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Glaxo Wellcome Pakistan Limited

Annual Report 1998

CREATING OUR FUTURE

AMBITION AND PURPOSE

Creating Our Future articulates our vision of where we

are going as a group. We aim to be the best in the

world in our business of fighting disease and improving

health - I am confident that we have the people, the

resources and the commitments to succeed in this.

We must shape our own destiny in a world of rapid

change - building on strengths and seizing new

opportunities. Everybody in the company has a role to

play in these efforts, through their energy, their creativity

and their innovative spirit.

Sir Richard Sykes

Chairman, Glaxo Wellcome plc

CORPORATE MISSION

Glaxo Wellcome Pakistan Limited is a subsidiary of Glaxo

Wellcome plc (a research-based company0 whose people

are committed to fighting disease by bringing innovative

medicines and services to patients in Pakistan and to

the health-care providers who serve them.

The strategic intent of Glaxo Wellcome Pakistan Limited

is to be an ethical, enterprising and aggressive company

seeking long term business opportunities.

KEY DATA

12 Months

December

1998

1997

Rs. in Million

Net Sales

3,295.5

2,595.3

Operating Profit

126.0

265.6

Profit before Taxation and Extraordinary Item

124.0

241.4

Taxation

30.1

66.3

Profit after Taxation and before Extraordinary Item

93.9

175.1

Extraordinary Item - Gain on divestment of

Glaxose-D business (net of tax)

262.9

Net Profit after Tax and Extraordinary Item

356.8

175.1

Dividend - Cash

134.2

117.4

Paid-up Capital

335.5

Shareholders' Equity

1,797.2

1,574.6

CONTENTS

Notice of Meeting

Corporate Information

Directors' Report

Review by the Chairman & Managing Director

Auditors' Report to the Members

Balance Sheet

Profit and Loss Account

Cash Flow Statement

Notes to the Accounts

Ten Years at a Glance

Pattern of Shareholdings

Factories and Distribution/Sales Offices

NOTICE OF MEETING

Notice is hereby given that the FIFTY-SECOND Annual General Meeting of the Shareholders

of the Company will be held at Beach Luxury Hotel, Karachi at 11 a.m. on Wednesday the

5 May 1999 to transact the following business:-

(a) To receive and adopt the Report of the Directors and the Accounts for the year

ended 31 December 1998 and the Auditors' Report thereon;

(b) To approve the payment of salaries and allowances to the Chief Executive and

the Directors as Executives of the Company during the year ended 31 December 1998;

To elect seven Directors of the Company as fixed by the Board for a period of three

years commencing from 7 May 1999 in accordance with the provisions of Section

178(1) of the Companies Ordinance 1984. Retiring Directors are Mr. Alan R Eldridge,

Mr. S Riaz Ahmad, Mr. Masood Ahmed, Dr Muzaffar Iqbal, Mr. Shahid Mustafa Qureshi,

Mr. A U Khawaja and Mr. Rafique Dawood.

To appoint Auditors and fix their remuneration.

By Order of the Board

Karachi

Shahid Mustafa Qureshi

9 April 1999

Director/Secretary

NOTES:

1. The Share Transfer Books of the Company will be closed for the purpose of determining

the entitlement for the payment of Final Dividend from 22 April 1999 to 5 May 1999

(both days inclusive).

2. Article 67 of the Articles of Association of the Company states "No person shall be

eligible for appointment as a Director at any General Meeting, unless not later than

fourteen nor more than twenty-one clear days before the day appointed for the

meeting there shall have been given to the Secretary notice of his intention to offer

himself for election as a Director."

3. A Member entitled to attend and vote at the Meeting may appoint another member

as his/her Proxy to attend, speak and vote at the Meeting on his/her behalf. Instrument

appointing Proxy must be deposited at the Registered office of the Company not less

than 48 hours before the time of the Meeting.

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

address.

CORPORATE INFORMATION

BOARD OF DIRECTORS

Mr. Alan R Eldridge

Chairman & Managin9 Director

Mr. A U Khawaja

Non-Executive Director

Mr. Rafique Dawood

Non-Executive Director

Mr. S Riaz Ahmad

Commercial Director

Mr. Masood Ahmed

Finance Director

Dr Muzaffar Iqbal

Technical Director

Mr. Shahid Mustafa Qureshi

Human Resource

Corporate Affairs Director/

Company Secretary

Board of Directors

Mr. Alan R Eldridge

Chairman & Managing Director

Mr. A U Khawaja

Non-Executive Director

Mr. Rafique Dawood

Non-Executive Director

Mr. S Riaz Ahmad

Mr. Masood Ahmed

Dr Muzaffar Iqbal

Mr. Shahid Mustafa Qureshi

Secretary

Executive Committee

Mr. Alan R Eldridge

Chairman & Managing Director

Mr. S Riaz Ahmad

Commercial Director

Mr. Masood Ahmed

Finance Director

Dr Muzaffar Iqbal

Technical Director

Mr. Shahid Mustafa Qureshi

Human Resource & Corporate Affairs Director/

Company Secretary

Bankers

ANZ Grindlays Bank Limited

ABN Amro Bank NV

American Express Bank Limited

Bank of America

Credit Agricole Indosuez

Emirates Bank International PJSC

Habib Bank Limited

Standard Chartered Bank

The Hongkong and Shanghai Banking Corporation

The Bank of Tokyo-Mitsubishi Limited

United Bank Limited

Auditors

Coopers & Lybrand

Legal Advisors

Surridge & Beecheno

Fatehali W Vellani & Co.

Orr, Dignam & Co.

Registered Office

35-Dockyard Road, West Wharf,

Karachi-74000

Telephones: 2315478-82, 2316071-74 & 2315101-08

Fax: 2314898 & 2311105

DIRECTORS' REPORT

1. To be submitted to the Members of Glaxo Wellcome Pakistan Limited at the FIFTY-SECOND Annual General

Meeting of the Company to be held on 5 May 1999.

The Directors submit their Report and Audited Accounts of the Company for the year ended

31 December 1998.

Rs. 000

The Net Profit for the year before Extraordinary Item, Taxation,

WPPF and WWF

133,812

Workers' Profit Participation Fund

6,691

Workers' Welfare Fund

3,154

----------

9,845

----------

Profit before Taxation and Extraordinary Item

123,967

Taxation

30,055

----------

Profit after Taxation and before Extraordinary Item

93,912

Extraordinary Item - Gain on divestment of Glaxose-D

262,900

business (net of tax)

----------

Net Profit after Tax and Extraordinary Item

356,812

Unappropriated Profit brought forward

----------

Available for Appropriation

356,812

Appropriations:

Interim Dividend

@ 15%

50,326

Proposed Final Dividend @ 25%

83,877

Transfer to Revenue Reserve

222,500

----------

356,703

----------

Unappropriated Profit carried forward

109

==========

2. Review by the Chairman & Managing Director: The Chairman & Managing Director's Review on Pages 5 to 7

deals with the activities during the year. The Directors of the Company endorse the contents of the same.

3. Pattern of Shareholdings: The Pattern of holding of the Shares is shown on pages 41 and 42.

4. Earnings per Share: The after tax (before extraordinary item) earnings per ordinary share of Rs. 10 is Rs. 2.80

(1997: Rs. 1.42), and the after tax (after extraordinary item) earnings per ordinary share of Rs. 10 is Rs. 10.64

(1997: Rs. 1.42)

5. Holding Company: The Company is a subsidiary of Glaxo Group Limited which is incorporated in the United

Kingdom.

Auditors: The present Auditors, Messrs. Coopers It Lybrand will retire and being eligible, offer themselves for re-

appointment.

BY ORDER OF THE BOARD

Alan R Eldridge

Masood Ahmed

Chairman & Managing Director

Director

Chief Executive

Karachi

24 March 1999

REVIEW BY THE CHAIRMAN & MANAGING DIRECTOR

It gives me great pleasure to welcome you to the 52nd Annual General Meeting of the Company.

Board of Directors

Since the last Annual General Meeting, the following changes have taken place in the

constitution of the Company's Board;

On 2 October 1998 Mr. Aleem A Dani resigned and was replaced by Mr. Shahid

Mustafa Qureshi as the Company Secretary. The casual vacancy falling due to Mr. Aleem

Dani's resignation as Director was filled by the appointment of Mr. Shahid Mustafa

Qureshi as Director of the Company. Mr. Shahid Mustafa Qureshi is incharge of

Human Resource, Administration and Corporate Affairs Departments.

Election of Directors

The terms of office of the present directors will expire on 6 May 1999. The election of Directors

for another term of three years will be held on 5 May 1999. The names of persons who offer

themselves for the election as Directors at the Annual General Meeting will be notified in

accordance with the provisions of section 178 of the Companies Ordinance, 1984.

Sales

Net sales for the year under review were Rs. 3,296 million. This reflects a growth of 27%

over the same period last year. As there has been no price increase since November 1996,

this is all volume growth.

This performance of Glaxo Wellcome Pakistan Ltd. came in the wake of difficult operating

conditions. The economy of the country is passing through hard times. Moreover, the law

and order situation in Karachi and Sindh has also remained unsatisfactory. All of this required

more vigorous efforts to deliver the promise.

Pharmaceuticals

Net local pharmaceutical sales at Rs. 2,893 million were 27.2% higher than same period

last year, all due to volume growth.

Foods

By the end of 1998, the Glaxose-D business was divested.

Exports

Exports at Rs. 144 million recorded an impressive growth of 36.7% over the same

period last year owing to some sizeable export orders from Glaxo Wellcome Group

Companies.

Profits

Pretax profit, excluding extraordinary item at Rs. 124 million, was lower by 48.6% against the

same period last year, mainly due to high import costs on account of currency

depreciation, manufacturing facility rationalization and restructuring costs.

Development

New Products

The Company showed its commitment towards enhancing its presence in the local

market by introducing five new products during the year, namely Valtrex Tablets, Floxy

I.V. Infusion, Zofran 8m9 Tablets, Zofran 8mg/4ml Injection, Calpol Plus Tablets.

Capital Expenditure

The capital expenditure for the year was Rs. 92 million. The major expenditures were

for secondary manufacturing and Information Technology.

Staff

It gives me much pleasure to record the Directors' appreciation of the fine work put in

during the year by the Company's Staff at all levels.

Internal training courses were held under the auspices of the Company and a large number

of executives and employees participated in the courses organized by the management.

Future Outlook

The pharmaceutical industry is currently facing extremely adverse conditions and needs

immediate Government support in terms of allowing the annual price increase, which was

due on 1 November 1997. The situation has been compounded by the recent decision of

the Government to reduce the prices of certain products which when combined with the

continued non-implementation of the annual price increase due in both 1997 and 1998,

means that the profitability of the Company is being adversely effected. The Company is

hopeful that the formalization of the IMF package and rescheduling of debts by Paris and

London Clubs would lift the uncertainty that had clouded the short/medium term prospects

of the economy.

On our part, Glaxo Wellcome Pakistan Management is committed to a long term

growth strategy which is reflected by an expansion plan to improve, rationalize and

modernize our secondary manufacturing facilities in Karachi.

The company will continue to focus on our core pharmaceutical business in the future.

With no price increase in sight, at least in the near future, the Company will continue to

attempt to minimize the pressure on profitability by achieving high sales volume and holding

down costs through sustained efficiency improvement measures.

Alan R Eldridge

AUDITORS' REPORT TO THE MEMBERS

We have audited the annexed Balance Sheet of Glaxo Wellcome Pakistan Limited as at 31 December 1998

and the related Profit and Loss Account and Cash Flow Statement, together with the notes forming part

thereof, for the year then ended and we state that we have obtained all the information and explanations

which to the best of our knowledge and belief were necessary for the purposes of our audit and, after due

verification thereof, we report that:

(a) in our opinion, proper books of account have been kept by the Company as required by the

Companies Ordinance, 1984;

(b) in our opinion:

(i) the Balance Sheet and Profit and Loss Account together with the notes thereon have been

drawn up in conformity with the Companies Ordinance, 1984 and are in agreement with the

books of account and are further in accordance with accounting policies consistently applied;

(ii) the expenditure incurred during the year was for the purpose of the Company's business; and

(iii) the business conducted, investments made and the expenditure incurred during the year were

in accordance with the objects of the Company;

Balance Sheet, Profit and Loss Account and Cash Flow Statement, together with the notes forming

part thereof, give the information required by the Companies Ordinance, 1984 in the manner so

required and respectively give a true and fair view of the state of the Company's affairs as at 31

December 1998 and of the profit and cash flows for the year then ended; and

(d) in our opinion Zakat deductible at source under the Zakat and Ushr Ordinance, 1980 was deducted by

the Company and deposited in the Central Zakat Fund established under section 7 of that Ordinance.

Coopers & Lybrand

Karachi: 25 March 1999

Chartered Accountants

BALANCE SHEET AS AT 31 DECEMBER, 1998

31 December

1998

1997

Note

Rs. 000

Tangible Fixed Assets

686,799

693,514

Long-term Loans and Advances

10,579

17,682

Long-term Deposits and Prepayments

2,390

4,116

Current Assets

Stores and Spares

52,408

53,620

Stock-in-trade

887,606

1,153,364

Trade Debts

125,886

100,466

Loans and Advances

25,789

18,513

Trade Deposits and Prepayments

99,368

14,833

Short-term Investments

200,000

25,000

Taxation Recoverable

99,927

34,477

Other Receivables

388,733

44,211

Bank and Cash Balances

100,126

61,829

----------

1,979,843

1,506,313

Less: Current Liabilities

Short-term Finances

68,650

79,437

Creditors, Accrued and Other Liabilities

541,946

389,497

Dividend Payable

66,608

Proposed Dividend

83,877

50,326

----------

761,081

519,260

----------

Net Current Assets

1,218,762

987,053

----------

1,918,530

1,702,365

==========

Financed by:

Share Capital

335,507

Capital Reserve - Share Premium

1,409

Revenue Reserve

1,460,178

1,237,678

Unappropriated Profit

109

----------

Shareholders' Equity

1,797,203

1,574,594

Surplus on Revaluation of Fixed Assets

21,270

Long-term Loans and Deferred Liabilities

100,057

106,501

Contingent Liabilities and Commitments

----------

1,918,530

1,702,365

==========

The annexed notes form an integral part of these accounts.

Alan R Eldridge

Masood Ahmed

Chairman & Managing Director

Director

Chief Executive

PROFIT AND LOSS ACCOUNT

FOR THE YEAR ENDED 31 DECEMBER, 1998

12 Months

6 Months

December

1998

1997

Note

Rs. 000

Net Sales

Local

3,151,223

1,185,410

Export

144,316

55,886

----------

3,295,539

1,241,296

Cost of Sales

Local

3,070,191

1,133,165

Export

99,346

31,008

----------

3,169,537

1,164,173

Operating Profit

Local

81,032

52,245

Export

44,970

24,878

----------

126,002

77,123

Other Income

47,498

5,898