1. Actual GIS Consumption - PxQ Charge out Guidance July 2010 GIS Finance July 2010

2. 2 | Charge out Guidance| GIS Finance | Business Use Only Content  Charge-out Principles  Charge back process  Back up

3. 3 | Charge out Guidance| GIS Finance | Business Use Only 2010 charging of GIS operational costs to Divisions Monthly charges based on quarterly snapshots of quantities  Principles Reflect GIS actual consumption in local divisional financial income statements based on quarterly quantity snapshots (at the end of each quarter) validated by local divisional CIOs.  Each validated quarterly snapshots will be used as a basis for one quarterly charge out cycle: SnapshotApplet Charge out period Dec 09 (V3.1)  Q1 March 2010(V3.2)  Q2 June 2010(V3.3)  Q3 September 2010 (V3.4)  Q4 (Until validated Qs are available, the previous ones will be used for the monthly charge out)

4. 4 | Charge out Guidance| GIS Finance | Business Use Only Q1Q2 Q4 Dec 09 Q3 Collection /validation of Dec 09 quantities Dec 10 Collection /validation of March quantities Collection /validation of June quantities Collection /validation of Sept. quantities Q2 Charge out in June (March Qs) Q3 Charge out in September (June Qs) Q4 Charge out in December (Sept. Qs) Q1 Charge out in March (Dec 09Qs) 2010 charging of GIS operational costs

5. 5 | Charge out Guidance| GIS Finance | Business Use Only Charge out Mechanism GIS to Customer GIS to customer re-charging  As of 2009 GIS will use a Service Catalogue for standard offered services and related prices.  Prices (p) are fixed for one year and charges are depending on actual consumption of the rendered services (q)  PxQ.  Charges to customers (Reporting Units - PH, SDZ, OTC etc.) will occur within each Legal Entity (by booking a credit on Corporate GIS and a debit on the Div./BUs cost centers within the same Legal Entity).  Country Cost Basel (CCB) for PH will be replaced with local charges within each Legal Entity.  No more inter-company charges (GIS to Customer) SandozCorporate GIS Legal Entity 1 Legal Entity 2 GIS to customer PharmaCorporate GIS GIS to customer

6. 6 | Charge out Guidance| GIS Finance | Business Use Only Content  Charge-out Principles  Charge back process  Back up

7. 7 | Charge out Guidance| GIS Finance | Business Use Only Charge back process in general  GIS Finance to send out a detailed reports (by Divisions and by legal entity in PDF) and a summary report (in Excel) to Site/ Account managers and BPAs for each Applet in corresponding customer structure The PDF reports consists of quarterly and average quantities and charge out amounts in LC. The summary report shows the total amount to be a charged for YTD of the charging month in each legal entity by Division, global customers (for Pharma and Sandoz) and local customers in TUSD  Site/Account Managers to contact local Finance teams Share and explain charge out data Ensure local Finance organization is processing these amounts (book delta to existing amounts e.g. Budget figures) in order to ensure correct YTD reporting  Local Finance to book corresponding charge out as communicated by local GIS/GIS Finance and ensure correct reporting in IS_31

8. 8 | Charge out Guidance| GIS Finance | Business Use Only Charge back process – If Consuming entity is not the service delivering entity  Certain services are delivered by GIS out of a different reporting entity than the receiving reporting entity e.g. GIS Basel is providing services to Sandoz Holzkirchen  Principle is that the charges have to be booked were the services are consumed  The attached summary report lists these situations based on the customer definitions in each Applet  When preparing the charge out, please ensure that all charges are included in your reporting entity – even if services are delivered from a different reporting entity as per the attached spreadsheet.  As a consequence, The entity which delivered the service will not book any income or charges for these services The entity which received the service will debit the GIS customer for the charges according to PxQ and book the corresponding credit (income) in the local GIS cost center and report accordingly in IS_31.  Please note that this report is in TUSD – in order to get to your local currency amount you need to use the corresponding TGT 2010 rates for translation

9. 9 | Charge out Guidance| GIS Finance | Business Use Only July YTD (year to date) charge out composition  July charge out is based On December 2009 quantities (Applet V3.1) for January, February and March (Q1) On March 2010 quantities (Applet V3.2) for April, May, June (Q2) and July (to be replaced with June data once validated)

10. 10 | Charge out Guidance| GIS Finance | Business Use Only Three steps to be performed to reflect the correct charge- out amounts in the FCRS IS_31 form  Ensure local Finance teams will receive the charge out information – and be prepared to answer any questions  Charge-out YTD to be reflected in local ERP systems – to be performed on a monthly basis Income to be booked under Corporate (GIS Cost Center) and credit in a corresponding Divisional/BU Cost Center in the same legal entity (please refer to slide 8)  Update monthly FCRS reporting accordingly Charge out amounts to be reported in IS_31 in corresponding divisional lines: 620 – 665 The detailed description of IS_31 reporting can be found in the Novartis Accounting Manual (NAM). http://www.finance.novartis.intra/FRAdoc/productif- accountingmanual/Default.htm

11. Back up

12. 12 | Charge out Guidance| GIS Finance | Business Use Only GIS global and local re-charging GIS to GIS general GIS to GIS re-charging - general GIS inter-company charging will...  … be driven by statutory/tax considerations  … be based on actual and/or estimated costs (not GIS service catalog prices) agreed in signed SLAs 1. ... be accounted GIS to GIS only, with no impact on the customer (Reporting Units – PH, SDZ, OTC etc.)  … do not require to be performed monthly, but can be completed quarterly or even annually.  Decisions on inter-company charging are made by Finance/GIS Finance. SandozCorp. GIS Legal Entity 1 Legal Entity 2 PharmaCorporate GIS GIS to GIS 1) Service Level Agreement usually signed between two or more Legal Entities defining services and related charges.

13. 13 | Charge out Guidance| GIS Finance | Business Use Only GIS global and local back charging Summary SandozCorp. GIS PharmaCorporate GIS GIS to customer Legal Entity X1 Legal Entity X2 GIS to GIS - local GIS to customer PharmaCorporate GIS GIS to customer Legal Entity, Y1 GIS to GIS – cross border Country X Country Y GIS to customer – commercial driven  Based on service catalogue  Monthly cost center charges  Within each Legal Entity, no inter-company  Responsibility with GIS Finance GIS to GIS – fiscal driven  Based on costs, fiscal/statutory requirements and signed service level agreements (SLAs)  No monthly charging required (annual possible)  GIS to GIS only  no impact on customer (Div./BUs)  Decision with Finance/GIS Finance GIS re-charging - summary