| A
company’s internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with the
applicable accounting standards. A company’s internal control over financial reporting
includes those policies and procedures that (i) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of the assets of the company; (ii) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial
statements in accordance with the applicable accounting standards, and that receipts
and expenditures of the company are being made only in accordance with authorizations
of Management and Directors of the company; and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial
statements. Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Management’s assessment that the Novartis Group maintained effective
internal control over financial reporting as of December 31, 2005, is fairly stated,
in all material respects, based on criteria established in Internal Control –
Integrated Framework issued by the COSO. Also, in our opinion, the Novartis Group
maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2005, based on criteria established in Internal Control
– Integrated Framework issued by the COSO. | | As
described in the “Report of Novartis Management on Internal Control over Financial
Reporting”, Management has excluded Hexal AG, Eon Labs, Inc. and the acquired
over-the-counter activities of Bristrol-Myers-Squibb Co., from its assessment
of internal control over financial reporting as of December 31, 2005 because they
were acquired by the Novartis Group in business combinations during 2005. We have
also excluded Hexal AG, Eon Labs, Inc. and the acquired over-the-counter activities
of Brisol-Myers- Squibb Co. from our audit of internal controls over financial
reporting. Hexal AG, Eon Labs, Inc. and the acquired over-thecounter activities
of Bristol-Myers-Squibb Co. are wholly-owned businesses whose total assets and
total revenues represent approximately 17% or USD 10.0 billion and 5% or USD 1.5
billion, respectively, of the related consolidated financial statement amounts
as of and for the year ended December 31, 2005.
PricewaterhouseCoopers AG
R.
P. Muir | 
D.
Suter |
Basel, January 18, 2006 | |
