Glaxosmsc 5.25% Regulatory News (AG99)

Publication of GlaxoSmithKline Capital plc's

Annual Report 2010

Today, 27th April 2011, GlaxoSmithKline Capital plc published on the Company's website, www.gsk.com, its Annual Report in respect of the year ended 31st December 2010.

Copies of the Company's 2010 Annual Report, have been submitted to the UK Listing Authority's National Storage Mechanism and will shortly be available for inspection at www.Hemscott.com/nsm.do

In accordance with the requirements of Rule 4.1 of the Disclosure and Transparency Rules of the UK Financial Services Authority which apply in respect of accounting periods commencing after 20th January 2007, Appendix A to this announcement contains the Company's 2010 Annual Report, which includes a description of the principal risks and uncertainties affecting the Company together with a responsibility statement.

V A Whyte

Company Secretary

27th April 2011

Cautionary statement regarding forward-looking statements

Under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, GSK and the Company caution investors that any forward-looking statements or projections made by GSK and the Company, including those made in this announcement, are subject to risks and uncertainties that may cause actual results to differ materially from those projected. Factors that may affect the Group's and the Company's operations are described under 'Risk Factors' in Appendix A of this announcement.

Appendix A

GlaxoSmithKline Capital plc

(Registered Number 2258699)

Annual Report and Financial Statements

For the year ended 31st December 2010

Registered office address:

980 Great West Road

Brentford

Middlesex TW8 9GS

Index

Directors' Report

Independent Auditors' Report

Profit and Loss Account

Statement of Total Recognised Gains and Losses

Balance Sheet

Notes to the Financial Statements

GlaxoSmithKline Capital plc

(Registered Number 2258699)

Directors' Report for the year ended 31st December 2010

The Directors submit their report and the audited financial statements for the year ended 31st December 2010.

Principal activities

GlaxoSmithKline Capital plc ("the Company") issues European Medium Term Notes and provides financial services to fellow subsidiaries of the GlaxoSmithKline Group of Companies ("the Group"). The Directors do not envisage any change to the nature of the business in the foreseeable future.

Review of business

The Company made a profit on ordinary activities after taxation of £2,476,000 (2009: profit of £2,271,000). The Directors are of the opinion that the current level of activity and the year-end financial position are satisfactory and will remain so in the foreseeable future.

The retained profit for the year of £2,476,000 will be transferred to reserves (2009: retained profit for the year of £2,271,000 transferred to reserves).

All European Medium Term Notes in issue pay interest on a fixed rate basis. No new issuances were made during the year ended 31st December 2010.

Principal risks and uncertainties

The Directors of the ultimate parent undertaking, GlaxoSmithKline plc, manage the risks of the Group at a group level, rather than at an individual business unit level. For this reason, the Company's Directors believe that a discussion of the Group's risks would not be appropriate for an understanding of the development, performance or position of the Company's business. The principal risks and uncertainties of the Group, which include those of the Company, are discussed in the Group's 2010 Annual Report, which does not form part of this report.

In addition to the Financial Risk Management disclosed in the Treasury Policy Note on page 8 and 9 (Note 2), at a Company level, the principal risks and uncertainties relevant to the Group and the Company's business and financial condition and results would include risks from Global and Political Economic Conditions, Reliance on Information Technology, and the potential impact of new or revised Accounting Standards.

Global and Political Economic Conditions

The global recession caused by the international financial crisis continued to impact the world's economies during 2010. Although many countries and industry sectors saw some improvement over 2009, significant growth remained elusive and the recovery was fragile at best. The debt crisis in Greece spread to other economies such as Spain, Portugal, Italy, Ireland and Romania. As we moved towards the end of the year, many governments introduced austerity measures to complement the fiscal stimulus initiatives of 2009. Any decline in economic activity may have an impact on the Group's ability to raise capital. The Group has no control over changes in inflation and interest rates, foreign currency exchange rates and controls or other economic factors that may affect it or the Company, or the possibility of legal or regulatory changes in jurisdictions in which the Group or the Company operates.

Reliance on Information Technology

The Group is increasingly dependent on information technology systems, including Internet-based systems, for internal communication as well as communication with financial counterparties. Any significant disruption of these systems, whether due to computer viruses or other outside incursions, could materially and adversely affect the Group's operations.

Impact of New or Revised Accounting Standards

New or revised accounting standards, rules and interpretations circulated from time to time by the standard setting board could result in changes to the recognition of income and expense that may adversely impact the Group's reported financial results. The Group believes that it complies with the appropriate regulatory requirements concerning its financial statements and disclosures.

Key performance indicators (KPIs)

The Directors of GlaxoSmithKline plc manage the Group's operations on a business sector basis. For this reason, the Company's Directors believe that analysis using key performance indicators for the Company is not necessary or appropriate for an understanding of the development, performance or position of the Company's business. The development, performance and position of the Group are discussed in the Group's 2010 Annual Report which does not form part of this report.

Results and dividends

The Company's results for the financial year are shown in the profit and loss account on page 5.

No dividend is proposed to the holders of Ordinary Shares in respect of the year ended 31st December 2010 (2009: nil).

Directors and their interests

The Directors of the Company who were in office during the year and up to the date of signing the financial statements were as follows:

Edinburgh Pharmaceutical Industries Limited

Glaxo Group Limited

Mr J S Heslop

Resigned on 31st March 2011

Mr S P Dingemans

Appointed on 1st April 2011

No Director had, during the year or at the end of the year, any material interest in any contract of significance to the Company's business, with the exception of the Corporate Directors, where such an interest may arise in the ordinary course of business.

The following interests of the Directors in office at the year-end in the shares of the ultimate parent undertaking, GlaxoSmithKline plc, have been notified to the Company.

Directors' Interests

Ordinary Shares

Name

At 31.12.10

Mr J S Heslop

76,254

Share Options

At 31.12.10

Mr J S Heslop

585,050

All Share Options are over Ordinary Shares.

Performance Share Plan

At 31.12.10

Mr J S Heslop

507,831

All shares are over Ordinary Shares.

The details of the above-mentioned Plans are disclosed in the 2010 Annual Report of GlaxoSmithKline plc.

Directors' indemnity

Each of the Directors benefits from an indemnity given by the Company under its articles of association. This indemnity is in respect of liabilities incurred by the Director in the execution and discharge of its duties.

In addition, each of the Directors who is an individual benefits from an indemnity given by another Group company, GlaxoSmithKline Services Unlimited.

This indemnity is in respect of liabilities arising out of third party proceedings to which the Director is a party by reason of his engagement in the business of the Company.

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit and loss of the Company for that year.

In preparing those financial statements, the Directors are required to:

·;

Select suitable accounting policies and then apply them consistently;

·;

Make judgements and estimates that are reasonable and prudent;

·;

State whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

The Directors confirm that they have complied with the above requirements in preparing the financial statements.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements 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 fraud and other irregularities.

The Company's Annual Report and financial statements for the year ended 31st December 2010 are available upon request in hard-copy form and made available on the Group's website. The Directors are responsible for the maintenance and integrity of the Annual Report on the 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.

Each of the current Directors, whose names and functions are listed under the section 'Directors and their interests' above confirms that, to the best of their knowledge:

·;

the Company's financial statements, which have been prepared in accordance with UK Generally Accepted Accounting Practice, give a true and fair view of the assets, liabilities, financial position and profit of the Company;

and

·;

the Directors' report contained in the Annual Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

Disclosure of information to auditors

As far as each of the Directors are aware, there is no relevant audit information of which the Company's auditors are unaware, and the Directors have taken all the steps that ought to have been taken to make themselves aware of any relevant audit information and to establish that the Company's auditors are aware of that information.

Going concern

After making enquiries, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future, due to ongoing support from the intermediate parent undertaking, GlaxoSmithKline Finance plc. For this reason, they continue to adopt the going concern basis in preparing the financial statements.

Independent Auditors

PricewaterhouseCoopers LLP are willing to continue in office as auditors and resolutions dealing with their reappointment and remuneration will be proposed at a General Meeting of the Company.

By order of the Board

P Blackburn

For and on behalf of Glaxo Group Limited

Corporate Director

26th April 2011

GlaxoSmithKline Capital plc

Independent Auditors' Report to the members of GlaxoSmithKline Capital plc

We have audited the financial statements of GlaxoSmithKline Capital plc for the year ended 31st December 2010 which comprise the Profit and Loss Account, the Statement of Total Recognised Gains and Losses, the Balance Sheet and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

Respective responsibilities of directors and auditors

As explained more fully in the Statement of Directors' Responsibilities set out on page 3, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.

Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.

This report, including the opinions, has been prepared for and only for the Company's members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report 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 assessment of: whether the accounting policies are appropriate to the Company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements.

Opinion on financial statements

In our opinion the financial statements:

·;

give a true and fair view, of the state of the Company's affairs as at 31st December 2010 and its profit for the year then ended;

·;

have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

·;

have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matters prescribed by the companies Act 2006

In our opinion the information given in the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

·;

adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

·;

the financial statements are not in agreement with the accounting records and returns; or

·;

certain disclosures of directors' remuneration specified by law are not made; or

·;

we have not received all the information and explanations we require for our audit.

The Company has passed a resolution in accordance with Section 506 of the Companies Act 2006 that the auditor's name should not be stated.

PricewaterhouseCoopers LLP

Chartered Accountants and Statutory Auditors

London

26th April 2011

GlaxoSmithKline Capital plc

Profit and Loss Account

For the year ended 31st December 2010

2010

2009

Notes

£'000

£'000

Administrative expense

3

(35)

(35)

Interest receivable and similar income

4

410,134 

396,635 

Interest payable and similar charges

5

(406,631)

(393,445)

Net interest receivable

3,503 

3,190 

Operating profit

3,468 

3,155 

Profit on ordinary activities before taxation

3,468 

3,155 

Taxation on profit on ordinary activities

6

(992)

(884)

Profit for the financial year

12

2,476

2,271 

The results disclosed above relate entirely to continuing operations.

There is no difference between the profit on ordinary activities before taxation and the profit for the financial year stated above and their historical cost equivalents.

GlaxoSmithKline Capital plc

Statement of Total Recognised Gains and Losses

For the year ended 31st December 2010

2010

2009

Note

£'000

£'000

Profit for the financial year

2,476

2,271

Cash flow hedge reserve recycled to profit and loss account

12

411

411

Total recognised gains relating to the year

2,887

2,682

GlaxoSmithKline Capital plc

Balance Sheet

As at 31st December 2010

2010

2009

Notes

£'000

£'000

Debtors: amounts due after one year

7

8,262,755 

8,459,794 

Debtors: amounts due within one year

7

136,617 

129,868 

Debtors

8,399,372 

8,589,662 

Cash at bank and in hand

9

4 

4 

Current assets

8,399,376 

8,589,666 

Creditors

8

(134,716)

(137,563)

Creditors: amounts falling due within one year

8

(134,716)

(137,563)

Net current assets

8,264,660 

8,452,103 

Total assets less current liabilities

8,264,660 

8,452,103 

Loans due after one year

9

(8,270,708)

(8,461,038)

Creditors: amounts falling due after one year

9

(8,270,708)

(8,461,038)

Net liabilities

(6,048)

(8,935)

Capital and reserves

Called up share capital

11

100 

100 

Profit and loss account

12

1,075 

(1,401)

Cash flow hedge reserve

12

(7,223)

(7,634)

Total shareholders' deficit

13

(6,048)

(8,935)

The financial statements were approved by the Board of Directors on 26th April 2011 and were signed on its behalf by:

P Blackburn

For and on behalf of Glaxo Group Limited - Director

GlaxoSmithKline Capital plc

Notes to the Financial Statements for the year ended 31st December 2010

1

Accounting policies

The principal accounting policies adopted in the preparation of these financial statements are set out below. In addition, the Company has taken advantage of the exemption within FRS 29, 'Financial Instruments: Disclosure' from the disclosure requirements of this standard on the basis that the Company is included in the publicly available consolidated financial statements of the Group, issued by GlaxoSmithKline plc as its parent company, which include disclosures that comply with IFRS 7, 'Financial Instruments: Disclosures', which is equivalent to FRS 29.

(a)

Basis of accounting

These financial statements have been prepared on the going concern basis, due to ongoing support from the intermediate parent undertaking, GlaxoSmithKline Finance plc, under the historical cost convention, the accounting policies set out below, which have been applied consistently, and in accordance with the Companies Act 2006 and applicable UK Accounting Standards.

(b)

Foreign currency transactions

Foreign currency transactions are booked in local currency at the exchange rate ruling on the date of the transaction, or at the forward rate if hedged by a forward exchange contract. Foreign currency monetary assets and liabilities are translated into local currency at rates of exchange ruling at the balance sheet date, or at the forward rate. Exchange differences are included in operating profit.

(c)

Dividends paid and received

Interim dividends paid and received are included in the profit and loss account in the year in which the related dividend is actually paid or received. Final dividends are recorded in the profit and loss account upon shareholder approval.

(d)

Interest

Interest receivable and similar income and interest payable and similar charges are recognised on an accruals basis.

(e)

Bond expenses

Bond expenses are included as a component of the debt principal and are amortised using the effective interest rate over the term of the debt.

(f)

Expenditure

Expenditure is recognised in respect of goods and services received when supplied in accordance with contractual terms. Provision is made when an obligation exists for a future liability in respect of a past event and where the amount of the obligation can be reliably estimated.

(g)

Debt instruments

Debt instruments are stated at the amount of net proceeds adjusted to amortise the finance cost of debt using the effective interest rate method over the term of the debt, and for movements in the fair value of the bond, where hedge accounting is applicable.

(h)

Taxation

Current tax is provided at the amounts expected to be paid, applying tax rates that have been enacted or substantially enacted by the balance sheet date.

The Company accounts for taxation which is deferred or accelerated by reason of timing differences which have originated but not reversed by the balance sheet date. Deferred tax assets are only recognised to the extent that they are considered recoverable against future taxable profits.

Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the timing differences are expected to reverse. Deferred tax liabilities and assets are not discounted.

2

Treasury Policy

The Company's role in managing the Group objectives is primarily to manage the Group's external funding requirements and the resulting financial risk.

(a)

Treasury

The Company's ultimate parent undertaking, GlaxoSmithKline plc, is a UK-based business, reporting in Sterling and paying dividends out of Sterling profits.

Group treasury policies noted below are those operated by GlaxoSmithKline Capital plc.

The role of Corporate Treasury in the Group is to manage and monitor the Group's external and internal funding requirements and financial risks in support of Group corporate objectives. Treasury policies are governed by policies and procedures approved by the Board of Directors and monitored by a Treasury Management Group ("TMG"). The Group maintains treasury control systems and procedures to monitor foreign exchange, interest rate, liquidity, credit and other financial risks.

(b)

Liquidity

The Group operates globally, primarily through subsidiary companies established in the markets in which the Group trades. Due to the nature of the Group's business, with patent protection on many of the products in the Group's portfolio, the Group's products compete largely on product efficacy rather than on price. Selling margins are sufficient to cover normal operating costs and the Group's operating subsidiaries are substantially cash generative.

Operating cash flow is used to fund investment in the research and development of new products as well as routine outflows of capital expenditure, tax and dividends. The Group will from time to time have additional demands for finance, such as for share purchases and acquisitions.

The Group operates at low levels of net debt relative to its market capitalisation. In addition to the strong positive cash flow from normal trading activities, additional liquidity is readily available via the US dollar commercial paper programme.

(c)

Treasury operations

The objective of treasury activity is to manage the post-tax net cost/income of financial operations to the benefit of Group earnings. The Company does not operate as a profit centre.

The Group uses a variety of financial instruments, including derivatives, to finance its operations and to manage market risks from those operations.

The Group uses a number of derivative financial instruments to manage the market risks from Treasury operations. Derivative instruments, principally comprising forward foreign currency contracts, interest rate and currency swaps, are used by Corporate Treasury to swap borrowings and liquid assets into the currencies required for Group purposes and to manage exposure to market risks from changes in foreign exchange rates and interest rates.

The Group balances the use of borrowings and liquid assets having regard to;

·;

the cash flow from operating activities and the currencies in which it is earned;

·;

the tax cost of intra-group distributions;

·;

the currencies in which business assets are denominated; and

·;

the post-tax cost of borrowings compared to the post-tax return on liquid assets.

Liquid assets surplus to the immediate operating requirements of Group companies are invested and managed centrally by Corporate Treasury. Requirements of Group companies for operating finance are met whenever possible from central resources.

External borrowings, mainly managed centrally by Corporate Treasury, comprise a portfolio of long and medium-term instruments in addition to short-term finance.

The Group does not hold or issue derivative financial instruments for trading purposes and the Group's Treasury policies specifically prohibit such activity. All transactions in financial instruments are undertaken to manage the risks arising from underlying business activities, not for speculation.

(d)

Maturity and counterparty risk

The Group manages its net borrowing requirement through a portfolio of long and medium-term borrowings, including bonds, and have also used short-term finance through a US commercial paper programme.

The Group has a Euro Medium Term Note programme of £15 billion, of which £8.3 billion was in issue as at 31st December 2010, and a US shelf registration statement, of which $10.1 billion (£6.5 billion) was in issue as at 31st December 2010. The TMG monitors the cash flow forecast of the Group on a monthly basis.

The Group's long-term borrowings mature at dates between 2012 and 2042.

(e)

Interest rate risk management

The Group's policy on interest rate risk management requires that the amount of net borrowings at fixed rates increases with the ratio of forecast net interest payable to Group trading profit. At 31st December 2010, £nil (31st December 2009: £nil) of the Company's net borrowings were exposed to floating interest rates after the effects of hedging.

(f)

Foreign exchange risk management

The Group seeks to denominate borrowings in the currencies of its principal assets and cash flows. These are primarily denominated in US dollars, Euros and Sterling. Certain borrowings are swapped into other currencies as required for Group purposes.

3

Administrative expense

2010

2009

£'000

£'000

The following item has been (charged) in operating profit:

Management fee

(35)

(35)

GlaxoSmithKline Services Unlimited provides various services and facilities to the Company including finance and administrative services for which a management fee is charged. Included in the management fee is a charge for auditor remuneration of £30,103 (2009: £29,368).

4

Interest receivable

2010

2009

£'000

£'000

Interest receivable and similar income

On loans with Group undertakings

410,134 

396,635 

5

Interest payable

2010

2009

£'000

£'000

Interest payable and similar charges

Cash flow hedge recycling from equity

(411)

(411)

Interest on Medium-Term Notes and Eurobonds

(398,159)

(385,814)

Amortisation of bond expenses

(8,061)

(7,220)

(406,631)

(393,445)

6

Tax on profit on operating activities

2010

2009

£'000

£'000

Taxation charge based on profits for the year

UK corporation tax at 28% (2009: 28%)

850 

762 

Over provision in previous years

(1)

- 

Current tax charge

849 

762 

Deferred taxation - current year charge

121 

122 

Deferred tax - effect of tax rate change

22 

- 

Deferred tax charge

143 

122 

Total tax charge

992 

884 

The tax assessed for the year is lower (2009: lower) than the standard rate of corporation tax in the UK for the year ended 31st December 2010 of 28% (2009: 28%). The differences are explained below:

Reconciliation of current taxation charge

£'000

£'000

Profit on ordinary activities before taxation

3,468 

3,155 

Profit on ordinary activities at the UK statutory rate 28% (2009: 28%)

971 

884 

Permanent Disallowables - interest treated as paid by ultimate parent

113,857 

110,165 

Permanent Deductions - group relief received for no payment

(113,857)

(110,165)

Other timing differences

(121)

(122)

Prior year adjustments

(1)

- 

Current tax charge for the year

849 

762 

On 22nd June 2010 the Chancellor announced that the main rate of UK corporation tax will reduce from 28% to 27% with effect from 1st April 2011. This tax change became substantively enacted in July 2010 and hence the effect of the change on the deferred tax balances has been included in the figures above.

On 23rd March 2011, the Chancellor announced an additional 1% reduction in the main rate of UK corporation tax to 26% with effect from 1st April 2011. The effect of the change would create an additional adjustment of approximately £22k. This has not been reflected in the figures above as it was not substantively enacted at the balance sheet date.

Further changes to the rate are proposed to reduce the rate by one per cent per annum to 23 per cent by 1st April 2014, but have not yet been substantively enacted and therefore are not included in the figures above.

The overall effect of the further changes from 27 per cent to 23 per cent, if these applied to the deferred tax balance at 31st December 2010, would be to reduce the deferred tax asset by approximately £86k.

The prior period adjustments are in respect of various periods and arise from revision during the year of management's estimates, and the subsequent amendments to UK group loss utilisation and payment allocation.

7

Debtors

2010

2009

£'000

£'000

Amounts due within one year