| | annual
limitation described above) in lieu of the pension benefits they may otherwise
have been eligible to receive under the Pension Plan. Dr. Fishman is not eligible
to receive this 3% retirement contribution. Novartis Corporation and its US affiliates
also maintain various unfunded supplemental defined-contribution plans, each of
which provides its respective employees with an amount substantially equal to
the difference between the amount that would have been payable under the applicable
defined-contribution plan in the absence of legislation limiting retirement benefits
and the annual earnings that may be considered in calculating matching contributions
and retirement contributions under taxqualified defined-contribution plans, and
the amount actually payable under such plans.
PERSONAL LOANS AND SEVERANCE AGREEMENTS No loans were
granted to the Executives during 2005 or were outstanding as of December 31, 2005.
During 2005, one Executive received USD 327 942 as severance.
AUDIT AND COMPLIANCE COMMITTEE Management is responsible
for creating the financial statements and managing the reporting process. Further,
Management is responsible for designing internal controls over financial reporting
and assessing and reporting on the effectiveness of those internal controls. The
Audit and Compliance Committee (the “ACC”) reviews the Group’s financial reporting
process on behalf of the Board of Directors. For each
quarterly and annual financial release, Management’s Disclosure Review Committee
reviews the release for accuracy and completeness of the release’s disclosures.
The decisions taken by the Disclosure Review Committee are reviewed with the ACC
before publication of the financial release. The internal
audit function, which reports to the Chairman and works closely with the ACC,
reviews the effectiveness, efficiency and appropriateness of the internal control
systems, particularly regarding the protection of assets, the completeness and
accuracy of operational and financial information (with emphasis on internal reporting)
and the adherence to Novartis Group guidelines. The
independent auditor, PricewaterhouseCoopers AG (PwC), is responsible for expressing
an opinion on the conformity of the | | audited
financial statements with International Financial Reporting Standards (“IFRS”)
and compliance with Swiss law. Additionally, PwC is responsible for expressing
an opinion on Management’s assessment of the effectiveness of internal control
over financial reporting and for providing an opinion on the effectiveness of
internal control over financial reporting. The ACC
is responsible for overseeing the conduct of these activities by the Group’s Management
and PwC. During 2005, the ACC held 9 meetings. PwC attended all meetings of the
ACC and all matters of importance were discussed. PwC also attended one meeting
of the Board of Directors of the Group. PwC provided to the ACC the written disclosures
required by US Independence Standards Board Standard No. 1 (Communications
with Audit Committees), and the ACC and PwC have discussed the auditors’ independence
from the Group and its Management. Based upon the
reviews and discussions with Management and the independent auditors referred
to above, the ACC recommended to the Board of Directors, and the Board approved,
inclusion of the audited financial statements in the Group’s Annual Report for
the year ended December 31, 2005.
DURATION OF
THE MANDATE AND TERMS OF OFFICE OF THE INDEPENDENT AUDITORS
The ACC proposed to the Board of Directors the independent auditor for election
at the Annual General Meeting. PwC assumed the existing auditing mandate for Novartis
in 1996. The head auditors responsible for the mandate, Mr. Robert Muir and Mr.
Daniel Suter, began serving in their roles in 2005 and 2003, respectively.
POLICY
ON PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES OF INDEPENDENT AUDITORS The
ACC’s policy is to pre-approve all audit and non-audit services provided by PwC.
These services may include audit services, audit-related services, tax services
and other services, as described below. Pre-approval is detailed as to the particular
service or categories of services, and is subject to a specific budget.
PwC and Management report to the ACC regarding the extent of services provided
in accordance with this pre-approval and the fees for the services performed to
date on a quarterly basis. The ACC may also pre-approve additional services on
a case-by-case basis. | |
