Global equity capital markets experienced a recovery in 2005 following a challenging environment in 2004. The Swiss Market Index (SMI) increased by 33% in 2005 while the Morgan Stanley World Pharmaceutical Index (MSWPI) increased by 1% compared to 2004. The Novartis share price performed better when compared to most of its pharmaceutical peers, and when measured in USD outpaced the MSCI Pharmaceutical Index by 3% points but rose less than the SMI when measured in Swiss Francs. The Novartis share price closed at CHF 69.05 on December 30, 2005, compared to CHF 57.30 at December 31, 2004 resulting in a 21% increase. The ADS performance in the US, on the other hand, showed an increase of only 4% as a result of the strengthening USD towards the end of 2005. The market capitalization of Novartis amounted to USD 123 billion on December 31, 2005, compared to USD 118 billion at the end of 2004.

The Board is proposing a 10% increase in the dividend payment for 2005 to CHF 1.15 per share (2004: CHF 1.05) for approval at the Annual General Meeting. This represents the ninth consecutive increase in the dividend paid per share since the formation of Novartis in late 1996. If the 2005 dividend proposal is approved by shareholders, dividends paid out on the outstanding shares will amount to USD 2.0 billion (2004: USD 2.1 billion), resulting in a payout ratio of 33% (2004: 38%). Based on the 2005 year-end share price of CHF 69.05, the Novartis dividend yield is 1.7% (2004: 1.8%). The dividend payment date for 2005 will be March 3, 2006. With the exception of 258.1 million treasury shares, all shares issued are dividend bearing.

In August 2004, Novartis announced the completion of the third share repurchase program and the start of a fourth program to repurchase shares via a second trading line on the SWX Swiss Exchange for approximately USD 2.4 billion (CHF 3.0 billion). Additionally, a fifth share repurchase program for up to CHF 4.0 billion was approved at the Annual General Meeting on March 1, 2005.

shares amounting to USD 0.5 billion were bought back in 2005. Overall in 2005, a total of 16 million shares have been repurchased for USD 0.8 billion and a total of 13 million shares have been sold for USD 0.6 billion. This includes shares bought through the repurchase programs as well as additional shares bought/sold on the first trading line and transactions with associates.

Since 2001 Novartis has been offering US investors the ADS Direct Plan, which provides investors in the United States an easy and inexpensive way of directly purchasing Novartis shares and of reinvesting dividends. This plan holds Novartis American Depositary Shares (ADSs) which are listed on the New York Stock Exchange under the trading symbol NVS. At the end of 2005, the US ADS Plan had 453 participants. Since September 1, 2004, Novartis also offers a Direct Share Purchase Program to investors residing in Switzerland, Liechtenstein, France and the United Kingdom, which was the first of its kind in Europe. With this plan Novartis offers an easy and inexpensive way of directly purchasing Novartis registered shares and of depositing them free of charge with SAG SIS Aktienregister AG. As of December 31, 2005, a total of 9 163 shareholders had been enrolled in this program.

You can find further information on the Internet at http://www.novartis.com/investors.