GENERAL COMMENTS...7 HISTORICAL FINANCIAL INFORMATION...7

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1 French limited company (société anonyme) with a share capital of 1,965,401 euros , quai de Jemmapes Paris - France Paris trade and company register: Reference document This document is a free translation of the French language reference document that was filed with the French securities regulator (Autorité des marchés financiers, AMF) on April 25, 2012, in accordance with Article of the AMF's general regulations. This English version has not been approved by the AMF. This translation has been prepared solely for the information and convenience of English speaking readers. No assurances are given as to the accuracy or completeness of this translation, and Parrot assumes no responsibility with respect to this translation or any misstatement or omission that may be contained therein. In the event of any ambiguity or discrepancy between this translation and the French reference document, the French reference document shall prevail. The French document is available on the AMF site ( and the Parrot site ( The English document is only available on the Parrot site. A copy of this document may also be obtained free of charge by calling or sending a letter to Parrot, Investor Relations, 174 quai de Jemmapes, Paris, France.

2 Contents 2011 Reference Document GENERAL COMMENTS...7 HISTORICAL FINANCIAL INFORMATION...7 I. RESPONSIBILITY FOR THIS DOCUMENT Person responsible for the reference document Statement by the person responsible for the reference document...8 II. STATUTORY AUDITORS Incumbent statutory auditors Deputy statutory auditors Group fees for the statutory auditors and members of their network...10 III. SELECTED FINANCIAL INFORMATION Historical financial information...11 IV. RISK FACTORS Specific risks for the Group and its organization The Group depends on subcontractors for the manufacturing and assembly of its products In most countries where its products are sold, the Group depends on the development and extension of its commercial partnerships with its distributors and clients The Group could experience difficulties managing the risks linked to the international deployment of its activities and its growth on new international markets The Group could face difficulties in deploying its Group activities on mass retail markets Growth in the OEM business is exposing the Group to certain constraints The Group's success depends to a great extent on the development of Parrot's brand awareness The Group is dependent on certain key executives, engineers and sales managers whose departure could adversely affect its development The Company's main shareholder has the power to influence the Company's corporate decisions Future sales of Company shares could have an impact on the Company's stock price The Company does not intend to pay out dividends to its shareholders in the near future The company issues dilutive instruments which could have an impact on its capital The Group's earnings are subject to fluctuations which make them difficult to forecast The elements affecting the fourth quarter could have significant consequences on the Group's business results The Group could experience difficulties with integrating acquisitions Goodwill impairments may be recognized with a significant impact on the Group's earnings Risks relating to the Group's sector The Group is exposed to deteriorations in the economic environment The Group is dependent on the market environment for automotive and electronic products The Group may not be in a position to cope with growth in the markets The Group may not be in a position to cope with competition, especially if this were to increase on its markets The Group's target markets are subject to rapid technological change and frequent launches of new products The Group's business depends on the electronic components market The Group s activities are dependent on technical standards The Group s activities are dependent on regulations governing cellphone use while driving Financial risks Foreign exchange risk Rate risk Risk relating to treasury stock Liquidity and counterparty risk Risks relating to off-balance sheet commitments Legal risks Risks relating to products Intellectual property rights Insurance and risk coverage

3 V. INFORMATION CONCERNING PARROT Company history and development Corporate name and registered office Trade and company register, APE activity code Incorporation and life of the Company Legal form and governing legislation History Investments Investments carried out Investments underway...28 VI. OVERVIEW OF THE GROUP'S ACTIVITIES Main activities Products Development of activities over Main markets Market for wireless products Market for wireless handsfree products for vehicles Road safety: favorable regulatory framework Competitive advantages and environment Non-recurring items with an impact on the issuer's business Issuer's dependency on patents, licenses, industrial, commercial or financial contracts, or new manufacturing techniques Parrot s strategy Significant investments in research and development Opportunistic optimization of sales and marketing investments Flexible industrial strategy and effectively managed costs Customer service and after-sales service Quality and sustainable development Continuous quality improvement Sustainable development...55 VII. STRUCTURE Group structure Presentation of the Group's companies...57 VIII. PROPERTY, PLANT AND EQUIPMENT...60 IX. REVIEW OF THE FINANCIAL POSITION AND EARNINGS Review of the financial position Change in consolidated earnings Revenues Cost of sales and gross margin Operational costs Current operating income Non-current operating expenses Financial costs Earnings for the period Change in Parrot S.A. earnings Revenues External expenses Staff costs EBIT Net income External factors which might influence the Group's activities Five-year financial summary...66 X. CASH AND CAPITAL Cash

4 2011 Reference Document Sources and amount of cash flow Net cash from operations Cash from investment activities Net cash from financing activities Company financing lines Credit agreement Contractual obligations...69 XI. RESEARCH AND DEVELOPMENT R&D organization and strategy Innovation strategy and process Aftermarket technical division Group technologies Signal processing Parrot ASIC platforms Expertise in the Bluetooth technology Development of extended connectivity Mechanical conception and design Electronics Software development Image processing technologies Multistandard digital radio and television Intellectual and industrial property Brands and marks Patents Domain names Software Designs and models...78 XII. INFORMATION ON TRENDS Main trends with an impact on production, sales and inventories, sales prices and costs from the end of the last financial year through to the reference document registration date Known trends, uncertainties or demand or any commitment or event which might reasonably have a significant impact on the outlook for the current financial year...79 XIII. FINANCIAL OUTLOOK Outlook for XIV. ADMINISTRATIVE, MANAGEMENT, SUPERVISORY AND EXECUTIVE BODIES Board of Directors Offices held by directors and executives over the past five years Director biographies Conflicts of interest...84 XV. COMPENSATION AND BENEFITS Compensation and benefits in kind for the Company's executive officers Compensation and benefits in kind for Company directors and other corporate officers Company provisions for pensions or other benefits for directors and other corporate officers Corporate officers' capital interests Details of executive transactions to acquire, sell, subscribe for or exchange securities on the stock market Securities entitling holders to access the capital...88 XVI. ADMINISTRATIVE AND MANAGEMENT BODY OPERATIONS Company management Service agreements between members of the Board of Directors and the Company or any of its subsidiaries Audit and compensation committees Appointments and Compensation Committee Audit Committee

5 16.4. Corporate governance: Chairman's report on Overview of legal provisions Corporate governance and Board of Directors' operations Internal control procedures put in place by the Company Statutory auditors' report on the report drawn up by the Chairman of the Board of Directors of Parrot S.A XVII. EMPLOYEES Human resources Structure of the group Workforce Executive managers Company founder equity warrants, stock options and bonus shares for Group staff Company founder equity warrants Stock warrants Bonus shares Mandatory profit-sharing agreements Voluntary performance-related bonus agreement XVIII. MAIN SHAREHOLDERS Shareholding structure Current breakdown of the share capital and voting rights Change in the Company's capital Voting rights Issuer's control Agreements whose implementation could result in a change of control Information on the change XIX. OPERATIONS WITH RELATED PARTIES Information on regulated agreements and commitments Special statutory auditors' report on regulated agreements and commitments XX. FINANCIAL INFORMATION CONCERNING THE ISSUER'S ASSETS, LIABILITIES, FINANCIAL POSITION AND EARNINGS Consolidated financial statements Consolidated income statement Comprehensive income statement Consolidated balance sheet Consolidated cash-flow statement Change in consolidated shareholders' equity Appendix to the consolidated financial statement Statutory auditors' report on the consolidated financial statements for Parrot S.A. financial statements Parrot S.A. balance sheet Parrot S.A. Income statement Appendix to Parrot S.A.'s Financial statements Statutory auditors' report on the annual financial statements Interim financial information Dividend payment policies Arbitration and judicial proceedings Significant change in the commercial or financial position XXI. ADDITIONAL INFORMATION Share capital Amount of the share capital Non-capital securities Shares bought back over the past year Potential capital Authorized capital not issued

6 2011 Reference Document Information on conditions governing the capital Changes to the share capital during the last two fiscal years Bylaws Corporate purpose Members of administrative, management and supervisory bodies Rights and duties associated with shares Distribution of profits Changes to shareholder rights General meetings Clause likely to influence the Company's control Identification of shareholders Disclosure thresholds () Specific stipulations governing changes to the share capital XXII. SIGNIFICANT CONTRACTS XXIII. INFORMATION FROM THIRD PARTIES XXIV. PUBLIC DOCUMENTS XXV. EQUITY INTERESTS XXVI. INFORMATION PUBLISHED DURING THE PAST 12 MONTHS Regular and one-off disclosures Information released to the trade and specialized press Financial advertising Information published in the French official gazette (BALO) RESOLUTIONS FOR THE GENERAL MEETING ON JUNE 6, I. ORDINARY GENERAL MEETING II. EXTRAORDINARY GENERAL MEETING III. STATUTORY AUDITORS' REPORT ON THE CAPITAL OPERATIONS PROVIDED FOR UNDER RESOLUTIONS 10, 12, 13, 14, 15, 16, 17, 18, 19, 20 AND 22 FROM THE COMBINED GENERAL MEETING ON JUNE 6, IV. INDEX OF HEADINGS

7 General comments The company Parrot is referred to as the "Company". The "Group" refers to the Company and its subsidiaries: Parrot Inc., Waveblue LLC, Parrot Italia S.r.l., Parrot UK Ltd, Parrot GmbH, Parrot Asia Pacific Ltd, Parrot Trading (Shenzhen) Ltd, Parrot Iberia, S.L., Parrot Japan KK and Da Fact S.A.S. Investors are invited to carefully review the risk factors presented in Section IV "Risk factors" of the present reference document before taking their investment decision. If all or part of such risks were to occur, this would have an unfavorable impact on the Group's activities, position, financial results or objectives. This reference document presents: The Company's corporate financial statements for the 12-month period ended December 31, 2011, prepared in accordance with French generally accepted accounting principles; The Group's consolidated financial statements and the consolidated financial information for the 12-month period ended December 31, 2011, prepared in accordance with international financial reporting standards. These international accounting standards comprise the International Financial Reporting Standards (IFRS), the International Accounting Standards (IAS), and their interpretations, which have been adopted by the European Union at December 31, Unless indicated otherwise, the quantitative data used in the present reference document, and more specifically in Section VI "Overview of the Group's business", are extracted from the Group's consolidated financial statements presented under IFRS. The figures given in Section IX "Review of the financial position and earnings" of the present reference document are expressed in "million euros" ( '000,000) or "thousand euros" ( '000), rounded off to the nearest decimal. Historical financial information In accordance with the provisions of Article 28 of European Regulation 809/2004 of April 29, 2004, the present reference document includes references to the following information which readers are invited to refer to: For the year ended December 31, 2009: corporate financial statements (French accounting standards) and consolidated financial statements (IFRS) and the corresponding statutory auditors' reports, presented in Parrot's reference document filed with the AMF on April 30, 2010 under number D For the year ended December 31, 2010: corporate financial statements (French accounting standards) and consolidated financial statements (IFRS) and the corresponding statutory auditors' reports, presented in Parrot's reference document filed with the AMF on June 15, 2011 under number D

8 I. Responsibility for this document 2011 Reference Document 1.1. Person responsible for the reference document Henri Seydoux, Chairman and CEO 174 quai de Jemmapes Paris Tel: Statement by the person responsible for the reference document I certify that, having taken all reasonable measures to this effect, the information contained in the present reference document is, to the best of my knowledge, fair and accurate in all material respects and free from any omissions that could alter its substance. I certify that, to the best of my knowledge, the financial statements have been drawn up in accordance with the accounting standards applicable and faithfully reflect the assets, liabilities, financial position and earnings of the Company and all of the companies included in the basis for consolidation, and that the management report, included in this reference document, faithfully reflects the change in the business, earnings, and financial position of the Company and all the consolidated companies, as well as a description of the main risks and uncertainties faced by them. I have received a completion letter from the statutory auditors in which they indicate that they have verified the information relating to the financial position and financial statements given in this reference document and that they have reviewed the entire reference document. April 29, 2012 Henri Seydoux Chairman and Chief Executive Officer 8

9 II. Statutory auditors 2.1. Incumbent statutory auditors KPMG S.A., represented by Eric Lefebvre Immeuble KPMG - 1, cours Valmy Paris La Défense Cedex - France Nanterre trade and company register KPMG S.A. was appointed as the incumbent statutory auditor at the ordinary general meeting on June 29, 2001, for six (6) financial years. It was reappointed at the combined general shareholders' meeting on June 4, 2007 for six (6) financial years, ending further to the ordinary annual general meeting convened to approve the financial statements for the year ending December 31, DELOITTE Marque et Gendrot S.A., represented by Mr. Jean-Claude Berriex 185, avenue Charles de Gaulle Neuilly sur Seine Cedex, France Nanterre trade and company register BDO Marque et Gendrot S.A., now DELOITTE Marque et Gendrot S.A, was appointed as the incumbent statutory auditor at the ordinary general meeting on February 28, 2006, for six (6) financial years. Its office will therefore end further to the ordinary general meeting convened to approve the financial statements for the year ending December 31, A proposal will be submitted to shareholders at the next ordinary general meeting to appoint ERNST & YOUNG SAS, 1-2 Place des Saisons, Paris La Défense 1, Courbevoie, France, represented by Mr. Pierre Jouanne to replace DELOITTE Marque et Gendrot S.A. for a six-year period through to the ordinary general meeting convened to approve the financial statements for the year ending December 31, Deputy statutory auditors S.C.P. Jean-Claude André et Autres, represented by Mrs. Danielle Prut-Foulatière 2 bis, rue de Villiers Levallois-Perret - France (Nanterre trade and company register ) SCP Jean-Claude André et Autres was appointed as the deputy statutory auditor at the ordinary general meeting on February 28, 2006, replacing Mr. François Kimmel for the term left to run on his term of office. It was reappointed at the combined general shareholders' meeting on June 4, 2007 for six (6) financial years, ending further to the ordinary annual general meeting convened to approve the financial statements for the year ending December 31, Mr. Patrick Foulon 23, rue de Cronstadt Paris - France Mr. Patrick Foulon was appointed as the deputy statutory auditor at the ordinary general meeting on February 28, 2006, for six (6) financial years. His office will therefore end further to the ordinary general meeting convened to approve the financial statements for the year ending December 31, 2011.A proposal will be submitted to shareholders at the next ordinary general meeting to appoint AUDITEX SAS, 2 Place des Saisons, Paris La Défense 1, Courbevoie, France, to replace Mr. Patrick FOULON for a six-year period through to the ordinary general meeting convened to approve the financial statements for the year ending December 31,

10 2011 Reference Document 2.3. Group fees for the statutory auditors and members of their network KPMG DELOITTE net of tax % net of tax % Auditing Statutory auditing, certification, review of individual and consolidated accounts - Issuer 158, ,933 74% 65% 143, ,300 67% 60% - Fully-consolidated subsidiaries 56,255 72,382 26% 35% 71,885 69,930 33% 40% Other audits and services linked directly to the statutory auditing assignment - Issuer Fully-consolidated subsidiaries Subtotal 215, , % 100% 215, , % 100% Other services provided by networks to fully-consolidated subsidiaries Legal, tax, social 10,830 15, % 100% - 13, % Other Subtotal 10,830 15, % 100% - 13, % Total 225, , % 100% 215, , % 100% 10

11 III. Selected financial information The historical financial information selected by the Group and presented hereafter is extracted from the Group's consolidated financial statements for the years ended December 31 prepared under IFRS. DiBcom, a company that designs and markets high-performance integrated chipsets enabling radio and television reception in mobile and handheld environments. This firm was acquired on September 30, 2011 for 16,681,000 euros. Varioptic, a company that develops, designs and markets electrically-controlled miniature optics based on its proprietary and patented programmable liquid lens technology. This firm was acquired on May 5, 2011 for 7,937,000 euros (including an earnout for 3,000,000 euros). Following this acquisition program, each of these companies was merged. These mergers can be viewed as an internal restructuring operation aimed at rationalizing and optimizing operational and administrative management aspects by grouping all the material and human resources, particularly the research and development activities, together within the same entity. From a tax perspective, the mergers were carried out under Article 210A of the French general tax code. From an accounting and tax perspective, the effective date for these two mergers has been applied retroactively at January 1, Historical financial information This financial information must be read alongside the financial statements presented in Chapter XX "Financial information concerning the assets, liabilities, financial position and earnings" in the present reference document. Extracts from the Group's consolidated financial statements for the years ended Dec. 31, 2009, 2010 and 2011 (IFRS) Condensed income statement ( '000) Year ended December / 2010 % Revenues 168, , , % Gross margin 79, , , % % of revenues 47.34% 49.75% 53.20% 6.9% Income from ordinary operations(1) 7,405 31,653 34, % % of revenues 4.39% 13.10% 14.10% 7.8% Non-recurring items ,487 EBIT 7,405 31,653 32, % % of revenues 4.39% 13.10% 13.10% 0.5% Net income 9,577 27,831 28, % % of revenues 5.68% 11.52% 11.60% 0.7% (1) Since January 1, 2011, the French research tax credit (CIR) has been reclassified and deducted against research and development costs. For FY 2011, the research tax credit represents 5,172,000 euros. Quarterly revenues Q1 Q2 Q3 Q4 2011revenues per quarter 57,440 64,039 54,532 71, revenues per quarter 49,684 56,732 67,813 67, revenues per quarter 39,112 40,310 38,794 50,279 11

12 Condensed balance sheet ( '000) 2011 Reference Document / 2010 % Goodwill 21,125 21,076 44, % Non-current assets 9,808 13,647 29, % Current assets 137, , , % Total assets 168, , , % Shareholders' equity 114, , , % Non-current liabilities 4,922 5,029 6, % of which, long-term financial debt Current liabilities 45,644 36,591 97, % of which, short-term financial debt 1,172-29,741 Total liabilities 165, , , % Cash flow ( '000) Year ended December / 2010 % Cash and equivalents - year-start 44,606 76,035 62, % Cash flow from operations 15,106 45,928 44, % Working capital 17,571-20,260-4, % Net cash flow from operating activities 36,573 28,437 38, % Cash flow from investment activities -4,417-10,577-35, % Cash flow from financing activities ,678 16, % Cash and equivalents - year-end 76,035 62,844 83, % Other current financial assets - 27,961 33, % Net cash position 76,035 90, , % 12

13 IV. Risk factors 4.1. Specific risks for the Group and its organization The Group depends on subcontractors for the manufacturing and assembly of its products The Group is organized around a "fabless" model and does not operate any manufacturing or logistics units. The manufacturing and assembly of the Group's products are currently performed by a limited number of subcontractors. If contractual relations are broken off or difficulties are encountered with one of these subcontractors in relation to meeting their contractual commitments, and more specifically product quality or deliveries within the timeframes agreed on, or satisfying further increases in the Group's manufacturing requirements in the future, this could notably lead to stock shortages or higher manufacturing costs for the Group and have an unfavorable impact on its business, development, earnings and financial position. Based on the consolidated financial statements, the Group's purchases with its leading subcontractor represented around 69% of the Group's purchases in 2011, compared with 68% in Partnerships between the Group and its manufacturing, assembly and logistics subcontractors have been built up over several years in order to accompany the Group and are subject to a contractual framework. To date, the Group has never experienced any difficulties with its subcontractors. However, the Group cannot guarantee that this will continue in the future. To limit this risk the Group continuously works on double sourcing its strategic components through a buffer stock policy implemented with the subcontractors to sustain superior reactivity. Furthermore, manufacturing and assembly operations are carried out for the majority of the Group's products by subcontractors based in China. The legal, economic, climatic, political or geopolitical context in this region of the world could involve risks, particularly in terms of instability. The geographical distance involved with these production sites also results in longer transport times than if they were located in Europe. Within this context, the Group could experience difficulties meeting its customers' demands in the event of delays with deliveries or failings by any of its logistics providers In most countries where its products are sold, the Group depends on the development and extension of its commercial partnerships with its distributors and clients Although it maintains good relations with most of its commercial partners, the Group cannot guarantee the long-term viability of the various agreements entered into with its current partners beyond the term of their contracts, or compliance with contractual commitments (notably targets for sales, sales force deployment or marketing investments), nor can it guarantee that it will be able to develop the commercial partnerships needed for the development of its activities. If these risks were to occur, this could have a significant unfavorable impact on the Group's business, financial position, earnings or development. The first 10 clients represented 39.4% of the consolidated revenues in 2011 compared to 31.8% in 2010 The terms of payment usually applied vary from one country to another, but the average is around 66 days. Traditionally, the Group starts a commercial relationship with a new customer with payment on ordering, and only authorizes longer terms of payment when the commercial relationship is developing healthily and is likely to be long-term. No bad debts were recorded in 2011.The amount of bad debt recorded in 2010 represented 0.22% of the Group's revenues The Group could experience difficulties managing the risks linked to the international deployment of its activities and its growth on new international markets 91% of the Group revenues are generated outside of France. The international deployment of the Group's activities is likely to generate new risks and difficulties due in particular to: Group's lack of experience in certain regions; Potentially unfavorable tax impacts; 13

14 2011 Reference Document Quantitative and pricing restrictions on import-export operations and protectionist practices and regulations favoring local businesses in certain countries; A potential extension of terms of payment for sales made in certain foreign countries; More restrictive legislation and regulations applying to the Group's products; Limited intellectual property protection in certain countries; and Political instability in certain countries where the Group does business. These factors could have a significant unfavorable impact on the Group's business, financial position, earnings or development The Group could face difficulties in deploying its Group activities on mass retail markets The development and marketing of wireless mobile phone devices, particularly outside of the automotive world, entails a certain number of risks that could have an unfavorable impact on the Group's business, financial position, earnings or development. The success of the Group's products with the general public depends to some extent on their quality and reliability. Despite the Company's proven technical and technological expertise in the automotive sector, in which quality requirements are more demanding than for retail electronics, the Group cannot guarantee that its new wireless devices for mobile phones will not have any faults, will be in line with consumers' expectations, will not lead to any significant returns (greater than expected by the Group) and will not result in any claims against its liability. Furthermore, the wireless devices for mobile phones are distributed in part through distribution channels on which the Group has less experience than with its traditional channels. The significant success of the Parrot AR.Drone could enable the Group to better benefit from other potential new product launches and thus better control the risks related to these new activities Growth in the OEM business is exposing the Group to certain constraints In 2010 and 2011, the OEM business grew significantly, accounting for 46% of the Group's revenues at December 31, 2011.This growth, helping ensure the balanced breakdown of Parrot's revenues between its sales to distributors of Retail products and dedicated products for the automotive industry, was made possible by the development of the customer portfolio and market share gains internationally. Parrot is now a recognized player for on-board electronics with OEM and other manufacturers, chosen for its solutions at the cutting edge of technology and its ability to offer a high-performance industrial design. The majority of OEM contracts are entered into with automotive OEMs over one to four years. Under these contracts, the Group must meet very high quality standards and be able to supply significant quantities of products. Parrot's shortcomings, particularly in terms of sourcing and delivery capacity and quality, could have a significant unfavorable impact on the Group's business, financial position, earnings or development The Group's success depends to a great extent on the development of Parrot's brand awareness The growth in the Group's market shares shows that the Parrot brand is today well considered and recognized on the wireless handsfree kit market for vehicles, among manufacturers and auto equipment producers, retailers and the consumers who use them. The Group is forging ahead with efforts to significantly strengthen Parrot's brand awareness with consumers, on its core business products, as well as new wireless devices for mobile phones outside of the automotive sector. The development of Parrot's brand awareness is dependent more specifically on the Group s ability to offer the public innovative products that are in line with their expectations, in terms of the quality of its products and its after-sales service, as well as its ability to develop attractive commercial operations in appropriate distribution channels. However, the Group cannot provide any guarantee that the efforts made to achieve this will succeed. If the Group is unable to defend and further strengthen the Parrot brand, it could notably result in a reduction in its market shares. 14

15 The Group is dependent on certain key executives, engineers and sales managers whose departure could adversely affect its development The Group's success depends on the quality and experience of the members of the Company s management team, including Mr. Henri Seydoux, Chairman and Chief Executive Officer and the Company's main shareholder on the filing date for this reference document. The Company's management team has vast experience of the market in which the Group operates. Stock warrants, bonus shares or stock options for Company shares, contributing significantly to their loyalty. However, the Group cannot provide any guarantee that these key members of staff will continue to work within the Group. Furthermore, the Group's success is linked to the expertise of its research and development team and its sales team. To ensure the long-term viability of its business, the Group more specifically ensures that the engineers in its research and development team have a range of skills. The Group's future success will depend in particular on its ability to attract, train, retain and motivate highly qualified staff and executives, but there is no guarantee that the Group will be able to achieve this. The departure of one or more key members of staff or executives or the Group's inability to attract highly qualified staff could have a significant unfavorable impact on the Group's business, financial position, earnings or development The Company's main shareholder has the power to influence the Company's corporate decisions On the filing date for this reference document, Mr. Henri Seydoux held 35.3% of the Company's capital and voting rights. In this way, with the Company's other shareholders not owning a very high interest, he could adopt all the resolutions submitted for approval by shareholders at ordinary and extraordinary general meetings. Mr. Henri Seydoux may in the future have a decisive influence over most of the Company s corporate decisions (e.g. payment of dividends, appointment of members of the Board of Directors, approval of financial statements or any decision to carry out significant operations for the Company) Future sales of Company shares could have an impact on the Company's stock price If one of the Company's principal shareholders, and Mr. Henri Seydoux in particular, were to sell off a significant number of Company shares on the market or the market were to perceive such a sale as imminent, this could result in a reduction in the Company's share price The Company does not intend to pay out dividends to its shareholders in the near future To date, the Company intends to use its operating cash flow to finance its business over the short and medium term. The Company does not intend to pay out any dividends to its shareholders in the near future. If the Company is considering the payment of dividends, the decision to pay such dividends and, in this case, the amount of such dividends will depend on the facts and circumstances seen when the decision is taken The company issues dilutive instruments which could have an impact on its capital The total number of Company shares that may be issued further to the exercising of securities entitling holders to access the Company's capital at December 31, 2011 represents: Stock warrants: 797,169 shares, representing a potential dilution of approximately 6.2% of the Company's capital; traditionally, the Company offsets issues of stock options by cancelling treasury shares; Bonus shares: 325,663 shares, with no potential dilution: traditionally the company acquires its own shares on the financial market through its share buyback program authorized at the General Shareholders meetings. For further details, please refer to Sections and 17.2, relating to securities with an equity component held by corporate officers and employees respectively. The following charts present the breakdown of the Company's capital structure (i) before the exercising of securities entitling holders to access the Company's capital as of December 31, 2011 and (ii) after the exercising of securities entitling holders to access the Company's capital as of December 31, 2011 (cf "Potential capital" in the present reference document). 15

16 2011 Reference Document The Group's earnings are subject to fluctuations which make them difficult to forecast The Group's earnings may vary significantly from one quarter to the next (cf hereafter), particularly since the Group is developing its products on new markets. This fluctuation makes it difficult to use quarterly earnings as indicators for possible future trends, and could have a significant unfavorable impact on the Group's business, financial position, earnings or development. In addition to general economic factors and factors affecting companies in general, a certain number of factors which are specific to the Group and its business sector may result in quarterly variations, and more specifically: The relative weighting of each one of the products that the Group may sell, particularly due to the variable nature of the margins achieved on its various products; The variations in the US dollar ($) in relation to the euro ( ), and more specifically the Group's exposure to the US dollar (cf "Foreign exchange risk" hereafter); and The Group's ability to reduce manufacturing costs for its products in order to maintain its margins The elements affecting the fourth quarter could have significant consequences on the Group's business results The percentage of revenues generated during the fourth quarter each year is significant, particularly due to the high level of sales over the end of the year (seasonal trend linked to the end-of-year holidays period). Unfavorable events arising during the 4th quarter of the year could have a disproportionate impact on earnings for the whole year in question. During the previous three years, the breakdown of revenues for each quarter was as follows: Q4 30% Q3 23% Q2 24% Q1 23% Q3 28% Q2 23% Q1 21% The Group could experience difficulties with integrating acquisitions Q4 28% In connection with its development the Group could implement an external growth strategy and may carry out acquisitions or investments. As such, the Group acquired in % of the ownership of Varioptic and DiBcom. No guarantees may be given that the Group will manage to successfully integrate the companies, technologies or assets acquired, generate the synergies expected, maintain uniform policies, procedures, controls and standards, maintain good relations with staff from the entities acquired or that the additional revenues generated by each acquisition will Q4 29% Q3 22% Q2 26% Q1 23%

17 justify the price paid for the acquisition in question. Any failure in terms of integrations could have a significant unfavorable impact on the Group's business, financial position, earnings or development. Varioptic and DiBcom were acquired at the end of 2011, at this stage the Group believes it is too early to comment on the specific risk related to these acquisitions Goodwill impairments may be recognized with a significant impact on the Group's earnings The Company recorded goodwill of 44.7 million euros in its consolidated accounts further to the acquisition of a 100% stake in Inpro Tecnologià S.L. in 2006, Waveblue LLC in 2007 and Varioptic and DiBcom in 2011 accounted as business combination where the goodwill generated was 4.4 million euros for Varioptic and 19.1 million euros for DiBcom. (cf Appendix to the Consolidated financial statement, note 10 Business Combination ). With IFRS, goodwill is not depreciated, but subject to an annual impairment test under IAS 36. If the recoverable value is lower than the book value of the goodwill, an impairment in the value of the goodwill is recognized, particularly further to events or circumstances with lasting and significant unfavorable changes affecting the economic environment or the assumptions or objectives retained on the acquisition date. The Company cannot guarantee that there will not be any unfavorable events or circumstances in the future which might result in it reviewing the book value of goodwill and recording significant impairments, which could have a significant unfavorable impact on the Group's earnings. Furthermore, in connection with the annual impairment test, the goodwill is allocated to the cash generating units identified within the Group. These cash generating units are defined based on the Group's organization. The test applied based on +1% over the discount rate has not led to any impairment of acquisition goodwill, with no need to recognize any impairment at December 31, Any subsequent changes in the Group's organization or changes to IFRS could also result in the Group recording impairments and have a significant negative impact on the Group's earnings Risks relating to the Group's sector The Group is exposed to deteriorations in the economic environment The Group's business is subject to the general economic conditions in its key markets, and particularly France, Spain and the UK for its Retail activities (51% of consolidated revenues in 2011), as well as the performance of the automotive industry in general for its OEM activities (46% of consolidated revenues in 2011). In most countries, consumer spending on electronics equipment is linked to the general economic climate and tends to decline during periods of economic crisis, unemployment, reductions in consumer spending levels and increases in cost of living and inflation. The diversified geographical spread of the Group's activities may help mitigate the difficulties encountered on certain markets (cf Geographical developments and Notes to the consolidated financial statements for 2011: Note 4 - Segment reporting). Currently, the low rate of penetration for solutions marketed to the automotive industry may contribute towards mitigating the slowdowns experienced on this market due to the general economic climate (cf OEM market). However, a global recession or severe or continued contractions in the Group's main markets could have a significant unfavorable impact on the Group's business, financial position, earnings or development The Group is dependent on the market environment for automotive and electronic products The market for consumer and specialized electronics is closely linked to the economic environment. The deterioration in the global economic environment is increasing the Group's uncertainty in terms of assessing its potential for growth. On the automotive market, the rate of growth is still difficult to determine and depends on various factors, including the economic environment, the penetration rate for the various in-vehicle solutions offered by Parrot and even the price of options sold by the manufacturers. A global deterioration in the economic environment or the automotive and retail electronics markets could have a significant unfavorable impact on the Group's business, financial position, earnings or development. 17

18 The Group may not be in a position to cope with growth in the markets 2011 Reference Document The majority of the Group's products (excluding OEM) are sold to retail customers at the point of sale, without any time lag between purchase and delivery. In this respect, effective management of inventories and the whole supply chain is essential to the Group's commercial success. In addition, growth in activities requires the Group to organize itself in order to meet demand and manage supplies, manufacturing and sales networks. The complexity of the management of sourcing and logistics flows could be heightened by the increase in the number of models, products and customers. In view of the seasonal nature of some of its products, particularly during the 4th quarter each year, and of the supply cycle of approximately 4 to 5 months, the Group is constantly looking to ensure that its inventory levels are appropriate. However, risks of stock shortages cannot be ruled out. Furthermore, the Group must ensure that suitable sales teams are put in place in line with demand. These teams may be managed directly by the Group or indirectly by distributors abroad. In this way, the Group may not be able to recruit or train teams in sufficient numbers to meet the level of demand from its customers, which could have a significant unfavorable impact on its business, financial position, earnings or development The Group may not be in a position to cope with competition, especially if this were to increase on its markets The markets on which the Group operates are competitive. The Group may not be able to effectively compete with its rivals, which could limit its ability to sell its products, reducing its market share. In this way, certain players competing against the Group may have access to greater resources, particularly concerning financial, technical or commercial aspects. Acquisitions or other strategic operations carried out by such players could also weaken the Group's position in relation to the competition. If competition on the market for the Group s products was to increase, this could notably lead to the Group granting price cuts on its products. New products offered by rivals could offer benefits over the Group's products (particularly in terms of features, technology or cost), which could make the Group's products less appealing. On the market for new wireless devices for mobile phone (excluding the automotive world), the number of competitors is potentially higher than on the market covering handsfree products for vehicles; certain potential competitors have access to very significant financial, technical and commercial resources and could introduce new products, in direct competition with the Group's products. Generally, the Group's competitive advantages result from its significant capacity for innovation, consolidated by its sound financial position, which enables it to be very responsive. However, if the Group was unable to cope faced with new competitors, this could have a significant unfavorable impact on the Group's business, financial position, earnings or development The Group's target markets are subject to rapid technological change and frequent launches of new products The market for the Group's products is characterized by accelerated technological change, increasingly demanding customers, frequent launches of new products and technological improvements. New products based on new or improved technologies or new communications standards could make the Group's existing products less appealing or harder to sell. To maintain its competitive position, the Group will need to improve its existing products and develop new products in time in order to keep pace with technological developments and satisfy the demands of its customers. If the Group does not succeed, its products could become hard to sell, which could have an unfavorable impact on its business, financial position, earnings or development. The Group's product development process is highly complex and continuous development efforts. Any delay with the development and marketing of new or higher performance products, or any delay with adapting to technological changes could have a significant unfavorable impact on the Group's business, financial position, earnings or development The Group's business depends on the electronic components market Components account for the majority of costs for finished products. The Group cannot guarantee that the price of certain basic electronic components will not increase significantly. Neither can the Group guarantee that all the components will always be available under similar conditions in terms of lead-times and volumes to those seen today. 18

19 To address the sourcing risk, the Group (i) has several subcontractors for its main components and (ii) may sometimes buy phases in advance and store items at its component assemblers' sites. These are then resold (with no margin, cf. "Other" revenues) to the assemblers in order to be integrated into the finished products. However, if these risks were to occur, particularly for components subject to a strong level of demand, this could have a significant unfavorable impact on the Group's business, financial position, earnings or development The Group s activities are dependent on technical standards The Group's products are based on specific technical standards and all types of connectivity, requiring choices to be made in terms of strategic technological platforms. The Group cannot guarantee that a new more effective, technology will not emerge and establish itself as a new standard The Group s activities are dependent on regulations governing cellphone use while driving Road safety legislation in the countries in which the Company sells its products, which more specifically forbids the use of hand-held telephones while driving, may be subject to future changes that could be unfavorable. Indeed, no guarantees can be given that any rapid or major changes to such legislation may occur, particularly with regard to forbidding any in-car phone use, even with a handsfree kit. In this area, no significant changes occurred during 2011 that might indicate a less favorable context for the Company's business. (cf on Driving and Cellphone usage regulation) Financial risks Foreign exchange risk The Group is exposed to two types of foreign exchange risk which may have an impact on earnings and equity: on the one hand, risks relating to the conversion, for drawing up the consolidated accounts, of the foreign currency accounts of consolidated subsidiaries with a different functional currency than the euro, and on the other hand, operational risks on operating or financial flows not denominated in the entities' operating currencies. To hedge its exposure to changes in the US dollar, the Group has made spot purchases of US dollars since January 1, 2010 and allocated them to cover needs for the four quarters following the purchase date. The management horizon for the hedging policy is one year, divided into four equal periods. At December 31, 2011, there were no dollars allocated for exchange rate hedging. In order to limit the impact of changes in the US Dollar on its profitability, the Group has modified its operational flows in order to reduce its net exposure by developing sales denominated in this currency. In 2011, since 55% of the Group's revenues, 93% of the cost of sales and 7% of operating expenditure were denominated in the US Dollar or currencies linked to the dollar, the Group is exposed to this currency's fluctuations against the euro. The Group did not hedge its net exposure to changes in the USD. At the end of December 2011, 49.6% of the Group's net cash was in US dollars or related currencies Rate risk The Parrot Group's rate risk management policy involves limiting the risks of changes in rates for drawdowns on variable-rate credit lines. The Parrot Group adopts a policy which is intended to ensure that all or part of the exposure to changes in interest rates on borrowings is covered by fixed rates. The Group takes out interest-rate swaps and classes them as hedging for drawdowns on the variable-rate credit lines. In view of the cash invested during the year in risk-free vehicles with underlying rates of up to one year, the impact of a 1% variation in the average rate of return would represent a (722,000) euros loss on the level of consolidated financial income. Lastly, the cash pooling system which has also been rolled out in order to optimize cash management within the Group, lending funds to or borrowing funds from subsidiaries as necessary, has made it possible to reduce the rate risks, repatriate surplus cash from certain subsidiaries and optimize the investment of free cash flow Risk relating to treasury stock 19

20 2011 Reference Document The Group does not hold any investments in shares, with the exception of treasury stock, in line with the share buyback program authorized by the general shareholders' meeting. Parrot's share price has historically been subject to significant variations, both up and down. These variations, which may continue, are dependent on numerous factors, such as the Group's financial performance levels, the sector's financial performance levels, technological innovations and more generally fluctuations on the stock markets. The value of treasury stock reclassified as equity represents 13,689,000 euros for 685,983 shares, with an average share price of Liquidity and counterparty risk Liquidity risk management is centralized by the Finance Division. Global cash management at Group level makes it possible to offset any internal cash requirements and surpluses. Parrot's financing policy aims to ensure that the Group has the liquidity needed to finance its assets, its short-term cash requirements and its development at all times, in terms of both the duration and the amounts, at the lowest possible cost. Financial assets at December 31, 2011 The counterparty risk represents the risk of a financial loss for the Group in the event of a customer or counterparty for a financial instrument failing to uphold its contractual obligations. This risk stems primarily from trade receivables. The net book value of financial assets represents the Group's maximum exposure faced with the credit risk. At December 31, 2011, the maximum credit risk exposure can therefore be broken down as follows: Trade receivables 55.8 million euros, in line with the Group's normal operating cycle: Other receivables: 10.6 million euros Other current financial assets: 33.9 million euros Cash and cash equivalents: 83.5 million euros In 2011, the Parrot Group's policy was to diversify its counterparty risk management by distributing investments among first-rate banking institutions and over various timeframes, in addition to regularly monitoring developments. Faced with the counterparty risk on trade receivables, a provision is recorded for bad debt, which may correspond to all or part of the amount, determined in view of the probability of the debt being collected. The credit risk is monitored at Group level by the «Cash & Credit Management» department. The Group monitors terms of payment with its subsidiaries on a monthly basis and records provisions for debts which it considers to be unrecoverable. To protect itself against the credit risk and therefore cover its risk of non-payment, the Group has put in place procedures for collecting funds and blocking customer accounts. A COFACE policy covers the non-collection of debt from certain French and foreign Company customers located within Regions "1" and "2" (respectively covering OECD countries and the rest of the world, based on criteria defined by COFACE) for sales of Company products, as well as sales made by the subsidiaries: Parrot GmbH, Parrot UK Ltd, Parrot Iberia S.L., Parrot S.r.l., Parrot Inc. (policy set up in this entity in 2010) and Parrot Asia Pacific Ltd. The amount of the cover represents 90% of the net debt covered excluding VAT. Financial liabilities at December 31, 2011 At December 31, 2011, financial liabilities primarily comprised: 1.0 million euros in non-current financial liabilities (non-convertible bonds for 0.4 million euros, and sundry borrowings and financial debt for 0.6 million euros); 29.7 million euros in current financial liabilities (non-convertible bonds for 0.2 million euros, borrowings and debt with credit institutions for 29.5 million euros, and sundry borrowings and financial debt for 50,000 euros); Non-convertible bonds: 20

21 In October 2010, Varioptic issued convertible bonds subscribed for by the main investment funds which were already shareholders in Varioptic, for a total of 1.1 million euros. In connection with Varioptic's acquisition, the convertible bonds were restructured as follows: Holders waived their conversion option; Parrot made an immediate cash redemption of 250,000 euros on closing; The outstanding capital and accrued interest, i.e. 851,000 euros, was refinanced as straight bonds, redeemable in four installments through to December 31, 2014, with an interest rate indexed against the three-month Euribor; A first 213,000 euro installment was redeemed at the end of December 2011, taking the outstanding capital down to 638,000 euros (with 213,000 euros under one year and 425,000 euros over one year). Sundry borrowings and financial debt: The OSEO advance received by Varioptic, initially repayable from September 2010; the repayment schedule for this zero-rate advance was redefined with the amendment dated September 28, 2010, running from September 30, 2012 to June 30, The fair value of the OSEO advance was estimated at 600,000 euros, factoring in the probability of advances being repaid, resulting from the probability of success with the projects funded and the discounting of cash flows based on a representative rate for the cost of debt (Euro Industrial BBB-, average maturity of five years, i.e. 4.5%). Borrowings and debt with credit institutions: On July 1, 2011, Parrot S.A. set up two credit opening agreements with drawdown notices, repayable on a quarterly basis, with its banking partners - HSBC (for 15 million euros) and LCL (for 20 million euros) - and a revolving loan agreement with drawdown notices with Crédit Agricole Ile de France (for 10 million euros), to finance all or part of its external growth. These three contracts cover a five-year period and are indexed against the three-month Euribor. To hedge its exposure to the rate risk, and more specifically fluctuations in the three-month Euribor, against which the credit line drawdowns are indexed, the Company decided to take out two variable-fixed rate swap agreements (2.085% for 20 million euros of capital and 1.85% for 10 million euros) in order to protect itself against interest rate fluctuations. The Company also decided to apply hedge accounting for these two instruments at December 31st. At December 31, 2011, the breakdown of borrowings and debt with credit institutions was as follows: Credit line drawdowns: 29 million euros (LCL: 16 million euros and HSBC: 13 million euros) Fair value of swaps: 478,000 euros Risks relating to off-balance sheet commitments At December 31, 2011, the Company's commitments concerned future payments relating to operating leases that may not be terminated: Year 2011 gross value ( '000) , , and later - Total 3,651 Firm orders at December 31, 2011 with the main suppliers represented a total of 33 million euros. In addition, a bank guarantee has been given for 300,000 euros. At the start of the second half of 2011, 5 million euros of collateral were put in place with the financial securities account opened in the Company's name in the books of Crédit Agricole Ile de France as a guarantee for the 10 million euro credit line. 21

22 4.4. Legal risks 2011 Reference Document Risks relating to products The complex products marketed by the Company could be subject to manufacturing or operating faults, particularly when launching a new product or releasing new or improved versions of products. Furthermore, if products are not compliant with regulatory requirements, this could expose the Company to risks of administrative and/or criminal penalties. Manufacturing faults or other issues linked to the reliability of products could also result in damages for its customers (notably in the event of an accident involving a car driven by a product user), for which they could claim compensation from the Company. If such claims were to arise, the Company's defense would take time, would be expensive and could tarnish its reputation, which could result in the loss of customers and a reduction in its revenues. The cover provided under the various insurance policies may not be enough to protect against these risks. In 2011 and previous years, the Company did not experience any such issues Intellectual property rights Potential lack of protection in terms of intellectual property The Group's success depends to some extent on its ability to obtain, maintain and protect its patents and other intellectual property rights. The Company cannot be certain that it will be able to develop new patentable inventions, that the patent requests underway will result in patents being issued, that the patents or other intellectual property rights granted to it or awarded under a license will not be disputed or that other parties will not claim rights to the patents and other intellectual property rights it holds or even the technologies it uses. Furthermore, the Company, which has trademarks protecting the Company's name and the names of some of its products in many countries, a license to use the "Bluetooth " trademark, and licenses to use the trademarks of its trading partners, cannot be certain that the validity of these trademarks will not be disputed by third parties or that it will be in a position to register new trademarks in all the countries where it would like to sell its products. This risk could have a significant unfavorable impact on the Group's business, financial position, earnings or development Potential unauthorized use of technologies developed by the Company Third parties, particularly competitors of the Company, could infringe its patents and other intellectual and industrial property rights the on technologies it has developed. To oppose this, the Company could sue for infringement, leading to lengthy and costly proceedings. The issuing of a patent on an invention does not guarantee either the validity of this patent or the extent of protection it may offer. Similarly, the legal effectiveness of copyright protection for software remains uncertain as long as its original nature has not been discussed during court proceedings. As such, the Company cannot be certain of the protection provided for its patents and other intellectual property rights if it attempts to cite them in legal proceedings during which their validity or scope may be challenged. Moreover, the Company could become involved in objection proceedings with national intellectual property offices with a view to preventing third parties from filing patents in infringement of its previous rights, or even the filing of patents for technologies that it considers to be non-patentable and whose appropriation would hinder its activities. The costs associated with such administrative and legal proceedings could be significant even if the Company wins the case, and the Company could find itself at a disadvantage faced with rivals which are in a better position to cover the cost of such proceedings thanks to their greater financial resources. It is difficult to control the unauthorized use of patents or other intellectual property rights and the Company may not be in a position to prevent the unlawful appropriation or use of its patents or other intellectual property rights by third parties. Furthermore, certain jurisdictions in which the Company develops its activities may not offer intellectual property right protection that is as effective an in the European Union or the United States, and these jurisdictions may not have appropriate proceedings to enable the Company to effectively defend its rights. If the aforementioned risks were to occur, this could have a significant unfavorable impact on the Group's business, financial position, earnings or development. 22

23 Potential shortcomings concerning confidentiality protection for certain information relating to its technology In addition to patented technologies, the Group's business is based to a great extent on unregistered know-how, techniques, specifications, technical data and information which are only protected as long they remain secret. As a result of the "fabless" model implemented by the Group, its products are manufactured and assembled by external subcontractors which must be provided with some of this confidential information (cf "The Group depends on subcontractors for the manufacturing and assembly of its products" in the present reference document). Although the Company protects such information through confidentiality agreements with its various partners and their staff, these agreements may not be respected and result in the Company having to take legal steps to obtain compensation for its damages. More specifically, the disclosure of such confidential information could facilitate the unlawful appropriation of the Company's technologies by a competitor, result in the loss of a monopoly on protected know-how further to its disclosure, or even destroy the novelty of an invention and prevent the Company from protecting it by filing a patent Potential claims from third parties which consider that they hold intellectual property rights on certain technologies used by the Company The Company has a strong and dynamic research and development activity, enabling it to develop new technologies (inventions, software, etc.). However, the Company cannot guarantee that certain technologies, although developed internally, will not infringe on intellectual property rights held by third parties (such as patents or copyright on software).in addition, the Company integrates a number of technologies whose industrial property rights are held by its commercial partners which grant it licenses to use such technologies and which could also infringe on third-party intellectual property rights. In the event of a claim by a third party claiming to hold intellectual property rights on a technology used by the Company, the Company or its commercial partner, if the claim is founded, could be made to sign a license with this third party in return for compensation or if a license cannot be obtained, or not under commercial conditions that are considered to be reasonable by the Company or commercial partner, it could be made to modify its products so that they no longer use the technology in question, failing which it would be exposed to being sued for infringement. This could have a significant unfavorable impact on its business, development, earnings and financial position. The Company is regularly approached by third parties claiming to hold intellectual property rights on technologies and which would like to set up licenses with it The Company could encounter difficulties linked to the use of "freeware" To develop its products, the Company uses various operating systems, including the ecos operating system, the Linux system and, for its new generation of products, the Android platform. These three operating systems are all based on the use of "free" software or freeware. "Freeware" is available to users on a fee or free basis and is governed by three main types of licenses making it possible to modify and reuse this software's source codes, provided that they comply with the requirements set out by the licenses. "Free" licenses require access to the source codes of spin-off developments or codes linked to "freeware" and their use by the entire community of developers under the same conditions as the initial "freeware". They are also characterized by their contaminant effect, which means that all the software programs - whether or not they are proprietary - linked to them pass under the "free" license system. On the other hand, "semi-free" or "public" licenses do not have any contaminant effect and therefore make it possible, under certain conditions, to develop proprietary solutions based on "freeware". The choice of "freeware" used in connection with developing products is therefore critical. "Freeware" is used without the standard contractual guarantees provided under proprietary software licenses. As such, the risks linked to a fault with "freeware" or potential infringement proceedings by third parties claiming to hold intellectual property rights on such software remain the full responsibility of the Company. If such risks were to occur, this could have a significant unfavorable impact on the Group's business, development, earnings and financial position. To protect itself against such risks, the Company ensures that the research and development teams are aware of the issues relating to the use of "freeware", and has put in place an "open source" policy Insurance and risk coverage 23

24 2011 Reference Document The Group has put in place a policy to cover the main risks that are linked to its activity and may be insured at reasonable prices, subject to the standard exclusions, cover caps and deductibles applied by insurance companies on the market. The Company has taken out the following insurance policies: Civil liability on operations: CHARTIS More specifically, this policy covers the Company's liability resulting from damages caused to third parties and occurring before the delivery of products or the completion of work, as well as the Company's liability resulting from damages caused to third parties after the delivery of products or the completion of work, it being understood that consecutive material damages are also covered. The premium for the master policy for 2011 came to 93,043 euros and covered the activities of the following Group subsidiaries, excluding Parrot Inc. Certain legislation requires local policies to be taken out, supplementing the master policy. In this way, the Group also pays premiums for Parrot Trading (Shenzhen) Ltd, Parrot Japan KK and Parrot Asia Pacific Ltd for 26,042 CYN, 325,890 JPY and 30,574 HK$ respectively, giving an equivalent to 9,217 euros. The global premium for 2011 came to 102,260 euros. In addition, as required by American legislation, Parrot Inc.'s activities are covered under a local policy. Comprehensive office liability: AGF The Company has taken out a "comprehensive office" insurance policy for all the premises located in the building in which the Company has its headquarters and conducts part of its business (cf. Section VIII. "Property, plant and equipment" in the present reference document), covering more specifically fire, water, theft and glass breakage risks. The Company has also taken out a "comprehensive IT" policy covering electronic equipment, excluding electrical equipment. For FY 2011, the "comprehensive office" policy represented 8, euros, with the "comprehensive IT" policy coming in at 3, euros. The amounts of the premiums have been adjusted to factor in the increase in the space occupied in the building where the Company has its headquarters, as well as the increase in the number of staff. In addition, the Company has maintained the "comprehensive office" policies covering the offices for the Lyon business unit and the Digital Tuner business unit in Nantes. Export debt liability: COFACE This policy guarantees the non-collection of debt from some of the Company's French and foreign customers located in Regions "1" and "2" (covering respectively OECD countries and the rest of the world, based on criteria defined by COFACE) concerning Company product sales, as well as sales made by the following subsidiaries: Parrot GmbH, Parrot UK Ltd, Parrot Iberia S.L., Parrot S.r.l., Parrot Inc. and Parrot Asia Pacific Ltd. The cover amount represents 90% of the net debt covered excluding VAT. The premium came to 282, euros in Executive liability: CHARTIS The Company has taken out insurance cover for the liability of its executives and corporate officers. It covers the personal liability which the insured parties may incur individually or jointly with regard to third parties in the event of any professional negligence during the performance of their functions, whatever the jurisdiction concerned (civil, criminal or administrative), the defense costs which executives may incur in the event of claims against their civil liability, and, as relevant, any damages which they may be required to pay. Furthermore, an extension of this policy makes it possible to cover any costs incurred in the event of a crisis arising within the Company further to the disappearance of a key person for instance. This insurance came to a total of 16, euros in Transported goods liability: ALLIANZ GLOBAL The Company has taken out insurance to cover the inherent risks associated with transporting components and products (import), transporting products to customers or distribution subsidiaries (export), in addition to transport between storage sites in France. The premium paid in 2011 totaled 39, euros. Storage liability: GENERALI 24

25 The Company has set up specific insurance to notably cover the risks of theft or destruction in the main warehouse where components and products are stored in France. The premium paid in 2011 totaled 33, euros. Conclusion The Company has not had to make any major claims, and only used its policies on an isolated and insignificant basis in Work to optimize the various insurance policies was launched at the end of 2011 with a view to incorporating the activities of two companies - Varioptic (IT hardware) and DiBcom (RC, IT hardware, transportation of goods) - into certain insurance policies. This integration has not had any impact on the amount of the policies. This work will continue over the next year. The Company considers that the insurance policies and protection procedures described above provide reasonable cover for all the major risks inherent in its business in France and internationally. 25

26 V. Information concerning Parrot 2011 Reference Document 5.1. Company history and development Corporate name and registered office The Company's corporate name is "Parrot". The registered office is located at , quai de Jemmapes, Paris, France (Tel: ) Trade and company register, APE activity code The Company is registered in the Paris trade and company register under number The APE code (main activity) is 2630Z Incorporation and life of the Company The Company was incorporated on February 28, 1994 for a 99-year period ending on February 28, Legal form and governing legislation The Company is a French-law limited company (société anonyme) with a Board of Directors, notably governed by the provisions of Book II of the French commercial code and Decree of March 23, History Year Events 1994 Company founded by Mr. Henri Seydoux. Voice recognition technologies developed (including signal processing algorithms) First voice recognition-enabled electronic diary launched Parrot+ launched, successor to the initial voice diary, specifically designed for the visually impaired Acoustic-related technologies developed (noise reduction, echo cancellation) First wire-based handsfree kit launched for vehicles (Parrot CK28). Company joins the Bluetooth SIG. Parrot VoiceMate launched, new generation of electronic diaries for the visually impaired Parrot CK3000 Bluetooth in-vehicle handsfree kit launched Parrot CK4000 developed (OEM) Parrot DRIVEBLUE launched, first plug-and-play Bluetooth handsfree system (no installation required) Parrot CK3100 and Parrot CK3300 launched. US subsidiary created (Parrot, Inc.). Parrot EASYDRIVE, Parrot CK3000 EVOLUTION, Parrot 3200 LS COLOR, Parrot 3400 LS-GPS and Parrot 2005 RHYTHM N'BLUE launched. Parrot CK5000 launched (OEM). Subsidiaries created in Germany (Parrot GmbH), the UK (Parrot UK Ltd), Italy (Parrot Italia S.r.l.) and Hong Kong (Parrot Asia Pacific Ltd). Manufacturing of voice-recognition electronic diaries (VoiceMate) stopped Company floated. 100% stake acquired in the Spanish company Inpro Tecnologiá, S.L., which became Parrot Iberia, S.L. Parrot DRIVER HEADSET and Parrot MINIKIT (1st version) launched. Parrot PHOTO VIEWER and Parrot SOUND SYSTEM launched, first wireless devices designed by the Group to accompany new mobile phone uses (music, photos). Parrot MK6000 launched Parrot CONFERENCE launched (Plug & Play range). Parrot PHOTO VIEWER 7 and Parrot BOOMBOX launched (Multimedia range). Parrot 3200LS-COLOR PLUS launched (installed handsfree kit range). 26

27 Parrot MK6100, Parrot PMK5800 and Parrot SK4000 launched (Plug & Play range). Parrot RK8200 launched (handsfree kit range). Parrot DS3120, Parrot DS7220 and Parrot DF1120 launched (Multimedia range). Distribution agreement sealed with BestBuy and CircuitCity in the US. OEM contracts signed with Navigon and Navman. First MMS photo frame launched in partnership with Bouygues Telecom. Compatibility of products with Apple Mac OS X Leopard products. 100% stake acquired in the US firm Waveblue, then integration into Parrot Inc OEM branch opened in Japan (Tokyo). Strategic partnership set up with HTC. OEM contract signed with Kenwood. "Parrot accredited fitter" program launched. First NFC-compatible speakers launched: Parrot Party Black Edition (Multimedia range). New MINIKIT TM launched (Plug & Play range): "Slim" and "Chic". Parrot SK4000 launched (handsfree kit range), designed specifically for two wheels. Extension of Parrot Bluetooth handsfree technologies supplied to PSA Peugeot-Citroën. Parrot MKi9X000 launched (handsfree kit range): three new handsfree kits with integrated music features. New digital photo frame launched ("Parrot By" collection): Parrot SPECCHIO by Martin Szekely. OEM contract signed with Hyundai Kia Automotive Group. Parrot receives the top award for the Paris Region and the national award for the electronics and hardware sector in the Deloitte Technology Fast 50 rankings. Multimedia range repositioned around products from the "Parrot By" collection. Parrot by Starck speakers launched ("Parrot By" collection) Alliance between Parrot and Hyundai ramped up on two new vehicle models. Entry-level products gradually phased out from the Multimedia segment range (Parrot Photoviewer, Parrot Party, etc.). Alliance with Renault ramped up (OEM, through Continental). Distribution network gradually put in place for Parrot Zikmu By Philippe Starck wireless speakers in 31 countries. Parrot RKi8400 launched: car radio handsfree kit specially designed for the iphone, equipped with a removable front and iphone/ipod /ipod touch, USB and jack connectors. OEM contract signed with Pioneer. One-off versions of the Minikit Slim released (special operations) First Parrot AR.Drone prototype unveiled at the CES: wifi-controlled quadricopter using an iphone/itouch. Launch of the Grande Specchio in the Parrot By collection: new digital photo frame designed by Martin Szekely. Parrot's OEM solutions are integrated into three new vehicle brands: Audi, BMW and Volkswagen. Parrot AR.Drone launched in summer 2010 in six countries, then extended at the end of the year to include a further three countries. Parrot Zikmu By Philippe Starck speakers released in four new colors. Parrot Minikit SMART presented: dedicated Plug & Play product for smartphones Parrot ASTEROID presented at the CES: car radio with internet, voice recognition and handsfree telephony applications. New digital photo frame launched, with the "Parrot By" collection: Parrot DIA, a frame developed with Jean- Louis Frechin, founder of the NoDesign agency. OEM partnership with e.solutions GmbH Parrot Minikit SMART launched (Plug & Play) Acquisition of Varioptic (Digital Lenses) Acquisition of DiBcom (Digital TV and Radio) Parrot Minikit+ launch Parrot joins GENIVI alliance (on-profit industry alliance committed to driving the broad adoption of an In- Vehicle Infotainment (IVI) open-source development platform.) 2012 Parrot ASTEROID range of internet connected handsfree solutions presented at CES (installed car kit) Parrot ZIK presented at CES (Multimedia) Parrot AR.Drone 2 presented at CES (Multimedia) Ford Motor Company selects S1nn and Parrot for its multimedia handsfree solution Parrot expends its business with a leading German car manufacturer 27

28 5.2. Investments 2011 Reference Document Investments carried out The Group has made the following investments: In 2010, intangible investments totaled million euros, with million euros for the capitalization of development efforts (IFRS standard). Tangible investments totaled million euros. Parrot subscribed for two capital increases carried out by Da Fact for 676 thousand euros. In 2011, intangible investments totaled million euros, with million euros for the capitalization of development efforts (IFRS standard). Tangible investments totaled million euros. Parrot subscribed for one capital increase carried out by Da Fact for 325,620 euros. In addition, Parrot acquired two companies (cf Appendix to the consolidated financial statement: Note 10 Business Combinations): In May 2011, Parrot acquired a 100% stake in the company Varioptic. In September 2011, Parrot acquired a 100% stake in the company DiBcom Investments underway The investments underway at February 29, 2011 are presented below: 92,842 euros in intangible fixed assets, excluding the capitalization of development efforts (IFRS); 349,667 euros in tangible fixed assets; 8,211 euros in long-term financial investments. On the date when the present reference document was published, no significant investment commitment is underway. 28

29 VI. Overview of the Group's activities 6.1. Main activities Founded in 1994, Parrot has rapidly established itself as a leading global player for wireless mobile phone accessories. Drawing on its tried-and-tested expertise on voice recognition and signal processing technologies, Parrot was one of the very first companies to produce Bluetooth standard wireless handsfree car kits. Since 2006, in light of the outstanding development of the technologies offered by mobile phones (including photography and music), Parrot has been working to expand its range, moving towards devices outside of the automotive world. Product range and distribution The Group has developed four product ranges: Three ranges for vehicles: Installed handsfree kits (also referred to as aftermarket products), installed in most cases by a professional after the vehicle's purchase, "Plug & Play" products, handsfree kits which can be used as soon as they have been purchased (without any installation) by end consumers, and OEM (Original Equipment Manufacturer) connectivity solutions, designed for original assembly by auto firms, i.e. installed by automobile manufacturers or their equipment manufacturers before the vehicle's delivery. One range for the home: "Multimedia" products, designed to enable consumers to share their mobile phones' multimedia content wirelessly within their home. Products for the personal world, moving beyond in-car car mobile phone use. Parrot covers both retail markets (installed handsfree kits, Plug & Play handsfree kits and Multimedia products) and automotive industry professionals (OEM connectivity solutions for handsfree telephony and music). 29

30 2011 Reference Document The following table presents the breakdown of the Group's consolidated revenues between the various product categories: Products 2009 Revenues (M ) 2009 (% of revenues) 2010 Revenues ( ) 2010 (% of revenues) 2011 Revenues ( ) 2011 (% of revenues) Installed kits % % % Plug & Play % % % Multimedia 5.0 3% % % Subtotal Retail products % % % OEM % % % Subtotal OEM products % % % Other % % 7.4 3% - of which, navigation products (1) 8.6 5% % 1.4 1% - of which accessories and other (2) 9.7 6% % 6.0 2% Total (1) The Spanish subsidiary's contract for distributing navigation products is a result of the acquisition of the distributor Inpro Tecnologiá S.L, now Parrot Iberia S.L, in At the end of 2010, Parrot decided to stop distributing navigation products. (2) Cables and accessories (steering wheel-mounted controls, etc.) sold by Parrot to help adapt its products for different types of vehicles, as well as services billed to suppliers (components) and customers (delivery, marketing, etc.) Products Main features All of the Group's Bluetooth wireless handsfree products for vehicles share the following features: Automatic Bluetooth connection between the user's mobile phone (or even several mobile phones, a useful feature for professionals) and the handsfree product (once the initial pairing has been carried out), Automatic transfer of handsfree calls to the vehicle's speakers (or the product's integrated speaker for Plug & Play solutions), "Full duplex" communications thanks to the acoustic echo cancelation system used, Noise reduction making it possible to improve the quality of sound perceived by the caller, Automatic synchronization of the phonebook stored in the mobile phone, Voice recognition (speech to text) making it possible to dial phone numbers and give control instructions verbally (pick up, hang up, access address book, etc.) Voice synthesis feature (text to speech) enabling the product to "say", without any prior learning, names from the address book, menus, etc. Access to the list of your last calls, Simple interface with two buttons to pick up / hang up and one button for the menu (with installed systems, the "remote-control" can be mounted on the steering wheel or dashboard). Connectivity The Group's wireless handsfree products are based on the Bluetooth standard. This wireless communications standard enables secure digital data exchanges between two devices equipped with Bluetooth chips. A vast majority of mobile phone sold worldwide integrate Bluetooth connectivity. In addition Parrot also incorporated other connectivity features such as USB, SD card, jack as well as the specific connectors for idevices / Apple. Compatibility Over and above the Bluetooth standard, each mobile phone manufacturer incorporates its own specific features. To ensure that the Group's products are compatible with virtually all Bluetooth mobile phones, the Group: Carries out compatibility tests with most of the Bluetooth phones present on the market, Integrates the latest up-to-date version of the operating software for its products during the final assembly phase, Regularly updates operating software for its products. 30

31 All the software for Parrot's handsfree products for vehicles can be updated by users through their mobile phone or a USB key or by a professional with a laptop offering Bluetooth connectivity, making it possible to guarantee compatibility with virtually all new models of Bluetooth phones. Updates are available on the Group internet site ( Technologies The Group's products are based on technological expertise in terms of digital signal processing and the design of application-specific integrated circuits (ASIC). At December 31, 2011, the vast majority of the products offered by the Parrot were equipped with Parrot4+, Parrot4++, Parrot5 and Parrot5+ ASICs. Since 2008, the Group has significantly increased the connectivity of its products in order to offer more features, particularly in terms of reading, listening to music and viewing photos. In this way, in addition to Bluetooth, the Group's latest products offer the main current connectors: mini-usb (for mobile phones, MP3 players, cameras, computers), jack (for all types of MP3 players), SD card (memory card), Wi-Fi (for transferring music files or photos from a Wi-Fi-enabled mobile device) and lastly NFC or Near Field Communication (for mobile phones equipped with this new wireless standard). In 2011, Parrot focused a large part of its R&D resources on the development of its next-generation chip and a portfolio of technologies making it possible to serve the automotive infotainment market. Alongside this, the Group further strengthened its portfolio of technologies through two acquisitions: Varioptic, the pioneer and global market leader for programmable miniature optics, particularly with exclusive autofocus, stabilization and zoom applications. Varioptic's major technological edge in optics will enable Parrot to add to its portfolio of signal processing solutions, incorporating advanced image processing technologies. DiBcom, the digital radio and television specialist for the auto industry, designs high-performance integrated chipsets enabling low-power and high-mobility digital television and radio reception, for all transmission standards (DVB-T, DVB-SH, ISDB-T, ATSC, CMMB, DAB, etc.), thanks in particular to a programmable core for signal processing, developed by DiBcom. For a detailed description of Parrot's technologies, please refer to Section XI "Research and development" in the present reference document Installed handsfree kit range The installed handsfree kit range represents the Group's principal and historical segment. It generated 82.6 million euros of revenues in 2011, representing 33% of the Group s revenues. Installed handsfree kits enable a vehicle's driver to make or receive phone calls without handling the mobile phone. These products are integrated into the vehicle's audio system, by a professional fitter in most cases, and therefore offer the driver optimum comfort for talking and listening. The conversation takes place using the vehicle's speakers and a microphone fitted in the vehicle. The echo cancellation and noise reduction proprietary system make it possible to operate under optimum acoustic conditions. The voice recognition system enables fully handsfree use. The car radio is automatically interrupted in the event of a phone call and starts up again once the call has ended. The Group sells this range to specialized retailers (vehicle repair center, specialized auto equipment stores, fitters). The range has been developed to target three main customer segments, depending on the mobile phones (conventional mobiles or smartphones), with three product categories depending on customers sensitivity to pricing and technology. CK products (Car Kit) are Parrot's historical installed handsfree kits, with the first product launched in September They offer advanced handsfree telephony features for "conventional" mobile phone users; MK products (Music Kit) are the installed handsfree kits launched by the Group at the end of More specifically, they are designed for users of smartphones and the iphone in particular. In addition to advanced handsfree telephony features, they enable digital music stored on a smartphone to be played wirelessly on the vehicle's audio system; The first web-enabled car radio (Asteroid, launched in summer 2011) combines advanced handsfree telephony features with connection to web services, access to innovative applications and the ability to listen to music from multiple sources. 31

32 2011 Reference Document The entire range offers a simple man-machine interface ("remote control"), with two push buttons and one turning button. A vocal interface combined with the graphic interface makes it possible to minimize distractions for the user and enables comfortable driving, adapted to any legislation in force. Installed handsfree products sold in 2011 Parrot CK3000 Evolution Recommended retail price: 99 (including VAT) Bluetooth handsfree kit with voice recognition. Parrot CK3100 LCD Recommended retail price: 139 (including VAT) Bluetooth handsfree kit with voice recognition and blackand-white LCD screen Parrot MKi 9200 Recommended retail price: 129 (including VAT) Advanced Bluetooth handsfree system with digital music streaming. Parrot MKi 9100 Recommended retail price: 159 (including VAT) Advanced Bluetooth handsfree system with digital music streaming and black-and-white LCD screen. Parrot MKi 9000 Recommended retail price: 199 (including VAT) Advanced Bluetooth handsfree system with digital music streaming and color LCD screen. Parrot ASTEROID Recommended retail price: 299 (including VAT) Multimedia car radio with advanced handsfree solution and internet connectivity to access geolocalization services, internet radio, points of interest and other useful services Plug & Play range In 2011, the Plug & Play» generated revenues of 11.2 million euros (5% of the Group s revenues). Plug & Play products are intended for the market of accessories sold in specialized mass retailers and telephony stores. Unlike simple Bluetooth earpieces, the Plug & Play products are portable handsfree kits offering a series of technologies (described below) designed to meet the main requirements (comfort, portability) of drivers. They are referred to as "Plug & Play" because they do not require any installation and are ready for immediate use. Products from the Plug & Play range have an integrated speaker and can be recharged using the vehicle's cigarette lighter connection or a standard power outlet. Since being launched in 2008, the Parrot MINIKIT SLIM has been one of the flagship products in the range. The Parrot MINIKIT+ launched at the end of 2011 is the next generation of Plug & Play products. In 2011, Parrot also sold a new Plug & Play product designed more specifically for smartphones: the Parrot MINIKIT Smart. With an integrated docking support for all smartphones, whatever their format (56mm and 70mm wide), the MINIKIT Smart is able to simultaneously manage handsfree telephone conversations and the navigation applications available on smartphones. Voice calls and GPS guidance are delivered on an integrated 2W speaker. The MINIKIT Smart is compatible with all the navigation software available (free or not) and all operating systems: Android, Apple ios, Windows Mobile, Blackberry, Symbian, Bada. 32

33 Plug & Play products sold in 2011 Parrot MINIKIT SLIM / CHIC / L.E. Recommended retail price: 69 (including VAT) Portable and independent ultra-flat Bluetooth handsfree kit, voice recognition and advanced noise reduction. Parrot MINIKIT + Recommended retail price: 70 (including VAT) Portable and independent ultra-flat Bluetooth handsfree kit, voice recognition and advanced noise reduction. Parrot MINIKIT SMART Recommended retail price: 99 (including VAT) Bluetooth hands-free charging holder for Smartphones. Voice recognition and speech synthesis OEM range Parrot provides turnkey solutions directly for OEMs and manufacturers in the automotive industry, as well as car radio and navigation product manufacturers, including: Handsfree telephony Multimedia connectivity (USB, ipod/iphone) Multi-speaker voice recognition Audio processing (signal processing) This segment is strategically important for Parrot, not only in terms of its potential for growth over the medium term, but also since it highlights the excellent quality of the products developed by Parrot. The Group is positioned as a leading connectivity supplier for the auto makers and their equipment manufacturer. Depending on the case, the Group offers a combined hardware and software solution. The manufacturers sourcing supplies from these original equipment manufacturers integrating Parrot solutions include the Volkswagen Group (VW, Seat and Skoda brands), AUDI, the Hyundai-Kia Group, Fiat, Ford, Renault & Nissan and PSA Peugeot-Citroën. They offer equipment as standard or as an option. As opposed to retail products, they are perfectly integrated into the vehicles' man-machine interface through the multimedia or navigation systems offered in the vehicles. Alongside the original integration of its products into vehicles, Parrot also sells its solutions to manufacturers of aftermarket multimedia and navigation systems. Leading players on this market, such as Alpine, JVC, Kenwood, Pioneer and Clarion, integrate the Parrot technology. 33

34 OEM Modules FC6XXX CK 5XXX 2011 Reference Document CK5xxx capacities + Android and Smartphone applications: point of interest, internet radio, navigation + 3G+ internet access + Wi-Fi Hotspot for 3G sharing and multimedia playback with UPnP. + Advanced voice recognition + Bluetooth 3.0 Bluetooth 2.1+ EDR Handsfree profile Speaker-Independent Voice Recognition Text-To-Speech Digital signal processing (DSP): echo cancellation, noise reduction ipod /iphone, supports USB, audio streaming by A2DP/AVRCP. multimedia connectivity USB high-speed connection to USB sticks, MP3 players & ipod CK4XXX CK5xxx capacities + Stand alone. + Connectivity with the vehicle's (CAN or MOST) OEM Application-specific integrated circuit (ASIC) Parrot 6 / Parrot 5+ / Parrot 5 / Parrot 4+ Acquisition of DiBcom in 2011 Example of Parrot ASIC capacities: Connectivity: Advanced digital audio Interface Memory (up to 3 SD card) 1 SIM card Video camera interface LCD 2 High-Speed USB Signal processing: Full duplex Advanced voice recognition Echo cancellation, noise reduction H.264 encoding and decoding DiBcom designs and markets high-performance integrated chipsets enabling low-power and high-mobility digital television and radio reception, for all transmission standards (DVB-T, DVB-SH, ISDB-T, ATSC, CMMB, DAB, etc.), thanks in particular to a programmable core for signal processing, developed by DiBcom. Founded in 2000, DiBcom has already sold more than 25 million integrated chipsets enabling digital radio and television to be received whatever the transmission settings used, in Europe, Asia, Australia, South America and Japan. Its solutions are used for receiving radio and television in handheld multimedia products as well as vehicles, sold worldwide by manufacturers including Audi, BMW, Mercedes, Porsche, Volvo or Garmin. This operation is particularly strategic for Parrot, which is going to be able to harness unique know-how in the multistandard digital radio and television field, as well as a broader customer base in the automotive sector. At the same 34

35 time, the development of a complete solution, incorporating all the technologies developed by both companies, represents a significant competitive advantage and adds further value, particularly on the growing market for infotainment and multimedia car radios Multimedia products In 2006, the Group began launching a new range of wireless devices offering consumers the possibility to make better use of their mobile phone's new features, such as music or digital photos. Since 2008, with the launch of the Parrot By collection, the Group has chosen to realign its multimedia product range towards the upscale market, combining its advanced technologies with leading designers. For Parrot, the "Parrot By" collection represents a positive response to several objectives in terms of both the brand image and investments: Differentiating products through the reputation of designers and their artistic design choices, judiciously enabling Parrot's products to stand out from other such products, Increasing its innovation capacity in multimedia while engaging outside the automotive world, Benefiting from a better reputation and a positive influence on the rest of the products, Targeting new suitable distribution channels focused on quality rather than quantity, Giving priority to a margin strategy rather than a volume strategy, The "Parrot By" products combine Parrot's technologies with the creativity of top internationally-renowned designers. In this way, they benefit from better visibility at points of sale and are offered in specific distribution channels for high-end products (for ex. Colette in Paris, Corner Shop in Berlin, etc.). To date, this collection has been developed in partnership with Andrée Putman (2008), Martin Szekely (2009 and 2010) and Philippe Starck (2010) and Jean-Louis Frechin, founder of NoDesign (early 2011). On this segment, Parrot is committed to a strong innovation policy aiming to offer new wireless products to accompany the constant technological developments linked to mobility. Through this exploratory strategy on new products in the world of wireless devices, Parrot is looking into new high potential markets. Multimedia products sold in 2011 Parrot by PUTMAN Recommended retail price: 300 (including VAT) Wireless digital photo frame, internal memory 400 photos - Bluetooth, 2.0 EDR, SD card, mini-usb. 15 cm LCD screen, with 262,144 colors. Parrot SPECCHIO by Martin SZEKELY Recommended retail price: 350 (including VAT) Wireless digital photo frame, internal memory 1,500 photos - Bluetooth, 2.1 EDR, WI-FI, NFC, SD card, mini-usb, USB - 13 cm LCD screen, 262,144 colors. Parrot DIA by NoDesign Recommended retail price: 500 (including VAT) Wireless digital photo frame, internal memory 1,500 photos - Bluetooth, 2.1 EDR, WI-FI, SD/MMC card, 2 USB, WPS and RSS - Android OS 24 bit color, 4:3 high Parrot GRANDE SPECCHIO by Martin SZEKELY Recommended retail price: 500 (including VAT) Wireless digital photo frame, internal memory 1,500 photos - Bluetooth, 2.1 EDR, WI-FI, NFC, SD card, mini-usb, USB bit color, 10.4 inch LCD screen. 35

36 resolution LCD screen Reference Document Parrot ZIKMU by Philippe STARCK Recommended retail price: 1,200 (including VAT) 2 wireless Hi-Fi speakers available in 5 colors, 360 sound, 100 W RMS, 3 channel digital amplifier (cl. D), Bluetooth, 2.1 EDR, WI-FI, ipod / iphone / ipod touch, RCA connection. Parrot AR.Drone Recommended retail price: 299 (including VAT) Wi-Fi quadricopter controlled with ipod touch / iphone / ipad. 2 video cameras, 3 colors, easy takeoff and landing with autopilot. Structure: carbon-fiber tube and high resistance PA66 plastic. All spare parts available separately Development of activities over 2011 In 2011, Parrot's consolidated revenues came to million euros, with 2.5% annual growth for the Group. Restated for navigation products, the low-margin distribution business discontinued at the beginning of 2011, full-year revenues are up by 15.1 million euros, giving a growth rate of 6.5% (restated 2011 revenues: million euros, versus restated 2010 revenues: million euros). The highlights of 2011 were as follows: Acceleration of R&D focused on in-vehicle infotainment and the next generation Parrot chip; Acquisition of Varioptic (digital lens) and DiBcom (multistandard digital radio and television); Launch of three new products (Parrot Minikit Smart, Parrot Minikit +, Parrot Asteroid); Continued success of the Parrot AR.Drone, first launched in July 2010; Increase in brand awareness, notably thanks to the Parrot AR.Drone's success and the development of Parrot s presence on social networks (Facebook, Twitter and YouTube). The Group's main management balances were maintained despite the acquisitions and product launches, with growth in 2011 driven by: Continued strong growth (+41%) in the OEM activities, offsetting the contraction in Retail products faced with a relatively sluggish economic environment; The continued success of the Parrot AR.Drone, launched in summer 2010, establishing itself as Parrot's flagship Multimedia product and partially offsetting the contraction in business for Retail products Developments for each product range 36

37 The Retail Products business, grouping together aftermarket installed systems, Plug & Play, Multimedia and "Other" products, represented 54% of the Group's revenues (versus 66% in 2010). The OEM business generated 46% of the Group's revenues (versus 34% in 2010). Breakdown of consolidated revenues by product range (% of Group revenues) OEM 46% Retail 54% Installed handsfree kit 33% Plug & Play 5% Multimedia 13% Others* 3% (*) Definition of "Other" revenues: (i) navigation product sales, (ii) accessory sales (steering wheel-mounted controls, cables, etc.) (iii) ancillary sales to customers (marketing, delivery, etc.) and (iv) component sales to suppliers. In early 2011, Parrot stopped selling navigation products. As in 2010, the Group's growth was driven by the OEM business, with revenues climbing from 81.3 million euros in 2010 to million euros in 2011 (+41%). The development of revenues was made possible by (i) the ramping up of customers brought on board in 2010, and particularly deliveries for German manufacturers, (ii) the increased penetration of handsfree connectivity solutions and the adoption rate among existing customers, and (iii) the orders recorded, particularly at the end of the year, with two new customers (Ford Europe and Toyota). In 2011, Parrot sold 8.4 million OEM product units. The Retail Products business recorded million euros in full-year revenues, compared with million euros in 2010 (-17%), notably affected by the end of sales for low-margin products (-87%). In 2011, Parrot sold 1.5 million Retail product units. The developments for each product range were as follows: Installed handsfree kits generated 82.6 million euros in revenues (versus 95.8 million euros in 2010), representing 33% of the Group's revenues (versus 40% in 2010). Performance in terms of sales on these aftermarket products for vehicles is traditionally linked to (i) consumption, (ii) breakthrough technologies in the mobile phone sector, and the resulting new uses, (iii) strengthening of the legislative framework for in-car phone use, with a relatively limited impact for all these factors in Alongside this, only one new product was launched on this range, in summer 2011: the Parrot Asteroid, the first web-enabled car radio, with 5,000 units sold during the second half of 2011 in five countries. This product illustrates Parrot s ambitions in the in-vehicle infotainment and internet connectivity field. At this stage in the development of mobile telecommunications networks, particularly faced with 3G capacities, Parrot is not aiming for a volume strategy here, but setting out its capacity for innovation and its technological lead in this area. However, on this segment, Parrot gradually slowed down the contraction in its sales throughout 2011 (from -17% in Q to -10% in Q4 2011). Plug & Play product sales generated 11.2 million euros in revenues (versus 14.6 million euros in 2010), representing 5% of the Group's revenues (versus 6% in 2010), down 23% for the year. During the second half of 2011, Parrot launched two new Plug & Play products: the Parrot Minikit Smart, designed specifically for smartphones, and the Parrot Minikit+, a new generation of the flagship Parrot Minikit product. Linked primarily to the strengthening of regulations for in-car mobile phone use, the dynamic commercial development of the products sold in this more competitive market segment traditionally take several quarters to be adopted by consumers. In addition, the results achieved with the first waves of advertising campaigns in summer 2011 were disappointing. Multimedia product sales, including Parrot AR.Drone sales, generated 31.9 million euros in revenues (versus 28.0 million euros in 2010), representing 13% of Group revenues (versus 12% in 2010). The Parrot AR.Drone represents the main factor behind the continued expansion of the Multimedia range, confirming the validity of the innovation strategy rolled out by Parrot on this segment. 37

38 Geographical developments 2011 Reference Document Breakdown of consolidated revenues by region (% of Group revenues) OEM 46% Retail 54% Spain 9% UK 6% Germany 4% Italy 3% USA 6% France 9% Asia 5% Rest of world 12% For FY 2011, the regional breakdown of Retail sales (the OEM business is treated globally) shows: EMEA region: million euros (versus million euros in 2010), representing 43% of Group revenues (versus 57% in 2010) Located primarily in Europe, performance levels are consistent, essentially reflecting the country's economic situation. Country 2010 Revenues in m 2011 Revenues in m Change in % France % Spain % Italy % UK % Germany % Other EMEA % Total EMEA % North America region: 15.6 million euros (versus 16.1 million euros in 2010), representing 6% of Group revenues (7% in 2010): Sales are virtually stable for this region, where the Parrot AR.Drone was a resounding success throughout the year. Asia region: 11.3 million euros (versus 5.9 million euros in 2010), representing 5% of Group revenues (2% in 2010): Sales have continued to develop in this region, where Parrot has notably strengthened its presence in Australia and New Zealand. In Hong Kong and Japan, the Parrot AR.Drone has performed well. Ultimately, the balanced breakdown of Retail product sales across diverse countries and Parrot's emergence in new growing regions significantly limit Parrot's exposure to localized country risks Main markets The current markets for products developed by Parrot are as follows: The market for wireless products for vehicles and more specifically products linked to the Bluetooth standard; The OEM market and more specifically the solutions dedicated to automotive connectivity and multimedia; The market for wireless accessories and products related to mobility and connectivity supplementing the new usage created by the technological progress of the cell/smart phone devices. Parrot sells its products in more than 80 countries, primarily developed and emerging countries. In this way, the rate of growth for the Group's products is influenced by each country's specific economic and cultural environment and in particular by: 38

39 The penetration in the Bluetooth standard's penetration in consumer electronic products and more specifically mobile phone handsets, The regulatory framework concerning in-car mobile phone use, The strong growth in mobile telephony around the world, accompanying the development of new mobile phone uses (photos, music, games, etc.). The figures presented in this section are taken primarily from research by the specialized consultancies IMS Research and Frost & Sullivan. The estimated figures presented hereafter therefore come from organizations which are independent from the Company. Although the Company is not aware of any factors which might make these forecasts inaccurate, the Company has not been involved in drawing them up and cannot guarantee their reliability. Market growth could be affected by numerous factors, including those presented in Chapter IV. "Risk factors" in the present reference document Market for wireless products Bluetooth is now established as the leading standard for short-distance wireless communications between mobile devices and accessories. Bluetooth makes it possible to eliminate the need for wires, while guaranteeing secure and high-quality communications between a wide range of products, primarily including mobile phones and smartphones, as well as tablets, laptop computers, desktop computers, handsfree kits, printers, etc. Over the last 10 years, Bluetooth has cemented its position as the wireless communications standard for portable devices and mobile phones in particular. Currently, more than 1 billion Bluetooth products are sold worldwide. The success of the Bluetooth standard is mainly due to its ability to evolve and modernize. In the specific universe of mobile telephony, estimates indicate that close to 1.1 billion mobile phones incorporating the Bluetooth standard will be manufactured in 2012 (sources: IMS Research 2009: "The Worldwide Market for Mobile Handsets Edition 2009"). Handsfree telephony systems for vehicles are particularly well suited to the Bluetooth standard. Indeed, the distance between the device and the phone inside the vehicle is short. On top of that, Bluetooth handsfree systems, unlike wirebased kits, do not need to be plugged in and are suitable for virtually all Bluetooth phones. Lastly, Bluetooth can notably make it possible to connect up the various parts of handsfree systems with one another (remote control, screen, etc.) inside a vehicle in order to limit interference by cables. About Bluetooth : The Bluetooth standard has been designed and developed by the Bluetooth Special Interest Group (SIG), founded in 1998 by Ericsson, IBM, Intel, Nokia and Toshiba, joined shortly afterwards by Agere, Microsoft and Motorola. In addition to this first circle of eight companies, which are "Promoter" members in charge of this standard's technical and strategic development, the Bluetooth SIG also has "Associate" members, including Parrot since These associate members benefit from privileged access to the technical specifications and their modifications before they are published and take part in the Bluetooth SIG's working groups. Lastly, the third and final circle is made up of "Adopter" members, which simply use the Bluetooth standard for their products. All of the members can take part in the qualification and test programs organized by the Bluetooth SIG. In 2011, more than 15,000 firms were members of the Bluetooth SIG (source: The Bluetooth standard is based on a series of documents called "Specifications", which are developed in connection with working groups within the Bluetooth SIG and adopted through special committees in which the nine "Promoter" members are automatically represented, alongside "Associate" members in certain cases. Version 1.0 of the Bluetooth standard was launched in December 1999, followed by Version 1.2 in November 2003 and Version "2.0+EDR" at the start of In August 2007, the Bluetooth SIG adopted Version "2.1+EDR", which is compatible with NFC technologies (automatic pairing of devices positioned near one another). This latest version offers improved security, simplified pairing and limited energy consumption. Version 3.0 of Bluetooth is the current version of the leading wireless communications standard. This generation is based on the "WiMedia Ultra Wideband" (UWB) and/or standards to combine the strengths and security levels offered by both technologies. These developments are intended to position the technology on the markets for equipment and services which require more bandwidth (e.g. video). Bluetooth 4.0 combines the different types of Bluetooth already available: Bluetooth 2.1+EDR standard, Bluetooth 3.0 and the new Bluetooth Low Energy. Bluetooth 4.0 devices will be able to choose between using, either separately or simultaneously, the three transmission types, in line with their uses. The new standard adopted in July 2010 focuses on reducing in-use and standby energy consumption, opening up new markets for Bluetooth, from sport to healthcare and security. The latest generations of Apple products (iphone 4S and ipad 3) incorporate Bluetooth

40 The main benefits of the Bluetooth standard are as follows: 2011 Reference Document No broadcasting authorization for Bluetooth products The Bluetooth standard operates in a shared-status frequency band which does not require any broadcasting authorization. This concerns the 2.4 GHz ISM frequency band which is available worldwide (subject to a few residual local restrictions); Transmission capacity and security The security of communications is ensured by frequency hopping (1,600 hops per second in a 79 MHz wide band containing 79 channels 1 MHz apart), combined with an integrated encryption system. Furthermore, the radiation capacity is adapted to the signal receiver range; the maximum theoretical speed is 2.1 Mbps, with 3 Mbps in EDR mode; the range is around 10 meters; Low power consumption From the outset, the Bluetooth standard has been designed for very low power consumption in order to save battery life in devices incorporating it; Low production and integration costs Since 2008, the cost of a Bluetooth chip dropped below two dollars per unit. The price of Bluetooth chips is continuing to fall, making it possible to accelerate their integration into a growing number of devices; Possibility to create an intelligent network of devices connected up to one another wirelessly; Ongoing efforts to develop and improve the Bluetooth standard within the Bluetooth SIG. Other common wireless communications standards Wi-Fi (IEEE ) is another wireless communications standard, particularly for laptop computers. This is the established technology for wireless access to the local network. Today, the main applications concern internet access and voice over IP. This standard has been integrated into products from the new Multimedia range. Ultrawideband or UWB is a radio modulation technique which is based on transmitting impulses over very short times, often less than a nanosecond. This makes it possible to deliver very high bandwidths. Two signal modulation methods are primarily used: impulse position modulation, with either time or biphase modulation. UWB can be used as a wireless communications technique, providing very high network transfer rates over relatively short distances and at low voltages. The RFID (Radio Frequency IDentification) technology makes it possible to identify an object, track its movements and determine its characteristics remotely thanks to a radio wave emitting label which is attached or incorporated into the object. The RFID technology enables labels to be read even without a direct line of sight, and can pass through thin layers of materials (paint, snow, etc.). NFC (Near Field Communication) is a technology for exchanging data at distances of a few centimeters. It represents an application of radio-identification technologies (high frequency). Launched by Sony and Philips, the NFC technology enables data to be exchanged between a reader and any mobile terminal or between the terminals themselves, at a maximum speed of 424 Kbps. In the future, these standards could be combined with the Bluetooth technology, or added in future portable devices in addition to or replacing Bluetooth. Parrot is working on all of these standards and already offers a certain number of products with wireless connectivity using WI-FI (Specchio Parrot By Martin Szekely photo frame, Zikmu Parrot by Philippe Starck speakers) or NFC (Grande Specchio Parrot By Martin Szekely photo frame) Market for wireless handsfree products for vehicles There are two main types of solutions on this market: aftermarket solutions, i.e. fitted after the purchase of the vehicle, and Original Equipment Manufacturer (OEM) solutions, which are included by the manufacturer when the vehicle is produced. In addition to Bluetooth's penetration rate, the main factors affecting this market are: Technological advanced and functionalities offered by the mobile phones, Regulations governing in-car mobile phone use, Drivers' perception of the risk and the comfort involved with in-car mobile phone use, Knowledge of the existence of this type of solution, Interoperability and compatibility between cellphones/smartphones and handsfree systems, Users' experience. 40

41 Installed handsfree market (retail) Parrot is number one on this market, with approximately 80% market share in Europe (company s estimate based on 2010 GFK study). For users, installed handsfree kits offer the following benefits: Peace of mind: installed handsfree kits, with a remote control mounted on or close to the steering wheel, make it possible to keep your hands on the wheel (or no further away than the gear stick) and your eyes on the road; Choice: a variety of products designed for various uses (from handsfree calls to digital music), offering a wide range of prices; Comfort and durability: a product that is always charged up, integrated into the interior, with software (management of connectivity, features, compatibility) that can easily be updated. On the other hand, there are two main obstacles relating to the use of installed wireless handsfree kits: fitting and technical aspects. To address these obstacles, Parrot has been developing a certified installer program since 2008 (cf "Opportunistic optimization of sales and marketing investments"), which makes it easy to locate a fitter in a given area. In terms of technical aspects, Parrot's products all contain three buttons: pick up, hang up and menu. Traditionally, the installed handsfree kit market is driven by the gradual strengthening of legislation restricting in-car mobile phone use. If such regulations are not in place, the installed handsfree kit market is influenced by the technological advances made with mobile phones. For instance, the needs created by smartphones with integrated digital music players are generating new requirements, such as listening to this "portable" music in the car, covered by the latest generations of Parrot handsfree systems (MKi and Asteroid range). With this in mind, Parrot is constantly looking to anticipate the next breakthrough technologies for mobile phones in order to develop useful products for vehicle users Plug & Play handsfree market (retail) The market for Plug & Play products is the Group's most competitive market. Indeed, many manufacturers of mobile phone accessories and particularly earpieces are positioned on this segment; for instance, installation-free products are sold by Nokia, Supertooth, Bluetrek and Sony Ericsson among others. However, the handsfree kits developed by mobile phone manufacturers offer limited compatibility with mobile phones from other brands. This represents an obstacle to their penetration on these markets: in most developed countries, mobile phones are renewed every two years at least (source: Observatoire Sociétale du téléphone portable AFOM / TNS Sofres). From a financial perspective, the market for Plug & Play products is not strategic for Parrot. On the contrary, the Group is positioned on this market in order to have an attractively priced installation-free product, while paving the way for drivers to understand the advanced features offered by a handsfree system (phonebook synchronization, voice recognition, time for use with no recharging, etc.) compared with headsets. In this way, the Plug & Play products meet an educational goal and must enable Parrot to promote penetration and build understanding of the technical features available with handsfree systems in general OEM market (BtoB) Vehicles currently have a low level of equipment in terms of handsfree kits when they are manufactured ("OEM"). These kits are mostly integrated as an option, i.e. when requested by customers in return for a price supplement. In 2011, out of a total of approximately 65 million new vehicles produced, Frost & Sullivan estimates the Bluetooth penetration rate in new vehicles at 18% (source: Global Automotive Industry Outlook 2009, March 2009). Frost & Sullivan's forecasts for 2015 show a penetration rate for Bluetooth in new vehicles of 30% (worst-case scenario: 21%; best-case scenario: 46%) for an annual production of 87.5 million vehicles. Estimated penetration rate for handsfree OEM Bluetooth solutions (% penetration, Frost & Sullivan 2009) ~65 million new cars ~85 million new cars

42 2011 Reference Document On this market, Parrot is targeting car makers and their original equipment manufacturers which incorporate the Parrot solution into their own products (control board, head unit or navigation system) for assembly on the auto manufacturers' production lines. Parrot also supplies manufacturers of aftermarket multimedia and navigation systems. The main original equipment manufacturers and auto manufacturers which are Parrot s customers are listed in "OEM range". Today, the OEM market is far from mature and subject to the automotive industry's constraints, especially in terms of the cycle for developing new cars, estimated at two years in average. As a result, a car designed with the technologies currently available will likely be launched in two years and will thus be two years behind the mobile technologies existing at time of the car launch. However, the future development of handsfree technologies and more generally the growing integration of multimedia features aiming to offer drivers new services is a strong trend in the automotive industry. It provides an additional source of revenues (sold as an option) and is a differentiating factor (marketing of the multimedia functionalities by car manufacturers) Road safety: favorable regulatory framework Road safety regulations are gradually being strengthened around the world. In many countries where the Group is present, drivers are forbidden from holding a phone in their hands while driving a vehicle. In this way, in Germany, Spain, France, Italy and the UK, it is expressly forbidden to hold a phone while driving. In Spain, it is also expressly forbidden to use earpieces. In Italy, it is expressly forbidden to use headsets and dual earpieces (drivers must be able to hear their environment). In the US, the law in the State of New York, New Jersey, Connecticut, Oregon, Washington, Washington DC and California forbids in-car mobile phone use. However, using a handsfree kit is authorized provided that it makes it possible to hold a conversation without having to use your hands (except for taking the call). At this time, this regulation is poorly enforced. However, more and more American states are drawing up proposals for bills aimed at regulating in-car mobile phone use, including: Arkansas, North Carolina, Colorado, Delaware, Florida, Georgia, Hawaii, Indiana, Maryland, Missouri, New Mexico, Texas and Virginia. Over the last few years, a legislative trend has emerged in North America concerning the prohibition to compose text messages while driving a vehicle, specific laws were passed in a majority states. Description of bans concerning in-car use by drivers (listed by the site Country Ban* Comments Australia Yes Forbidden in all States variable fines Austria Yes Variable fines up to $22 per offence Bahrain Yes Variable fines prison sentence Belgium Yes Mobiles may be used without handsfree kits when the vehicle is stopped Brazil Yes Forbidden since January 2001 Canada Variable Forbidden in most states variable fines. Chile Yes China Yes Czech Republic Yes Denmark Yes Forbidden since July 1998 Fine of $60 per offence Egypt Yes Fines up to $100 per offence Finland Yes Forbidden since 2003, fine of $55 per offence France Yes Forbidden since 2003, fine of 100 per offence and deduction of 3 point Germany Yes Forbidden since except when the vehicle is stopped. Fine of 40 per offence Greece Yes Hong Kong Yes Hungary Yes India - New Delhi Yes Forbidden Ireland Yes Forbidden fine of $380 per offence 3 month prison sentence after 3 offences Isle of Man Yes Forbidden since 2000 Israel Yes Italy Yes Fines up to 124 per offence Japan Yes Forbidden since November

43 Jersey Yes Forbidden since February 1998 Jordan Yes Forbidden since October 2001 Kenya Yes Forbidden since 2001 Malaysia Yes Mexico Partially Forbidden in Mexico City Netherlands Yes Fines up to 2,000 or two year prison sentence New Zealand Yes Forbidden since end of 2009 Norway Yes Fines up to $600 per offence Pakistan Partially Forbidden in Islamabad Philippines Yes Poland Yes Fine up to $100 - higher if challenged Portugal Yes Romania Yes Russia Yes Imposed by the Prime Minister in March 2001 Singapore Yes Slovenia Yes South Africa Yes South Korea Yes Forbidden since July Fine of $47 + deduction of 15 points from license Spain Yes Sweden No Switzerland Yes Fine up to CHF100 Thailand Yes Forbidden since May 2000 Turkey Yes Turkmenistan Yes Forbidden since May 2003 UK Yes * The legislation in place is not necessarily applied Forbidden since December 2003 fines up to GBP 2,500 and deduction of 3 points Naturally, Parrot pays close attention to planned or current regulatory changes, carefully monitors the various research published on these subjects and works with the various players concerned (authorities, associations, research institutes, etc.) in order to offer solutions aimed at raising awareness among drivers and their callers (the caller is also responsible for the safety of the person they are contacting) and ensure that these handsfree systems enable drivers to continue paying attention to their driving, simply as if the driver was having a conversation with a passenger in his vehicle Infotainment: digitization of vehicles The market for wireless handsfree products for vehicles is moving into a new technological cycle linked primarily to the success and technological capabilities of smartphones. Through smartphones mobile internet connectivity, manufacturers and OEMs are starting to deploy on-board entertainment systems in vehicles, providing information, music, internet access, navigation and telephony features. All of these services, combined with new technological solutions, are commonly referred to as Infotainment or IVI (In Vehicle Infotainment). According to research by IHS Automotive in March 2012, the in-vehicle infotainment market already represented 32.5 billion US dollars in 2011, up 3.4% in relation to Reflecting the impact of the increase in global car production and growth in electronic content in vehicles, this development looks set to continue this year (+3% to 33.5 billion dollars). Parrot, through its new Retail solutions with the Parrot Asteroid (first product launched in H and full range presented at the 2012 CES event) and its long-established multimedia connectivity expertise, is positioning itself to lead the field on this significant and growing market Competitive advantages and environment Fragmented competition The Group's rivals on the market for in-vehicle wireless handsfree products are primarily from four different sectors: mobile telephony OEMs, automobile OEMs, small and medium-sized businesses specializing in handsfree kits, and Bluetooth chipset manufacturers. 43

44 The technological strengths of the Group's products over its rivals primarily include: voice synthesis and recognition features integrated into the handsfree system, optimum audio quality (echo cancellation, specific noise reduction for each product, full duplex), compatibility with virtually all the Bluetooth phones on the market, irrespective of the brand or model, 2011 Reference Document full integration with the car radio (audio from installed handsfree kits is transmitted using the vehicle's speakers, automatic phonebook synchronization between the handsfree system and mobile phone, with the Group, to the best of its knowledge, one of the only players to offer six different data synchronization protocols, audio streaming which makes it possible to play the MP3 files on your mobile phone, wireless remote control mounted on the steering wheel or nearby on the dashboard (for installed handsfree systems). Mobile telephony original equipment manufacturers The leading manufacturers of mobile phone handsets, such as Nokia or Motorola, are the Group's main and historical rivals on retail handsfree products. They offer wireless Bluetooth handsfree products on an aftermarket basis competing against Parrot's products. For telecoms original equipment manufacturers, Bluetooth handsfree products represent only a sub-segment of their mobile phone accessories sales business, with this activity in turn related to their core business (sale of mobile phone handsets). In this way, they are focused primarily on mobile telephony distribution channels and have a much weaker presence on automotive distribution networks. Furthermore, unlike Parrot, they are not focusing on the compatibility of their handsfree products with other mobile brands. This is significantly holding back their development when we consider that a mobile subscriber changes handsets every two years on average, whereas vehicles are generally kept for seven to nine years in Europe and the US. Automotive original equipment manufacturers Several automotive original equipment manufacturers now offer Bluetooth systems for the OEM market, including Harman Becker (through its subsidiary Temic) and Johnson Controls. Parrot is positioned as a second-tier supplier for automotive original equipment manufacturers, and is developing partnerships with some of them. Once again, the technical benefits offered by the Group's products, as well as the Group's leading position, have made it possible to sign a growing number of contracts for supplying auto manufacturers directly as well as original equipment manufacturers which are looking for a better quality solution, excellent phone compatibility and at a better cost than they would be available to develop on their own. Handsfree telephony kit manufacturers Several SMEs, particularly in Germany, are the Group's longstanding rivals. This primarily concerns THB Bury, Cullmann, Funkwerk Dabendorf and Peiker. In the past, these companies have had a certain level of success on traditional wire-based handsfree systems in which the mobile phone, supported in a mechanical unit, is connected up to the electronic control box by a cable. With the introduction of the Parrot CK3100 LCD, the Group offered a solution which, to its knowledge, outperformed its rivals' products in terms of features and the quality of its user interface. The Group was also the first player on the market to launch products with an LCD screen. More recently, Parrot has rapidly and successfully positioned itself on advanced handsfree systems which are compatible with Apple products (ipod, iphone, itouch), thanks to the MKi products launched in December Several companies, including some based in Asia, offer handsfree systems that do not require any installation, the Plug & Play of Parrot products. Including Blue Ant (Australia), ECE (France), Jabra (Denmark), Hamg Shing (Taiwan), Seecode (Korea), Southwing and Westech. To face these challengers, Parrot focuses on the innovative nature of its products, maintaining its technological excellence and the reputation of its brand. Bluetooth chipset manufacturers On the OEM segment, the Group is competing against manufacturers of ASICs and modules, such as CSR (UK), Alps (Japan) or TeleChips (South Korea). In some markets, the Group may also face local players. 44

45 Parrot's competitive advantages The Group considers that it has a certain number of competitive advantages on the market for handsfree products for vehicles, enabling it to develop its business on the market for wireless mobile phone devices outside of the automotive sector. Major player on the market for in-vehicle wireless handsfree products In most of the countries where it is present, the Group has established itself as the market leader for in-vehicle Bluetooth wireless handsfree products. The main factors behind this success include: The value for money offered by Parrot's products, Their extensive features, thanks to the technological expertise developed since 1994, Their compatibility with virtually all mobile phones. Full range on the market for in-vehicle wireless handsfree products The Group's highly technological and varied product offering makes it possible to meet its customers' requirements. Indeed, the Group has a full range of in-vehicle handsfree products, from the simplest (e.g. Parrot MINIKIT) through to the most sophisticated (e.g. Parrot ASTEROID internet car radio). The Group is present on the markets for installed handsfree kits, Plug & Play and OEM, enabling it to establish Parrot's brand awareness across several channels and better free itself up from consumption cycles while positioning itself as a leading player on the entire market for wireless handsfree telephony equipment for vehicles. Recognized technological expertise The Group's technological expertise is based on years of applied research and development on the design, production and more generally the quality of Parrot's products. Section XI. of the present reference document is focused more specifically on the Group's research and development. In terms of design, the Group has built up undisputed expertise on the essential technologies for its products, particularly with regard to: Signal processing and other specific areas required for on-board acoustics (echo cancellation, ambient noise reduction, voice recognition, audio effects for music, etc.), The Bluetooth standard and mobile technologies in general (USB, Wi-Fi, SRD, NFC). In terms of manufacturing, the effective management and control over supplies, particularly for electronic components, from subcontractors and the logistics chain within the framework of a "fabless" model ensures great flexibility and responsiveness, enabling the Group to accommodate market growth and benefit from the reduction in its production costs. For further information, refer to Section "Flexible industrial strategy and effectively managed costs". With regard to quality, for several years now, the Group has factored in the automotive industry's quality requirements: its design, manufacturing and control processes are quality certified for the automotive sector and make it possible to ensure the quality of products and satisfaction of consumers. Parrot is ISO 9001 and ISO TS certified (quality approach for the automotive industry developed by the International Automotive Task Force (IATF), validated and published by the ISO). For further information, please refer to Section "Flexible industrial strategy and effectively managed costs" in the paragraph on "Continuous quality improvements". Sound international experience The Group sells its in-vehicle handsfree products in almost 90 countries. It offers its products with documentation and a software interface in 19 languages, enabling a better level of acceptance by local markets. In addition to its distribution agreements, the Group has set up subsidiaries in Germany, the UK, Asia (Hong Kong), the US and Italy. Well-established multichannel distribution The Group has several distribution channels for its products: (i) mobile telephony specialists (operators, retailers, specialized stores and supermarkets), (ii) automotive specialists (repairers, equipment fitters, importers and dealers) and (iii) auto manufacturers and OEMs. This diversity in terms of distribution makes it possible to reach customers in a 45

46 2011 Reference Document suitable way and provide good coverage for the full range of products. The distribution approach is detailed in Section "Opportunistic optimization of sales and marketing investments". Recognized and respected brand in the in-vehicle handsfree product sector With almost 10 million in-vehicle wireless handsfree products sold under the Parrot brand since 2004, the Group today has a brand that is clearly identified and recognized on the market for in-vehicle wireless handsfree products by retailers as well as by auto manufacturers and OEMs. Quality teams with a proven track record in the sector More specifically, the Group's success reflects the experience and the very good fit between the management team, the sales team and the research and development team. Within these teams, certain members have been present for more than 10 years, while others have years of experience with major players on the mobile telephony or electronic markets. All of the team members have built up expertise in the market, technologies, sales and marketing methods, and the manufacturing strategies which are essential to the Group's development. The biographies of the Group's main executives are presented in Section XVII. of the present reference document. Sound financial structure and proven profitability for several years The Group has shown its ability to achieve profitable growth since FY More specifically, this success stems from a comprehensive range of products which is regularly renewed, a distribution structure and marketing effort which have been gradually put in place, and a constant focus on reducing costs aimed at maintaining its operating margins. Detailed financial data are provided in Section IX. and Section XX. of the present reference document. New innovative products on the market for wireless mobile phone devices The Group is drawing on the technological expertise it has built up on handsfree products for vehicles in order to develop other products. Parrot is naturally accompanying the technological evolution of mobile phones, which are becoming an increasingly important part of day-to-day life. Moreover, Parrot devotes around 15% of its R&D spending each year to exploring new products. In this way, the Group aims to be able to anticipate the next features to be introduced for mobile phones. In line with this approach, the Parrot AR.Drone was presented in January 2010 in order to accompany the breakthrough made by videogames in the mobile phone world Non-recurring items with an impact on the issuer's business NA Issuer's dependency on patents, licenses, industrial, commercial or financial contracts, or new manufacturing techniques Please refer to Chapter IV. "Risk factors" Parrot s strategy Parrot's strategy aims primarily to continue moving forward with a sustained innovation policy in order to anticipate technological evolution relating to mobility and the constant progress of the smartphone capacities, deploy its sales force and marketing actions in each country where the Group is present, as well as for export, identify new growth opportunities in harmony with the economic model, markets and technologies group. In this way, Parrot aims to maintain its leadership around the world on its historical business and give itself the means to seize new opportunities in the world of wireless devices. Drawing more specifically on the competitive advantages presented in Section "Competitive advantages", the Group's strategy is built primarily around the following focuses. 46

47 Significant investments in research and development R&D policy serving future growth In order to maintain its competitive edge, Parrot has continued to further strengthen its teams of engineers. In 2011, the R&D teams (355 people) represented 51% of the Group workforce at the end of December 2011 (compared with 44% at December 31, 2010). As in the past, Parrot continuously maintains a committed and daring research and development policy in order to support the expansion of its vehicle handsfree kit range, while giving itself the means to generate new development opportunities on new markets in the mobile world and more specifically on the IVI market (cf Infotainment: the digitalization of the cars ). With this in mind, Parrot completed two acquisitions in 2011, with both of these companies merged into Parrot S.A., supplementing its portfolio of technologies and accelerating its positioning on the infotainment market: Varioptic, acquired in summer 2011 (100% of the capital), is a French company specialized in liquid digital lenses, enabling Parrot to position itself on the digital image processing market, dovetailing with its longstanding digital sound processing expertise. DiBcom, acquired in autumn 2011 (100% of the capital), is a French company specialized in mobile and multistandard digital radio and television. Further information on the technologies acquired through Varioptic and DiBcom is provided in Sections and Parrot has maintained the growth of its R&D investment program focused on developing the next generations of automotive products (retail and OEM), as well as the integration of new features drawing on the Android platform and internet connectivity. Recognized technological expertise on its historical business Parrot s expertise in its historical segment is universally recognized today, thanks to years of research and development and a constant focus on optimizing the technological architectures acquired by the Group. Most Parrot products are based on common technologies adapted to the various uses, customers and distribution channels. At the same time, new features are added in order to accompany the technological progress made on mobile phones. In this way, at the end of 2008, Parrot was the first player to launch an iphone/itouch-compatible product: the MKi range. In 2010, the Parrot AR.Drone's highly innovative features and technological advances were widely acclaimed by professionals and consumers. At the forefront of technological developments, Parrot is anticipating changes and adaptations in an industry that spans a wide range of technological standards. Ability to deploy value-creating technological partnerships At the same time, the Group does not hesitate to implement technological partnerships in certain areas in which external contributions help ensure the quality of its products and in this way the satisfaction of its end customers. In addition to the Group's technology, its products incorporate elements supplied by third parties which, as relevant, may be protected by intellectual property rights. In this way for instance, the Parrot 5 ASIC incorporates the Baseband Bluetooth module, software licensed out by Ericsson (cf. Chapter XI. "Research and development, patents and licenses" in the present reference document). The various Parrot ASIC platforms may also incorporate know-how from certain Group suppliers which worked on their development. Lastly, the R&D Department calls on the services of external specialists to address one-off specific issues: in this way, 27 external consultants worked with the R&D Department as of December 31, Attractive development opportunities thanks to new mobile phone uses One of the key elements in the Group's strategy lies in its ability to go along with the new functionalities offered in the mobile world. Drawing on the technical and technological excellence it has built up on its core business, and more specifically signal processing, acoustics and expertise in wireless technologies, the Group aims to continue expanding its product range to include other wireless devices for mobile phones, notably music, photos and more recently video 47

48 2011 Reference Document games. The quest for new market drives Parrot's ambition to accelerate its growth. The Parrot AR.Drone is an illustration of the success of this strategy Opportunistic optimization of sales and marketing investments Product-centric marketing approach The Group considers that the penetration for handsfree kits on vehicles in circulation is low, pointing to major potential for development in particular if laws governing the use of mobile phones when driving in many countries continue to get implemented globally. This expansion is also being supported by the ongoing technological improvements in mobile phones and the new uses brought about: making calls, listening to music, taking pictures, playing videogames, etc. are uses which were almost unthinkable a few years ago. The improvement of mobile technologies in day-to-day life are accompanying the activity's natural progression. In this context, Parrot is focusing its marketing efforts on four main areas: Product launches: positioning built around the technological benefits and strong coverage in traditional media and online; Product placement on retailer shelves: giving priority to sections for mobile phone accessories rather than vehicle accessories; Visibility of its products at points of sale: display stand, point-of-sale advertising, packaging, etc. Brand awareness: through press relations, social media or pop-up stores. Constantly strengthening the distribution network Parrot currently operates on four main distribution channels. The following diagram provides an overview of the distribution channels covered by the Group and the products distributed in each one. The distributor brands are provided as examples and the list is not intended to be exhaustive. Auto specialists (dealers and independent fitters) are Parrot s historical distributors. They offer the advantage of enabling end customers to acquire their handsfree kits and get them installed at just one point of sale. Mobile phone specialists (telecoms operator sales networks, telecoms stores, and mobile phone distributors), mass retail firms (specialized or general) and e-tailer sites complete this network. On these channels, Parrot mainly sells its Plug & Play and Multimedia products, with the exception of telecoms operators, which, as part of their approach for sales to professionals, offer installed handsfree kits for professional vehicle fleets. In addition, the Group has deployed its Parrot By products on specific distribution channels, with a high-end focus, in order to bypass the competitive mass retail environment. On these channels, Parrot applies a carefully thought-out just-in-time distribution policy in order to maintain a good level of visibility on product sales and distributor stocks. Certified installer program Since the end of 2007, Parrot has been rolling out a certified installer program, looking to extend the distribution network and offer end customers more choice for the installation of their 48

49 handsfree kits (closer to home, by their usual garage, near their workplace, etc.). Currently in more than 20 countries (Europe, Scandinavian countries, USA and Canada, Australia, South Africa), the certified installers program had over 4,000 members at the end of December For independent garage owners who are members of the program, Parrot offers a series of tools through a dedicated internet site: certified installer specifications, advertising materials (posters, brochures, stickers, display stands, etc.), installation guides, presentation videos, etc. A genuine program developed specifically for this network enables garage owners to diversify their sales, showcase their place of business and access a broader customer base. On the Parrot site, the certified installer's location gives them immediate visibility and drives growth in traffic at their point of sale. For end customers, Parrot's network of certified installers is available on the Group internet site (e.g. in France in the "certified installers" section on the homepage). By entering their postcode, customers can immediately find their nearest installer. In this way, they will be able to arrange an appointment with a professional who is committed to installing their Parrot product quickly and effectively. This program, showcasing the Parrot brand for professionals and customers, continues to be rolled out in the countries indicated above, as well as in new countries. In countries where Parrot does not have a subsidiary, part of the cost of deploying the program can be covered by the local wholesaler. In time, Parrot will draw on the network of certified installers to expand the distribution of its installed handsfree kits to retailers which do not offer installation, by proposing partnerships between retailers and installers on specific trading areas. "Push-and-pull": acting on two commercial levels Parrot's success on in-vehicle handsfree kits has been based on its first-rate listing with automobile specialists. The large installed base of specialized distributors represents a key competitive advantage on a market in which the opinionleader effect has a major impact. The "Push" sales policy, leveraging wholesaler margins to push its products to retailers and fitters, is primarily applied in the countries where Parrot does not have a subsidiary. The "pull" strategy is embodied by the sales teams: they establish regular and quality contacts with retailers, which they advise, guide and train up on the products. This approach is therefore based on closer ties and tailor-made support for the opinion-leader in order to meet their expectations. Online marketing and social networks Over the last few years, Parrot has significantly ramped up its online presence in order to support the brand's growing reputation and establish direct communication with its end customers. Parrot actively communicates on social networks ( twitter.com/#parrot) and social media ( to support the brand globally and showcase certain products in particular ( ARdrone, twitter.com/#ardrone, The online content developed by Parrot covers several objectives: helping create a buzz, explaining features and supplementing technical support. At the end of 2011, Parrot had over 200,000 fans on its main Facebook page (compared to 50,000 at the end of 2010), while the videos available on Parrot's YouTube channel have been watched more than 30,000,000 times (compared to 5,000,000 at the end of 2010). OEM: strategy to grow market shares Positioned on the OEM market since 2004, Parrot has rapidly established itself as a major player on dedicated electronic components for handsfree telephony and more recently digital music, in car multimedia and connectivity and the broad world of infotainment. The OEM activity is carried out directly with original equipment manufacturers and auto manufacturers. The contracts signed have a long-term focus; after 6 to 18 months of negotiations, a design win (which the Group is not able to communicate on before the vehicle is announced) and an approximately 12-months development phase, with the commercial work together spread over several years (four years in the majority of cases). The nature of the product involved (ASIC or modules) makes this a high volume business: 8.4 million components sold in 2011 (versus 5.6 million in 2010). For further information on the OEM market, please refer to Section "OEM market (BtoB)" above. 49

50 2011 Reference Document Map of OEM customers around the world The strategy applied by the OEM department aims to: Provide manufacturers with technical solutions that in line with current and future mobility trends. Parrot's OEM solutions combine hardware and software design to offer a series of features: USB, Wi-Fi, Bluetooth, digital signal processing, multi-speaker voice recognition. Since 2010, the Group has also offered additional smartphone features based on the Android platform, as well as internet connectivity. For further information on the OEM products, please refer to Section "OEM range" in the present reference document. Build a quality offering for each OEM customer, supported by local follow-up and corresponding services. Parrot supplies complete hardware and software solutions, as well as technical support (system design and integration) and after-sales maintenance (software updates, compatibility testing with new handsets, etc.). To meet these two objectives, the Group aims to maintain a high capacity for innovation on its core technology, with regular R&D investments to enable Parrot to stay ahead of its competitors. For instance, the solutions marketed in 2008, with deliveries beginning in 2009, incorporate compatibility with Apple's mobile handsets (iphone, ipod touch, ipod). Since 2009, the Group has been working to integrate Android (Google's mobile system). Combined with mobile internet access, this platform allows Parrot customers to provide internet connected application and content such as internet radio or driving related services (geolocalization) to the drivers in addition to the traditional navigation and radio functionalities. These latest innovation are the actual main focus of the Group s R&D investments. In addition, Parrot is deploying a strategy to build close ties, which is essential to ensuring the sustainability of the longterm commercial relations established with OEM customers. 50

51 Map of the global presence of Parrot's OEM teams Flexible industrial strategy and effectively managed costs Parrot s industrial strategy is built around three key components: (i) outsourcing production and logistics, (ii) producing mainly in Asia, and (iii) continuously improving its cost structure, flexibility and quality. Managing costs effectively The Group intends to continue moving forward with a design, manufacturing and marketing policy which is firmly focused on reducing and optimizing costs. This demand for effective control over costs, present as of the product design stage, is also applied across the entire production and marketing line in order to support the Group's strategy for profitable growth. To be able to apply an aggressive pricing policy, Parrot has adopted a design-to-cost approach. Indeed, the Group is constantly looking for new low-cost components, qualifying and redesigning its products. At the same time, it regularly renegotiates prices with its main subcontractors. Industrial strategy: fabless model The Group is organized around a "fabless" model, with production and logistics both outsourced. This strategy enables flexibility combined with rapid execution on all the market segments on which the Group is present. Most of the production is outsourced in Southeast Asian countries, which makes it possible to significantly reduce labor costs. Part of the production team is based in Hong Kong in order to be close to the production centers and component suppliers in Asia. Hong Kong represents the Group's global point of supply in Asia. Group industrialization and production department The industrialization and production department, made up of 66 people at December 31, 2011, with 38 based in China, is responsible for the introduction of new products, their handling in the factories through to delivery to customers, as well as after-sales service. To perform these missions, the production department has dedicated personnel for: Working with the research and development department to take industrial constraints into consideration as soon as projects start up, with a view to optimizing quality and costs; 51

52 2011 Reference Document Managing the suppliers manufacturing products, in order to ensure the effective compliance of the process, product and delivery times; Sourcing and importing products for the logistics platforms; Designing and maintaining the dedicated resources for loading software; Overseeing methods and the scheduling of packaging for products; Handling sales administration (preparation, shipping and billing of customer orders); Designing and maintaining test resources, including hardware maintenance for products and redesigning certain features with a view to reducing costs; Providing after-sales service, particularly for software update operations, repairs or standard exchanges under warranty; Stringent selection of suppliers and subcontractors A "fabless" company is a company which is focused on the quality and management of subcontractors, selected for their excellence. For each new product, the Group selects strategic partners, particularly for the manufacturing of their ASICs, a key element in the Group's products, as well as the production of electronic sub-units intended for the logistics platforms for producing finished products. The majority of the electronic sub-units are assembled in Asia, particularly by JABIL Circuit Ltd (China), Aztech, ACT and LITE-O: cables, keyboards, LCD screens and electronic units. Parrot acquires these sub-units from these subcontractors, which in turn source their products, particularly for the main components -- Parrot ASIC and memory -- from suppliers, preselected by Parrot, and set up contracts based on prices and other conditions negotiated beforehand. The Group has entrusted the manufacturing of its ASICs Parrot 4+ and 4++ chips to Atmel, the manufacturing of ASICs Parrot 5 ASIC chips to STMicroelectronics, the manufacturing of ASICs Parrot 5+ chips and ASICs Parrot 6 and 6i chips to Global Foundries, world-leading foundries on the semiconductor market. When a new alliance is set up with a foundry for manufacturing a chip, this requires initial investments, particularly for important developing manufacturing masks. In this way, the Group is dependent to a certain extent on the foundries initially selected for manufacturing its chips. That is why the Group selects renowned foundries with the certifications and experience required. Lastly, the Group regularly communicates with these foundries in order to anticipate any difficulties. The amounts invoiced to the Group s main suppliers are as follows: Supplier Location 2010 ranking 2010 (in m) 2011 ranking 2011 (in m) Jabil Circuit Ltd (Chine) Asia 1 50,6 1 57,4 Aztech System Ltd Europe 2 25,5 2 12,7 Accent Europe 4 7,9 3 6,6 UTAC Asia 6 4,0 4 4,5 UMCT France - 5 4,3 ACT Asia 5 4,8 6 3,8 Spil France - 7 3,6 GEODIS France 9 3,1 8 3,2 STMicroElectronics France 7 3,8 9 2,9 Mixicom SAS France ,1 Tom Tom Asia 3 9,4 - Micron Europe Ltd France 10 2,6 - Numonyx BV France 8 3,2 - The Group uses a number of component suppliers, looking to have at least two manufacturers for each component, with which the sub-unit assemblers set up contracts directly. The prices of basic components trend down on the semiconductor market in general. Assembly of component sub-units As the final production phase, the packaging, i.e. the final assembly, of sub-units into finished products was carried out by KUEHNE-NAGEL until February 2010 and by Geodis since February 2010 in France, and by Hercules in China. The Spanish and American subsidiaries have a distribution platform, managed respectively by SEUR and Le Saint Logistic. 52

53 Stock and production management The Group uses the SAP Business One solution for managing and monitoring orders, stock, manufacturing and deliveries. The schedules of finished products are managed in SAP. The Group has set itself a maximum of five working days between the customer's order and the availability of products ready to be delivered, including personalized products. The Group has set itself a target of less than 16 weeks for manufacturing its products. The production time for electronic units is linked to the component sourcing phase, which Parrot manages upstream and which generally represents 16 to 22 weeks for strategic components such as the Parrot ASICs. In addition, two weeks are needed for assembly, with assembly operations including the cabling of components on the electronic card, the integration of the card into its unit, and the testing and checks required at the end of the line. In general, a further two weeks are needed to transport the products from their place of production in China to the logistics platforms. Products manufactured in Asia which are low-value (such as cables) or weigh considerable amounts (such as car radios or speakers) are shipped by boat (around six weeks), while high-value products such as the electronic units are transported by plane. The stock management rules planned for three weeks worth of stock, one week of finished products (fully packaged and ready to be delivered to customers) and two weeks of semi-finished products (sub-units) ready to be packaged. In 2009, the Group decided to put in place strategic stocks of components with a view to compensating for any shortages on the market and satisfying a higher level of commercial demand than forecast. Continuous quality improvement Quality improvement represents a constant requirement faced with increasingly demanding customers, particularly on the OEM market. All of the Group's main subcontractors are ISO TS certified, the benchmark quality certification in the automotive sector, and have recognized experience in the auto industry. The Group has put its own ISO 9001 quality system (2000 version) in place and regularly monitors the quality indicators for its subcontractors and products, enabling it to significantly reduce its rate of product returns. In 2011, the average rate of returns for finished products was 2.98% (percentage of the number of items returned in Week N / number of items delivered in Week N-12, with this return rate including returns for simple software updates). The Quality Division applies the quality policy defined by the executive leadership team and coordinates its implementation within the Company's various departments. Its actions are reflected in: An organizational "quality system" activity which concerns all the departments: Describing the Company's operations through the quality system (quality manual, procedures, forms, methodologies, checklists, etc.); Ensuring that the quality system is effectively understood and applied; Adapting the quality system to the Company's developments and ensuring consistency in terms of how we operate. This activity also includes overseeing the certification approach and the integration of aspects relating to employee working conditions, the environment and more generally sustainable development into our practices. An operational "product quality" activity aimed at improving, during the project phase and the production phase, product quality working with the business lines in: The Aftermarket business unit (btoc); It involves: The OEM business unit (btob). 53

54 2011 Reference Document Ensuring the use of best practices for developing products under good conditions and guaranteeing product quality; Providing support for product specifications; Ensuring the effective application of product specifications by the production plants and logistics platforms; Managing customer return statistics and overseeing actions aimed at improving products. The Quality Division capitalizes on the close fit between these two activities in order to optimize the Company's flows and the quality of its products Customer service and after-sales service Customer service The customer service team (Technical Support) is made up of four multilingual people (as of December 31, 2011) based in Paris as well as one person in each subsidiary to manage its own technical support. A main database of issues is centralized and analyzed at the Paris headquarters. The support is mainly provided in French, English and Spanish, over the phone and by . The online forums and documentation also make it possible to provide users with specific and comprehensive information on how to use Parrot's products. A department staffed by five other people (as of December 31, 2011) is focused on the compatibility of Bluetooth phones and Apple devices, 3G keys... They work closely with the Support team and summarize this feedback from the field in databases collecting the information entered for each call. This enables Parrot to adapt products with new software versions made available on the internet site and in the production process. After-sales service The after-sales service team is made up of four people (as of December 31, 2011), based at the Group's head office in Paris. In 2011, the rate of product returns came to around 2.98% (percentage of the number of items returned in Week N / number of items delivered in Week N-12, with this return rate including returns for simple software updates). Returns are physically processed ("Level 1") by the Parrot logistics platform, managed by Geodis Logistics in the Paris region. Returned products are recorded to trace returns for each product and each customer. This information is made available to each one of the commercial departments in order to keep them informed about any products returned by their customers. The Group's policy is to replace or repair products which have been returned within 15 working days, excluding transport times, insofar as possible. In the majority of cases, a simple software update is needed, with no hardware faults to report on products. When products are effectively faulty, an appraisal (based on a sample) is carried out within the after-sales service team ("Level 2") or by the quality department in order to determine the cause. The quality department then transmits this information, depending on the type of fault, to either the production department (supplier fault) or the design team (design fault) in order to correct the issue at its source Quality and sustainable development Continuous quality improvement Quality improvement represents a constant requirement faced with increasingly demanding customers, particularly on the OEM market. All of the Group's main subcontractors are ISO TS certified, the benchmark quality certification in the automotive sector, and have recognized experience in the auto industry. The Group has put its own ISO 9001 quality system (2000 version) in place and regularly monitors the quality indicators internally as well as for its subcontractors and products, enabling it to significantly reduce its rate of product returns. The Quality Division applies the quality policy defined by the executive leadership team and coordinates its implementation within the Company's various departments. Its actions are reflected in: An organizational "quality system" activity which concerns all the departments: Describing the Company's operations through the quality system (quality manual, procedures, forms, methodologies, checklists, etc.); 54

55 Ensuring that the quality system is effectively understood and applied; Adapting the quality system to the Company's developments and ensuring consistency in terms of how we operate; Continuously improving quality by putting in place targeted actions and audits. This activity also includes overseeing the certification approach and the integration of aspects relating to employee working conditions (health and security), the environment (on site and in product conception) and more generally sustainable development into our practices. An operational "product quality" activity aimed at improving, during the project phase and the production phase, product quality working with the business lines in: The Aftermarket business unit (btoc); It involves: The OEM business unit (btob). Ensuring the use of best practices for developing products under good conditions and guaranteeing product quality; Providing support for product specifications; Ensuring the effective application of product specifications by the production plants and logistics platforms; Managing customer return statistics and overseeing actions aimed at improving products. The Quality Division capitalizes on the close fit between these two activities in order to optimize the Company's flows and the quality of its products Sustainable development Parrot's management system has been built around three areas - Quality, Safety and the Environment - with progress marked by a certain number of certifications. ISO 9001 since 2002 (Quality), supplemented with an ISO/TS certificate relating to the automotive sector; ISO since 2008 (Environment), and since 2010 in Parrot's Chinese subsidiary; OHSAS since 2009 (Occupational Health and Safety) This overall approach ensures effective control over Parrot's activities in these three areas, as well as their compliance with recognized and proven international standards. Incorporating economic, social and environmental dimensions, sustainable development was established as a major focus for the company's progress since 2010, following on logically from the efforts already made. 55

56 Stakes and strategy 2011 Reference Document Parrot has reviewed its sustainable development performance based on the standard defined by the French automotive suppliers federation (FIEV) in order to determine the most significant issues at stake for the company. These have made it possible to draw up a corporate social responsibility (CSR) strategy built around the following points. Assessing and optimizing the environmental impacts of Parrot's products and activities Continuing to improve the work environment and conditions for building staff loyalty Developing an ethical and responsible policy throughout the supply chain Reporting to its stakeholders on the company's sustainable performance Further strengthening internal and external communications A sustainable development correspondent has been appointed and a sustainable development action plan has been mapped out, also incorporating all the actions resulting from regulation watch, audits and risk analyses. It represents the tool for overseeing the sustainable development approach at Parrot. SRI stakes In 2011, Parrot was once again included in the Gaia Index. Launched in October 2009 by IDMidCaps and EthiFinance, with backing from the French society of financial analysts (SFAF) and MiddleNext, the GAIA Index information system makes it possible to determine the commitment made by French mid-caps in terms of non-financial criteria (Environment, Social, Governance). The 2011GAIA Index panel was made up of 230 listed companies spread over three sectors which were representative of the French economy: industry, services and retail. This panel of 230 companies represents more than 126 billion euros of revenues, 55 billion annual transactions and almost 1 million employees. The methodology is based on 94 questions, with 27 looking at the environment, 24 covering social criteria and 33 on the governance aspects. The Gaia Index rating methodology makes it possible to rank these 230 firms and extract an index of the 70 companies with the best ratings. For further information: 56

57 VII. Structure 7.1. Group structure Structure of the Company's subsidiaries (with the capital interest held) on the filing date for the present reference document On the filing date for this reference document, the Company at the head of the Group directly owned all of the following companies: Parrot, Inc., fully-owned American subsidiary; Waveblue LLC, American sub-subsidiary fully-owned through Parrot Inc.; Parrot Italia S.r.l., fully-owned Italian subsidiary; Parrot GmbH, fully-owned German subsidiary; Parrot UK Ltd, fully-owned UK subsidiary; Parrot Asia Pacific Ltd, fully-owned subsidiary based in Hong Kong; Parrot Trading (Shenzhen) Ltd, Chinese sub-subsidiary fully-owned through Parrot Asia Pacific Ltd; Parrot Iberia, S.L., (formerly Inpro Tecnologiá, S.L.), fully-owned Spanish subsidiary; Parrot Japan K.K, fully-owned Japanese subsidiary; DaFact, 49.1% owned subsidiary ( integration through equity investment method) During the past year, the basis for consolidation changed following the acquisition of all the shares of Varioptic on May 5, 2011 and DiBcom on September 23, During the Board of Directors meeting on November 10, 2011, Parrot and DiBcom on the one hand, and Parrot and Varioptic on the other, set out a proposed merger, this became effective at December 31, From an accounting and tax perspective, the mergers were effective retroactively to January 1, DiBcom is a fabless French company that designs and markets high-performance integrated chipsets enabling radio and television reception in mobile and handheld environments. Varioptic is a French company that develops, designs and markets electrically-controlled miniature optics based on its proprietary and patented programmable liquid lens technology Presentation of the Group's companies The Company wanted to extend its international reach and incorporate and ensure the long-term viability of its distribution network through the subsidiaries it has set up (namely Parrot, Inc., Parrot Italia S.r.l., Parrot UK Ltd, 57

58 2011 Reference Document Parrot GmbH, Parrot Asia Pacific Ltd and Parrot Japan KK) or acquired (namely Parrot Iberia, S.L. formerly Inpro Tecnologiá S.L.), which are presented hereafter. Mr. Henri Seydoux, the Company's Chairman and Chief Executive Officer, is also the manager of the following subsidiaries: Parrot, Inc. Parrot Italia S.r.l., Parrot UK Ltd, Parrot GmbH, Parrot Asia Pacific Ltd and Parrot Japan KK. In addition, Mr. Edward Planchon, a Company director, is also Vice-President, Secretary and Treasurer of Parrot, Inc. and a director in Parrot UK Ltd (cf in the present reference document). The Company has financial and commercial relations with its subsidiaries under supply contracts and the cash pooling agreement, which is presented in Section 19 "Operations with related parties" in the present reference document. Each subsidiary individually recorded the following amounts of corporate sales (including invoicing within the Group): Parrot, Inc.: 17.1 million euros in 2011, compared with 17.3 million euros in 2010 Parrot Italia S.r.l.: 5.7 million euros in 2011, compared with 8.2 million euros in 2010 Parrot GmbH: 7.8 million euros in 2011, compared with 6.1 million euros in 2010 Parrot UK Ltd: 14.7 million euros in 2011, compared with 16.7 million euros in 2010 Parrot Asia Pacific Ltd: million euros in 2011, compared with million euros in 2010 Parrot Trading (Shenzhen) Ltd: 3.3 million euros in 2011, compared with 1.6 million euros in 2010 Parrot Iberia: 23.9 million euros in 2011, compared with 46.5 million euros in 2010 Parrot S.A.: million euros in 2011, compared with million euros in 2010 Parrot Japan KK: 0.9 million euros in 2011 compared with 0.9 million euros in 2010 (company created in 2009). Parrot, Inc. Parrot, Inc. is an American-law limited company with a capital of USD 1,000. It was incorporated in New York State on January 30, Its registered office is located at Clayton & McKervey, P.C., Franklin Road, Suite 1200, Southfield, MI 48034, USA. Parrot, Inc.'s corporate purpose is to develop, market and sell Parrot telecommunications and IT products. It may also carry out any operation which might directly or indirectly support its corporate purpose. In this way, it may set up branches and acquire interests in other businesses. At December 31, 2011, Parrot, Inc. employed 16 people (compared with 14 at December 31, 2010). Parrot Italia S.r.l. Parrot Italia S.r.l. is an Italian-law limited liability company with a share capital of 10,000 euros. It was registered on January 19, 2005 in the Italian trade register under number IT Its registered office is located at Via Lattanzio 23, Milan, Italy. Parrot Italia S.r.l.'s corporate purpose is to develop, market and sell Parrot telecommunications and IT products. It may also carry out any operation which might directly or indirectly support its corporate purpose. In this way, it may set up branches and acquire interests in other businesses. At December 31, 2011, Parrot Italia S.r.l. employed 7 people (compared with 6 at December 31, 2010). Parrot UK Ltd Parrot UK Ltd is an English-law limited liability company with a share capital of 100 pounds, split into 100 shares of 1 pound each. It was incorporated on June 14, 2005 under number Its registered office is located at MGI Wenham Major LLP, 89, Cornwall street, Birmingham B3 3BY (UK). Parrot UK Ltd's corporate purpose is to develop, market and sell Parrot telecommunications and IT products. It may also carry out any operation which might directly or indirectly support its corporate purpose. In this way, it may set up branches and acquire interests in other businesses. At December 31, 2011, Parrot UK Ltd employed 13 people (same as December 31, 2010). 58

59 Parrot GmbH Parrot GmbH is a German-law company with a share capital of 25,000 euros. It was incorporated on April 29, 2005 and registered on July 8, 2005 under number HR Its registered office is located at EuroTaxControl GmbH, sise Englmannstrasse 2, Munich (Germany). Parrot GmbH's corporate purpose is to develop, market and sell Parrot telecommunications and IT products. It may also carry out any operation which might directly or indirectly support its corporate purpose. In this way, it may set up branches and acquire interests in other businesses. At December 31, 2011, Parrot GmbH employed 8 people (compared with 7 at December 31, 2010). Parrot Asia Pacific Ltd Parrot Asia Pacific Ltd is a private company limited by shares with a share capital of 10, Hong Kong dollars split into 10,000 shares of 1 Hong Kong dollar each. It was incorporated on July 25, 2005 under number Its registered office is located at Suite 501B, 5th Floor, Ocean Centre, 5 Canton Road, Tsim Sha Tsui, Kowloon, Hong-Kong (China). Parrot Asia Pacific Ltd's corporate purpose is to develop, market and sell Parrot telecommunications and IT products. It may also carry out any operation which might directly or indirectly support its corporate purpose. In this way, it may set up branches and acquire interests in other businesses. At December 31, 2011, Parrot Asia Pacific Ltd employed 80 people, with 58 in Shenzhen, 18 in Hong Kong and 4 in Taiwan (compared with 64, with 49 in Shenzhen and 15 in Hong Kong at December 31, 2010). Parrot Iberia, S.L. Parrot Iberia, S.L. is a Spanish-law company with a share capital of 63,036 euros split into 10,506 shares of 6 euros each. It was acquired by Parrot in 2005 and is registered under number B Before the Company's acquisition of a 100% of its capital, Parrot Iberia S.L. (formerly Inpro Tecnologiá) was the Company's exclusive distributor in Spain (mutually exclusive rights). Its registered office is located at Augustin Duran 24, Madrid, Spain. Parrot Iberia S.L. corporate purpose is to develop, market and sell Parrot telecommunications and IT products. It may also carry out any operation which might directly or indirectly support its corporate purpose. In this way, it may set up branches and acquire interests in other businesses. At December 31, 2011, Parrot Iberia, S.L. employed 26 people (compared with 32 at December 31, 2010). Parrot Japan KK Parrot Japan KK is a Japanese-law company with a share capital of 10,000,000 Yen. It was incorporated on April 30, 2009 and registered on April 30, 2009 under number Its registered office is located at PMC Building , Higashi-Azabu, Minato-ku, Tokyo. Parrot Japan KK is working to deploy the OEM business. At December 31, 2011, Parrot Japan KK employed 4 people (compared with 5 at December 31, 2010). Da Fact Da Fact is a French-law company with a capital of 72,631 euros that designs digital musical instruments. It was incorporated on March 21, 2006 and registered under number Its registered office is located at 174, quai de Jemmapes, Paris, France. 59

60 VIII. Property, plant and equipment 2011 Reference Document The Group and its subsidiaries do not own any major tangible fixed assets and do not intend to acquire any such fixed assets in the near future. The parent company operates out of its registered office in the premises located at , quai de Jemmapes, Paris, France, occupied under leases entered into with the real estate company Neuilly Château S.A. There are no links between the real estate company Neuilly Château S.A. and the Company or any of its executives. Neither are there any links between any of the Group's lessors and the Company, its subsidiaries or any of their executives. 60

61 IX. Review of the financial position and earnings 9.1. Review of the financial position In 2011, Parrot's consolidated revenues came to million euros, with 2.5% annual growth for the Group. Restated for navigation products, the low-margin distribution business that was discontinued at the beginning of 2011, full-year revenues are up 15.1 million euros or 6.5% (restated 2011 revenues: million euros, versus restated 2010 revenues: million euros). The highlights of 2011 were as follows: Acceleration of R&D focused on in-vehicle infotainment and the next generation Parrot chip; Acquisition of Varioptic (liquid digital lens) and DiBcom (multistandard digital radio and television); Launch of three new products (Parrot Minikit Smart, Parrot Minikit +, Parrot Asteroid); Continued success of the Parrot AR.Drone, initially launched in July 2010; Increase in brand awareness, notably thanks to the Parrot AR.Drone's success and the development of Parrot s presence on social networks (Facebook, Twitter and YouTube). The Group's main management balances were maintained despite the acquisitions and product launches, with growth in 2011 driven by: Continued strong growth (+41%) in the OEM activities, offsetting the contraction in Retail products faced with a relatively sluggish economic environment; The continued success of the Parrot AR.Drone, launched in summer 2010, establishing itself as Parrot's flagship Multimedia product and partially offsetting the contraction in business for Retail products. Breakdown by product range (consolidated revenues in m and as % of annual revenues) (*) Definition of "Other" revenues: (i) navigation product sales, (ii) accessory sales (steering wheel-mounted controls, cables, etc.) (iii) ancillary sales to customers (marketing, delivery, etc.) and (iv) component sales to suppliers. In early 2011, Parrot stopped selling navigation products. As in 2010, the Group's growth was driven by the OEM business, with revenues climbing from 81.3 million euros in 2010 to million euros in 2011 (+41%). The development of revenues was made possible by (i) the ramping up of 61

62 2011 Reference Document customers brought on board in 2010, and particularly deliveries for German manufacturers, (ii) the increased penetration of handsfree connectivity solutions and the adoption rate among existing customers, and (iii) the orders recorded, particularly at the end of the year, with two new customers (Ford Europe and Toyota). In 2011, Parrot sold 8.4 million OEM product units. The Retail Products business recorded million euros in full-year revenues, compared with million euros in 2010 (-17%), notably affected by the end of sales for low-margin products (-87%). In 2011, Parrot sold 1.5 million Retail product units. The developments for each product range were as follows: Installed handsfree kits generated 82.6 million euros in revenues (versus 95.8 million euros in 2010), representing 33% of the Group's revenues (versus 40% in 2010). Performance in terms of sales on these aftermarket products for vehicles is traditionally linked to (i) consumption, (ii) breakthrough technologies in the mobile phone sector, and the resulting new uses, (iii) strengthening of the legislative framework for in-car phone use, with a relatively limited impact for all these factors in Alongside this, only one new product was launched on this range, in summer 2011: the Parrot Asteroid, the first web-enabled car radio, with 5,000 units sold during the second half of 2011 in five countries. This product illustrates Parrot s ambitions in the in-vehicle infotainment and internet connectivity field. At this stage in the development of mobile telecommunications networks, particularly faced with 3G capacities, Parrot is not aiming for a volume strategy here, but setting out its capacity for innovation and its technological lead in this area. However, on this segment, Parrot gradually slowed down the contraction in its sales throughout 2011 (from -17% in Q to -10% in Q4 2011). Plug & Play product sales generated 11.2 million euros in revenues (versus 14.6 million euros in 2010), representing 5% of the Group's revenues (versus 6% in 2010), down 23% for the year. During the second half of 2011, Parrot launched two new Plug & Play products: the Parrot Minikit Smart, designed specifically for smartphones, and the Parrot Minikit+, a new generation of the flagship Parrot Minikit product. Linked primarily to the strengthening of regulations for in-car mobile phone use, the dynamic commercial development of the products sold in this more competitive market segment traditionally take several quarters to be adopted by consumers. In addition, the results achieved with the first waves of advertising campaigns in summer 2011 were disappointing. Multimedia product sales, including Parrot AR.Drone sales, generated 31.9 million euros in revenues (versus 28.0 million euros in 2010), representing 13% of Group revenues (versus 12% in 2010). The Parrot AR.Drone represents the main factor behind the continued expansion of the Multimedia range, confirming the validity of the innovation strategy rolled out by Parrot on this segment. Breakdown by region (consolidated revenues in m and as % of annual revenues) (*) Revenues generated by the OEM business are treated globally. The breakdown of revenues by region therefore excludes OEM. For FY 2011, the regional breakdown of Retail sales (the OEM business is treated globally) shows: EMEA region: million euros (versus million euros in 2010), representing 43% of Group revenues (versus 57% in 2010) 62

63 North America region: 15.6 million euros (versus 16.1 million euros in 2010), representing 6% of Group revenues (7% in 2010): Sales are virtually stable for this region, where the Parrot AR.Drone was a resounding success throughout the year. Asia region: 11.3 million euros (versus 5.9 million euros in 2010), representing 5% of Group revenues (2% in 2010): Sales have continued to develop in this region, where Parrot has notably strengthened its presence in Australia and New Zealand. In Hong Kong and Japan, the Parrot AR.Drone has performed well. Ultimately, the balanced breakdown of Retail product sales across diverse countries and Parrot's emergence in new growing regions significantly limit Parrot's exposure to localized country risks Change in consolidated earnings ' Revenues 241, Cost of sales -121, Gross margin 120, % of revenues 49.7% 53,2% Research and development costs -28, % of revenues 11.9% 12% Sales and marketing costs -41, % of revenues 17.1% 17,9% General costs -10, % of revenues 4.4% 5,6% Production and quality -7, % of revenues 3.3% 3,6% Current income from operations 31, % of revenues 13.1% 14,1% Non-current operating expenses Income from operations 31, Income from cash and cash equivalents Cost of gross financial debt Cost of net financial debt Other financial income and expenses Corporate income tax -2, Share in income from equity affiliates Net income attributable to Parrot S.A. shareholders 27, % of revenues 11.5% 11,6% (1) Since January 1, 2011, the French research tax credit (CIR) has been reclassified and deducted against research and development costs. For FY 2011, the research tax credit represents 5,172,000 euros Revenues The consolidated accounts show 247,673,000 in consolidated revenues, up 2.5% compared with the previous year (241,666,000 euros). The following table presents a breakdown of the Group's consolidated revenues for 2010 and 2011 between its various product categories: Revenues ( '000,000 and %) Installed kits 95,8 40% 82,6 33% Plug & Play 14,6 6% 11,2 5% OEM 81,3 34% 114,5 46% Multimedia 28,0 11% 31,9 13% Other(1) 21,9 9% 7,4 3% Total 241,7 100% 247,7 100% (1) Definition of Other revenues: (i) navigation product sales, (ii) accessory sales (steering wheel-mounted controls, cables, etc.) (iii) ancillary sales to customers (marketing, delivery, etc.) and (iv) component sales to suppliers. In early 2011, Parrot stopped selling navigation products. 63

64 Cost of sales and gross margin 2011 Reference Document The total cost of sales came to 116 million euros in 2010, compared with million euros in 2010, down 5.4 million euros from the 88.7 million euros recorded in The ratio of the cost of sales to revenues came out at 46.8%, compared with 50.3% in The gross margin climbed to 53.2% of revenues (compared with 49.7% at December 31, 2010), primarily as a result of the product mix and also the decision of the Group to stop selling lower margin retail products Operational costs Research and development costs Since January 1, 2011, the French research tax credit (CIR) has been reclassified and deducted against research and development costs. For FY 2011, the research tax credit represents 5,172,000 euros. In 2011, R&D spending came to 29.6 million euros, representing 12% of revenues, compared with 28.7 million euros and 11.9% one year earlier. In line with its development plan for 2011, the Company increased its capacity for innovation by further strengthening its R&D teams. More specifically, work is focusing on developing the next generation of Parrot chips. This will cover the majority of the Group's products, making it possible to meet the challenges associated with mobile internet connectivity. In terms of the balance sheet and cash flow, the Group is stepping up its capitalization policy in view of the current program s features: in 2011, acquisitions of tangible and intangible fixed assets relating to R&D totaled 8,599,000 euros, compared with 9,998,000 euros in Sales and marketing costs In 2011, the Group's sales and marketing costs came to 44.2 million euros, representing 17.9% of revenues, compared with 41.2 million euros in 2010, representing 17.1% of revenues, up 3 million euros representing an increase of 7.3%. General and administration costs In 2011, G&A costs were up 5.3 million euros (+29.9%) in relation to 2010, coming in at 13.9 million euros and representing 5.6% of sales. In 2009, general costs totaled 9.2 million euros, representing 5.4% of sales. In 2010, G&A cost totaled 10.7 million euros, representing 4.4% of sales. Production and quality In 2011, production and quality costs were up 1.1 million euros and +13.9% in relation to 2010, representing 9 million euros and 3.6% of sales. In 2010, production and quality costs totaled 7.9 million euros, representing 3.3% of sales Current operating income Current operating income came to 35.0 million euros, giving a current operating margin of 14.1%, compared with 13.1% one year earlier. Current operational profitability came to 13.3% of revenues for the first half of 2011 and 14.9% for the second Non-current operating expenses Non-current operating expenses for 2011 correspond to the costs involved with the acquisition of the two companies Varioptic and DiBcom, as well as the reorganization costs for these activities Financial costs The net financial result is 1.6 million euros in 2011, compared with 0.1 million euros in Earnings for the period Net income (Group share) totaled 28.7 million euros, representing 11.6% of revenues, compared with 27.8 million euros and 11.5% respectively in

65 9.3. Change in Parrot S.A. earnings Revenues Net revenues came to million euros, compared with million euros the previous year, up 2.9% External expenses External expenses increased from 41.7 million euros in 2010 to 56.4 million euros in 2011, up 35.5% Staff costs Staff costs increased from 30.2 million euros in 2010 to 47.5 million euros in 2011, up 57.6% EBIT 2011 EBIT totaled 5.7 million euros, compared with 18.5 million euros in Operating margin (EBIT / revenues) came to 4.0% in 2011 compared to 13.3% in Net income FY 2010 shows a net accounting profit of 7.8 million euros, compared with 17.5 million euros one year earlier. The net margin (profit / revenues) rose from 12.5% in 2010 to 5.5% in The financial result shows a loss of 0.1 million euros, compared with 6.8 million euros in income for the previous year. It includes 10 million euros in dividends received from its subsidiary Parrot Iberia S.L., as well as the depreciation of equity securities in its subsidiaries Da Fact (49.1% owned) and Parrot Iberia (100% owned). Non-recurring items represent a 1.8 million euro loss, compared with 6.0 million euros loss for the previous year External factors which might influence the Group's activities A certain number of factors could have a significant impact on the Group's earnings. For further information, please refer to Chapter IV "Risk factors". 65

66 2011 Reference Document 9.5. Five-year financial summary Breakdown (, except I-b and IV-a) I. Capital at year-end a) Share capital (*) ,961,660 1,970,217 2,035,113 1,992,152 b) Number of existing ordinary shares ,867,615 12,923,747 13,349,573 13,067,681 c) Number of existing priority dividend shares (without voting rights) d) Maximum number of future shares to be created: - by converting bonds by exercising subscription rights (1) 3,423,127 (2) 3,497,279 (3) 3,637,813 (4) 3,814,436 (5) II. Operations and earnings for the year a) Revenues (net of tax) ,034, ,375, ,960, ,625,580 b) Earnings before tax, employee ,932,584 17,956,126 7,397,974 19,622,789 profit-sharing, depreciation and provisions c) Corporate income tax ,257,652 (4,006,195) (2,249,012) 2,318,453 d) Employee profit-sharing due for the - 505, ,072 year e) Earnings after tax, employee profitsharing, ,472,449 14,586,258 3,020,626 9,915,987 depreciation and provisions f) Distributed earnings III. Earnings per share a) Earnings after tax and employee 2, profit-sharing, but before depreciation and provisions b) Earnings after tax, employee profitsharing, 0, depreciation and provisions(**) c) Dividend per share IV. Workforce a) Average headcount over the year b) Annual payroll ,390,251 16,732,546 17,520,479 14,633,650 c) Amount of sums paid for employee benefits for the year (social security, benefits, etc.) ,776,326 8,613,101 7,253,206 6,139,855 (*)For 2008 and subsequent years, the figures reported on this line represent earnings before tax, employee profit sharing, depreciation and provisions. (1) 0 B.S.P.C.E AGA SOP. (2) 2,574,085 company founder equity warrants + 164,342 bonus shares + 684,700 stock options (3) 2,711,387 company founder equity warrants + 25,000 stock warrants + 175,592 bonus shares + 585,300 stock options. (4) 2,932,676 company founder equity warrants + 41,200 stock warrants + 5,106 bonus shares + 718,462 stock options. (5) 3,188,693 company founder equity warrants + 65,200 stock warrants + 5,106 bonus shares + 545,437 stock options. 66

67 X. Cash and capital Cash In 2011, the Group's financing came partly from cash generated by operating activities (38.6 million euros). At December 31, 2011 the Group's cash position, including other financial assets, came to117.4 million euros, compared with 90.8 million euros at December 31, The Group carried out four share buyback mandates in 2011 for 7.2 million euros. Free cash flow is invested in risk-free products based primarily on underlying rates for a maximum of three months. Including the operations presented above, the Group's gross cash position increased by 26.6 million euros overall thanks to the operational cash flow generated by its business compared with the previous year-end. Investments represented 35.2 million euros, some 24.6 million euros higher than 2010, linked to the acquisition of the two companies Varioptic and DiBcom. The Group's debts, generated over 2011, came to 30.7 million euros: 29.5 million euros in borrowings from credit institutions to finance the acquisitions and 1.2 million euros contributed by Varioptic (bonds and OSEO liability). In this way, net cash after liabilities came to 86.7 million euros at December 31, There are no post-balance sheet events to report that might have a significant impact on the Group's cash position. The Group's consolidated cash flow (IFRS): ' Operating cash flow Earnings for the period 27,831 28,698 Share in income from equity affiliates Depreciation and amortization 13,106 9,114 Capital gains and losses on disposals 11-2 Tax charges 2,842 5,226 Cost of share-based payments 1,647 2,627 Cost of net financial debt Cash flow from operations before tax and cost of net financial debt 45,928 44,926 Working capital -20,260-4,009 CASH FROM OPERATING ACTIVITIES 25,668 40,917 Tax due 2,770-2,286 NET CASH FROM OPERATING ACTIVITIES (A) 28,437 38,631 Investing cash flow Interest received - - Acquisition of tangible and intangible fixed assets -9,998-8,599 Acquisition of subsidiaries, net of cash acquired (Note 3) - -26,287 Acquisition of long-term financial investments Increase in other current financial assets - 4 Disposal of tangible and intangible fixed assets - - Disposal of subsidiaries, net of cash divested (Note 3) - - Disposal of long-term financial investments CASH FROM INVESTMENT ACTIVITIES (B) -10,577-35,191 Financing cash flow Equity contributions 1, Dividends paid - - Receipts linked to new loans - 29,535 Other financing - - Cash invested for over 3 months -27,961-5,903 Cost of net financial debt Exchange hedging instruments Repayment of short-term financial debt (net) - -1,556 Repayment of other debt - - Acquisition of treasury stock -5,207 7,160 Interest paid

68 2011 Reference Document CASH FROM FINANCING ACTIVITIES (C) -31,678 16,001 NET CHANGE IN CASH POSITION (D = A+B+C) Net exchange rate differences -13, ,441 1,246 CASH AND CASH EQUIVALENTS AT YEAR-START CASH AND CASH EQUIVALENTS AT YEAR-END 76,035 62,844 62,844 83,530 Other current financial assets ,864 CASH, CASH EQUIVALENTS AND OTHER FINANCIAL ASSETS AT YEAR-END 90, , Sources and amount of cash flow Net cash from operations The Group's net cash from operating activities came to 38.6 million euros in 2011, compared with 28.4 million euros in 2010, primarily reflecting the limited impact of working capital requirements on cash flow from operations in Cash from investment activities Cash from investment activities totaled 35.2 million euros in 2011, compared with 10.6 million euros in The increase compared with the previous year must be considered in relation to the acquisitions of Varioptic and DiBcom Net cash from financing activities Net cash from financing activities came to 16.0 million euros in 2011, compared with million euros in To a great extent, this change factors in the use of bank financing for the acquisitions of Varioptic and DiBcom. The Group's debts, generated over 2011, came to 30.7 million euros: 29.5 million euros in borrowings from credit institutions to finance the acquisitions and 1.2 million euros contributed by Varioptic (bonds and OSEO liability) Company financing lines Since the start of 2011, the Company has had authorized overdraft lines and an import documentary letter of credit with the banks Palatine, HSBC and BNP representing a total of 8.3 million euros, enabling it to cover all or part of any temporary fluctuations in its cash flow. The short-term financing lines can be broken down as follows: HSBC An unconfirmed overdraft line for 2 million euros with an annual interest rate of 1% over the three-month EURIBOR; this line is not guaranteed; An import documentary letter of credit for 3.3 million euros; BNP An unconfirmed overdraft line for 1 million euros with an annual interest rate of 0.90% over the EONIA; this line is not guaranteed; PALATINE An unconfirmed overdraft line for 2 million euros with an annual interest rate of 0.80% over the three-month EURIBOR: this line is not guaranteed; There are no specific repayment or default clauses on the overdraft authorizations granted by the banks PALATINE, BNP and HSBC. None of the financing lines presented above were used by the Company in Credit agreement On July 1, 2011, Parrot S.A. set up two credit opening agreements with drawdown notices, repayable on a quarterly basis, with its banking partners - HSBC (for 15 million euros) and LCL (for 20 million euros) - and a revolving loan 68

69 agreement with drawdown notices with Crédit Agricole Ile de France (for 10 million euros), to finance all or part of its external growth. These three contracts cover a five-year period and are indexed against the three-month Euribor. To hedge its exposure to the rate risk, and more specifically fluctuations in the three-month Euribor, against which the credit line drawdowns are indexed, the Company decided to take out two variable-fixed rate swap agreements (2.085% for 20 million euros of capital and 1.85% for 10 million euros) in order to protect itself against interest rate fluctuations. The Company also decided to apply hedge accounting for these two instruments at December 31st. At December 31, 2011, the breakdown of borrowings and debt with credit institutions was as follows: Credit line drawdowns: 29 million euros (LCL: 16 million euros and HSBC: 13 million euros). The following ratios were respected at December 31, 2011: Consolidated net financial debt / consolidated EBITDA; Consolidated gross financial debt / consolidated equity (Group share); Consolidated net financial debt / consolidated equity Contractual obligations Please refer to Section XXII. "Significant contracts" in the present reference document for the contractual obligations of Parrot. 69

70 XI. Research and development 2011 Reference Document R&D organization and strategy A key part of the Group's success The Group's research and development is one of its key elements, including towards its competitive edge, flexibility, cost savings and technological independence. Parrot's research and development is focused on three goals: Improving existing products by incorporating ever more features; Developing new technologies by expanding its portfolio of technologies to position itself in the emerging market of automotive infotainment; Exploring new possibilities for mobile phone accessories or more generally wireless technologies Innovation strategy and process With a team of 400 engineers educated in the most prestigious French and foreign schools (École Supérieure d'électricité, École Nationale Supérieure des Télécommunications, École Centrale des Arts et Manufactures, École Polytechnique, Georgia Tech, Stanford University, etc.), the Group has vertical expertise across all the technologies required for developing its products. More specifically, it designs its own integrated electronic circuits and chips (Parrot4+, Parrot5, Parrot 5+ and more recently Parrot 6 ASICs), as well as its own signal processing algorithms. The Group also stands out through its expertise on the Bluetooth stack (series of software layers for implementing the Bluetooth standard), an essential condition for ensuring the development of products upstream and achieving the best interoperability during their lifecycle (cf "Software development" in the present reference document). Today, the Group is also moving forward with its strategy for innovation outside of the handsfree telephony sector in order to accompany the development of mobile phones. In this way, the Company has made substantial investments in vehicle and domestic music. These investments have enabled excellent technical results to be achieved, including the development of the psychoacoustic audio effects algorithm, virtual basses and sound spatialization. These technologies are present in Parrot's products, and more specifically the Zikmu Parrot by Starck wireless speakers and several handsfree kit ranges combining handsfree telephony with music features. At the same time, the Group has significantly increased its connectivity portfolio with the integration of USB, SD, ipod and Wifi interfacing technologies into Parrot's products. Lastly, the company has invested in new automatic and video processing technologies, notably paving the way for the development of the AR.DRONE, a revolutionary quadricopter capable of flying by itself thanks to two onboard cameras, an inertial unit and ultrasound sensors Aftermarket technical division The Aftermarket technical division coordinates the research and development activities linked to the design and industrialization of the Group's products (excluding modules sold directly to auto manufacturers in connection with the OEM business). The department is made up of signal, acoustic and automatic processing research engineers, industrial designers, electronic design engineers, software design engineers and project managers responsible for the crossbusiness coordination of the various teams involved in each project. 70

71 Platform technical division The Platform technical division coordinates the research and development activities for designing electronic chips (ASIC) and the core software used in all the Group's products. It is made up of microelectronic design and software design engineers Group technologies The Group's technological core is built around the following main areas: digital signal processing, design of applicationspecific integrated circuits or ASIC chips, knowledge and expertise on Bluetooth wireless data transfer technology, mechanical conception and design, electronics and software development. These various fields represent the key elements for the Group's Bluetooth handsfree telephony kits, as well as its new retail electronic products Signal processing Since 1994, the Group has invested in developing new technologies relating to digital signal processing (DSP), which is essential to the audio quality of products. Since 1997, the Group has built up significant expertise on signal processing algorithms for applications in the automotive sector. Indeed, the processing of speech in a noisy environment is one of the Group's main areas of expertise. Over and above its expertise in this area, the Company holds various patents and has filed patent requests on voice recognition technologies applied for on-board handsfree kits, noise reduction and acoustic echo cancellation (cf "Intellectual property" in the present reference document). The Group's signal processing expertise: Voice recognition: Since 1994, the Group has invested in developing voice recognition solutions in-house. Certain parts of the voice recognition algorithms are integrated into another of the Group's key technologies, i.e. the Parrot ASIC platforms (cf "ASIC platforms" in the present reference document). More specifically, the voice recognition applications are behind the voice control capabilities offered on the Group's products and the key factor for the hands free features. Acoustic echo cancellation: acoustic echo cancellation is one of the two critical algorithmic points for establishing good quality communications with a handsfree solution. During a phone call, the remote caller's voice is transmitted to the kit's user via a speaker. Acoustic echo refers to the phenomenon of this voice signal being returned to the remote caller. This phenomenon is due to the fact that the microphone used by the handsfree kit's user records not only their speech, but also the signals from the speaker. To resolve this difficulty, the Group has been developing various solutions since In this way for instance, the VSSLMS algorithm for handsfree kits for vehicles makes it possible to reduce the echo effect up to 50 db (decibels). When designing the Parrot MINIKIT in 2006, the issue took on a new scale. Indeed, since the speaker and the microphone were very close to one another, the acoustic echo is seen as infinitely stronger than the user's voice by the microphone. Thanks to two new major inventions (with two patent requests filed in summer 2006), the audio processing team has successfully resolved this issue and achieved a superior echo cancellation quality compared with rival products (benchmarking carried out by an independent laboratory). Noise reduction: the distance between the microphone in a handsfree kit system and the user's mouth, and the inevitable noise inside any car when driving require ingenious solutions to establish good quality communications. Since 1997, the Group has developed noise reduction solutions in-house. Thanks to its technology, noise reduction can reach 16 db for a simple microphone on "stationary" noises (engine, wind, ventilation). The Group is improving its noise reduction system by implementing algorithms based on the use of several microphones. In addition, a new 71

72 2011 Reference Document noise reduction algorithm with a microphone that can eliminate almost 70% of instationary noise (sound environment) has been developed (patent request filed in February 2006). Audio effects: devices used in day-to-day life are often very limited in terms of their ability to reproduce hi-fi quality sound (car radio, speakers), particularly stereo separation and low frequencies. Parrot has successfully stood out through the use of innovative technologies to resolve these effects, including a virtual bass creation algorithm, used on the multimedia products and auto products, as well as audio spatialization algorithms making it possible to expand the stereo effect or refocus the sound image within the vehicle (MKi range). Video processing: the new video processing technologies designed and developed by the Company make up one of the fundamental bases of the technical core enabling the AR.DRONE to be developed. Thanks to extremely sophisticated methods, the AR.DRONE is able to use a camera pointing towards the ground to "observe" and compensate for any drift by moving the motor in the opposite direction. Automatic: another cornerstone for the AR.DRONE, the advanced servo-control methods devised by the company enable the quadricopter to control its flight path thanks to the intelligent processing of data from various sensors: motion sensor, gyroscope, ultrasound, magnetometer, barometer Parrot ASIC platforms The Group's products are based on Parrot ASIC or application-specific electronic chip platforms, with these technologies developed by the Group. As early as 1994, the Group launched work to develop Parrot ASIC platforms, aware that a proprietary hardware solution would give it an even greater capacity for innovation, more independence and more effective control over its costs. The latest chip developed by the Group (Parrot 6) offers a calculation capacity that is twice as high as the previous generation, has a digital display interface, accelerators for image and video processing, a new audio interface, two highspeed USB controllers. The latest Parrot ASICs are enabling new features to be deployed for consumer electronics and products, while optimizing the cost price on these products. The new ASIC Parrot6i, incorporating analog components (feeds, analogdigital audio converter) to optimize the overall cost price for these products, is used in the Group's products during the course of Expertise in the Bluetooth technology The Bluetooth wireless data transmission technology can only be used if it is combined with sophisticated software making it possible to control it. Furthermore, to comply with the standards of the group supporting the Bluetooth technology, the Bluetooth SIG, such software must be able to manage a large number of standard features (the Bluetooth stack), enabling transparent communication between the various electronic devices equipped with this technology. In this way, the Group has developed its own Bluetooth software solution since Indeed, the Group was one of the first to develop Bluetooth hands free telephony systems, notably offering the Parrot CK3000 as early as Having its own Bluetooth standard management software offers a key advantage over the Group's rivals and is essential for ensuring the interoperability of its products with all the Bluetooth mobile phones available on the market. This represents a key differentiating factor compared with rival products. Indeed, many competitors' products use software that is developed by third parties (generic solutions), rather than software developed specially for their products. The generic solutions used by these rivals are, on account of their very nature, less scalable than the in-house software used by Parrot, which can be adapted more quickly and easily in line with the specific requirements of Parrot's products and market developments. Furthermore, certain Bluetooth features are proprietary and which are not present in any generic solutions. For instance, the universal downloading of the phonebook by Bluetooth is a feature that only the Group has been able to develop. The Company's status as a Bluetooth SIG associate member and its contribution to the working groups, its close collaboration with mobile phone manufacturers, the systematic checking of the compatibility of its products with new mobile phone models all represent factors which are enabling the Group to ensure the interoperability of its products with the latest developments on the market. In this way for instance, in 2009 Parrot developed a Bluetooth stack compatible with the high-speed Version 3.0 of the standard, making it possible to significantly increase speeds thanks to radio components using Standard

73 Development of extended connectivity The Group has sought to diversify the connectivity of its products in order to deploy new scenarios for their use, notably by adding Wifi and USB technologies. With the Parrot Specchio by Martin Szekely digital photo frame, the Wifi technology makes it possible to offer an internet connection and support for and RSS feed features, as well as the sharing of photos with a PC or even the integration of applications based on Androïd TM (Google mobile operating system). A proprietary Wifi audio streaming system has also been developed by the Group and is integrated into the Parrot Zikmu by Starck speakers. The USB technology has been widely deployed in the Group's recent products; more specifically, connectivity with Apple ipod and iphone devices is based on this, as offered in the MKi handsfree kit range and Zikmu Parrot by Starck speakers Mechanical conception and design Designing quality products also requires a good level of expertise on the aesthetic and mechanical aspects of products. More specifically, many advances in this area have enabled Parrot to develop expertise in microphone assembly technologies. Today, these technologies enable 15dB decoupling between the microphone and speaker, which represents a crucial point in the design of products in which these elements are extremely close to one another Electronics The Group's products contain a large number of integrated circuits, which is standard practice in this type of industry. The Group "hardware" team has been able to build up strong expertise in miniaturization and energy consumption management. Electronic blueprints are drawn up and designs validated in-house, whereas more standard routing activities for electronic cards are entrusted to external partners Software development Parrot develops most of the software used in its products in-house and has therefore built up strong expertise in many areas such as multi-language interface management, graphic displays and telematics. The software developed by Parrot includes: multimedia and signal processing libraries and algorithms, the Bluetooth stack, specific software for controlling proprietary components (ASIC) and application software for all the product ranges. The software development teams are primarily made up of engineers employed by the Group, as well as a small number of people deployed by external firms, notably IT engineering service providers. For its Parrot4 ASIC-based platform, the Group uses a proprietary operating system. Since 2006, Parrot has focused on freeware operating systems: ecos then Linux. In this way, Parrot developed its first product based on the Linux operating system (Parrot 6) in In 2009, the Google Androïd TM system was chosen to be added to Linux in connection with the development of the next Parrot software platform. Lastly, its expertise in ergonomics issues enables the Group to offer products which are simple to use despite their growing range of features Image processing technologies The image processing technologies result from the acquisition of Varioptic in 2011, the world leader for liquid lens technology for miniature cameras. Varioptic is contributing towards the miniaturization of optical systems (cameras, photo devices, optical readers, etc.) and offering innovative technologies to improve the quality of digital images. Varioptic s liquid lenses make it possible to develop various optical features, from image focusing to optical stabilization to eliminate movement-related blur, without any mobile mechanical part or motor Multistandard digital radio and television The digital radio and television technologies result from the acquisition of DiBcom in 2011, enabling Parrot to harness unique know-how in the multistandard digital radio and television field, while representing a major strategic asset for the Group's development on the in-vehicle infotainment market. 73

74 2011 Reference Document The high-performance integrated chipsets developed by DiBcom since 2000 make it possible to receive digital radio and television with a low-power and high-mobility approach, covering all transmission standards (DVB-T, DVB-SH, ISDB-T, ATSC, CMMB, DAB, etc.), thanks in particular to a programmable core for signal processing, developed by DiBcom. DiBcom provides complete solutions for the rapid development of receivers, from the blueprints to software through to testing for the final device, with help from an effective technical support structure. These solutions use two ranges of components: Multistandard Octopus: a programmable processor for receiving digital radio and TV. As the standard is defined by software, this solution addresses the issues relating to the growing number of TV standards rolled out around the world. Single standard: a low-cost integrated chipset for receiving a single TV standard, intended for consumer electronics devices. Integration DiBcom is able to integrate the tuner, demodulator, conditional access system, memory, power supply management and a USB, if necessary, into the same component. This integrated circuit enables manufacturers to rapidly develop and market their products with a high-performance, flexible and economically profitable solution. Programmability Octopus is a multistandard integrated chipset based on a software-controlled vector signal processor (VSP). This component makes it possible to target several TV and radio standards with one single platform (e.g. DVB, DAB, DMB, CMMB, ISDB, ATSC, CTTB standards, etc.). Mobility Mobile reception represents a real challenge because the signals received are weak and affected by speed, echoes and multiple interferences. DiBcom has developed innovative and patented algorithms and architectures to ensure excellent reception under such difficult conditions. Diversity The MRC diversity technology, integrated from the outset into all DiBcom chips, is key to improving reception reliability, speed and sensitivity, particularly in mobile environments Intellectual and industrial property Parrot protects some of its inventions using patents. Furthermore, the software developed in-house may, provided that they are original, benefit from copyright protection. The Group may also protect its know-how through measures protecting the confidentiality of its technical knowledge (e.g. through confidentiality agreements with its technical partners). The Group's protection against its technology being copied by rivals is, to a certain extent, ensured in practice by the Group s technological edge thanks to its continuous research and development drive and the conception of new products Brands and marks At March 31, 2012, the Company held word and figurative marks Parrot and its logo and / or has filed requests for registration in Classes 09, 38 and 42 for the PARROT in France, European Union countries, Swiss, Island, the United States, Canada and more widely for International in most countries in which Parrot distributes its products: in Central and South America (Mexico, Colombia, Guatemala), in Asia (China, Japan, Hong Kong, Taiwan, Singapore), in Israel, in Turkey, Egypt, Kuwait, UAE, Australia, New Zealand, South Africa and India. Parrot has also registered the names of some of its products: RHYTHM N'BLUE in European Union countries and the United States, as well as Asia (China, Japan, Singapore); EZDRIVE in France, DRIVE BLUE in most European countries as well as the United States, Singapore, Japan and Turkey; and the following brands in European Union countries in Classes 09, 38 and 42: PARROT 3200 LS COLOR, PARROT 3400 LS GPS, PARROT BOOMBOX, PARROT CK 3000 EVOLUTION, PARROT CK 3100 LCD, PARROT CK 3300 GPS, PARROT CK 3300 NAVIGATION PACK, PARROT CK 3500 PRO, PARROT CK 3500 PROFLEET SYSTEM, PARROT CONFERENCE, PARROT EASY DRIVE, PARROT MINIKIT, PARROT PHOTO VIEWER, PARROT SOUND SYSTEM, PARROT PMK

75 The Company holds mark of Parrot ASTEROID in Classes 09, 38 and 42 in the European Union, in Switzerland, the United-States, Singapore, Mexico; the registration request are still being process in the Unites States Canada, China, Japan, Australia, the Russian Federation, India, South Africa, Chile, Egypt and more widely in the countries where the product will be marketed through a request for international registration. The Company also holds the figurative marks ASTEROID in the same Classes in the countries of the European Union. Registration request are in process in the United-States, China and Japan. The Company holds marks corresponding to the names of the products from its "Designer Collection" in classes 09: SPECCHIO PARROT for the photo frame designed by Martin Szekely and ZIKMU PARROT for the speakers designed by Philippe Starck, the DIA PARROT mark for the photo frame designed by the agency No Design in Classes 09 and 42 in the European Union, registration request are in process in the United-States and Japan. The Company also holds mark of ZIK for the wireless headset designed by Philippe Starck in the European Union registration request are in process in the United-States and Japan. In 2007, Parrot adopted a slogan - Parrot Move Wireless - which is registered in the European Union countries, in the United States (class 9) and more widely through international registration for all the countries in which the Group distributes its products. The Company holds mark of the logo for its Parrot certified installers program - PARROT Certified Installer - in European Union countries in Classes 09,37, 38 and 42 and in the United States in Class 37, as well as PARROT Certified Premium Installer in European Union countries in the same Classes. In 2009, the word and figurative marks as well as the Parrot logo were also Class 28 registered in the European Union countries, in the United States, China and Japan, in order to accompany the development of the Group's business in the gaming sector. The Company has registered the mark Textfriendly in Classes 09, 38 and 42 in the European Union in order to support the development of its interactive voice management service for s and text messages directly from a handsfree system or kit. Registration requests are underway in the US and Canada. The Company holds the mark PARROT AR.DRONE in the European Union (Class 28), the US, China (Classes 09 and 28) and many countries in which the AR.Drone is sold. The Company also holds the word mark AR Drone in the European Union and China in the same classes, as well as the mark-registered slogan "When Video Games Become Reality" in the European Union. In 2011, the Company registered the logo associated with its AR.Drone piloting tutorials site, the AR.Drone Academy. Registration requests are underway in the US, China and Japan. The Company holds the "skull" logo associated with its AR.Drone quadricopter in the European Union and Japan in Classes 09 and 28; registration requests are underway in China and the US. In addition, the Company holds the marks associated with the names of the applications making it possible to pilot or play with the AR.Drone, such as AR.FleeFlight, AR.Pursuit, AR.Game and AR.FlyingAce in Classes 09 and 28 in the European Union countries, the US, Japan, Hong Kong, Australia, South Africa and more generally in the countries where the product is distributed under international registration procedures. The Company also holds the mark AR.Rescue, registered as a logo in the European Union. As a member of the Bluetooth SIG, the Company benefits from a license to use the "Bluetooth" mark, notably enabling it to display it on its products which are compliant with the Bluetooth standard and validated in accordance with the process established by the Bluetooth SIG. Parrot is also a member of the Wifi Alliance and, in this respect, benefits from a license to use the Wifi mark, in addition to many other licenses for using marks belonging to its technical and/or commercial partners Patents Aware that patents represent a tool making it possible to promote, defend and maintain its technological advances, the Group strongly encourages its Research and Development teams to devise technologies that are innovative, relevant and likely to be patented for the products developed. In this way, the eventual patentability of any new technologies is carefully examined, drawing on the expertise of an industrial property advisor. Patent history In 1997, the Company filed a patent for a voice recognition handsfree telephony kit with phonebook synchronization, (filing FR for "voice-control mechanism for radio telephony, particularly for use in an automobile vehicle"). The Company obtained a corresponding European patents, as well as a patent in the United States. 75

76 2011 Reference Document In 1999, the Company filed a patent to protect a new echo cancelation technology (filing FR for "Technique for eliminating the acoustic echo of an audio signal, notably in the signal captured by a microphone"). In 2002, the Company filed a French patent to protect a technology for interfacing the handsfree telephony kit with the car's audio system (filing FR for "Handsfree telephone adapter for cars, notably for original assembly fitting, including a universal audio output circuit allowing multiple connection configurations"). The Company has obtained a corresponding European patent. In 2004, the Company filed a patent request concerning a voice interface for searching and selecting a section in the handsfree telephony kit menu (filing FR for "Voice interface for searching and selecting a section, notably for a mobile phone in a vehicle"). The Company has obtained a corresponding European patent. Requests are underway in the United States and China. In 2004, 2005 and 2006, the Company filed various patent requests, notably for "a mobile telephone handsfree system, adaptable in a removable way on an automobile vehicle" (filing FR ) and a "car radio with a wireless link to a mobile telephone allowing handsfree use" (filing FR ). Between 2007 and 2011, the Company filed 27 patent requests covering its multimedia and handsfree kit products: An active acoustic speaker with distributed mode loudspeaker (filing FR ); An automatic control lighting mechanism and installation covering various such mechanisms (filing FR ); A synchronized signal processing and distribution system, particularly audio signals in a network of wireless speakers (filing FR ); An audio device for a vehicle with docking for portable electronic devices (filing FR ) An automatic source concentrator for multimedia system (filing FR ); A handsfree telephone unit for a motorcycle, with handlebar-mounted remote control (filing FR ); A technique and system for recreating low frequencies in an audio signal (filing FR ); A system for automatically controlling the gain applied to an audio signal depending on the ambient noise (filing FR ); A unit for protecting and framing an object such as a digital display unit (filing FR ); A digital image display unit (filing FR ); An audio device for a vehicle with docking for portable electronic devices (filing FR ); A technique for selecting a microphone from among two or more microphones, for a speech processing system such as a handsfree telephone mechanism operating in a noisy environment (filing FR ); A technique for detecting a situation with double speech for a handsfree telephone system (filing FR ); A technique for filtering non-stationary lateral noise for a multi-microphone audio mechanism, particularly a handsfree telephone mechanism for an automobile vehicle (filing FR ); A technique for optimized filtering of non-stationary noises captured by a multi-microphone audio mechanism, particularly a handsfree telephone mechanism for an automobile vehicle (filing FR ); An integrable audio/video device for an automobile vehicle, particularly a car radio, with optimized ergonomics and extraction (filing FR ). A wall attachment accessory for a flat unit such as a digital image display unit (patent number FR ); A "handsfree" interface device for mobile telephones (filing FR ). A system for attaching an electronic unit remote control in a vehicle (filing FR ); A wireless remote control with a tactile interface for in-vehicle handsfree telephony and multimedia equipment (filing FR ); A handsfree telephony and multimedia equipment architecture for vehicles (filing FR ). An audio device comprising speech signal noise reduction features with fractional delay filtering, particularly for a handsfree telephony system (filing FR ) A noise reduction technique for multi-microphone audio equipment, particularly for a handsfree telephony system (filing FR ) 76

77 A combined wire-based / wireless remote control unit for multimedia and/or handsfree telephony equipment in a vehicle (filing FR ) A combined microphone / headset audio unit including near speech signal noise reduction features, particularly for a handsfree telephony system (filing FR ) A technique for strengthening low-pitch frequencies in a digital audio signal (filing FR ) A non-adaptive active noise control audio headset for listening to an audio music source and/or handsfree telephony features (filing FR ) Most of these patent requests are covered by international extensions, in Europe (patents covering certain European countries), the US, China and even Japan. Patents covering the AR.Drone Between 2007 and 2011, the Company filed 19 patent requests concerning its AR.Drone quadricopter: A mechanism for recognizing objects in a shooting game for remote control toys (filing FR ); A fictitious event simulation system for remote control toys (filing FR ); A technique for steering a drone with rotary wings (filing FR ); A mechanism for steering a drone (filing FR ); A system for drones equipped with recognition signals (filing FR ); An ultrasound telemetry technique for a drone, with discrimination for echo interference from another drone (filing FR ); A navigation electronic card support for a drone with rotary blades (filing FR ); A motor base for a drone with rotary blades (filing FR ); A marking signal for guiding and navigating a drone on sight (filing FR ); A remote control device and technique for a drone, particularly a drone with rotary blades (filing FR ); A synchronized control technique for the electrical motors of a remote-controlled drone with rotary blades, such as a quadricopter (filing FR ); A technique for assessing the horizontal speed of a drone, particularly a drone designed for autopiloted stationary flight (filing FR ); A remote control device and technique for a drone, particularly a drone with rotary blades (filing FR ); A mechanism for steering a drone with multiple rotary blades (filing FR ); A technique for transmitting orders and a video stream between a drone and a remote control unit via a wireless network-type connection (filing FR ). A technique for steering following a curvilinear change of direction by a drone with rotary blades and multiple rotors (filing FR ); A technique for recognizing a target strip such as a finishing line in an image captured by a drone's camera (filing FR ); A technique for detecting a prompt applied by a user for a drone in order to produce a route marker (filing FR ). A technique for dynamically controlling a drone's bearing for the automatic execution of moves such as spirals or dives (filing FR ). Most of these patent requests are covered by international extensions, in Europe (patents covering certain European countries), the United States and Japan, as well as China. The Group s portfolio of patents has been further strengthened following the acquisition of the two companies Varioptic and DiBcom, with a portfolio of 24 active patents in terms of optics (lens, liquid lens, ophthalmology, module camera, barcode, etc.) for the new Varioptic business unit, and a portfolio of 29 active patents, particularly concerning chip implementation architectures, reception antennas, etc., for the new Digital Tuner business unit. 77

78 Domain names 2011 Reference Document The Company applies a filing and domain name monitoring policy in order to prevent third parties from unduly benefiting from investments made to strengthen its reputation and brand awareness. More specifically, Parrot owns the domain names and as well as various domain names in the countries in which it has subsidiaries ( and on which it communicates, and a lot of domain names in the countries in which it sells its products. Parrot also registers the domain names associated with the Group's activities, such as parrotoem.com for the OEM business or even textfriendly.com for the vocal text messaging services integrated into its hands-free communication systems, as well as the domain names associated with the products it sells, including parrotcarkits.com, parrotzikmu.com, parrotspecchio.com and recently parrotasteroid.com, and many other adaptations. Parrot has also registered several domain names in connection with the launch and commercial deployment of its AR.Drone quadricopter: as well as the domain names associated with the applications making it possible to steer or develop the quadricopter in connection with games: AR.Freeflight, ARFlying.Race Software With a strategy to adopt an open standard, the Group has focused on "freeware" for its operating system; it uses the ecos operating system for its platform based on the Parrot5 ASIC and has chosen the Linux system for its platform based on the Parrot6 ASIC. For its new generation of products offering extended connectivity services, the Company has chosen to use the ANDROID TM platform Designs and models The Group has registered several community models with a view to protecting the appearance of some of its products, and more specifically a handsfree telephony system (handsfree kits, earpieces and microphone for a two-wheel kit), wireless speakers, wireless screens, a car radio and a car radio front, including the Parrot ASTEROID, which has been registered since 2009 as well as the other products of the ASTEROID range. The intellectual property rights concerning models from the "Parrot By" range remain the property of the designers, with the exception of the Parrot SPECCHIO by SZEKELY, for which the model's rights have been transferred to the Company. In 2010, the Company filed a European Union design registration for its quadricopter, the Parrot AR.DRONE. The design registration has been extended to cover the United States, China and Japan. The Company also registered the design for its Parrot Minikit Smart communications system, making it possible to dock a smartphone. 78

79 XII. Information on trends Main trends with an impact on production, sales and inventories, sales prices and costs from the end of the last financial year through to the reference document registration date None Known trends, uncertainties or demand or any commitment or event which might reasonably have a significant impact on the outlook for the current financial year None. 79

80 XIII. Financial outlook 2011 Reference Document Outlook for 2011 On February 15, 2012, when publishing its full-year earnings for 2011, Parrot indicated in its press release: Strategy and outlook for 2012 The development plan aims to position the Group on the growing automotive infotainment market ( CAGR of 7% to 9% 1 ). The combination of Parrot s technological expertise and its sustained R&D drive are expected to enable the Group to continue acquiring customers, while maintaining the value created by its solutions and developing its presence on the market for digital car radios, navigation and useful services for drivers. In this way, Parrot will be able to meet the demands of auto manufacturers and their OEMs, subject to development cycles running from 18 to 24 months, while working alongside them to anticipate the deployment of 4G networks, which will make a major contribution towards optimizing mobile connectivity in the automotive environment by increasing data traffic capabilities. With this in mind, Parrot is developing its next-generation chip and continuing to roll out its strategy for innovation on Retail products in order to continue consolidating its position as a pioneer and leader for wireless connectivity solutions. In addition, the Group will continue setting aside a reasonable percentage of its resources for developing Multimedia products 2, looking to support new mobile phone uses outside of the automotive sector. While already making a positive contribution to the Group's image and earnings, these activities, based on technologies that dovetail together effectively, are expected to continue generating new sources of growth. For 2012, faced with an uncertain economic environment and the impact of the acquisitions made, Parrot is continuing to target profitable growth and setting itself the following objectives: Continuing to step up R&D efforts: over a full year, incorporating the additional staff from Parrot, DiBcom and Varioptic (+ 175 people in total), aiming to support Parrot s ramp-up on the automotive infotainment market; Integrating acquisitions without calling the Group's main management balances into question: deployment of a shared roadmap, as well as operational and financial synergies; Accelerating Retail product renewals, primarily during the second half of the year, in order to support dynamic commercial development through a strategy for innovation; Throughout the year, adjusting marketing spending in line with sales volume forecasts, with significant resources deployed, primarily during the second and third quarters of 2012, to support the product launches; Maintaining moderate growth on OEM activities, consistent with the increase in volumes with existing customers and the stronger penetration rate for in-car connectivity solutions; Greater volatility with quarterly results: Parrot expects the uncertain economic environment and the product launches to increase the quarterly variations in its revenues and spending, but, as in the past, it will continue to benefit from the flexibility of its business model. 1 Respectively Frost & Sullivan 2011: The connected car IMS Research 2010: The wireless car. 2 See press release from January 9th and 10, 2011 at Press Releases section. 80

81 XIV. Administrative, management, supervisory and executive bodies Board of Directors The Company's administration is entrusted to a Board of Directors with a minimum of three and a maximum of 12 members, subject to the exceptions provided for under French law in the event of a merger. Directors are appointed for a six-year term of office. The board currently comprised 8 directors. The Companies represented in relation to third parties by Mr. Henri Seydoux, Chief Executive Officer, who also serves as Chairman of the Company's Board of Directors. Mr. Henri Seydoux was reappointed as a director at the ordinary general meeting on June 18, 2009 for a six-year period. In addition, on June 19, 2009, the Company's Board of Directors appointed Mr. Henri Seydoux as Chairman and decided that the Company's executive management would continue to be performed by Mr. Henri Seydoux, serving as the Chairman and Chief Executive Officer. Mr. Henri Seydoux's term of office as a director, Chairman of the Board of Directors and Chief Executive Officer will end further to the ordinary general meeting convened to approve the financial statements for the year ended December 31, Mr. Edward Planchon was reappointed at the ordinary general meeting on June 9, 2010 for a six-year period. Mr. Edward Planchon term of office as a director of Board will end further to the ordinary general meeting convened to approve the financial statements for the year ended December 31, Since the terms of office of Mr. Geoffroy Roux de Bézieux and Mr. Olivier Legrain are due to end, a proposal will be submitted to shareholders at the next ordinary general meeting on June 6, 2012 to reappoint them for a six-year period ending further to the ordinary general meeting convened to approve the financial statements for the year ending December 31, Mr. Geoffroy Roux de Bézieux, Mr. Olivier Legrain, Mr. Stéphane Marie and Mrs. Natalie Rastoin, with the latter appointed at the general meeting on May 31, 2011, are independent directors. At its meeting on November 10, 2011, reviewing each director's position in relation to the independence criteria, the Board of Directors observed that Mr. Jean- Yves Helmer satisfied all the criteria. As a result, the Board acknowledged Mr. Jean-Yves Helmer's status as an independent director Offices held by directors and executives over the past five years Director's name, age and professional address Henri Seydoux 51 years old quai de Jemmapes Paris, France Jean-Marie PAINVIN 60 years old 1633 Broadway, Suite 1804 New York NY Edward K. PLANCHON 78 years old 38 rue de Berri Paris Office and term Other offices Company name Chairman of the Board of Directors and Chief Executive Officer 6 years from 6/18/2009 Date first appointed: 1/31/1994 Director 6 years from 6/18/2009 Date first appointed: 31/01/1994 Director 6 years from 9/06/2010 Date first appointed: 5/04/2004 Director Director Director Chairman Director Director Director Director Manager Director CEO Chairman Director Director Director Director, Vice Chairman and treasury secretary Trimaran Seymechamlou Christian Louboutin Parrot, Inc Parrot UK Ltd (UK) Parrot Asia Pacific Ltd (Hong Kong) Parrot Iberia, S.L. (Spain) Parrot Italia S.r.l. (Italy) Parrot GmbH (Germany) Da FACT Compagnie Deutsch SAS Deutsch Group SAS Boulogne Electricfil Electricfil Corp (USA) Parrot, Inc. (USA) 81

82 Jean-Yves HELMER 66 years old 121 boulevard Haussmann Paris Olivier LEGRAIN 59 years old 19, place de la Résistance Issy-les-Moulineaux Geoffroy ROUX de BEZIEUX 49 years old OMEA TELECOM 12 rue Belgrand Levallois-Perret Stéphane MARIE 48 years old COREVISE 3-5 rue Scheffer Paris Natalie RASTOIN 52 years old OGILVY rue Marbeuf Paris Jean-Marie PAINVIN 60 years old 1633 Broadway, Suite 1804 New York NY Director 6 years from 6/04/2007 Date first appointed: 6/ Director 6 years from 14/09/2006 Date first appointed: 14/09/2006 Renewal: AGM 6/6/2012 Director 6 years from 9/14/2006 Date first appointed: 9/14/2006 Renewal: AGM 6/6/2012 Director 6 years from 6/18/2009 Date first appointed: 6/18/2009 Director 6 years from 5/31/2011 Date first appointed: 5/31/2011 Director 6 years from 6/18/2009 Date first appointed: 1/31/1994 Director Director Chairman & CEO Director Director - - Chairman and/or Director and/or Manager and/or CEO and Director Director Chairman Chairman Director Member of the Board Director Chairman Director Director Chairman Vice CEO and Director Vice CEO and Director Co-manager CEO Chairman CEO Chairman Director 2011 Reference Document Parrot UK Ltd (UK) Parrot Iberia, S.L. (Spain) EKP Consult LLC (USA) Holding Enricau SAS Alpen Tech SAS Materis et Sociétés du Groupe en France et au Luxembourg Kerneos SA Parex Lanko SA Solaire SAS Trèfle SAS, Trèfle II Terreal Holding SAS Financière K2 (Kiloutou) SAS Mécénat Ballas OMEA TELECOM Ltd Seloger.com PSA FINANCOM Corevise FINDINTER SCI Lak Vest Ogilvy France Ogilvy One Compagnie Deutsch SAS Deutsch Group SAS Boulogne Director biographies Henri Seydoux Henri Seydoux founded the Company in 1994 and has served as Chairman and Chief Executive Officer since its creation. Self-educated, he began his career in 1978 as a trainee with Journal Actuel, where he was later employed as a journalist from 1979 to In 1981, he joined the sales team at the Matin de Paris newspaper. Then, in 1982, he joined SSCI as an operating system software developer, before working for Microarchi from 1983 to 1984 in the same role. In 1985, he set up BBS, a company intended to market the micro archi operating system. In 1986, he created BSCA, a synthetic 3D imaging company, and became its Chairman and Chief Executive Officer from 1986 to In 1991, with three other partners, he founded and became a director in the luxury goods company Christian Louboutin. Jean-Marie Painvin Jean-Marie Painvin was appointed as a Company director on June 24, After graduating from Rice University in Texas with a masters in mechanical engineering, he began his career in 1975 as a regional director for Trailor S.A., where he went on to become sales and marketing director between 1981 and In 1988, he became Chairman of Deutsch Relays, Inc. in the US, and was then appointed in 1994 to head up Compagnie Deutsch, where he has served as Chairman and CEO since He is currently Chairman and Chief Executive Officer of the Deutsch group. Edward Planchon Edward Planchon was appointed as a Company director on May 4, He has a degree in economic sciences and international affairs from the University of Michigan, where he also obtained an MBA. He has lived in numerous countries and speaks six languages. He began his career in 1957 at Chrysler, where, for 22 years, he was responsible in turn for financial management, marketing and sales worldwide. He was in charge of European distribution subsidiaries, a 82

83 negotiator on the Chrysler Mitsubishi agreements, and the CEO responsible for sales and distribution network management for the Chrysler, Dodge, Simca, Rootes and Mitsubishi brands on international markets. He joined the executive management team at Tenneco-Poclain in 1980 and then Valeo in 1987, where he spent 16 years heading up Valeo's international business and commercial development worldwide. In 1997, he was appointed chairman of Valeo Inc, the Group's holding structure in North America, before being promoted to CEO for the Valeo group in He retired in December Today, Edward Planchon is also a director with the Electricfil Group, Alpen'Tech and Vignal Group. Olivier Legrain Olivier Legrain was appointed as an independent director for the Company on September 14, Olivier Legrain graduated in civil engineering from the Ecole des Mînes and from the Ecole Nationale de la Statistique de l'administration Economique (ENSAE). After various executive management positions within the Rhône Poulenc group, he served as the deputy CEO for the Basic Chemicals Division from 1986 to 1990, for the Fibers and Polymers sector from 1990 to 1991, and for the Organic Intermediates and Minerals sector from 1991 to In 1994, he was appointed deputy CEO for the Lafarge group and a member of the executive committee. In 1995, he was appointed to head up the Specialty Materials branch, before also taking on responsibility for the group's strategic coordination in Since 2001, he has been Chairman of Materis. He has also been a director at Rhodia since May Geoffroy Roux de Bézieux Geoffroy Roux de Bézieux was appointed as an independent director for the Company on September 14, After graduating from ESSEC and completing a postgraduate DESS at Dauphine in 1984, he spent two years in the special forces (Marine Commandos), with operations in Africa and Lebanon. He then joined the L'Oréal group, where he spent 10 years in various positions in both France and abroad, notably serving as head of marketing in the UK and then CEO for Poland. In 1996, he set up The Phone House the first fully dedicated chain of mobile telephony stores. One year later, he brought the English group The Carphone Warehouse on board as a shareholder. In 2000, with a network of 100 stores, he sold The Phone House off to this London-listed group and became its CEO for four years in order to develop Phone house in Europe. Today, The Phone House has 2,000 employees in France and 15,000 across Europe. In 2004 and still with Carphone Warehouse as a shareholder alongside him, he set up the company Omer Telecom, launching Breizh Mobile, an alternative mobile operator for the west of France. In 2006, he convinced the Virgin Group to invest in this project and launched Virgin Mobile. In 2008, he bought out Télé 2 mobile. Today, Omea Telecom, with more than 2 million customers, is firmly established as France's fourth-largest mobile operator. From 2005 to 2008, Geoffroy Roux de Bézieux was President of CroissancePlus, the association for strong-growth businesses. He is a member of the Conseil de France Investissement and the Attali and Levy-Jouyet Commissions. From 2008 to 2010, he chaired Unedic. Today, he is its vice-chairman in relation to Medef. For Medef, he is also Vice- Chairman of the Pôle Emploi employment hub. He is a member of the Medef ethical committee. He founded Alternative Mobile, the association for alternative operators, serving as its chairman from 2007 to He is a director at Unetel. Lastly, he has set up a charity foundation with his wife - the ARAOK Foundation - under the auspices of Fondation de France. He is the author of "Salauds de Patrons?" (Hachette) and "Pour sortir de la crise, le capitalisme" (Editions du Moment). Jean-Yves Helmer Jean-Yves Helmer was appointed as a Company director on June 4, Jean-Yves Helmer is a managing partner at Lazard Frères in Paris and Managing Director of Lazard LLC. In April 2001, he joined Lazard. He previously spent five years as the delegate general for armament at the French Ministry of Defense, where he was responsible for armament acquisitions, as well as a range of industrial activities, such as the naval construction division. Before being appointed as the delegate general for armament by the French government in March 1996, he had spent 18 years with the PSA Peugeot Citröen automobile group, where he held various positions, notably as the manager in charge of after-sales services and spare parts, the head of exports, the head of the Poissy production center and, from July 1988 to March 1996, the head of the automobile division, the group's number 2. Before joining PSA Peugeot Citröen, he began his career in the civil service, notably in the Ministry of Finance's treasury division and as an industrial affairs adviser for Prime Minister Raymond Barre from August 1976 to May Stéphane Marie Stéphane Marie was appointed as a Company director on June 18, Stéphane Marie is a statutory auditor and certified accountant and graduated from CPA (HEC Executive MBA). He worked in international audit firms for nine years, including nearly three in the US, before joining the Paris-based firm Corévise in 1994, a member of Nexia International. He is currently a partner, focused in particular on statutory auditing assignments for real estate, industrial and retail groups. 83

84 2011 Reference Document Natalie Rastoin Natalie Rastoin was appointed as a Company director on May 31, She also satisfies the criteria to be considered an independent director. Natalie Rastoin has been CEO of Ogilvy France since 2005 and Chairman of Ogilvy One since After starting off in strategic planning, she joined Saatchi & Saatchi in 1986 as Chief Development Officer, then, in 1991, she was appointed Vice-President in charge of European development. In 1992, she became CEO of the Paris branch of BDDP Conseil, before being appointed Chief Executive Officer of Ogilvy & Mather Paris in 1997 ( ). Natalie Rastoin has worked with many high-tech clients, particularly on brand globalization issues (Cisco, Yahoo!, IBM, AOL). To the best of the Company s knowledge: There are no family ties between the Company's directors, with the exception of Mr. Henri Seydoux and Mr. Jean- Marie Painvin, who are related (brothers-in-law); None of the directors have been convicted of fraud over the past five years; None of the directors have been associated with a bankruptcy, sequestration or liquidation over the past five years; None of the directors have been incriminated or officially sanctioned by statutory or regulatory authorities (including designated professional bodies) over the past five years; and None of the directors have been prevented by a court from serving as a member of an issuer's administrative, management or supervisory body or from managing or conducting the business of an issuer over the past five years Conflicts of interest To the best of the Company's knowledge, there are no conflicts of interest between the duties of the members of the Board of Directors in relation to the Company on the one hand, and on the other, their private interests or other duties. Offices held by directors and executives over the past five years The following table summarizes all of the companies in which the members of the Company's Board of Directors have been members of an administrative, management or supervisory body or a general partner at any point over the last five years. Director name Henri Seydoux, Chairman of the Board of Directors and Chief Executive Officer Jean-Marie Painvin Edward Planchon Olivier Legrain Geoffroy Roux de Bézieux Jean-Yves Helmer Stéphane Marie Natalie Rastoin Other officers held in any company over the past five years and not held on the filing date for the present reference document NA Director of Fin-Air Chairman of Golf du Médoc Director of Golf des Baux de Provence Vice-Chairman of the auto equipment union FIEV Director of CLEPA Chairman of the Supervisory Board of Vignal Systems Director of Terreal Director of Rhodia Director of Parex Lanko SA Director of Ecor Director of Kerneos SA Director of Rhodia Chief Operating Officer of Carphone Warehouse Director of Budget Telecom Director of Micromania Director of Sporever Director of Nocibé Director of IMS NA NA NA 84

85 Definition of the independent director concept The bylaws drawn up by Parrot for the Board of Directors and specialized committees specify the role and the operating conditions for the Board of Directors and specialized committees in accordance with French law and the corporate bylaws of Parrot S.A., in addition to the corporate governance rules applicable for companies whose securities are traded on a regulated market. In this way, at least two (2) of the directors must be independent. Directors are considered to be independent if they meet the following criteria: May not be an employee, be an executive or have any close ties with an executive from an entity that is a member of the Group or a company controlling the Company as per Article L of the French commercial code; May not be an executive or have any close ties with an executive from a company in which an entity that is a member of the Group directly or indirectly holds a corporate office; May not be a customer, corporate banker supplier or service provider of the Group or a member of a company that is one of the Group's customers, suppliers or service providers; May not serve as a director for the Company for more than twelve (12) years; May not have been an auditor of the Company during the five (5) years prior to their appointment; May not: Represent a shareholder holding, Be a member of an entity holding, directly or indirectly, Directly or indirectly hold more than a five percent (5%) interest in the Company's capital or voting rights. The concepts of "executive" and person with "closes tie with an executive" are those defined by Article L of the French monetary and financial code. Directors are considered to be independent if they meet the above criteria on the date when their status as an independent director is determined and during the previous five years. Moreover, the Board of Directors is required to check, at least on an annual basis, that the directors or candidates for positions as directors comply with the independence criteria set out above. The Board reports on the findings from this review to the shareholders: Each year at the general meeting convened to approve the annual financial statements, and During general meetings convened to rule on the appointment of new directors or the ratification of directors coopted by the Board. 85

86 XV. Compensation and benefits 2011 Reference Document Compensation and benefits in kind for the Company's executive officers Executive officer: Henri Seydoux Start of office: June 24, 2003 Reappointed: June 9, 2010 End of office: general meeting ruling on the year ending December 31, 2014 Employment contract: NO Supplementary pension scheme: NO Severance or termination benefits: NA Benefits due to a no-compete clause: NA Summary of the executive officer's compensation (Table 1 of the AMF recommendation) FY 2010 FY 2011 Henri Seydoux Compensation due for the year (detailed in Table 2) 715, ,000 Value of options awarded during the year (detailed in Table 4) None None Value of options awarded during the year (detailed in Table 6) None None TOTAL 715, ,000 Summary of the executive officer's compensation (Table 2 of the AMF recommendation) Executive officer FY 2010 Amounts FY 2010 Amounts FY 2011 Amounts FY 2011 Amounts due paid due paid Fixed compensation 210, , , ,000 Variable compensation (1) 480, , ,000 (2) 279,500 Exceptional compensation NA NA NA NA Attendance fees 25,000 25,000 25,000 25,000 Benefits in kind NA NA NA NA TOTAL 715, , , ,500 (1) Variable compensation for 2011 was determined with a target of 100% based on a progressive scale combining a criterion for achieving revenues (25%) weighting, an EBIT criterion (25% weighting) and a company performance criterion (25% weighting) assessed factoring in the success of new product launches, progress with the share price in relation to the SBF 120, the diversification and acquisition strategy, and the 2012 roadmap. Variable compensation for 2010 was determined with a target of 100% based on a progressive scale combining a criterion for achieving revenues excluding AR.Drone, an EBIT/revenue ratio excluding AR.Drone, and a company performance criterion assessed by the Appointments and Compensation Committee. (2) Of which, 75,000 euros paid in Securities with an equity component awarded during the year to each corporate officer by the issuer and any Group company (Table 4 of the AMF recommendation) None. Securities with an equity component exercised during the year by each corporate officer (Table 5 of the AMF recommendation) None. 86

87 History of securities with an equity component awarded Company founder equity warrant scheme Share warrant scheme General meeting date May 4, 06 May 4, 06 Board of Directors or Management Board meeting date, as relevant Jun 12, 06 Jun 12, 06 Total number of shares that may be subscribed for or purchased, of which the number that may be subscribed for or purchased by: 2,400,000 25,000 Corporate officers 1 1 Officer 1 Henri Seydoux Officer 2 Edward Planchon Start date for exercising options Jun 30, 07 Jun 30, 07 End date for subscribing for share warrants Jun 11, 2009 End date for Exercising options and share warrants Jun 11, 2011 Jun 11, 2011 Subscription or purchase price Subscription or purchase price Subscription or purchase price Exercising conditions (Tranche 1) 1,200,000 at ,000 at Exercising conditions (Tranche 2) 720,000 at ,500 at Exercising conditions (Tranche 3) 480,000 at Number of shares subscribed for on the filing date for the present reference document 0 0 Aggregate number of company founder equity warrants or share warrants cancelled or null and void ,000 Remaining company founder equity warrants or share warrants at year-end Compensation and benefits in kind for Company directors and other corporate officers Name Office Compensation and benefits Jean-Marie Painvin Company director From Jan 1, 2011 to Dec 31, 2011: Attendance fees: 25,000 euros Edward Planchon Company director and Chairman of the Audit Committee From Jan 1, 2011 to Dec 31, 2011: Attendance fees: 25,000 euros for participating in the Board and 15,000 euros for chairing a specialized committee 5, US dollars for reimbursement of costs, paid by Parrot S.A. Director of Parrot UK Ltd NA Director of Parrot Iberia S.L NA Vice-Chairman, Secretary and NA Treasurer of Parrot, Inc. Olivier Legrain Company director From Jan 1, 2011 to Dec 31, 2011: Attendance fees: 25,000 euros Geoffroy Roux de Bézieux Company director and Chairman of the Appointments and Compensation Committee From Jan 1, 2011 to Dec 31, 2011: Attendance fees: 25,000 euros for participating in the board and 15,000 euros for his role at the Appointments and Compensation Jean-Yves Helmer Company director From Jan 1, 2011 to Dec 31, 2011: Attendance fees: 25,000 euros Stéphane Marie Company director From Jan 1, 2011 to Dec 31, 2011: Attendance fees: 25,000 euros Natalie Rastoin Company director From Jan 1, 2011 to Dec 31, 2011: Attendance fees: 25,000 euros * Please refer to Section 16.2 for details on services provided. 87

88 2011 Reference Document Company provisions for pensions or other benefits for directors and other corporate officers No provisions were recorded in this respect Corporate officers' capital interests Officers # of Company shares % of capital and # of Company shares % of capital and held at 12/31/2011 voting rights on a diluted basis voting rights Henri Seydoux 4,546, % 4,546,204 34,2% Jean Marie Painvin % % Edward Planchon 5, % 5, % Geoffroy Roux de Bézieux % % Olivier Legrain % % Jean-Yves Helmer % % Stéphane Marie 1 0.0% 1 0.0% Natalie Rastoin % % Details of executive transactions to acquire, sell, subscribe for or exchange securities on the stock market In 2011, none of the executives carried out any operations to acquire, sell off, subscribe for or exchange securities on the stock market. For details on transactions carried out by staff to acquire, sell, subscribe for or exchange securities on the stock market, please refer to Section 17.2.: Company founder equity warrants, stock options and bonus shares for Group staff Securities entitling holders to access the capital Company founders equity warrants allocated in 2006 have expired on June 12, They have not been exercised. At the registration date of the present reference documents, the officers do not hold any securities entitling access to the capital. 88

89 XVI. Administrative and management body operations The Company is compliant with the legal provisions in force concerning internal control and the principles relating to corporate governance. The Company has internal control procedures covering both operational and financial aspects. The Chairman of the Board of Directors has drawn up a report on the conditions for the preparation and organization of the Board's work, as well as the internal control procedures put in place by the Company Company management Details on the Company's management are presented in Sections 14.1 "Board of Directors" and "Executives" in the present reference document Service agreements between members of the Board of Directors and the Company or any of its subsidiaries Mr. Edward Planchon, appointed as a Company director on May 4, 2004, supervised the creation of its American subsidiary Parrot, Inc. and may be called on from time to time for consulting services due to his expertise for marketing high-tech products on the American market. Mr. Edward Planchon, through EKP Consult LLC, the company he controls, there occasionally invoices fees to the Company or Parrot, Inc. based on time spent by EKP Consult LLC (daily rate: USD equivalent of 1,500 euros) for services provided to the Company or Parrot, Inc. For 2011, EKP Consult, LLC, the American-law company controlled by Mr. Edward Planchon, a Company director, did not bill for any services provided to any Group companies. EKP Consult was paid 5, US dollars by Parrot S.A. for the reimbursement of costs. To the best of the Company's knowledge, there are no other service agreements in place between the Company or any of its subsidiaries and any of the members of the Company's Board of Directors providing for benefits to be awarded under such an agreement Audit and compensation committees The Board of Directors is made up of two permanent committees: The Audit Committee The Appointments and Compensation Committee For biographical information on the members of these two committees, please refer to Section "Director biographies" in the present reference document Appointments and Compensation Committee The Appointments and Compensation Committee is chaired by Mr. Geoffroy Roux de Bézieux, appointed at the Board of Directors meeting on April 10, The other directors serving on the Committee are Messrs Henri Seydoux, Olivier Legrain and Jean-Yves Helmer, with the latter also appointed at the Board of Directors meeting on April 10, In accordance with the bylaws, at least two of the members are independent directors Audit Committee At year-end 2010, the Audit Committee comprised the Chairman, Mr. Edward Planchon, and one independent member, Mr. Stéphane Marie who was appointed as a director by the general meeting on June 18, 2009 and has pursued his mission within the Audit Committee in this capacity since then, in accordance with the requirements of the Ruling from December 8, 2008 concerning the makeup of audit committees. 89

90 16.4. Corporate governance: Chairman's report on Reference Document The Chairman's report, presented hereafter, incorporates the Company's governance principles Overview of legal provisions In accordance with the provisions of Article L of the French commercial code, amended by Law of July 3, 2008, this report is intended to provide information on: The conditions for the preparation and organization of the Board s work and the internal control and risk management procedures put in place by the Company; The principles and rules defined by the Board of Directors for determining compensation and benefits of any kind awarded to corporate officers; The restrictions set by the Board of Directors concerning the Chief Executive Officer's powers. In addition, it must indicate whether the Company refers to a corporate governance code and specify where this code may be consulted. Furthermore, the specific conditions for shareholder participation in general meetings and the elements that may have an impact in the event of a public offering are presented. Lastly, it reports on the application of the principle for the balanced representation of women and men within the Board of Directors, in accordance with French Law of January 27, Corporate governance and Board of Directors' operations Board of Directors At December 31, 2011, the Board had eight members: Mr. Henri Seydoux, Chairman and Chief Executive Officer Mr. Jean-Marie Painvin, Director Mr. Edward Planchon, Director Mr. Olivier Legrain, Independent Director Mr. Geoffroy Roux de Bézieux, Independent Director Mr. Jean-Yves Helmer, Independent Director Mr. Stéphane Marie, Independent Director Mrs. Natalie Rastoin, Independent Director Mrs. Natalie Rastoin was appointed during the general meeting on May 31, 2011, in line with the Board's initiative to ensure compliance with gender parity within the Board of Directors. Moreover, Mr. Legrain, Mr. Roux de Bézieux, Mr. Marie and Mrs. Rastoin are independent directors. At its meeting on November 10, 2011, reviewing each director's position in relation to the independence criteria, the Board of Directors observed that Mr. Jean-Yves Helmer satisfied all the criteria. As a result, the Board acknowledged Mr. Jean-Yves Helmer's status as an independent director. Board's operations The Board s bylaws require the Board of Directors to meet at least four times a year, and it may hold additional meetings if required by the economic situation or any specific event. In 2011, the Board met four times to review the quarterly, halfyear and annual financial statements. It also held a further two sessions to review the project to acquire DiBcom and adopt the budget for 2012.The attendance rate within the Board of Directors remained constant over 2011, with six out of seven directors present, then seven out of eight directors following the appointment of Mrs. Natalie Rastoin. The co-statutory auditors are invited to attend all Board of Directors meetings convened to review the annual or half-year financial statements. Two members representing the Works Council are also invited to attend all of the Board of Directors' meetings. 90

91 Mr. Gilles Labossière, Chief Administrative and Financial Officer, is invited to and attends the Board of Directors' sessions. Mrs. Karin Wittkötter, Chief Legal Officer, in charge of legal secretary aspects, serves as the Board's secretary. Mrs. Marie Ein, in charge of the Group's financial communications, is also invited to and attends the sessions. The Board of Directors is made up of two permanent committees: The Audit Committee; The Appointments and Compensation Committee. The Appointments and Compensation Committee is chaired by Mr. Geoffroy Roux de BÉZIEUX. The other directors serving on the Committee are Messrs Henri Seydoux, Olivier Legrain and Jean-Yves Helmer. In accordance with the bylaws, two of the members are independent directors. The Appointments and Compensation Committee meets twice before each of the Board's sessions is held in order to review matters relating to the policy for awarding stock options or bonus shares to Group staff, compensation for Management Committee members, as well as the Chairman's compensation. The Appointments and Compensation Committee is also consulted concerning the recruitment of strategic profiles for the Group. The Head of Human Resources takes part in the Committee's meetings. The Audit Committee comprised the Chairman, Mr. Edward Planchon, and one independent member, Mr. Stéphane Marie, who was appointed as a director at the general meeting on June 18, 2009 and who has pursued his mission within the Audit Committee in this capacity since then, in accordance with the requirements of the Ruling from December 8, 2008 concerning the makeup of audit committees. The Audit Committee meets four times a year. For the approval of the audited accounts for the second and fourth quarters, the Chief Administrative and Financial Officer, the Head of Internal Audit and the statutory auditors attend the meetings. The primary objective with these meetings is to review the accounts. For the approval of the unaudited accounts for the first and third quarters, only the members of the Committee itself, the Chief Administrative and the Head of Internal Audit attend. The primary focus for these meetings is risk management and the effective application of internal control rules. The Audit Committee reports to the Board on its work at least once a year Principles and rules defined by the Board for determining compensation and benefits of any kind awarded to corporate officers The issue of compensation for members of the Board of Directors primarily concerns the Chairman. The Chairman's overall compensation is reviewed on a preliminary basis by the Appointments and Compensation Committee, which submits a proposal to the Board of Directors. During the Board session approving the financial statements for the previous year, or during the following session, the Board members: Determine the Chairman's variable compensation for the previous year following a review of the definitive accounts and the objectives set the previous year; Determine the Chairman's fixed compensation for the current year; Define the principle for calculating his variable compensation, In addition, a comparative review was carried out at the beginning of 2012 between the AFEP-MEDEF and MiddleNext governance codes, presented to the Board during its session on February 15, This research revealed that the provisions from the MIDDLENEXT governance code are better suited to the Company's practices than those from the AFEP-MEDEF code. The Board of Directors therefore decided to adopt the recommendations from the MIDDLENEXT governance code during this session Conditions for the performance of executive management: Mr. Henri Seydoux was reappointed as a director at the ordinary general meeting on June 18, 2009 for a six-year period. In addition, on June 19, 2009, the Company's Board of Directors appointed Mr. Henri Seydoux as Chairman and decided that its Company's executive management would continue to be performed by Mr. Henri Seydoux, serving as the Chairman and Chief Executive Officer. 91

92 2011 Reference Document Mr. Henri Seydoux's term of office as a director, chairman of the Board of Directors and chief executive officer will end further to the ordinary general meeting convened to approve the financial statements for the year ending December 31, Approach for the prevention of insider trading The Company is looking to apply the recommendation issued by the French securities regulator (AMF) on November 3, 2010 under number concerning the prevention of insider trading and establish negative windows for managers and people assimilated with managers, as well as any parties with regular or occasional access to privileged information. This was approved by the Board of Directors during its meeting on May 12, 2011 and applied immediately. As a result, Parrot has instituted negative windows for 30 calendar days prior to the publication of the annual accounts, half-year accounts and, if applicable, complete quarterly accounts, or the publication of quarterly information. The parties subject to these windows are only authorized to trade in the Company's securities from the day after the information in question has been published Internal control procedures put in place by the Company Internal control scope The Group's internal control rules apply to all of the Company's subsidiaries. In 2011, Parrot S.A. acquired two companies - DiBcom and Varioptic which were consolidated on a retroactive basis to January 1, 2011 and subject to specific monitoring. Naturally, the scope for internal control has been extended to include all such new integrated entities Reviews underlying the preparation of the report This report describes the internal control system put in place by the Group Company objectives concerning internal control procedures Applying the internal control procedures, comprising rules, guidelines, directives and operating procedures, for all of the Group's activities and seeking to create the conditions for a general internal control environment that is in keeping with the Group's specific features. As defined by the market group created on the AMF's initiative to map out a frame of reference for internal control that may be used by French companies subject to the requirements applicable under the French financial security law (Loi de sécurité financière), internal control represents a system defined by the Group and implemented under its responsibility, aimed at ensuring: The development and optimization of operations, including the performance of operations and the protection of our assets; The reliability of financial and management information (financial statements), the accurate and exhaustive nature of accounting records, and the timely production of reliable accounting and financial information; The compliance of activities with the laws and regulations in force; The prevention and management of risks resulting from the Company's activities, risks of errors or fraud, particularly in terms of accounting and financial aspects; like any control system, it cannot however provide any absolute guarantee that such risks will be eliminated entirely. Furthermore, internal control also aims to: On the one hand, ensure that management decisions or operations are carried out and that staff behave within the framework defined by the guidance given for the Company's activities by the corporate bodies, by the laws and regulations in force, and by the Company's internal rules, standards and values; On the other hand, check that the accounting, financial and management information given to the corporate bodies accurately reflects the Company's situation. 92

93 By contributing towards preventing and managing the risks of not achieving the objectives set by the Group, the internal control system plays a key role in the performance and steering of its various activities. However, the internal control system cannot provide any absolute guarantees against all possible risks, no more than it can guarantee, regardless of its own quality or the quality of the staff performing such controls, perfect compliance with the objectives set by the Group General internal control structure The players or structures performing control activities are as follows: Internal control is applied by several departments depending on the type of procedures, and more specifically the Administration and Finance Division, which is responsible for drawing up and implementing the procedures and ensuring the effective application of internal control with the Internal Control and Audit function. Delegations and authorizations are formalized in connection with the strict application of the procedures drawn up, relating more specifically to signatures on the bank accounts. Moreover, signatures on the bank accounts are limited in terms of the amounts concerned based on the positions of the signatories, with these restrictions expressly stipulated when opening such accounts with financial institutions. The role of the various players or structures performing control activities in terms of internal control procedures and their general operating conditions are as follows: The application of procedures is controlled on a regular basis by the Administration and Finance Division, which is responsible for this on a day-to-day basis; these procedures are updated each year; Procurement / Production / Quality control is reviewed on a yearly basis by a specialized independent firm, which carries out an audit as part of the process to validate the ISO 9001 certification; The recommendations made are applied and used to update the procedures; The external benchmarks are the ISO 9001 certification awarded for quality control and formalized in a manual detailing the Company's internal procedures. Internal audit performs audit assignments, including in subsidiaries, in order to ensure that the Group's procedures and rules are effectively applied. An initial risk mapping was carried out in 2011 by the internal audit unit, and will be reviewed every year by the Audit Committee. More specifically, the organization for drawing up the accounting and financial information intended for shareholders is as follows: Main internal control players involved in controlling this information: Accounting Manager for the procedures concerning customers, controlling pricing policies, etc. Administrative Manager for the procedure concerning travel, assignment and entertainment costs, Head of Management Control for supplier commitment and inventory management procedures, R&D spending, pricing model, etc. Administrative and Financial Managers to cover the main operational activities (Digital Tuner, Varioptic and significant subsidiaries), etc. Head of Cash and Credit Management for the procedures to allocate banking authorities, interest and exchange rate hedging, etc. The strict accounting rules are applied, particularly for cost accounting and the naming of products and components, which make it possible to draw up the monthly reports. A manual of Group financial procedures was drawn up in Overview of the internal control procedures in place Main internal control procedures Internal control procedures are centralized by the managers of the departments in question. 93

94 Information system 2011 Reference Document Parrot set up an ERP (SAP Business One) for the head office in 2006 and the subsidiaries in 2007, benefiting from an integrated management system for the entire Group. Between 2009 and 2011, several business and financial applications were rolled out: a PLM solution (SAP PLM), making it possible to monitor the lifecycle of Parrot products, as well as a reporting and planning solution (SAP BPC), a timesheet tracking solution for R&D projects, and an expenses workflow solution (Notilus). In addition, an infrastructure audit was carried out at the end of 2010, with the recommendations from the audit report gradually implemented in 2011 and early This represents the first phase in a three-year plan to optimize the information systems. Lastly, an IT helpdesk audit at the end of 2011 made it possible to move into line with ITIL best practices. Nature of main procedures Written procedures are drawn up in the following areas: Procedure concerning travel, assignment and entertainment costs: objective to control staff business trips, and prior authorization for the main travel requests, particularly by plane, in order to justify the need for spending, raise staff awareness on the benefits and cost of such spending, prevent any abuse and meet the budget. Procedure concerning customers, in order to take preventative action on the customer risk (financial position) and monitor customer accounts, particularly in terms of the payment of their debts. Procedure concerning component purchases for Production, the Production process and Production quality control. Procedure concerning the recognition of revenues based on deliveries made by the logistics provider and the contractual conditions relating to volume discounts, particularly with retailers, in order to ensure the reliability of the financial statements. Procedure concerning the recognition of costs with a purchase order and order form system integrated into the ERP system in order to ensure the reliability of the financial statements. Procedure concerning promotion fees with an analysis of contractual conditions in order to ensure the reliability of the financial statements. Procedure concerning the management of marketing spending. Procedure concerning the management of price lists in the SAP information system in order to ensure compliance with the Group pricing policy. Procedure concerning the depreciation of inventories in order to ensure the reliability of the financial statements Internal control procedures relating to the preparation and processing of accounting and financial information Accounting functions are centralized by the chief accountant, who reports to the Chief Administrative and Financial Officer. The function relating to budget control and reporting is overseen by the Financial Controller, who reports to the Chief Administrative and Financial Officer. The Consolidation function was created in 2009 and reports to the Chief Administrative and Financial Officer. Its role is to establish the consolidated accounts and ensure that the financial statements are compliant with the rules in force. In this way, it oversees tax risks. The accounting information system is interfaced with the other information systems (commercial management, fixed assets, sourcing, inventory management). The Company adopted IFRS accounting standards in 2006 in connection with its preparations for listing on the stock market, and applied them retroactively to January 1, 2005 in order to enable comparisons between financial years. To do this, it called on the expertise of a specialized accounting firm. The Company closes its accounts at regular intervals (every month), making accurate adjustments for each quarterly close. The budgeting procedure, with the collection of information on a decentralized basis by each of the Group's operational departments and legal entities through to approval, makes it possible to draw up the consolidated budget, which can be compared against the close of account reports. Accounting figures are interfaced with the budget and reporting system. 94

95 In the same way as for general internal control, the processes contributing towards controlling the preparation of accounting and financial information are known by the various players Specific conditions for shareholder participation in general meetings The conditions for shareholder participation in general meetings are set in Article 20 of the Company's bylaws in the section entitled "Access to general meetings Powers", and presented below: 1) The General Meeting comprises all the shareholders, irrespective of the number of shares held, provided that they have been fully paid-up. All shareholders are entitled to attend general meetings and take part in deliberations, either personally or through a proxy, irrespective of the number of shares held, upon justification of their status. 2) If shareholders are unable to attend general meetings in person, they may choose one of the following three options: Be represented by another shareholder or their spouse; Vote remotely using a paper or electronic form, in accordance with the regulatory requirements, and which may be obtained under the conditions indicated in the notice to attend for the meeting; paper correspondence voting forms will only be taken into consideration if they reach the Company at least three (3) days before the meeting date; electronic correspondence voting forms may be received by the Company up until 3 pm (Paris time) on the day before the general meeting; Send a power of attorney form to the Company without indicating any representative; the chairman of the general meeting will vote in favor of adopting the draft resolutions put forward or approved by the Board of Directors, and will vote against adopting any other draft resolutions; to vote in any other way, shareholders will need to select a proxy, who agrees to vote as indicated by the shareholders in question. Holders of securities referred to in Paragraph 7 of Article L of the French commercial code may be represented by a registered intermediary under the terms and conditions required by French law. 3) The right to take part in general meetings is subject to securities being registered in the name of the shareholder or their intermediary by midnight (Paris time) on the third working day before the meeting, either in the registered securities accounts held by the Company, or in the bearer securities accounts held by an authorized intermediary, as justified in accordance with the regulations in force. Under this condition, all shareholders are entitled to take part in meetings, irrespective of the number of shares held, either in person, using videoconferencing facilities or any other electronic means of communication applicable under the laws and regulations in force, as mentioned in the notice to attend, by returning a correspondence voting form or appointing a proxy. The Board of Directors may shorten or eliminate the timeframes indicated above. The Board of Directors may, if it deems it relevant, provide shareholders with personal admission cards in their own names and require these cards to be shown. In accordance with the provisions of Decree from November 9, 2011, which came into force on March 1, 2012, Parrot will be able to offer registered shareholders the option to receive electronic invitations to attend general meetings Elements likely to have an impact in the event of a public offering Only the extraordinary general meeting is authorized to amend any bylaw provisions. To the best of the Company's knowledge, the Group has not entered into any agreements that would be amended or terminated in the event of a change of control, or any agreements providing for compensation for executives or employees if their positions were to be terminated further to a public offering. However, if all of the Company's shares were to be sold to a new shareholder (sale of the Company), or the Company was taken over and merged with another company, the beneficiaries of stock warrants and/or company founder equity warrants would be automatically entitled to exercise 50% of their remaining options ahead of schedule and would be required to exercise these options within 90 days of the definitive sale or merger. 95

96 2011 Reference Document Statutory auditors' report on the report drawn up by the Chairman of the Board of Directors of Parrot S.A. Statutory auditors report, drawn up in accordance with Article L of the French commercial code, on the Chairman of the Board of Directors' report Deloitte Marque & Gendrot KPMG Audit 185, Avenue Charles de Gaulle 1, cours Valmy Neuilly sur Seine Paris La Défense Cedex France France Dear Shareholders, In our capacity as statutory auditors for Parrot, and in accordance with the provisions of Article L of the French commercial code, please find hereafter our report on the report drawn up by the Chairman of your company pursuant to the provisions of Article L of the French commercial code for the year ended December 31, The Chairman is responsible for drawing up a report and submitting it for approval to the Board of Directors, presenting the internal control and risk management procedures put in place within the company and providing the other information required by Article L of the French commercial code notably relative to the corporate governance system. It is our responsibility to: Report to you our observations on the information set out in the Chairman s report, Certify that this report contains the other information required under Article L of the French commercial code, it being understood that it is not our responsibility to check the accuracy of such other information. We conducted our audit in accordance with the industry standards applicable in France. Information concerning the internal control and risk management procedures relating to the preparation and processing of accounting and financial information Industry standards require that we plan and perform the audit to obtain reasonable assurance that the information concerning the internal control and risk management procedures applied when drawing up and processing the accounting and financial information contained in the Chairman's report is free from any material misstatements. This notably consisted of: Reviewing the internal control and risk management procedures relative to the preparation and processing of the accounting and financial information supporting the information presented in the Chairman's report, as well as existing documentation; Reviewing work that has made it possible to draw up such information and existing documentation; Determining whether the major shortcomings concerning internal control relative to the preparation and processing of accounting and financial information which we have identified in connection with our audit are presented with appropriate information in the Chairman's report. On the basis of this work, we do not have any observations to make regarding the information given concerning the company's internal control and risk management procedures relative to the preparation and processing of the accounting and financial information contained in the Chairman of the Board of Directors' report, drawn up pursuant to the provisions of Article L of the French commercial code. Other information We certify that the Chairman of the Board of Directors' report contains the other information required under Article L of the French commercial code. The statutory auditors Neuilly sur Seine, April 24, 2012 Paris La Défense, April 24, 2012 Deloitte Marque & Gendrot KPMG Audit - Département de KPMG S.A. Jean-Claude Berriex Partner Eric Lefebvre Partner 96

97 XVII. Employees Human resources Structure of the group The main executives reporting to the Chairman and CEO are as follows: The Group's success stems among other things from the quality of its management team, who have a very strong and varied level of experience in the different markets on which Parrot operates: telecommunications, retail, automotive, electronics, research, etc. For biographical information on the main executives who are part of the Group Executive Committee, please refer to Section "Executive managers" in the present reference document Workforce At December 31, 2011, the Group employed 695 people (versus 519 people at December 31, 2010), including 540 people within the Company (versus 369 people at December 31, 2010), representing 78% of the Group's workforce. Breakdown of the Group's workforce by function Increase in workforce in 2011 was mainly geared to support: The development of the infotainment technologies (R&D) in relation with the Group strategy on this market, The integration of the sales force from both acquisitions. 97

98 2011 Reference Document Breakdown of the Group's workforce by subsidiaries (at Dec. 31) Asia (Parrot Asia Pacific) Spain (Parrot Iberia S.L.) USA (Parrot Inc.) UK (Parrot UK LLC) Germany (Parrot GmbH) Italy (Parrot Italia Srl) Japan (Parrot Japan KK) The headcount for the Group's sales functions covering the countries listed below was as follows: At December France USA 9 10 Italy 5 6 Germany 6 6 UK Hong-Kong Spain Total Additional information are available in the Appendix to the financial statement of Parrot SA, chapter note 5.4. In order to further strengthen its capacity for innovation, the Company also calls on highly specialized providers for engineering services in the research and development sector. In this way, the Company had 27 engineering providers under contract at December 31, The Company also draws up a HR report, which is available on request from Parrot, Investor Relations Department, 174 quai de Jemmapes, Paris, France Executive managers The main executive managers who are part of the Group's management committee are as follows: Aurore Lesellier Aurore Lesellier became Chief Procurement Officer in July After graduating from Ecole Supérieure de Commerce de Rennes, she began her career as a commodities buyer with CELLon (formerly Philips Consumer Electronics: mobile telephony) in In 2005, she joined Parrot as an electronics buyer, successfully managing the memory, screen and ASIC portfolios. Cristina Sanz Cristina Sanz joined Parrot in January 2007 as the Group's Chief Marketing Officer. Before Inpro Tecnologiá S.L. was taken over by Parrot, Cristina was the CEO, co-founder and partner in this company. Cristina graduated in economics from Complutense University in Madrid, and also has a certificate in Marketing Management and International Commerce from the University of California in Los Angeles (UCLA). In March 2012, Cristina Sanz resigned for personal reasons. Christophe Sausse 98

99 Christophe Sausse joined Parrot in April 2006 as Head of Human Resources. After completing his post-graduate DESS in human resources at the IEP in Paris, he began his career in 1995 at Saft, where he was responsible for executive recruitment then head of personnel. Between 1998 and 2000, he was involved in setting up the HR function as Human Resources Development Manager within the Sema Group. In 2000, he joined Bouygues Télécom, serving as HR manager then head of human resources for a subsidiary. Elise Tchen Elise Tchen joined Parrot in 2000 to oversee product manufacturing as the Chief Industrial and Quality Officer. She has transformed this department into an industrial division capable of growing at the same rate as the Company. Since September 2006, Elise has been heading up Parrot's Asia-Pacific subsidiary, in Hong Kong and Shenzhen. She has developed an entity covering both the industrial section and component sourcing. This entity is enabling the Group to be as close as possible to suppliers in order to ensure effective control over quality and dramatically reduce the costs of the products manufactured. After graduating from ENSEM in Nancy, she began her career at Renault, first in the research division, and then in the cabling engineering research team. Eric Riyahi Eric Riyahi joined Parrot in September 2005 as OEM Executive Director. In 1994, he joined the Valeo Electronique group, working as an applications engineer and then project manager, responsible for costs, quality and deadlines. In 1999, he started off as a customer account manager for Visteon, where he then became a European product manager. Eric graduated from INSEAD YMP and EUDIL in Lille. Gilles Labossière Gilles Labossière joined Parrot in September 2008 as the Group's Chief Financial and Operations Officer. An HEC graduate, he began his career as a Manager with the audit firm Arthur Andersen. In 1991, he was appointed to serve on the executive management committee of the logistics group Saga as Chief Internal Audit Officer then Chief Financial and Operations Officer. In 1997, he joined Techpack International as Chief Financial and Operations Officer. In 2000, he was involved in founding Republic Alley, a major incubator for innovative companies in France, where he was Chairman. In 2003, he became Chief Financial and Operations Officer at Linedata Services, before joining Rocamat as Deputy Chief Executive Officer to accompany the drive to turn this company around. Guillaume Pinto Guillaume Pinto joined Parrot in January 2006 as Deputy Chief Technical Officer in charge of the organization of the research office, as well as project planning and coordination. A Polytechnique graduate, he worked in 2004 in the signal processing department which was part of Parrot's research office, before continuing with his studies at Stanford University (US). Khaled Maalej Khaled Maalej joined Parrot in September 2011 as Technical Director of the Digital Tuner business unit following the acquisition of DiBcom. In 2000, he co-founded DiBcom. Previously, Khaled Maalej was technical director of Atmel Communication s broadband communications branch and spent five years in the signal processing team at Sat/Sagem, co-developing several integrated chipsets. Khaled Maalej graduated as an engineer from Ecole Polytechnique (Palaiseau) and Ecole Supérieure des Télécommunications (Paris). Nicolas Besnard Nicolas Besnard joined Parrot in 1994 (year when it was founded) and has been its Chief Technical Officer for many years now, after working as a software development engineer then head of software development. After graduating from Ecole Supérieure d'electricité (Supelec) in Gif-sur-Yvette, he began his career at the Kourou-Arianespace space center in French Guyana, carrying out software development research as part of the "ground resources" team for the European launcher Ariane IV. Samuel Grand Samuel Grand joined Parrot in 2005 as Chief Procurement Officer, before being appointed to head up the new business unit Varioptic at the end of

100 2011 Reference Document With a postgraduate DESS in procurement and electronics from Bordeaux University, he began his career in a tech firm from the telecoms sector in Portugal. Between 1998 and 2001, he served as a buyer and senior buyer respectively for Beta Electronics then ACT Manufacturing, two electronics subcontractors based in Ireland. Between 2001 and 2005, he became head of procurement for Eurologic then NCR, both American electronics manufacturers and world leaders in their fields. Yannick Levy Yannick Levy graduated from Supelec in 1991 and completed his Ph.D. at Notre Dame University in the US in He began his career as a project leader with SAT, a Sagem group subsidiary, where he oversaw the development of digital equipment for cable television networks. In 1997, he joined the Luxembourg-based firm Astra as a systems engineer. In 1998, he created a new business unit within the American company Atmel, overseeing the development and sale of integrated chipsets for cable and fiber optic-based access to digital television and the internet. In 2000, he co-founded DiBcom, a pioneering company in the mobile television field; he led the company from 2000 to 2011 before joining Parrot when DiBcom was sold to Parrot in September He now heads up the Digital Tuner business unit Company founder equity warrants, stock options and bonus shares for Group staff Company founder equity warrants The Company wanted certain members of staff to benefit from company founder equity warrants. In this respect, the Company set up several schemes in 2003, 2004, 2005 and All of the schemes have expired and the founder equity warrants are superseded. During FY 2011, no founder equity warrants were exercised. During its meeting on November 10, 2011, the Board of Directors acknowledged that the 2006 plans had lapsed Stock warrants 2007 SOP Decision by the Chairman and Chief Executive Officer on March 1, 2007, as subdelegated by the Board of Directors on February 14, 2007, under the delegation granted by the extraordinary general meeting on May 4, 2006 (twenty fourth resolution) Under the delegation granted to it by the extraordinary general meeting on May 4, 2006 as indicated above, on February 14, 2007 the Board of Directors approved the principle for awarding 83,000 stock warrants out of the 270,994 still to be awarded following the allocation of 260,000 warrants by the Board of Directors on November 10th as indicated above to employees of the Company or affiliated companies. As subdelegated by the Board of Directors on February 14, 2007, on March 1, 2007 the Chairman set the unit subscription price for shares based on the exercising of warrants at euros and approved the list of staff beneficiaries for the said warrants. These warrants are valid from March 1, 2007 to February 28, 2012, with the possibility to exercise up to 25% of them by the earliest at the end of a 12-month period following their allocation, then after this period 6.25% of the warrants at the end of each quarter during the 36 months following the first 12-month period. The Board of Directors on July 31, 2007 acknowledged that 3,000 stock warrants awarded on March 1, 2007 had become null and void, further to the departure of a staff beneficiary. The Board of Directors on July 31, 2008 acknowledged that 10,000 stock warrants awarded on March 1, 2007 had become null and void, further to the departure of staff beneficiaries. The Board of Directors on February 12, 2009 acknowledged that 25,000 stock warrants awarded on March 1, 2007 had become null and void, further to the departure of staff beneficiaries. At the Board meetings on February 11, 2010 and November 10, 2010, the Directors acknowledged that 9,000 stock warrants awarded on March 1, 2007 had become null and void, further to the departure of staff beneficiaries. Decision by the Chairman and Chief Executive Officer on May 30, 2007, as subdelegated by the Board of Directors on May 15, 2007, under the delegation granted by the extraordinary general meeting on May 4, 2006 (twenty fourth resolution) 100

101 Under the delegation granted to it by the extraordinary general meeting on May 4, 2006 as indicated above, the Board of Directors on May 15, 2007 approved the principle for awarding 47,000 stock warrants out of the 187,994 still to be awarded following the allocation of 83,000 warrants by the Chairman on March 1, 2007, under the aforementioned subdelegation from the Board of Directors on February 14, to employees of the Company or affiliated companies. As subdelegated by the Board of Directors on May 15, 2007, on May 30, 2007 the Chairman set the unit subscription price for shares based on the exercising of warrants at euros and approved the list of staff beneficiaries for the said warrants. These warrants are valid from May 30, 2007 to May 29, 2012, with the possibility to exercise up to 25% of them by the earliest at the end of a 12-month period following their allocation, then after this period 6.25% of the warrants at the end of each quarter during the 36 months following the first 12-month period. The Board of Directors on February 12, 2009 acknowledged that 4,000 stock warrants awarded on May 30, 2007 had become null and void, further to the departure of a staff beneficiary. Decision by the Chairman and Chief Executive Officer on August 15, 2007, as subdelegated by the Board of Directors on July 31, 2007, under the delegation granted by the extraordinary general meeting on May 4, 2006 (twenty fourth resolution) Under the delegation granted to it by the extraordinary general meeting on May 4, 2006 as indicated above, the Board of Directors on July 31, 2007 approved the principle for awarding 40,000 stock warrants out of the still to be awarded following the allocation of 47,000 warrants by the Chairman on May 30, 2007, under the aforementioned subdelegation from the Board of Directors on May 15, to employees of the Company or affiliated companies. As subdelegated by the Board of Directors on July 31, 2007, on August 15, 2007 the Chairman set the unit subscription price for shares based on the exercising of warrants at euros and approved the list of staff beneficiaries for the said warrants. These warrants are valid from August 15, 2007 to August 14, 2012, with the possibility to exercise up to 25% of them by the earliest at the end of a 12-month period following their allocation, then after this period 6.25% of the warrants at the end of each quarter during the 36 months following the first 12-month period. Further to the departure of two Company employees, each holding 3,000 stock warrants which had been awarded to them on November 10th 2006 and March 1, 2007 and which are now available to be reallocated, the number of warrants still to be awarded was increased to 106,994, following the allocation of the aforementioned 40,000 warrants The Board of Directors on April 10, 2008 and July 31, 2008 acknowledged that 13,000 stock warrants awarded on August 15, 2007 had become null and void, further to the departure of staff beneficiaries. The Board of Directors on November 10, 2010 acknowledged that 7,000 stock warrants awarded on August 15, 2007 had become null and void, further to the departure of staff beneficiaries. Decision by the Chairman and Chief Executive Officer on November 28, 2007, as subdelegated by the Board of Directors on November 13, 2007, under the delegation granted by the extraordinary general meeting on May 4, 2006 (twenty fourth resolution) Under the delegation granted to it by the extraordinary general meeting on May 4, 2006 as indicated above, the Board of Directors on November 13, 2007 approved the principle for awarding 62,000 stock warrants out of the still to be awarded following the allocation of 40,000 warrants by the Chairman on August 15, 2007, under the aforementioned subdelegation from the Board of Directors on July 31, to employees of the Company or affiliated companies. As subdelegated by the Board of Directors on November 13, 2007, on November 28, 2007 the Chairman set the unit subscription price for shares based on the exercising of warrants at euros and approved the list of staff beneficiaries for the said warrants. These warrants are valid from November 28, 2007 to November 27, 2012, with the possibility to exercise up to 25% of them by the earliest at the end of a 12-month period following their allocation, then after this period 6.25% of the warrants at the end of each quarter during the 36 months following the first 12-month period. Further to the departure of certain Company employees, these members of staff lost their entitlement to the warrants awarded to them; as the Board acknowledges that such warrants have become null and void, they will therefore be available for reallocation. The Board of Directors on February 12, 2009, May 14, 2009 and July 31, 2009 acknowledged that 17,000 stock warrants awarded on November 28, 2007 had become null and void, further to the departure of staff beneficiaries. The Board of Directors on November 10, 2010 acknowledged that 7,000 stock warrants awarded on August 15, 2007 had become null and void, further to the departure of staff beneficiaries. 101

102 2011 Reference Document Decision by the Board of Directors on April 10, 2008, under the delegation granted by the extraordinary general meeting on May 4, 2006 (twenty fourth resolution) Under the delegation granted to it by the extraordinary general meeting on May 4, 2006 as indicated above, the Board of Directors on April 10, 2008 approved the principle for awarding 1,500 of the stock warrants still to be awarded following the allocation of 62,000 warrants by the Chairman on November 28, 2007, under the aforementioned subdelegation from the Board of Directors on November 13, to employees of the Company or affiliated companies. The Board set the unit subscription price for shares based on the exercising of warrants at euros and approved the list of staff beneficiaries for the said warrants. These warrants are valid from April 10, 2008 to April 9, 2013, with the possibility to exercise up to 25% of them by the earliest at the end of a 12-month period following their allocation, then after this period 6.25% of the warrants at the end of each quarter during the 36 months following the first 12-month period. Further to the departure of Company employees, these members of staff lost their entitlement to the 10,000 warrants awarded to them; as the Board acknowledges that such warrants have become null and void, they will therefore be available for reallocation. Decision by the Chairman and Chief Executive Officer on May 29, 2008, as subdelegated by the Board of Directors on May 13, 2008, under the delegation granted by the extraordinary general meeting on May 4, 2006 (twenty fourth resolution) Under the delegation granted to it by the extraordinary general meeting on May 4, 2006 as indicated above, the Board of Directors on May 13, 2008 approved the principle for awarding 73,400 stock warrants out of the 98,994 still to be awarded following the allocation of 1,500 warrants by the Board of Directors on April 10, 2008, to employees of the Company or affiliated companies. As subdelegated by the Board of Directors on November 13, 2007, on May 29, 2008 the Chairman set the unit subscription price for shares based on the exercising of warrants at euros and approved the list of staff beneficiaries for the said warrants. These warrants are valid from May 29, 2008 to May 28, 2012, with the possibility to exercise up to 25% of them by the earliest at the end of a 12-month period following their allocation, then after this period 6.25% of the warrants at the end of each quarter during the 36 months following the first 12-month period. The Board of Directors on February 12, 2009 and May 14, 2009 acknowledged that 61,700 stock warrants awarded on May 29, 2008 had become null and void, further to the departure of staff beneficiaries SOP Extraordinary general meeting on June 11, 2008 (seventh resolution) The Company's extraordinary general meeting on June 11, 2008 decided to authorize the Board of Directors to award, on one or more occasions, Company stock options or warrants, with the total number that may be awarded not entitling beneficiaries to subscribe for or acquire a number of shares representing more than 2% of the Company's capital on June 11, 2008, and gave it full powers with a view to implementing the said authorization. Decision by the Chairman and Chief Executive Officer on August 15, 2008, as subdelegated by the Board of Directors on July 31, 2008, under the delegation granted by the extraordinary general meeting on June 11, 2008 (seventh resolution) Under the delegation granted to it by the extraordinary general meeting on June 11, 2008 as indicated above, the Board of Directors on July 31, 2008 approved the principle for awarding 55,000 stock warrants out of the 266,376 warrants (representing 2% of the capital at June 11, 2008) to be awarded to employees of the Company or affiliated companies. As subdelegated by the Board of Directors on July 31, 2008, on August 15, 2008 the Chairman set the unit subscription price for shares based on the exercising of warrants at euros and approved the list of staff beneficiaries for the said warrants. These warrants are valid from August 15, 2008 to August 14, 2013, with the possibility to exercise up to 50% of them by the earliest at the end of a 24-month period following their allocation, then after this period 6.25% of the warrants at the end of each quarter for the 24 months following the first 24-month period. At the Board meetings on February 11, 2010 and November 10, 2010, the Directors acknowledged that 20,000 stock warrants awarded on August 15, 2008 had become null and void, further to the departure of staff beneficiaries. 102

103 Decision by the Chairman and Chief Executive Officer on November 28, 2008, as subdelegated by the Board of Directors on November 13, 2008, under the delegation granted by the extraordinary general meeting on June 11, 2008 (seventh resolution) Under the delegation granted to it by the extraordinary general meeting on June 11, 2008 as indicated above, the Board of Directors on November 13, 2008 approved the principle for awarding 45,000 stock warrants out of the 211,376 warrants still to be awarded (following the allocation of 55,000 warrants on August 15, 2008) to employees of the Company or affiliated companies. As subdelegated by the Board of Directors on November 13, 2008, on November 28, 2008 the Chairman set the unit subscription price for shares based on the exercising of warrants at euros and approved the list of staff beneficiaries for the said warrants. These warrants are valid from November 28, 2008 to November 27, 2013, with the possibility to exercise up to 50% of them by the earliest at the end of a 24-month period following their allocation, then after this period 6.25% of the warrants at the end of each quarter for the 24 months following the first 24-month period. At the Board meeting on November 10, 2010, the Directors acknowledged that 7,000 stock warrants awarded on November 28, 2008 had become null and void, further to the departure of staff beneficiaries. Decision by the Chairman and Chief Executive Officer on March 2, 2009, as subdelegated by the Board of Directors on February 12, 2009, under the delegation granted by the extraordinary general meeting on June 11, 2008 (seventh resolution) Under the delegation granted to it by the extraordinary general meeting on June 11, 2008 as indicated above, the Board of Directors on February 12, 2009 approved the principle for awarding 107,000 stock warrants out of the 166,376 warrants still to be awarded (following the allocation of 55,000 warrants on August 15, 2008 and 45,000 on November 28, 2008) to employees of the Company or affiliated companies. As subdelegated by the Board of Directors on February 12, 2009, on March 2, 2009 the Chairman set the unit subscription price for shares based on the exercising of warrants at euros and approved the list of staff beneficiaries for the said warrants. These warrants are valid from March 2, 2009 to March 1, 2014, with the possibility to exercise up to 50% of them by the earliest at the end of a 24-month period following their allocation, then after this period 6.25% of the warrants at the end of each quarter for the 24 months following the first 24-month period. The Board of Directors on July 30, 2009 acknowledged that 1,250 stock warrants awarded on March 2, 2009 had become null and void, further to the departure of staff beneficiaries. At the Board meetings on February 11, 2010, May 12, 2010 and November 10, 2010, the Directors acknowledged that 6,500 stock warrants awarded on March 2, 2009 had become null and void, further to the departure of staff beneficiaries. Decision by the Chairman and Chief Executive Officer on June 2, 2009, as subdelegated by the Board of Directors on May 14, 2009, under the delegation granted by the extraordinary general meeting on June 11, 2008 (seventh resolution) Under the delegation granted to it by the extraordinary general meeting on June 11, 2008 as indicated above, the Board of Directors on May 14, 2009 approved the principle for awarding 59,300 stock warrants out of the 59,376 warrants still to be awarded (following the allocation of 55,000 warrants on August 15, 2008, 45,000 on November 28, 2008 and 107,000 on February 12, 2009) to employees of the Company or affiliated companies. As subdelegated by the Board of Directors on May 14, 2009, on June 2, 2009 the Chairman set the unit subscription price for shares based on the exercising of warrants at euros and approved the list of staff beneficiaries for the said warrants. These warrants are valid from May 15, 2009 to May 14, 2014, with the possibility to exercise up to 50% of them by the earliest at the end of a 24-month period following their allocation, then after this period 6.25% of the warrants at the end of each quarter for the 24 months following the first 24-month period. At the Board meetings on February 11, 2010, May 12, 2010 and November 10, 2010, the Directors acknowledged that 7,500 stock warrants awarded on June 2, 2009 had become null and void, further to the departure of staff beneficiaries SOP Extraordinary general meeting on June 18, 2009 (ninth resolution) 103

104 2011 Reference Document The Company's extraordinary general meeting on June 18, 2009 decided to authorize the Board of Directors to award, on one or more occasions, Company stock options or warrants, with the total number that may be awarded not entitling beneficiaries to subscribe for or acquire a number of shares representing more than 0.5% of the Company's capital on June 18, 2009, and gave it full powers with a view to implementing the said authorization. Decision by the Chairman and Chief Executive Officer on August 14, 2009, as subdelegated by the Board of Directors on July 30, 2009, under the delegation granted by the extraordinary general meeting on June 18, 2009 (ninth resolution) Under the delegation granted to it by the extraordinary general meeting on June 18, 2009 as indicated above, the Board of Directors on July 30, 2009 approved the principle for awarding 2,000 stock warrants out of the 64,956 warrants to be awarded to employees of the Company or affiliated companies. As subdelegated by the Board of Directors on July 30, 2009, on August 14, 2009 the Chairman set the unit subscription price for shares based on the exercising of warrants at euros and approved the list of staff beneficiaries for the said warrants. These warrants are valid from July 30, 2009 to July 29, 2014, with the possibility to exercise up to 50% of them by the earliest at the end of a 24-month period following their allocation, then after this period 6.25% of the warrants at the end of each quarter for the 24 months following the first 24-month period. Decision by the Chairman and Chief Executive Officer on November 27, 2009, as subdelegated by the Board of Directors on November 12, 2009, under the delegation granted by the extraordinary general meeting on June 18, 2009 (ninth resolution) Under the delegation granted to it by the extraordinary general meeting on June 18, 2009 as indicated above, the Board of Directors on November 12, 2009 approved the principle for awarding 5,000 stock warrants out of the 62,956 warrants still to be awarded (following the allocation of 2,000 warrants on August 14, 2009) to employees of the Company or affiliated companies. As subdelegated by the Board of Directors on November 12, 2009, on November 27, 2009 the Chairman set the unit subscription price for shares based on the exercising of warrants at euros and approved the list of staff beneficiaries for the said warrants. These warrants are valid from November 12, 2009 to November 11, 2014, with the possibility to exercise up to 50% of them by the earliest at the end of a 24-month period following their allocation, then after this period 6.25% of the warrants at the end of each quarter for the 24 months following the first 24-month period. Decision by the Chairman and Chief Executive Officer on February 26, 2010, as subdelegated by the Board of Directors on February 11, 2010, under the delegation granted by the extraordinary general meeting on June 18, 2009 (ninth resolution) Under the delegation granted to it by the extraordinary general meeting on June 18, 2009 as indicated above, the Board of Directors on February 11, 2010 approved the principle for awarding 20,500 stock warrants out of the 57,956 warrants still to be awarded (following the allocation of 2,000 warrants on August 14, 2009 and 5,000 warrants on November 27, 2009) to employees of the Company or affiliated companies. As subdelegated by the Board of Directors on February 11, 2010, on February 26, 2010 the Chairman set the unit subscription price for shares based on the exercising of warrants at euros and approved the list of staff beneficiaries for the said warrants. These warrants are valid from February 26, 2010 to February 25, 2015, with the possibility to exercise up to 50% of them by the earliest at the end of a 24-month period following their allocation, then after this period 6.25% of the warrants at the end of each quarter for the 24 months following the first 24-month period SOP Extraordinary general meeting on June 9, 2010 (eighth resolution). The Company's extraordinary general meeting on June 9, 2010 decided to authorize the Board of Directors to award, on one or more occasions, Company stock options or warrants, with the total number that may be awarded not entitling beneficiaries to subscribe for or acquire a number of shares representing more than 1% of the Company's capital on June 9, 2010, and gave it full powers with a view to implementing the said authorization. Decision by the Chairman and Chief Executive Officer on August 13, 2010, as subdelegated by the Board of Directors on July 29, 2010, under the delegation granted by the extraordinary general meeting on June 9, 2010 (eighth resolution) 104

105 Under the delegation granted to it by the extraordinary general meeting on June 9, 2010 as indicated above, the Board of Directors on July 29, 2010 approved the principle for awarding 95,000 stock warrants out of the 129,413 warrants to be awarded to employees of the Company or affiliated companies. As subdelegated by the Board of Directors on July 29, 2010, on August 13, 2010 the Chairman set the unit subscription price for shares based on the exercising of warrants at euros and approved the list of staff beneficiaries for the said warrants. These warrants are valid from August 13, 2010 to August 12, 2015, with the possibility to exercise up to 50% of them by the earliest at the end of a 24-month period following their allocation, then after this period 6.25% of the warrants at the end of each quarter for the 24 months following the first 24-month period. Decision by the Chairman and Chief Executive Officer on November 30, 2010, as subdelegated by the Board of Directors on November 10, 2010, under the delegation granted by the extraordinary general meeting on June 9, 2010 (eighth resolution) Under the delegation granted to it by the extraordinary general meeting on June 9, 2010 as indicated above, the Board of Directors on November 10, 2010 approved the principle for awarding 6,000 stock warrants out of the 34,413 warrants still to be awarded to employees of the Company or affiliated companies. As subdelegated by the Board of Directors on November 10, 2010, on November 30, 2010 the Chairman set the unit subscription price for shares based on the exercising of warrants at euros and approved the list of staff beneficiaries for the said warrants. These warrants are valid from November 30, 2010 to November 29, 2015, with the possibility to exercise up to 50% of them by the earliest at the end of a 24-month period following their allocation, then after this period 6.25% of the warrants at the end of each quarter for the 24 months following the first 24-month period. Decision by the Chairman and Chief Executive Officer on February 25, 2011, as subdelegated by the Board of Directors on February 10, 2011, under the delegation granted by the extraordinary general meeting on June 9, 2010 (eighth resolution) Under the delegation granted to it by the extraordinary general meeting on June 9, 2010 as indicated above, the Board of Directors on February 10, 2011 approved the principle for awarding 12,500 stock warrants out of the 28,413 warrants still to be awarded to employees of the Company or affiliated companies. As subdelegated by the Board of Directors on February 10, 2011, on February 25, 2011 the Chairman set the unit subscription price for shares based on the exercising of warrants at euros and approved the list of staff beneficiaries for the said warrants. These warrants are valid from February 25, 2011 to February 24, 2016 with the possibility to exercise up to 50% of them by the earliest at the end of a 24-month period following their allocation, then after this period 6.25% of the warrants at the end of each quarter for the 24 months following the first 24-month period. At the Board meeting on May 12, 2011, the Directors acknowledged the availability of 5,000 stock warrants and the possibility for them to be reallocated following the departure of a member of staff. Decision by the Chairman and Chief Executive Officer on May 30, 2011, as subdelegated by the Board of Directors on May 12, 2011, under the delegation granted by the extraordinary general meeting on June 9, 2010 (eighth resolution) Under the delegation granted to it by the extraordinary general meeting on June 9, 2010 as indicated above, the Board of Directors on May 12, 2011 approved the principle for awarding 20,913 stock warrants out of the 20,913 warrants still to be awarded to employees of the Company or affiliated companies. As subdelegated by the Board of Directors on May 12, 2011 the Chairman, on May 30, 2011 set the unit subscription price for shares based on the exercising of warrants at euros and approved the list of staff beneficiaries for the said warrants. These warrants are valid from May 30, 2011 to May 29, 2016 with the possibility to exercise up to 50% of them by the earliest at the end of a 24-month period following their allocation, then after this period 6.25% of the warrants at the end of each quarter for the 24 months following the first 24-month period. 105

106 2011 SOP 2011 Reference Document Decision by the Chairman and Chief Executive Officer on August 12, 2011, as subdelegated by the Board of Directors on July 28, 2011, under the delegation granted by the extraordinary general meeting on May 31, 2011 (eighth resolution) Under the delegation granted to it by the extraordinary general meeting on May 31, 2011 as indicated above, the Board of Directors on July 28, 2011 approved the principle for awarding 8,000 stock warrants out of the 386,541 warrants still to be awarded to employees of the Company or affiliated companies. As subdelegated by the Board of Directors on July 28, 2011 the Chairman, on August 12, 2011, set the unit subscription price for shares based on the exercising of warrants at euros and approved the list of staff beneficiaries for the said warrants. These warrants are valid from August 12, 2011 to August 11, 2018 with the possibility to exercise up to 50% of them by the earliest at the end of a 24-month period following their allocation, then after this period 6.25% of the warrants at the end of each quarter for the 24 months following the first 24-month period. Decision by the Chairman and Chief Executive Officer on November 29, 2011, as subdelegated by the Board of Directors on November 10, 2011, under the delegation granted by the extraordinary general meeting on May 31, 2011 (eighth resolution) Under the delegation granted to it by the extraordinary general meeting on May 31, 2011 as indicated above, the Board of Directors on November 10, 2011 approved the principle for awarding 75,000 stock warrants out of the 378,541 warrants still to be awarded to employees of the Company or affiliated companies. As subdelegated by the Board of Directors on November 10, 2011 the Chairman, on November 29, 2011, set the unit subscription price for shares based on the exercising of warrants at euros and approved the list of staff beneficiaries for the said warrants. These warrants are valid from November 29, 2011 to November 28, 2018 with the possibility to exercise up to 50% of them by the earliest at the end of a 24-month period following their allocation, then after this period 6.25% of the warrants at the end of each quarter for the 24 months following the first 24-month period. Decision by the Chairman and Chief Executive Officer on March 1, 2012, as subdelegated by the Board of Directors on February 15, 2012, under the delegation granted by the extraordinary general meeting on May 31, 2011 (eighth resolution) Under the delegation granted to it by the extraordinary general meeting on May 31, 2011 as indicated above, the Board of Directors on February 15, 2012 approved the principle for awarding 205,750 stock warrants out of the 303,541 warrants still to be awarded to employees of the Company or affiliated companies. As subdelegated by the Board of Directors on February 15, 2012 the Chairman, on March 1, 2012, set the unit subscription price for shares based on the exercising of warrants at euros and approved the list of staff beneficiaries for the said warrants. These warrants are valid from March 1, 2012 to February 28, 2019, with the possibility to exercise up to 50% of them by the earliest at the end of a 24-month period following their allocation, then after this period 6.25% of the warrants at the end of each quarter for the 24 months following the first 24-month period. The following table summarizes the number of stock warrants awarded to the Group's 10 members of staff who received the highest number in 2011: Beneficiary Date awarded by the BoD &/or Chairman (1) Number of warrants awarded Corresponding share allocation Subscription price ( ) Exercise period (2) 1 11/29/ ,000 10, /29/2011 to 11/28/ /29/ ,000 10, /29/2011 to 11/28/ /30/2011 9,913 9, /05/2011 to 05/29/ /29/2011 8,500 8, /29/2011 to 11/28/ /29/2011 8,000 8, /29/2011 to 11/28/ /25/2011 5,000 5, /02/2011 to 28/24/ /29/2011 7,000 7, /29/2011 to 11/28/ /29/2011 5,000 5,000, /29/2011 to 11/28/ /29/2011 4,500 4, /29/2011 to 11/28/ /29/2011 4,500 4, /29/2011 to 11/28/

107 (1) Date awarded by the Chairman as subdelegated by the Board of Directors on February 10, 2011, May 12, 2011 and November 10, (2) 50% of the warrants may be exercised by the earliest at the end of a 24-month period following their allocation date for warrants awarded as authorized by the combined general meeting on June 9, 2010.Further to this period, the remaining warrants may be exercised at a rate of 1/12 per quarter, at the end of each quarter during the 36 months / 24 months following the first 12-month / 24-month period. They are valid for five years. In any case, warrants may be exercised up to eight days prior to the end of the five-year period following the date of their issue. (3) 50% of the warrants may be exercised by the earliest at the end of a 24-month period following their allocation date for warrants awarded as authorized by the combined general meeting on May 31, Further to this period, the remaining warrants may be exercised at a rate of 1/12 per quarter, at the end of each quarter during the 36 months / 24 months following the first 12-month / 24-month period. They are valid for seven years. In any case, warrants may be exercised up to eight days prior to the end of the five-year period following the date of their issue. Breakdown of stock warrants awarded during FY 2011 Out of all the stock warrants awarded, i.e. 116,413, the breakdown is as follows: Parrot S.A. staff 49,913 stock warrants. Staff from foreign subsidiaries 66,500 stock warrants. Corporate officers NA. Number and price of shares subscribed for or purchased in 2011 NA Bonus shares Extraordinary general meeting of May 4, 2006 Decision by the Board of Directors on May 13, 2008 under the delegation granted by the extraordinary general meeting on May 4, 2006 (twenty third resolution) Under the delegation granted by the extraordinary general meeting on May 4, 2006, as indicated above, on May 13, 2008 the Board of Directors determined the principle for awarding 25,000 out of the 171,892 bonus shares still to be awarded (following the allocation of 5,106 on November 28, 2007) to employees of the Company or affiliated companies. These bonus shares are subject to a two-year vesting period from April 10, 2008 and a two-year lock-in period running from the end of the vesting period. On February 12, 2009, the Board of Directors acknowledged that 25,000 bonus shares awarded on May 13, 2008 had become null and void, further to the departure of the staff beneficiary. Decision by the Board of Directors on July 31, 2008 under the delegation granted by the extraordinary general meeting on May 4, 2006 (twenty third resolution) Under the delegation granted by the extraordinary general meeting on May 4, 2006, as indicated above, on July 31, 2008 the Board of Directors determined the principle for awarding 81,000 out of the 146,892 bonus shares still to be awarded (following the allocation of 5,106 on November 28, 2007 and 25,000 on May 13, 2007) to employees of the Company or affiliated companies. These bonus shares are subject to a two-year vesting period from July 31, 2008 and a two-year lock-in period running from the end of the vesting period. At the Board meetings on February 12, 2009 and May 14, 2009, the Directors acknowledged that 2,000 bonus shares awarded on July 31, 2008 had become null and void, further to the departure of staff beneficiaries. At the Board meetings on May 12, 2010 and November 10, 2010, the Directors acknowledged that 3,000 bonus shares awarded on July 31, 2008 had become null and void, further to the departure of staff beneficiaries. Decision by the Board of Directors on November 13, 2008 under the delegation granted by the extraordinary general meeting on May 4, 2006 (twenty third resolution) Under the delegation granted by the extraordinary general meeting on May 4, 2006, as indicated above, on July 31, 2008 the Board of Directors determined the principle for awarding 28,000 out of the 65,892 bonus shares still to be awarded (following the allocation of 5,106 on November 28, 2007, 25,000 on May 13, 2008 and 81,000 on July 31, 2008) to employees of the Company or affiliated companies. These bonus shares are subject to a two-year vesting period from November 13, 2008 and a two-year lock-in period running from the end of the vesting period. Decision by the Board of Directors on February 12, 2009 under the delegation granted by the extraordinary general meeting on May 4, 2006 (twenty third resolution) Under the delegation granted by the extraordinary general meeting on May 4, 2006, as indicated above, on February 12, 2009 the Board of Directors determined the principle for awarding 11,000 out of the 37,892 bonus shares still to be 107

108 2011 Reference Document awarded (following the allocation of 5,106 on November 28, 2007, 25,000 on May 13, 2008, 81,000 on July 31, 2008 and 28,000 on November 13, 2008) to employees of the Company or affiliated companies. These bonus shares are subject to a two-year vesting period from February 13, 2009 and a two-year lock-in period running from the end of the vesting period. At the Board meeting on November 10, 2010, the Directors acknowledged that 1,000 bonus shares awarded on February 12, 2009 had become null and void, further to the departure of staff beneficiaries. Decision by the Board of Directors on May 14, 2009 under the delegation granted by the extraordinary general meeting on May 4, 2006 (twenty third resolution) Under the delegation granted by the extraordinary general meeting on May 4, 2006, as indicated above, on May 14, 2009 the Board of Directors determined the principle for awarding 53,892 out of the 53,892 bonus shares still to be awarded (following the allocation of 5,106 on November 28, 2007, 25,000 on May 13, 2008, 81,000 on July 31, 2008, 28,000 on November 13, 2008 and 11,000 on February 12, 2009 and following the reintegration of 26,000 and 46,042 bonus shares as decided by the Chairman on March 2, 2009) to employees of the Company or affiliated companies. These bonus shares are subject to a two-year vesting period from May 15, 2009 and a two-year lock-in period running from the end of the vesting period. At the Board meetings on February 11, 2010 and November 10, 2010, the Directors acknowledged that 2,500 bonus shares awarded on May 12, 2009 had become null and void, further to the departure of staff beneficiaries. Extraordinary general meeting on June 18, 2009 The Company's extraordinary general meeting on June 18, 2009 (tenth resolution) decided to authorize the Board of Directors to award Company bonus shares on one or more occasions, with the total number of shares that may be awarded representing no more than 0.5% of the Company's capital on June 18, 2009, and gave it full powers to implement the said authorization. Decision by the Board of Directors on July 30, 2009 under the delegation granted by the extraordinary general meeting on June 18, 2009 (tenth resolution) Under the delegation granted by the extraordinary general meeting on June 18, 2009, as indicated above, on July 30, 2009 the Board of Directors determined the principle for awarding 2,000 out of the 64,956 bonus shares to be awarded to employees of the Company or affiliated companies. These bonus shares are subject to a two-year vesting period from July 31, 2009 and a two-year lock-in period running from the end of the vesting period. Decision by the Board of Directors on November 12, 2009 under the delegation granted by the extraordinary general meeting on June 18, 2009 (tenth resolution) Under the delegation granted by the extraordinary general meeting on June 18, 2009, as indicated above, on November 12, 2009 the Board of Directors determined the principle for awarding 2,000 out of the 62,956 bonus shares still to be awarded (following the allocation of 2,000 on July 30, 2009) to employees of the Company or affiliated companies. These bonus shares are subject to a two-year vesting period from November 13, 2009 and a two-year lock-in period running from the end of the vesting period. Decision by the Board of Directors on February 11, 2010 under the delegation granted by the extraordinary general meeting on June 18, 2009 (tenth resolution) Under the delegation granted by the extraordinary general meeting on June 18, 2009, as indicated above, on February 11, 2010 the Board of Directors determined the principle for awarding 52,000 out of the 60,956 bonus shares still to be awarded (following the allocation of 2,000 on July 30, 2009 and 2,000 on November 12, 2009) to employees of the Company or affiliated companies. These bonus shares are subject to a two-year vesting period from February 12, 2010 and a two-year lock-in period running from the end of the vesting period. At the Board meeting on November 10, 2010, the Directors acknowledged that 2,000 bonus shares awarded on February 11, 2010 had become null and void, further to the departure of staff beneficiaries. Decision by the Board of Directors on May 12, 2010 under the delegation granted by the extraordinary general meeting on June 18, 2009 (tenth resolution) Under the delegation granted by the extraordinary general meeting on June 18, 2009, as indicated above, on May 12, 2010 the Board of Directors determined the principle for awarding 8,956 out of the 8,956 bonus shares still to be awarded (following the allocation of 2,000 bonus shares on July 30, 2009, 2,000 bonus shares on November 12, 2009 and February 11, 2010) to employees of the Company or affiliated companies. These bonus shares are subject to a twoyear vesting period from May 12, 2010 and a two-year lock-in period running from the end of the vesting period. 108

109 Extraordinary general meeting on June 9, 2010 The Company's extraordinary general meeting on June 9, 2010 (ninth resolution) decided to authorize the Board of Directors to award Company bonus shares on one or more occasions, with the total number of shares that may be awarded representing no more than 1% of the Company's capital on June 9, 2010, and gave it full powers to implement the said authorization. Decision by the Board of Directors on July 29, 2010 under the delegation granted by the extraordinary general meeting on June 9, 2010 (ninth resolution) Under the delegation granted by the extraordinary general meeting on June 9, 2010, as indicated above, on July 29, 2010 the Board of Directors determined the principle for awarding 39,400 out of the 129,413 bonus shares still to be awarded to employees of the Company or affiliated companies. These bonus shares are subject to a two-year vesting period from July 29, 2010 and a two-year lock-in period running from the end of the vesting period. Decision by the Board of Directors on November 10, 2010 under the delegation granted by the extraordinary general meeting on June 9, 2010 (ninth resolution) Under the delegation granted by the extraordinary general meeting on June 9, 2010, as indicated above, on November 10, 2010 the Board of Directors determined the principle for awarding 800 out of the 90,013 bonus shares still to be awarded to employees of the Company or affiliated companies. These bonus shares are subject to a two-year vesting period from November 10, 2010 and a two-year lock-in period running from the end of the vesting period. Decision by the Board of Directors on February 10, 2011 under the delegation granted by the extraordinary general meeting on June 9, 2010 (ninth resolution) Under the delegation granted by the extraordinary general meeting on June 9, 2010, as indicated above, on February 10, 2011 the Board of Directors determined the principle for awarding 58,400 out of the 89,213 bonus shares still to be awarded to employees of the Company or affiliated companies. These bonus shares are subject to a two-year vesting period from February 10, 2011 and a two-year lock-in period running from the end of the vesting period. At the Board meeting on February 10, 2011, the Directors acknowledged that 1,000 bonus shares awarded had become null and void, further to the departure of staff beneficiaries. At the Board meeting on May 12, 2011, the Directors acknowledged that 2,400 bonus shares awarded had become null and void, further to the departure of staff beneficiaries. Decision by the Board of Directors on May 10, 2011 under the delegation granted by the extraordinary general meeting on June 9, 2010 (ninth resolution) Under the delegation granted by the extraordinary general meeting on June 9, 2010, as indicated above, on May 12, 2011 the Board of Directors determined the principle for awarding 34,613 out of the 34,613 bonus shares still to be awarded (following the allocation of 2,000 on July 30, 2009 and 2,000 on November 12, 2009) to employees of the Company or affiliated companies. These bonus shares are subject to a two-year vesting period from May 12, 2011 and a two-year lock-in period running from the end of the vesting period. Extraordinary general meeting on May 31, 2011 The Company's extraordinary general meeting on May 31, 2011 (ninth resolution) decided to authorize the Board of Directors to award Company bonus shares on one or more occasions, with the total number of shares that may be awarded representing no more than 3% of the Company's capital on May 31, 2011, and gave it full powers to implement the said authorization. Decision by the Board of Directors on July 28, 2011 under the delegation granted by the extraordinary general meeting on May 31, 2011 (ninth resolution) Under the delegation granted by the extraordinary general meeting on May 31, 2011, as indicated above, on February 10, 2011 the Board of Directors determined the principle for awarding 8,300 out of the 378,241 bonus shares still to be awarded to employees of the Company or affiliated companies. These bonus shares are subject to a two-year vesting period from July 28, 2011 and a two-year lock-in period running from the end of the vesting period. On July 28, 2011, the Board of Directors also determined the principle for awarding 65,000 bonus shares out of the 378,241 bonus shares still to be awarded to Varioptic executives. These bonus shares are subject to various performance conditions, as detailed in the minutes from the said Board meeting. Decision by the Board of Directors on November 10, 2011 under the delegation granted by the extraordinary general meeting on May 31, 2011 (ninth resolution) 109

110 2011 Reference Document Under the delegation granted by the extraordinary general meeting on May 31, 2011, as indicated above, on November 10, 2011 the Board of Directors determined the principle for awarding 58,200 out of the 313,241 bonus shares still to be awarded to employees of the Company or affiliated companies. These bonus shares are subject to a two-year vesting period from November 10, 2011 and a two-year lock-in period running from the end of the vesting period. Decision by the Board of Directors on February 15, 2012 under the delegation granted by the extraordinary general meeting on May 31, 2011 (ninth resolution) Under the delegation granted by the extraordinary general meeting on February 15, 2012, as indicated above, on November 10, 2011 the Board of Directors determined the principle for awarding 27,350 out of the 255,041 bonus shares still to be awarded to employees of the Company or affiliated companies. These bonus shares are subject to a two-year vesting period from February 15, 2012 and a two-year lock-in period running from the end of the vesting period. The following table summarizes the number of bonus shares awarded to the Group's 10 members of staff who received the highest number in 2011: Beneficiary Date awarded (1) Number of shares awarded Vesting period Lock-in period 1 7/28/2011(1) 50,000 2 to 4 years from award date 2 years from vesting 2 7/28/2011(1) 15,000 2 to 4 years from award date 2 years from vesting 3 11/10/2011 5,500 2 years from award date 2 years from vesting 4 11/10//2011 5,500 2 years from award date 2 years from vesting 5 5/12/2011 3,000 2 years from award date 2 years from vesting 6 7/28/2011 3,000 2 years from award date 2 years from vesting 7 11/10/2011 3,000 2 years from award date 2 years from vesting 8 11/10/2011 3,000 2 years from award date 2 years from vesting 9 5/12/2011 2,700 2 years from award date 2 years from vesting 10 5/12/2011 2,200 2 years from award date 2 years from vesting (1) The definitive vesting date and the definitive number of bonus shares to be awarded depend on various performance conditions reviewed by the Board of Directors between the second and fourth anniversaries of the allocation date (July 28, 2011). Breakdown of bonus shares awarded by category in 2011 Out of all the bonus shares awarded, i.e. 224,513, the breakdown is as follows: Parrot S.A. staff 224,513 bonus shares. Staff from foreign subsidiaries NA. Corporate officers NA Mandatory profit-sharing agreements The Company is required to put in place a mandatory profit-sharing agreement since In this way, a mandatory profit-sharing agreement was signed on May 2, 2006 between the Company's management and the sole staff representative office, notably looking to introduce a special profit-sharing reserve calculated based on the legal formula for Company staff and defining the conditions for managing employees' entitlements, the procedure for resolving any disputes between the parties, and the conditions for informing staff on an individual and a collective basis. For 2011, the amount of the special profit-sharing reserve to be paid out represents nothing (compared with 505,084 euros in 2010) Voluntary performance-related bonus agreement A voluntary performance-related bonus agreement was signed on June 29, 2009 between the Company and the sole staff representative office, notably looking to offer staff an opportunity to share in the Company's development and performances. The agreement was entered into for a three-year period, commencing January 1, The performance-related bonus is calculated based on elements from the Group's income from ordinary operations and revenues. 110

111 The individual amount of the performance-related bonus is determined in proportion to each employee's salary base for half, with the other half calculated in proportion to the period for which the employee was present during the year. In 2011, the amount of the performance-related bonus to be paid out is 1,437,412 euros (versus 2,189,370 in 2010). 111

112 XVIII. Main shareholders 2011 Reference Document Shareholding structure Current breakdown of the share capital and voting rights The following table presents the breakdown of the capital interests and voting rights of the Company's main shareholders at December 31, 2011 (i) before the exercising of securities entitling holders to access the Company's capital (undiluted capital) and (ii) after the exercising of securities entitling holders to access the Company's capital (see Section "Potential capital" in the present reference document). Number of Company shares held at Dec 31, 2011 % of capital % of voting rights Number of Company shares on a diluted basis % of capital % of voting rights Total number of shares (A) 12,892,145 13,304,129 Founder (B) Henri Seydoux (1) 4,546, % 35.3% 4,546, % 34.2% Founder, Chairman subtotal 4,546, % 35.3% 4,546, % 34.2% Directors Jean Marie Painvain % 0.0% % 0.0% Edward Planchon 5, % 0.0% 5, % 0.0% Geoffroy Roux de Bézieux % 0.0% % 0.0% Olivier Legrain % 0.0% % 0.0% Jean-Yves Helmer % 0.0% % 0.0% Stéphane Marie 1 0.0% 0.0% 1 0.0% 0.0% Natalie Rastoin 1, % 0.0% 1, % 0.0% Directors subtotal 7, % 0.1% 7, % 0.1% Parrot staff Staff on registered basis 365, % 2.8% 777, % 5.8% Parrot staff subtotal 365, % 2.8% 777, % 5.8% Historical investor Seventure Partner (2) 762, % 5.9% 762, % 5.7% Seventure Partner subtotal 762, % 5.9% 762, % 5.7% Parrot S.A. treasury shares 685, % 5.3% 685, % 5.2% Estimated float (A-B-C-D) 7,652, ,064, % 60.6% (1) Shares spread across various innovative technology investment funds (FCPI). (2) On February 6, 2012, Seventure Partners disclosed that on February 3, 2012 it had dropped below the thresholds representing 5% of Parrot's capital and voting rights, and held 643,362 Parrot shares, representing the same number of voting rights, i.e. 4.99% of this company's capital and voting rights[2]. 112

113 Change in the Company's capital For the main shareholders, the following table presents the changes in their interests in the Company's share capital (% of capital) and voting rights (% of voting rights) over the last two financial years: Shareholding Number of shares Position at Dec 31, 2010 Position at Dec 31, 2011 % of % of voting Number of % of capital rights shares capital Total number of shares 12,867,599 12,892,145 % of voting rights Founder Henri Seydoux 4,546, % 35.3% 4,546, % 35.3% Founder subtotal 4,546, % 35.3% 4,546, % 35.3% Directors Jean Marie Painvin 100 NS NS 100 NS NS Edward Planchon 5,183 NS NS 5,183 NS NS Geoffroy Roux de Bézieux 732 NS NS 732 NS NS Olivier Legrain 20 NS NS 20 NS NS Jean-Yves Helmer 50 NS NS 50 NS NS Stéphane Marie 1 NS NS 1 NS NS Natalie Rastoin NA NA NA 1,000 NS NS Directors subtotal 6, % 0.0% 7, % 0.1% Employees (1) Registered employee shareholders 275, % 2.1% 365, % 2.8% Employees subtotal 275, % 2.1% 365, % 2.8% Treasury shares Parrot S.A. 418, % 3.3% 685, % 5.3% Treasury shares subtotal 418, % 3.3% 685, % 5.3% Other investors (1) Seventure Partners S.A. (2) 941, % 7.3% 762, % 5.9% NS: Not significant. NA: Not applicable. (1) Assimilated with the float. (2) On February 6, 2012, Seventure Partners disclosed that on February 3, 2012 it had dropped below the thresholds representing 5% of Parrot's capital and voting rights, and held 643,362 Parrot shares, representing the same number of voting rights, i.e. 4.99% of this company's capital and voting rights[2]. (3) On July 15, 2008, Covea Finance disclosed that on February 3, 2012 it had dropped below the thresholds representing 5% of Parrot's capital and voting rights, and held 683,725 Parrot shares, representing the same number of voting rights, i.e. 4.99% of this company's capital and voting rights. At December 31, 2011, the estimated float therefore represented 59.5% of the capital Voting rights On the filing date for the present reference document, each Company share is entitled to one voting right. As such, the shareholders listed in Section "Current breakdown of the share capital and voting rights" in the present reference document have a number of voting rights that is equal to the number of shares they hold Issuer's control At December 31, 2011 the Company's main shareholder was Mr. Henri Seydoux, holding 35.3% of the Company's capital and voting rights and serving as its Chairman and Chief Executive Officer. As indicated in the Chairman of the Board of Directors' report on internal control (cf. Section "Corporate governance" in the present reference document), the Company has put in place the provisions required to comply with the corporate governance system following the MiddleNext Governance code recommendation, more specifically setting up an Audit Committee and an Appointments and Compensation Committee, which report on their work directly to the 113

114 2011 Reference Document Board of Directors. Furthermore, five of the eight directors are independent, which makes it possible to ensure that decisions are taken in line with the corporate interests of the Company and the Group in general Agreements whose implementation could result in a change of control To the best of the Company's knowledge, there are: No other shareholders holding directly, indirectly or in concert 5.00% or more of Parrot's capital or voting rights, No shareholder agreements and no other agreements whose implementation could result in a change of control over Parrot, No direct or indirect interests in the Company's capital as defined by Articles L and L of the French commercial code, No agreements which have been entered into by the Company that would be amended or terminated in the event of a change of control over the Company Information on the change The following chart presents the change in Parrot's share price from its initial public offering (June 27, 2006) to April 24,