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Annual Report 2015

2015 saw substantial progress

to accelerate new product sales growth and strengthen our Pharmaceuticals, Vaccines and Consumer Healthcare businesses

B GSK Annual Report 2015

Strategic report

Governance & remuneration Financial statements Investor information " In 2015, we made substantial progress to accelerate new product sales growth, integrate new businesses in Vaccines and Consumer Healthcare and restructure our global Pharmaceuticals business. This progress means the Group is well positioned to return to core earnings growth in 2016."

Sir Andrew Witty, Chief Executive Officer

Overview of 2015

Performance summary

Front cover story

Innovation is at the heart of all we do

Katherine, pictured left, is one of a team of scientists continuing to develop Nucala after almost

20 years of focused R&D, including nine distinct patient studies. Nucala is a monoclonal antibody

that stops IL-5 from binding to its receptor on the surface of eosinophils. In people with asthma, eosinophils - a type of white blood cell - cause inflammation in the lungs, making it difficult to breathe and increasing the risk of asthma attacks. The 2015 European and US regulatory approvals of Nucala - the first-in-class approved targeted biologic therapy for people with eosinophilic-driven severe asthma - consolidates GSK"s leading global position in respiratory medicine.

Katherine, GSK senior scientist, Stevenage, UK

£23.9

bn

Group turnover

(up 6% CER/up 1% CER pro-forma) a

£10.3

bn

Total operating profit

(up >100% CER) a

£5.7

bn

Core operating profit

(down 9% CER/down 3%

CER pro-forma)

a

£3.9

bn

Cash dividends paid

in 2015

£2.0

bn

New product sales

b (up >100%) 174.3
p

Total earnings per share

(up >100%, primarily reflecting impact of transaction gains) 75.7
p

Core earnings per share

(down 15% CER, primarily reflecting short-term dilution of the Novartis transaction) a 100

Markets now operating

new commercial model ~40

Potential new medicines

and vaccines profiled at R&D event, 80% of which have potential to be first-in-class c 20

Potential to file up to

20 assets with regulators

by 2020 ~13

Estimated internal

rate of return in R&D in 2015 1 st

In Access to Medicine

Index

Footnotes

a We use a number of adjusted measures to report the performance of our business, as described on page 54. These include core results, CER growth rates and pro-forma CER growth rates. A reconciliation of total results to core results is set out on page 62. b

New products defined as:

Pharmaceuticals: Relvar/Breo Ellipta, Anoro Ellipta, Incruse Ellipta, Arnuity Ellipta,

Eperzan/Tanzeum, Nucala, Tivicay, Triumeq.

Vaccines: Menveo, Bexsero, Shingrix (not yet approved). c

GSK R&D event on 3 November 2015.

GSK Annual Report 2015 1

Strategic report

Governance & remuneration Financial statements Investor information

At GSK, our mission is to improve the quality of human life by enabling people to do more, feel better, live longer. Contents

Financial statements

Directors" statement

of responsibilities 130

Independent Auditor"s report 131

Financial statements 138

Notes to the financial statements 142

Financial statements of

GlaxoSmithKline plc

prepared under UK GAAP 211

Strategic report

Our investor proposition ??

Our business 04

Chairman"s statement 06

CEO"s statement 07

Our global marketplace 08

Our business model 11

Our strategic priorities 12

How we performed 14

Our approach to risk 16

Pharmaceuticals 18

Vaccines 26

Consumer Healthcare 32

Responsible business 38

Group financial review 50

Governance & remuneration

Our Board 74

Our Corporate Executive Team 78

Board governance 80

Corporate governance framework 82

Committee reports

Audit & Risk 88

Nominations 95

Corporate Responsibility 98

Remuneration report

Chairman"s annual statement 102

Annual report on remuneration 103

Remuneration policy summary 127

Investor information

Quarterly trend 218

Five year record 222

Product development pipeline 225

Product, competition and

intellectual property 228

Risk factors 231

Share capital and share price 241

Dividends 243

Financial calendar 243

Annual General Meeting 2016 243

Tax information for shareholders 244

Shareholder services

and contacts 246

US law and regulation 248

Group companies 250

Glossary of terms 259

Find out more www.gsk.com

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. Other than in accordance with its legal or regulatory obligations (including under the UK Listing

Rules and the Disclosure and Transparency Rules of the Financial Conduct Authority), the Group undertakes no

obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

The reader should, however, consult any additional disclosures that the Group may make in any documents which it

publishes and/or files with the SEC. All readers, wherever located, should take note of these disclosures. Accordingly,

no assurance can be given that any particular expectation will be met and shareholders are cautioned not to place

undue reliance on the forward-looking statements.

Forward-looking statements are subject to assumptions, inherent risks and uncertainties, many of which relate to factors

that are beyond the Group"s control or precise estimate. The Group cautions investors that a number of important factors,

including those in this document, could cause actual results to differ materially from those expressed or implied in any

forward-looking statement. Such factors include, but are not limited to, those discussed under 'Risk factors" on pages

231-240 of this Annual Report. Any forward-looking statements made by or on behalf of the Group speak only as of the

date they are made and are based upon the knowledge and information available to the Directors on the date of this

Annual Report.

All expectations and targets regarding future performance should also be read together with 'Assumptions related

to 2016-2020 outlook" on the inside back cover.

A number of adjusted measures are used to report the performance of our business. These measures are defined

on page 54 and a reconciliation of core results to total results is set out on page 62.

2 GSK Annual Report 2015

Strategic report

Governance & remuneration Financial statements Investor information

Our investor proposition

GSK is a science-led global healthcare company that aims to deliver growth and improving returns to shareholders through the development of innovative pharmaceutical, vaccine and consumer healthcare products.

Pharmaceuticals

£14.2

bn

2015 turnover

Leadership in key

therapeutic areas including Respiratory and HIV

Vaccines

£3.7

bn

2015 turnover

The most comprehensive

vaccines portfolio in the industry

Consumer Healthcare

£6.0

bn

2015 turnover

One of the world"s

leading global Consumer

Healthcare companies

(by retail sales)

Three world-leading

businesses

Each has a broad range

of growth drivers and the global presence to access increasing demand for healthcare.

HIV/infectious

diseases

Rare diseases

Immuno-

inflammationVaccines Respiratory diseases

Oncology

Strong R&D

innovation

R&D underpins all

our businesses with research focused in six core therapy areas.

Efficient global

operating model

We are focused on

optimising our operations through restructuring, investments and modernisation to improve profitability and efficiency. £1 bn in incremental annual cost savings delivered in 2015 and £3 bn in annual cost savings expected by end of 2017 d

Around 40

new potential medicines and vaccines in our pipeline profiled at R&D event b 80
of which we believe are potentially first-in-class 20

Potential to file up

to 20 assets by 2020

£2.5

bn

2015 adjusted free cash flow excluding

costs funded by divestments c

£6.7

bn net proceeds from disposals generated in 2015

£3.7

bn reduction in net debt in 2015 b GSK R&D event on 3 November 2015. c Excluding legal payments and also non-core restructuring and integration costs and the initial tax payments on the sale of the Oncology business.d

£1.6 billion annual savings

achieved by 31 December 2015.

GSK Annual Report 2015 3

Strategic report

Governance & remuneration Financial statements Investor information e Legacy GSK brands. f Customer trust rankings as demonstrated in GSK annual customer value survey of over 4,000 customers. g

At its Investor event on 6 May 2015, GSK

outlined a series of expectations for its performance over the five year period

2016-2020. See inside back cover.

h

Expected compound annual growth rate

(CAGR) to 2020, using 2015 as the base year. See inside back cover.

Earnings

• Core EPS percentage

growth expected to reach double digits

CER in 2016

• Medium-term outlook

for Group to grow Core

EPS mid-to-high single

digits g

CAGR over five

years to 2020 CER h

Returns

• Ordinary dividend of

80p per share for 2015

• Special dividend of

20p per share for 2015

(£1 billion from Novartis transaction proceeds)

• Expect to pay ordinary

dividend of 80p per share for both 2016 and 2017 100
on time supply for all key new pharmaceutical product introduction launches in 2015 across all markets 93

Consumer Healthcare

supply: average service levels of 93% OTIF (on time in full) in 2015 e 150+

Presence in more

than 150 markets ~13

Estimated internal

rate of return on

R&D investment

No.1 in customer trust for both GSK Respiratory and Vaccines in the US f 1.8 m unique visitors to GSK

HCP digital portals,

+21% in 2015
1,500

We partner with over 1,500

organisations around the world, including academic institutions, public-private partnerships and other pharmaceutical and biotechnology companies £6 bn in annual revenues expected from new

Pharmaceutical and

Vaccine product sales

(£2bn sales achieved in 2015) a a At its Investor event on 6 May 2015,

GSK outlined a series of expectations for

its performance over the five year period

2016-2020. See inside back cover.

4 GSK Annual Report 2015

Strategic report

Governance & remuneration Financial statements Investor information

Our strategy

Our strategy is designed to generate

sustainable sales and earnings growth and improved returns to shareholders.

We have three strategic priorities:

To grow a balanced business

and product portfolio, capable of delivering sustainable sales growth

To research, develop and deliver

more high quality, innovative products that offer valuable improvements in treatment for patients, consumers and healthcare providers

To simplify the way we operate to

reduce complexity, increase efficiency and free up resources to reinvest elsewhere in the business, or return to shareholders wherever we see the most attractive returns.

Responsible business

Being a responsible business is central to

our strategy, and how we deliver success is just as important as what we achieve.

Our work is underpinned by our values of

patient focus, integrity, respect for people and transparency.

Read more about our strategic priorities

and our approach to responsible business on pages 12 to 13.

We are focused on the research and development

of innovative pharmaceutical medicines, vaccines and consumer healthcare products.

Our businesses

Our Pharmaceuticals, Vaccines and

Consumer Healthcare businesses

generated turnover of £23.9 billion in 2015.

Each business benefits from GSK"s global

commercial infrastructure, integrated supply networks, innovative R&D and significant global presence.

See our business model on page 11.

Read more about our businesses opposite

and on pages 18 to 37.

Global presence

We have a significant global presence

with 101,255 employees in more than 150 markets, a network of 89 manufacturingquotesdbs_dbs49.pdfusesText_49

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