ADSs are equity securities known as "American Depositary Shares," and Novartis ADSs trade on the New York Stock Exchange under the trading symbol "NVS" at prices quoted in US dollars. Each ADS represents one Novartis "ordinary share." Ordinary shares are the Swiss equivalent of common stock in a US corporation. Novartis ordinary shares trade on the Swiss Exchange at prices quoted in Swiss francs. Novartis announces its cash dividends in Swiss francs. However, dividends declared on ADSs will be paid in US dollars.

The following is a summary of the material provisions of the Plan, but does not restate the Plan in its entirety. The following summary is subject to, and is qualified in its entirety by reference to, all the provisions of the Plan.

If you wish to obtain a copy of the Plan or have any questions about the Plan, you may call JPMorgan Chase, the administrator of the Plan, at 1-877-816-533

Eligibility and enrollment

The Plan is open to investors residing in the United States, its territories and possessions. You will not be required to pay an enrollment fee or brokerage fee for the purchase of ADSs.

New investors

If you do not yet own any ADSs, you may enroll in the Plan by completing the Plan authorization form and returning it to the administrator with a check or money order for a minimum of USD 500 and up to a maximum of USD 120 000.

Registered ADS holders

If you have at least 10 ADSs registered in your own name, you can enroll your ADSs in the Plan by completing the Plan authorization form and returning it by mail to the administrator.

"Street name" Holders

If you already own ADSs through a bank nominee or broker in "street name," you may enroll in the Plan by instructing your bank, broker or trustee to have at least 10 of your ADSs registered in your name. You can then enroll your ADSs in the Plan by completing the Plan authorization form and returning it by mail to the administrator.

All completed authorization forms should be returned to the administrator by first-class mail, return receipt requested, to:

Novartis ADS Direct Plan
c/o JPMorgan Chase Bank
PO Box 2408
South Hackensack, NJ 07606-3408

Novartis reserves the right to deny, modify, suspend or terminate participation by any person or entity.

Additional investments in ADSs

After enrollment, you may buy additional ADSs twice a week by mailing a check or money order to the administrator or by automatic monthly bank debits, in an amount of at least USD 100. In addition, you may purchase additional ADSs online through the administrator's website, www.adr.com. You may combine checks or money orders with automatic monthly bank debits and investments through the Internet as long as your total additional investment in each calendar year does not exceed USD 120 000. The administrator will not charge you any fees for participating in these additional investments.

Checks and money orders

Checks and money orders received by the administrator will be invested in additional ADSs within three business days or, if the trading market for ADSs is closed, then on the next business day after the third business day that the trading market for ADSs is open. Checks and money orders should be made payable to "JPMorgan Chase Bank, N.A. - Novartis."

Automatic monthly bank debits

You may purchase ADSs by authorizing automatic monthly debits, in a minimum amount of USD 100 per month, from your bank account. You may do so through the administrator's website or by completing Section 4 of the Plan authorization form and sending your completed form to the administrator by mail. Funds will be debited from your bank account on or about the 15th of each month and will be invested within three business days, or if the trading market for ADSs is closed, on the next business day after the third business day that the trading market for ADSs is open.

Once the administrator receives your completed authorization form, it will take the administrator four to six weeks to process the form. You must notify the administrator in writing by mail, online through the administrator's website or by telephone, to change or terminate this automatic debit feature. Please allow about two weeks from the date the administrator receives your instructions for a change or cancellation to take effect.

Conducting transactions through the internet

You may authorize monthly investments by automatic bank debits online. You may complete the authorization form electronically and forward the authorization form to the administrator. In addition, you can purchase additional ADSs online through the administrator's website. You can access the administrator's services at its website, www.adr.com.

Returned checks; failed transfers

The administrator will process only those purchases for which it has received good funds. If your check is returned or an electronic debit from your bank account fails due to insufficient funds, the administrator will not process your request until it receives good funds covering your purchase.

Pricing

The price of ADSs purchased pursuant to the Plan will be calculated differently depending upon whether the transactions are executed directly with Novartis, in the open market or in negotiated transactions:

• Open market or negotiated transactions ? The price of ADSs purchased in the open market or in negotiated transactions will be the weighted average price per ADS of all ADSs purchased for the Plan on the date of the purchase.
• Transactions with Novartis ? The price of newly issued ADSs, representing ordinary shares purchased by the administrator from Novartis and deposited with a custodian bank, will be the average of the high and low sale prices of ADSs (as published in the Wall Street Journal reports of the New York Stock Exchange Composite Transactions) on the date of the purchase, or if the New York Stock Exchange is closed on that date, on the next day that the New York Stock Exchange is open.

Neither the administrator nor you will be able to purchase ADSs at a specific date or time or at a specific price. It is up to the independent broker-dealer used by the Plan to determine when and at what prices ADSs will be bought. You will bear any risk associated with fluctuations in the market price of ADSs while investment funds are held pending investment. No interest will be paid on your funds pending investment.

Source of ADSs

The administrator will purchase ADSs on the New York Stock Exchange, in the over-the-counter market or in privately negotiated transactions twice a week, subject to any waiting periods required under the applicable securities laws or stock exchange regulations.

The administrator also may purchase ordinary shares directly from Novartis, deposit the ordinary shares with a custodian bank and issue an equivalent number of ADSs. Novartis will use the proceeds it receives, if any, from the sale of such newly issued ADSs, representing ordinary shares purchased directly from Novartis, for general corporate purposes.

Novartis determines the source of ADSs used to fulfill Plan requirements. Subject to certain regulatory restrictions on the frequency with which Novartis can change its determination, Novartis may change its determination on the source of ADSs from time to time without giving you notice. Novartis expects that, generally, Plan purchases will be effected in open market transactions.

"Book-Entry" account

If not otherwise instructed, the administrator will hold the ADSs in the Plan for you in a book-entry account. ADS ownership in book-entry form means that, while you will have full ownership of the ADSs that you have purchasd pursuant to the Plan, you will not receive a paper stock certificate. Book-entry accounts eliminate the risk and expense of replacing lost or stolen American Depositary Receipts ("ADRs"), assure that your ADSs are always available if you need to deliver them for transfer, and avoid costs you would incur for maintaining a safe deposit box or other place to store your ADRs.

American Depositary Receipts

An ADR is a paper stock certificate that represents ADSs. If you prefer to hold your ADSs in certificated form, you may request an ADR. You can obtain ADRs for any whole ADSs in your Plan account at any time by contacting the administrator in writing, by mail, through the administrator's website or by telephone. The administrator will mail you ADRs for the requested number of whole ADSs within 30 calendar days of receipt of your request.

ADRs will be issued in the name(s) in which the Plan account is registered, unless you instruct the administrator otherwise. If an ADR is to be issued in a name other than your Plan account registration, the administrator will require a signature guarantee.

ADR safekeeping

If you hold ADRs representing ADSs, whether or not such ADSs were acquired under the Plan, you have the option of depositing your existing ADRs for safekeeping in your Plan account by sending your ADRs by registered mail, return receipt requested, to the administrator with written instructions to deposit them in your Plan account in book-entry form. Do not endorse the ADRs or complete the assignment section of the ADRs. Novartis recommends that you send your ADRs by registered mail, return receipt requested, and insure them for 2% of the market value of the underlying ADSs or a minimum of USD 20. To ensure against loss resulting from mailing your ADRs, the administrator provides mail insurance free of charge for ADRs valued at up to USD 25 000 when you send them by certified mail and request a return receipt.

Transaction statements

Each time that you purchase, reinvest dividends, sell, transfer or withdraw ADSs through the Plan, you will receive a statement from the administrator confirming your transaction. Each statement will include a transaction request form to help you make additional investments, sales, transfers or withdrawals. You can also obtain transaction request forms at any time from the administrator. You may request duplicate transaction statements, at no cost, at any time by contacting the administrator.

Annual statements

You will receive annual statements reflecting your account balance and all transactions relating to your Plan account, including reinvestment of dividends. You may request duplicate annual statements, at no cost, at any time by contacting the administrator.

Shareholder rights and privileges

As a plan participant, you enjoy all the rights and privileges associated with the ownership of ADSs. You will receive all shareholder communications, including annual reports and proxy statements. You will be given the opportunity to vote the ADSs that you hold pursuant to the Plan; however, fractional ADSs cannot be voted.

If you do not elect otherwise, all cash dividends declared on ADSs that are enrolled in the Plan will be reinvested automatically in additional ADSs. The administrator will credit your Plan account with the purchased ADSs, including any fractional ADSs, within 30 calendar days of the dividend payment date.

If you wish to change your dividend reinvestment election, you must instruct the administrator by mail, Internet or telephone to reinvest the cash dividends on all, a portion or none of your ADSs that are held in the Plan. Your instructions will be effective commencing with the following dividend payment date if received two business days before the applicable dividend record date. The dividend record date normally will be about four to six weeks prior to the dividend payment date.

The payment of dividends is at the discretion of the Board of Directors of Novartis. The Board may change the amount and timing of dividends at any time without notice.

If Novartis declares a split of its ADSs, your account under the Plan will be credited with the appropriate number of additional ADSs on the effective date of the split. If Novartis declares a split of its ordinary shares, your existing ADSs will represent the appropriate number of additional ordinary shares distributed pursuant to the share split.

In the event that Novartis offers any share subscription or other rights to holders of its ordinary shares, to the extent that such rights are made available to holders of ADSs, the administrator will make them available to you with respect to the whole number of ADSs that you hold in the Plan. To the extent that such rights are not made available to holders of ADSs, they will be sold for the benefit of such holders, and the administrator will allocate your share of the proceeds of such sale to your account in the form of additional purchased ADSs.

Please notify the administrator immediately of any change in your name or address.

As a participant, you can arrange with the administrator to sell all or a portion of the ADSs in your Plan account on days that the trading market for ADSs is open. Sale requests received by the administrator by 12:00 p.m., Eastern Standard Time, will be processed on the same day. You may only sell whole ADSs held in your Plan account. Fractional ADSs will be cashed out only upon termination of your Plan account. The administrator cannot accept requests to sell your ADSs at a specific time or at a specific price. The administrator will deduct a USD 15 transaction fee and a brokerage commission of USD 0.12 per ADS from the sale proceeds and will forward a check for the remaining balance to you within 15 business days after it receives your sale request. You will not be required to pay any other fees or charges for selling your ADSs.

Voluntary withdrawal by participant

You may terminate your participation by telephone, through the internet or by completing a transaction request form that you obtain from the administrator. Your termination request generally will be processed on the day it is received by the administrator or on the next business day.

Unless you instruct otherwise, upon termination of your account, the administrator will issue you an ADR representing all of the whole ADSs in your account. The administrator will liquidate any fractional ADSs in your account based on the sale price of ADSs on the date of liquidation and will send you a check for the cash value of fractional ADSs. You will not be charged any fees for the issuance of the ADR or liquidation of your fractional ADSs.

When terminating your account, you may also request that all or part of the ADSs in your account be sold. Please refer to the section of the Plan prospectus entitled "Sales of ADSs." ADSs sold in connection with terminating your account (including any fractional ADS) will be priced as discussed in the section of the prospectus called "Sales of ADSs - Pricing."

Dividends payable on ADSs that you hold after terminating your account will not be reinvested, but will be sent directly to you.

Termination by the administrator

If you maintain less than 10 ADSs in your account under the Plan and the ADSs in your account are worth less than USD 500, the administrator may notify you that it will terminate your account if you do not invest enough additional funds to have 10 ADSs or ADSs worth at least USD 500 in your account.

If you do not make such investments within three months of receiving such a notice, the administrator may then terminate your account. In the event of such termination, the administrator will issue you an ADR representing all the whole ADSs in your account. The administrator will liquidate any fractional ADSs in your account based on the sale price of ADSs on the date of liquidation, and will send you a check for the cash value of fractional ADSs. You will not be charged any fees for the issuance of the ADR or liquidation of your fractional ADSs.

The information set forth below summarizes certain US federal income tax consequences of participation in the Plan. The information is not intended to be a complete description of all such consequences, and it does not discuss any state, local, Swiss withholding or other non-US tax considerations that may be relevant to participation in the Plan. The description of US federal income tax considerations may be affected by future legislation, IRS rulings and regulations and/or court decisions (possibly on a retroactive basis). For these reasons, participants should consult their own tax advisors with respect to the US federal, state, local, Swiss withholding and other income tax consequences of participation in the Plan. The following discussion applies only to investors that are US persons and that will hold ADSs as capital assets.

In general, all your dividends, whether paid to you in cash or reinvested, are considered taxable income to you at the time the dividends are received or reinvested. In addition, brokerage commissions on purchases of ADSs purchased through the Plan, which will be paid by Novartis on your behalf, will be treated as distributions subject to US federal income tax in the same manner as cash dividends. Shortly after the end of the year, the total amount of dividends and other distributions will be reported to you and the Internal Revenue Service (the "IRS") on Form 1099-DIV.

Under this general rule, the cost basis for US federal income tax purposes of ADSs purchased through the Plan with reinvested dividends or cash investments is the price at which the ADSs are credited to your Plan account (see "Additional Investments in ADSs ? Pricing"), increased by the amount of the brokerage commissions, if any, with respect to such ADSs paid by Novartis on your behalf.

Generally, you will not realize gain or loss for US federal income tax purposes upon the purchase and deposit of the ADSs in your Plan account, or the receipt of ADRs for ADSs held in your Plan account. However, you generally will realize gain or loss upon the sale by the administrator of whole ADSs held in your account (the Plan precludes a sale of fractional ADSs) or upon the sale of ADRs by yourself in the open market. The amount of realized gain or loss, if any, is based on the difference between the amount you receive for the ADSs and your cost basis in the ADSs. Shortly after the close of the year, you will receive a Form 1099-B reflecting the proceeds from the sale of any ADSs executed by the administrator.

The above rules may not be applicable to certain participants, such as tax-exempt entities. These participants should consult their own tax advisors.

In general, information reporting requirements will apply to dividends or sale proceeds in respect of the ADSs paid within the United States, other than to certain exempt recipients, including corporations. In addition, under certain circumstances, you may be subject to "backup withholding" with respect to dividends paid on the ADSs or the proceeds of any sale of the ADSs, unless you (i) are a corporation or fall within certain other exempt categories, or (ii) provide a correct Taxpayer Identification Number ("TIN"), certify that you are not subject to backup withholding and otherwise comply with applicable requirements of the backup withholding rules.

Any amount withheld under the backup withholding rules generally will be creditable against your US federal income tax liability, provided that you furnish the required information to the IRS in a timely manner. If you do not provide a correct TIN, you may be subject to penalties imposed by the IRS.

Please retain your account statements to establish the cost basis of ADSs purchased under the Plan for income tax and other purposes.