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Widely dispersed shareholdings
Novartis shares are widely held. As of December
31, 2003, Novartis had approximately 174 000 shareholders (2002: 167
000) registered in its share register. Based on the Novartis AG share
register approximately 62% (2002: 68%) of the Novartis AG shares which
are registered by name are held in Switzerland and approximately 26%
are held by approximately 1 100 holders in the USA (2002: 18% and
1 100 holders, respectively). 25% of the Novartis AG shares are not
entered in the share register. Because certain of the shares are held
by brokers or other nominees, the above numbers are not representative
of the actual number of beneficial owners located in Switzerland or
the US.
Limitation of registration, voting rights
and major shareholders
No person or entity shall be registered
with the right to vote for more than 2% of the share capital as set
forth in the Commercial Register. The Board of Directors may allow
exemptions from the limitation for registration in the share register.
Based upon information available to the
Group, shareholders owning 2% or more of Novartis AG’s capital at
December 31 are listed in the table below:
Exchange rate exposure and risk management
Novartis transacts its business in many currencies
other than the US dollar. As a result of the Group’s foreign currency
exposure, exchange rate fluctuations have a significant impact in
the form of both translation risk and transaction risk on its income
statement. Translation risk is the risk that the Group’s consolidated
financial statements for a particular period or as of a certain date
may be affected by changes in the prevailing rates of the various
currencies of the reporting subsidiaries against the US dollar. Transaction
risk is the risk that the value of transactions executed in currencies
other than the subsidiary’s measurement currency may vary according
to currency fluctuations.
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Quantitative and qualitative disclosures about
market risk
Growth and currency contributions
Sales and operating costs by currencies
Liquid funds and financial debt by currencies
On average in 2003, the US dollar was weaker
against the Swiss franc, Japanese yen, Euro and British pound than
in 2002. The total positive currency effect on sales growth was
8% and the total positive impact on operating income growth was
15%.
Market risk: Novartis is exposed to
market risk, primarily related to foreign exchange, interest rates
and the market value of the investments of liquid funds. Management
actively monitors these exposures. To manage the volatility relating
to these exposures, the Group enters into a variety of derivative
financial instruments. The Group’s objective is to reduce, where
it deems appropriate to do so, fluctuations in earnings and cash
flows associated with changes in interest rates, foreign currency
rates and market rates of investments of liquid funds. It is the
Group’s policy and practice to use derivative financial instruments
to manage exposures and to enhance the yield on the investment of
liquid funds. It does not enter any financial transactions containing
a risk that
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