I: Taxable income

I. (Not applicable)

II. - 1) Distributions by venture capital companies that meet the conditions set forth in Article 1-1 of Act no. 85-695 of 11 July 1985 on various economic and financial provisions, deducted from net capital gains on disposals of securities made by the company during financial years ending on or after 31 December 2001 are taxed under the conditions set out in 1 or 2 of Article 200 A when the shareholder is an individual domiciled in France for tax purposes within the meaning of article 4 B, or subject to the withholding tax provided for in article 2 of 119 bis when they are paid in a non-cooperative State or territory within the meaning of article 238-0 A other than those mentioned in 2° of 2 bis of the same Article 238-0 A, or subject to this same withholding tax at the rate of 12.8% when the shareholder is an individual domiciled outside France for tax purposes.

However, when these distributions relate to shares giving rise to different rights over the company's net assets or income and allocated on the basis of the person's status and are paid to the employees or managers mentioned in the first paragraph of 8 of II of Article 150-0 A, the tax arrangements provided for in 1 or 2 of Article 200 A apply subject to compliance with the following conditions:

1° These shares have been subscribed or acquired, for a price corresponding to the value of the shares, by the employee or manager who is the beneficiary of the distribution;

2° All the shares in the same venture capital company giving rise to different rights to the company's net assets or income and allocated according to the status of the person satisfy the following conditions:

a) They constitute one and the same class of shares;

b) They represent:

- at least 1% of the total amount of subscriptions in the company for its fraction less than or equal to one billion euros;

- and at least 0.5% of the fraction of the total amount of subscriptions in the company that exceeds one billion euros.

By way of derogation, a different percentage may be set by decree for certain categories of companies, after obtaining the opinion of the Autorité des marchés financiers;

c) The distributions to which these shares give entitlement are paid at least five years after the date of issue of these shares;

3° The employee or director who is the beneficiary of the distribution receives normal remuneration under the employment contract or corporate office that enabled him to subscribe for or acquire these shares.

2) Distributions deducted from profits made as part of their corporate purpose as defined in article 1-1 of the aforementioned law no. 85-695 of 11 July 1985 are exempt when the following conditions are met:

1° The shareholder is resident for tax purposes in France or in a country or territory that has concluded an administrative assistance agreement with France to combat tax evasion and avoidance;

2° The shareholder holds his shares for at least five years from the date of their subscription or acquisition;

3° The proceeds are immediately reinvested during the period mentioned in 2° in the company either in the form of a subscription or purchase of shares, or in a blocked account ; the exemption then extends to the interest on the account, which is released when the account is closed;

4° The shareholder, his or her spouse and their ascendants and descendants do not together hold, directly or indirectly, more than 25% of the rights in the profits of companies whose securities are included in the assets of the venture capital company, or have not held this share at any time during the five years prior to the subscription or acquisition of the shares in the venture capital company.

The provisions of 2 do not apply to shares in venture capital companies giving rise to different rights to the net assets or income of the fund and allocated according to the status of the person, nor to the distributions mentioned in the first paragraph of 1 of this II paid in a non-cooperative State or territory within the meaning of Article 238-0 A other than those mentioned in 2° of 2 bis of the same Article 238-0 A.

III. Amounts that have been exempt from income tax are added to the taxable income of the year in which the company or taxpayer ceases to meet the conditions set out above.

However, the exemption is maintained in the event of the transfer of shares by the taxpayer when he or she or one of the spouses subject to joint taxation is in one of the following cases: disability corresponding to classification in the second or third of the categories provided for in article L. 341-4 of the Social Security Code, death, retirement or redundancy.