at fair value through profit or loss (16) (2) –
Reclassification of cash flow hedge from other comprehensive income (3) (1) –
Unwinding of discounts on provisions (18) (11) (16)
Net investment hedge ineffectiveness (1) – –
Other finance expense (25) – –
(831) (783) (843)
All derivatives at fair value through profit or loss except designated and effective hedging instruments are classified as held-for-trading
financial instruments under IAS 39.
13 Associates and joint ventures

2010 2009 2008
£m £m £m
Associates:
Share of after tax profits of Quest Diagnostics Inc. 79 73 47
Share of after tax profits of Aspen Pharmacare Holdings Limited 32 2 –
Share of after tax losses of other associates (7) (3) (3)
104 72 44
Share of after tax (losses)/profits of joint ventures (23) (8) 4
81 64 48
Share of turnover of joint ventures 18 13 13

Sales to joint ventures and associates 90 26 9
Summarised income statement information in respect of the Group’s associates is set out below:
2010 2009 2008

£m £m £m
Total turnover:
Quest Diagnostics Inc. 4,754 4,779 3,919
Aspen Pharmacare Holdings Limited 1,171 67 –
Others 65 7 3
5,990 4,853 3,922
Total profit:
Quest Diagnostics Inc. 465 467 314
Aspen Pharmacare Holdings Limited 233 12 –
Others (23) (14) (7)
675 465 307
The results of Aspen Pharmacare Holdings Limited included in the summarised income statement information above represent the
estimated earnings of the Aspen group in the period.
Subsequent to the year-end, GSK sold its entire shareholding in Quest Diagnostics Inc.

127
14 Taxation

2010 2009 2008
Taxation charge based on profits for the year £m £m £m
UK corporation tax at the UK statutory rate 82 600 2,213

Less double taxation relief (156) (183) (1,924)
(74) 417 289
Overseas taxation 1,496 1,997 1,589
Current taxation 1,422 2,414 1,878
Deferred taxation (118) (192) 69
1,304 2,222 1,947
2010 2009 2008

Reconciliation of the taxation rate on Group profits % % %

UK statutory rate of taxation 28.0 28.0 28.5
Differences in overseas taxation rates 8.1 3.5 1.9
Benefit of special tax status (2.6) (1.8) (2.4)
R&D credits (3.7) (1.9) (1.3)
Inter-company stock profit 1.7 0.5 2.1
Impact of share based payments 1.4 0.1 0.7
Tax on profit of associates (1.2) (0.2) (0.4)
Losses for which no benefit is recognised 5.5 0.6 0.0
Other permanent differences 6.2 (0.9) 1.2
Prior year items (6.5) 0.1 (1.6)
Restructuring 4.4 0.2 0.5
Tax rate 41.3 28.2 29.2
The higher tax rate for the year ended 31st December 2010 reflects the impact of the relatively low tax relief arising on the £4 billion
of legal provisions charged during the year and the non-deductibility of costs associated with certain site closures, partly offset by the

settlement of certain historical tax matters. The percentages within the above reconciliation are exacerbated by the relatively low
reported profit.
The Group operates in countries where the tax rate differs from the UK tax rate. The impact of these overseas taxes on the overall
rate of tax is shown above. Profits arising from certain operations in Singapore are accorded special status and are taxed at reduced
rates compared with the normal rates of tax in that territory. The effect of this reduction in the taxation charge increased earnings per
share by 1.6p in 2010, 2.8p in 2009 and 2.8p in 2008. The Group is required under IFRS to create a deferred tax asset in respect of
unrealised inter-company profit arising on inventory held by the Group at the year-end by applying the tax rate of the country in which
the inventory is held (rather than the tax rate of the country where the profit was originally made and the tax paid, which is the practice
under UK and US GAAP). As a result of this difference in accounting treatment the Group tax rate on current period inter-company profit
under IFRS increased by 1.7% in 2010 (2009 – 0.5% increase; 2008 – 2.1% increase) arising from changes in the location of work-in-
progress and finished goods.
2010 2009 2008

Tax on items charged to equity and statement of comprehensive income £m £m £m
Current taxation
Share based payments – 1 4

Foreign exchange movements – 19 15
– 20 19
Deferred taxation
Share based payments 2 13 (5)
Defined benefit plans 1 183 441
Fair value movements on cash flow hedges 1 2 (3)
Fair value movements on available-for-sale investments (28) (11) 8
(24) 187 441
Total (charge)/credit to equity and statement of comprehensive income (24) 207 460
All of the above items have been charged to the statement of comprehensive income except for tax on share based payments.

128
14 Taxation continued
Issues relating to taxation
The integrated nature of the Group’s worldwide operations involves significant investment in research and strategic manufacture at a
limited number of locations, with consequential cross-border supply routes into numerous end-markets. This gives rise to complexity and
delay in negotiations with revenue authorities as to the profits on which individual Group companies are liable to tax. Resolution of such
issues is a continuing fact of life for GSK.
During the year GSK agreed and settled further open years with major tax authorities up to and including 2008. In Canada, the Federal
Court of Appeal overturned a judgement of the Tax Court of Canada in respect of GSK’s transfer pricing in the early 1990’s and remanded
the case back to the Tax Court for reconsideration. The parties are seeking leave to appeal to the Supreme Court of Canada.
GSK continues to believe that it has made adequate provision for the liabilities likely to arise from periods which are open and not yet
agreed by tax authorities. The ultimate liability for such matters may vary from the amounts provided and is dependent upon the
outcome of agreements with relevant tax authorities or litigation where appropriate.
No provision has been made for taxation which would arise on the distribution of profits retained by overseas subsidiaries, on the grounds
that the Group is able to control the timing of the reversal of these temporary differences and it is probable that they will not reverse in
the foreseeable future. The aggregate amount of these unremitted profits at the balance sheet date was approximately £30 billion
(2009 – £29 billion). The deferred tax on unremitted earnings at 31st December 2010 is estimated to be £500 million (2009 – £500 million),
which relates to taxes payable on repatriation and dividend withholding taxes levied by overseas tax jurisdictions. UK legislation relating to
company distributions provides for exemption from tax for most repatriated profits, subject to certain exceptions.
Movement in deferred tax assets and liabilities
Pensions & Manu- Share Other

Accelerated Intra- other post Legal facturing Stock option net Offset
capital group employment Tax & other restruct- valuation and award temporary within
allowances Intangibles profit benefits losses disputes uring adjustments schemes differences countries Total
£m £m £m £m £m £m £m £m £m £m £m £m
Deferred tax assets at

1st January 2010 24 177 1,183 1,043 211 303 157 30 126 822 (1,702) 2,374
Deferred tax liabilities at
1st January 2010 (628) (1,476) – – (28) – – (198) – (17) 1,702 (645)
At 1st January 2010 (604) (1,299) 1,183 1,043 183 303 157 (168) 126 805 – 1,729
Exchange adjustments (5) (10) 70 15 3 7 2 (2) – 31 – 111
Credit/(charge) to income
statement 146 10 (126) (36) (88) 115 (42) 148 (35) 26 – 118
Credit to equity – – – – – – – – 2 – – 2
Credit/(charge) to statement of
comprehensive income – – – 1 – – – – – (27) – (26)
Acquisitions – (40) – – – – – – – (35) – (75)
At 31st December 2010 (463) (1,339) 1,127 1,023 98 425 117 (22) 93 800 – 1,859
Deferred tax assets at

31st December 2010 49 224 1,127 1,023 98 425 117 29 93 914 (1,533) 2,566
Deferred tax liabilities at
31st December 2010 (512) (1,563) – – – – – (51) – (114) 1,533 (707)
(463) (1,339) 1,127 1,023 98 425 117 (22) 93 800 – 1,859
The deferred tax credit to income relating to changes in tax rates is £11 million (2009 – £9 million, 2008 – £18 million). All other deferred
tax movements arise from the origination and reversal of temporary differences. Other net temporary differences mainly include accrued
expenses for which a tax deduction is only available on a paid basis.

129
14 Taxation continued

Tax losses Recognised Unrecognised
2010 2009 2010 2009

£m £m £m £m
Trading losses expiring:

Within 10 years 163 76 14 34
In more than 10 years 329 445 529 159
Available indefinitely 1 96 5,302 4,204
At 31st December 493 617 5,845 4,397
Deferred tax asset 98 183 – –
In addition, the Group had capital losses at 31st December 2010 of approximately £4.3 billion (2009 – £4.3 billion) in respect of which no
deferred tax asset has been recognised. Deferred tax assets are recognised where it is probable that future taxable profit will be available
to utilise losses.

Factors affecting the tax charge in future years
As a global organisation there are many factors which could affect the future effective tax rate of the Group. The mix of profits across
different territories, transfer pricing and other disputes with tax authorities and the location of research and development activity can all
have a significant impact on the Group’s effective tax rate.
Changes to tax legislation in territories where GSK has business operations could also impact the Group’s effective tax rate. The UK
Government has proposed some significant changes to the UK taxation system. In June 2010 the UK Government announced a phased
reduction in the main rate of corporation tax from 28% to 24% over 4 years from April 2011. The deferred tax movements reflect the
reduction in the UK tax rate from 28% to 27% as it has been substantively enacted. In November 2010 the UK Government reconfirmed
its intention to introduce a ‘patent box’ regime which would apply a reduced rate of corporation tax to income from patents with effect
from April 2013, following a period of consultation. The UK Government also continues to consult with business on proposed changes
to legislation relating to controlled foreign companies. The majority of these changes are expected to be enacted in 2012.
15 Earnings per share
2010 2009 2008

pence pence pence
Basic earnings per share 32.1 109.1 88.6

Adjustment for major restructuring 21.8 12.1 16.1
Basic earnings per share before major restructuring 53.9 121.2 104.7
Diluted earnings per share 31.9 108.2 88.1
Adjustment for major restructuring 21.6 12.1 16.0
Diluted earnings per share before major restructuring 53.5 120.3 104.1
Basic and adjusted earnings per share have been calculated by dividing the profit attributable to shareholders by the weighted average
number of shares in issue during the period after deducting shares held by the ESOP Trusts and Treasury shares. The trustees have
waived their rights to dividends on the shares held by the ESOP Trusts.
Adjusted earnings per share is calculated using results before major restructuring earnings. The calculation of results before major
restructuring is described in Note 1 ‘Presentation of the financial statements’.
Diluted earnings per share have been calculated after adjusting the weighted average number of shares used in the basic calculation
to assume the conversion of all potentially dilutive shares. A potentially dilutive share forms part of the employee share schemes where
its exercise price is below the average market price of GSK shares during the period and any performance conditions attaching to the
scheme have been met at the balance sheet date.
The numbers of shares used in calculating basic and diluted earnings per share are reconciled below.
2010 2009 2008

Weighted average number of shares in issue millions millions millions
Basic 5,085 5,069 5,195

Dilution for share options 43 39 31
Diluted 5,128 5,108 5,226

130
16 Dividends
2010 First interim Second interim Third interim Fourth interim Total
Total dividend (£m) 764 759 816 967 3,306

Dividend per share (pence) 15 15 16 19 65
Paid/payable 8th July 2010 7th October 2010 6th January 2011 7th April 2011
2009
Total dividend (£m) 701 713 763 919 3,096
Paid 9th July 2009 8th October 2009 7th January 2010 8th April 2010
2008
Total dividend (£m) 683 679 730 859 2,951
Paid 10th July 2008 9th October 2008 8th January 2009 9th April 2009
Under IFRS interim dividends are only recognised in the financial statements when paid and not when declared. GSK normally pays a
dividend two quarters after the quarter to which it relates and one quarter after it is declared. The 2010 financial statements recognise
those dividends paid in 2010, namely the third and fourth interim dividends for 2009 and the first and second interim dividends for 2010.
The amounts recognised in each year are as follows:
2010 2009 2008
£m £m £m
Dividends to shareholders 3,205 3,003 2,929
17 Property, plant and equipment

Plant,
Land and equipment Assets in
buildings and vehicles construction Total

£m £m £m £m
Cost at 1st January 2009 5,979 10,686 2,322 18,987

Exchange adjustments (343) (493) (154) (990)
Additions 188 432 803 1,423
Additions through business combinations 67 76 8 151
Capitalised borrowing costs – – 1 1
Disposals and write-offs (184) (614) (5) (803)
Reclassifications 309 430 (735) 4
Transfer to assets held for sale (14) (2) – (16)
Cost at 31st December 2009 6,002 10,515 2,240 18,757
Exchange adjustments 80 60 (7) 133
Additions 75 293 670 1,038
Additions through business combinations 20 7 – 27
Capitalised borrowing costs – – 6 6
Disposals and write-offs (111) (661) (2) (774)
Reclassifications 223 432 (671) (16)
Transfer to assets held for sale (171) (105) – (276)
Cost at 31st December 2010 6,118 10,541 2,236 18,895

131
17 Property, plant and equipment continued

Plant,
Land and equipment Assets in
buildings and vehicles construction Total
£m £m £m £m
Depreciation at 1st January 2009 (2,062) (6,630) – (8,692)

Exchange adjustments 128 312 – 440
Charge for the year (283) (847) – (1,130)
Disposals and write-offs 129 478 – 607
Transfer to assets held for sale 1 1 – 2
Depreciation at 31st December 2009 (2,087) (6,686) – (8,773)

Exchange adjustments (39) (51) – (90)
Charge for the year (321) (825) – (1,146)
Transfer to assets held for sale 147 95 – 242

Depreciation at 31st December 2010 (2,289) (6,959) – (9,248)
Impairment at 1st January 2009 (161) (412) (44) (617)

Exchange adjustments 6 10 4 20
Disposals and write-offs 28 104 4 136
Impairment losses (27) (108) (25) (160)
Reversal of impairments 1 10 – 11
Impairment at 31st December 2009 (153) (396) (61) (610)

Exchange adjustments – 2 (1) 1
Impairment losses (43) (160) (2) (205)
Reversal of impairments 14 5 – 19
Transfer to assets held for sale 18 – – 18
Impairment at 31st December 2010 (100) (438) (64) (602)

Total depreciation and impairment at 31st December 2009 (2,240) (7,082) (61) (9,383)
Total depreciation and impairment at 31st December 2010 (2,389) (7,397) (64) (9,850)
Net book value at 1st January 2009 3,756 3,644 2,278 9,678
Net book value at 31st December 2009 3,762 3,433 2,179 9,374
Net book value at 31st December 2010 3,729 3,144 2,172 9,045
The net book value at 31st December 2010 of the Group’s land and buildings comprises freehold properties £3,427 million
(2009 – £3,462 million), properties with leases of 50 years or more £238 million (2009 – £239 million) and properties with leases of
less than 50 years £64 million (2009 – £61 million).
Included in land and buildings at 31st December 2010 are leased assets with a cost of £582 million (2009 – £561 million), accumulated
depreciation of £280 million (2009 – £261 million), impairment of £nil (2009 – £nil) and a net book value of £302 million (2009 –
£300 million). Included in plant, equipment and vehicles at 31st December 2010 are leased assets with a cost of £95 million (2009 –
£126 million), accumulated depreciation of £54 million (2009 – £44 million), and a net book value of £41 million (2009 – £82 million).
Some lease agreements include renewal or purchase options or escalation clauses.
The impairment losses principally arise from decisions to rationalise facilities and are calculated based on either fair value less costs to
sell or value in use. The value in use calculations determine the net present value of the projected risk-adjusted, post-tax cash flows
of the relevant asset or cash generating unit, applying a discount rate of the Group post-tax weighted average cost of capital (WACC)
of 8%, adjusted where appropriate for relevant specific risks. Where an impairment is indicated and a pre-tax cash flow calculation
is expected to give a materially different result, the test would be reperformed using pre-tax cash flows and a pre-tax discount rate.
The Group WACC is equivalent to a pre-tax discount rate of approximately 11%. The impairment losses have been charged to cost
of sales £142 million (2009 – £95 million), R&D £46 million (2009 – £47 million) and SG&A £17 million (2009 – £18 million), and
include £57 million (2009 – £57 million) arising from the major restructuring programmes.
Reversals of impairment arise from subsequent reviews of the impaired assets where the conditions which gave rise to the original
impairments are deemed no longer to apply. All of the reversals have been credited to cost of sales.

132
18 Goodwill
2010 2009
£m £m
Cost at 1st January 3,361 2,101

Exchange adjustments 95 (116)
Additions through business combinations 160 1,376
Impairment losses (10) –
Cost at 31st December 3,606 3,361
Net book value at 1st January 3,361 2,101

Net book value at 31st December 3,606 3,361
The impairment losses in the year arose from the decision to exit the Pliva Research Institute site in Zagreb, Croatia. This loss is reported
in the consolidated income statement under the major restructuring programme within selling, general and administration.
The additions in the year, translated at acquisition exchange rates, arose primarily on the acquisition of Laboratorios Phoenix S.A.I.C.yF.
See Note 38, ‘Acquisitions and disposals’ for further details.
The carrying value of goodwill, translated at year-end exchange rates, is made up of balances arising on acquisition of the following
businesses:
2010 2009
Cash generating unit £m £m
Stiefel Laboratories, Inc. US, Europe, Emerging Markets, Asia Pacific, Other pharmaceuticals 894 901
ID Biomedical Corporation US, Europe, Emerging Markets, Asia Pacific, Japan, Other pharmaceuticals 464 426
Reliant Pharmaceuticals, Inc. US pharmaceuticals 448 434
Sirtris Pharmaceuticals, Inc. US, Europe, Emerging Markets, Asia Pacific, Japan, Other pharmaceuticals 304 294
Pfizer HIV business ViiV Healthcare 255 255
GlaxoSmithKline K.K. Japan pharmaceuticals 246 208
Domantis Limited US, Europe, Emerging Markets, Asia Pacific, Japan, Other pharmaceuticals 181 181
CNS, Inc. Consumer Healthcare 142 137
Polfa Poznan S.A. Europe pharmaceuticals 118 118

Certain businesses from UCB S.A. Emerging Markets and Asia Pacific pharmaceuticals 89 87
Laboratorios Phoenix S.A.I.C.yF. Emerging Markets pharmaceuticals 66 –
NovaMin Technology Inc. Consumer Healthcare 52 50
Others 347 270
3,606 3,361

133
18 Goodwill continued

Goodwill is allocated to cash generating units which are tested for impairment at least annually. With effect from 1st January 2010,
GSK revised its segmental disclosures to reflect changes in the internal reporting structure. ViiV Healthcare is now shown as a separate
segment and the Stiefel business has been integrated with the GSK legacy dermatology business. Following these changes, the goodwill
arising on the acquisition of Stiefel has been allocated to the US, Europe, Emerging Markets, Asia Pacific and Other pharmaceuticals
CGUs for impairment testing purposes as the benefits of the acquired business are expected to arise from these businesses.
The goodwill arising on the acquisitions of ID Biomedical, Sirtris Pharmaceuticals and Domantis has been split between the US, Europe,
Emerging Markets, Asia Pacific, Japan and Other pharmaceutical CGUs for impairment testing purposes as either the benefit of the
acquired businesses is split among the CGUs or the acquired businesses do not generate independent cash flows.
In 2010, the allocation of Polfa Poznan S.A. goodwill has changed from Poland pharmaceuticals to the Europe pharmaceuticals cash
generating unit. This change of allocation reflects the level at which GSK internal management monitors the Polfa Poznan S.A. goodwill.
The valuation of the US pharmaceuticals cash generating unit for goodwill impairment testing purposes, has been prepared on a fair
value less costs to sell basis, using turnover and earnings multiples derived from observed market data.
The recoverable amounts of the other cash generating units are assessed using either a value in use or a fair value less costs to sell

model. Value in use is calculated as the net present value of the projected risk-adjusted post-tax cash flows plus a terminal value of the
cash generating unit to which the goodwill is allocated. Initially a post-tax discount rate is applied to calculate the net present value
of the post-tax cash flows. The post-tax discount rate used is based on the Group WACC of 8%, as most cash generating units have
integrated operations across large parts of the Group. The Group WACC is equivalent to a pre-tax discount rate of approximately 11%.
The discount rate is increased where specific country risks are sufficiently significant to have a material impact on the outcome of the
impairment test. Where the impairment test indicates that the recoverable value of the unit is close to or below its carrying value, the
test is reperformed using a pre-tax discount rate and pre-tax cash flows in order to determine if an impairment exists and to establish
its magnitude.
Fair value is calculated using a similar discounted cash flow approach based on the Group’s acquisition valuation model.
A post-tax discount rate is applied to the projected risk-adjusted post-tax cash flows and terminal value.
Details relating to the discounted cash flow models used in the impairment tests of the other significant goodwill balances are as follows:
Europe, Emerging Markets, Asia Pacific,

Other pharmaceuticals CGUs ViiV Healthcare CGU
Valuation basis Value in use Fair value less costs to sell

Key assumptions Sales growth rates Sales growth rates
Profit margins Profit margins
Discount rate Discount rate
Determination of assumptions Growth rates are internal forecasts Growth rates are internal forecasts
based on both internal and based on both internal and
external market information. external market information.
Margins reflect past experience, Margins reflect past experience,
adjusted for expected changes. adjusted for expected changes.
Discount rate based on Discount rate based on
Group WACC. Group WACC.
Period of specific projected cash flows 5 years 5 years

Discount rate 8% 8%
Terminal growth rate Europe 6% p.a. decline 2.5% p.a.

Emerging Markets 1% p.a.
Asia Pacific 0% p.a.
Other 0% p.a.

134
18 Goodwill continued
Japan pharmaceuticals CGU Consumer Healthcare CGU
Valuation basis Fair value less costs to sell Fair value less costs to sell
Key assumptions Sales growth rates Sales growth rates
Profit margins Advertising and promotion
Discount rate investment
Terminal growth rate
Discount rate
Determination of assumptions Growth rates are internal Growth rates are internal forecasts
forecasts based on both internal based on both internal and external
and external market information. market information.
Margins reflect past experience, Advertising and promotion
adjusted for expected changes. investment based on historical levels
Discount rate based on adjusted for management’s view of
Group WACC. support needed for
innovation and expansion.
Terminal growth rate based on
management’s estimate of future
long-term average growth rates.
Discount rate based on
Group WACC.
Period of specific projected cash flows 5 years 5 years

Discount rate 8% 8%
Terminal growth rate 2% p.a. 3% p.a.
The terminal growth rates do not exceed the long-term projected growth rates for the relevant markets. The terminal growth rates used
in the value in use calculations for the pharmaceuticals cash generating units reflect the impact of future generic competition and take
no account of new product launches.

The Consumer Healthcare cash generating unit comprises a collection of smaller cash generating units including brands with indefinite
lives with a carrying value of £1.83 billion (2009 – £1.79 billion).
The pharmaceutical cash generating units also comprise a collection of smaller cash generating units including assets with indefinite lives
with a carrying value of £708 million (2009 – £660 million). Details of indefinite life brands are given in Note 19 ‘Other intangible assets’.
In each case the valuations indicate sufficient headroom such that a reasonably possible change to key assumptions is unlikely to result
in an impairment of the related goodwill.

135
19 Other intangible assets

Computer Licences, Amortised Indefinite life
software patents, etc. brands brands Total
£m £m £m £m £m
Cost at 1st January 2009 1,003 4,794 331 1,823 7,951

Exchange adjustments (36) (193) (23) (99) (351)
Capitalised internal development costs 13 – – – 13
Additions through business combinations 30 1,883 51 758 2,722
Other additions 41 391 – – 432
Disposals and asset write-offs (17) (26) – – (43)
Reclassifications (4) – – – (4)
Cost at 31st December 2009 1,030 6,849 359 2,482 10,720
Exchange adjustments 14 150 7 55 226
Capitalised internal development costs 81 – – – 81
Additions through business combinations – 214 11 27 252

Capitalised borrowing costs – 2 – – 2
Other additions 58 469 – – 527
Disposals and asset write-offs (25) (13) – – (38)
Reclassifications 16 – – – 16
Cost at 31st December 2010 1,174 7,671 377 2,564 11,786
Amortisation at 1st January 2009 (698) (995) (24) – (1,717)
Exchange adjustments 27 58 – – 85
Charge for the year (113) (306) (13) – (432)
Disposals and asset write-offs 16 1 – – 17
Amortisation at 31st December 2009 (768) (1,242) (37) – (2,047)
Exchange adjustments (8) (37) – – (45)
Charge for the year (106) (411) (16) – (533)
Amortisation at 31st December 2010 (862) (1,689) (53) – (2,604)

Impairment at 1st January 2009 (32) (304) – (29) (365)
Exchange adjustments 1 19 – 3 23
Impairment losses (4) (168) – – (172)
Impairment at 31st December 2009 (33) (431) – (26) (490)
Exchange adjustments (1) (13) – (1) (15)
Impairment losses (5) (143) (2) – (150)
Disposals and asset write-offs 3 – 2 – 5
Impairment at 31st December 2010 (36) (587) – (27) (650)
Total amortisation and impairment at 31st December 2009 (801) (1,673) (37) (26) (2,537)
Total amortisation and impairment at 31st December 2010 (898) (2,276) (53) (27) (3,254)
Net book value at 1st January 2009 273 3,495 307 1,794 5,869
Net book value at 31st December 2009 229 5,176 322 2,456 8,183
Net book value at 31st December 2010 276 5,395 324 2,537 8,532

136
19 Other intangible assets continued

Amortisation and impairment losses, net of reversals, have been charged in the income statement as follows:
Amortisation Net impairment losses
2010 2009 2010 2009
£m £m £m £m
Cost of sales 26 29 – 1
Selling, general and administration 353 270 13 1
Research and development 154 133 137 170
533 432 150 172
Included in the impairments above is £8 million arising from the major restructuring programmes.
The net book value of computer software includes £129 million (2009 – £80 million) of internally generated costs.
Licences, patents, etc. includes a large number of acquired licences, patents, know-how agreements and marketing rights, which are
either marketed or in use, or still in development. The net book value includes £5 million (2009 – £6 million) of internally generated
costs. Impairment losses of £143 million (2009 – £168 million) principally arise on assets in development that are no longer being actively
pursued. Note 38, ‘Acquisitions and disposals’ gives details of additions through business combinations in the year. The book values of the
largest individual items are as follows:
2010 2009
£m £m
Fluviral 663 648

Lovaza 593 637
Selzentry 299 337
Arzerra 294 191
Duac 157 165
Fraxiparine 135 158
Others 3,254 3,040
5,395 5,176
Amortised brands include OTC rights relating to alli, with a book value at 31st December 2010 of £252 million (2009 – £260 million).
Indefinite life brands comprise a portfolio of Consumer Healthcare products primarily acquired with the acquisitions of Sterling Winthrop,
Inc. in 1994, Block Drug Company, Inc. in 2001 and CNS, Inc. in 2006, together with a number of pharmaceutical brands from the
acquisition of Stiefel Laboratories, Inc. in 2009. The book values of the major brands are as follows:
2010 2009
£m £m
Panadol 426 399

Sensodyne 270 271
Stiefel trade name 216 209
Breathe Right 199 193
Physiogel 182 176
Polident 114 115
Corega 102 102
Biotene 111 108
Poligrip 70 71
Solpadeine 59 59
Others 788 753
2,537 2,456
Each of these brands is considered to have an indefinite life, given the strength and durability of the brand and the level of marketing
support. The brands are in relatively similar stable and profitable market sectors, with similar risk profiles, and their size, diversification and
market shares mean that the risk of market-related factors causing a reduction in the lives of the brands is considered to be relatively low.
The Group is not aware of any material legal, regulatory, contractual, competitive, economic or other factor which could limit their useful
lives. Accordingly, they are not amortised.
Each brand is tested annually for impairment applying a fair value less costs to sell methodology, generally using four year post-tax
cash flow forecasts with a terminal value calculation and a discount rate equal to the Group post-tax WACC of 8%, adjusted where
appropriate for country-specific risks. The main assumptions include future sales price and volume growth, product contribution and
the future expenditure required to maintain the product’s marketability and registration in the relevant jurisdictions. These assumptions
are based on past experience and are reviewed as part of management’s budgeting and strategic planning cycle for changes in market
conditions and sales erosion through competition. The terminal growth rates applied of between 2% and 3% are management’s
estimates of future long-term average growth rates of the relevant markets. In each case the valuations indicate sufficient headroom
such that a reasonably possible change to key assumptions is unlikely to result in an impairment of these brands.
137
20 Investments in associates and joint ventures

Joint Associated 2010 Joint Associated 2009
ventures undertakings Total ventures undertakings Total
£m £m £m £m £m £m
At 1st January 46 849 895 28 524 552

Exchange adjustments 4 8 12 (3) (44) (47)
Additions 30 35 65 36 312 348
Disposals – (2) (2) – (69) (69)
Transfer from other investments – 40 40 – 56 56
Distributions received (3) (18) (21) (7) (10) (17)
Other movements – 11 11 – 8 8
(Loss)/profit after tax recognised in the consolidated
income statement (23) 104 81 (8) 72 64
At 31st December 54 1,027 1,081 46 849 895

The Group held two significant associated undertakings at 31st December 2010.
Quest Diagnostics Inc., a US clinical laboratory business listed on the New York Stock Exchange. The investment had a book value at
31st December 2010 of £494 million (2009 – £410 million) and a market value of £1,064 million (2009 – £1,153 million). At
31st December 2010, the Group owned 18.1% of Quest (2009 – 16.8%). Although the Group held less than 20% of the ownership
interest and voting control in Quest, the Group had the ability to exercise significant influence through both its significant shareholding
and its nominated director’s active participation on the Quest Board of Directors and Board sub-committees.
Subsequent to the year-end GSK sold its entire shareholding in Quest Diagnostics Inc. The sale comprised a secondary public offering
and an accompanying repurchase of shares by Quest Diagnostics which together are expected to generate gross proceeds of $1.1 billion
(£0.7 billion) after tax.
At 31st December 2010, the Group owned 81.7 million shares or 19% of Aspen Pharmacare Holdings Limited. Aspen, listed on
the Johannesburg Stock Exchange, is Africa’s largest pharmaceutical manufacturer and a major supplier of branded and generic
pharmaceutical, healthcare and nutritional products to the southern African and selected international markets. The investment had a
book value at 31st December 2010 of £397 million (2009 – £372 million) and a market value of £729 million (2009 – £505 million).
Although the Group holds less than 20% of the ownership interest and voting control of Aspen, the Group has the ability to exercise
significant influence through both its shareholding and its nominated director’s active participation on the Aspen Board of Directors.

The transfer from other investments in 2010 relates to the Group’s holding in JCR Pharmaceuticals Ltd, previously classified within
Other investments.
Summarised balance sheet information in respect of the Group’s associates is set out below:
2010 2009
£m £m
Total assets:
Quest Diagnostics Inc. 5,466 5,319
Aspen Pharmacare Holdings Limited 1,913 1,318
Others 360 121
7,739 6,758
Total liabilities:
Quest Diagnostics Inc. (2,868) (2,828)
Aspen Pharmacare Holdings Limited (786) (689)

Others (73) (19)
(3,727) (3,536)
Net assets 4,012 3,222
The summarised balance sheet information in respect of Aspen Pharmacare Holdings Limited is based on preliminary results information
and analysts forecasts available at 31st December 2010.
Investments in joint ventures comprise £66 million share of gross assets (2009 – £57 million) and £12 million share of gross liabilities
(2009 – £11 million). These principally arise from 50% interests in two joint ventures, Shionogi-ViiV Healthcare Holdings, L.P., which
is developing specified chemical compounds, and ViiV Shire Canada, which primarily co-markets Combivir, Trizivir and Epivir in certain
territories, both of which are now part of the ViiV Healthcare business. Investments in joint ventures also include a 28% interest in
Pharmaceutical Insurance Limited, which is a mutual insurance company covering pharmaceutical business risk, and a 49% interest in
GlaxoSmithKline - NeptunusBio, which is a flu vaccine research, development and manufacturing venture.
During 2010, GSK made additional capital contributions of £6 million to Shenzhan GlaxoSmithKline - NeptunusBio Co., Ltd and
£24 million to Shionogi-ViiV Healthcare Holdings, L.P.

138
21 Other investments
2010 2009
£m £m
At 1st January 454 478

Exchange adjustments 7 (48)
Additions 281 175
Net fair value movements 96 57
Impairment losses (60) (95)
Transfer to investments in associates and joint ventures (40) (56)
Disposals (27) (57)
At 31st December 711 454
Other investments comprise non-current equity investments which are available-for-sale investments recorded at fair value at each balance
sheet date. For investments traded in an active market, the fair value is determined by reference to the relevant stock exchange quoted
bid price. For other investments, the fair value is estimated by management with reference to relevant available information, including the
current market value of similar instruments and discounted cash flows of the underlying net assets. The Group holds a number of equity
investments in entities where the Group has entered into research collaborations. Other investments include listed investments of
£491 million (2009 – £245 million), the increase primarily arising from a number of additional investments during the year.
On disposal of investments, fair value movements are reclassified from equity to the income statement based on average cost for shares
acquired at different times. The transfer to associates relates to the Group’s holding in JCR Pharmaceuticals, which increased during the
year to 27%.
The impairment losses recorded in the tables above have been recognised in the income statement for the year within other operating
income, together with amounts reclassified from the fair value reserve on recognition of the impairments. These impairments initially
result from prolonged or significant declines in the fair value of the equity investments below acquisition cost, subsequent to which any
further declines in fair value are immediately taken to the income statement.
Other investments include assets that have been impaired, as follows:
2010 2009
£m £m
Original cost 429 401

Impairments recognised in profit and loss (340) (292)
Subsequent fair value increases 45 43
Carrying value at 31st December 134 152
22 Other non-current assets

2010 2009
£m £m
Amounts receivable under insurance contracts 343 299

Pension schemes in surplus 23 23
Other receivables 190 261
556 583
23 Inventories
2010 2009
£m £m
Raw materials and consumables 1,466 1,153

Work in progress 751 1,437
Finished goods 1,620 1,474
3,837 4,064

139
24 Trade and other receivables

2010 2009
£m £m
Trade receivables 4,727 5,486

Prepaid pension contributions 2 1
Other prepayments and accrued income 256 301
Interest receivable 16 20
Employee loans and advances 50 48
Other receivables 742 636
5,793 6,492
Trade receivables include £42 million (2009 – £32 million) due from associates and joint ventures and are stated after deducting the
provision for bad and doubtful debts.
2010 2009
Bad and doubtful debt provision

£m £m

Exchange adjustments – (10)
Charge for the year 54 21
Subsequent recoveries of amounts provided for (19) (18)
Utilised (1) (6)
25 Cash and cash equivalents

2010 2009
£m £m
Cash at bank and in hand 1,027 856

Short-term deposits 5,030 5,689

6,057 6,545
26 Assets held for sale

2010 2009
£m £m
Land and buildings 6 13

Plant, equipment and vehicles 10 1
16 14

140
27 Trade and other payables

2010 2009
£m £m
Trade payables 2,141 1,855

Wages and salaries 931 1,089
Social security 115 125
Other payables 296 280
Deferred income 70 156
Customer return and rebate accruals 1,632 1,379
Other accruals 1,703 1,888
6,888 6,772
Customer return and rebate accruals are provided for by the Group at the point of sale in respect of the estimated rebates, discounts
or allowances payable to customers, principally in the USA, and have increased during the year as a result of the US healthcare reform
amendments. Accruals are made at the time of sale but the actual amounts paid are based on claims made some time after the initial
recognition of the sale. As the amounts are estimated they may not fully reflect the final outcome and are subject to change dependent
upon, amongst other things, the types of buying group and product sales mix. The level of accrual is reviewed and adjusted quarterly in
the light of historical experience of actual rebates, discounts or allowances given and returns made and any changes in arrangements.
Future events could cause the assumptions on which the accruals are based to change, which could affect the future results of the Group.
Trade and other payables include £26 million (2009 – £23 million) due to associates and joint ventures.
28 Pensions and other post-employment benefits

2010 2009 2008
Pension and other post-employment costs £m £m £m
UK pension schemes 158 206 236

US pension schemes 115 94 60
Other overseas pensions schemes 125 101 87
Unfunded post-retirement healthcare schemes 156 90 118
Other post-employment costs – – 4

554 491 505
Analysed as:
Funded defined benefit/hybrid pension schemes 325 338 318
Unfunded defined benefit pension schemes 28 25 23
Unfunded post-retirement healthcare schemes 156 90 118
Defined benefit schemes 509 453 459
Defined contribution pension schemes 45 38 42
Other post-employment costs – – 4
554 491 505
The costs of the defined benefit pension and post-retirement healthcare schemes are charged in the income statement as follows:
Cost of sales 117 121 179
Selling, general and administration 254 195 160
Research and development 138 137 120
509 453 459
GSK entities operate pension arrangements which cover the Group’s material obligations to provide pensions to retired employees.
These arrangements have been developed in accordance with local practices in the countries concerned. Pension benefits can be provided
by state schemes; by defined contribution schemes, whereby retirement benefits are determined by the value of funds arising from
contributions paid in respect of each employee; or by defined benefit schemes, whereby retirement benefits are based on employee
pensionable remuneration and length of service. Some ‘hybrid’ defined benefit schemes also include defined contribution sections.

141
28 Pensions and other post-employment benefits continued

Pension costs of defined benefit schemes for accounting purposes have been calculated using the projected unit method. In certain
countries pension benefits are provided on an unfunded basis, some administered by trustee companies. Formal, independent, actuarial
valuations of the Group’s main plans are undertaken regularly, normally at least every three years.
Actuarial movements in the year are recognised through the statement of comprehensive income. Discount rates are derived from AA
rated corporate bond yields except in countries where there is no deep market in corporate bonds where government bond yields are
used. Discount rates are selected to reflect the term of the expected benefit payments. The expected rate of return on bonds reflects
the portfolio mix of index-linked, government and corporate bonds. An equity risk premium of between 3% and 4% is added to longer
term government bond yields to give the expected rate of return on equities. Projected inflation rate and pension increases are long-term
predictions based on the yield gap between long-term index-linked and fixed interest Gilts. In the UK, mortality rates are determined by
adjusting the PCA00 standard mortality tables to reflect recent scheme experience. These rates are then projected to reflect improvements
in life expectancy in line with the medium cohort (i.e. improvements at recently observed higher levels which are assumed to continue
to 2020) with minimum improvements thereafter of 1% per year for both males and females. In the USA, mortality rates are calculated
using the RP2000 fully generational table, projected using scale AA, with the white collar adjustment.
The average life expectancy assumed now for an individual at the age of 60 and projected to apply in 2030 for an individual then at the

age of 60 is as follows:
UK USA
Male Female Male Female
Years Years Years Years
Current 27.4 28.7 24.6 26.3

Projected for 2030 29.7 30.5 26.5 27.4
The assets of funded schemes are generally held in separately administered trusts, either as specific assets or as a proportion of a
general fund, or are insurance contracts. Assets are invested in different classes in order to maintain a balance between risk and return.
Investments are diversified to limit the financial effect of the failure of any individual investment. Following an asset liability study in 2007,
the Group decided to adopt a strategy to reduce gradually the allocation of investment in equities. During 2009, it was agreed that the
pace of reallocation would be increased primarily through investment of the deficit reduction contributions in bonds. The target allocation
of equities and property in the US scheme has been reduced to 50% of the total.
In the UK the defined benefit pension schemes operated for the benefit of former Glaxo Wellcome employees and former SmithKline

Beecham employees remain separate. These schemes were closed to new entrants in 2001 and subsequent UK employees are entitled
to join a defined contribution scheme. In the USA the former Glaxo Wellcome and SmithKline Beecham defined benefit schemes were
merged during 2001. In addition, the Group operates a number of post-retirement healthcare schemes, the principal one of which is in
the USA.
The Group has applied the following financial assumptions in assessing the defined benefit liabilities:
UK USA Rest of World

2010 2009 2008 2010 2009 2008 2010 2009 2008
% pa % pa % pa % pa % pa % pa % pa % pa % pa
Rate of increase of future earnings 4.50 4.60 3.90 4.50 4.50 4.50 3.50 3.00 3.10
Discount rate 5.50 5.70 6.20 5.20 5.75 6.00 4.50 4.70 5.00
Expected pension increases 3.50 3.60 2.90 n/a n/a n/a 2.20 2.20 2.10
Cash balance credit/conversion rate n/a n/a n/a 4.20 4.75 4.50 1.30 1.60 1.20
Inflation rate 3.50 3.60 2.70 2.25 2.50 2.50 1.70 1.70 1.70 Shareholder information P192–P212

142

The amounts recorded in the income statement and statement of comprehensive income for the three years ended 31st December 2010
in relation to the defined benefit pension and post-retirement healthcare schemes were as follows:
Post-retirement
Pensions benefits
UK USA Rest of World Group Group
2010 £m £m £m £m £m
Amounts charged to operating profit

Current service cost 130 68 70 268 31
Past service cost – – – – 5
Expected return on pension scheme assets (427) (134) (51) (612) –
Interest on scheme liabilities 425 151 64 640 73
Settlements and curtailments 30 30 (3) 57 47
158 115 80 353 156
Actuarial gains/(losses) recorded in the statement of

comprehensive income 73 43 (37) 79 (80)
Post-retirement
Pensions benefits
2009 £m £m £m £m £m

Past service cost – (6) – (6) (27)
206 94 63 363 90
Actuarial (losses)/gains recorded in the statement of

comprehensive income (578) (5) (77) (660) 1
Post-retirement
Pensions benefits
2008 £m £m £m £m £m

Past service cost – 10 2 12 4
236 60 45 341 118
Actuarial (losses)/gains recorded in the statement of

comprehensive income (776) (576) (82) (1,434) 64
The total actuarial losses recorded in the statement of comprehensive income since 1st January 2003 amount to £2,048 million.
The amounts included within settlements and curtailments include £110 million (2009 – £72 million; 2008 – £208 million) of augmentation
costs arising from major restructuring programmes (see Note 29 ‘Other provisions’).

143

The fair values of the assets and liabilities of the UK and US defined benefit pension schemes, together with aggregated data for other
defined benefit pension schemes in the Group are as follows:
UK USA Rest of World Group
Average
Expected rate Fair Expected rate Fair expected rate Fair Fair
At 31st December 2010 of return value of return value of return value value
% £m % £m % £m £m
Equities 8.00 4,698 8.25 1,092 7.40 251 6,041

Property 7.00 272 7.25 147 7.00 6 425
Bonds 4.50 2,460 4.75 1,012 3.10 572 4,044
Other assets 3.50 1,188 0.25 59 3.80 399 1,646
Fair value of assets 8,618 2,310 1,228 12,156
Present value of scheme obligations (9,119) (2,781) (1,479) (13,379)

(501) (471) (251) (1,223)
Unrecognised past service cost – (2) 1 (1)
Recognised on the balance sheet (501) (473) (250) (1,224)
Included in other non-current assets – – 23 23

Included in pensions and other post-employment
benefits (501) (473) (273) (1,247)
(501) (473) (250) (1,224)
Actual return on plan assets 881 240 43 1,164
In December 2010, the UK scheme purchased an insurance contract that will guarantee payment of specified pensioner liabilities.
This is included within ‘Other assets’ and the ‘Present value of scheme obligations’ in the table above at a value
of £698 million at 31st December 2010.

Average
% £m % £m % £m £m
Equities 8.00 4,209 8.25 914 7.50 232 5,355

Property 7.00 291 7.25 159 7.00 20 470
Bonds 4.90 2,632 5.00 907 3.50 562 4,101
Other assets 0.50 367 0.25 92 3.80 309 768
(947) (556) (241) (1,744)
Unrecognised past service cost – (2) 1 (1)

benefits (947) (558) (263) (1,768)
(947) (558) (240) (1,745)
Actual return on plan assets 1,076 243 65 1,384

144
Average
% £m % £m % £m £m
Equities 7.75 3,334 8.25 838 7.00 211 4,383

Property 6.75 331 7.25 259 6.75 22 612
Bonds 4.75 2,430 5.25 893 3.25 598 3,921
Other assets 2.75 40 1.50 26 4.25 306 372
(750) (722) (220) (1,692)
Unrecognised past service cost – – 1 1

Restriction on surplus – – (6) (6)

benefits (750) (722) (264) (1,736)
(750) (722) (225) (1,697)
Actual return on plan assets (1,249) (470) (87) (1,806)


145

Post-retirement
Pensions benefits
Movements in defined benefit obligations £m £m £m £m £m
Obligations at 1st January 2008 (7,371) (1,945) (1,022) (10,338) (1,019)

Exchange adjustments – (753) (353) (1,106) (351)
Service cost (126) (71) (61) (258) (28)
Interest cost (377) (121) (53) (551) (62)
Settlements and curtailments (175) (12) 19 (168) (16)
Actuarial gains 915 38 58 1,011 64
Scheme participants’ contributions (33) – (5) (38) (9)
Benefits paid 282 126 60 468 53
Transfers to other provisions – – – – 14
Obligations at 31st December 2008 (6,885) (2,738) (1,357) (10,980) (1,354)

Exchange adjustments – 294 109 403 133
Service cost (121) (58) (64) (243) (5)
Interest cost (378) (148) (62) (588) (74)
Settlements and curtailments (54) (7) 68 7 (8)
Actuarial (losses)/gains (1,307) (127) (102) (1,536) 1
Benefits paid 345 156 71 572 69
Acquisitions (29) – (19) (48) (4)
Exchange adjustments – (84) (27) (111) (38)
Service cost (130) (68) (70) (268) (31)
Interest cost (425) (151) (64) (640) (73)
Settlements and curtailments (30) (30) 3 (57) (44)
Actuarial losses (381) (63) (29) (473) (80)

Benefits paid 313 243 80 636 73
Unrecognised past service cost – (2) 1 (1) 34
Recognised on the balance sheet at 31st December 2010 (9,119) (2,783) (1,478) (13,380) (1,425)
The UK defined benefit schemes include defined contribution sections with obligations totalling £961 million at 31st December 2010
(2009 – £765 million; 2008 – £553 million).
The liability for the US post-retirement healthcare scheme has been assessed using the same assumptions as for the US pension scheme,
together with the assumption for future medical inflation of 8% (2009 – 8.5%), grading down to 4.75% in 2018 and thereafter.
During 2007, the US post-retirement healthcare scheme was amended. The main change was an increase in the cap on Group costs.
During 2009, both the US pension and post-retirement healthcare plan were amended. The changes resulted in a one-off gain of
£37 million in the income statement. At 31st December 2010 the US plan obligation was £1,288 million (2009 – £1,102 million;
2008 – £1,223 million). However, in accordance with IAS 19 the unvested part of a benefit improvement is not recognised immediately
on the balance sheet but is recognised gradually through the income statement. At 31st December 2010, the unrecognised amount
of £34 million (2009 – £40 million; 2008 – £51 million) primarily relates to the effect of the change in the US post-retirement scheme,
which amounted to £36 million (2009 – £42 million; 2008 – £53 miilion).

146

The defined benefit pension obligation is analysed as follows:
2010 2009 2008

£m £m £m
Funded (13,033) (12,126) (10,662)

Unfunded (346) (312) (318)
(13,379) (12,438) (10,980)
Post-retirement benefits are unfunded.
Post-retirement
Pensions benefits
Movements in fair values of assets £m £m £m £m £m
Assets at 1st January 2008 7,293 2,004 885 10,182 –

Exchange adjustments – 598 298 896 –
Expected return on assets 442 144 47 633 –
Settlements and curtailments – – 3 3 –
Actuarial gains/(losses) (1,691) (614) (134) (2,439) –
Employer contributions 340 10 93 443 44
Scheme participants’ contributions 33 – 5 38 9
Benefits paid (282) (126) (60) (468) (53)
Assets at 31st December 2008 6,135 2,016 1,137 9,288 –
Exchange adjustments – (221) (93) (314) –
Settlements and curtailments – – (51) (51) –
Actuarial losses 729 122 19 870 –
Benefits paid (345) (156) (71) (572) (69)
Acquisitions 22 – 18 40 –

Exchange adjustments – 66 26 92 –
Actuarial gains 454 106 (8) 552 –
Benefits paid (313) (243) (80) (636) (73)
The UK defined benefit schemes include defined contribution sections with account balances totalling £961 million at 31st December
2010 (2009 – £765 million; 2008 – £553 million).
During 2010, the Group made special funding contributions to the UK pension schemes totalling £365 million (2009 – £332 million;
2008 – £200 million) and £91 million (2009 – £95 million; 2008 – £nil) to the US scheme. In 2009, GSK reached an agreement with the
trustees of the UK pension schemes to make additional contributions to eliminate the pension deficit identified at the 31st December
2008 actuarial funding valuation. The additional contributions are expected to be £365 million per year for 2011 to 2013. The
contributions are based on a discount rate of 5.25% and an inflation assumption of 2.8%. The next review of contribution levels
is expected to be at the 31st December 2011 actuarial valuation.
Employer contributions for 2011, including special funding contributions, are estimated to be approximately £800 million in respect of
defined benefit pension schemes and £65 million in respect of post-retirement benefits.

147

Post-retirement
Pensions benefits
History of experience gains and losses £m £m £m £m £m
2010
Experience gains/(losses) of scheme assets 454 106 (8) 552
Percentage of scheme assets at 31st December 2010 5% 5% 1% 5%
Experience (losses)/gains of scheme liabilities (45) 5 (3) (43) (14)

Percentage of scheme obligations at 31st December 2010 – – – – 1%
Fair value of assets 8,618 2,310 1,228 12,156 –

Present value of scheme obligations (9,119) (2,781) (1,479) (13,379) (1,459)
Deficits in the schemes (501) (471) (251) (1,223) (1,459)

2009
Experience gains of scheme assets 729 122 19 870
Experience gains/(losses) of scheme liabilities 162 (27) (15) 120 6

Percentage of scheme obligations at 31st December 2009 2% 1% 1% 1% –

2008
Experience losses of scheme assets (1,691) (614) (134) (2,439)
Experience (losses)/gains of scheme liabilities (148) 2 1 (145) (14)

Percentage of scheme obligations at 31st December 2008 2% – – 1% 1%

2007
Experience gains/(losses) of scheme assets 168 46 (18) 196
Experience gains/(losses) of scheme liabilities 33 (30) 6 9 –

Percentage of scheme obligations at 31st December 2007 – 2% 1% – –
Fair value of assets 7,293 2,004 885 10,182 –

(Deficits)/surpluses in the schemes (78) 59 (137) (156) (1,019)
2006
Experience gains of scheme assets 227 168 26 421
Experience (losses)/gains of scheme liabilities (37) (16) (42) (95) 17

Percentage of scheme obligations at 31st December 2006 – 1% 4% 1% 2%
Fair value of assets 6,554 1,953 741 9,248 –

Present value of scheme obligations (7,444) (1,949) (952) (10,345) (1,063)
(Deficits)/surpluses in the schemes (890) 4 (211) (1,097) (1,063)

148

Sensitivity analysis
Effect of changes in assumptions used on the annual defined benefit pension and post-retirement costs or the benefit obligations:
£m
A 0.25% decrease in discount rate would have the following approximate effect:
Increase in annual pension cost 4
Increase in annual post-retirement benefits cost –
Increase in pension obligation 472
Increase in post-retirement benefits obligation 41
A one year increase in life expectancy would have the following approximate effect:
Increase in annual post-retirement benefits cost 4
A 0.25% decrease in expected rates of return on assets would have the following approximate effect:
A 1% increase in the rate of future healthcare inflation would have the following approximate effect:
Increase in annual post-retirement benefits cost 1
A 0.25% increase in inflation would have the following approximate effect:

29 Other provisions
Integration
Legal Major Employee and
and other restructuring related manufacturing Other
disputes programmes provisions reorganisation provisions Total
£m £m £m £m £m £m
At 1st January 2010 2,020 574 241 55 351 3,241

Exchange adjustments 12 (4) 6 1 4 19
Charge for the year 4,111 837 39 – 15 5,002
Reversed unused (103) (40) (5) (4) (16) (168)
Unwinding of discount 7 3 – – 8 18
Utilised (2,047) (610) (35) (17) (19) (2,728)
Transfer to pensions obligations – (110) – – – (110)
Reclassifications and other movements – 24 5 (8) (11) 10
At 31st December 2010 4,000 674 251 27 332 5,284
To be settled within one year 3,654 512 34 4 176 4,380

To be settled after one year 346 162 217 23 156 904
At 31st December 2010 4,000 674 251 27 332 5,284

149
29 Other provisions continued Pension augmentations arising from staff redundancies of

£110 million (2009 – £72 million) have been charged during the
Legal and other disputes year and then transferred to the pension obligations provision as
GSK is involved in a number of legal and other disputes, shown in Note 28 ‘Pensions and other post-employment benefits’.
including notification of possible claims, as set out in Note 44 Asset write-downs have been recognised as impairments of
‘Legal proceedings’. Provisions for legal and other disputes property, plant and equipment in Note 17 ‘Property, plant
include amounts relating to product liability, intellectual property, and equipment’. The majority of the amounts provided are
anti-trust, government investigations, contract terminations, expected to be utilised in the next two years.
self-insurance, environmental clean-up and property rental.
Employee related provisions
The charge for the year primarily relates to provisions in relation Employee related provisions include certain medical benefits
to the investigation by the US Government into the Group’s to disabled employees and their spouses in the USA. At
former manufacturing site at Cidra, Puerto Rico; product liability 31st December 2010, the provision for these benefits amounted
and anti-trust litigation relating to Paxil; the investigation by the to £120 million (2009 – £118 million). Other employee benefits
US Attorney’s Office for the District of Colorado into the Group’s reflect a variety of provisions for severance costs, jubilee awards
US sales and promotional practices, and product liability cases and other long-service benefits.
regarding Avandia and other products. The discount on the
Integration and manufacturing reorganisation

provisions decreased by £2 million in 2010 (2009 – £5 million
increase) and was calculated using risk-adjusted projected cash Provisions for integration and manufacturing reorganisations
flows and risk-free rates of return. The movement in 2010 includes reflect costs related to ongoing restructuring programmes not
a decrease of £10 million (2009 – £6 million increase) arising from included within the costs disclosed in Note 7, ‘Major restructuring
a change in the discount rate in the year. programmes’.
In respect of product liability claims related to certain products, Other provisions
there is sufficient history of claims made and settlements to Included in other provisions is contingent consideration in respect of
enable management to make a reliable estimate of the provision business acquisitions, principally of Stiefel Laboratories Inc. in 2009.
required to cover unasserted claims. In certain cases an IBNR The contingent consideration is payable upon certain criteria being
(incurred but not reported) actuarial technique is used to met by certain specified dates in the future. The aggregate provision
determine this estimate. The ultimate liability for such matters for these items amounts to £164 million at 31st December 2010
may vary from the amounts provided and is dependent upon (2009 – £161 million).
the outcome of litigation proceedings, investigations and possible
settlement negotiations.
It is in the nature of the Group’s business that a number of

these matters, including those provided using the IBNR actuarial
technique, may be the subject of negotiation and litigation over
several years.
At 31st December 2010, it is expected that £117 million
(2009 – £97 million) of the provision made for legal and other
disputes will be reimbursed by third party insurers. This amount is
included within ’Other receivables’ in Note 22, ‘Other non-current
assets’ and Note 24, ‘Trade and other receivables’. For a discussion
of legal issues, see Note 44 ‘Legal proceedings’.
Major restructuring programmes
In October 2007 GSK announced a significant new Operational
Excellence programme to improve the effectiveness and
productivity of its operations (see Note 7 ‘Major restructuring
programme’). A significant expansion of the Operational Excellence
programme was approved by the Board and announced in February

2009. A further expansion was approved by the Board and
announced in February 2010.
Provisions for staff severance payments are made when
management has made a formal decision to eliminate certain
positions and this has been communicated to the groups of
employees affected. No provision is made for staff severance
payments that are made immediately.

150
30 Other non-current liabilities

2010 2009
£m £m
Accruals and deferred income 103 124

Other payables 491 481
594 605
31 Contingent liabilities
At 31st December 2010, contingent liabilities, comprising guarantees, discounted bills and other items arising in the normal course of
business, amounted to £165 million (2009 – £150 million). At 31st December 2010, £4 million (2009 – £9 million) of financial assets
were pledged as collateral for contingent liabilities. For discussions of tax and legal issues, refer to Note 14, ‘Taxation’ and Note 44,
‘Legal proceedings’.
32 Net debt
2010 2009
Listing exchange £m £m
Current assets:
Liquid investments 184 268
Cash and cash equivalents 6,057 6,545
6,241 6,813
Short-term borrowings:
US$ Floating Rate Note 2010 New York Stock Exchange – (621)
Commercial paper – (621)
Bank loans and overdrafts (259) (182)
Loan stock – (7)
Obligations under finance leases (32) (40)
(291) (1,471)
Long-term borrowings:
3.00% € European Medium Term Note 2012 London Stock Exchange (640) (662)
5.125% € European Medium Term Note 2012 London Stock Exchange (1,919) (1,985)
4.85% US$ US Medium Term Note 2013 New York Stock Exchange (1,599) (1,548)
4.375% US$ US Medium Term Note 2014 London Stock Exchange (1,049) (990)
4.00% € European Medium Term Note 2025 London Stock Exchange (632) (653)
5.25% £ European Medium Term Note 2033 London Stock Exchange (981) (979)
5.375% US$ US Medium Term Note 2034 London Stock Exchange (318) (308)
Bank loans (1) –
Obligations under finance leases (71) (90)
(14,809) (14,786)
Net debt (8,859) (9,444)

151
32 Net debt continued

Current assets
Liquid investments are classified as available-for-sale investments. At 31st December 2010, they included US Treasury Notes and
other government bonds. The effective interest rate on liquid investments at 31st December 2010 was approximately 1.6%
(2009 – approximately 4.6%). Liquid investment balances at 31st December 2010 earning interest at floating and fixed rates
amount to £2 million and £182 million respectively (2009 – £1 million and £267 million).
The effective interest rate on cash and cash equivalents at 31st December 2010 was approximately 1.3% (2009 – approximately 0.7%).
Cash and cash equivalents balances at 31st December 2010 earning interest at floating and fixed rates amount to £5,752 million and
£166 million respectively (2009 – £6,372 million and £17 million).
GSK’s policy regarding the credit quality of cash and cash equivalents is referred to in Note 41, ‘Financial instruments and related
disclosures’.
Short-term borrowings
GSK has a US $10 billion (£6.4 billion) commercial paper programme, of which none was in issue at 31st December 2010
(2009 – $1 billion (£621 million)) and committed facilities of 364 days duration of $3.9 billion (£2.5 billion) (2009 – $3.9 billion

(£2.4 billion)) renewable annually, and liquid investments, cash and cash equivalents as shown in the table above.
The weighted average interest rate on current bank loans and overdrafts at 31st December 2010 was 4.5% (2009 – 4.8%).
Long-term borrowings
At the year-end, GSK had long-term borrowings of £14.8 billion (2009 – £14.8 billion) of which £8.2 billion (2009 – £9.5 billion)
falls due in more than five years. The average effective interest rate of all notes at 31st December 2010 was approximately 5.2%
(2009 – approximately 5.3%).
Long-term borrowings repayable after five years carry interest at effective rates between 3.92% and 6.46%. The repayment dates
range from 2017 to 2042.
Secured liabilities
GSK had no loans secured by charges on non-current and current assets in the year (2009 – £nil). The Group has pledged investments
in US Treasury Notes with a par value of $107 million (£69 million) (2009 – $103 million (£64 million)) as security against irrevocable
letters of credit issued on the Group’s behalf in respect of the Group’s self-insurance activity. Provisions in respect of self-insurance are
included within the provisions for legal and other disputes discussed in Note 29, ‘Other provisions’.

2010 2009
Finance lease obligations £m £m
Rental payments due within one year 37 44

Rental payments due between one and two years 32 38
Rental payments due between two and three years 21 26
Rental payments due between three and four years 13 16
Rental payments due between four and five years 8 6
Rental payments due after five years 8 16
Total future rental payments 119 146
Future finance charges (16) (16)
Total finance lease obligations 103 130
Finance lease obligations at 31st December 2010 bearing interest at floating and fixed rates amount to £70 million and £33 million,
respectively (2009 – £89 million and £41 million).

152
33 Share capital and share premium account

Share
Ordinary Shares of 25p each premium
Number £m £m
Share capital authorised

At 31st December 2008 10,000,000,000 2,500
At 31st December 2009 10,000,000,000 2,500
At 31st December 2010 10,000,000,000 2,500
Share capital issued and fully paid
At 1st January 2008 6,012,587,026 1,503 1,266
Issued under share option schemes 5,640,119 2 60
Share capital purchased and cancelled (356,910,908) (90) –
At 31st December 2008 5,661,316,237 1,415 1,326

At 31st December 2009 5,665,128,719 1,416 1,368
At 31st December 2010 5,670,458,177 1,418 1,428
31st December 31st December

2010 2009
Number (‘000) of shares issuable under outstanding options (Note 42) 207,132 213,110
Number (‘000) of unissued shares not under option 4,122,410 4,121,761
At 31st December 2010, of the issued share capital, 105,472,070 shares were held in the ESOP Trust, 474,194,158 shares were held as
Treasury shares and 5,090,791,949 shares were in free issue. All issued shares are fully paid. The nominal, carrying and market values of
the shares held in the ESOP Trust are disclosed in Note 42, ‘Employee share schemes’.
The company did not purchase any of its own shares in 2010. On 3rd February 2011, GSK announced that it would commence a new
long-term share buy-back programme and expected to repurchase £1-2 billion of shares, depending on market conditions and other
factors, in 2011. The exact amount and timing of purchases and whether the shares will be held as Treasury shares or be cancelled will
be determined by the company and is dependent on market conditions and other factors. No shares were purchased in the period 1st
January 2011 to 3rd February 2011. In the period 4th February 2011 to 24th February 2011 10.4 million shares were purchased at a cost
of £123.4 million.

153
34 Movements in equity

Retained earnings and other reserves amounted to £6,041 million at 31st December 2010 (2009 – £7,221 million; 2008 – £5,190 million)
of which £472 million (2009 – £390 million; 2008 – £391 million) relates to joint ventures and associated undertakings. The cumulative
translation exchange in equity is shown below in the following table:
Net translation exchange included in:

Non- Total
Fair value Retained controlling translation
reserve earnings interests exchange
£m £m £m £m
At 1st January 2008 9 335 (75) 269

Exchange movements on overseas net assets 1 952 64 1,017
Reclassification of exchange on liquidation of overseas subsidiary – 84 – 84
At 31st December 2008 10 1,371 (11) 1,370
Exchange movements on overseas net assets 1 (161) (34) (194)
Reclassification of exchange on liquidation of overseas subsidiary – (44) – (44)

At 31st December 2009 11 1,166 (45) 1,132
Exchange movements on overseas net assets – 145 21 166
Reclassification of exchange on liquidation or disposal of overseas subsidiaries – (2) – (2)
At 31st December 2010 11 1,309 (24) 1,296
The analysis of other reserves is as follows:
ESOP Trust Fair value Cash flow Other

shares reserve hedge reserve reserves Total
£m £m £m £m £m
At 1st January 2008 (1,617) 49 (7) 1,934 359

Transferred to income and expense in the year on disposals – (32) – – (32)
Transferred to income and expense in the year on impairment – (2) – – (2)
Net fair value movement in the year – (23) 4 – (19)
Ordinary Shares purchased and cancelled – – – 90 90

Ordinary Shares acquired by ESOP Trusts (19) – – – (19)
Ordinary Shares transferred by ESOP Trusts 10 – – – 10
Write-down of shares held by ESOP Trusts 181 – – – 181
At 31st December 2008 (1,445) (8) (3) 2,024 568
Transferred to income and expense in the year on disposals – (40) 1 – (39)
Transferred to income and expense in the year on impairment – 40 – – 40
Net fair value movement in the year – 30 (4) – 26
Put option over non-controlling interest – – – (2) (2)
At 31st December 2009 (1,138) 22 (6) 2,022 900
Transferred to income and expense in the year on disposals – (5) 3 – (2)
Transferred to income and expense in the year on impairment – 5 – – 5
Net fair value movement in the year – 67 (1) – 66

At 31st December 2010 (845) 89 (4) 2,022 1,262
Other reserves include various non-distributable merger and pre-merger reserves amounting to £1,849 million at 31st December 2010
(2009 – £1,849 million; 2008 – £1,849 million). Other reserves also include the capital redemption reserve created as a result of the
share buy-back programme amounting to £175 million at 31st December 2010 (2009 – £175 million; 2008 – £175 million).

154
35 Related party transactions

GSK held a 18.1% interest in Quest Diagnostics Inc. at 31st December 2010 (2009 – 16.8%). The Group and Quest Diagnostics are
parties to a long-term contractual relationship under which Quest Diagnostics is the primary provider of clinical laboratory testing to
support the Group’s clinical trials testing requirements worldwide. During 2010, Quest Diagnostics provided services of £41 million
(2009 – £47 million) to the Group. At 31st December 2010, the balance payable by GSK to Quest Diagnostics was £10 million
(2009 – £10 million).
Subsequent to the year-end, GSK sold its entire shareholding in Quest Diagnostics Inc. The sale comprised a secondary public offering
and an accompanying repurchase of shares by Quest Diagnostics which together are expected to generate gross proceeds of $1.1 billion
GSK held a 19% interest in Aspen Pharmacare Holdings Limited at 31st December 2010 (2009 – 19%).
During 2010, GSK distributed £81 million (2009 – £18 million) of its products through Aspen’s extensive distribution network. At
31st December 2010, the balance due to GSK from Aspen was £22 million (2009 – £18 million) and the balance payable by GSK to
Aspen was £12 million (2009 – £13 million).
In 2010, both the Group and Shionogi & Co. Ltd. entered into transactions with their 50/50 US joint venture company in support of
the research and development activities conducted by that joint venture company. During 2010, GSK provided services to the joint
venture of £42 million (2009 – £15 million). At 31st December 2010, the balance due to GSK from the joint venture was £20 million
(2009 – £14 million).
At 31st December 2010, GSK held a 50% interest in ViiV Shire Canada, which primarily co-markets Combivir, Trizivir and Epivir in certain
territories. At 31st December 2010, the balance payable by GSK to GlaxoSmithKline Canada was £4 million (2009 – £nil).
The aggregate compensation of the Directors and CET is given in Note 10, ‘Employee Costs’.
36 Adjustments reconciling profit after tax to operating cash flows
2010 2009 2008

£m £m £m
Profit after tax 1,853 5,669 4,712

Tax on profits 1,304 2,222 1,947
Share of after tax profits of associates and joint ventures (81) (64) (48)
Finance income net of finance costs 715 713 530
Depreciation 1,146 1,130 920
Amortisation of intangible assets 533 432 311
Impairment and assets written off 411 445 436
Profit on sale of intangible assets (118) (835) (170)
Profit on sale of investments in associates (8) (115) –
Profit on sale of equity investments (17) (40) (33)
Changes in working capital:
Decrease/(increase) in inventories 238 (132) (411)
Decrease/(increase) in trade receivables 905 (473) 519
Decrease/(increase) in other receivables 6 (134) 22
Increase/(decrease) in trade payables 154 499 (39)
(Decrease)/increase in other payables (179) 409 (162)
Increase/(decrease) in pension and other provisions 1,653 (320) 548
Share-based incentive plans 179 179 241
Other (63) (40) (268)
6,778 3,876 4,343
Cash generated from operations 8,631 9,545 9,055
The increase in pension and other provisions primarily reflects the charge for legal costs in the year of £4.0 billion, partly offset by legal
settlements of £2.0 billion and further contributions to the defined benefit pension schemes.

155
37 Reconciliation of net cash flow to movement in net debt

2010 2009 2008
£m £m £m
Net debt at beginning of year (9,444) (10,173) (6,039)

(Decrease)/increase in cash and bank overdrafts (642) 1,054 1,148
Cash inflow from liquid investments (91) (87) (905)
Net increase in long-term loans – (1,358) (5,523)
Net repayment of short-term loans 1,290 102 3,059
Net repayment of obligations under finance leases 45 48 48
Debt of subsidiary undertakings acquired (20) (9) –
Exchange adjustments 61 1,041 (1,918)
Other non-cash movements (58) (62) (43)
Movement in net debt 585 729 (4,134)
Net debt at end of year (8,859) (9,444) (10,173)

At 31.12.09 Exchange Other Reclassifications Acquisitions Cash flow At 31.12.10
Analysis of changes in net debt £m £m £m £m £m £m £m
Liquid investments 268 7 – – – (91) 184
Cash and cash equivalents 6,545 77 – – 12 (577) 6,057

Overdrafts (177) 4 – – – (77) (250)
6,368 81 – – 12 (654) 5,807
Debt due within one year:

Commercial paper (621) – – – – 621 –
Eurobonds and Medium-Term Notes (621) (24) – – – 645 –
Other (52) (1) (18) (15) (20) 65 (41)
(1,294) (25) (18) (15) (20) 1,331 (41)

Debt due after one year:
Eurobonds, Medium-Term Notes and
private financing (14,696) (1) (40) – – – (14,737)
Other (90) (1) – 15 – 4 (72)
(14,786) (2) (40) 15 – 4 (14,809)
Net debt (9,444) 61 (58) – (8) 590 (8,859)
For further information on significant changes in net debt see Note 32 ‘Net debt’.
38 Acquisitions and disposals

Details of the acquisition and disposal of significant subsidiaries and associates, joint ventures and other businesses are given below:
2010
Acquisitions
Laboratorios Phoenix S.A.C.yF.

On 10th June 2010, GSK acquired 100% of the issued share capital of Laboratorios Phoenix S.A.C.yF., a leading pharmaceutical business
focused on the development, marketing and sale of branded generic and over-the-counter products in Latin America, for cash. The
purchase price of £174 million included £11 million of net cash, £121 million of intangible assets, £72 million of goodwill and £30 million
of other net liabilities. The goodwill arising on the acquisition of this business reflects the potential for business synergies and further sales
growth through the increase in GSK’s market presence following the acquisition of an established market participant. None of the goodwill
recognised is expected to be deductible for income tax purposes.
The results of Phoenix are reported as part of the Emerging Markets operating segment. This transaction has been accounted for by using
the purchase method of accounting.
The pro-forma results of Laboratorios Phoenix S.A C.yF. for the full year are turnover of £60 million and loss after tax (before major
restructuring) of £2 million.

156
38 Acquisitions and disposals continued

2010
Acquisitions continued
Laboratorios Phoenix S.A.C.yF.

Since acquisition, GSK recorded turnover of £35 million and after tax losses (before major restructuring) of £0.5 million from the business.
Transaction costs expensed in 2010 arising on the acquisition of Laboratorios Phoenix S.A.C.yF. amounted to £3 million.
Fair value
Book value adjustments Fair value
£m £m £m
Net assets acquired

Intangible assets – 121 121
Property, plant and equipment 6 10 16
Other assets including cash and cash equivalents 39 7 46
Deferred tax provision (1) (41) (42)
Other liabilities (27) (12) (39)
17 85 102
Goodwill – 72 72
Total consideration 17 157 174
Other acquisitions
During the year, GSK completed three smaller subsidiary acquisitions for cash. The total purchase price of £198 million included £1 million
of net cash.
Fair value
Book value adjustments Fair value
£m £m £m
Net assets acquired

Intangible assets 3 128 131
Property, plant and equipment 9 2 11

Deferred tax provision – (33) (33)
Other liabilities (10) – (10)
22 109 131
Goodwill – 75 75
Fair value gain recognised on conversion of associate to subsidiary – (8) (8)
If the other acquisitions had been made at the beginning of the year, it is estimated that Group turnover would have increased by
£51 million for the year. As some of the subsidiaries have been fully integrated into the GSK business it is not practicable to separately
identify the impact of the acquisitions on the Group profit for the year.
The goodwill arising on the acquisitions reflects the potential for business synergies and further sales growth through the increase in
GSK’s market presence following the acquisition of these established market participants. In addition, goodwill of £13 million was
recognised in respect of further consideration for a prior year acquisition. None of the goodwill recognised is expected to be deductible
for income tax purposes.
The results of the other acquisitions are reported primarily as part of the Emerging Markets reportable operating segment.
The Group recognised a gain of £8 million as a result of measuring at fair value an associate held prior to the acquisition date. This gain
is reported as Profit on disposal of interest in associates in the income statement.
Acquisition costs expensed in 2010 arising on other acquisitions totalled £7 million.

157

2010
Investments in associates and joint ventures

GSK made cash and non-cash contributions of £24 million in a joint venture in which the Group has a 50% share, £6 million in a joint
venture in which the Group has a 49% share, an investment in an associate of £32 million to increase the Group’s share to 27% and
other investments in associates totalling £3 million.
Associates
Other and joint
Phoenix acquisitions ventures Total
Cash flows £m £m £m £m
Total cash consideration 174 198 61 433

Cash and cash equivalents acquired (11) (1) – (12)
Cash consideration, net of cash acquired 163 197 61 421

Net cash consideration paid 163 191 61 415
Deferred consideration – 6 – 6
Cash consideration, net of cash acquired 163 197 61 421
2009
Acquisitions
Certain businesses from UCB S.A.
On 31st March 2009, the Group acquired from UCB S.A. its marketed product portfolio across certain territories in Africa, the Middle
East, Asia Pacific and Latin America which included several leading pharmaceutical brands in a number of disease areas. Subsequent
to this date the Group completed further country acquisitions which formed part of the original transaction. The purchase price of
£477 million included £5 million of net cash, £445 million of intangible assets, £87 million of goodwill and £60 million of other net
liabilities. The goodwill arising on the acquisition of this business reflects the potential for product growth throughout the regions and
the expected synergies for the Group. This transaction has been accounted for by the purchase method of accounting.
The transaction included acquisition of both a number of legal entities and product rights that had been previously marketed outside of

those entities. The product portfolio acquired was integrated into the GSK business after acquisition and it is not therefore practicable to
identify the result after tax arising as a result of this transaction for the period of 2009 after acquisition.
During 2009, prior to acquisition it is estimated that the product portfolio recorded turnover of £26 million. Since acquisition GSK
recorded turnover of £77 million in 2009 from the products acquired.
Book Fair value Fair

value adjustment value
£m £m £m
Net assets acquired

Property, plant and equipment 1 – 1
Cash and cash equivalents 5 – 5
418 (28) 390
Goodwill – 87 87

158

2009
Stiefel Laboratories, Inc.

On 22nd July 2009, the Group acquired all of the share capital of Stiefel Laboratories, Inc., the world’s largest private dermatological
company for a cash consideration of £1,993 million net of cash acquired and including £326 million of debt repaid on acquisition.
The purchase price of £2,219 million (including contingent cash consideration of £152 million payable upon certain criteria being met
by specified dates in the future) included £74 million of cash and cash equivalents, £1,513 million of intangible assets, £885 million of
goodwill, representing the potential for additional growth from the combination of the Stiefel business and GSK’s existing dermatology
portfolio, and £253 million of other net liabilities. The purchase price included potential obligations to make additional payments of
up to $300 million (£183 million) depending on the future performance of certain products. Stiefel Laboratories Inc. had a turnover
of £547 million and a loss after tax (including restructuring costs) of £103 million for the year ended 31st December 2009, of which
£248 million of turnover and £78 million of loss after tax (including restructuring costs) related to the period since acquisition and are
included in the Group accounts. In 2009, since acquisition, Stiefel made an operating profit of £35 million before restructuring costs and
intangible assets amortisation.
The business will provide significant opportunities for both sales and cost synergies. Stiefel’s products will benefit from GSK’s global
distribution and commercial organisations, particularly in markets such as Brazil, Russia, India, China and Japan. GSK’s products will
benefit from Stiefel’s speciality sales force relationships and experienced management in dermatology.
Cost synergies for the business are expected primarily from combining manufacturing and administrative functions. As previously reported,
GSK expects to deliver annual pre-tax cost savings of up to £155 million by 2012 with restructuring costs of approximately £205 million.
Excluding restructuring costs, the Stiefel acquisition resulted in a dilution of GSK’s earnings per share of less than 1% in 2009.

£m £m £m
Net assets acquired

Intangible assets 274 1,239 1,513
Deferred tax provision 35 (331) (296)

379 955 1,334
Goodwill – 885 885
Total consideration 379 1,840 2,219
ViiV Healthcare Limited

On 30th October 2009, GSK acquired Pfizer Inc.’s HIV business and combined it with its own HIV business to form ViiV Healthcare
Limited, a sub-group owned 85% by GSK and 15% by Pfizer. The consideration given by GSK, representing 15% of the net value of
GSK’s HIV business, contingent consideration and transaction costs, was valued at £383 million. This was represented by £595 million
of intangible assets, £172 million of deferred tax liability, £21 million of other net assets, £316 million increase in non-controlling
interests and £255 million of goodwill representing the economies of scale gained from the combination of the two businesses and the
potential for growth of both partners’ HIV products within ViiV Healthcare. The non-controlling interest represents Pfizer’s interest in
ViiV Healthcare including the right to preferential dividends based on the sales performance of certain products.
GSK recognised an accounting gain of £296 million on this transaction arising on the disposal of a 15% interest in GSK’s HIV business
to Pfizer recorded at book value, in return for 85% of Pfizer’s HIV business recorded at fair value.

159

2009
The acquired Pfizer HIV business had a turnover of £89 million and a loss after tax of £39 million in 2009, of which, after taking account
of the transition status in various territories, £1 million of turnover and £23 million of loss after tax, including restructuring costs, was
recognised in the Group accounts in 2009.

£m £m £m
Net assets acquired

23 421 444
Non-controlling interests – (316) (316)

Consideration
Fair value of assets contributed by GSK 328
Fair value of contingent equity contributed by GSK 37
Direct costs 18
Total consideration 383
Other acquisitions
Other investments in the year included £327 million in five subsidiaries, £16 million in a joint venture in which the Group has a 50%
share and £20 million in an associate in which the Group has an initial 40% share.
Certain Stiefel

businesses Laboratories,
of UCB S.A. Inc. Other Total
Cash flows £m £m £m £m
Cash consideration 477 2,067 371 2,915

Cash and cash equivalents acquired (5) (74) (15) (94)
Net cash consideration 472 1,993 356 2,821
Contingent consideration – 152 2 154
Net purchase consideration 472 2,145 358 2,975
If the acquisitions of subsidiaries had been made at the beginning of the year, it is estimated that Group turnover would have increased
by £477 million for the year. As some of the acquisitions have been fully integrated into the GSK business it is not practicable to
separately identify the impact of the acquisitions on the Group profit for the year.

160

2008
Sirtris Pharmaceuticals Inc.

On 5th June 2008, the Group acquired 100% of the issued share capital of Sirtris Pharmaceuticals Inc., a biopharmaceutical company
based in Massachusetts, USA for a cash consideration of £376 million. The company is focused on discovering and developing proprietary,
orally available, small molecule drugs with the potential to treat diseases associated with ageing, including metabolic diseases such as
Type 2 diabetes. Sirtris’ drug candidates are designed to mimic certain beneficial health effects of calorie restriction by activation of
sirtuins, a recently discovered class of enzymes that Sirtris believes control the ageing process. This transaction has been accounted for
by the purchase method of accounting. The goodwill arising on the acquisition reflects the potential for enabling GSK to enhance its
metabolic, neurology, and immuno-inflammation research efforts by establishing a world-leading presence in the sirtuin field, aided
by the existence in the company of a highly experienced development team that encompasses all aspects of sirtuin biology. Sirtris
Pharmaceuticals Inc. had a turnover of £nil and a loss after tax of £25 million in 2008, of which £nil of turnover and £14 million of
loss after tax related to the period after acquisition and are included in the Group accounts in 2008.

£m £m £m
Net assets acquired

Intangible assets – 106 106
Other assets including cash and cash equivalents 86 – 86
49 85 134
Other acquisitions
Other investments in the year included £140 million in a subsidiary, of which £10 million was deferred, a further £6 million in a joint
venture in which the Group has a 50% share and £2 million in an associate in which the Group has a 36.8% holding.
Sirtris Other Total

Cash flows £m £m £m
Cash consideration 376 139 515

Cash and cash equivalents acquired (52) – (52)
Net cash payment on acquisitions 324 139 463
If the subsidiaries had been acquired at the beginning of 2008, combined Group turnover for the year would have been £24,373 million
and combined Group profit for the year would have been £4,705 million.

161
39 Commitments

2010 2009
Contractual obligations and commitments £m £m
Contracted for but not provided in the financial statements:

Intangible assets 11,762 12,280
Property, plant and equipment 380 416
Investments 37 86
Purchase commitments 1,127 82
Business combinations 285 –
Pensions 1,095 1,460
Other commitments 242 52
Interest on loans 10,312 10,733
Finance lease charges 16 16
25,256 25,125

The commitments related to intangible assets include milestone payments, which are dependent on successful clinical development or
on meeting specified sales targets, and which represent the maximum that would be paid if all milestones, however unlikely, are achieved.
The amounts are not risk-adjusted or discounted. A number of commitments were made in 2010 under licensing and other agreements,
including arrangements with Amicus Therapeutics, Amplimmune Inc., Apeiron Biologics AG, Fondazione Telethon, Isis Pharmaceuticals,
Inc. and Shionogi & Co., Limited. These new arrangements were offset by reduced commitments due on prior year transactions including
Actelion Pharmaceuticals Limited, Targacept, Inc. and Neurosearch A/S which were terminated or curtailed during the year.
The commitments relating to business combinations reflect three agreements signed in 2010 but not completed at the balance sheet date.
In 2009, GSK reached an agreement with the trustees of the UK pension schemes to make additional contributions to eliminate the
pension deficit identified at the 31st December 2008 actuarial funding valuation. The table above shows this commitment, but excludes
the normal ongoing annual funding requirement of approximately £130 million.
The Group also has other commitments which principally relate to revenue payments to be made under licences and other alliances.
Commitments in respect of future interest payable on loans are disclosed before taking into account the effect of interest rate swaps.

2010 2009
Commitments under non-cancellable operating leases £m £m
Rental payments due within one year 123 111

Rental payments due between one and two years 73 72
Rental payments due between two and three years 46 50
Rental payments due between three and four years 32 21
Rental payments due between four and five years 25 14
Rental payments due after five years 116 69
Total commitments under non-cancellable operating leases 415 337
40 Post balance sheet events

Subsequent to the year end, GSK completed the acquisition of the three business combinations referred to in Note 39 ‘Commitments’.
Since the year end, GSK has sold its entire shareholding in Quest Diagnostics Inc. The sale comprised a secondary public offering and
an accompanying repurchase of shares by Quest Diagnostics which together are expected to generate gross proceeds of $1.1 billion

On 3rd February 2011, GSK announced that the company has initiated a new long-term share buy-back programme, and the intention
is to repurchase £1-2 billion of shares in 2011, depending on market conditions. In the period 4th February 2011 to 24th February 2011,
10.4 million shares were purchased at a cost of £123.4 million.

162
41 Financial instruments and related disclosures These borrowings, together with cash generated from operations,
are on-lent, contributed as equity to certain subsidiaries or used to
GlaxoSmithKline plc reports in Sterling and pays dividends out pay dividends and make acquisitions. GSK did not make any share
of Sterling profits. The role of Corporate Treasury is to manage repurchases in 2010.
and monitor our external and internal funding requirements
and financial risks in support of our strategic objectives. Treasury Total capital (equity and net debt) of the Group has decreased from
activities are governed by policies and procedures approved by £20,186 million in 2009 to £18,604 million in 2010. The decrease
the Board of Directors, most recently on 7th October 2010. of £1,582 million arises principally as a result of the excess of
dividend distribution for the year of £3,205 million over earnings
A Treasury Management Group (TMG) chaired by our Chief Financial attributable to shareholders of £1,634 million. The Group’s positive
Officer, meets on a monthly basis to review treasury activities. cash generation was sufficient to finance the Group’s acquisitions
Its members receive management information relating to treasury and payment of legal costs in the year. Net debt continued to
activities. Our internal auditors review the Treasury internal control reduce in 2010, reflecting the benefits of our ongoing restructuring
environment regularly. programme and the success of our working capital initiatives.
GSK uses a variety of financial instruments to finance its operations Liquidity risk
and derivative financial instruments to manage risks from these
We manage our net borrowing requirements through a portfolio
operations. These derivatives, principally comprising forward
of long-term borrowings, including bonds, together with short-
foreign currency contracts, interest rate and currency swaps, are
term finance under the US$10 billion commercial paper programme
used to swap borrowings and liquid assets into currencies required
and $3.9 billion of committed facilities. The facilities were last
for Group purposes and to manage exposure to funding risks from
renewed in October 2010. We consider this level of committed
changes in foreign exchange rates and interest rates.
facilities to be adequate given current liquidity requirements. For
GSK does not hold or issue derivatives for speculative purposes further information on these facilities, please refer to Note 32 to
and our Treasury policies specifically prohibit such activity. All the financial statements, ‘Net debt’. We also benefit from strong
transactions in financial instruments are undertaken to manage the positive cash flow from operating units.
risks arising from underlying business activities, not for speculation.
We have a European Medium Term Note programme of £15 billion.
Capital management At 31st December 2010, we had £8.3 billion of notes in issue under
We manage our capital to ensure that entities in the Group are this programme. We also have a US shelf registration statement. At
able to operate as going concerns and to optimise return to 31st December 2010, we had $10.1 billion (£6.5 billion) of notes in
shareholders through an appropriate balance of debt and equity. issue under this programme.
The Board reviews the Group’s dividend policy and funding The long-term borrowings mature at dates between 2012 and
requirements annually. 2042. Our long-term debt ratings have remained stable since
The capital structure of the Group consists of net debt (see February 2008. Currently we are rated A+ stable outlook by
Note 32, ‘Net debt’) and shareholders’ equity (see ’Consolidated Standard and Poor’s and A1 stable outlook by Moody’s Investors
statement of changes in equity‘ on page 107). Service ‘Moody’s’. Our short-term debt ratings are A-1 and P-1
with Standard and Poor’s and Moody’s respectively.
Our commitment is to use free cash flow to support increasing
dividends, undertake share repurchases or, where returns are more As well as our committed facilities we also had substantial cash
attractive, invest in bolt-on acquisitions. Investment opportunities and cash equivalents and liquid investments, which amounted to
will continue to be assessed against strict financial criteria. £6.2 billion at 31st December 2010. We also benefit from strong
positive cash flow from operating units. The TMG monitors the
GSK operates on a global basis, primarily through subsidiary
cash flow forecast on a monthly basis.
companies established in the markets in which we trade.
With significant levels of patent or trademark protection, our Market risk
pharmaceutical products compete largely on product efficacy Interest rate risk management
or differentiation. Selling margins are sufficient to cover normal
The policy on interest rate risk management limits the amount
operating costs and our operations are cash generative.
of floating interest payments to a prescribed percentage of
Operating cash flow is used to fund investment in research and trading profit.
development of new products. It is also used to make routine
We use a series of interest rate swaps to redenominate one of our
outflows of capital expenditure, tax, dividends, repayment of
external borrowings into the interest rate coupon required by GSK.
maturing debt and, to the extent determined by the Board, share
The duration of this swap matches the duration of the principal
repurchases. In 2011, as part of a new long-term share buy-back
instrument. Interest rate derivative instruments are accounted for as
programme and depending on market conditions and other
fair value or cash flow hedges of the relevant assets or liabilities.
factors, we expect to purchase £1-2 billion of shares.
Our policy is to borrow centrally, using a variety of capital
market issues and borrowing facilities, to meet anticipated
funding requirements.

163
41 Financial instruments and related disclosures continued

Foreign exchange risk management
Foreign currency transaction exposures arising on internal and external trade flows are not hedged. The exposure of overseas operating
subsidiaries to transaction risk is minimised by matching local currency income with local currency costs. For this purpose, our internal trading
transactions are matched centrally and we manage inter-company payment terms to reduce foreign currency risk. Exceptional foreign
currency cash flows are hedged selectively under the management of Corporate Treasury. We manage the cash surpluses or borrowing
requirements of subsidiary companies centrally using forward contracts to hedge future repayments back into the originating currency.
We seek to denominate borrowings in the currencies of our principal assets and cash flows. These are primarily denominated in US
dollars, Euros and Sterling. Certain borrowings can be swapped into other currencies as required. Borrowings denominated in, or swapped
into, foreign currencies that match investments in overseas Group assets may be treated as a hedge against the relevant assets. Forward
contracts are also used in major currencies to reduce our exposure to our investment in overseas Group assets (see ‘Net investment
hedges’ section of this note for further details). The TMG reviews the ratio of borrowings to assets for major currencies monthly.
Credit risk
The Group considers its maximum credit risk to be £12,285 million (2009 – £13,434 million) which is the total of the Group’s financial
assets with the exception of ’Other investments’ which do not bear credit risk. See page 165 for details on the Group’s total financial

assets.
GSK’s greatest concentration of credit risk is £1.3 billion with JP Morgan Chase (Aa1/AA- rated with Moody’s and Standard and Poor’s
respectively), comprising £1.2 billion invested in deposits and £0.1 billion of derivatives. In 2009, the greatest concentration of credit
risk was £1.3 billion of investments in US Treasury and Treasury repo only money market funds which bear credit exposure to the US
Government (Aaa/AAA rated with Moody’s and Standard and Poor’s respectively).
Treasury-related credit risk
GSK has continued to maintain its conservative approach to counterparty risk throughout this period. A report on relationship banks and
their credit ratings is presented annually to the TMG for approval.
The aggregate credit risk in respect of financial instruments the Group may have with one counterparty is limited by reference to the long-term
credit ratings assigned for that counterparty by Moody’s and Standard and Poor’s. The table below sets out the credit ratings of counterparties for
liquid investments, cash and cash equivalents and derivatives. The gross asset position on each derivative contract is considered for the purpose
of this table, though, under the ISDA contracts, the amount at risk is the net position with each counterparty.
The £92 million invested in Baa3/BBB- rated investments includes bank deposits with Allied Irish Bank and State Bank of India and

Indian Government bonds. These counterparties are used either for local cash management purposes or for local investment purposes
where GSK is not the sole shareholder.
The £27 million invested in Ba1/BB+ rated investments includes Greek Government bonds issued in lieu of settlement on long outstanding
amounts and bank deposits with HDFC Bank, a domestic bank used in India to invest funds locally.
Credit rating of counterparty

2010 Aaa/AAA Aa2/AA Aa3/AA- A1/A+ A2/A Baa1/BBB+ Baa2/BBB Baa3/BBB- Ba1/BB+ Total
£m £m £m £m £m £m £m £m £m £m
Bank balances and deposits – 1,772 1,226 2,494 67 1 – 84 16 5,660

US Treasury and Treasury repo only
money market funds 360 – – – – – – – – 360
Corporate debt instruments – – 10 – – – – – – 10
Government securities 192 – – – – – – 8 11 211
3rd party financial derivatives – 23 49 100 – – – – – 172
Total 552 1,795 1,285 2,594 67 1 – 92 27 6,413
Credit rating of counterparty

2009 Aaa/AAA Aa2/AA Aa3/AA- A1/A+ A2/A Baa1/BBB+ Baa2/BBB Baa3/BBB- Ba1/BB+ Total
£m £m £m £m £m £m £m £m £m £m
Bank balances and deposits 793 1,385 1,359 1,467 102 – 27 63 10 5,206
US Treasury and Treasury repo only
money market funds 1,305 – – – – – – – – 1,305
Corporate debt instruments – – 10 – – – – – – 10
Government securities 237 – – 43 – – – 11 1 292
3rd party financial derivatives – 48 32 106 – – – – – 186
Total 2,335 1,433 1,401 1,616 102 – 27 74 11 6,999
The credit ratings in the above tables are as assigned by Moody’s and Standard and Poor’s respectively. Where the opinion of the two
rating agencies differ, GSK assigns the lower rating of the two to the counterparty. Where local rating agency data is the only source
available, the ratings are converted to global ratings equivalent to those of Moody’s Investor Services or Standard and Poor’s using
published conversion tables.

164
41 Financial instruments and related disclosures The following methods and assumptions were used to estimate
continued the fair values:
s#ASHANDCASHEQUIVALENTSnAPPROXIMATESTOTHECARRYING
Our centrally managed cash reserves amounted to £3.0 billion at
amount
31st December 2010, all available within 3 months. This excludes
£0.9 billion centrally managed cash held by ViiV Healthcare, an s ,IQUIDINVESTMENTSnBASEDONQUOTEDMARKETPRICESORCALCULATED
85% owned subsidiary. The Group may invest centrally managed based on observable inputs in the case of marketable securities;
liquid assets in bank deposits, AAA/Aaa rated US Treasuries and based on principal amounts in the case of non-marketable
US Treasury repo only money market funds and short term securities because of their short repricing periods
corporate debt instruments with a minimum short-term credit s /THERINVESTMENTSnINVESTMENTSTRADEDINANACTIVEMARKET
rating of A-1/P1. determined by reference to the relevant stock exchange quoted
bid price; other investments determined by reference to the
Global counterparty limits are assigned to each of GSK’s banking
current market value of similar instruments or by reference to the
and investment counterparties based on long-term credit ratings
discounted cash flows of the underlying net assets
from Moody’s and Standard and Poor’s. Corporate Treasury’s usage
of these limits is monitored daily by a Corporate Compliance Officer s 3HORT TERMLOANSANDOVERDRAFTSnAPPROXIMATESTOTHECARRYING
(CCO) who operates independently of Corporate Treasury. Any amount because of the short maturity of these instruments
breach of these limits would be reported to the CFO immediately. s ,ONG TERMLOANSnBASEDONQUOTEDMARKETPRICESINTHECASEOF
The CCO also monitors the credit rating of these counterparties the Eurobonds and other fixed rate borrowings; approximates to
and, when changes in ratings occur, notifies Corporate Treasury the carrying amount in the case of floating rate bank loans and
so that changes can be made to investment levels or authority other loans
limits as appropriate. s &ORWARDEXCHANGECONTRACTSnBASEDONMARKETDATAAND
Wholesale and retail credit risk exchange rates at the balance sheet date
In the USA, in line with other pharmaceutical companies, the s #URRENCYSWAPSnBASEDONMARKETDATAATTHEBALANCESHEETDATE
Group sells its products through a small number of wholesalers s )NTERESTRATESWAPSnBASEDONTHENETPRESENTVALUEOF
in addition to hospitals, pharmacies, physicians and other groups. discounted cash flows
Sales to the three largest wholesalers amount to approximately s 2ECEIVABLESANDPAYABLESnAPPROXIMATESTOTHECARRYINGAMOUNT
85% of the Group’s US pharmaceutical sales. At 31st December
2010, the Group had trade receivables due from these three s #OMPANY OWNEDLIFEINSURANCEPOLICIESnBASEDONCASH
wholesalers totalling £890 million (2009 – £867 million). The surrender value
Group is exposed to a concentration of credit risk in respect of s ,EASEOBLIGATIONSnAPPROXIMATESTOTHECARRYINGAMOUNT
these wholesalers such that, if one or more of them encounters Fair value of investments in GSK shares
financial difficulty, it could materially and adversely affect the

At 31st December 2010, the Employee Share Ownership Plan
Group’s financial results.
(ESOP) Trusts held GSK shares with a carrying value of £845 million
The Group’s credit risk monitoring activities relating to these (2009 – £1,138 million) with a fair value of £1,308 million
wholesalers includes review of their quarterly financial information (2009 – £1,554 million) based on quoted market price. The shares
and Standard & Poor’s credit ratings, development of GSK internal represent purchases by the ESOP Trusts to satisfy future exercises
risk ratings, and establishment and periodic review of credit limits. of options and awards under employee incentive schemes. The
However, the Group believes there is no further credit risk provision carrying value, which is the lower of cost or expected proceeds,
required in excess of the normal provision for bad and doubtful of these shares has been recognised as a deduction from other
debts (see Note 24, ‘Trade and other receivables’). Outside the reserves. At 31st December 2010, GSK held Treasury shares at a
USA no customer accounts for more than 5% of the trade cost of £6,286 million (2009 – £6,286 million) which has been
receivables balance. deducted from retained earnings.
Fair value of financial assets and liabilities Committed facilities
The table on page 165 presents the carrying amounts and the The Group has committed facilities of $3.9 billion (£2.5 billion)
fair values of the Group’s financial assets and liabilities at (2009 – $3.9 billion (£2.4 billion)) of 364 days duration, renewable
31st December 2010 and 31st December 2009. annually. At 31st December 2010 these were undrawn.
The fair values of the financial assets and liabilities are included
at the amount at which the instrument could be exchanged in a
current transaction between willing parties, other than in a forced
or liquidation sale.

165

2010 2009
Carrying Fair Carrying Fair
value value value value
£m £m £m £m
Cash and cash equivalents 6,057 6,057 6,545 6,545

Available-for-sale investments:
,IQUIDINVESTMENTS
– Government bonds 172 172 254 254
– other 12 12 14 14
Total liquid investments 184 184 268 268

Other investments 711 711 454 454
,OANSANDRECEIVABLES
Trade and other receivables and certain Other non-current

assets in scope of IAS 39 5,667 5,667 6,271 6,271
Financial assets at fair value through profit or loss:
Other non-current assets 187 187 153 153
Held-for-trading financial assets:
Derivatives designated as accounting hedges 97 97 104 104
Other derivatives 93 93 93 93
Total financial assets 12,996 12,996 13,888 13,888
Financial liabilities measured at amortised cost:

Borrowings:
– bonds in a designated hedging relationship (6,029) (6,401) (6,139) (6,499)
– other bonds (8,708) (9,653) (9,178) (9,864)
– commercial paper – – (621) (621)
– bank loans and overdrafts (260) (260) (182) (182)

– other loans and private financing – – (7) (7)
– obligations under finance leases (103) (103) (130) (130)
Total borrowings (15,100) (16,417) (16,257) (17,303)

Trade and other payables, Other provisions and
Other non-current liabilities in scope of IAS 39 (6,590) (6,590) (6,051) (6,051)
Held-for-trading financial liabilities:
Derivatives designated as accounting hedges (23) (23) (55) (55)
Other derivatives (170) (170) (113) (113)
Total financial liabilities (21,883) (23,200) (22,476) (23,522)

Net financial assets and financial liabilities (8,887) (10,204) (8,588) (9,634)

166

The following tables categorise the Group’s financial assets and liabilities held at fair value by the valuation methodology applied in
DETERMININGTHEIRFAIRVALUE7HEREPOSSIBLEQUOTEDPRICESINACTIVEMARKETSAREUSED,EVEL 7HERESUCHPRICESARENOTAVAILABLETHE
ASSETORLIABILITYISCLASSIlEDAS,EVELPROVIDEDALLSIGNIlCANTINPUTSTOTHEVALUATIONMODELUSEDAREBASEDONOBSERVABLEMARKETDATA)F
ONEORMOREOFTHESIGNIlCANTINPUTSTOTHEVALUATIONMODELISNOTBASEDONOBSERVABLEMARKETDATATHEINSTRUMENTISCLASSIlEDAS,EVEL
,EVEL ,EVEL ,EVEL Total
At 31st December 2010 £m £m £m £m
Financial assets at fair value

Available–for–sale financial assets:
,IQUIDINVESTMENTS 159 25 – 184
Other investments 491 – 220 711
Other non-current assets – 187 – 187
Held–for–trading financial assets:
Derivatives designated as accounting hedges – 97 – 97
Other derivatives – 92 1 93
650 401 221 1,272
Financial liabilities at fair value

Held–for–trading financial liabilities:
Derivatives designated as accounting hedges – (23) – (23)
Other derivatives – (169) (1) (170)
– (192) (1) (193)
,EVEL ,EVEL ,EVEL Total

At 31st December 2009 £m £m £m £m
Financial assets at fair value

Available–for–sale financial assets:
,IQUIDINVESTMENTS 249 19 – 268
Other investments 245 – 209 454

Other non-current assets – 153 – 153
Held–for–trading financial assets:
Derivatives designated as accounting hedges – 104 – 104
Other derivatives – 93 – 93
494 369 209 1,072
Financial liabilities at fair value

Held–for–trading financial liabilities:
Derivatives designated as accounting hedges – (55) – (55)
Other derivatives – (113) – (113)
– (168) – (168)
-OVEMENTSINTHEYEARFORlNANCIALINSTRUMENTSMEASUREDUSING,EVELVALUATIONMETHODSAREPRESENTEDBELOW
2010 2009
£m £m

,OSSES recognised in the income statement (13) (11)
,OSSES GAINSRECOGNISEDINOTHERCOMPREHENSIVEINCOME (1) 1
Additions 51 81
Disposals (3) (4)
4RANSFERSFROM,EVEL (26) –
Exchange 3 (17)
Net losses of £13 million (2009 – £11 million) attributableTO,EVELlNANCIALINSTRUMENTSheld at the end of the year were reported
in other operating income.4RANSFERSOUTOF,EVELOFaMILLIONnaNIL RELATETOEQUITYINVESTMENTSWHICHWERELISTEDONSTOCK
exchanges during the year. A reasonably possible change in assumptions is unlikely to result in a material change in the fair value of
THE,EVELINSTRUMENTS

167

Trade and other receivables and Other non-current assets in scope of IAS 39
The following table reconciles financial assets within Trade and other receivables and Other non-current assets which fall within the scope
of IAS 39 to the relevant balance sheet amounts. The financial assets are predominantly non-interest earning. Financial instruments within
Other non-current assets include company-owned life insurance policies. Other assets include tax receivables, pension surplus balances
and prepayments, which are outside the scope of IAS 39.
2010 2009
£m £m
Trade and other receivables (Note 24) 5,793 6,492

Other non-current assets (Note 22) 556 583
6,349 7,075
Analysed as:
Financial assets in scope of IAS 39 5,854 6,424

Other assets 495 651
6,349 7,075
The following table shows the age of such financial assets which are past due and for which no provision for bad or doubtful debts has
been made:
2010 2009
£m £m
Past due by 1–30 days 134 262

Past due by more than 365 days 67 78
466 559

Amounts past due by greater than 90 days total £194 million (2009 – £192 million). Of this balance £127 million (2009 – £132 million)
relates to receivables due from state hospital authorities in certain European countries. Given the profile of our customers, including
large wholesalers and government backed agencies, no further credit risk has been identified with the trade receivables not past due
other than those balances for which an allowance has been made.
Trade and other payables, Other provisions and Other non-current liabilities in scope of IAS 39
The following table reconciles financial liabilities within Trade and other payables, Other provisions and Other non-current liabilities
which fall within the scope of IAS 39 to the relevant balance sheet amounts. The financial liabilities are predominantly non-interest
bearing. Accrued wages and salaries are included within financial liabilities. Other liabilities include payments on account, tax and
social security payables and provisions which do not constitute contractual obligations to deliver cash or another financial asset,
which are outside the scope of IAS 39.
2010 2009
£m £m
Trade and other payables (Note 27) (6,888) (6,772)

Other provisions (Note 29) (5,284) (3,241)
Other non-current liabilities (Note 30) (594) (605)

(12,766) (10,618)
Analysed as:
Financial liabilities in scope of IAS 39 (6,590) (6,051)
Other liabilities (6,176) (4,567)
(12,766) (10,618)

168

Debt interest rate repricing table
The following table sets out the exposure of the Group to interest rates on debt before and after the effect of interest rate swaps.
The maturity analysis of fixed rate debt is stated by contractual maturity and of floating rate debt by interest rate repricing dates.
For the purpose of this table, debt is defined as all classes of borrowings other than obligations under finance leases.
2010 2009
Effect of Effect of
interest interest
Debt rate swaps Total Debt rate swaps Total
£m £m £m £m £m £m
Floating and fixed rate debt less than one year (259) (1,049) (1,308) (1,431) (990) (2,421)
Between one and two years (2,559) – (2,559) – – –
Between two and three years (1,599) – (1,599) (2,647) – (2,647)
Between three and four years (1,049) 1,049 – (1,548) – (1,548)
Between four and five years (1,358) – (1,358) (990) 990 –
Between five and ten years (2,819) – (2,819) (4,205) – (4,205)
Greater than ten years (5,354) – (5,354) (5,306) – (5,306)
Total (14,997) – (14,997) (16,127) – (16,127)
Original issuance profile:
Fixed rate interest (14,757) 1,049 (13,708) (14,696) 990 (13,706)
Floating rate interest (239) (1,049) (1,288) (1,430) (990) (2,420)
Total interest bearing (14,996) – (14,996) (16,126) – (16,126)
Non-interest bearing (1) – (1) (1) – (1)
(14,997) – (14,997) (16,127) – (16,127)
Sensitivity analysis
The sensitivity analysis has been prepared on the assumption that the amount of net debt, the ratio of fixed to floating interest rates of
the debt and derivatives portfolio and the proportion of financial instruments in foreign currencies are all constant and on the basis of the
hedge designations in place at 31st December.
Financial instruments affected by market risk include borrowings, deposits and derivative financial instruments. The following analyses are
intended to illustrate the sensitivity of such financial instruments to changes in relevant foreign exchange and interest rates.
Foreign exchange sensitivity
The tables below show the Group’s sensitivity to foreign exchange rates on its US dollar, Euro and Yen financial instruments excluding
obligations under finance leases and certain non-derivative financial instruments not in net debt and which do not present a material
exposure. These three currencies are the major foreign currencies in which GSK’s financial instruments are denominated. GSK has
considered movements in these currencies over the last three years and has concluded that a 20% movement in rates is a reasonable
benchmark. In the table below, financial instruments are only considered sensitive to foreign exchange rates where they are not in the
functional currency of the entity that holds them. Inter-company loans which are fully hedged to maturity with a currency swap have
been excluded from this analysis.
2010 2009
Increase Reduction Increase Reduction
Non-functional currency foreign exchange exposure in income in equity in income in equity
£m £m £m £m
20% appreciation of the US dollar 386 – 214 755

20% appreciation of the Euro 35 1,697 72 1,779
20% appreciation of the Yen – – 5 45
A 20% depreciation of the stated currencies would have an equal and opposite effect.
The movements in the income statement relate primarily to hedging instruments for US legal provisions, and to trade payables and trade
receivables. Whilst the hedging instruments provide economic hedges, the related provisions are not financial instruments and therefore
are not included in the table above. The combined sensitivity of these hedging instruments and the provisions would be insignificant if the
provisions were included.
The movements in equity relate to foreign exchange positions used to hedge Group assets denominated in Euro. The US dollar and Yen
positions were closed out in 2010. Therefore, a depreciation on the currency swap would give rise to a corresponding appreciation on the
Group asset. Foreign exchange sensitivity on Group assets other than financial instruments is not included above.

169

The table below presents the Group’s sensitivity to foreign exchange rates based on the composition of net debt adjusting for the effects
of foreign exchange derivatives, which are not part of net debt but affect future foreign currency cash flows. These derivatives relate
primarily to foreign exchange contracts used to hedge the Group’s currency net assets and US legal provisions.
2010 2009
Increase/(decrease) Increase/(decrease)
Impact of foreign exchange movements on net debt in net debt in net debt
£m £m
20% appreciation of the US dollar 851 523

20% appreciation of the Euro 606 686
20% appreciation of the Yen (13) 89
A 20% depreciation of the stated currencies would have an equal and opposite effect.
Interest rate sensitivity
The table below shows the Group’s sensitivity to interest rates on its floating rate Sterling, US dollar and Euro financial instruments, being the

currencies in which GSK has historically issued debt and held investments. GSK has considered movements in these interest rates over the last
three years and has concluded that a 2% (200 basis points) increase is a reasonable benchmark. Debt with a maturity of less than one year is
floating rate for this calculation. A 2% (200 basis points) movement in interest rates is not deemed to have a material effect on equity.
2010 2009
Increase/(decrease) Increase/(decrease)
in income in income
£m £m
2% (200 basis points) increase in Sterling interest rates 29 (2)

2% (200 basis points) increase in US dollar interest rates (18) 38
2% (200 basis points) increase in Euro interest rates 37 18
These interest rates could not be decreased by 2% as they are currently less than 1.0%. The maximum increase/(decrease) in income
would therefore be limited to (£8 million), £2 million and (£11 million) for Sterling, US Dollar and Euro interest rates respectively
(2009 – £1 million, (£4 million) and (£2 million)). Interest rate movements on foreign currency derivatives and other financial instruments
not in net debt do not present a material exposure to the Group’s balance sheet based on a 2% increase or decrease in these interest rates.

Contractual cash flows for non-derivative financial liabilities and derivative instruments
The following is an analysis of the anticipated contractual cash flows including interest payable for the Group’s non-derivative financial
liabilities on an undiscounted basis. The impact of interest rate swaps has been excluded. For the purpose of this table, debt is defined as
all classes of borrowings except for obligations under finance leases. Interest is calculated based on debt held at 31st December without
taking account of future issuance. Floating rate interest is estimated using the prevailing interest rate at the balance sheet date. Cash
flows in foreign currencies are translated using spot rates at 31st December.
Finance charge Trade payables
Obligations on obligations and other
Interest on under finance under finance liabilities not
At 31st December 2010 Debt debt leases leases in net debt Total
£m £m £m £m £m £m
Due in less than one year (259) (755) (32) (5) (6,280) (7,331)
Between one and two years (2,564) (756) (27) (5) (178) (3,530)
Between two and three years (1,603) (638) (18) (3) (35) (2,297)
Between three and four years (962) (559) (11) (2) (57) (1,591)
Between four and five years (1,368) (538) (7) (1) (7) (1,921)
Between five and ten years (2,831) (2,053) (8) – (21) (4,913)
Greater than ten years (5,425) (5,013) – – (12) (10,450)
Gross contractual cash flows (15,012) (10,312) (103) (16) (6,590) (32,033)
Finance charge Trade payables

Obligations on obligations and other
Interest on under finance under finance liabilities not
At 31st December 2009 Debt debt leases leases in net debt Total
£m £m £m £m £m £m
Due in less than one year (1,431) (757) (40) (4) (5,828) (8,060)
Between one and two years – (753) (32) (6) (161) (952)
Between two and three years (2,655) (754) (24) (2) (28) (3,463)
Between three and four years (1,553) (594) (14) (2) (14) (2,177)
Between four and five years (932) (536) (5) (1) (5) (1,479)
Between five and ten years (4,230) (2,088) (15) (1) (15) (6,349)
Greater than ten years (5,382) (5,251) – – – (10,633)
Gross contractual cash flows (16,183) (10,733) (130) (16) (6,051) (33,113)

170

The following table provides an analysis of the anticipated contractual cash flows for the Group’s derivative instruments, excluding
embedded derivatives and equity options which are not material, using undiscounted cash flows. Cash flows in foreign currencies are
translated using spot rates at 31st December. The gross cash flows of foreign exchange contracts are presented for the purposes of
this table, though, in practice, the Group uses standard settlement arrangements to reduce its liquidity requirements on these instruments.
2010 2009
Receivables Payables Receivables Payables
£m £m £m £m
,ESSTHANONEYEAR 13,555 (13,511) 21,341 (21,318)

Between one and two years 288 (365) 72 (51)
Between two and three years 31 (10) 285 (321)
Between three and four years 14 (7) 21 (19)
Between four and five years – – 10 (11)
Greater than five years – – – –
Gross contractual cash flows 13,888 (13,893) 21,729 (21,720)
Derivative financial instruments and hedging programmes

The following table sets out the fair values of derivatives held by GSK.
2010 2009
Fair value Fair value
Assets Liabilities Assets ,IABILITIES
£m £m £m £m
Fair value hedges – Interest rate swaps

(principal amount – £962 million (2009 – £932 million)) 97 – 68 –
Net investment hedges – Foreign exchange contracts
(principal amount – £3,506 million (2009 – £7,756 million)) – (23) 36 (55)
Derivatives designated as accounting hedges 97 (23) 104 (55)

Foreign exchange contracts

(principal amount – £6,474 million (2009 – £8,568 million)) 88 (160) 89 (108)
Embedded and other derivatives 5 (10) 4 (5)
Derivatives not designated as accounting hedges 93 (170) 93 (113)

Total derivative instruments 190 (193) 197 (168)
Analysed as:
Current 93 (188) 129 (168)
Non-current 97 (5) 68 –
Total 190 (193) 197 (168)
Derivative financial instruments

The principal amount on foreign exchange contracts is the net total of outstanding positions at the balance sheet date. The majority
of contracts are for periods of 12 months or less. At 31st December 2010, the Group held outstanding foreign exchange contracts
consisting primarily of currency swaps with a total credit fair value of £72 million (2009 – £19 million credit) which represent hedges of
inter-company loans and deposits, but are not designated as accounting hedges. Changes in fair value are taken to the income statement
in the period to offset the exchange gains and losses on the related inter-company lending and borrowing.
Cash flow hedges
The Group entered into a number of foreign exchange forward contracts and designated them as a cash flow hedge of the exchange
arising on the US dollar purchase consideration of a highly probable business acquisition. The acquisition occurred in October 2010 and the
cash flow hedge matured at that date. The amount recognised in other comprehensive income in 2010 was removed upon maturity of the
hedge and included in the initial carrying value of goodwill and intangibles recorded on the acquisition of the entity.
The Group has also entered into a number of foreign exchange forward contracts and designated them as cash flow hedges of the
exchange exposure arising on the GBP equivalent interest cost on Euro loans issued and settled in July and December 2010.
The net fair value movements on cash flow hedges are disclosed in the consolidated statement of comprehensive income. No
ineffectiveness was recorded on cash flow hedges during 2010.

171
Fair value hedges

The Group has designated a series of interest rate swaps as a fair value hedge. The risk being hedged is the variability of the fair value
of the bond arising from interest rate fluctuations. Gains and losses on fair value hedges are disclosed in Note 12, ‘Finance costs’.
Net investment hedges
During the year, certain foreign exchange contracts were designated as net investment hedges in respect of the foreign currency
translation risk principally arising on consolidation of the Group’s net investment in its US Dollar, Euro and Yen foreign operations. At
31st December 2010, the Group held such net investment hedges only in respect of its Euro foreign operations. In addition, Euro loan
capital of €5.85 billion issued in previous years is designated as a net investment hedge in respect of the foreign currency translation risk
principally arising on consolidation of the Group’s net investment in its Euro operations. Net investment hedge ineffectiveness is disclosed
in Note 11, ‘Finance income’.
42 Employee share schemes

The Group operates share option schemes, whereby options are granted to employees to acquire shares or ADS in GlaxoSmithKline plc at
the grant price, savings-related share option schemes and share award schemes. In addition, GSK operates the Performance Share Plan,
whereby awards are granted to employees to acquire shares or ADS in GlaxoSmithKline plc at no cost, subject to the achievement by the

Group of specified performance targets and the Share Value Plan, whereby awards are granted to employees to acquire shares or ADS
in GlaxoSmithKline plc at no cost after a three year vesting period. The granting of restricted share awards has replaced the granting of
options to certain employees as the cost of the scheme more readily equates to the potential gain to be made by the employee and from
2010 onwards, no further grants will be made under the savings-related share option schemes.
Grants under share option schemes are normally exercisable between three and ten years from the date of grant. Grants of restricted shares
and share awards are normally exercisable at the end of the three year vesting/performance period. Grants under savings-related share
option schemes are normally exercisable after three years’ saving. Grants under share option schemes and awards under the Performance
Share Plan are normally granted to employees to acquire shares or ADS in GSK plc but in some circumstances will be settled in cash.
Options under the share option schemes are granted at the market price ruling at the date of grant. In accordance with UK practice, the
majority of options under the savings-related share option schemes are granted at a price 20% below the market price ruling at the date
of grant. Share options awarded to the Directors and, with effect from the 2004 grant, the CET are subject to performance criteria.
Option pricing
For the purposes of valuing options and awards to arrive at the share based payment charge, the Black-Scholes option pricing model has
been used. The assumptions used in the model for 2008, 2009 and 2010 are as follows:

2010 2009 2008
Risk-free interest rate 0.8% – 1.9% 1.4% – 2.9% 1.3% – 4.8%

Dividend yield 5.3% 5.2% 4.8%
Volatility 26% – 29% 23% – 29% 19% – 24%
Expected lives of options granted under:
Share option schemes 5 years 5 years 5 years
Savings-related share option and share award schemes 3-4 years 3-4 years 3 years
Weighted average share price for grants in the year:
Ordinary Shares £12.04 £11.72 £11.59
ADS $37.29 $33.73 $45.02
Volatility is determined based on the three and five year share price history where appropriate. The fair value of performance share plan
grants take into account market conditions. Expected lives of options were determined based on weighted average historic exercises
of options.

172
42 Employee share schemes continued

Share option Share option Savings-related
Options outstanding schemes – shares schemes – ADS share option schemes
Weighted Weighted Weighted Weighted Weighted Weighted
Number exercise fair Number exercise fair Number exercise fair
000 price value 000 price value 000 price value
At 1st January 2008 149,041 £15.38 77,274 $49.91 8,538 £11.02

Options granted 11,314 £11.50 £1.32 7,690 $44.89 $3.84 5,570 £9.51 £2.56
Options exercised (2,198) £11.84 (1,989) $42.18 (453) £10.26
Options lapsed (21,602) £16.52 (7,497) $53.13 (2,401) £10.67
At 31st December 2008 136,555 £14.93 75,478 $49.29 11,254 £10.38
Options granted 11,393 £11.76 £1.16 7,741 $33.68 $3.41 1,648 £9.72 £2.22
Options exercised (2,660) £11.80 (353) $37.03 (1,460) £11.34
Options lapsed (21,269) £17.18 (9,447) $55.64 (3,377) £11.09
At 31st December 2009 124,019 £14.32 73,419 $46.88 8,065 £9.77
Options granted 11,257 £12.04 £1.19 7,384 $37.29 $3.95 – – –
Options exercised (3,625) £11.86 (916) $36.59 (1,310) £10.45
Options lapsed (21,551) £15.10 (7,776) $49.62 (800) £10.02
At 31st December 2010 110,100 £14.02 72,111 $45.73 5,955 £9.59
Range of exercise prices £10.76 – £19.40 $33.42 – $58.00 £9.51 – £10.50
Weighted average market
price on exercise £12.39 $38.71 £12.46
Weighted average remaining
contractual life 4.19 years 4.39 years 1.52 years

Options outstanding schemes – shares schemes – ADS share option schemes
at 31st December 2010 Weighted ,ATEST Weighted ,ATEST Weighted ,ATEST

Number exercise exercise Number exercise exercise Number Exercise exercise
Year of grant 000 price date 000 price date 000 price date
2001 29,047 £18.13 29.11.11 18,244 $51.85 28.11.11 – – –

2002 11,414 £11.98 03.12.12 4,727 $37.68 03.12.12 – – –
2003 16,256 £12.67 16.12.13 9,186 $43.54 16.12.13 – – –
2004 5,074 £11.23 03.12.14 5,516 $43.17 02.12.14 – – –
2005 155 £13.07 02.11.15 374 $47.31 02.11.15 – – –
2006 6,979 £14.69 28.11.16 5,427 $51.32 28.07.16 – – –
2007 9,041 £14.81 25.07.17 7,061 $57.54 25.07.17 175 £10.50 25.04.11
2008 10,306 £11.50 27.07.18 7,196 $44.90 05.11.18 4,351 £9.51 23.04.12
2009 10,827 £11.76 22.07.19 7,228 $33.68 22.07.19 1,429 £9.72 22.04.13
2010 11,001 £12.04 21.07.20 7,152 $37.29 21.07.20 – – –
Total 110,100 £14.02 72,111 $45.73 5,995 £9.59
Options normally become exercisable from three years from the date of grant but may, under certain circumstances, vest earlier as set out
within the various scheme rules.
There has been no change in the effective exercise price of any outstanding options during the year.

Options exercisable schemes - shares schemes - ADS share option schemes
Weighted Weighted Weighted
Number exercise Number exercise Number exercise
000 price 000 price 000 price
At 31st December 2008 109,207 £15.29 55,384 $48.57 3,248 £11.45
At 31st December 2009 94,967 £14.86 53,493 $47.63 254 £11.40
At 31st December 2010 81,362 £14.80 53,831 $48.26 175 £10.50

173

GlaxoSmithKline share award schemes
Performance Share Plan
The Group operates a Performance Share Plan whereby awards are granted to Directors and senior executives at no cost. The percentage
of each award that vests is based upon the performance of the Group over a three year measurement period. Awards granted to Directors
and members of the CET prior to 2009 are subject to a single performance condition which compares GSK’s TSR over the period with the
TSR of companies in the comparator group over the same period. For awards granted in 2009 and 2010 to Directors and members of
the CET, 40% of the award is based on the achievement of adjusted free cash flow targets over a three year measurement period. The
remaining 60% of the award is based on relative TSR performance against a comparator group as described on pages 85 and 87. Half
of the TSR element of each award is measured over three years and half over four years.
For those awards made to all other eligible employees prior to 2009 the performance conditions consist of two parts, each of which
applies to 50% of the award. The first part of the performance condition compares GSK’s EPS growth to the increase in the UK Retail
Prices Index over the three year measurement period. The second part of the performance condition compares GSK’s TSR over the period
with the TSR of companies in the comparator group over the same period. For awards granted from 2009 onwards, the first part of the
performance condition continues to be based on EPS. The second part of the performance condition is based on strategic or operational

business measures, over a three year measurement period, specific to the employee’s business area.
Shares Weighted ADS Weighted

Number of shares and ADS issuable Number (000) fair value Number (000) fair value
At 1st January 2008 5,731 4,327

Awards granted 2,834 £7.77 1,467 $27.99
Awards exercised (1,519) (1,516)
Awards cancelled (511) (420)
At 31st December 2008 6,535 3,858
Awards granted 3,365 £8.80 1,392 $29.45
Awards exercised (1,270) (21)
Awards cancelled (1,024) (1,497)
At 31st December 2009 7,606 3,732
Awards granted 3,812 £9.13 1,624 $29.91

Awards exercised (440) (386)
Awards cancelled (2,085) (1,357)
At 31st December 2010 8,893 3,613
Share Value Plan

The Group operates a Share Value Plan whereby awards are granted, in the form of shares, to certain employees at no cost. The awards
vest after three years. There are no performance criteria attached.

Number (000) fair value Number (000) fair value
At 1st January 2008 9,634 8,283

Awards granted 5,572 £9.85 4,640 $36.46
At 31st December 2008 13,688 11,362

Awards granted 5,572 £9.86 4,291 $30.53
At 31st December 2009 14,235 11,309
Awards granted 5,844 £10.04 4,355 $31.30
At 31st December 2010 14,252 10,978

174

Deferred Investment Award Plan
The Group operates a Deferred Investment Award Plan whereby awards are granted, in the form of notional shares, to certain senior
executives at no cost. Awards typically vest over a three-year period commencing on the fourth anniversary from date of grant with
50% of the award initially vesting and then 25% in each of the subsequent two years. There are no performance criteria attached.

Number of shares and ADS issuable Number (000) fair value Number (000) fair value
At 1st January 2008 224 96

Awards granted 334 £11.70 70 $43.80
Awards cancelled – (27)
At 31st December 2008 538 119
Awards granted 46 £12.04 132 $31.94
Awards granted 290 £12.20 96 $36.85
Employee Share Ownership Plan Trusts

The Group sponsors Employee Share Ownership Plan (ESOP) Trusts to acquire and hold shares in GlaxoSmithKline plc to satisfy awards
made under employee incentive plans and options granted under employee share option schemes. The trustees of the ESOP Trusts
purchase shares on the open market with finance provided by the Group by way of loans or contributions. Costs of running the ESOP
Trusts are charged to the income statement. Shares held by the ESOP Trusts are deducted from other reserves and held at the value of
proceeds receivable from employees on exercise. If there is deemed to be a permanent diminution in value this is reflected by a transfer
to retained earnings. The Trusts also acquire and hold shares to meet notional dividends re-invested on deferred awards under the
SmithKline Beecham Mid-Term Incentive Plan. The trustees have waived their rights to dividends on the shares held by the ESOP Trusts.
Shares held for share award schemes 2010 2009
Number of shares (‘000) 51,125 57,197
£m £m
Nominal value 13 14
Carrying value 208 217
Market value 634 755
Shares held for share option schemes 2010 2009
Number of shares (‘000) 54,347 60,538
£m £m
Nominal value 14 15
Carrying value 637 921
Market value 674 799

175
43 Principal Group companies

The following represent the principal subsidiary and associated undertakings of the GlaxoSmithKline Group at 31st December 2010.
Details are given of the principal country of operation, the location of the headquarters, the business sector and the business activities.
The equity share capital of these undertakings is wholly owned by the Group except where its percentage interest is shown otherwise.
All companies are incorporated in their principal country of operation except where stated.
Europe Location Subsidiary Sector Activity %
England Brentford +GlaxoSmithKline Holdings Limited Ph,CH h

Brentford +GlaxoSmithKline Holdings (One) Limited Ph,CH h
Brentford +GlaxoSmithKline Services Unlimited Ph,CH s
Brentford +GlaxoSmithKline Mercury Limited Ph h
Brentford GlaxoSmithKline Finance plc Ph,CH f
Brentford GlaxoSmithKline Capital plc Ph,CH f
Brentford SmithKline Beecham Limited Ph,CH dehmpr
Brentford Wellcome Limited Ph,CH h

Brentford Glaxo Group Limited Ph h
Brentford Glaxo Operations UK Limited Ph p
Brentford GlaxoSmithKline Export Limited Ph e
Brentford GlaxoSmithKline Research & Development Limited Ph dr
Brentford GlaxoSmithKline UK Limited Ph mp
Brentford Glaxochem Pte Ltd (i) Ph h
Brentford Setfirst Limited Ph,CH h
Brentford The Wellcome Foundation Limited Ph p
Cambridge Domantis Limited Ph dr
Brentford ViiV Healthcare Limited Ph h 85
Brentford ViiV Healthcare UK Limited Ph ms 85
Brentford ViiV Healthcare Trading Services Limited Ph ef 85
Austria Vienna GlaxoSmithKline Pharma GmbH Ph m
Belgium Genval GlaxoSmithKline S.A. Ph m
Rixensart GlaxoSmithKline Biologicals S.A. Ph dempr

Czech Republic Prague GlaxoSmithKline s.r.o. Ph,CH m
Denmark Orestadt GlaxoSmithKline Consumer Healthcare A/S CH m
Brøndby GlaxoSmithKline Pharma A/S Ph m
Finland Espoo GlaxoSmithKline Oy Ph m
France Marly le Roi Groupe GlaxoSmithKline S.A.S. Ph h
Marly le Roi Laboratoire GlaxoSmithKline S.A.S. Ph mrd
Marly le Roi Glaxo Wellcome Production S.A.S. Ph p
Marly le Roi GlaxoSmithKline Sante Grand Public S.A.S. CH m
Marly le Roi ViiV Healthcare S.A.S. Ph m 85
St. Amand Les Eaux GlaxoSmithKline Biologicals S.A.S. Ph p
Germany Buehl GlaxoSmithKline Consumer Healthcare GmbH & Co. KG CH dhmprs
Munich GlaxoSmithKline GmbH & Co. KG Ph dhms
Greece Athens GlaxoSmithKline A.E.B.E Ph,CH m

Hungary Budapest GlaxoSmithKline Medicine and Healthcare Products Limited Ph,CH em
Italy Verona GlaxoSmithKline S.p.A. Ph dhm
Milan GlaxoSmithKline Consumer Healthcare S.p.A. CH m
Verona GlaxoSmithKline Manufacturing S.p.A. Ph p

176
43 Principal Group companies continued
Europe Location Subsidiary Sector Activity %
Luxembourg Mamer GlaxoSmithKline International (Luxembourg) S.A.R.L Ph,CH fh

Netherlands Zeist GlaxoSmithKline B.V. Ph m
Zeist GlaxoSmithKline Consumer Healthcare B.V. CH m
Norway Oslo GlaxoSmithKline AS Ph m
Poland Poznan GlaxoSmithKline Pharmaceuticals S.A. Ph p
Poznan GSK Services Sp.z o.o. Ph m
Warsaw GlaxoSmithKline Consumer Healthcare Sp.z o.o. CH me
Portugal Alges GlaxoSmithKline-Produtos Farmaceuticos, Limitada Ph m
Republic of Carrigaline SmithKline Beecham (Cork) Limited (ii) Ph dpr
Ireland Cork GlaxoSmithKline Trading Services Limited (ii) Ph e
Dublin GlaxoSmithKline Consumer Healthcare (Ireland) Limited (ii) CH m
Dublin GlaxoSmithKline (Ireland) Limited Ph m
Dungarvan Stafford Miller (Ireland) Limited (ii) CH p
Dungarvan GlaxoSmithKline Dungarvan Limited (ii) CH p
Romania Brasov Europharm Holding S.A. Ph,CH s
Bucharest GlaxoSmithKline (GSK) S.R.L. Ph mrs
Russian Moscow GlaxoSmithKline Trading ZAO Ph m
Federation Moscow GlaxoSmithKline Healthcare ZAO CH m
Spain Madrid GlaxoSmithKline S.A. Ph m
Madrid GlaxoSmithKline Consumer Healthcare S.A. CH m
Aranda de Duero Glaxo Wellcome, S.A. Ph p
Sweden Solna GlaxoSmithKline AB Ph m
Switzerland Muenchenbuchsee GlaxoSmithKline AG Ph m
USA
USA Research Triangle Park Stiefel Laboratories, Inc. Ph hmp
Marietta Corixa Corporation Ph mp
Philadelphia GlaxoSmithKline LLC Ph,CH d e h m p r s
Pittsburgh GlaxoSmithKline Consumer Healthcare, L.P. CH mp 88
Pittsburgh Block Drug Company, Inc. CH hm
Wilmington GlaxoSmithKline Holdings (Americas) Inc. Ph,CH h
Wilmington GlaxoSmithKline Capital Inc. Ph f
Cambridge Sirtris Pharmaceuticals Inc. Ph r
Research Triangle Park ViiV Healthcare Company Ph m 85
Americas
Bermuda Hamilton GlaxoSmithKline Insurance Ltd Ph,CH i
Canada Mississauga GlaxoSmithKline Inc. Ph mpr
Mississauga GlaxoSmithKline Consumer Healthcare Inc. CH m
Laval ID Biomedical Corporation Ph h
Quebec City ID Biomedical Corporation of Quebec Ph dmpr
Mexico Delegacion Tlalpan GlaxoSmithKline Mexico S.A. de C.V. Ph,CH emps
Puerto Rico Guaynabo GlaxoSmithKline Puerto Rico Inc. Ph m
Asia Pacific
Australia Boronia GlaxoSmithKline Australia Pty Ltd Ph,CH dempr
China Beijing GlaxoSmithKline (China) Investment Co. Ltd Ph,CH dhms
Hong Kong GlaxoSmithKline Limited Ph,CH m
Shanghai GlaxoSmithKline Biologicals (Shanghai) Ltd Ph mp
Tianjin Sino-American Tianjin Smith Kline & French Laboratories Ltd CH dmpr 55

177
43 Principal Group companies continued

Asia Pacific Location Subsidiary Sector Activity %
India Mumbai GlaxoSmithKline Pharmaceuticals Limited Ph mp 51

Nabha GlaxoSmithKline Consumer Healthcare Limited (iii) CH dempr 43
Malaysia Petaling Jaya GlaxoSmithKline Pharmaceutical Sdn Bhd Ph m
Selangor GlaxoSmithKline Consumer Healthcare Sdn Bhd CH m
New Zealand Auckland GlaxoSmithKline NZ Limited Ph,CH m
Pakistan Karachi GlaxoSmithKline Pakistan Limited Ph,CH mpe 82
Philippines Makati GlaxoSmithKline Philippines Inc Ph,CH m
Singapore Singapore Glaxo Wellcome Manufacturing Pte Ltd Ph dhpr
Singapore GlaxoSmithKline Pte Ltd Ph,CH m
South Korea Seoul GlaxoSmithKline Korea Limited Ph ,CH m
Thailand Bangkok GlaxoSmithKline (Thailand) Limited Ph,CH m

Japan
Japan Tokyo GlaxoSmithKline K.K. Ph,CH dmp
Latin America
Argentina Buenos Aires GlaxoSmithKline Argentina S.A. Ph,CH dempr
Buenos Aires Laboratorios Phoenix Sociedad Anonima Industrial
Comercial y Financiera Ph demp
Brazil Rio de Janeiro GlaxoSmithKline Brasil Limitada Ph,CH emp
Colombia Bogota GlaxoSmithKline Colombia S.A. Ph,CH m
Venezuela Caracas GlaxoSmithKline Venezuela, C.A. Ph,CH m
Middle East & Africa

Egypt Cairo GlaxoSmithKline S.A.E Ph mp 91
South Africa Johannesburg GlaxoSmithKline South Africa (Pty) Limited Ph,CH emp
Turkey Istanbul GlaxoSmithKline Ilaclari Sanayi ve Ticaret A.S. Ph,CH m
USA Location Associate Sector Activity %
USA Madison Quest Diagnostics Incorporated (iv) Clinical testing 18
Middle East & Africa

South Africa Johannesburg Aspen Pharmacare Holdings Limited (iv) Ph,CH mpr 19
(i) Incorporated in Singapore.

(ii) Exempt from the provisions of Section 7 of the Companies (Amendment) Act 1986 (Ireland).
(iii) Consolidated as a subsidiary undertaking in accordance with Section 1162 (4)(a) of the Companies Act 2006 on the grounds of
dominant influence.
(iv) Equity accounted on the grounds of significant influence. Subsequent to the year-end GSK sold its entire shareholding in Quest
Diagnostics Inc. See Note 20 for further details.
+ Directly held wholly owned subsidiary of GlaxoSmithKline plc.
Key
Business sector: Ph Pharmaceuticals, CH Consumer Healthcare
Business activity: d development, e exporting, f finance, h holding company, i insurance, m marketing, p production, r research, s service
Full details of all Group subsidiary and associated undertakings will be attached to the company’s Annual Return to be filed with the
Registrar of Companies. Each of GlaxoSmithKline Capital Inc. and GlaxoSmithKline Capital plc is a wholly-owned finance subsidiary of
the company, and the company has fully and unconditionally guaranteed the securities issued by each of GlaxoSmithKline Capital Inc.
and GlaxoSmithKline Capital plc.

178
44 Legal proceedings A revocation action against the basic patent covering the Seretide
combination in Ireland was filed in the High Court in Dublin on
The Group is involved in significant legal and administrative behalf of Ivax in July 2008. The High Court handed down a decision
proceedings, principally product liability, intellectual property, on 26th June 2009 finding the patent invalid for obviousness.
tax, anti-trust and governmental investigations, as well as related The Group filed an appeal of this decision in October 2009. No
private litigation. The Group makes provision for these proceedings trial date has been set for the appeal.
on a regular basis as summarised in Note 2, ‘Accounting principles
and policies’ and Note 29, ‘Other provisions’. The Group may An action for revocation of the French Seretide combination patent
become involved in legal proceedings in respect of which it is not was filed by Sandoz with the Tribunal de Grande Instance of Paris.
possible to make a reliable estimate of the expected financial effect, Trial has been scheduled for June 2011. The basic patent covering
if any, that could result from ultimate resolution of the proceedings. the combination product in Seretide expired in September 2010 but
In these cases, appropriate disclosures about such cases would be is subject to a SPC which extends protection until September 2013.
included but no provision would be made. Intellectual property In January 2011, Sandoz initiated a revocation action against the
claims include challenges to the validity and enforceability of Group’s Belgian Seretide patent.
the Group’s patents on various products or processes as well as
assertions of non-infringement of those patents. A loss in any of To date, no generic Seretide product has been approved in any
these cases could result in loss of patent protection for the product major European market despite the revocation of certain Group
at issue. The consequences of any such loss could be a significant patents covering Seretide in some countries.
decrease in sales of that product and could materially affect future Argatroban
results of operations for the Group.
In December 2007, Encysive Pharmaceuticals Inc., Mitsubishi Kasei
Legal expenses incurred and provisions related to legal claims are Corporation and the Group filed an action in the United States
charged to selling, general and administration costs. Provisions are District Court for the Southern District of New York against Barr
made, after taking appropriate legal and other specialist advice, Laboratories, Inc. for infringement of Mitsubishi’s pharmaceutical
where an outflow of resources is considered probable and a reliable composition patent covering argatroban. Pursuant to a license
estimate can be made of the likely outcome of the dispute. In from Mitsubishi, Encysive developed argatroban for the treatment
respect of product liability claims related to certain products there of heparin-induced thrombocytopenia and holds the New Drug
is sufficient history of claims made and settlements to enable Application approved by the US FDA. Encysive licensed the US
management to make a reliable estimate of the provision required marketing rights for argatroban to the Group. The Mitsubishi patent
to cover unasserted claims. In certain cases an incurred but not expires in June 2014. Barr (now Teva Pharmaceuticals, Inc.) filed
reported (IBNR) estimate using actuarial techniques as appropriate an Abbreviated New Drug Application (ANDA) with the FDA with
is used to determine and estimate the Group’s exposure, as a certification of invalidity, unenforceability and non-infringement
described in Note 29, ‘Other provisions’. At 31st December 2010, of the Mitsubishi patent. On 17th June 2010, the Group and
the Group’s aggregate provision for legal and other disputes (not its partners prevailed against Teva, with the trial judge ruling
including tax matters described in Note 14, ‘Taxation’) was that Mitsubishi’s patent covering the formulation for injectable
£4.0 billion. The ultimate liability for legal claims may vary from the argatroban was infringed and not invalid. As a result of the Court’s
amounts provided and is dependent upon the outcome of litigation decision, Teva is precluded from launching its generic product until
proceedings, investigations and possible settlement negotiations. 20th June 2014, the expiration date of the patent. Teva appealed
The Group’s position could change over time, and, therefore, there the decision to the Court of Appeals for the Federal Circuit.
can be no assurance that any losses that result from the outcome of
Arzerra
any legal proceedings will not exceed the amount of the provisions
reported in the Group’s financial accounts by a material amount. If In October 2009, the Group filed an action in the United States
this were to happen, it could have a material adverse impact on the District Court for the Southern District of Florida for a declaration
results of operation of the Group in the reporting period in which that US Patent No. 6,331,415 (the so-called ‘Cabilly II’ patent),
the judgments are incurred or the settlements entered into. The which is owned jointly by Genentech, Inc. and City of Hope, is
most significant of these matters are described below. invalid, unenforceable, or not infringed by the Group’s product
Arzerra (ofatumumab). Arzerra was approved by the FDA for
Intellectual property chronic lymphocytic leukaemia (an orphan indication) in October
2009. In February 2010, the Group voluntarily dismissed the case
Advair/Seretide
and filed a new case in the United States District Court for the
A number of companies have challenged the Group’s patents Northern District of California where the suit is currently pending.
covering Advair/Seretide in certain European jurisdictions,
including in the UK, Belgium, France, Germany, Ireland and On 23rd March 2010, Genentech and Biogen Idec filed suit
the Netherlands. As reported previously, the Group’s Seretide against the Group in the United States District Court for the
combination patent covering the product in the UK was revoked Southern District of California alleging that the Group’s sale of
in 2004. On 23rd February 2010, in actions brought by Mylan, Arzerra induces and contributes to infringement of US Patent
Hexal, Neolab and Ivax, the Federal Court in Munich revoked the No. 7,682,612. That patent claims the treatment of chronic
Group’s German Seretide combination patent for lack of inventive lymphatic leukemia with an anti-CD-20 monoclonal antibody.
step. The Group has appealed this decision. In the Netherlands, The case is in its early stages.
in an action brought by Sandoz and Hexal, the District Court of
The Hague on 26th January 2011 revoked the Supplementary
Protection Certificate (SPC) which extends protection for the
product until September 2013. The Group is determining
whether to appeal this decision.

179
44 Legal proceedings continued Combivir

Patents listed in the Orange Book for Combivir include composition
Avodart
of matter (3TC/lamivudine), combination (lamivudine and AZT)
In January 2008, the Group received notice that Barr Laboratories and lamivudine crystal form patents that expire in 2010, 2012 and
filed an ANDA with the FDA with an allegation of invalidity of 2016, respectively. In September 2007, the Group received notice
the three patents listed in the Orange Book which cover the that Teva Pharmaceuticals, Inc. filed an ANDA with the FDA alleging
active ingredient in Avodart and its use to treat benign prostatic that the combination patent is invalid.
hyperplasia. Two of these patents expire in 2013, and one expires
in 2015. In February 2008, the Group filed an action in the United In November 2007, the Group filed an action in the United
States District Court for the District of Delaware against Barr for States District Court for the District of Delaware against Teva
infringement of these patents. In March 2010, the Group and Pharmaceuticals USA Inc. for infringement of the combination
Barr (now Teva Pharmaceuticals, Inc.) reached a settlement of the patent. In April 2010, the Group and Teva agreed to settle the
litigation. On 12th May 2010, the district court dismissed the case. suit filed by the Group. Under the terms of the settlement, Teva
Pursuant to the settlement, Teva will obtain a license to enter the will obtain a license to enter the US market in the fourth quarter
US market with a generic dutasteride product in the fourth quarter of 2011, or earlier under certain circumstances. In light of the
of 2015 or earlier under certain circumstances. settlement, the district court dismissed the case on 26th May 2010.

In November 2010, Banner Pharmacaps, Inc. sent the Group notice In July 2008, the Group received notice that Lupin Ltd. filed a
that it had filed an ANDA to market a generic version of Avodart. certification with the FDA alleging that the combination patent is
Banner’s notification contained a ‘Paragraph IV’ certification invalid or not infringed by its product. Lupin also filed a certification
alleging that two Group patents expiring in 2013 and one patent that the Group’s patent covering the crystal form of lamivudine
expiring in 2015 were invalid or not infringed by Banner’s proposed is invalid or not infringed. In August 2008, the Group filed suit
generic dutasteride product. These patents are the same patents against Lupin in the United States District Court for the District of
that were the subject of the Group’s settlement with Teva in March Delaware for infringement of its combination patent. In March
2010. Since Teva was the first to file a complete ANDA with a 2009, the action against Lupin was stayed by mutual consent
Paragraph IV certification, it holds 180-day exclusivity as to all pending resolution of the case against Teva. On 26th May 2010,
later filers. Banner cannot enter the market until the expiration or the Group’s case against Teva, the first ANDA filer, was settled
forfeiture of Teva’s 180 days of exclusivity. The Group sued Banner and dismissed. Lupin may choose to reactivate its case against the
in the United States District Court for the District of Delaware in Group under the terms of the stay. However, Lupin will not be
January 2011. able to obtain final approval for its product until the expiration or
forfeiture of Teva’s 180-day exclusivity period.
In December 2010, Anchen Pharmaceuticals, Inc. sent the Group
notices that it had filed ANDAs with Paragraph IV certifications Levitra

for Avodart and Jalyn, alleging that the Group patent expiring The Group participates in the marketing of Levitra pursuant to a
in 2015 that covers dutasteride was invalid or not infringed by co-promotion agreement with Bayer Healthcare. In July 2009, Bayer
their proposed products. Jalyn is a combination of dutasteride brought suit against Teva Pharmaceuticals in the United States
and tamsulosin and is covered by the same patents that cover District Court for the District of Delaware for infringement of its
Avodart. Anchen cannot launch its generic Jalyn product before patent relating to Levitra. Teva had filed an ANDA with the FDA
the expiration of the non-challenged patents in September 2013. with a certification that the patent covering the active ingredient
Anchen cannot launch its generic Avodart product until the later in Levitra, which expires in 2018, is invalid, unenforceable or not
of September 2013 or expiration or forfeiture of Teva’s 180-day infringed. A stay against FDA approval was put into effect by the
exclusivity. The Group sued Anchen in the United States District filing of the lawsuit until the earlier of a decision in the case adverse
Court for the District of Delaware in January 2011. to Bayer or November 2011. In January 2011, the trial date in the
matter was extended from 31st October 2011 to 27th February
Benlysta
2012, and Teva consented to an extension of the stay against FDA
In February 2010, the UK Court of Appeal upheld an earlier High approval by an amount equal to the extension of the trial date.
Court decision revoking the Human Genome Sciences (HGS) UK The Group is not a party to this suit.
Patent No. EP0939804. The claim for revocation was brought by
Eli Lilly in 2006 on the patent which claims the cytokine BLyS and Lovaza
any antibody that binds to BLyS, such as Benlysta (belimumab). The In March 2009, the Group received notice that Teva
Group has a licence to this patent from HGS but was not a party Pharmaceuticals USA, Inc., Par Pharmaceutical, Inc., and Apotex
to these litigation proceedings. The equivalent European patent Inc., had filed ANDAs with a certification that two patents covering
was upheld in October 2009 on a final appeal from the European Lovaza are invalid, unenforceable, or not infringed. The patents
Patent Office following an opposition proceeding filed by Eli Lilly. expire in 2013 and 2017. The Group is the licensee under these
This UK decision does not affect the other European patents arising patents. Pronova Biopharma Norge AS, the owner of the patents,
from this same European Patent. HGS appealed the UK decision. In sued Teva, Par and Apotex in the United States District Court for
July 2010, the UK Supreme Court decided that it would hear the the District of Delaware. FDA approval of the ANDAs will be stayed
appeal. A hearing date for the appeal has been set for 18th July until the earlier of May 2012 or a decision favourable to one of the
2011. This decision will not affect the Group’s or HGS’ ability to generics. Trial has been set by the court for 28th March 2011.
market and sell Benlysta. The Group is not a party to these suits.
Three additional patents covering Lovaza were granted to Pronova
between March and June 2010. Pronova sued Teva, Par and Apotex
on these patents, and a separate trial has been scheduled for
3rd January 2012. No additional 30-month stay attached to a suit
under these patents.

180
44 Legal proceedings continued Product liability

Malarone Pre-clinical and clinical trials are conducted during the development
In August 2009, the Group filed suit in the United States District of potential products to determine the safety and efficacy of
Court for the District of Delaware against Glenmark Generics products for use by humans following approval by regulatory
Inc. USA for infringement of its patents related to Malarone. The bodies. Notwithstanding these efforts, when drugs and vaccines are
Group had received notification that Glenmark had filed an ANDA introduced into the marketplace, unanticipated safety issues may
for Malarone, with certification alleging that the Group’s patents become evident. The Group is currently a defendant in a number
were invalid, unenforceable, or not infringed. These patents, which of product liability lawsuits related to the Group’s pharmaceutical
expire in 2014, cover the combination of atovaquone and proguanil and consumer healthcare products. The most significant of those
hydrochloride and its use for preventing malaria. The Group settled matters are described below.
the case in April 2010. Under the terms of the settlement agreement, Avandia
Glenmark has received a royalty-bearing licence to enter the market The Group has been named in product liability lawsuits on behalf
with its product in the third quarter of 2011 or earlier in certain of individuals asserting personal injury claims arising out of the use
circumstances. The case was dismissed 24th May 2010. of Avandia. The federal cases are part of a multi-district litigation
Paxil/Seroxat proceeding pending in the United States District Court for the
Following a court-ordered mediation in the second quarter of 2010, Eastern District of Pennsylvania. Cases have also been filed in a
the Group resolved all claims by and against Apotex in the Paxil/ number of state courts. Cases filed in state court in Philadelphia have
Seroxat patent infringement and anti-trust litigation venued in the been coordinated in the Mass Tort Program; cases in state court in
US District Court for the Eastern District of Pennsylvania, as well California have been coordinated in Los Angeles. Additionally, there
as litigation brought by Apotex against the Group in Canada. are 14 purported class actions seeking economic damages on behalf
The litigation has been dismissed with respect to all parties. of third party payers and consumers asserting claims arising under
various state and federal laws, including The Racketeer Influenced
Treximet and Corrupt Organizations Act (RICO), state unfair trade practices
In October 2008, the Group received a letter from Par and/or consumer protection laws.
Pharmaceuticals that the FDA had accepted its ANDA for Treximet,
which included a certification that patents owned by Pozen, Inc. On 23rd September 2010, the FDA took action on rosiglitazone,
relating to Treximet were invalid, unenforceable or not infringed. keeping all rosiglitazone products on the market, but requiring
Pozen’s patents are licensed to the Group. In November 2008, additional labeling and restrictions on use to ensure that the benefits
Pozen filed suit against Par under three of its patents in the District of Avandia continue to outweigh its risks, including a Risk Evaluation
Court for the Eastern District of Texas. In November 2008, the and Mitigation Strategy (REMS) program to ensure the safe use of
Group received a letter from Alphapharm and its designated agent, the medicine. In the EU, the EMA announced on 23 September 2010
that it had determined to suspend the marketing authorisation for
Mylan Pharmaceuticals, that the FDA had accepted its ANDA for
Treximet, which also included a certification that Pozen’s patents rosigilitazone (including all Avandia products). Regulatory agencies
relating to Treximet were invalid, unenforceable or not infringed. in other countries are reviewing or have taken regulatory action.
Pozen filed suit against Alphapharm and Mylan in January 2009 The Group is working to implement the decisions of the FDA, EMA
for infringement of its patents in the District Court for the Eastern and other regulatory agencies. On 7th February 2011, the FDA
District of Texas. In 2009, Pozen also sued Teva Pharmaceuticals announced a change in the labeling for Avandia to restrict use to
USA, Inc. and Dr. Reddy’s under the same patents in the same those patients already taking a rosiglitazone-containing medicine,
court. A trial was held in October 2010, and the parties are to new patients who are unable to achieve adequate glycemic
awaiting a decision. Treximet has data exclusivity that precludes control with other diabetes medications, and to those patients
approval of a generic product until April 2011. The Group is not a who have decided not to take pioglitazone or pioglitazone-
party to any of the lawsuits brought by Pozen. containing medicines.
Vesicare The Group has continued to receive a significant number of new

product liability cases regarding Avandia in the USA, in part as a
The Group markets Vesicare in the USA under license from
result of the regulatory action taken by FDA and in part based on
Astellas Pharma Inc. In September 2009, Astellas filed suit against
other negative publicity concerning the product, and adjusted its
Teva Pharmaceuticals USA, Inc. in the Federal District Court for
provision for potential settlements accordingly, which provision
the Southern District of New York for infringement of its patent
includes an estimate of future claims. With respect to such product
covering the active ingredient in Vesicare. Astellas had received
liability cases in the USA, the Group has reached agreements to
notice that Teva had filed an ANDA with a certification that the
settle the majority of claims pending as of February, 2011
basic patent, which expires in 2018, was invalid or unenforceable.
The parties settled, and the case was dismissed 28th June 2010. One purported class action on Avandia has been filed in Israel, and
Under the terms of the settlement, Teva will be able to enter the briefing of whether to certify the class action is underway. Eleven
market in October, 2018. class actions are pending in Canada, and are at an early stage.
On 15th February 2011, Astellas and the Group announced
that the Group will cease promoting Vesicare in the USA by
January 2012.

181
44 Legal proceedings continued Thimerosal

The Group, along with a number of other pharmaceutical
Paxil and Paxil CR
companies, has been named as a defendant in numerous individual
The Group has received numerous lawsuits and claims alleging personal injury lawsuits in state and federal district courts in
that use of Paxil (paroxetine) has caused a variety of injuries. Many the USA alleging that thimerosal, a preservative used in the
of these lawsuits and claims allege that the use of Paxil during manufacture of vaccines, causes neurodevelopmental disorders
pregnancy resulted in the birth of a child with birth defects or and other injuries, including autism.
health issues. Other lawsuits and claims allege that patients who
took Paxil committed or attempted to commit suicide or acts of Two of the cases are purported class actions, although there
violence. Finally, a third group of lawsuits and claims allege that has been no determination whether any of those cases will be
the use of Paxil caused patients to suffer symptoms on permitted to proceed as a class action. A number of purported class
discontinuing treatment with Paxil. actions in other jurisdictions have been withdrawn or dismissed.
Plaintiffs seek remedies including compensatory, punitive and
The Group has reached agreements to settle the vast majority of statutory damages as well as the cost of a fund for medical
the US claims pending as of February 2011. Other matters have monitoring and research.
been dismissed without payment. Some lawsuits remain scheduled
for trial, including nine cases scheduled for trial in the Philadelphia As of the date of this report, in the limited number of cases

Mass Tort Program in May and June 2011 concerning use of Paxil that have approached trial dates, vaccine manufacturers and
during pregnancy. There remains purported class action litigation manufacturers of other thimerosal containing medicinal products
in Canada concerning use of Paxil during pregnancy. have been successful in excluding testimony of plaintiffs’ expert
witnesses on causation, specifically on grounds that plaintiffs have
A California court granted plaintiffs’ motion to certify a class in a failed to establish that the hypothesised link between thimerosal
consumer fraud lawsuit seeking only economic damages, focused and neurodevelopmental disorders is generally accepted as reliable
on discontinuation symptoms. within the relevant scientific community.
In Canada, the Court of Appeal affirmed the Quebec court’s denial In February 2009, the Office of Special Masters of the United
of plaintiffs’ motion to certify a class of patients who allegedly States Court of Federal Claims rejected the first three of
experienced discontinuation symptoms. That litigation is now approximately 4,900 autism claims filed under the National
concluded. Vaccine Injury Compensation Program (NVICP) on the grounds
In the UK, public funding has been withdrawn from the that claimants failed to produce reliable scientific evidence linking
hundreds of claimants who had received funding to pursue their vaccinations to their medical conditions, including autism.
common issues in litigation alleging that paroxetine has caused The Group was not a party to these proceedings. The findings from
them to suffer from withdrawal reactions and dependency. them cannot be used as evidence in the pending lawsuits against

The Legal Services Commission’s decision to withdraw funding the Group. All three decisions were upheld on appeal by the United
is being appealed to a Special Cases Review Panel by some States Court of Federal Claims. Two of the three NVICP claimants
claimants. Other claimants have discontinued their claims, and appealed the rulings to the United States Court of Appeals for
the trial listed to commence in early 2011 in the High Court in the Federal Circuit which affirmed the decisions of the United
London has been vacated. States Court of Federal Claims. The third claimant has elected not
Poligrip to appeal further and has rejected the decision from the NVICP.
Beginning in 2005, a number of product liability lawsuits and claims This claimant now has the option of filing an action either against
were filed against the Group in both state and federal courts in the Group and/or the physician who administered the vaccine in
the USA, including purported class actions, alleging that the zinc question. As of this date, no such action has been commenced.
in Poligrip causes copper depletion and permanent neurologic The remaining approximately 4,900 NVICP claimants also will
injury. The federal cases are part of the Denture Cream Adhesive ultimately have the option of pursuing personal injury lawsuits
multi-district litigation (MDL) in the United States District Court against the vaccine manufacturers, including the Group.
for the Southern District of Florida which was established in June On 22nd February 2011, the United States Supreme Court issued
2009. Both the Group and Procter & Gamble are defendants in this its decision in Bruesewitz v. Wyeth, Inc., which involved the issue
litigation. Included in the MDL are purported class actions asserting of whether the National Vaccine Injury Compensation Act (NVICA)
economic loss claims under state consumer protection laws and precludes lawsuits against vaccine manufacturers claiming that
claims for medical monitoring. With three current exceptions (two vaccines covered by the NVICP are defectively designed. The
state court cases in Pennsylvania and one in New York), all of Supreme Court affirmed the decision of the United States Court
the state court cases have been consolidated in the Philadelphia of Appeal for the Third Circuit and held that the NVICA pre-empts
Mass Tort Program. Purported class actions asserting consumer all design defect claims against vaccine manufacturers brought by
fraud claims were also filed in Canada. The Group has reached plaintiffs seeking compensation for injury or death caused by a
agreements in principle to settle the vast majority of current vaccine’s side effects.
cases. The Group has voluntarily withdrawn all zinc-containing
formulations of Poligrip from the market. To date, the Group has not seen an increase in the number of
civil lawsuits filed against it following the announcement of the
NVCIP decisions. Since the scope of the Bruesewitz ruling impacts
only the ability of plaintiffs to pursue claims that the design of
certain childhood vaccines was defective because it included the
use of thimerosal as a preservative, its impact on the willingness of
plaintiffs to pursue their civil lawsuits based on other legal theories
remains unknown. As of the date of this report, there are no cases
scheduled for trial in 2011 in which the Group is a defendant.

182
44 Legal proceedings continued HIV division inquiry

On 26th July 2010, the Group received a subpoena from the
Sales and marketing and regulation Eastern District of New York’s US Attorney’s Office regarding
sales and marketing practices for three HIV products, as well
‘Colorado Investigation’
as educational programs, grants or payments to physicians
In February 2004, the Group received a subpoena from the United
regarding any drug used to treat HIV-infected adults. The Group
States Attorney’s office in Colorado regarding the Group’s sales and
is cooperating with the investigation.
promotional practices relating to nine of its largest selling products,
for the period from January 1997 to 2004. That investigation Average wholesale price
was later taken over by the United States Attorney’s office for The United States Department of Justice, a number of states and
the District of Massachusetts and expanded to the present with putative classes of private payers have for several years now been
respect to Advair. In particular, the government has inquired about investigating and/or bringing civil litigation regarding allegations
alleged promotion of all of these drugs for off-label uses, as well that numerous pharmaceutical companies, including the Group,
as Group-sponsored continuing medical education programmes, have violated federal or state fraud and abuse laws as a result of
other speaker events, special issue boards, advisory boards, speaker the way ‘average wholesale price’ (AWP) and ‘wholesale acquisition
training programmes, clinical studies and related grants, fees, cost’ (WAC) have been determined and reported for various drugs
travel and entertainment. Although the original subpoena was reimbursed under the Medicare, Medicaid and other insurance
issued from the US Attorney’s office in Colorado, the scope of the programmes. In 2005, the Group reached a $149 million civil
inquiry is nationwide. The Group continues to cooperate with the settlement with the federal government to resolve allegations
government in its investigation. relating to the pricing and marketing of Zofran and Kytril. The
The government is also inquiring about the Group’s response to Group also amended its existing corporate integrity agreement
an October 2002 letter from the FDA’s Division of Drug Marketing, as a requirement of the settlement. In 2007, the Group received
Advertising and Communication requesting information on the final approval of a $70 million nationwide private payer class
Group’s alleged promotion of Wellbutrin SR for off-label use. action settlement relating to the Group’s price reporting in an
The Group is cooperating with the investigation and providing MDL proceeding in the United States District Court for the District
the requested information. of Massachusetts.
A number of states, through their respective attorneys general,
Avandia-related matters
and most of the counties in New York State have filed civil
The Group is in the process of responding to a United States
lawsuits in state and federal courts against the Group and many
Department of Justice subpoena it received in June 2010 seeking
other drug companies claiming damages and restitution due to
documents relating to the development and marketing of
AWP and/or WAC price reporting for pharmaceutical products
Avandia. The Group has also received Civil Investigative Demands
covered by the states’ Medicaid programmes. The states seek
from a number of State Attorneys General offices relating to the

recovery on behalf of the states as payers and, in some cases, on
development and marketing Avandia, and is cooperating with
behalf of in-state patients as consumers.
these offices.
The Group has separately resolved AWP claims by state Medicaid
The Utah Attorney General’s Office and the Louisiana Attorney
programmes in more than two-thirds of the states through the
General’s Office both have filed suit against the Group asserting
DOJ Settlement or separate negotiations. Litigation concerning
various statutory and common law claims relating to the Group’s
AWP issues is continuing with six states.
development and marketing of Avandia. The suits are in their
early days. In November 2009, a Kentucky state court jury returned a
$661,860 compensatory damages only verdict against the Group
UN Oil for Food Programme in another such case filed by the State of Kentucky. The jury found
Following a United Nations report alleging that bribes had been the Group liable for violating the state’s consumer protection laws,
paid to Iraqi government officials in connection with the UN Oil but not liable under the state’s Medicaid fraud and false advertising
for Food Programme, the Group received a subpoena from the statutes. In January 2010, the judge in the case awarded the State
SEC in February 2006 in respect of the Group’s participation in of Kentucky an additional $5,828,000 in statutory penalties. The
that programme. The United States Department of Justice (DOJ) Group has settled the case with Kentucky. The judgment was
also initiated an investigation. In December 2007, the UK Serious vacated, and the Group denied liability as part of the settlement.
Fraud Office (SFO) issued a formal notice to the Group requiring
production of documents related to the Group’s participation in
the programme. On 9th September 2010, the SFO notified the
Group that it had completed its investigation and intends to take
no further action. The Group has received no further contact from
the SEC or DOJ in 2010 regarding this matter.

183
44 Legal proceedings continued Paxil/Seroxat

Following the Group’s 2004 settlement of a lawsuit filed by the
Nominal pricing New York State Attorney General’s office alleging failure to disclose
The Group responded to two letter requests from the United States data on the use of Paxil in children and adolescents, similar cases,
Senate Committee on Finance, dated April 2004 and February some of which purported to be class actions, were filed by private
2005, for documents and information relating to the nominal plaintiffs seeking to recover amounts paid for Paxil purchased for
price exception to the best price reporting requirements under the use by patients under the age of 18. Following a class settlement
Medicaid Drug Rebate Programme. In January 2007, the committee with consumers in 2007, the United States District Court for
released its findings that some pharmaceutical manufacturers the District of Minnesota in 2008 approved a $40 million class
inappropriately used the nominal price exception contrary to settlement of ensuing lawsuits seeking recovery on behalf of
the committee’s interpretation of Congressional intent. In May insurance companies and other third-party payers for payments
2004, the Group was advised by the United States Department for prescriptions of Paxil to children and adolescents. The Group
of Justice that it is investigating certain of the Group’s nominal denied liability in both settlements. In 2009, a similar purported
pricing and bundled sales arrangements to determine whether class action was filed in United States District Court for the District
those arrangements qualify under the exception to the best price of Minnesota on behalf of all federal, state and local government
reporting requirements or violate civil statutes or laws. entities that paid for prescriptions of Paxil to minors. There also
remains a similar purported class action in Canada seeking

In March 2008, the Group received a broad letter request from economic damages on behalf of individuals, third party payers
the US Department of Justice seeking a range of documents and governmental entities that purchased Paxil for use by patients
relating to all of the Group’s nominal pricing arrangements since under the age of 18.
1994 and any possible bundled sales. The Group is continuing to
cooperate in the investigation and produce documents. The Cidra, Puerto Rico manufacturing site
Group has also received subpoenas and requests for documents In April 2005, the Group received a subpoena from the United
and information from Delaware and Michigan related to the States Attorney’s Office in Boston requesting production of records
Group’s nominal price arrangements. The Group is cooperating regarding its manufacturing facilities located in Cidra, Puerto Rico,
in those investigations and producing responsive documents. which have since ceased operations. In addition, in July 2007, the
In addition to these governmental investigations, allegations Group learned that the United States District Court for the District
concerning nominal pricing have been made in the 340B of Massachusetts had unsealed a complaint brought by a former
Programme litigation. The Group has not entered into any employee under the federal False Claims Act claiming monetary
nominal price arrangements since December 2003. damages as a result of the alleged failure of the Cidra facility to
comply with FDA Good Manufacturing Processes (GMPs) in the
340B Programme
manufacture of various products.
The Group is defending an action filed in federal court in the

United States District Court for the Northern District of California On 26th October 2010, the Group finalised an agreement with
by the County of Santa Clara and one other county, which seeks to the US Attorney’s Office for the District of Massachusetts and
represent a putative class of hospitals, clinics and other entities in the US Department of Justice with respect to the investigation of
California that are eligible to receive discounted ‘ceiling prices’ on the Group’s former manufacturing facility in Cidra, Puerto Rico.
pharmaceuticals under a federal programme known as the ‘340B Under the agreement and as a comprehensive settlement of
Programme.’ Plaintiffs allege that the Group and numerous other pending claims against the Group arising from the investigation,
pharmaceutical manufacturers have been setting ‘ceiling prices’ the Group paid a total of $750 million (£500 million) in civil and
higher than allowed by law and, under the contract that governs criminal penalties, and SB Pharmco Puerto Rico, Inc., a subsidiary
the programme, and have therefore overcharged the entities in of the Group, pleaded guilty to certain charges. The Group is in
California that are eligible to participate in the 340B Programme. the process of negotiating a Corporate Integrity Agreement with
the Office of Inspector General that will cover manufacturing
The lawsuit was dismissed in 2006. It was reinstated in August compliance matters.
2008 following an appeal. The United States Supreme Court
agreed to review the issue of whether 340B entities have standing The Group has received Civil Investigative Demands and a
to sue manufacturers under the manufacturers’ 340B contract with subpoena from several State Attorneys General offices relating to
the government. The trial court stayed all proceedings in the case the matters at issue in the federal investigation. The enquiries are at
until after the Supreme Court’s decision. Oral argument before an early stage, and the Group is cooperating with these offices.
the Supreme Court occurred on 19th January 2011. The Supreme
Court has not yet issued its decision. SEC/DOJ FCPA Inquiry
The US Securities and Exchange Commission (SEC) and the US
Department of Justice (DOJ) are conducting an industry-wide
investigation into whether pharmaceutical companies may have
engaged in violations of the Foreign Corrupt Practices Act relating
to the sale of pharmaceuticals, including in Argentina, Brazil,
Canada, China, Germany, Italy, Poland, Russia and Saudi Arabia.
The Group is one of the companies that have been asked to
respond to this inquiry and is cooperating with the SEC and DOJ.

184
44 Legal proceedings continued Wellbutrin XL

Actions have been filed against Biovail and the Group by
Anti-trust/competition purported classes of direct and indirect purchasers who allege
unlawful monopolisation and other anti-trust violations related
Paxil/Seroxat
to the enforcement of Biovail’s Wellbutrin XL patents and the
As noted previously on page 180, the Group has settled its patent
filing, by Biovail, of citizen petitions. The Group’s motion to
infringement and anti-trust litigation with Apotex regarding Paxil/
dismiss the amended complaint of the indirect purchasers was
Seroxat, and the litigation has been dismissed as to all parties.
granted in respect of some, but not all, of the claims of the class
EU sector inquiry representatives and many of the claims asserted by the indirect
purchasers. The case has proceeded to discovery with respect to
In January 2008, the European Commission announced an
the remaining claims as well as the ones brought by the purported
inquiry into certain aspects of competition in the pharmaceutical
class of direct purchasers. A class certification hearing is scheduled
sector and initiated inspections at the premises of a number
for April 2011.
of innovator and generic pharmaceutical companies, including
the Group. The Commission published a preliminary report in Flonase
November 2008. The report suggests that defensive patenting
Purported direct and indirect purchaser class actions have been
strategies may lead to obstacles to innovation and that innovator
filed in the United States District Court for the Eastern District of
companies employ measures to hinder generics coming onto
Pennsylvania alleging the Group illegally maintained monopoly
the market. The final report was issued in July 2009. While not
power in the ‘market’ for Flonase and charged plaintiffs supra-
contradicting the preliminary report, the final report conceded that
competitive prices. Additionally, a suit has been filed by Roxane
delays in generic entry were as much the fault of the regulatory
Laboratories, Inc., a generic competitor, seeking lost profits from
environment as innovator companies’ defensive strategies. In this
the Group’s alleged actions unlawfully delaying Roxane’s entry into
report, the Commission stated that it did not attack legitimate
the market. The predicate for all of these allegations was the filing
patenting practices and identified areas for follow up scrutiny
by the Group of allegedly sham citizen petitions and subsequent
by the Commission and recommended regulatory reform and
litigation. The motion of the direct purchasers to certify a class
improvement.
was granted by the court. The Group has successfully narrowed
On 17th January 2011, the Commission requested information the claims of the purported class of indirect purchasers through
from the Group and a number of other pharmaceutical companies motions to dismiss their complaint and amended complaints. The
relating to patent settlement agreements affecting European Union Group’s motion to dismiss Roxane’s complaint was denied.
and European Economic Area markets. The request for information
is the second monitoring exercise by the Commission patent Commercial and corporate
settlement agreements in the pharmaceuticals sector. The Group Securities/ERISA class actions
is in the process of responding to the Commission’s request.

On 6th July 2009, a class action suit brought on behalf of current
Wellbutrin SR and former employees of Stiefel Laboratories, Inc., was filed in
United States District Court for the Southern District of Florida.
In December 2004, January 2005 and February 2005, lawsuits,
The complaint alleges that Stiefel and its officers and directors
several of which purported to be class actions, were filed in the
violated US Employee Retirement Income Security Act (ERISA) and
United States District Court for the Eastern District of Pennsylvania
federal and state securities laws by inducing Stiefel employees
against the Group on behalf of direct and indirect purchasers of
to sell their shares in the employee stock plan back to Stiefel at
Wellbutrin SR. The complaints allege violations of US anti-trust
a greatly undervalued price and without disclosing to employees
laws through sham litigation and fraud on the patent office by the
that Stiefel was about to be sold to the Group. In January 2010,
Group in obtaining and enforcing patents covering Wellbutrin SR.
defendants’ motion to dismiss was granted in part and denied in
The complaints followed the introduction of generic competition to
part. Specifically, while the Court determined that the ERISA claims
Wellbutrin SR in April 2004, after district and appellate court rulings
against the individual Stiefel defendants as well as the federal
that a generic manufacturer did not infringe the Group’s patents.
securities claims against the individual defendants and Stiefel could
A class of direct purchasers has been certified. The court recently
go forward, the Court dismissed the Florida Securities Act and
entered an order granting the motion of the indirect purchaser
common law breach of fiduciary duty claims holding that ERISA
plaintiffs to file a renewed motion for class certification. The court
pre-empts state and common law, as well as a malpractice claim
has scheduled trial for 27th June 2011 with regard to the claims of
against Stiefel’s former accountants. Trial of the remaining claims is
the certified class of direct purchasers.
scheduled for July 2011.
Secondary wholesaler A putative class action suit was filed against the Group on
In July 2006, RxUSA Wholesale, Inc., a ‘secondary wholesaler,’ 27th August 2010 in the United States District Court for the
filed suit against the Group and many other pharmaceutical Southern District of New York. The complaint alleges that the
manufacturers and wholesalers in the United States District Group and its officers, directors and certain employees made
Court for the Eastern District of New York. The complaint alleges misleading public statements about Avandia, and that when
that the defendants engaged in a conspiracy to refuse to supply these alleged ‘misleading statements’ were exposed, the
pharmaceutical products to RxUSA in violation of federal and state value of the Group’s stock dropped. Plaintiff has brought suit
anti-trust laws. The Group’s motion to dismiss the complaint was on behalf of himself and all other participants in the Group’s
granted. The United States Court of Appeals for the Second Circuit retirement plans, claiming that the Group and the individual
affirmed the dismissal of the complaint. The case is now concluded. defendants breached their fiduciary duties to plan participants
under ERISA.

185
44 Legal proceedings continued Environmental matters

The Group has been notified of its potential responsibility relating
Plaintiffs have amended their complaint to add allegations
to past operations and its past waste disposal practices at certain
concerning Wellbutrin SR and Paxil and to include additional
sites, primarily in the USA. Some of these matters are the subject of
Group defendants and individual members of the Group’s
litigation, including proceedings initiated by the US federal or state
benefits committees. The Group filed a motion to dismiss on
governments for waste disposal, site remediation costs and tort
4th February 2011.
actions brought by private parties.
Wage and hour claims The Group has been advised that it may be a responsible party
In December 2006, two purported class actions were filed at approximately 28 sites, of which 12 appear on the National
against the Group on behalf of the entire Group’s US Priority List created by the Comprehensive Environmental Response
pharmaceutical sales representatives. These actions, which Compensation and Liability Act (Superfund). These proceedings
were filed in or transferred to the United States District Court seek to require the operators of hazardous waste facilities,
for the Central District of California, initially alleged that those transporters of waste to the sites and generators of hazardous
representatives are not ‘exempt’ employees under California law waste disposed of at the sites to clean up the sites or to reimburse
and/or the US Fair Labor Standards Act (FLSA) and are consequently the government for cleanup costs. In most instances, the Group
entitled to overtime pay, among other things. is involved as an alleged generator of hazardous waste. Although

Superfund provides that the defendants are jointly and severally
Plaintiffs subsequently amended their complaints to assert a class
liable for cleanup costs, these proceedings are frequently resolved
action, limited solely to pharmaceutical sales representatives
on the basis of the nature and quantity of waste disposed of by the
working in California, and only asserting claims under California’s
generator at the site. The Group’s proportionate liability for cleanup
wage and hour laws.
costs has been substantially determined for about 20 of the sites
The suits seek a variety of compensatory, punitive and statutory referred to above.
damages. The Group moved for summary judgment dismissing
The Group’s potential liability varies greatly from site to site. While
the claims of the putative class representatives on the ground
the cost of investigation, study and remediation at such sites could,
that they were exempt employees. The Court held that there are
over time, be substantial, the Group routinely accrues amounts
appeals pending in the United States Court of Appeals for the
related to its share of the liability for such matters.
Ninth Circuit in cases involving other manufacturers with virtually
the same factual and legal arguments. It therefore deferred ruling
on the summary judgment motion and stayed any further activity
in the case until the appellate court rules in at least one of the
other companies’ pending cases.

A third case, filed in the United States District Court for the District
of Arizona in August 2008, sought to establish a nationwide
collective action on behalf of the entire Group’s US pharmaceutical
sales representatives on the ground that those representatives
were not exempt employees under the FLSA. Plaintiffs sought
double damages for all overtime allegedly worked by the Group’s
pharmaceutical sales representatives over a three year period.
In November 2009, the Court granted the Group’s motion for
summary judgment and dismissed the lawsuit on the ground
that the sales representatives were ‘exempt’ employees under
the outside sales exemption to the FLSA. Plaintiffs appealed the
decision to the United States Court of Appeals for the Ninth Circuit.
On 14th February 2011, the Ninth Circuit issued an opinion in
favour of the Group affirming the judgment of the United States
District Court for the District of Arizona and finding that the
Group’s pharmaceutical sales representatives are exempt employees
under the outside sales exemption to the FLSA and, therefore, not
entitled to overtime pay.
In November 2010, a purported class action was filed against
the Group in the United States District Court for the Northern
District of New York on behalf of the Group’s pharmaceutical sales
representatives working in New York during the past six years. The
plaintiff alleges that these sales representatives are not ‘exempt’
employees, and, therefore, are entitled to overtime under the New
York wage and hour laws which closely follow the US Fair Labor
Standards Act. In January 2011, a plaintiff filed a similar purported
class action in Florida state court alleging that the Group’s
pharmaceutical sales representatives are entitled to overtime
under the FLSA.

186
Directors’ statement of responsibilities

Directors’ statement of responsibilities in Disclosure of information to auditors
relation to the company’s financial statements The Directors in office at the date of this Report have each
The Directors are responsible for preparing the parent company, confirmed that:
GlaxoSmithKline plc, financial statements and the Remuneration sSOFARASHEORSHEISAWARETHEREISNORELEVANTAUDIT
Report in accordance with applicable law and regulations. information of which the company’s auditors are unaware; and
Company law requires the Directors to prepare financial statements sHEORSHEHASTAKENALLTHESTEPSTHATHEORSHEOUGHTTOHAVE
for each financial year. Under that law the Directors have elected taken as a Director to make himself or herself aware of any
to prepare the parent company financial statements in accordance relevant audit information and to establish that the company’s
with United Kingdom Accounting Standards and applicable law auditors are aware of that information.
(United Kingdom Generally Accepted Accounting Practice). Under
company law the Directors must not approve the parent company This confirmation is given and should be interpreted in accordance
financial statements unless they are satisfied that they give a true with the provisions of Section 418 of the Companies Act 2006.
and fair view of the state of affairs of the company for that period.
Going concern basis
In preparing those financial statements, the Directors are
After making enquiries, the Directors have a reasonable
required to:
expectation that the company has adequate resources to continue
sSELECTSUITABLEACCOUNTINGPOLICIESANDTHENAPPLY in operational existence for the foreseeable future. For this reason,
them consistently; they continue to adopt the going concern basis in preparing the
financial statements.
sMAKEJUDGEMENTSANDACCOUNTINGESTIMATESTHATARE
reasonable and prudent;
The Combined Code
sSTATETHATWITHREGARDTOTHEPARENTCOMPANYlNANCIAL The Board considers that GlaxoSmithKline plc applies the Main
statements that applicable UK Accounting Standards have been Principles of Section 1 of the Combined Code mantained by the
followed, subject to any material departures disclosed and FRC, as described in the Corporate Governance section on pages
explained in the parent company financial statements. 58 to 80, and has complied with its provisions except as described
The Directors are responsible for keeping adequate accounting on page 63.
records that are sufficient to show and explain the company’s As required by the FSA’s Listing Rules, the auditors have considered
transactions and disclose with reasonable accuracy at any time the the Directors’ statement of compliance in relation to those points of
financial position of the company and to enable them to ensure the Combined Code which are specified for their review.
that the parent company financial statements and Remuneration
Report comply with the Companies Act 2006. They are also
responsible for safeguarding the assets of the company and hence

for taking reasonable steps for the prevention and detection of Sir Christopher Gent
fraud and other irregularities. Chairman
The parent company financial statements for the year ended 1st March 2011
31st December 2010, comprising the balance sheet for the year
ended 31st December 2010 and supporting notes, are set out
on pages 188 to 191 of this report.
The responsibilities of the auditors in relation to the parent
company financial statements are set out in the Independent
Auditors’ report (page 187).
The financial statements for the year ended 31st December 2010
are included in the Annual Report, which is published in hard copy
printed form and made available on the website. The Directors
are responsible for the maintenance and integrity of the Annual
Report on the company’s website in accordance with UK legislation
governing the preparation and dissemination of financial
statements. Access to the website is available from outside
the UK, where comparable legislation may be different.

187
Independent Auditors’ report to the members of GlaxoSmithKline plc

We have audited the parent company financial statements of Matters on which we are required to report

GlaxoSmithKline plc for the year ended 31st December 2010 by exception
which comprise the Company Balance Sheet – UK GAAP and the
We have nothing to report in respect of the following matters
related Notes A-H. The financial reporting framework that has
where the Companies Act 2006 requires us to report to you if,
been applied in their preparation is applicable law and United
in our opinion:
Kingdom Accounting Standards (United Kingdom Generally
Accepted Accounting Practice). sADEQUATEACCOUNTINGRECORDSHAVENOTBEENKEPTBYTHEPARENT
company, or returns adequate for our audit have not been
Respective responsibilities of directors and received from branches not visited by us; or
auditors
sTHEPARENTCOMPANYlNANCIALSTATEMENTSANDTHEPARTOF
As explained more fully in the Directors’ statement of the Directors’ Remuneration Report to be audited are not in
responsibilities set out on page 186, the directors are responsible agreement with the accounting records and returns; or
for the preparation of the parent company financial statements
and for being satisfied that they give a true and fair view. Our sCERTAINDISCLOSURESOFDIRECTORSREMUNERATIONSPECIlEDBYLAWARE
responsibility is to audit and express an opinion on the parent not made; or
company financial statements in accordance with applicable law sWEHAVENOTRECEIVEDALLTHEINFORMATIONANDEXPLANATIONSWE

and International Standards on Auditing (UK and Ireland). Those require for our audit.
standards require us to comply with the Auditing Practices Board’s
Ethical Standards for Auditors. Other matters
This report, including the opinions, has been prepared for and only We have reported separately on the Group financial statements of
for the company’s members as a body in accordance with Chapter GlaxoSmithKline plc for the year ended 31st December 2010.
3 of Part 16 of the Companies Act 2006 and for no other purpose.
The Company has passed a resolution in accordance with section
We do not, in giving these opinions, accept or assume responsibility
506 of the Companies Act 2006 that the senior statutory auditor’s
for any other purpose or to any other person to whom this report
name should not be stated.
is shown or into whose hands it may come save where expressly
agreed by our prior consent in writing.
Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material

misstatement, whether caused by fraud or error. This includes an PricewaterhouseCoopers LLP
assessment of: whether the accounting policies are appropriate to Chartered Accountants and Statutory Auditors
the parent company’s circumstances and have been consistently London
applied and adequately disclosed; the reasonableness of significant 1st March 2011
accounting estimates made by the directors; and the overall
presentation of the financial statements.
Opinion on financial statements

In our opinion the parent company financial statements:
s GIVEATRUEANDFAIRVIEWOFTHESTATEOFTHECOMPANYSAFFAIRS
as at 31st December 2010;
s H
AVEBEENPROPERLYPREPAREDINACCORDANCEWITH5NITED
Kingdom Generally Accepted Accounting Practice; and
s H
AVEBEENPREPAREDINACCORDANCEWITHTHEREQUIREMENTSOF
the Companies Act 2006.
Opinion on other matters prescribed by the

Companies Act 2006
In our opinion:
s THEPARTOFTHE$IRECTORS2EMUNERATION2EPORTTOBEAUDITEDHAS
been properly prepared in accordance with the Companies Act
2006; and
s T HEINFORMATIONGIVENINTHE$IRECTORS2EPORTFORTHElNANCIALYEAR
for which the parent company financial statements are prepared is
consistent with the parent company financial statements.

188
Company balance sheet – UK GAAP at 31st December 2010

2010 2009
Notes £m £m
Fixed assets – investments D 19,659 19,632
Debtors E 720 736

Cash at bank 10 9
Current assets 730 745
Creditors: amounts due within one year F (6,230) (3,068)

Net current liabilities (5,500) (2,323)
Net assets 14,159 17,309
Capital and reserves

Called up share capital G 1,418 1,416
Share premium account G 1,428 1,368
Other reserves H 1,282 1,255
Profit and loss account H 10,031 13,270
Equity shareholders’ funds 14,159 17,309
Approved by the Board on 1st March 2011.


Chairman
GlaxoSmithKline plc
Registered number: 3888792

189
Notes to the company balance sheet – UK GAAP

A Presentation of the financial statements Expenditure

Expenditure is recognised in respect of goods and services received
Description of business
when supplied in accordance with contractual terms. Provision is
GlaxoSmithKline plc is the parent company of GSK, a major global made when an obligation exists for a future liability in respect of
healthcare group which is engaged in the creation and discovery, a past event and where the amount of the obligation can be
development, manufacture and marketing of pharmaceutical reliably estimated.
products, including vaccines, over-the-counter (OTC) medicines
and health-related consumer products. Investments in subsidiary companies
Investments in subsidiary companies are held at cost less any
Preparation of financial statements
provision for impairment.
The financial statements, which are prepared on a going concern
basis, are drawn up in accordance with UK generally accepted Impairment of investments
accounting principles (UK GAAP) and with UK accounting The carrying value of investments are reviewed for impairment
presentation as at 31st December 2010, with comparative figures when there is an indication that the investment might be impaired.
as at 31st December 2009. Where appropriate, comparative Any provision resulting from an impairment review is charged to
figures are reclassified to ensure a consistent presentation with the income statement in the year concerned.
current year information.

Share based payments
As permitted by s.408 of the Companies Act 2006, the profit and
loss account of the company is not presented in this Annual Report. The issuance by the company to its subsidiaries of a grant over
the company’s options, represents additional capital contributions
Accounting convention and standards by the company in its subsidiaries. An additional investment in
The balance sheet has been prepared using the historical cost subsidiaries results in a corresponding increase in shareholders’
convention and complies with applicable UK accounting standards. equity. The additional capital contribution is based on the fair
value of the grant issued, allocated over the underlying grant’s
Accounting principles and policies vesting period.
The preparation of the balance sheet in conformity with generally
accepted accounting principles requires management to make Taxation
estimates and assumptions that affect the reported amounts Current tax is provided at the amounts expected to be paid
of assets and liabilities and disclosure of contingent assets and applying tax rates that have been enacted or substantially enacted
liabilities at the date of the balance sheet. Actual amounts could by the balance sheet date.
differ from those estimates. The company accounts for taxation which is deferred or accelerated
The balance sheet has been prepared in accordance with the by reason of timing differences which have originated but not

company’s accounting policies approved by the Board and reversed by the balance sheet date. Deferred tax assets are only
described in Note B. recognised to the extent that they are considered recoverable
against future taxable profits.
B Accounting policies Deferred tax is measured at the average tax rates that are
Foreign currency transactions expected to apply in the periods in which the timing differences
Foreign currency transactions are recorded at the exchange rate are expected to reverse. Deferred tax liabilities and assets are
ruling on the date of transaction, or at the forward rate if hedged not discounted.
by a forward exchange contract. Foreign currency assets and
Financial guarantees
liabilities are translated at rates of exchange ruling at the balance
sheet date, or at the forward rate. Liabilities relating to guarantees issued by the company on behalf
of its subsidiaries are initially recognised at fair value and amortised
Dividends paid and received over the life of the guarantee.
Dividends paid and received are included in the accounts in the
period in which the related dividends are actually paid or received. C Operating profit
A fee of £11,140 (2009 – £11,140) relating to the audit of the
company has been charged in operating profit.

190
D Fixed assets
2010 2009
£m £m
Shares in GlaxoSmithKline Services Unlimited 613 613

Shares in GlaxoSmithKline Holdings (One) Limited 18 18
Shares in GlaxoSmithKline Holdings Limited 17,888 17,888
Shares in GlaxoSmithKline Mercury Limited 33 33
18,552 18,552
Capital contribution relating to share based payments 1,107 1,080
19,659 19,632
E Debtors
2010 2009
£m £m
Amounts due within one year:

UK Corporation tax recoverable 223 228
Amounts owed by Group undertakings 112 116
335 344
Amounts due after more than one year:
Amounts owed by Group undertakings 385 392
720 736
F Creditors
2010 2009
£m £m
Amounts due within one year:

Bank overdraft 9 8
Amounts owed to Group undertakings 5,774 2,606
Other creditors 447 454

6,230 3,068
The company has guaranteed debt issued by one of its subsidiary companies for which it receives an annual fee from the subsidiary.
In aggregate, the company has outstanding guarantees over $10 billion of debt instruments.
The amount due from the subsidiary companies in relation to these guarantee fees will be recovered over the life of the bonds and are
disclosed within debtors (see Note E).

191
G Share capital and share premium account

Share
Ordinary Shares of 25p each premium
Number £m £m
Share capital authorised

At 31st December 2009 10,000,000,000 2,500
At 31st December 2010 10,000,000,000 2,500
Share capital issued and fully paid
At 1st January 2009 5,661,316,237 1,415 1,326
At 31st December 2009 5,665,128,719 1,416 1,368

At 31st December 2010 5,670,458,177 1,418 1,428

31st December 31st December
2010 2009
Number (‘000) of shares issuable under outstanding options 207,132 213,110

Number (‘000) of unissued shares not under option 4,122,410 4,121,761
At 31st December 2010, of the issued share capital, 105,472,070 shares were held in the ESOP Trust, 474,194,158 shares were held as
Treasury shares and 5,090,791,949 shares were in free issue. All issued shares are fully paid. The nominal, carrying and market values of
the shares held in the ESOP Trust are disclosed in Note 42, ‘Employee share schemes’.
The company did not purchase any of its own shares in 2010. On 3rd February 2011, GSK announced that it would commence a new
long-term share buy-back programme and expected to repurchase £1-2 billion of shares, depending on market conditions, in 2011.
The exact amount and timing of purchases and whether the shares will be held as Treasury shares or be cancelled will be determined
by the company and is dependent on market conditions and other factors. No shares were purchased in the period 1st January 2011
to 3rd February 2011. In the period 4th February 2011 to 24th February 2011 10.4 million shares were purchased at a cost of
£123.4 million.

H Reserves
Other Profit and
reserves loss account Total
£m £m £m
At 1st January 2009 1,216 11,273 12,489

Profit attributable to shareholders – 5,000 5,000
Dividends to shareholders – (3,003) (3,003)
Capital contribution relating to share based payments 39 – 39
At 31st December 2009 1,255 13,270 14,525
Loss attributable to shareholders – (34) (34)
Dividends to shareholders – (3,205) (3,205)
Capital contribution relating to share based payments 27 – 27
At 31st December 2010 1,282 10,031 11,313
The loss of GlaxoSmithKline plc for the year was £34 million (2009 – profit of £5,000 million), which after dividends of £3,205 million
(2009 – £3,003 million), gave a retained loss of £3,239 million (2009 – profit of £1,997 million). The profit and loss account reserve at
31st December 2010 stood at £10,031 million (2009 – £13,270 million), of which £4,096 million is unrealised (2009 – £4,096 million).
I Post balance sheet event

On 3rd February 2011, the company initiated a new long-term share buy-back programme, and the intention is to repurchase
£1-2 billion of shares in 2011, depending on market conditions. In the period 4th February 2011 to 24th February 2011 10.4 million
shares were purchased at a cost of £123.4 million.

192
Financial record
Quarterly trend
An unaudited analysis of the Group results and pharmaceutical sales by therapeutic area is provided by quarter in Sterling for the
financial year 2010.
Income statement – total 12 months 2010 Q4 2010

£m CER% £% £m CER% £%
Turnover – Pharmaceuticals 23,382 (2) (1) 5,930 (16) (14)

– Consumer Healthcare 5,010 5 7 1,267 4 7
Total turnover 28,392 (1) – 7,197 (13) (11)
Cost of sales (7,592) 3 3 (2,077) (2) (2)
Selling, general and administration (13,053) 36 36 (4,461) 48 51
Research and development (4,457) 8 9 (1,097) (4) (3)
Other operating income 493 118
Operating profit 3,783 (59) (55) (320) (>100) (>100)
Finance income 116 58
Finance costs (831) (240)
Profit on disposal of interest in associate 8 8
Share of after tax profits of associates and joint ventures 81 18
Profit before taxation 3,157 (64) (60) (476) (>100) (>100)
Taxation (1,304) (157)
Tax rate % 41.3% 33.0%
Profit after taxation for the period 1,853 (71) (67) (633) (>100) (>100)
Profit attributable to non-controlling interests 219 57
Profit attributable to shareholders 1,634 (690)
Basic earnings per share (pence) 32.1p (75) (71) (13.6)p (>100) (>100)
Diluted earnings per share (pence) 31.9p (13.4)p
Income statement – results before major restructuring
Total turnover 28,392 (1) – 7,197 (13) w(11)

Cost of sales (7,405) 4 4 (1,980) (6) (6)
Selling, general and administration (12,388) 35 35 (4,289) 51 54
Research and development (3,964) – – (1,083) (3) (1)
Other operating income 493 118
Operating profit 5,128 (48) (45) (37) (>100) (>100)
Finance income 116 58
Finance costs (828) (240)
Profit on disposal of interest in associate 8 8
Share of after tax profits of associates and joint ventures 81 18
Profit before taxation 4,505 (52) (48) (193) (>100) (>100)
Taxation (1,544) (134)

Tax rate % 34.3% 69.4%
Profit after taxation for the period 2,961 (56) (53) (327) (>100) (>100)
Profit attributable to non-controlling interests 219 57
Profit attributable to shareholders 2,742 (384)
Adjusted earnings per share (pence) 53.9p (59) (56) (7.5)p (>100) (>100)
Diluted earnings per share (pence) 53.5p (7.5)p
The calculation of results before major restructuring is described in Note 1 to the financial statements, ‘Presentation of the financial
statements’.

193
Financial record

Q3 2010 Q2 2010 Q1 2010
£m CER% £% £m CER% £% £m CER% £%
5,553 (3) (1) 5,773 – 3 6,126 14 9

1,260 4 8 1,252 3 7 1,231 9 7
6,813 (2) 1 7,025 – 4 7,357 13 9
(1,906) 7 7 (1,657) 4 2 (1,952) 11 9
(2,040) (9) (5) (4,202) 82 (83) (2,350) 17 7
(1,004) 11 14 (1,196) 21 (23) (1,160) 7 3
95 81 199
1,958 (10) (5) 51 (106) (98) 2,094 22 22

22 19 17
(197) (189) (205)
– – –
16 22 25
1,799 (11) (6) (97) 1,931 15 16
(456) (155) (536)
25.3% 159.8% 27.8%
1,343 (8) (2) (252) 1,395 19 19
55 52 55
1,288 (304) 1,340
25.3p (10) (4) (6.0)p (129) (121) 26.4p 18 18
25.1p (5.9)p 26.1p

6,813 (2) 1 7,025 – 4 7,357 13 9
(1,875) 9 8 (1,626) (2) – (1,924) 19 17
(1,956) (9) (5) (3,845) 71 73 (2,298) 18 8
(948) 8 10 (994) 5 8 (939) (9) (13)
95 81 199
2,129 (9) (4) 641 (80) (73) 2,395 21 21
22 19 17
(196) (188) (204)
– – –
16 22 25
1,971 (10) (5) 494 (86) (78) 2,233 16 16
(480) (312) (618)

24.4% 63.2% 27.7%
1,491 (5) 1 182 (96) (89) 1,615 18 18
55 52 55
1,436 130 1,560
28.2p (6) (1) 2.6p (99) (92) 30.7p 16 17
28.0p 2.5p 30.4p

194
Financial record
Quarterly trend
Pharmaceutical turnover – total Group

Q4 2010 Q3 2010 Q2 2010 Q1 2010
£m CER% £% £m CER% £% £m CER% £% £m CER% £%
Respiratory 1,917 (2) – 1,726 5 8 1,829 2 5 1,766 6 2

Avamys/Veramyst 50 45 52 40 23 29 57 19 21 46 52 48
Flixonase/Flonase 37 3 6 32 11 14 50 21 28 45 (30) (35)
Flixotide/Flovent 220 (5) (1) 187 7 11 201 1 6 196 5 1
Seretide/Advair 1,346 (4) (1) 1,243 5 8 1,286 – 3 1,264 9 4
Serevent 50 (21) (18) 48 (13) (11) 52 (14) (12) 51 (16) (18)
Ventolin 142 (1) 2 130 15 18 134 16 20 116 3 –
Zyrtec 23 (5) 5 19 – 6 20 6 18 20 17 11
Anti-virals 224 (64) (62) 218 (68) (65) 286 (50) (47) 358 (44) (46)
Hepsera 33 – 10 32 7 14 34 7 17 29 11 7
Relenza 11 (96) (96) 18 (91) (90) 8 (97) (87) 84 (60) (62)
Valtrex 96 (60) (57) 95 (75) (73) 165 (59) (56) 176 (46) (49)
Zeffix 64 9 16 55 (4) 2 62 7 13 52 4 (2)
Central nervous system 450 (14) (1) 436 1 4 450 (4) – 417 (13) (16)
Imigran/Imitrex 50 (40) (38) 53 (4) – 52 (25) (24) 57 (9) (11)
Lamictal 130 (3) (2) 131 7 8 123 15 19 120 (11) (17)
Requip 60 (9) (8) 58 33 35 60 16 18 55 14 10
Seroxat/Paxil 128 (15) (8) 115 (11) (4) 133 (9) (4) 106 (12) (16)
Treximet 14 – – 13 (13) (13) 16 17 33 13 7 (7)
Wellbutrin 22 (5) – 18 13 13 21 (33) (30) 20 (67) (69)
Cardiovascular and urogenital 696 11 13 650 15 18 654 10 13 570 9 3
Arixtra 80 8 8 72 17 20 79 28 30 70 25 19
Avodart 177 22 24 156 16 19 157 14 17 139 20 14
Coreg 41 29 32 44 8 13 44 (16) (14) 42 (12) (18)
Fraxiparine 55 (8) (8) 54 – (4) 57 (3) (2) 56 4 2
Lovaza 147 11 14 138 20 24 138 29 33 107 9 1
Vesicare 31 3 7 28 8 12 30 12 15 25 13 4
Volibris 16 >100 >100 11 100 83 10 >100 >100 9 >100 >100
Metabolic 110 (65) (63) 125 (58) (56) 213 (33) (30) 230 (18) (22)
Avandia products 49 (76) (74) 70 (65) (62) 152 (26) (23) 169 (10) (14)
Bonviva/Boniva 18 (73) (73) 17 (70) (72) 20 (70) (70) 23 (63) (63)
Anti-bacterials 370 (2) (2) 333 (4) (2) 337 (4) (3) 356 (6) (9)
Augmentin 168 (2) (3) 153 (7) (6) 144 (3) (1) 160 (10) (14)
Oncology and emesis 172 – 1 172 13 15 175 2 5 169 23 17
Arzerra 9 >100 >100 9 – – 8 – – 5 – –
Hycamtin 29 (36) (36) 35 (15) (15) 40 (12) (7) 40 – (7)
Promacta 10 80 100 7 >100 >100 8 >100 >100 6 >100 >100
Tyverb/Tykerb 60 23 25 58 26 26 56 32 37 53 62 56
Votrient 14 >100 >100 11 – – 8 – – 5 – –
Vaccines 994 (36) (35) 982 19 22 939 17 24 1,411 >100 >100
Boostrix 49 37 40 59 49 51 43 8 10 30 19 15
Cervarix 67 68 76 48 64 71 50 (33) (32) 77 60 60
Fluarix, FluLaval 69 64 64 167 14 14 – – – 5 (43) (29)
Flu pandemic 161 (82) (81) 58 >100 >100 275 >100 >100 698 >100 >100
Hepatitis 164 5 9 189 9 11 170 (16) (13) 197 38 32
Infanrix, Pediarix 190 24 24 168 1 1 176 14 14 166 (3) (5)
Rotarix 79 11 13 52 (40) (38) 39 (49) (45) 65 19 14
Synflorix 48 (2) – 90 >100 >100 38 >100 >100 45 – –
Dermatologicals 288 10 13 272 20 24 262 >100 >100 265 >100 >100

Bactroban 29 4 4 33 (3) – 30 (6) (6) 27 (7) (10)
Dermovate 22 – – 18 – – 19 – – 15 – –
Duac 27 13 17 33 39 43 29 – – 27 – –
Soriatane 17 – 6 19 58 58 17 – – 18 – –
Zovirax 39 (3) 3 31 11 15 33 (6) – 49 61 58
Other 306 19 21 238 14 15 239 12 15 211 20 17
5,527 (17) (15) 5,152 (4) (1) 5,384 – 4 5,753 15 11
VIIV Healthcare (HIV) 403 (4) (3) 401 (1) 2 389 1 3 373 (7) (11)
Combivir 99 (11) (9) 96 (10) (6) 86 (18) (16) 82 (23) (27)
Epivir 29 (3) (3) 31 (15) (9) 27 (13) (13) 28 (15) (18)
Epzicom/Kivexa 146 (3) (2) 138 3 5 140 8 9 131 (1) (4)
Lexiva 36 (18) (18) 39 (12) (9) 39 (12) (9) 41 (8) (15)
Selzentry 22 >100 >100 20 – – 19 – – 19 – –
Trizivir 32 (35) (35) 38 (21) (19) 36 (29) (27) 38 (27) (32)
5,930 (16) (14) 5,553 (3) (1) 5,773 – 3 6,126 14 9
Pharmaceutical turnover includes co-promotion income.

195
Financial record
Quarterly trend

Pharmaceutical turnover – USA
Q4 2010 Q3 2010 Q2 2010 Q1 2010
Respiratory 875 (6) (4) 846 9 14 868 1 5 805 3 (5)

Avamys/Veramyst 17 7 13 15 (7) – 20 11 11 17 (10) (15)
Flixonase/Flonase 5 (17) (17) 8 >100 >100 18 >100 >100 6 (40) (40)
Flixotide/Flovent 118 – 3 105 19 24 109 8 12 99 8 –
Seretide/Advair 670 (7) (5) 649 6 11 655 (3) 1 630 4 (4)
Serevent 15 (25) (25) 16 (6) – 17 (6) (6) 16 (11) (16)
Ventolin 49 – 2 50 37 43 45 38 41 35 – (8)
Zyrtec – – – – – – – – – – – –
Anti-virals 41 (82) (81) 57 (84) (83) 118 (66) (64) 154 (42) (47)
Hepsera – – – – – – – – – – – –
Relenza (5) – – 13 (73) (71) 5 (84) (74) 30 >100 >100
Valtrex 24 (83) (81) 27 (91) (90) 94 (69) (68) 107 (55) (58)
Zeffix 3 (25) (25) 3 (25) (25) 4 (40) (20) 3 – (25)

Central nervous system 114 (37) (36) 124 3 8 131 (11) (8) 136 (32) (37)
Imigran/Imitrex 15 (65) (65) 18 (11) (5) 18 (45) (45) 24 (11) (14)
Lamictal 66 (11) (8) 70 5 9 60 29 33 61 (23) (29)
Requip 10 (38) (38) 13 >100 >100 11 83 83 10 38 25
Seroxat/Paxil – (100) (100) 5 – – 12 (8) (8) 10 (29) (29)
Treximet 14 – – 13 (13) (13) 15 25 25 13 – (7)
Wellbutrin 7 (30) (30) 4 (25) – 5 (70) (75) 8 (85) (85)
Cardiovascular and urogenital 422 10 13 409 17 22 403 8 12 337 6 (2)
Arixtra 49 12 14 43 28 34 46 36 39 39 27 18
Avodart 86 1 4 87 5 9 88 2 6 76 12 4
Coreg 41 29 32 43 8 10 44 (16) (12) 42 (12) (18)
Fraxiparine – – – – – – – – – – – –
Lovaza 146 11 14 137 20 25 138 29 33 107 10 2
Vesicare 31 3 7 27 4 8 30 12 15 25 13 4
Volibris – – – – – – – – – – – –
Metabolic 40 (75) (73) 32 (78) (76) 77 (51) (48) 89 (36) (41)
Avandia products 40 (65) (63) 33 (70) (66) 75 (33) (30) 89 (14) (21)

Bonviva/Boniva – (100) (100) - (100) (100) – – – – – –
Anti-bacterials 16 (38) (33) 14 (41) (36) 21 (29) (25) 24 (10) (17)
Augmentin – (100) (100) 1 (89) (89) 2 (91) (82) 8 (44) (50)
Oncology and emesis 75 (16) (13) 89 34 39 94 2 7 92 41 31
Arzerra 6 >100 100 8 – – 7 – – 5 – –
Hycamtin 14 (46) (46) 21 (17) (13) 24 (4) – 24 – (8)
Promacta 6 20 20 6 100 100 7 >100 >100 6 >100 >100
Tyverb/Tykerb 17 14 21 18 42 50 18 – 6 17 73 55
Votrient 11 >100 >100 9 – – 8 – – 5 – –
Vaccines 171 (44) (42) 278 32 35 143 (31) (27) 171 55 44
Boostrix 28 65 65 41 67 71 26 19 24 15 55 36
Cervarix 1 (75) (75) 4 – – 6 – – 2 – –
Fluarix, FluLaval 28 >100 >100 81 29 29 – – – 1 – –
Flu pandemic – (100) (100) 1 – – – – – – – –
Hepatitis 56 6 10 97 39 45 62 (33) (29) 92 92 77
Rotarix 21 18 24 17 (27) (23) 9 (64) (59) 27 93 80
Synflorix – – – – – – – – – – – –
Dermatologicals 94 1 3 93 22 26 74 >100 >100 97 100 >100

Bactroban 12 (14) (14) 14 (7) (7) 14 (13) (7) 11 (20) (27)
Dermovate – – – – – – – – – – – –
Duac 15 (7) – 20 27 33 15 – – 17 – –
Soriatane 17 – 6 19 58 58 17 – – 18 – –
Zovirax 14 8 8 8 75 100 5 25 25 26 >100 >100
Other 6 >100 100 8 14 14 6 >100 >100 4 (20) (20)
1,854 (22) (20) 1,950 (8) (4) 1,935 (13) (10) 1,909 (1) (9)
VIIV Healthcare (HIV) 163 (16) (14) 162 (8) (4) 176 3 7 159 (11) (18)
Combivir 34 (30) (28) 36 (19) (16) 39 (16) (11) 34 (30) (36)
Epivir 10 (17) (17) 10 (25) (17) 10 (9) (9) 10 (15) (23)
Epzicom/Kivexa 55 (16) (13) 50 (8) (4) 57 10 14 48 (10) (17)
Lexiva 20 (20) (20) 19 (25) (21) 20 (17) (13) 21 (15) (22)
Selzentry 9 – – 8 – – 9 – – 8 – –
Trizivir 16 (38) (38) 19 (22) (17) 19 (24) (24) 19 (33) (37)

196
Financial record
Quarterly trend
Pharmaceutical turnover – Europe

Q4 2010 Q3 2010 Q2 2010 Q1 2010
Respiratory 557 (4) (6) 488 (3) (5) 535 (1) (3) 569 6 4
Avamys/Veramyst 12 9 9 10 11 11 21 31 31 13 56 44
Flixonase/Flonase 10 (10) – 8 – (11) 12 – – 10 (17) (17)
Flixotide/Flovent 42 (10) (14) 33 (11) (13) 39 (9) (9) 45 (6) (6)
Seretide/Advair 416 (3) (5) 370 – (2) 392 – (2) 423 10 7
Serevent 24 (17) (17) 24 (11) (11) 24 (17) (17) 26 (16) (16)
Ventolin 38 (7) (10) 32 (9) (9) 35 3 (3) 37 – –
Zyrtec – – – – – – – – – – – –
Anti-virals 24 (73) (73) 24 (71) (72) 26 (64) (64) 35 (78) (79)
Hepsera 1 – – – – – – – – – – –
Relenza – – – 2 (95) (95) 2 (96) (92) 2 (97) (98)
Valtrex 15 (61) (63) 14 (63) (63) 16 (59) (59) 23 (43) (45)
Zeffix 6 (14) (14) 7 (14) – 6 (13) (25) 7 – –
Central nervous system 132 (8) (10) 131 (4) (6) 137 (3) (5) 140 (2) (3)
Imigran/Imitrex 20 (20) (20) 22 – (4) 21 (9) (9) 22 (12) (12)
Lamictal 34 (10) (13) 35 (8) (8) 37 (3) (3) 37 (3) (5)
Requip 33 (8) (11) 32 – (6) 36 6 3 36 13 13
Seroxat/Paxil 19 (9) (14) 19 (14) (14) 22 (15) (19) 22 (21) (21)
Treximet – – – – – – – – – – – –
Wellbutrin 11 22 22 10 25 25 9 43 29 9 50 50
Arixtra 24 – (8) 22 (8) (8) 27 22 17 26 23 18
Avodart 50 31 28 41 19 14 44 19 19 40 17 11
Coreg – – – – – – – – – – – –
Fraxiparine 38 (13) (16) 34 (17) (19) 39 (7) (9) 43 – –
Lovaza – – – – – – – – – – – –
Vesicare – – – – – – – – – – – –
Volibris 13 86 86 10 100 100 9 >100 >100 8 >100 >100
Metabolic 13 (80) (81) 37 (42) (45) 55 (23) (23) 61 (7) (10)
Avandia products (4) – – 20 (52) (52) 34 (22) (26) 38 (12) (12)
Bonviva/Boniva 14 (35) (39) 13 (41) (41) 17 (22) (26) 20 (5) (5)
Anti-bacterials 153 (11) (13) 121 (9) (12) 120 (12) (14) 142 (21) (22)
Augmentin 69 (13) (16) 55 (16) (19) 53 (13) (13) 63 (23) (25)
Oncology and emesis 55 10 6 49 (2) (4) 47 (4) (6) 50 – (2)
Arzerra 3 – – 1 – – – – – – – –
Hycamtin 12 (20) (20) 11 (21) (21) 12 (20) (20) 13 (7) (13)
Promacta 3 – – 1 – – 1 – – – – –
Tyverb/Tykerb 25 24 19 23 21 21 22 28 22 24 41 41
Votrient 3 – – 1 – – – – – – – –
Vaccines 393 (49) (51) 310 (8) (10) 365 14 14 613 >100 >100
Boostrix 11 – – 12 9 9 11 10 10 9 25 13
Cervarix 25 37 32 11 (35) (35) 21 (65) (67) 59 51 51
Fluarix, FluLaval 13 18 18 50 (13) (17) – – – – – –
Flu pandemic 90 (82) (82) 2 (50) (50) 92 >100 >100 304 >100 >100
Hepatitis 63 – (2) 55 (14) (15) 63 (13) (13) 61 2 –
Infanrix, Pediarix 120 22 19 96 (6) (9) 109 22 20 104 (2) (5)
Rotarix 9 (36) (36) 8 (43) (43) 8 (42) (33) 13 8 –
Synflorix 8 (27) (27) 9 (9) (18) 14 40 40 12 – –
Dermatologicals 62 14 11 59 15 13 63 >100 >100 62 >100 100

Bactroban 7 33 17 7 – – 7 – – 6 – –
Dermovate 5 – – 5 – – 5 – – 4 – –
Duac 6 – – 5 50 25 6 – – 6 – –
Soriatane – – – – – – – – – – – –
Zovirax 7 (14) – 6 – (14) 7 (13) (13) 7 (13) (13)
Other 99 – (3) 65 (6) (7) 78 26 18 68 24 24
1,647 (24) (26) 1,428 (9) (11) 1,580 1 (1) 1,893 16 13
VIIV Healthcare (HIV) 145 (5) (6) 136 (10) (12) 145 (4) (6) 159 (3) (5)
Combivir 28 (22) (24) 26 (25) (28) 30 (19) (19) 33 (17) (20)
Epivir 8 (27) (27) 9 (25) (25) 10 (17) (17) 10 (21) (29)
Epzicom/Kivexa 63 2 – 57 (2) (5) 61 5 3 64 6 3
Lexiva 10 (21) (29) 13 (13) (13) 13 (13) (19) 15 (12) (12)
Selzentry 11 >100 >100 10 – – 9 – – 11 – –
Trizivir 14 (32) (26) 15 (16) (21) 14 (25) (30) 17 (29) (11)

197
Financial record
Quarterly trend

Pharmaceutical turnover – Emerging Markets
Q4 2010 Q3 2010 Q2 2010 Q1 2010
Respiratory 162 17 20 145 11 14 166 19 25 143 30 24

Avamys/Veramyst 9 100 >100 8 >100 >100 9 >100 >100 5 >100 >100
Flixonase/Flonase 11 38 38 9 (11) – 10 10 – 9 13 13
Flixotide/Flovent 12 33 33 10 – 11 12 50 50 14 75 75
Seretide/Advair 85 14 18 77 11 17 86 12 18 80 28 23
Serevent – (100) (100) 1 – – 1 – – – – (100)
Ventolin 30 20 20 27 18 23 31 25 29 24 14 9
Zyrtec 4 – – 4 (33) (33) 4 33 33 2 100 100
Anti-virals 61 (13) (9) 56 (10) (7) 59 10 13 47 9 –
Hepsera 15 8 15 16 25 33 15 8 15 12 – (8)
Relenza (1) – – 1 (92) (92) – – (100) 1 – –
Valtrex 8 – – 7 – 17 8 33 33 5 – (17)
Zeffix 39 28 34 32 7 10 36 21 24 29 11 4

Central nervous system 62 22 24 63 22 24 53 11 13 45 14 7
Imigran/Imitrex 1 (50) (50) 1 – – 2 100 100 1 – –
Lamictal 16 42 33 15 27 36 14 17 17 12 8 (8)
Requip 1 – – 1 – – 1 – – – – –
Seroxat/Paxil 19 5 – 19 – – 20 (14) (5) 15 – (12)
Treximet – – – – – – – – – – – –
Wellbutrin 4 33 33 3 33 – 3 – 50 3 50 50
Arixtra 3 50 50 3 50 50 2 – – 2 100 100
Avodart 9 50 50 8 33 33 9 60 80 7 60 40
Coreg – – – – – – – – – – – –
Fraxiparine 15 25 25 15 27 36 14 40 40 11 22 22
Lovaza – – – – – – – – – – – –
Vesicare – – – – – – – – – – – –
Volibris – – – 1 – – – – – – – –
Metabolic 17 (43) (39) 12 (61) (61) 31 (9) (3) 31 18 11
Avandia products 3 (76) (82) 2 (90) (90) 18 (14) (14) 19 6 6

Bonviva/Boniva – – (100) 1 – – 1 – – – – –
Anti-bacterials 159 14 15 151 7 9 153 8 12 146 11 4
Augmentin 78 29 26 74 6 9 69 15 17 70 12 4
Oncology and emesis 17 13 13 17 6 6 16 – 14 12 8 –
Arzerra – – – – – – – – – – – –
Hycamtin 1 – – 2 – – 2 – – 2 100 100
Promacta – – – – – – – – – – – –
Tyverb/Tykerb 9 50 50 9 29 29 7 17 17 5 67 67
Votrient – – – – – – – – – – – –
Vaccines 260 11 14 216 29 32 179 18 23 272 >100 >100
Boostrix 4 >100 >100 2 – – 1 (80) (80) 2 100 100
Cervarix 7 – – 8 17 33 6 50 50 4 (33) (33)
Fluarix, FluLaval 20 43 43 19 36 36 1 (89) (89) – (100) (100)
Flu pandemic 25 (60) (55) 6 – – 43 – – 152 – –
Hepatitis 23 17 28 20 (9) (9) 25 9 14 20 17 11
Rotarix 45 36 36 20 (56) (53) 20 (34) (31) 17 (25) (29)
Synflorix 35 13 13 74 >100 >100 14 – – 26 – –
Dermatologicals 82 39 44 73 35 40 69 74 82 62 75 72
Bactroban 7 17 17 8 14 14 7 14 – 6 (14) (14)
Dermovate 11 – – 7 – – 7 – – 5 – –
Duac 3 >100 >100 3 50 50 2 – – 3 – –
Soriatane – – – – – – – – – – – –
Zovirax 6 20 20 6 20 20 8 – 14 6 – –
Other 113 62 64 106 30 34 86 24 26 80 30 27
969 16 19 873 14 17 848 17 22 866 43 36
VIIV Healthcare (HIV) 50 57 67 59 73 79 19 (17) (17) 18 – (5)
Combivir 26 67 73 24 69 85 7 (36) (36) 6 (33) (40)
Epivir 6 25 50 7 75 75 2 (33) (33) 3 50 50
Epzicom/Kivexa 9 14 29 12 86 71 6 50 50 2 – (33)
Lexiva 2 – (33) 7 >100 >100 2 50 – 2 >100 100
Selzentry 1 – – – – – 1 – – – – –
Trizivir – (50) (100) 3 (75) (25) – – – 1 – –

198
Financial record
Quarterly trend
Pharmaceutical turnover – Rest of World
Q4 2010 Q3 2010 Q2 2010 Q1 2010
Respiratory 323 5 17 247 5 17 260 2 15 249 4 8

Avamys/Veramyst 12 >100 >100 7 50 75 7 (30) (30) 11 >100 >100
Flixonase/Flonase 11 – – 7 (14) – 10 (33) 11 20 (41) (49)
Flixotide/Flovent 48 (16) (2) 39 (3) 5 41 (15) – 38 (5) (5)
Seretide/Advair 175 2 14 147 11 21 153 10 24 131 23 28
Serevent 11 (18) – 7 (36) (36) 10 (18) (9) 9 (18) (18)
Ventolin 25 (13) 4 21 11 17 23 (5) 15 20 – 5
Zyrtec 19 (6) 6 15 17 25 16 – 14 18 12 6
Anti-virals 98 (59) (55) 81 (55) (48) 83 (14) (2) 122 (27) (27)
Hepsera 17 (12) – 16 (6) – 19 6 19 17 21 21
Relenza 17 (89) (88) 2 (98) (98) 1 – (92) 51 (49) (50)
Valtrex 49 (2) 11 47 8 18 47 2 9 41 – 5
Zeffix 16 (7) 7 13 (14) (7) 16 8 23 13 (7) (7)
Central nervous system 142 (4) 9 118 (4) 4 129 (1) 11 96 3 –
Imigran/Imitrex 14 18 27 12 – 20 11 (9) – 10 – –
Lamictal 14 33 56 11 63 38 12 13 50 10 67 67
Requip 16 27 45 12 (23) (8) 12 11 33 9 – (10)
Seroxat/Paxil 90 (11) 2 72 (14) (3) 79 (5) 3 59 (7) (12)
Treximet – – – – – – 1 – – – – –
Wellbutrin – – – 1 – – 4 100 >100 – (50) –
Arixtra 4 – 33 4 100 100 4 – 33 3 – –
Avodart 32 100 >100 20 89 >100 16 78 78 16 88 100
Coreg – – – 1 – – – – – – – –
Fraxiparine 2 (67) (33) 5 >100 67 4 (60) (20) 2 – (33)
Lovaza 1 – – 1 – – – – – – – –
Vesicare – – – 1 – – – – – – – –
Volibris 3 – – – – (100) 1 – – 1 – –
Metabolic 40 (32) (25) 44 (28) (19) 50 (8) (2) 49 2 2
Avandia products 10 (64) (60) 15 (50) (42) 25 (13) 4 23 4 (4)
Bonviva/Boniva 4 – 100 3 67 – 2 – 100 3 – –
Anti-bacterials 42 (2) 2 47 – 12 43 (2) 2 44 5 10
Augmentin 21 (10) 5 23 24 35 20 33 33 19 – –
Oncology and emesis 25 41 47 17 (17) (6) 18 21 29 15 27 36
Arzerra – – – – – – 1 – – – – –
Hycamtin 2 (33) (33) 1 100 – 2 (50) – 1 – –
Promacta 1 – – – – – – – – – – –
Tyverb/Tykerb 9 14 29 8 13 – 9 – – 7 >100 >100
Votrient – – – 1 – – – – – – – _
Vaccines 170 (28) (17) 178 81 >100 252 >100 >100 355 >100 >100
Boostrix 6 (17) – 4 – – 5 67 67 4 (67) (33)
Cervarix 34 >100 >100 25 >100 >100 17 >100 >100 12 >100 >100
Fluarix, FluLaval 8 (33) (33) 17 50 70 (1) – – 4 >100 >100
Flu pandemic 46 (67) (57) 49 >100 >100 140 – – 242 >100 >100
Hepatitis 22 11 22 17 – 6 20 29 43 24 22 33
Infanrix, Pediarix 21 13 31 18 (6) 6 16 (6) – 20 13 33
Rotarix 4 (33) (33) 7 40 40 2 (75) (75) 8 40 60
Synflorix 5 (33) (17) 7 >100 >100 10 >100 >100 7 – –
Dermatologicals 50 (12) (2) 47 2 12 56 76 93 44 95 100
Bactroban 3 – 50 4 (25) – 2 (33) (33) 4 100 100

Dermovate 6 – – 6 – – 7 – – 6 – –
Duac 3 >100 >100 5 100 >100 6 – – 1 – –
Soriatane – – – – – – – – – - – –
Zovirax 12 (15) (8) 11 (9) – 13 (14) (7) 10 (17) (17)
Other 88 – 11 59 14 16 69 (17) (4) 59 11 4
1,057 (16) (6) 901 (1) 9 1,021 16 31 1,085 35 35
VIIV Healthcare (HIV) 45 5 10 44 6 22 49 24 32 37 (5) –
Combivir 11 – 10 10 (20) – 10 – – 9 – 13
Epivir 5 100 67 5 (33) (17) 5 – – 5 (20) –
Epzicom/Kivexa 19 19 19 19 23 46 16 – 7 17 7 21
Lexiva 4 – 100 – (33) (100) 4 – 100 3 – –
Selzentry 1 – – 2 – – – – – – – –
Trizivir 2 – – 1 100 – 3 (100) (25) 1 >100 –

199
Financial record
Quarterly trend

Consumer Healthcare turnover
Q4 2010 Q3 2010 Q2 2010 Q1 2010
Over-the-counter medicines 645 1 4 601 1 5 593 (2) 3 617 11 8

Oral healthcare 411 7 10 400 4 7 410 9 12 381 5 4
Nutritional healthcare 211 7 10 259 12 16 249 6 10 233 12 10
1,267 4 7 1,260 4 8 1,252 3 7 1,231 9 7
Q4 2010 Q3 2010 Q2 2010 Q1 2010

USA 279 5 7 249 (4) – 263 – 4 246 3 (5)

Europe 503 (3) (5) 491 (2) (3) 493 (2) (3) 471 9 8

Rest of World 485 13 22 520 15 (25) 496 11 22 514 13 13
1,267 4 7 1,260 4 8 1,252 3 7 1,231 9 7


200
Financial record
Five year record

A record of financial performance is provided, analysed in accordance with current reporting practice. The information included in the
Five year record is prepared in accordance with IFRS as adopted by the European Union and also with IFRS as issued by the International
Accounting Standards Board.
2010 2009 2008 2007 2006

Turnover by business segment £m £m £m £m £m
Pharmaceutical 23,382 23,694 20,381 19,163 20,013

Consumer Healthcare 5,010 4,674 3,971 3,553 3,212
28,392 28,368 24,352 22,716 23,225
2010 2009 2008 2007 2006

Pharmaceutical turnover by therapeutic area £m £m £m £m £m
Respiratory 7,238 6,977 5,817 5,032 4,991

Anti-virals 1,086 2,416 1,584 1,478 1,191
HIV 1,566 1,605 1,513 1,442 1,515
Central nervous system 1,753 1,870 2,897 3,348 3,642
Cardiovascular and urogenital 2,570 2,298 1,847 1,554 1,636
Metabolic 678 1,181 1,191 1,508 1,870
Anti-bacterials 1,396 1,457 1,301 1,213 1,271
Oncology and emesis 688 629 496 477 1,069
Vaccines 4,326 3,706 2,539 1,993 1,692
Dermatologicals 1,087 707 414 375 367
Other 994 848 782 743 769
23,382 23,694 20,381 19,163 20,013
2010 2009 2008 2007 2006

Pharmaceutical turnover by geographic area £m £m £m £m £m
USA 8,308 9,294 8,894 9,273 10,353

Europe 7,133 7,720 6,483 5,560 5,437
Emerging Markets 3,702 3,000 2,282 1,883 1,769
Asia Pacific/Japan 3,204 2,715 1,918 1,701 1,666
Other 1,035 965 804 746 788
23,382 23,694 20,381 19,163 20,013
Pharmaceutical turnover includes co-promotion income. In 2010 ViiV Healthcare turnover is included in the geographic area in which a
sale is made.
2010 2009 2008 2007 2006

Consumer Healthcare turnover £m £m £m £m £m
OTC medicines 2,456 2,339 1,935 1,788 1,561

Oral healthcare 1,602 1,484 1,240 1,049 993
Nutritional healthcare 952 851 796 716 658
5,010 4,674 3,971 3,553 3,212

201
Financial record
2010 2009 2008 2007 2006

Financial results – total £m £m £m £m £m
Turnover 28,392 28,368 24,352 22,716 23,225

Operating profit 3,783 8,425 7,141 7,593 7,808
Profit before taxation 3,157 7,891 6,659 7,452 7,799
Profit after taxation 1,853 5,669 4,712 5,310 5,498
pence pence pence pence pence
Basic earnings per share 32.1 109.1 88.6 94.4 95.5

Diluted earnings per share 31.9 108.2 88.1 93.7 94.5
2010 2009 2008

Financial results – before major restructuring £m £m £m
Turnover 28,392 28,368 24,352

Operating profit 5,128 9,257 8,259

Profit before taxation 4,505 8,726 7,782
Profit after taxation 2,961 6,283 5,551
pence pence pence
Adjusted earnings per share 53.9 121.2 104.7

Adjusted diluted earnings per share 53.5 120.3 104.1
2010 2009 2008 2007 2006

millions millions millions millions millions
Weighted average number of shares in issue:

Basic 5,085 5,069 5,195 5,524 5,643
Diluted 5,128 5,108 5,226 5,567 5,700

% % % % %
Return on capital employed 30.8 82.8 73.1 76.2 90.6
Return on capital employed is calculated as total profit before taxation as a percentage of average net assets over the year.
2010 2009 2008 2007 2006

Balance sheet £m £m £m £m £m
Non-current assets 26,194 25,292 22,124 17,377 14,561

Current assets 16,036 17,570 17,269 13,626 10,992
Total assets 42,230 42,862 39,393 31,003 25,553
Current liabilities (12,794) (12,118) (10,017) (10,345) (7,265)

Non-current liabilities (19,691) (20,002) (21,058) (10,748) (8,640)
Total liabilities (32,485) (32,120) (31,075) (21,093) (15,905)
Net assets 9,745 10,742 8,318 9,910 9,648
Shareholders’ equity 8,887 10,005 7,931 9,603 9,386

Non-controlling interests 858 737 387 307 262
Total equity 9,745 10,742 8,318 9,910 9,648

202
Financial record
Number of employees
2010 2009 2008 2007 2006
USA 17,555 22,594 21,176 24,838 24,726

Europe 39,910 42,048 44,677 46,869 45,758
Rest of World:
Asia Pacific, including China 23,388 21,011 18,983 17,525 17,570
Japan 3,461 3,264 3,174 3,284 3,195
Middle East, Africa 3,609 3,619 3,403 3,156 3,204
Latin America 6,432 5,169 5,228 5,249 5,856
Canada 2,106 2,208 2,362 2,562 2,386
Rest of World 38,996 35,271 33,150 31,776 32,211
96,461 99,913 99,003 103,483 102,695
Manufacturing 30,611 31,162 32,622 33,995 33,235
Selling 43,918 44,621 42,430 44,499 44,484
Administration 8,850 9,405 8,787 8,960 9,024
Research and development 13,082 14,725 15,164 16,029 15,952
96,461 99,913 99,003 103,483 102,695
The geographic distribution of employees in the table above is based on the location of GSK’s subsidiary companies. The number of
employees is the number of permanent employed staff at the end of the financial period. It excludes those employees who are employed
and managed by GSK on a contract basis.
Exchange rates
As a guide to holders of ADS, the following tables set out, for the periods indicated, information on the exchange rate of US dollars
for Sterling as reported by the Federal Reserve Bank of New York (‘noon buying rate’)*.
2010 2009 2008 2007 2006
Average 1.55 1.56 1.85 2.00 1.85
The average rate for the year is calculated as the average of the noon buying rates for each day of the year.
Feb Jan Dec Nov Oct Sept

2011 2011 2010 2010 2010 2010
High 1.62 1.60 1.59 1.63 1.60 1.58

Low 1.60 1.55 1.54 1.55 1.57 1.53
* On 31st December 2008, the Federal Reserve Bank of New York ceased publishing noon buying rates. The Bank of England 4pm buying
rates have been used for subsequent calculations.
The 4pm buying rate on 24th February 2011 was £1 = US$1.61.

203
Product development pipeline

Key

†
In-license or other alliance relationship with third party BLA Biological License Application
S Month of first submission MAA Marketing Authorisation Application (Europe)
A Month of first regulatory approval (for MAA, this is the first EU NDA New Drug Application (USA)
approval letter) Phase I Evaluation of clinical pharmacology, usually conducted in volunteers
AL/CR Month Approvable or Complete Response Letter received – indicates Phase II Determination of dose and initial evaluation of efficacy, conducted in a
that ultimately approval may be given subject to resolution of small number of patients
outstanding queries Phase III Large comparative study (compound versus placebo and/or established
PO Month of EU Positive Opinion treatment) in patients to establish clinical benefit and safety
TA FDA Tentative Approval
MAA and NDA/BLA Regulatory milestones shown in the table below are those that have been achieved. Future filing dates are not included in this list.
Achieved Regulatory
review milestones
Compound Type Indication Phase MAA NDA/BLA
Biopharmaceuticals
933776 beta amyloid monoclonal antibody Alzheimer’s disorders I

1070806 IL18 monoclonal antibody metabolic disease I
1223249 NOGO-A monoclonal antibody amyotrophic lateral sclerosis & multiple sclerosis I
2401502† domain antibody targetted multi-component malignant melanoma I
vaccine
2586881 (APN01)† recombinant human angiotensin converting acute respiratory distress syndrome I
anzyme 2
iboctadekin† (+ Doxil) IL18 immunomodulator (+ topoisomerase II ovarian cancer I
inhibitor)
†
otelixizumab anti-CD3 monoclonal antibody (i.v.) Graves eye disease I
otelixizumab† anti-CD3 monoclonal antibody (s.c. & i.v.) rheumatoid arthritis I
otelixizumab† anti-CD3 monoclonal antibody (s.c.) type 1 diabetes I
249320 myelin-associated glycoprotein monoclonal stroke II
antibody
315234 oncostatin M monoclonal antibody rheumatoid arthritis II
768974† parathyroid hormone osteoporosis II
albiglutide† glucagon-like peptide 1 (GLP 1) agonist heart failure II
Benlysta† anti-B lymphocyte stimulator monoclonal systemic lupus erythematosus II
antibody (s.c.)
mepolizumab anti-IL5 monoclonal antibody severe asthma & nasal polyposis II
ofatumumab† anti-CD20 human monoclonal antibody (s.c.) multiple sclerosis II

ofatumumab† anti-CD20 human monoclonal antibody (s.c.) rheumatoid arthritis II
otelixizumab† anti-CD3 monoclonal antibody (i.v.) myaesthenia gravis II
albiglutide† GLP 1 agonist type 2 diabetes III
Arzerra† anti-CD20 human monoclonal antibody chronic lymphocytic leukaemia, first line therapy & use III
in relapsed patients
Arzerra† anti-CD20 human monoclonal antibody diffuse large B cell lymphoma (relapsed patients) III
Arzerra† anti-CD20 human monoclonal antibody follicular lymphoma (refractory & relapsed patients) III
otelixizumab† anti-CD3 monoclonal antibody (i.v.) type 1 diabetes III
Benlysta† anti-B lymphocyte stimulator monoclonal systemic lupus erythematosus Submitted S: Jun10 S: Jun10
antibody (i.v.)
denosumab† anti-receptor activator for nuclear kappa bone metastatic disease Submitted N/A N/A
(RANK) ligand human monoclonal antibody
Arzerra† anti-CD20 human monoclonal antibody chronic lymphocytic leukaemia (refractory patients) Approved A: Apr10 A: Oct09
Prolia† anti-RANK ligand human monoclonal antibody hormone ablative/chemotherapy bone loss in prostate Approved N/A N/A
cancer patients
Prolia† anti-RANK ligand human monoclonal antibody postmenopausal osteoporosis Approved A: May10 N/A
Cardiovascular & Metabolic

1614235† sodium dependent glucose transport (SGLT1) type 2 diabetes I
inhibitor
2245840 SIRT1 activator sarcopaenia (also COPD & psoriasis) I
256073 high affinity nicotinic acid receptor (HM74A) metabolic disorders II
agonist
557296 oxytocin antagonist premature ejaculation II
1278863 prolyl hydroxylase inhibitor anaemia associated with chronic renal disease II
1278863 prolyl hydroxylase inhibitor peripheral arterial disease II
1292263 G-protein coupled receptor 119 (GRP119) metabolic disorders II
agonist
1521498 mu-opioid receptor inverse agonist compulsive eating disorders II
2245840 SIRT1 activator type 2 diabetes (also COPD & psoriasis) II
losmapimod p38 kinase inhibitor cardiovascular disease (also COPD & pain) II
retosiban oxytocin antagonist threatened pre-term labour II
rilapladib† Lp-PLA2 inhibitor atherosclerosis II
darapladib† Lp-PLA2 inhibitor atherosclerosis III
Arixtra synthetic factor Xa inhibitor treatment of acute coronary syndrome Approved A: Aug07 AL: Feb07
& Sep07

204
Achieved Regulatory
review milestones
Infectious Diseases
2251052† leucyl t-RNA synthetase inhibitor (oral & i.v.) bacterial infections I
2336805 hepatitis C virus inhibitor hepatitis C I
2485852 hepatitis C virus inhibitor hepatitis C I
1322322 polypeptide deformylase inhibitor bacterial infections II
tafenoquine† 8-aminoquinoline Plasmodium vivax malaria II
Relenza† neuraminidase inhibitor (i.v.) influenza III
Neurosciences
2018682 sphingosine-1-phosphate receptor 1 (S1P1) multiple sclerosis I
agonist
239512 histamine H3 antagonist dementia & schizophrenia II
649868† orexin antagonist sleep disorders II
742457 5HT6 antagonist dementia II
firategrast† dual alpha4 integrin antagonist (VLA4) multiple sclerosis II
Horizant† voltage-gated calcium channel modulator post-herpetic neuralgia II N/A
losmapimod p38 kinase inhibitor pain (also cardiovascular disease & COPD) II
orvepitant NK1 antagonist depression & anxiety II
IPX066† dopamine precursor + DOPA decarboxylase Parkinson’s disease III N/A
inhibitor
Horizant† voltage-gated calcium channel modulator restless legs syndrome Submitted S: Sep08,
Jan09 &
Oct10
Trobalt/Potiga neuronal potassium channel opener epilepsy - partial seizures Submitted PO: Jan11 CR: Nov10
(retigabine/ezogabine)†
Oncology
2110183 AKT protein kinase inhibitor cancer I
2126458 Pi3 kinase inhibitor cancer I
2141795 AKT protein kinase inhibitor cancer I
2256098 focal adhesion kinase inhibitor cancer I
vestipitant NK1 antagonist (i.v.) post operative nausea & vomiting I
1120212† + BKM120 mitogen-activated protein kinase inhibitor cancer I
(MEK1/2) + Pi3 alpha kinase inhibitor
1120212† MEK1/2 inhibitor pancreatic cancer II
1120212† +2118436 MEK1/2 inhibitor + BRaf protein kinase inhibitor metastatic melanoma II
2285921† thrombopoietin receptor agonist thrombocytopaenia II
foretinib† mesenchymal-epithelial transition factor papillary renal cell carcinoma and other cancers II
(C-met) kinase inhibitor
Revolade/Promacta† thrombopoietin receptor agonist oncology-related thrombocytopaenia II
1120212† MEK1/2 inhibitor metastatic melanoma III
2118436 BRaf protein kinase inhibitor metastatic melanoma III
Votrient multi-kinase angiogenesis inhibitor ovarian cancer, maintenance therapy III
Revolade/Promacta† thrombopoietin receptor agonist chronic liver disease induced thrombocytopaenia III
Revolade/Promacta† thrombopoietin receptor agonist hepatitis C induced thrombocytopaenia III
Tyverb/Tykerb Her2 and EGFR dual kinase inhibitor breast cancer, adjuvant therapy III
Tyverb/Tykerb Her2 and EGFR dual kinase inhibitor gastric cancer III
Tyverb/Tykerb Her2 and EGFR dual kinase inhibitor head & neck squamous cell carcinoma (resectable disease) III
Votrient multi-kinase angiogenesis inhibitor renal cell cancer, adjuvant therapy III
Votrient multi-kinase angiogenesis inhibitor sarcoma III
Votrient + Tyverb/Tykerb multi-kinase angiogenesis inhibitor + inflammatory breast cancer III
Her2 and EGFR dual kinase inhibitor
Avodart 5-alpha reductase inhibitor reduction in the risk of prostate cancer Submitted S: Sep09 & CR: Jan11
Mar10
Duodart/Jalyn 5-alpha reductase inhibitor + alpha blocker benign prostatic hyperplasia - fixed dose combination Approved A: Mar10 A: Jun10
Revolade/Promacta† thrombopoietin receptor agonist idiopathic thrombocytopaenic purpura Approved A: Mar10 A: Nov08
Tyverb/Tykerb Her2 and EGFR dual kinase inhibitor breast cancer, first line therapy Approved A: Jun10 A: Jan10
Votrient multi-kinase angiogenesis inhibitor renal cell cancer Approved A: Jun10 A:Oct09
Ophthalmology
pazopanib multi-kinase angiogenesis inhibitor (oral) age-related macular degeneration (also cancer indications) I
pazopanib multi-kinase angiogenesis inhibitor (eye drops) age-related macular degeneration II

205
Achieved Regulatory

review milestones
Respiratory & Immuno-inflammation

610677 p38 kinase inhibitor (inhaled) COPD I
705498 transient receptor potential vanilloid (TRPV1) pruritis I
antagonist (topical)
1322888 motilin receptor agonist delayed gastric emptying I
1325756 chemokine receptor (CXCR2) antagonist COPD I
1440115 urotensin antagonist asthma I
2245840 SIRT1 activator COPD (also type 2 diabetes & sarcopaenia) I
2245840 SIRT1 activator psoriasis (also type 2 diabetes & sarcopaenia) II
256066 PDE4 inhibitor (inhaled) COPD II
656933 chemokine receptor (CXCR2) antagonist cystic fibrosis II
685698 glucocorticoid agonist asthma II
681323 p38 kinase inhibitor (i.v.) acute lung injury & acute respiratory distress syndrome II
705498 transient receptor potential vanilloid (TRPV1) non-allergic rhinitis II
antagonist (intranasal)
870086 novel glucocorticoid agonist (inhaled) asthma II

870086 novel glucocorticoid agonist (topical) atopic dermatitis II
961081† muscarinic antagonist, beta2 agonist COPD II
962040 motilin receptor agonist delayed gastric emptying II
1399686 anti-inflammatory macrolide conjugate (oral) inflammatory bowel disease II
2190915† 5-lipoxygenase-activating protein (FLAP) asthma II
inhibitor
losmapimod p38 kinase inhibitor (oral) COPD (also cardiovascular disease & pain) II
573719 muscarinic acetylcholine antagonist COPD III
573719 + vilanterol muscarinic acetylcholine antagonist + COPD III
(642444)† long-acting beta2 agonist
vilanterol (642444)† long-acting beta2 agonist COPD III
1605786 (CCX282)† CCR9 antagonist Crohn’s disease III
Relovair
(vilanterol† + 685698) long-acting beta2 agonist + asthma III
glucocorticoid agonist
Relovair
(vilanterol† + 685698) long-acting beta2 agonist + COPD III
glucocorticoid agonist

Paediatric Vaccines
Heptavalent combination conjugated Neisseria meningitis C, Haemophilus influenzae type b, II
vaccine diphtheria, Hepatitis B, tetanus, pertussis and poliomyelitis
disease prophylaxis
MMR live attenuated measles, mumps, rubella prophylaxis II (USA) A: Oct03
S. pneumoniae paediatric recombinant – conjugated Streptococcus pneumoniae disease prophylaxis II
next generation
Mosquirix recombinant malaria prophylaxis (Plasmodium falciparum) III N/A
Nimenrix (MenACWY-TT) conjugated Neisseria meningitis groups A, C, W & Y disease prophylaxis Submitted
MenHibrix conjugated Neisseria meningitis groups C & Y & Haemophilus influenzae Submitted N/A CR: Jun10
(Hib-MenCY-TT) type b disease prophylaxis
Other Vaccines
Flu pandemic† cell-culture based H5N1 vaccine pandemic influenza prophylaxis I
HIV recombinant HIV disease prophylaxis I
HIV recombinant HIV disease immunotherapy II
Tuberculosis recombinant tuberculosis prophylaxis II
Flu vaccine inactivated split – quadrivalent seasonal influenza prophylaxis III
Zoster recombinant Herpes Zoster prevention III

Flu (pre-) pandemic H5N1 inactivated split – monovalent (Quebec) pre-pandemic & pandemic influenza prophylaxis Submitted N/A S:Jun09
(Canada)
Pumarix H5N1 inactivated split – monovalent (Quebec) pandemic influenza prophylaxis Submitted PO: Nov10 N/A

206
Achieved Regulatory
review milestones
Antigen Specific Cancer Immunotherapeutic (ASCI)

PRAME recombinant treatment of metastatic melanoma I
PRAME recombinant treatment of resectable non-small cell lung cancer I
NY-ESO-1 recombinant treatment of metastatic melanoma I
WT1 recombinant treatment of acute myelogenous leukaemia II
MAGE-A3 recombinant treatment of melanoma III
MAGE-A3 recombinant treatment of non-small cell lung cancer III
Rare Diseases
2402968† antisense oligonucleotide Duchenne muscular dystrophy III
2696273† ex-vivo stem cell gene therapy adenosine deaminase severe combined immune deficiency III
(ADA-SCID)
migalastat HCl† pharmacological chaperone Fabry disease III
Stiefel (late stage assets only)

tazarotene foam retinoid foam acne vulgaris III
Duac low dose clindamycin/benzoyl peroxide gel acne vulgaris Submitted S: Nov10
Sorilux vitamin D3 analog mild to moderate plaque psoriasis Approved A: Oct10
(calcipotriene foam)
itraconazole tablets oral anti-fungal onychomycosis Approved A: Apr10
Veltin antibiotic/retinoid gel acne vulgaris Approved A: Jul10
HIV (ViiV Healthcare)

1265744† HIV integrase inhibitor (long-acting formulation) HIV infections I
2248761† non-nucleoside reverse transcriptase inhibitor HIV infections II
PF-232798 CCR5 antagonist HIV infections II
UK-453061 non-nucleoside reverse transcriptase inhibitor HIV infections II
1349572† HIV integrase inhibitor HIV infections III
1349572† + abacavir HIV integrase inhibitor + reverse transcriptase HIV infections III
sulphate + lamivudine inhibitors (fixed dose combination)
Option-based alliances with third parties that include assets in Phase I or later development:
Company Disease Area Phase

Cancer Research UK cancer I
ChemoCentryx inflammatory disease I* & II
Galapagos autoimmune disease I*
OncoMed Pharmaceuticals oncology I*
Prosensa Therapeutics neuroscience I
Ranbaxy Laboratories respiratory I
Theravance pain I
Telethon Institute for Gene Therapy stem cell gene therapy I & II
Affiris Alzheimer’s disease treatment vaccine II
Nabi nicotine vaccine III
* Two assets

207
The Ordinary Shares of the company are listed on the London Stock Dividends per ADS

Exchange and on the New York Stock Exchange (NYSE) in the form The table below sets out the dividends per ADS in US dollars in
of American Depositary Shares (ADS). For details of listed debt and the last five years, translated into US dollars at applicable
where it is listed refer to Note 32, ‘Net debt’. exchange rates.
Share price Year US$
2010 2009 2008 2010 2.04

£ £ £ 2009 1.93
At 1st January 13.20 12.85 12.79 2008 2.01
High during the year 13.40 13.34 13.85 2007 2.14
Low during the year 10.95 9.87 9.95 2006 1.80
At 31st December 12.40 13.20 12.85
Increase/(decrease) (6.1%) 2.7% 0.5% pence US$
70 3.5
The table above sets out the middle market closing prices. The
60 3.0
company’s share price decreased by 6.1% in 2010. This compares
50 2.5
with an increase in the FTSE 100 index by 9% during the year.

The share price on 24th February 2011 was £11.78. 40 2.0
30 1.5
£ US$
15 60 20 1.0
14 55 10 0.5
13 50 0 0
12 45 2006 2007 2008 2009 2010
11 40
10 35
UK dividends per share US dividends per ADS
9 30 Dividend calendar
8 25 Quarter Ex-dividend date Record date Payment date
01/01/08 31/12/08 31/12/09 31/12/10
Q4 2010 9th February 2011 11th February 2011 7th April 2011
UK share price US ADR price (US$) Q1 2011 4th May 2011 6th May 2011 7th July 2011
Q2 2011 3rd August 2011 5th August 2011 6th October 2011
Market capitalisation

Q3 2011 2nd November 2011 4th November 2011 5th January 2012
The market capitalisation, based on shares in issue excluding
Treasury shares, of GlaxoSmithKline at 31st December 2010 was
£64 billion. At that date GSK was the sixth largest company by Financial reporting calendar
market capitalisation on the FTSE index.
Publication Date
SmithKline Beecham plc Floating Rate Results announcements

Unsecured Loan Stock 1990/2010 Quarter 1 April 2011
Quarter 2 July 2011
The Loan Stock, which was not listed on any exchange, was
Quarter 3 October 2011
redeemed in its entirety at par, i.e. £1 for every £1 of loan stock
Preliminary/Quarter 4 February 2012
held, on 1st June 2010.
Annual Report/Summary February/March 2012
Dividends
GSK pays dividends quarterly. It continues to increase cash returns Results announcements
to shareholders through its dividend policy. Dividends remain Results announcements are issued to the London Stock Exchange
an essential component of total shareholder return and GSK is and are available on its news service. Shortly afterwards, they are
committed to increasing its dividend over the long-term. Details issued to the media, are made available on the website and sent
of the dividends declared, the amount and the payment dates to the US Securities and Exchange Commission and the NYSE.
are given in Note 16 to the financial statements, ‘Dividends’.
Financial reports
Dividends per share
GSK publishes an Annual Report and for the shareholder not needing
The table below sets out the dividends per share in the last five years. the full detail of the Report, a Summary document. These are
Year pence available from the date of publication on the website. The Summary
is sent to all shareholders. Shareholders may elect to receive the
2010 65 Annual Report by writing to the registrars. Alternatively shareholders
2009 61 may elect to receive notification by email of the publication of
2008 57 financial reports by registering on www.shareview.co.uk.
2007 53
2006 48 Copies of previous financial reports are available on GSK’s website.
Printed copies can be obtained from the registrars in the UK and
from the GSK Response Center in the USA.

208
Corporate Responsibility Report Internet

We will publish our 2010 Corporate Responsibilty Report Information about the company including details of the share
online on 21st March 2011. This will outline GSK’s approach price is available on GSK’s website at www.gsk.com. Information
and performance on responsibility areas including access made available on the website does not constitute part of this
to medicines, research and business ethics, environmental Annual Report.
sustainability and community investment.
Annual General Meeting 2011
Nature of trading market
The following tables set out, for the periods indicated, the high The Queen Elizabeth II Conference Centre, 5th May 2011
and low middle market closing quotations in pence for the shares Broad Sanctuary, Westminster,
on the London Stock Exchange, and the high and low last reported London SW1P 3EE
sales prices in US dollars for the ADS on the NYSE.
The AGM is the company’s principal forum for communication
Pence per share with private shareholders. In addition to the formal business
High Low there will be a presentation by the Chief Executive Officer on the
Quarter ended 31st March 2011* 1270 1128 performance of the Group and its future development. There will
February 2011* 1200 1128 be opportunity for questions to the Board, and the Chairmen of
January 2011 1270 1129 the Board’s Committees will take questions on matters relating to
those committees.
December 2010 1277 1231
November 2010 1262 1212 Investors holding shares through a nominee service should
October 2010 1319 1221 arrange with that nominee service to be appointed as a corporate
September 2010 1290 1249 representative or proxy in respect of their shareholding in order to
Quarter ended 31st December 2010 1319 1212 attend and vote at the meeting.
Quarter ended 30th September 2010 1290 1095
ADR holders wishing to attend the meeting must obtain a proxy
Quarter ended 30th June 2010 1281 1119 from The Bank of New York Mellon which will enable them to
Quarter ended 31st March 2010 1340 1196 attend and vote on the business to be transacted. ADR holders may
Quarter ended 31st December 2009 1334 1219 instruct The Bank of New York Mellon as to the way in which the
Quarter ended 30th September 2009 1252 1063 shares represented by their ADR should be voted by completing
Quarter ended 30th June 2009 1117 987 and returning the voting card provided by the bank in accordance
Quarter ended 31st March 2009 1305 1003 with the instructions given.
Year ended 31st December 2008 1385 995
Year ended 31st December 2007 1493 1160 Documents on display
Year ended 31st December 2006 1577 1326 The Articles of Association of the company and other
documents referred to in this Annual Report are available for
US dollars per ADS inspection at the Registered Office of the company.
High Low
Quarter ended 31st March 2011* 39.86 36.33

Exchange controls and other limitations
February 2011* 39.15 36.98 affecting security holders
January 2011 39.86 36.33 There are currently no UK laws, decrees or regulations restricting
December 2010 40.04 38.66 the import or export of capital or affecting the remittance of
November 2010 40.85 38.28 dividends or other payments to holders of the company’s shares
October 2010 41.86 39.04 who are non-residents of the UK. There are no limitations relating
September 2010 40.47 38.78 only to non-residents of the UK under English law or the company’s
Quarter ended 31st December 2010 41.86 38.28 Articles of Association on the right to be a holder of, and to vote in
Quarter ended 30th September 2010 40.47 33.78 respect of, the company’s shares.
Quarter ended 30th June 2010 39.57 32.34
Quarter ended 31st March 2010 42.97 37.03

Duplicate publications
Quarter ended 31st December 2009 42.91 38.72 Queries relating to receipt of duplicate copies of GSK’s publications
Quarter ended 30th September 2009 40.03 34.36 should be addressed to the registrars.
Quarter ended 30th June 2009 36.56 29.11
Quarter ended 31st March 2009 39.24 27.27 Investor relations
Year ended 31st December 2008 54.36 32.02 Investor relations may be contacted as follows:
Year ended 31st December 2007 59.35 47.87
UK
Year ended 31st December 2006 58.38 50.15
980 Great West Road, Brentford, Middlesex TW8 9GS
* to 24th February 2011 Tel: +44 (0)20 8047 5000
USA
Taxation
One Franklin Plaza, PO Box 7929, Philadelphia PA 19101
General information concerning the UK and US tax effects of
Tel: 1 888 825 5249 (US toll free)
share ownership is set out on page 210 ‘Taxation information
for shareholders’. Tel: +1 215 751 4000 (outside the USA)

209
Registrar Glaxo Wellcome and SmithKline Beecham

The company’s registrars are: Corporate PEPs
Equiniti Limited The Share Centre Limited
Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA Oxford House, Oxford Road, Aylesbury, Bucks HP21 8SZ
www.shareview.co.uk Tel: +44 (0)1296 414141
Tel: 0871 384 2991 (inside the UK) ADR programme administrator
Tel: +44 (0)121 415 7067 (outside the UK)
The ADR programme is administered by:
Lines are open from 8.30am to 5.30pm, Monday to Friday. BNY Mellon Shareowner Services
Equiniti also provides the following services: PO Box 358516
Pittsburgh, PA 15252-8516
s.OMINEEDEALINGACCOUNTAND)NDIVIDUAL3AVINGS!CCOUNT)3! www.bnymellon.com/shareowner
s'LAXO3MITH+LINE#ORPORATE3PONSORED.OMINEE Tel: 1 877 353 1154 (US toll free)
s3HAREVIEWSERVICE Tel: +1 201 680 6825 (outside the USA)
email: [email protected]
s3HAREDEALINGSERVICE

s$IVIDEND2EINVESTMENT0LAN The administrators also provide Global BuyDIRECT, a direct ADS
purchase/sale and dividend reinvestment plan for ADR holders.
Share dealing service GSK Response Center
Shareholders may trade shares, either held in certificates or in
Tel: 1 888 825 5249 (US toll free)
the Corporate Sponsored Nominee by internet or telephone
through Shareview Dealing, a share dealing service provided by The provision of the details above is not intended to be an
Equiniti Financial Services Limited. For internet deals log on to invitation or inducement to engage in an investment activity.
www.shareview.co.uk/dealing. For telephone deals call Advice on share dealing should be obtained from a stockbroker
08456 037 037 (inside the UK only). or independent financial adviser.
For the Investment Account and ISA service, either
www.shareview.co.uk/dealing or call 0845 300 0430.
Telephone services are available between 8.00am to 6.00pm,
Monday to Friday (market trading hours 8.00am to 4.30pm).

Analysis of shareholdings at 31st December 2010
Number of % of total % of total Number of
accounts accounts shares shares
Holding of shares
Up to 1,000 112,292 71 1 41,170,410
1,001 to 5,000 35,996 23 1 77,156,810
5,001 to 100,000 8,144 5 2 117,679,956
100,001 to 1,000,000 827 1 5 302,361,401
Over 1,000,000 411 – 91 5,132,089,600
157,670 100 100 5,670,458,177
Held by
Nominee companies 28,100 18 74 4,195,447,676
Investment and trust companies 39 – – 1,626,510
Insurance companies 8 – – 4,834

Individuals and other corporate bodies 129,521 82 5 252,304,068
BNY (Nominees) Limited 1 – 13 746,880,931
Held as Treasury shares by GlaxoSmithKline 1 – 8 474,194,158
157,670 100 100 5,670,458,177
The Bank of New York Mellon’s holding held through BNY (Nominees) Limited represents the company’s ADR programme, whereby
each ADS represents two Ordinary Shares of 25p nominal value. At 24th February 2011, BNY (Nominees) Limited held 752,137,377
Ordinary Shares representing 14.50% of the issued share capital excluding Treasury shares at that date.
At 24th February 2011, the number of holders of shares in the USA was 1,118 with holdings of 1,314,614 shares, and the number of
registered holders of the ADR was 32,203 with holdings of 376,067,688 ADR. Certain of these shares and ADR were held by brokers
or other nominees. As a result the number of holders of record or registered holders in the USA is not representative of the number of
beneficial holders or of the residence of beneficial holders.

210
Taxation information for shareholders

A summary of certain UK tax and US federal income tax US shareholders
consequences for certain holders of shares and ADR who are citizens This summary only applies to a shareholder (a citizen or resident of
of the UK or the USA is set out below. It is not a complete analysis the USA or a domestic corporation or a person that is otherwise
of all the possible tax consequences of the purchase or ownership subject to US federal income tax on a net income basis in respect
of these securities. It is intended only as a general guide. Holders are of the shares or ADR) that holds shares or ADR as capital assets, is
advised to consult their advisers with respect to the tax consequences not resident in the UK for UK tax purposes and does not hold shares
of the purchase and ownership of their shares or ADR, and the for the purposes of a trade, profession or vocation that is carried
consequences under state and local tax laws in the USA and the on in the UK through a branch or agency. The summary also does
implications of the current UK/US Income Tax convention. not address the tax treatment of holders that are subject to special
US holders of ADR generally will be treated as the owners of the tax rules, such as banks, tax-exempt entities, insurance companies,
underlying shares for the purposes of the current USA/UK double dealers in securities or currencies, persons that hold shares or ADR as
taxation conventions relating to income and gains (Income Tax part of an integrated investment (including a ‘straddle’) comprised
Convention), estate and gift taxes (Estate and Gift Tax Convention) of a share or ADR and one or more other positions, and persons that
and for the purposes of the US Internal Revenue Code of 1986, as own (directly or indirectly) 10% or more of the voting stock of GSK.
amended (the Code). Taxation of dividends
UK shareholders The gross amount of dividends received is treated as foreign source
dividend income for US tax purposes. It is not eligible for the dividend
This summary only applies to a UK resident shareholder that holds received deduction allowed to US corporations. Dividends on ADR
shares as capital assets. are payable in US dollars; dividends on shares are payable in Sterling.
Taxation of dividends Dividends paid in pounds Sterling will be included in income in the
UK resident individual shareholders will generally be subject to UK US dollar amount calculated by reference to the exchange rate on
income tax on the full amount of dividends paid, grossed up for the the day the dividends are received by the holder. Subject to certain
amount of a one ninth dividend tax credit. The tax credit may be exceptions for short-term or hedged positions, an individual eligible
set against the individual’s income tax liability in respect of the gross US holder will be subject to US taxation at a maximum rate of 15%
dividend, but is not repayable to shareholders with a tax liability of in respect of qualified dividends received before 2013.
less than the associated tax credit. For the tax year 2010-11 and Taxation of capital gains
subsequent tax years, an additional rate of income tax on dividends Generally, US holders will not be subject to UK capital gains tax,
is imposed for taxpayers whose income is above £150,000. UK but will be subject to US tax on capital gains realised on the sale
resident shareholders that are corporation taxpayers should note or other disposal of shares or ADR. Such gains will be long-term
that dividends are generally entitled to exemption from corporation capital gains (subject to reduced rates of taxation for individual
tax. If shareholders are in any doubt as to their position, they holders) if the shares or ADR were held for more than one year.
should consult their own professional advisers.
Information reporting and backup withholding
Taxation of capital gains
Dividends and payments of the proceeds on a sale of shares or
UK shareholders may be liable for UK tax on gains on the disposal ADR, paid within the USA or through certain US-related financial
of shares or ADR. For disposals by individuals and subject to the intermediaries are subject to information reporting and may be
availability of any exemption or relief such as the annual exempt subject to backup withholding unless the US holder is a corporation
amount, a taxable capital gain accruing on a disposal of shares or or other exempt recipient or provides a taxpayer identification
ADR will be taxed at 28% if, after all allowable deductions, such number and certifies that no loss of exemption has occurred.
shareholder’s taxable income for the tax year exceeds the basic rate Non-US holders generally are not subject to information reporting or
income tax limit. In other cases, a taxable capital gain accruing on backup withholding, but may be required to provide a certification
a disposal of shares or ADR may be taxed at 18% or 28% or at a of their non-US status in connection with payments received. Any
combination of both rates. Corporation taxpayers may be entitled amounts withheld will be allowed as a refund or credit against
to an indexation allowance which applies to reduce capital gains a holder’s US federal income tax liability provided the required
to the extent that such gains arise due to inflation. Indexation information is furnished to the IRS.
allowance may reduce a chargeable gain but will not create an
allowable loss. Estate and gift taxes
Under the Estate and Gift Tax Convention, a US shareholder is not

Inheritance tax
generally subject to UK inheritance tax.
Individual shareholders may be liable to inheritance tax on the
transfer of shares or ADR. Tax may be charged on the amount by Stamp duty
which the value of the shareholder’s estate is reduced as a result UK stamp duty or SDRT will, subject to certain exemptions,
of any transfer by way of gift or other disposal at less than full be payable on any issue or transfer of shares to the ADR custodian
market value. or depository at a rate of 1.5% of their price (if issued), the amount
of any consideration provided (if transferred on sale), or their value
If such a gift or other disposal were subject to both UK inheritance
(if transferred for no consideration).
tax and US estate or gift tax, the Estate and Gift Tax Convention
would generally provide for tax paid in the USA to be credited No SDRT would be payable on the transfer of, or agreement to
against tax payable in the UK. transfer an ADR. No UK stamp duty should be payable on the transfer
of an ADR provided that any instrument of transfer is executed and
Stamp duty
remains at all times outside the UK. Any stamp duty on the transfer of
UK stamp duty or stamp duty reserve tax (SDRT) will, subject to an ADR would be payable at a rate of 0.5% of the consideration for
certain exemptions, be payable on the transfer of shares at a rate the transfer. Any sale of the underlying shares would, subject to certain
of 0.5% of the consideration for the transfer. exceptions, result in liability to UK stamp duty or, as the case may be,
SDRT at a rate of 0.5%.
211
Glossary of terms
Terms used in the Annual Report US equivalent or brief description

Accelerated capital allowances Tax allowance in excess of depreciation arising from the purchase of fixed assets that delay
the charging and payment of tax. The US equivalent of tax depreciation.
American Depositary Receipt (ADR) Receipt evidencing title to an ADS. Each GlaxoSmithKline ADR represents two
Ordinary Shares.
American Depositary Shares (ADS) Listed on the New York Stock Exchange; represents two Ordinary Shares.
Basic earnings per share Basic income per share.
Called-up share capital Ordinary Shares, issued and fully paid.
CER growth Growth at constant exchange rates.
Combined Code Guidelines required by the Listing Rules of the Financial Services Authority to address the
principal aspects of Corporate Governance.

The company GlaxoSmithKline plc.
Currency swap An exchange of two currencies, coupled with a subsequent re-exchange of those currencies,
at agreed exchange rates and dates.
Defined benefit plan Pension plan with specific employee benefits, often called ‘final salary scheme’.
Defined contribution plan Pension plan with specific contributions and a level of pension dependent upon the growth
of the pension fund.
Derivative financial instrument A financial instrument that derives its value from the price or rate of some underlying item.
Diluted earnings per share Diluted income per share.
Employee Share Ownership Plan Trusts Trusts established by the Group to satisfy share-based employee incentive plans.

Finance lease Capital lease.
Freehold Ownership with absolute rights in perpetuity.
Gearing ratio Net debt as a percentage of total equity.
The Group GlaxoSmithKline plc and its subsidiary undertakings.
Hedging The reduction of risk, normally in relation to foreign currency or interest rate movements,
by making off-setting commitments.
Intangible fixed assets Assets without physical substance, such as computer software, brands, licences, patents,
know-how and marketing rights purchased from outside parties.
Profit Income.
Profit attributable to shareholders Net income.

Share capital Ordinary Shares, capital stock or common stock issued and fully paid.
Shareholders’ funds Shareholders’ equity.
Share option Stock option.
Share premium account Additional paid-up capital or paid-in surplus (not distributable).
Shares in issue The number of shares outstanding.
Subsidiary An entity in which GlaxoSmithKline holds a majority shareholding and/or exercises control.
Treasury share Treasury stock.
Turnover Revenue.

212
Index
Page Page
2010 Performance overview 08 Inventories 138

Accounting principles and policies 110 Investments in associates and joint ventures 137
Acquisitions and disposals 155 Investor relations 208
Adjustments reconciling profit after tax to operating cash flows 154 Key accounting judgements and estimates 114
Annual General Meeting 71,208 Key performance indicators 09
Annual remuneration 94 Legal proceedings 178
Assets held for sale 139 Major restructuring programmes 121
Associates and joint ventures 126 Manufacturing and supply 19
Board 58 Movements in equity 153
Business review 07 Nature of trading market 208
Cash and cash equivalents 139 Net debt 150
Chairman and CEO summary 04 New accounting requirements 116
Combined Code 63 Non-Executive Director terms and conditions 92
Commitments 161 Non-Executive Directors’ remuneration 95
Committee reports 74 Notes to the financial statements 109
Competition 14 Operating profit 124
Consolidated balance sheet 106 Other intangible assets 135
Consolidated cash flow statement 108 Other investments 138
Consolidated income statement 104 Other non-current assets 138
Consolidated statement of changes in equity 107 Other non-current liabilities 150
Consolidated statement of comprehensive income 104 Other operating income 123
Consumer Healthcare 11,17,18,19,27,36,49,199 Other provisions 148
Contingent liabilities 31 Outlook 07
Corporate Executive Team 60 Pensions and other post-employment benefits 140
Corporate governance 58 Pharmaceutical turnover 34
Critical accounting policies 40 Post balance sheet events 161
Dialogue with shareholders 69 Presentation of the financial statements 109
Directors and Senior Management 101 Price controls 18
Directors’ interests 96 Principal Group companies 175
Directors’ interests in contracts 101 Product development pipeline 203
Directors’ statement of responsibilities 102 Products 14
Dividends 130 Property, plant and equipment 130
Donations to political organisations and Quarterly trend 192
political expenditure 70 Reconciliation of net cash flow to movement in net debt 155
Earnings per share 129 Registrar 209
Employee costs 125 Regulation 18
Employee share schemes 171 Related party transactions 154
Employees 33 Remuneration policy 84
Exchange rates 116 Remuneration Report 81
Executive Director terms and conditions 91 Research and development 10
Finance costs 126 Responsible business 29
Finance income 125 Risk factors 53
Financial instruments and related disclosures 162 Segment information 117
Financial position and resources 41 Segment reviews 22
Financial review 2010 34 Share capital and control 69
Financial review 2009 47 Share capital and share premium account 152
Financial statements of GlaxoSmithKline plc, prepared Share options 97
under UK GAAP 186 Share price and dividends 207

Five year record 200 Shareholder information 192
Foreign exchange management 46 Strategy 07
Glossary of terms 211 Taxation 127
Goodwill 132 Taxation information for shareholders 210
Governance and policy 64 Total equity 42
Improving access to medicines 30 Trade and other payables 140
Incentive plans 87 Trade and other receivables 139
Independent Auditors’ report 103 Trademarks 16
Intellectual property 14 Treasury operations 46
Interest rate risk management 46 US law and regulation 78
Internal control framework 71 World market 20

History and development of the company
GlaxoSmithKline plc is a public limited company incorporated on 6th December 1999 under English law. Its shares are listed on the
London Stock Exchange and the New York Stock Exchange. On 27th December 2000 the company acquired Glaxo Wellcome plc
and SmithKline Beecham plc, both English public limited companies, by way of a scheme of arrangement for the merger of the two
companies. GSK and its subsidiaries and associates constitute a major global healthcare group engaged in the creation, discovery,
development, manufacture and marketing of pharmaceutical and consumer health-related products.
Annual Report and Summary

This report is the Annual Report of GlaxoSmithKline plc for the year ended 31st December 2010, prepared in accordance with United
Kingdom requirements. It was approved by the Board of Directors on 1st March 2011 and published on 2nd March 2011.
A summary of the year, intended for the shareholder not needing the full detail of the Annual Report, is produced as a separate document
and issued to all shareholders. The summary does not constitute a set of summary financial statements as defined by section 428 of the
Companies Act 2006. The Annual Report is issued to shareholders who have elected to receive it. Both documents are available on
GSK’s website.
In this Report ‘GlaxoSmithKline’, the ‘Group’ or ‘GSK’ means GlaxoSmithKline plc and its subsidiaries; the ‘company’ means
GlaxoSmithKline plc; ‘GlaxoSmithKline share’ means an Ordinary Share of GlaxoSmithKline plc of 25p; American Depositary Shares (ADS)
each represent two GlaxoSmithKline shares.
Governnce and remuneration 0sn0s
Brand names
Brand names appearing in italics throughout this report are trademarks either owned by and/or licensed to GlaxoSmithKline or associated
companies, with the exception of Benlysta, a trademark of Human Genome Science, Boniva/Bonviva, a trademark of Roche, Botox, a
trademark of Allergan, Levitra, a trademark of Bayer, NicoDerm, a trademark of Elan, Johnson & Johnson, Merrell, Novartis, Sanofi-Aventis
or GlaxoSmithKline, Potiga, a trademark of Valeant, Prolia, a trademark of Amgen, Vesicare, a trademark of Astellas Pharmaceuticals
in many countries and of Yamanouchi Pharmaceuticals in certain countries and Volibris, a trademark of Gilead, all of which are used in
certain countries under licence by the Group.
Exchange rates
The Group operates in many countries and earns revenues and incurs costs in many currencies. The results of the Group, as reported in
Sterling, are affected by movements in exchange rates between Sterling and other currencies. Average exchange rates prevailing during
the period are used to translate the results and cash flows of overseas subsidiaries, associates and joint ventures into Sterling. Period end

rates are used to translate the net assets of those entities.
The currencies that most influence the Group’s results remain the US dollar, the Euro, the Yen and Sterling. Details of the exchange rates
used by the Group are given in Note 5 ‘Exchange Rates’ on page 116.
During 2010, average Sterling exchange rates were stronger against the Euro but weaker against the US dollar and the Yen compared
with 2009. Year end Sterling exchange rates were also stronger against the Euro but weaker against the US dollar and the Yen.

We have chosen ten Andrew Witty introduction
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case studies from 2010 to running our business responsibly.
that demonstrate the
progress we have made
against our strategic
priorities. Each of these
stories may be viewed
online at:
www.gsk.com/
corporatereporting
Case studies
Here you will find downloadable pdfs:
Delivering the next generation of medicines
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Maintaining our leadership position in respiratory
Web information on:
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sLINKTO#ORPORATE2ESPONSIBILITY Investing in nutritional healthcare
2EPORT
Conducting a sophisticated approach to pricing
Strengthening our biopharmaceuticals business
Extending access in the developing world
Growing our global vaccines business
Building our leadership position in dermatology
Evolving the US business model
(EAD/FlCEAND2EGISTERED/FlCE
'LAXO3MITH+LINEPLC Creating a rare diseases unit
'REAT7EST2OAD
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in the production of this document
is made from 100% post consumer
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a totally chlorine free process.

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