GlaxoSmithKline Pharmaceuticals

1.  We have audited the attached Balance Sheet of GlaxoSmithKline
 Pharmaceuticals Limited, as at 31st December, 2008, and the related
 Profit and Loss Account for the year ended on that date annexed thereto
 and the Cash Flow Statement for the year ended on that date, which we
 have signed under reference to this report. These financial statements
 are the responsibility of the companys management. Our responsibility
 is to express an opinion on these financial statements based on our
 audit.
 
 2.  We conducted our audit in accordance with the auditing standards
 generally accepted in India. Those Standards require that we plan and
 perform the audit to obtain reasonable assurance about whether the
 financial statements are free of material misstatement. An audit
 includes examining, on a test basis, evidence supporting the amounts
 and disclosures in the financial statements. An audit also includes
 assessing the accounting principles used and significant estimates made
 by management, as well as evaluating the overall financial statement
 presentation. We believe that our audit provides a reasonable basis for
 our opinion.
 
 3.  As required by the Companies (Auditors Report) Order, 2003 as
 amended by the Companies (Auditors Report) (Amendment) Order, 2004
 (together the Order) issued by the Central Government of India in
 terms of sub-section (4A) of Section 227 of The Companies Act, 1956 of
 India (the Act) and on the basis of such checks of the books and
 records of the company as we considered appropriate and according to
 the information and explanations given to us, we give in the Annexure a
 statement on the matters specified in paragraphs 4 and 5 of the Order.
 
 4.  Further to our comments in the Annexure referred to in paragraph 3
 above, we report that:
 
 (a) We have obtained all the information and explanations, which to the
 best of our knowledge and belief were necessary for the purposes of our
 audit;
 
 (b) In our opinion, proper books of account as required by law have
 been kept by the company so far as appears from our examination of
 those books;
 
 (c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement
 dealt with by this report are in agreement with the books of account;
 
 (d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash
 Flow Statement dealt with by this report comply with the accounting
 standards referred to in sub-section (3C) of Section 211 of the Act;
 
 (e) On the basis of written representations received from the Directors
 of the company, as on 31st December, 2008, and taken on record by the
 Board of Directors of the company, none of the Directors of the company
 is disqualified as on 31st December, 2008 from being appointed as a
 Director in terms of clause (g) of sub-section (1) of Section 274 of
 the Act;
 
 (f) In our opinion and to the best of our information and according to
 the explanations given to us, the said financial statements together
 with the notes thereon and attached thereto give in the prescribed
 manner the information required by the Act and give a true and fair
 view in conformity with the accounting principles generally accepted in
 India:
 
 (i) in the case of the Balance Sheet, of the state of affairs of the
 company as at 31st December, 2008;
 
 (ii) in the case of the Profit and Loss Account, of the profit for the
 year ended on that date; and
 
 (iii) in the case of the Cash Flow Statement, of the cash flows for the
 year ended on that date.
 
 Annexure To Auditors Report
 
 [Referred to in paragraph 3 of the Auditors Report of even date to the
 members of GlaxoSmithKline Pharmaceuticals Limited on the financial
 statements for the year ended 31st December, 2008]
 
 1.  (a) The company has maintained proper records showing full
 particulars including quantitative details and situation of fixed
 assets, other than the situation of furniture and office equipment, for
 which the situation recorded is the location of the companys different
 establishments.
 
 (b) The fixed assets are physically verified by the management
 according to a phased programme designed to cover all the items over a
 period of three years which, in our opinion, is reasonable having
 regard to the size of the company and the nature of its assets.
 Pursuant to the programme, a portion of the fixed assets has been
 physically verified by the management during the year and no material
 discrepancies between the book records and the physical inventory have
 been noticed.
 
 (c) In our opinion, a substantial part of fixed assets has not been
 disposed of by the company during the year.
 
 2.  (a) The inventory, excluding materials in transit, has been
 physically verified by the management during the year. Further, a major
 portion of inventory lying with third parties has been physically
 verified by the management during the year.  In our opinion, the
 frequency of verification is reasonable.
 
 (b) In our opinion, the procedures of physical verification of
 inventory followed by the management are reasonable and adequate in
 relation to the size of the company and the nature of its business.
 
 (c) On the basis of our examination of the inventory records, in our
 opinion, the company is maintaining proper records of inventory. In our
 opinion, the discrepancies noticed on physical verification of
 inventory as compared to the book records were not material and have
 been properly dealt with in the books of account.
 
 3.  (a) The company has not granted any loans, secured or unsecured, to
 companies, firms or other parties covered in the register maintained
 under Section 301 of the Act. Accordingly, clauses (iii)(b) to (iii)(d)
 of paragraph 4 of the Order are not applicable to the company for the
 current year.
 
 (b) The company has not taken any loans, secured or unsecured, from
 companies, firms or other parties covered in the register maintained
 under Section 301 of the Act. Accordingly, clauses (iii)(f) and
 (iii)(g) of paragraph 4 of the Order are not applicable to the company
 for the current year.
 
 4.  In our opinion and according to the information and explanations
 given to us, having regard to the explanation that certain items of
 inventory and fixed assets purchased are of special nature for which
 suitable alternative sources do not exist for obtaining comparative
 quotations, there is an adequate internal control system commensurate
 with the size of the company and the nature of its business for the
 purchase of inventory and fixed assets and for the sale of goods and
 services. Further, on the basis of our examination of the books of
 account and according to the information and explanations given to us,
 we have not come across nor have we been informed of any instance of
 major weaknesses in the aforesaid internal control system.
 
 5.  In our opinion and according to the information and explanations
 given to us, there are no contracts or arrangements referred to in
 Section 301 of the Act during the year that need to be entered in the
 register maintained under that Section.  Accordingly, clause (v)(b) of
 paragraph 4 of the Order is not applicable to the company for the
 current year.
 
 6.  In our opinion, the company has complied with the provisions of
 Sections 58A, 58AA or any other relevant provisions of the Act and the
 Companies (Acceptance of Deposits) Rules, 1975 with regard to the
 deposits accepted from the public which have matured and are remaining
 unpaid as at 31st December, 2008. According to the information and
 explanations given to us, no order has been passed by the Company Law
 Board or National Company Law Tribunal or Reserve Bank of India or any
 Court or any other Tribunal on the company in respect of the aforesaid
 deposits.
 
 7.  In our opinion, the company has an internal audit system
 commensurate with its size and nature of its business.
 
 8.  We have broadly reviewed the books of account maintained by the
 company, pursuant to the Rules made by the Central Government of India
 for the maintenance of cost records, under clause (d) of sub-section
 (1) of Section 209 of the Act and are of the opinion that prima facie,
 the prescribed accounts and records have generally been maintained and
 are under preparation. We have not, however, made a detailed
 examination of the records with a view to determining whether they are
 accurate or complete.
 
 9.  (a) According to the books of account and records as produced and
 examined by us in accordance with the generally accepted auditing
 practices in India, in our opinion, the company is generally regular in
 depositing undisputed statutory dues in respect of provident fund,
 investor education and protection fund, employees state insurance,
 income-tax, sales-tax, wealth tax, service tax, customs duty, excise
 duty, cess and other material statutory dues as applicable with the
 appropriate authorities in India.
 
 (b) According to the books of account and records as produced and
 examined by us in accordance with the generally accepted auditing
 practices in India, there are no dues of customs duty and cess which
 have not been deposited on account of any dispute. The particulars of
 dues of income-tax, wealth tax, sales tax, service tax and excise duty
 as at 31st December, 2008 which have not been deposited on account of a
 dispute, are as follows -
 
 Name of the statute   Nature of dues              Amount*
                                              Rs. in lakhs
 
 The Income-tax        Income-tax                 16,80.11
 Act, 1961             including interest,
                       as applicable
 The Central Sales     Sales tax                  15,94.82
 Tax Act, 1956 and     including interest
 Local Sales           and penalty, as
 Tax Acts              applicable
                                                   8,99.91
 The Finance           Service tax                 2,55.45
 Act, 1994
                                                   1,12.98
 The Central           Excise duty                 1,10.37
 Excise Act, 1944      including interest
                       and penalty, as
                       applicable
                                                   6,48.61
                                                     30.12
 
 Period to which the            Forum where the
 amount relates                 dispute is pending
 
 #Assessment                    Appellate Authority -
 Year 2005-2006                 up to Commissioners
                                level
 Several demands                Appellate Authority -
 pertaining to the              up to Commissioners
 period 1983-1984               level
 to 2007-2008
 Several demands                Tribunal
 pertaining to the period
 1990-1991 to 2003
 January 2001 to                Tribunal
 December 2002
 and May 2006 to
 January 2007
 October 1998 to                The High Court of
 December 2000                  Judicature at Bombay
 Several demands                Appellate Authority - up to
 pertaining to the              Commissioners level
 period March 1992
 to November 2007
 Several demands                Tribunal
 pertaining to the period
 July 1993 to
 January 2007
 1977 to 1980                   The High Court of
                                Judicature at Bombay
 
 * Net of amounts paid under protest or otherwise
 
 * Subsequent to the year end, out of the total dues of Rs. 16,80.11
 lakhs, an amount of Rs. 2,14.53 lakhs has been adjusted by the
 Income-tax authorities against the refund due to the company.
 
 10.  The company has no accumulated losses as at 31st December, 2008
 and has not incurred any cash losses in the financial year ended on
 that date or in the immediately preceding financial year.
 
 11.  According to the books of account and records of the company,
 there has been no default in repayment of dues to any financial
 institution or bank or debenture holders during the year.
 
 12.  The company has not granted any loans and advances on the basis of
 security by way of pledge of shares, debentures and other securities.
 
 13.  The provisions of any special statute applicable to chit
 fund/nidhi/mutual benefit fund/societies are not applicable to the
 company.
 
 14.  In our opinion and according to the information and explanations
 given to us, the company is not a dealer or trader in shares,
 securities, debentures and other investments.
 
 15.  The company has not given any guarantee for loans taken by others
 from banks or financial institutions during the year.
 
 16.  In our opinion, the company has not obtained any term loans that
 were not applied for the purpose for which these were raised.
 
 17.  On the basis of the information and explanations given to us and
 on an overall examination of the Balance Sheet of the company, in our
 opinion, there are no funds raised on a short-term basis which have
 been used for long-term investment.
 
 18.  The company has not made any preferential allotment of shares to
 parties and companies covered in the register maintained under Section
 301 of the Act during the year.
 
 19.  The company has not issued any debentures.
 
 20.  The company has not raised any money by public issue during the
 year.
 
 21.  During the course of our examination of the books of account and
 records of the company, carried out in accordance with the generally
 accepted auditing practices in India, we have not come across any
 instance of fraud on or by the company, noticed or reported during the
 year, nor have we been informed of such case by the management.
 
                                                     K. H. Vachha
                                                          Partner
                                             Membership No. 30798
 
                                             For and on behalf of
                                           Price Waterhouse & Co.
 Mumbai, 18th February, 2009                Chartered Accountants