Form 20-F 2005

Financial Statements and Other Communications with shareholders
In connection with any shareholders’ meeting, we must provide a set of documents including our Annual Report and a summary
of the results of the five previous fiscal years to any shareholder who so requests.
French corporate law requires that a special report be provided to the ordinary shareholders’ meeting regarding stock options
authorized and/or granted by the Company.
Pursuant to the French Financial Security Law of August 1, 2003, the Chairman of our Board prepared a special report to the annual
general shareholders’ meeting regarding the terms of preparation and organization of the workings of our Board of Directors, the
terms of internal controls procedures implemented by our Company and the restrictions, if any, that our Board of Directors has
placed on powers granted to the Chief Executive Officer (Directeur général). More precisely, this report describes our internal control
objectives, the organization of internal control participants and internal control procedures in place. This report will be presented
to the combined extraordinary and ordinary shareholders’ meeting of April 28, 2006.
Dividends
We may only distribute dividends to our shareholders from our stand-alone net income in each fiscal year (after deductions for
depreciation and provisions), as increased or reduced by any profit or loss carried forward from prior years, less any contributions
to the reserve accounts pursuant to law or our by-laws.
Legal reserve
French law provides that French sociétés anonymes such as our Company must allocate 5% of their unconsolidated statutory
net profits in each fiscal year, after reduction for losses carried forward from previous years, if any, to a legal reserve fund before
dividends may be paid with respect to that year. Funds must be allocated until the amount in that fund equals 10% of the aggregate
nominal amount of the issued and outstanding share capital. This restriction on the payment of dividends also applies to each of
our French subsidiaries on an unconsolidated basis. The legal reserve constitutes a legal guarantee for third party dealing with us
and, in this respect, they may not be distributed to shareholders, nor used by us to purchase treasury shares. In the event of loss,
the legal reserve funds will be used to compensate such loss in the absence of any other available reserve. At December 31, 2005,
our legal reserve was approximately €32 million.
Approval of dividends
Upon recommendation of our Board of Directors, our shareholders may at the annual general meeting decide to allocate all or part
of distributable profits among special or general reserves, to carry them forward to the next fiscal year as retained earnings, or to
allocate them to the shareholders as dividends. Our Board of Directors may propose a dividend for approval by the shareholders
at the annual general meeting of shareholders.
We must distribute dividends to our shareholders pro rata according to their shareholdings.
Interim dividends
In addition, if we have earned distributable income since the end of the preceding fiscal year, as reflected in an interim income
statement certified by our auditors, our Board of Directors may distribute interim dividends, to the extent of the distributable income
without shareholder approval, subject to French corporate law and regulations.
94 Form 20 - F 2005 - Rhodia