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Novartis is fully committed to good corporate
governance. Novartis’ principles and rules on corporate governance
are laid down in the Articles of Incorporation, the Regulations
of the Board and the Charters of the Board Committees. The Board’s
Corporate Governance Committee reviews these principles and rules
regularly in the light of prevailing best practices and forwards
suggestions for improvement to the full Board for approval.
Group Structure and Shareholders
Novartis AG, a holding company organized
under Swiss law, owns directly or indirectly all companies worldwide
belonging to the Novartis Group.
The Novartis Group is divided operationally
into two divisions: Pharmaceuticals and Consumer Health. The Pharmaceuticals
Division is organized into five Business Units: Primary Care, Oncology,
Transplantation, Mature Products and Ophthalmics. The six Business
Units of the Consumer Health Division are: Sandoz, Over-the-Counter
self-medication (OTC), Animal Health, Medical Nutrition, Infant &
Baby and CIBA Vision. The business operations of the Business Units
are conducted through local Novartis Group companies. The most important
Novartis subsidiaries and associated companies are listed in Note
31 to the Group’s consolidated financial statements.
There are three Novartis subsidiaries whose
shares are traded on public stock exchanges. These are Novartis India
Limited, Novartis Pharma S.A.E. (an Egyptian company), and Novartis
Pharma (Pakistan) Limited. 49% of the shares of Novartis India Limited
are registered for trading and less than 5% of the other two companies
are registered for trading. In comparison with the Group structure
and in relation to the size of the business of each of these three
companies, none are considered significant to the Group as a whole.
Each of these companies is majority owned,
indirectly, by Novartis AG.
Additionally, Novartis holds significant
investments in two large publicly listed companies:
• Roche Holding AG, registered in Basel,
Switzerland, and listed on the SWX Swiss Exchange (registered shares:
Valor No 1203211/ISIN CH0012032113, symbol RO; non-voting equity securities:
Valor No 12032048/ISIN CH0012032048, symbol: ROG; ADRs for non-voting
equity
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securities are traded on the OTC market
in the US, symbol: RHHBY) The market capitalization of Roche Holding
AG on Dec. 31, 2003 was USD 90.6 billion, and
• Chiron Corporation, with its registered
head office in Emeryville, California, and listed on the NASDAQ (Valor
No 918297/ISIN US1700401094, symbol: CHIR). The market capitalization
of Chiron Corporation on Dec. 31, 2003 was USD 10.7 billion.
Further information on the size of each
shareholding and the method of consolidation are given in Note 10
to the Novartis Group’s consolidated financial statement.
Both Roche and Chiron are associated companies
but are independently governed, managed and operated.
The other significant Group subsidiaries
and associated companies as shown in Note 31 to the Novartis Group’s
financial statement are not publicly traded. In December 2002, Novartis
AG acquired through a whollyowned subsidiary in a public tender offer
99.07% of Lek d.d., Ljubljana, Slovenia, a company which at that time
was publicly listed on the stock exchange in Ljubljana. In 2003 Novartis
AG acquired the remaining 0.93% of the outstanding shares and delisted
the shares of Lek d.d. from the Ljubljana stock exchange.
The largest registered Novartis shareholders
are the Novartis Foundation for Employee Participation, registered
in Basel, Switzerland (holding 3.3% of the share capital) and Emasan
AG, registered in Basel, Switzerland (holding 3.1%). No other shareholder
is registered as owner of more than 2% of the issued share capital
and there are no cross-holdings equal to or higher than this amount.
Novartis AG has not concluded any shareholders’
agreement or other agreement regarding voting or holding of its shares.
Capital Structure
The share capital of Novartis AG is CHF 1 400
735 000, fully paid-in and divided into 2 801 470 000 registered
shares of CHF 0.50 nominal value each. Novartis AG has neither authorized
nor conditional capital. All shares have equal voting rights. Novartis
has not issued participation certificates or non-voting equity securities
(Genussscheine). After the repurchase program announced in 2001
was completed with a corresponding capital reduction approved by
the General Meeting in 2002, Novartis announced on
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