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

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1 French limited company (société anonyme) with a share capital of 1,961, 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 June 16th, 2011, 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 2010 Reference document GENERAL COMMENTS...7 HISTORICAL FINANCIAL INFORMATION...7 I. RESPONSIBILITY FOR THIS DOCUMENT Statement by the person responsible for the reference document and the financial report...8 II. STATUTORY AUDITORS Incumbent statutory auditors Deputy statutory auditors Group fees for the statutory auditors and members of their network...10 III. 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 Risks relating to the Group's distribution network and customers The Group could experience difficulties managing the risks linked to the international deployment of its activities and its growth on new international markets Risks relating to the deployment of new Group activities on mass retail markets 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 Risks relating to the level of potential capital The Group's earnings are subject to fluctuations which make them difficult to forecast The elements affecting the fourth quarter could have major 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 Growth and size expectations may prove to be incorrect and impact the Group's level of business and profitability 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 is dependent on technical standards, and primarily the Bluetooth standard Risks relating to regulations 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...23 V. INFORMATION CONCERNING THE ISSUER Company history and development Corporate name and registered office Trade and company register, APE activity code

3 Incorporation and life of the Company Legal form and governing legislation History Investments Investments carried out Investments underway Future investments and investments subject to a firm commitment...27 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 Strategy Investments driving 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...51 VII. STRUCTURE Group structure Presentation of the Group's companies...53 VIII. PROPERTY, PLANT AND EQUIPMENT...56 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 Income from ordinary operations 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...62 X. CASH AND CAPITAL Cash 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

4 2010 Reference document 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 Intellectual and industrial property Marks Patents Domain names Software Designs and models...72 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 date Q earnings: Further development of OEM business Acquisition of a technological component in the optics sector 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...77 XIII. FINANCIAL OUTLOOK Outlook for Outlook for Q XIV. ADMINISTRATIVE, MANAGEMENT, SUPERVISORY AND EXECUTIVE BODIES...79 XV Board of Directors Offices held by directors and executives over the past five years Director biographies Conflicts of interest...82 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...86 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 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

5 Structure 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 XX Information on current agreements Special statutory auditors' report on regulated agreements and commitments for FINANCIAL INFORMATION CONCERNING THE ISSUER'S ASSETS, LIABILITIES, FINANCIAL POSITION AND EARNINGS Consolidated financial statements Consolidated income statement for the years ended December 31st, 2009 and Profit and loss statement for the years ended December 31st, 2009 and Consolidated balance sheet at December 31st, 2009 and Consolidated cash-flow statement for the years ended December 31st, 2009 and Change in consolidated shareholders' equity for the years ended December 31st, 2009 and Notes Statutory auditors' report on the consolidated financial statements for Parrot S.A. financial statements Parrot S.A. income statement Parrot S.A. balance sheet Notes to Parrot S.A.'s financial statements Note 1. Highlights Note 2. Accounting methods, principles and rules Note 3. Balance sheet information Note 4. Information on the income statement Note 5. Other information 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 Information on conditions governing the capital Changes to the share capital during the last two fiscal years Bylaws Corporate purpose (Article 2 of the Company's bylaws) Members of administrative, management and supervisory bodies

6 2010 Reference document Rights and duties associated with shares (Article 11 of the Company's bylaws) Distribution of profits (Article 22 of the Company's bylaws) Changes to shareholder rights General meetings (Article 20 of the Company's bylaws) Clause likely to influence the Company's control Identification of shareholders Disclosure thresholds (Article 13 of the Company's bylaws) Specific stipulations governing changes to the share capital (Article 7 of the Company's bylaws) 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) XXVII. RESOLUTIONS PRESENTED AT THE GENERAL MEETING ON MAY 31 ST, I. ORDINARY GENERAL MEETING II. EXTRAORDINARY GENERAL MEETING 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. (formerly Inpro Tecnologiá, 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 31st, 2010, 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 31st, 2010, 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 31st, 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 29th, 2004, the present reference document includes references to the following information which readers are invited to refer to: For the year ended December 31st, 2008: 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 May 5th, 2009 under number R For the year ended December 31st, 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 30th, 2010 under number D

8 I 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. June, 15th 2011 Henri Seydoux Chairman and Chief Executive Officer II. 8

9 KPMG S.A., represented by Mr. Jean-Pierre Valensi and Mrs. Nahid Sheikhalishahi 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 29th, 2001, for six (6) financial years. It was reappointed at the combined general shareholders' meeting on June 4th, 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 31st, 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 28th, 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 31st, SCP 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 28th, 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 4th, 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 31st, 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 28th, 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 31st,

10 2010 Reference document KPMG DELOITTE Amount Amount % (, net of tax) (, net of tax) % Auditing Statutory auditing, certification, review of individual and consolidated accounts - Issuer 193, ,933 67% 53% 110, ,300 59% 60% - Fully-consolidated subsidiaries 97,000 72,382 33% 47% 78,700 69,930 41% 40% Other audits and services linked directly to the statutory auditing assignment Issuer Fully-consolidated subsidiaries Subtotal 290, , % 189,639 73, % 100% Other services provided by networks to fully-consolidated subsidiaries Legal, tax, social 36,616 15, % 13,941 Other Subtotal 36,616 15, % 100% 0 13,941 0% 100% Total 327, , % 100% 189, , % 100% 10

11 III. 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 31st, 2007, 2008 and 2009, prepared under IFRS. 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 st, 2008, 2009 and 2010 (IFRS) Condensed income statement ( '000) Year ended December 31st / 2009 % Revenues 206, , , % Gross margin 105,143 79, , % % of revenues 50.90% 47.34% 49.75% Income from ordinary operations 17,887 7,405 31, % % of revenues 8.70% 4.39% 13.10% Non-recurring items -2, EBIT 15,577 7,405 31, % % of revenues 7.50% 4.39% 13.10% Net income 14,024 9,577 27, % % of revenues 6.80% 5.68% 11.52% Quarterly revenues ( '000) Q1 Q2 Q3 Q revenues per quarter 49,684 56,732 67,813 67, revenues per quarter 39,112 40,310 38,794 50, revenues per quarter 58,918 58,268 43,275 46,116 Condensed balance sheet ( '000) / 2009 % Goodwill 21,528 21,125 21, % Non-current assets 12,779 9,808 13, % Current assets 131, , , % Total assets 165, , , % Shareholders' equity 106, , , % Non-current liabilities 3,379 4,922 5, % Of which, long-term financial debt 1, Current liabilities 41,408 45,644 36, % Of which, short-term financial debt 1,137 1, Total liabilities 150, , , % Cash flow ( '000) Year ended December 31st / 2009 % Cash and equivalents - year-start 39,514 44,606 76, % Cash flow from operations 25,164 15,106 45, % Working capital -2,270 17,571-20,260 Net cash flow from operating activities 18,644 36,573 28, % Cash flow from investment activities -7,200-4,417-10, % Cash flow from financing activities -6, ,678 Cash and equivalents - year-end 44,606 76,035 62,844 11

12 2010 Reference document Other current financial assets ,961 Net cash position 44,606 76,035 90, % 12

13 IV. 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 43% of the Group's purchases in 2009, compared with 45% in With its top five subcontractors, this percentage rises to approximately 77% of Group purchases in 2009, compared with 78% in With its 10 main subcontractors, this percentage came to 88% in 2009, compared with 91% in main subcontractors, came to 68% in 2010, compared with 88% 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 all of its strategic components. 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 of the countries where its products are sold, the Group is dependent on maintaining and developing commercial partnerships with its distributors and customers. the ten largest customers generated around 31.8% of the Group's consolidated revenues, versus 31.0% in The terms of payment usually applied vary from one country to another, but the average is around 70 days. To date, the Group usually starts a commercial relationship with a new customer with payment upon ordering, and only authorizes longer terms of payment when the commercial relationship is likely to be long-term. The amount of bad debt recorded in 2010 represented 0.22% of the Group's revenues, versus 0.04% in 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. 13

14 2010 Reference document 90% 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; 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 development and marketing of wireless mobile phone devices, particularly outside of the automotive world, entails a certain number of risks that could have a significant 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, particularly due to their recent release on the market, the lack of any comparable products or even the impossibility of carrying out large-scale tests before their launch. 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. Even if the Group notably distributes its products through certain general mass retailers and retail electronics players, it cannot guarantee that it will be able to establish the partnerships required to market its new products. 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. 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, 14

15 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. On the filing date for this reference document, Mr. Henri Seydoux held 35.2% 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). 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. 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 total number of Company shares that may be issued further to the exercising of securities entitling holders to access the Company's capital at May 31st, 2011 represents: Company founder equity warrants: 2,558,318 shares, representing a potential dilution of approximately 19.8% of the Company's capital; Stock warrants: 734,813 shares, representing a potential dilution of approximately 5.7% of the Company's capital; Bonus shares: 191,963 shares, representing a non-significant potential dilution. For further details, please refer to Sections and 17.2 hereafter, relating to securities with an equity component held by corporate officers and employees respectively. If all or part of such securities entitling holders to access the Company's capital are exercised, the resulting Company shares issued would involve a dilution for existing shareholders and therefore a reduction in the relative value of their shares. The following charts present the breakdown of the Company's capital structure on the filing date for this reference document (i) before the exercising of securities entitling holders to access the Company's capital and (ii) after the exercising of securities entitling holders to access the Company's capital (cf "Potential capital" in the present reference document). 15

16 2010 Reference document The Group's earnings may vary significantly from one quarter to the next (cf below), 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 an impact on the Company's share price. 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 offer, 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 net 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 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: In connection with its growth strategy, which could be based on acquisitions, partnerships or alliances, the Group may carry out acquisitions or investments. However, the Group cannot guarantee that it will be able to identify acquisition or investment opportunities, or that such opportunities will arise. 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 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 or earnings or its ability to achieve its objectives. 16

17 Part of such acquisitions or investments could be paid for by issuing shares in the Company or Group companies, which could have a dilutive effect on the position of existing shareholders and reduce the level of net earnings per share. The Company recorded goodwill (21.1 million euros) in its consolidated accounts further to the acquisition of a 100% stake in Waveblue LLC in 2007 and Inpro Tecnologià S.L. in Furthermore, other external growth operations treated as business combinations could result in further goodwill being recorded. 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 31st, 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. The market for in-vehicle wireless handsfree products has been in a growth phase since While there are grounds to believe that this progress will continue, particularly due to the growing penetration of mobile phones, the rate of growth is still difficult to determine. Market growth could be curbed by factors which are out of the Group's control, linked in particular to the Bluetooth standard (cf below, and for further information on wireless communications, notably through Bluetooth, please refer to Section "Market for wireless products" in the present reference document) and regulations governing in-car mobile phone use. The rate of growth in new wireless devices for mobile phones, outside of the automotive world, is also difficult to evaluate at this stage and the Group cannot guarantee that these new products will find their markets. Lastly, certain local markets could experience different rates of growth to those forecast, which could affect the Group's international development. In any case, the deterioration in the economic situation since the beginning of the crisis in 2008 is increasing the uncertainties linked to the ability to assess its potential for growth. 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 17

18 2010 Reference document 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 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 production 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. 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 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. Components account for the majority of costs for finished products. 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 products are based on specific technical standards, and primarily the Bluetooth standard. The Group's success is founded on growing use of the Bluetooth standard by mobile phone manufacturers. Today, all mobile phone manufacturers around the world integrate Bluetooth in a vast majority of their mobile phones. The Group cannot guarantee that a new more effective, simpler, less expensive or even more energy-efficient technology will not emerge and establish itself as the new standard for wireless communications. Neither can the Group guarantee that mobile phone manufacturers will continue to sell products including the Bluetooth technology. Furthermore, the occurrence of technical faults with products incorporating Bluetooth technology (even products outside of the Group's product sector) could have a negative impact on support for this technology among customers. In the same way, a belief (based on proven facts or not) that Bluetooth products might be susceptible to hacking could affect the sale of products incorporating this standard. 18

19 If this were the case, this could have a significant unfavorable impact on the Group's business, financial position, earnings or development. 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 2010 that might indicate a less favorable context for the Company's business. 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 1st, 2010 and allocated them to cover needs for the four (4) quarters following the purchase date. This exposure represents virtually one third of the Group's purchases. 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. At the end of December 2010, 56.9% of the Group's net cash was in US dollars or related currencies. 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 (623,000) 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. 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 6,633,000 euros for 418,266 shares, with an average share price of 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 31st, 2010 At December 31st, 2010, financial assets primarily comprised: 19

20 48.4 million euros in trade receivables, in line with the normal course of the Group's operating cycle; 27,9 million euros in other current financial assets; 62.8 million euros in cash and cash equivalents; 2010 Reference document 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 31st, 2010, the maximum credit risk exposure can therefore be broken down as follows: Trade receivables: 48.4 million euros Other receivables: 4.8 million euros Other current financial assets: 27.9 million euros Cash and cash equivalents: 62.8 million euros In 2010, the Parrot Group's policy was to diversify its counterparty risk management by distributing investments among first-rate banking institutions and over short 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 31st, 2010 The Parrot Group did not have any financial liabilities at December 31st, At December 31st, 2010, the Company's commitments concerned future payments relating to operating leases that may not be terminated: Year 2010 gross value ( '000) and later 32 Total 3,860 In addition, a bank guarantee has been given for 300,000 euros. Firm orders at December 31st with our main suppliers represented a total of 47.3 million euros. For information on the Group's commitments linked to external growth, please refer to Chapter XXII concerning the earnout payable in Parrot S.A. shares to Barataria Inc. and Mr. Jon Elliott relating to the acquisition of all the capital of the American-law company Waveblue LLC. 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. 20

21 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 2010 and previous years, the Company did not experience any such issues. In this area, the Company has identified five types of risks: The Group could be exposed to a lack of protection in terms of intellectual propriety; The Company could be faced with third parties, particularly competitors, using technologies developed by the Company without its authorization; The Company could be unable to effectively protect the confidentiality of certain information relating to its technology; The Company could be exposed to claims by third parties which consider that they own intellectual or industrial property rights on certain technologies used by the Company; The Company could experience difficulties relating to the use of "freeware" The Group could be exposed to a 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 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. 21

22 2010 Reference document 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 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 decided to put in place an "open source" policy. 22

23 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 (cover amount: 7,500,000 euros per claim), 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 (cover amount: 10,000,000 euros per claim and per year of insurance). The premium for the master policy for 2010 came to 93, 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 3,020 euros, 1, euros and 4, dollars respectively, giving a total of 101, 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 2010, the "comprehensive office" policy represented 7, euros, with the "comprehensive IT" policy coming in at 2, 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. 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. (policy set up in this entity in 2010) and Parrot Asia Pacific Ltd. The cover amount represents 90% of the net debt covered excluding VAT. The premium came to 301,211 euros in Executive liability: CHARTIS The Company has taken out insurance cover for the liability of its executives and corporate officers. For up to 7.5 million euros per insurance year, 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 23

24 2010 Reference document sites in France. The total covered represents 300,000 euros per claim, with the exception of shipments to Spain, for which it is raised to 600,000 euros per claim. The premium paid in 2010 totaled 67, euros. Storage liability: GENERALI 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 total cover represents 19,900,000 euros (contractual compensation cap) all damages combined, with a premium of 29, euros in Conclusion The Company has not had to make any major claims, and only used its policies on an isolated and insignificant basis in As a result, the amount of the premiums remains reasonable and the change reflects adjustments made by the various insurance companies in relation to the Company's activity. 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. 24

25 V. The Company's corporate name is "Parrot". The registered office is located at , quai de Jemmapes, Paris, France (Tel: ). The Company is registered in the Paris trade and company register under number The Company was incorporated on February 28th, 1994 for a 99-year period ending on February 28th, 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 23rd, 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). 25

26 2010 Reference document 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 launched: 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. The Group has made the following investments: In 2008, intangible investments totaled 5,024,000 euros, with 4,197,000 euros for the capitalization of development efforts (IFRS standard) and 369,000 euros in additional costs for the acquisition of Waveblue. Tangible investments totaled 2,372,000 euros. In 2009, intangible investments totaled 3,532,000 euros, with 2,226,000 euros for the capitalization of development efforts (IFRS standard). Tangible investments totaled 1,215,000 euros. 26

27 In 2010, intangible investments totaled 6,863,000 euros, with 5,723,000 euros for the capitalization of development efforts (IFRS standard). Tangible investments totaled 3,183,000 euros. Parrot subscribed for two capital increases carried out by Da Fact for 676,000 euros. In May 2011, Parrot acquired a 100% stake in the company Varioptic. Detailed information is provided in Section of this reference document. The investments underway at May 31st, 2011 are presented below: 1,165,833 euros in intangible fixed assets, excluding the capitalization of development efforts (IFRS); 86,947 euros in tangible fixed assets; 53,628 euros in long-term financial investments. On the date when the present reference document was published, there were no significant acquisition projects underway. On the filing date for the present reference document, no significant investment commitments had been adopted by the Company's corporate bodies. 27

28 VI Reference document 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: "Home" 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 Home products) and automotive industry professionals (OEM connectivity solutions for handsfree telephony and music). 28

29 The following table presents the breakdown of the Group's consolidated revenues between the various product categories: Revenues Revenues Revenues Products (% of (% of (M ) (M ) ( ) revenues) revenues) 2010 (% of revenues) Installed kits % % % OEM % % % Plug & Play % % % Home 4.3 2% 5.0 3% % Other % % % Of which, navigation products (1) % 8.6 5% % Of which accessories and other (2) % 9.7 6% % 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 (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.). 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. More than 60% 1 of mobile phone worldwide have integrated Bluetooth connectivity. 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. All the software for Parrot's handsfree products for vehicles can be updated by users or professionals 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. 1 Bluetooth Continues to be Most Successful Wireless Interface Technology Ever - Electronics.ca Research Network 26/10/

30 Technologies 2010 Reference document 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 31st, 2009, the vast majority of the products offered by the Group 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). 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 96 million euros of revenues in 2010, representing 40% of the Group s revenues. Bluetooth installed handsfree kits enable a vehicle's driver to make or receive phone calls without handling the mobile phone and without having to plug the mobile phone into the Parrot product. 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 system makes 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; Car radio products (e.g. RKi 8400) allow a totally invisible integration into the vehicle and can also be adopted to replace a basic car radio. 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. Parrot CK3000 Evolution Recommended retail price: 99 (including VAT) Parrot CK3100 LCD Recommended retail price: 139 (including VAT) Black-and-white LCD screen Parrot MKi 9200 Recommended retail price: 199 (including VAT) Parrot MKi 9100 Recommended retail price: 159 (including VAT) 30

31 Parrot MKi 9000 Recommended retail price: 129 (including VAT) Parrot RKi8400 Recommended retail price: 299 (including VAT) Advanced handsfree kit and FM/AM car radio with RDS, equipped with all the dedicated connectors for digital and analogue music (including ipod, iphone and ipod touch ) Plug & Play range In 2010, the Plug & Play» generated revenues of 14.6 million euros (6% 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. As early as 2003, the Group was the first player on the market to offer a Plug & Play Bluetooth handsfree kit. It only takes a few minutes to carry out the initial pairing phase with the user's Bluetooth phone. Compact and light, the Plug & Play products can easily be switched from one vehicle to another or even moved about inside the user's home or workplace. 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. At the end of 2010, Parrot unveiled 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. Parrot SK4000 Recommended retail price: 199 (including VAT) The SK4000 Parrot is an advanced, AD2P Bluetooth wireless handsfree kit, RDS FM tuner, cable input designed for making and receiving calls and listening to music on a motorbike or scooter 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 SLIM Recommended retail price: 99 (including VAT) Bluetooth hands-free charging holder for Smartphones. Voice recognition and speech synthesis 31

32 OEM range 2010 Reference document 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 aftermarket 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. Modules FC6XXX CK 5XXX 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 32

33 CK4XXX CK5xxx capacities + Stand alone. + Connectivity with the vehicle's (CAN or MOST) Application-specific integrated circuit (ASIC) Parrot 6 / Parrot 5+ / Parrot 5 / Parrot 4+ 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 Wireless devices for new mobile phone users 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. 33

34 2010 Reference document 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 resolution LCD screen. 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. 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 take off and landing with autopilot. Structure: carbon-fiver tube and high resistance PA66 plastic. All spare parts available separately. 34

35 Parrot AR.Drone: flagship launch in 2010 The Parrot AR.Drone was first presented at the 2010 CES in Las Vegas (January 7 to 10, 2010), a leading consumer electronics shows, Parrot unveiled the first augmented reality quadricopter: the Parrot AR.Drone. With the Parrot AR.Drone, the Group intends to explore new markets, in line with the content and possibilities offered by current mobile phones and more specifically the buoyant mobile video games market. With its intuitive handling, open to everyone, the Parrot AR.Drone, which can currently be piloted using an iphone, an ipod Touch, or an ipad, can make highly spectacular flights. In addition to the simple pleasure of flying, this unique quadricopter offers augmented reality features, i.e. the capacity to link virtual games to the real environment. The video feed on the iphone or ipod touch screen makes it possible to pilot the AR.Drone "from the cockpit" and the image processing algorithms make it possible to integrate special augmented reality effects in real time. The Parrot AR.Drone was commercially launched in summer 2010 at a price of 299 euros including VAT. Parrot focused initially on its main countries (France, Germany, UK, Spain, Italy, US and Hong Kong) through exclusive contracts with local retailers (FNAC, Saturn, HMV, MediaMark, GameStop, Brookstone and Toys r Us). At the end of 2010, Australia, New Zealand, Switzerland and Belgium were also brought on board. To support the Parrot AR.Drone's launch, Parrot has rolled out a major advertising approach with online and poster campaigns. Many events have also been organized in the main cities and at points of sale. In 2010, the Parrot AR.Drone generated 23.2 million euros in revenues. In 2010, with the economic situation stabilizing, Parrot recorded strong revenue growth (+43.4% to million euros). On the whole, the Group has offset the negative impacts linked to the general environment to a great extent: since 2007, its best year in terms of revenues, the Group has achieved growth of 10%. In FY 2010, the Group's sales growth was driven primarily by: The dynamic commercial development of the OEM business (33.7% of 2010 revenues, +184%) reflecting the combined impact of orders from three major new contracts, as well as restocking actions and exceptional orders placed by longstanding clients; The commercial launch of the Parrot AR.Drone (9.6% of 2010 revenues), the IPhone/iTouch/iPad-controlled Wi-Fi quadricopter, representing a first major success in the Multimedia range Developments for each product range Installed handsfree kits generated 95.8 million euros in revenues (39.7% of 2010 revenues), down 4.7% on an annual basis. The new MKi products have continued to grow (notably iphone-compatible and including advanced music features, +23% on an annual basis), but their development has not been enough to make up for the slowdown on older products and/or products stopped in The first announcements for new products on the installed handsfree kit segment were made, as planned, at the 2011 CES, including a first car radio with Parrot's advanced handsfree telephony and multimedia features, as well as internet connectivity. Plug & Play product sales generated 14.6 million euros in revenues (6.0% of 2010 revenues), showing a sequential contraction of 17.5%, primarily due to the aging of the flagship product (Minikit Slim) and the stronger level of competition on this market segment. In October 2010, Parrot launched sales of the Minikit Smart. This new product, designed specifically for latest generation smartphones (all operating systems), is able to simultaneously manage phone calls and the navigation applications available on mobile handsets. It incorporates Parrot's advanced handsfree telephony features, as well as a speaker, microphone and connector set making it possible to recharge various models of smartphones. Multimedia product sales, including Parrot AR.Drone sales, generated 28.0 million euros in revenues (11.6% of 2010 revenues). Created through the exploration of new opportunities outside of the automotive sector, this business is proving its ability to deliver new sources of growth and gaining a significant scale within the Group. In addition to the major contribution by the Parrot AR.Drone, sales of Zikmu Parrot By Starck speakers have seen annual growth of 109%. Photo frames are continuing to represent a non-significant percentage of sales, while benefiting the Group's image and reputation Geographical developments For FY 2010, the regional breakdown of Retail sales (the OEM business is treated globally) shows: 35

36 2010 Reference document EMEA: +6.0% to million euros (57.3% of Group revenues) Located primarily in Europe, performance levels are consistent, notably reflecting the Parrot AR.Drone's success. Progress has been recorded in France (6.0% of Group revenues), with revenues up 42%, in Italy (3.4% of Group revenues), with revenues up 26%, and in the UK (9.4% of Group revenues), with revenues up 3%. In the region's other countries (13.9% of Group revenues), revenue growth came out at 19%. Sales to auto dealerships (OES), considered at European level, represent 3.4% of the Group's revenues, up 11%. This last trend enables Parrot to assume that the increase in the OEM penetration rate is not yet proving an obstacle to growth in Retail products. Contractions have been recorded in Germany (2.4% of Group revenues), with revenues down 12.0%, and Spain (19.2% of Group revenues), with revenues down 9%, with this drop primarily recorded at the end of the year. USA region: % to 16.1 million euros (6.7% of Group revenues): Following a particularly difficult year in 2009 (-73.4%), the various commercial measures rolled out in the US (rationalization of teams, new sales leadership, optimization of the distribution network moving towards traditional channels) seem to have delivered results. More specifically, the Parrot AR.Drone has been a resounding success in this region. Asia region: +80.0% to 5.9 million euros (2.4% of Group revenues): sales are gradually developing 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. 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 generally the automotive market; The emerging market for wireless products related to mobility and connectivity; 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: 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. 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 personal assistants (PDAs), 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. 36

37 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 2009, more than 13,000 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). The main benefits of the Bluetooth standard are as follows: 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 In 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. 37

38 2010 Reference document 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). 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 in the vehicle by the manufacturer when the vehicle is produced. In addition to Bluetooth's penetration rate, the main factors affecting this market are: 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 phones and handsfree systems, Users' experience Retail market (BtoC) Parrot is number one on this market, with more than 80% market share (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 the simplest to the most comprehensive), 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 OEM market (BtoB) Vehicles currently have a low level of equipment in terms of handsfree kits when they are manufactured ("OEM"). These kits are still rarely integrated as standard, but rather as an option, i.e. when requested by customers in return for a price supplement. In 2010, out of a total of approximately 60 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. The trend for equipping vehicles with handsfree solutions on an OEM basis is relatively recent. Today, virtually all auto manufacturers are already selling vehicles which are equipped with this type of product, as an option or as standard. On this market, Parrot is targeting car makers and their original equipment manufacturers which incorporate the Parrot solution into their own products (multimedia 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, on the one hand in terms of the timeframe for developing new products, estimated at two years, and on the other in view of the economic situation facing the industry. 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. In this way, the research published by Frost & Sullivan in April 2009 ("Strategic Analysis of the European Market for Wireless and Connectivity Technologies for Automotive Telematics Applications") provides many items of information supporting this. 38

39 For users, original-assembly installed handsfree systems offer the same benefits as systems fitted after buying the vehicle, while avoiding the obstacle linked to fitting by a third party. For manufacturers, original-assembly installed handsfree systems are frequently sold as an option at a price that is far higher than the integration cost Plug & Play product market 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, Jabra, ECE, 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). Most Plug & Play products are distributed by specialized mobile telecoms stores and operator points of sale, as well as general and electronic mass retailers. On this segment, Parrot sold nearly 400,000 Plug & Play product units in 2010, opting for a midmarket price positioning in order to offer a product with superior technology and design based on a mid-range price positioning. 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, Utah, 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 fairly new 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. In 2010, a legislative trend has emerged in North America concerning the prohibition to compose text messages while driving a vehicle, specific laws were passed in 30 states. Since 2009, several Canadian States adopted similar laws, as did New Zealand and Australia. 39

40 Description of bans concerning in-car use by drivers (listed by the site Reference document 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 the State of Newfoundland (December 2002) - fines up to C$180 Forbidden in Quebec (April 2008) - fines up to C$100 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 40 per offence and deduction of point Germany Yes Forbidden since February Mobiles may be used without handsfree kits 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 July 2000 Israel Yes Italy Yes Fines up to 124 per offence Japan Yes Forbidden since November 1999 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 GPB 2,500 and deduction of 3 points 40

41 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 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. The Group, to the best of its knowledge, has introduced the most new dedicated handsfree telephony systems over the past few years; and believes that its market shares range from about 40% to more than 95% in Spain. The technological strengths of the Group's products over its rivals primarily include: voice synthesis and recognition features integrated into the handsfree system, 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, optimum audio quality (echo cancellation, specific noise reduction for each product, full duplex), audio streaming which makes it possible to play the MP3 files on your mobile phone, and (vi) compatibility with virtually all the Bluetooth phones on the market, irrespective of the brand or model, 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. 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. 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

42 2010 Reference document 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) ou TeleChips (South Korea). In some markets, the Group may also face local players 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 GfK institute estimates Parrot's market share in Europe (Spain, France, UK, Italy, Germany) on the handsfree kit segment (aftermarket and Plug & Play) at around 88% for 2009 (compared with 80% in 2008). The Group has not requested this study in 2010 but believes that its market share is stable. 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. Bluetooth Parrot RKi8400 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". 42

43 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 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 nine million in-vehicle wireless handsfree products sold under the Parrot brand since 2004 and an 88% market share in 2009, 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. NA Please refer to Chapter IV. "Risk factors". 43

44 2010 Reference document Parrot's strategy aims primarily to continue moving forward with a sustained innovation policy in order to anticipate market trends and deploy its marketing actions and sales force in each country where the Group is present, as well as for export. 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. R&D policy serving future growth In order to maintain its competitive edge, Parrot has continued to further strengthen its teams of engineers. In 2010, the R&D teams (230 people) represented 44% of the Group workforce at the end of December 2010 (compared with 35% at December 31st, 2009). 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. More specifically, from the second half of 2010, Parrot launched a major recruitment campaign enabling it to bring around 60 new engineers on board. These teams will notably be focusing on developing the next generations of automotive products (retail and OEM), as well as the integration of new smart phone 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 recognized 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, 20 external consultants worked with the R&D Department in 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 games. The quest for new market drives Parrot's ambition to generate factors to accelerate its growth. 44

45 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. This expansion is being supported by the introduction of laws governing the use of mobile phones when driving in many countries, as well as ongoing technological improvements in mobile phones, both strongly correlated with the need for driver comfort. In this way, the new uses brought about by the expansion 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: primarily through press relations. Constantly strengthening the distribution network Parrot currently operates on four 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 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 installer program had over 3,500 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.), 45

46 2010 Reference document 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, will continue to be rolled out over 2011 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 Since 2009, 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 2010, Parrot had over 50,000 fans on its main Facebook page, while the videos available on Parrot's YouTube channel have been watched more than 5,000,000 times. OEM: strategy to grow market shares The OEM activity is carried out directly with auto manufacturers and original equipment manufacturers. The contracts signed have a long-term focus; after 6 to 18 months of negotiations, a design win (which the Group is rarely able to communicate on before the vehicle is announced, i.e. much later on) and a variable 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: 5.6 million components sold in 2010 (versus 3.0 million in 2009). 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. For further information on the OEM market, please refer to Section "OEM market (BtoB)" above. 46

47 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 adds smartphone features to the OEM solutions, with the capacity to harness a wide range of applications available online. 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. Map of the global presence of Parrot's OEM teams 47

48 2010 Reference document 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 renegotiates prices with its main subcontractors each quarter. 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 67 people at December 31st, 2010, with 26% 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; 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 the companyl, the manufacturing of ASICs Parrot 5 ASIC chips to STMicroelectronics, the manufacturing of ASICs Parrot 5+ chips and ASICs Parrot 6 chips to Global Foundries, world-leading foundries on the semiconductor market. 48

49 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: Suppliers Location Amounts invoiced in 2009 Amounts invoiced in ( '000,000) 2010( '000,000) Jabil Circuit Ltd (Chine) Asia Aztech System Ltd Europe Tom Tom Asia ACT Asia Kuehne & Nagel Logistics Europe Accent Europe Inser Microsat Europe UTAX Asia Merry Electronics Co Asia 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. 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 platform in France. 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. In 2009, 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. 49

50 Continuous quality improvement 2010 Reference document 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 2009, 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); The OEM business unit (btob). It involves: 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 The customer service team (Technical Support) is made up of five multilingual people 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 four other people 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 five people, based at the Group's head office in Paris. In 2010, 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. 50

51 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. 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. 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); The OEM business unit (btob). It involves: 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. 51

52 2010 Reference document Incorporating economic, social and environmental dimensions, sustainable development was established as a major focus for the company's progress in 2010, following on logically from the efforts already made. Stakes and strategy 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 2010, Parrot was 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 2010 GAIA Index panel was made up of 223 listed companies spread over three sectors which were representative of the French economy: industry, services and retail. This panel of 223 companies represents more than 126 billion euros of revenues, 55 billion annual transactions and almost 1 million employees. The methodology is based on 81 questions, with 26 looking at the environment, 24 covering social criteria and 28 governance aspects. The Gaia Index rating methodology makes it possible to rank these 223 firms and extract an index of the 70 companies with the best ratings. For further information: 52

53 VII. 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; Varioptic S.A., acquired in May 2011 and fully-owned. The company also holds 39.5% of Da Fact. In 2010, Parrot SA has opened a liaison office in Sydney, Australia. Structure of the Company's subsidiaries (with the capital interest held) on the filing date for the present reference document 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, 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 "Board of Directors" in the present reference document for a description of the joint offices held by executives in the Company and its subsidiaries). 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. 53

54 2010 Reference document In 2010, each subsidiary individually recorded the following amounts of corporate sales (including invoicing within the Group): Parrot, Inc.: million euros, compared with million euros in 2009 Parrot Italia S.r.l.: million euros, compared with million euros, compared with million euros in 2009 Parrot GmbH: million euros, compared with million euros in 2009 Parrot UK Ltd: million euros, compared with million euros in 2009 Parrot Asia Pacific Ltd: million euros, compared with million euros in 2009 Parrot Trading (Shenzhen) Ltd: million euros, compared with million euros in 2009 Parrot Iberia: million euros, compared with million euros in 2009 Parrot S.A.: million euros, compared with million euros in 2009 Parrot Japan KK: million euros compared with million euros 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 30th, 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 31st, 2010, Parrot, Inc. employed 14 people (compared with 12 at December 31st, 2009). 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 19th, 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 31st, 2010, Parrot Italia S.r.l. employed 6 people (same as December 31st, 2009). 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 14th, 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 31st, 2010, Parrot UK Ltd employed 13 people (compared with 11 at December 31st, 2009). Parrot GmbH Parrot GmbH is a German-law company with a share capital of 25,000 euros. It was incorporated on April 29th, 2005 and registered on July 8th, 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 31st, 2010, Parrot GmbH employed 7 people (same ast December 31st, 2009). 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 25th, 2005 under number Its 54

55 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 31st, 2010, Parrot Asia Pacific Ltd employed 64 people, with 49 in Shenzhen and 15 in Hong Kong (compared with 57, with 43 in Shenzhen at December 31st, 2009). Parrot Iberia, S.L. Parrot Iberia, S.L. (formerly Inpro Tecnologiá S.L.) distributes the Company's products and automobile accessories primarily in Spain. Parrot Iberia, S.L. also sells other vehicle accessories, and more specifically GPS navigation products. The Company has acquired a 100% capital stake in Parrot Iberia S.L. Before the Company's acquisition of a majority interest in its capital, Parrot Iberia S.L. (formerly Inpro Tecnologiá) was the Company's exclusive distributor in Spain (mutually exclusive rights), the world's leading market for handsfree kits. In 2009, Parrot Iberia S.L. recorded 46.5 million euros in revenues and 0.69 million euros in EBIT (compared with respectively million euros and 0.73 in 2009). At December 31st, 2010, Parrot Iberia, S.L. employed 32 people (compared with 31 at December 31st, 2009). 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 30th, 2009 and registered on April 30th, 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 31st, 2010, Parrot Japan KK employed 5 people. Da Fact Da Fact is a French-law company with a capital of 47,693 euros that designs digital musical instruments. It was incorporated on March 21st, 2006 and registered under number Its registered office is located at 174, quai de Jemmapes, Paris, France. 55

56 VIII 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. 56

57 IX. In 2010, with the economic situation stabilizing, Parrot recorded strong revenue growth (+43.4% to million euros). On the whole, the Group has offset the negative impacts linked to the general environment to a great extent: since 2007, its best year in terms of revenues, the Group has achieved growth of 10%. In FY 2010, the Group's sales growth was driven primarily by: The dynamic commercial development of the OEM business (33.7% of 2010 revenues, +184%) reflecting the combined impact of orders from three major new contracts, as well as restocking actions and exceptional orders placed by longstanding clients; The commercial launch of the Parrot AR.Drone (9.6% of 2010 revenues), the IPhone/iTouch/iPad-controlled Wi-Fi quadricopter, representing a first major success for a product from the Multimedia range. Breakdown by product range (% of annual revenues) Installed handsfree kits generated 95.8 million euros in revenues (39.7% of 2010 revenues), down 4.7% on an annual basis. The new MKi products have continued to grow (notably iphone-compatible and including advanced music features, +45% on an annual basis), but their development has not been enough to make up for the slowdown on older products and/or products stopped in The first announcements for new products on the installed handsfree kit segment were made, as planned, at the 2011 CES, including a first car radio with Parrot's advanced handsfree telephony and multimedia features, as well as internet connectivity. Plug & Play product sales generated 14.6 million euros in revenues (6.0% of 2010 revenues), showing a sequential contraction of 17.5%, primarily due to the aging of the flagship product (Minikit Slim) and the stronger level of competition on this market segment. In October 2010, Parrot launched sales of the Minikit Smart. This new product, designed specifically for latest generation smartphones (all operating systems), is able to simultaneously manage phone calls and the navigation applications available on mobile handsets. It incorporates Parrot's advanced handsfree telephony features, as well as a speaker, microphone and connector set making it possible to recharge various models of smartphones. 57

58 2010 Reference document Multimedia product sales, including Parrot AR.Drone sales, generated 28.0 million euros in revenues (11.6% of 2010 revenues). Created through the exploration of new opportunities outside of the automotive sector, this business is proving its ability to deliver new sources of growth and gaining a significant scale within the Group. In addition to the major contribution by the Parrot AR.Drone, sales of Zikmu Parrot By Starck speakers have seen annual growth of 109%. Photo frames are continuing to represent a non-significant percentage of sales, while benefiting the Group's image and reputation. OEM sales, spread around the world, generated 81.3 million euros in revenues (34% of 2010 revenues). The strong growth in this business over the year (+184%) was a major factor behind the Group's good performance in 2010, with the dynamic commercial development of OEM activities driven by: The first deliveries of products to equip Audi, BMW, Seat, Skoda and Volkswagen brand vehicles through the new clients acquired in 2009, The continued ramping up of sales in Asia to the various clients acquired in 2008, The increase in orders for equipping the Hyundai Kia Group's upcoming vehicles in Europe, following on from the contracts in place in Asia and America, The resumption of a good level of orders for various longstanding clients, Targeted commercial opportunities linked to the effective management of the Group's sourcing and production set against tensions on the component market. In this way, alongside the market share gains for the various solutions offered by Parrot, the OEM business has benefited from the market's global growth: more and more of the vehicles released for sale include options for handsfree connectivity and multimedia solutions (infotainment). Breakdown by region (% of annual revenues) * Revenues generated by the OEM business are treated globally. The breakdown of revenues by region therefore excludes OEM. For FY 2010, the regional breakdown of Retail sales (the OEM business is treated globally) shows: EMEA region: +6.0% to million euros (57.3% of Group revenues) Located primarily in Europe, performances are consistent, notably reflecting the Parrot AR.Drone's success. Progress has been recorded in France (6.0% of Group revenues), with revenues up 42%, in Italy (3.4% of Group revenues), with revenues up 26%, and in the UK (9.4% of Group revenues), with revenues up 3%. In the region's other countries (13.9% of Group revenues), revenue growth came out at 19%. Sales to auto dealerships (OES), considered at European level, represent 3.4% of the Group's revenues, up 11%. This last trend enables Parrot to assume that the increase in the OEM penetration rate is not yet proving an obstacle to growth in Retail products. Contractions have been recorded in Germany (2.4% of Group revenues), with revenues down 12.0%, and Spain (19.2% of Group revenues), with revenues down 9%, with this drop primarily recorded at the end of the year. USA region: % to 16.1 million euros (6.7% of Group revenues) 58

59 Following a particularly difficult year in 2009 (-73.4%), the various commercial measures rolled out in the US (rationalization of teams, new sales leadership, optimization of the distribution network moving towards traditional channels) seem to have delivered results. More specifically, the Parrot AR.Drone has been a resounding success in this region. Asia region: +80.0% to 5.9 million euros (2.4% of Group revenues): Sales are gradually developing 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. ' Revenues 168, ,668 Cost of sales -88, ,449 Gross margin 79, ,217 % of revenues 47.3% 49.7% Research and development costs -23,801-28,724 % of revenues -14.1% 11.9% Sales and marketing costs -32,054-41,247 % of revenues -19.0% 17.1% General costs -9,151-10,700 % of revenues -5.4% 4.4% Production and quality -7,362-7,884 % of revenues -4.4% 3.3% Income from operations 7,405 31,653 % of revenues 4.4% 13.1% Income from cash and cash equivalents Cost of gross financial debt Cost of net financial debt Other financial income and expenses Corporate income tax 1,651-2,842 Share in income from equity affiliates Net income attributable to Parrot 9,577 27,831 S.A. shareholders % of revenues 5.7% 11.5% The consolidated accounts show 241,666,000 in consolidated revenues, up 43.4% compared with the previous year (168,493,000 euros). The following table presents a breakdown of the Group's consolidated revenues for 2009 and 2010 between its various product categories: Revenues ( '000,000 and %) Installed kits % % Plug & Play % % OEM % % Multimedia % % Other(1) % % Total % % (1) Primarily sales relating to the contract for distributing navigation products in Spain, the sale of accessories for its products such as connection cables, as well as the sale of development services for adapting some of its products for major auto manufacturers or customers looking to incorporate the Group's technology into their own products. 59

60 2010 Reference document The total cost of sales came to million euros in 2010, up 32.7 million euros from the 88.7 million euros recorded in The ratio of the cost of sales to revenues came out at 50.3%, compared with 52.6% in The gross margin climbed to 49.7% of revenues (compared with 47.3% at December 31st, 2010), primarily as a result of the product mix and more specifically strong growth in OEM sales and the level of maturity of Retail products over the year. The impact of the dollar's rise has been offset by the hedging policy (cash-flow in US$) put in place since the end of 2009 with a view to covering projected purchases over a trailing 12-month period. Over the short term, the revenues generated in US$ are expected to cover the Group's purchases in this currency, limiting Parrot's exposure to exchange rate fluctuations. Research and development costs This spending came to 28,700,000 euros over 2010, representing 11.9% of revenues, compared with 23,800,000 euros and 14.1% one year earlier. Research and development costs primarily concern the development of tools for testing and measuring the quality of new products, outsourcing costs for the development of production tools for new products, research relating to technological changes and more specifically developments concerning the Bluetooth standard, as well as the production of Parrot chips. Capitalized research and development totaled 5.7 million euros over 2010 (cf. Note 9 to the consolidated financial statements). Sales and marketing costs In 2010, the Group's sales and marketing costs came to 41.2 million euros, representing 17.1% of revenues, compared with 32.1 million euros in 2009, representing 19% of revenues, up 9.1 million euros representing an increase of 29%. General costs In 2010, general costs were up 1.5 million euros (+17%) in relation to 2009, coming in at 10.7 million euros and representing 4.4% of sales. In 2009, general costs totaled 9.2 million euros, representing 5.4% of sales. Production and quality In 2010, production and quality costs were up 0.5 million euros and +7.0% in relation to 2009, representing 7.49 million euros and 3.3% of sales. In 2009, production and quality costs totaled 7.4 million euros, representing 4.4% of sales. Income from ordinary operations came to 31.6 million euros, giving a current operating margin of 13.1%, compared with 4.4% one year earlier. Current operational profitability came to 12.6% of revenues for the first half of 2010 and 13.5% for the second. The net financial result is not significant, coming in at 0.1 million euros, compared with 0.5 million euros in Net income (Group share) totaled 27.8 million euros, representing 11.5% of revenues, compared with 9.6 million euros and 5.7% respectively. The current tax expense for 2010 primarily reflects tax on profits for subsidiaries in France,Spain, Asia, the UK and Italy. These regions represent 7.6 million euros in current tax. The research tax credit for 2010 came in at 4.8 million euros compared with 3.9 million euros in

61 Net revenues came to million euros, compared with million euros the previous year, up 17%. External expenses increased from 28.7 million euros in 2009 to 41.7 million euros in 2010, up 45%. Staff costs increased from 25.3 million euros in 2009 to 30.2 million euros in 2010, up 19%. EBIT totaled 18.5 million euros, compared with 6.6 million euros in Operating margin (EBIT / revenues) came to 5.6% in 2009 to 13.3%. FY 2010 shows a net accounting profit of 17.5 million euros, compared with 14.6 million euros one year earlier. The net margin (profit / revenues) rose from 12.3% in 2009 to 12.5% in The financial result shows a gain of 6.1 million euros, compared with 3.8 million euros in income for the previous year. It includes a writedown of a loan to the subsidiary Parrot Inc., as well as Da Fact subsidiary equity securities (39.45%- owned). Non-recurring items represent a 6.0 million euro loss, compared with 0.08 million euros in income for the previous year. This result includes an 8.0 million dollar debt write-off granted to the subsidiary Parrot Inc. A certain number of factors could have a significant impact on the Group's earnings. For further information, please refer to Chapter 4 "Risk factors". 61

62 2010 Reference document Breakdown (, except I-b and IV-a) I. Capital at year-end a) Share capital (*) 1,961,660 1,970,217 2,035,113 1,992,152 1,920,198 b) Number of existing ordinary shares 12,867,615 12,923,747 13,349,573 13,067,681 12,599,724 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 3,423,127 (1) 3,497,279 (2) 3,637,813 (3) 3,814,436 (4) 3,930,150 (5) II. Operations and earnings for the year a) Revenues (net of tax) 139,034, ,375, ,960, ,625, ,701,297 b) Earnings before tax, employee 30,932,584 17,956,126 7,397,974 19,622,789 21,475,375 profit-sharing, depreciation and provisions c) Corporate income tax 1,257,652 (4,006,195) (2,249,012) 2,318,453 5,294,981 d) Employee profit-sharing due for the 505, , ,165 year e) Earnings after tax, employee profitsharing, 17,472,449 14,586,258 3,020,626 9,915,987 11,478,251 depreciation and provisions f) Distributed earnings III. Earnings per share a) Earnings after tax and employee profit-sharing, but before depreciation and provisions b) Earnings after tax, employee profitsharing, depreciation and provisions(**) c) Dividend per share IV. Workforce a) Average headcount over the year b) Annual payroll 18,390,251 16,732,546 17,520,479 14,633,650 10,230,324 c) Amount of sums paid for employee benefits for the year (social security, benefits, etc.) 11,776,326 8,613,101 7,253,206 6,139,855 4,321,624 (*) In connection with treasury stock: 211,376 shares were cancelled in At the end of 2010, 128,745 company founder equity warrants were exercised. (**) For 2008 and subsequent years, the figures reported on this line represent earnings before tax, employee profit sharing, depreciation and provisions. (1) 2,574,085 company founder equity warrants + 164,342 bonus shares + 684,700 stock options (2) 2,711,387 company founder equity warrants + 25,000 stock warrants + 175,592 bonus shares + 585,300 stock options. (3) 2,932,676 company founder equity warrants + 41,200 stock warrants + 5,106 bonus shares + 718,462 stock options. (4) 3,188,693 company founder equity warrants + 65,200 stock warrants + 5,106 bonus shares + 545,437 stock options. (5) 322,425 company founder warrants (June 24th, 2003) + 44,884 company founder warrants (July 6th, 2004) + 13,370 company founder warrants (November 18th, 2004) + 123,316 company founder warrants (October 18th, 2005) + 119,355 company founder warrants (December 14th, 2005) + 92,000 company founder warrants (February 28th, 2006) + 250,000 company founder warrants (June 12th, 2006) + 2,400,000 company founder warrants (June 12th, 2006) + 70,000 stock options (December 14th, 2005) following the cancellation of 10,000 stock options further to the resignation of a member of staff + 27,000 stock options (February 28, 2006) + 25,000 stock options (June 12th, 2006) + 260,000 stock options (November 10th, 2006) + 35,600 stock warrants (June 2003) + 71,200 stock warrants (July 2004) + 25,000 stock warrants (June 12th, 2006) + 51,000 bonus shares (December 14th, 2005). 62

63 X. In 2010, the Group's financing came partly from cash generated by operating activities (28.4 million euros). At December 31st, 2010 the Group's cash position, including financial investments, came to 90.8 million euros, compared with 76.0 million euros at December 31st, The Group carried out two share buyback programs in 2010 (May and November- December) for 5.2 million euros. Free cash flow is invested in risk-free investment products, such as negotiable certificates of deposit and term deposits with a maximum maturity of one year, in addition to conventional money market funds. Including the operations presented above, the Group's cash position increased by 14.8 million euros overall thanks to the operational cash flow generated by its business. 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) for the years ended December 31st, 2009 and 2010: ' Operating cash flow Earnings for the period 9,577 27,831 Share in income from equity affiliates Depreciation and amortization 6,042 13,106 Capital gains and losses on disposals - 11 Tax charges -1,651 2,842 Cost of share-based payments 1,740 1,647 Cost of net financial debt Cash flow from operations before tax and cost of net financial debt 15,106 45,928 Working capital 17,571-20,260 CASH FROM OPERATING ACTIVITIES 32,677 25,668 Tax due 3,896 2,770 NET CASH FROM OPERATING ACTIVITIES (A) 36,573 28,437 Investing cash flow Interest received - - Acquisition of tangible and intangible fixed assets -4,319-9,998 Acquisition of subsidiaries, net of cash acquired (Note 3) - - Acquisition of long-term financial investments Increase in other current financial assets - - 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) -4,417-10,577 Financing cash flow Equity contributions 124 1,106 Dividends paid - - Receipts linked to new loans - - Other financing - - Cash invested for over 3 months - -27,961 Cost of net financial debt Repayment of short-term financial debt (net) -1, Repayment of other debt - - Acquisition of treasury stock ,207 Interest paid - - CASH FROM FINANCING ACTIVITIES (C) ,678 NET CHANGE IN CASH POSITION (D = A+B+C) Net exchange rate differences 31, , CASH AND CASH EQUIVALENTS AT YEAR-START CASH AND CASH EQUIVALENTS AT YEAR-END 44,606 76,035 76,035 62,844 Other current financial assets

64 2010 Reference document The Group's net cash from operating activities came to 28.4 million euros in 2010, compared with 36.6 million euros in The decrease primarily reflects the increase in the Group's working capital linked to the upturn in business and the Parrot AR Drone's launch. Cash from investment activities totaled 10.6 million euros in 2010, compared with 4.4 million euros in The increase primarily reflects the development of the new generation Parrot chip and the ramping up of R&D efforts over Net cash from financing activities came to million euros in 2010, compared with -0.6 million euros in The change reflects the transactions carried out relative to 2010: two share buyback programs for 5.2 million euros and longer term investments (longer than three months) for 28.0 million euros. At December 31st, 2010, the Group had no debts. Since the start of 2010, 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. On the export debt facility (MCNE), the Company is not exposed to any repayability risk after the due date for payment of an invoice. None of the financing lines presented above were used by the Company in The Company does not currently have any loans and did not take out any new loans relative to Please refer to Section XXII. "Significant contracts" in the present reference document for the contractual obligations relating to the acquisitions of the Californian-law company Waveblue LLC and the French company Da Fact. 64

65 XI. 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 ever more innovative new products on its core business: handsfree telephony in the automotive world; Exploring new possibilities for mobile phone accessories or more generally wireless technologies. With a team of 180 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 Wi-Fi 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. 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. 65

66 Platform technical division 2010 Reference document 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. 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. 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 handsfree 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 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). 66

67 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. 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 intended to be used in the Group's products during the course of 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 handsfree 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 The Group has sought to diversify the connectivity of its products in order to deploy new scenarios for their use, notably by adding Wi-Fi and USB technologies. 67

68 2010 Reference document With the Parrot Specchio by Martin Szekely digital photo frame, the Wi-Fi 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 (Google mobile operating system). A proprietary Wi-Fi audio streaming system has also been developed by the Group and is integrated into the Parrot 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. 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. 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. 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 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. 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. At March 31st, 2011, 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, 68

69 Guatemala), in Asia (China, Japan, Hong Kong, Taiwan, Singapore), in Israël, 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 PMK5800. The Company has filed a verbal registration for the Parrot ASTEROID brand in Classes 09, 38 and 42 in the European Union, Switzerland, the United States, Canada, China, Japan, Australia, the Russian Federation, India, Australia, South Africa, Mexico, Chile, Egypt, Singapore, and more widely in the countries where the product will be marketed through a request for international registration. The Company has also filed a request to register the figurative mark ASTEROID in the same classes in the European Union countries. Parrot 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, and has filed a request to register the DIA PARROT mark for the photo frame designed by the agency No Design in Classes 09 and 42. In 2007, Parrot adopted a new slogan - Parrot Move Wireless - which has been covered by applications for registration in the European Union countries, in the United States and more widely through international registration for all the countries in which the Group distributes its products. Parrot has also submitted a request for the registration 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 holds the mark PARROT AR.DRONE and the slogan "When Video Games Become Reality", with requests for registration filed in the European Union countries, the United States and China under Class 28, and has filed requests for registration in Japan and the countries where it distributes this product. The Company also holds the Parrot AR.Drone logo The Flying Video Game in the European Union countries under Classes 09 and 28 and has filed an international registration request for the countries where the product is marketed in Classes 09 and/or 28 depending on the countries. In addition, the Company has submitted a request to register the "skull" logo associated with its AR.Drone quadricopter in the European Union countries, the United States and Japan in Classes 09 and 28, as well as under Class 09 in China. The Company has also filed registration requests for the names of applications making it possible to steer or play with the AR.Drone, such as AR.FleeFlight, AR.Pursuit in the European Union countries, the United States, Japan, Hong Kong, Australia and South Africa, as well as more widely an international registration request for the countries where the product is distributed. In addition, the Company has filed registration requests for the names AR.Game and AR.FlyingAce in the European Union countries and the United States in Classes 09 and 28. 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 Wi-Fi Alliance and, in this respect, benefits from a license to use the Wi-Fi mark, in addition to many other licenses for using marks belonging to its technical and/or commercial partners. 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. 69

70 Patent history 2010 Reference document 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. 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 2010, the Company filed 23 patent requests covering its multimedia and handsfree kit products, with those currently in force concerning: 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 ). During the first quarter of 2011, the Company filed three new patent requests concerning its handsfree kit and multimedia products: 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 ). 70

71 New patents Between 2007 and 2010, the Company filed 16 patent requests concerning its AR.Drone quadricopter, with 15 of them currently in force: 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 ). During the first quarter of 2011, the Company filed three new patent requests concerning its AR.Drone quadricopter: 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 ). Most of these patent requests are covered by international extensions, in Europe (European patent), the United States and Japan, as well as recently in China. 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 text message reading services integrated into its handsfree 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. 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 71

72 2010 Reference document based on the Parrot6 ASIC. For its new generation of products offering extended connectivity services, the Company has chosen to use the ANDROID platform. 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 The 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, as well as the product's packaging. The design registration has been extended to cover the United States, China and Japan. In 2010, the Company also registered the design for its Parrot Minikit Smart communications system, making it possible to dock a smartphone. 72

73 XII. On May 13th, 2011, following the board meeting held May 12th 2011, Parrot published its earnings for the first quarter of The release is reproduced here after: Level of business for the first quarter of 2011 Over the period, Parrot recorded 57.4 million euros in revenues, an annual increase of 16%. Revenues came in 10 million euros lower than the fourth quarter of 2010 as a result of the favorable seasonal trend benefiting sales over the end of the year. Retail Products (grouping together aftermarket installed systems, Plug & Play products, Multimedia products, as well as Other products) accounted for 56% of the Group revenues, compared with 72% in the first quarter of The OEM business represented 44% of the Group revenues, compared with 28% for the first quarter of Retail revenues Over the first quarter of 2011, the Retail Products revenues, coming in at 32.2 million euros, recorded an annual contraction of 10%. Excluding the impact of the end of navigation product distribution in Spain, announced in the fourth quarter of 2010, Retail Product revenues decrease of 7%. Revenues from Retail Automotive products, installed handsfree kits (36% of Group revenues / 65% of Retail revenues) and Plug & Play (5% of Group revenues / 8% of Retail revenues), are down 18% in relation to the first quarter of The downturn in consumption in Spain (VAT hike and the end of subsidies for the automotive sector since summer 2010) has weighed on the Retail Automotive products. In addition, the internet enabled car radio, Parrot Asteroid, has been on sale since the end of April 2011 and did not contribute to revenues over the first quarter. The Minikit Smart, launched at the end of 2010, gradually ramped up during the quarter and marketing campaigns are scheduled to start in late May Revenues from Retail Multimedia products (10% of Group revenues / 19% of Retail revenues) are up 524%, driven by Parrot AR.Drone sales, first released in stores during the third quarter of Other revenues (5% of Group revenues, versus 13% in Q1 2010) no longer include sales of third-party products - essentially navigation products, historically distributed by Parrot Iberia S.L. At the end of March 2011, Other revenues exclusively involve the sale of accessories and items or components designed to support the manufacturing and marketing of Parrot products. From a regional perspective For the EMEA region (49% of Group revenues / 87% of Retail revenues), Retail revenues totaled 32.2 million euros. As indicated above, the economic situation in Spain (13% of Group revenues, compared with 26% in Q1 2010) is weighing on the Group's commercial development. At the same time, the gradual phasing out over the period of the distribution of third-party products, generating low margins and sold exclusively in Spain, is reflected in an unfavorable basis for comparison. Restated from these factors, the EMEA region's annual growth comes out at 7% for the period. In North America (3% of Group revenues / 6% of Retail revenues), revenues are up 23% propped up by the success of the Parrot AR.Drone. In this region where the legislation on cellphone usage while driving is primarily focused on prohibiting sending text messages, Parrot has co-developed an interactive service called "TextFriendly " currently being tested in several states. 73

74 2010 Reference document In Asia (4% of Group revenues / 7% of Retail revenues), the Group is continuing to develop its commercial penetration and all the ranges are performing well. OEM revenues The range of OEM solutions generated 25.3 million euros in revenues over the quarter, an increase of 83% compared with the first quarter of In line with the Group's expectations, revenues reflect (i) the full impact of sales of solutions designed to equip German manufacturers, (ii) the increase in the equipment rate linked to the growing penetration rate for in-car connectivity solutions, and (iii) the gradual expansion of the ranges of equipped vehicles among existing customers. Gross margin For the first quarter of 2011, Parrot's gross margin came to 51.4%, with this 2.9 pt increase reflecting the favorable change in the product mix, and more specifically: (i) growth in the percentage of OEM activities in the Group's revenues, (ii) the fact that third-party products are no longer distributed, (iii) the ramping up of Multimedia products. For reference, the Group's gross margin is no longer exposed to variations in the dollar thanks to its currency hedging policy (cash converted in US$) and the ramping up of revenues denominated in US$, making it possible to cover virtually all of the Group's purchases denominated in this same currency. EBIT (*) Over the first quarter, EBIT came to 8.3 million euros, giving an operating margin of 14.5%. In relation to the first quarter of 2010, EBIT is up 59% in view of the following: R&D spending, coming in at 7.0 million euros (12.2% of revenues), factors in the positive impact of the research tax credit for 0.9 million euros and is in line with the Group's innovation strategy focused on developing new internet connected services et solutions specifically geared towards drivers; Sales and marketing spending totaled 9.1 million euros (15.8% of revenues), reflecting the moderate level of marketing investments over the period; General costs came in at 3.0 million euros (5.3% of revenues), with production and quality-related costs representing 2.1 million euros (3.6% of revenues), in line with the change in the Group's requirements over the period. At March 31 st, 2011, Parrot s workforce totaled 552 people, compared with 519 at December 31 st, The majority of the new positions are linked to the R&D recruitment plan rolled out since H (*) R&D costs for 2010 do not include income from the research tax credit. Net income After a 1.6 million euro tax expense, net income (Group share) came to 6.3 million euros, representing 0.49 euros per share for the first quarter of Financial structure At March 31 st, 2011, Parrot had 96.4 million euros in cash, compared with 90.8 million euros at December 31 st, Net cash from operating activities represents 10.0 million euros. The 0.4 million euro change in working capital is consistent with business returning to normal levels following the fourth quarter's seasonal peak. Cash used for investment activities represented 1.7 million euros for the quarter, in line with the ongoing R&D program linked to the gradual deployment of the next generations of Parrot products. During the first quarter of 2011, Parrot also continued buying back treasury stock, for a total of 3.0 million euros over the period. At March 31 st, 2011, inventories represented 24.8 million euros, in keeping with the level of business for the quarter. Trade receivables totaled 45.6 million euros. Parrot does not have any debt and has million euros in equity (compared with million euros at December 31 st, 2010), with 12.0 euros in net assets per share. 74

75 Recent developments and outlook Over the second quarter of 2011, Parrot notably intends to step up its marketing investments in order to support the penetration of new automotive products (Parrot Minikit Smart, Parrot Asteroid) and give itself the means to benefit from a positive summer season for sales of the Parrot AR.Drone, its Wifi-controlled quadricopter which is ideal for use outside. In view of the events in Japan, Parrot is continuing to carry out ongoing assessments on its sources of supplies in order to protect itself against any possible consequences for its business. Within this framework, the Group is more specifically ramping up its component storage strategy. In terms of its automotive customers, the Group has not seen any orders being put back by its OEM customers to date. The development plan announced previously for 2011 aims to enable the Group to continue growing, while moving forward with its retail communications strategy. More specifically, Parrot expects the year to be marked by: Growth in the OEM business, made possible by (i) a favorable basis for comparison due to the new customers brought on board, primarily during the second half of 2010, (ii) an increase in the equipment rate linked to the expected improvement in the penetration rate for in-car connectivity solutions, (iii) the gradual expansion of the vehicle ranges equipped among existing customers, (iv) the first orders for major new customers around mid-2011; The gradual stabilization of automotive product sales, in light of (i) the acceleration in the product renewal rate, (ii) the ramping up of marketing efforts, (iii) the unpredictable economic situation in certain regions, and particularly in Spain; Ongoing moves to ramp up the Home business, with: (i) the third phase in the deployment of the Parrot AR.Drone targeting new distributors and countries, (ii) the launch of innovative products and the maintenance of R&D investments in this area. Lastly, Parrot is continuing to focus on its long-term growth and maintaining its technological lead, drawing on a strong innovation strategy. In this way, Parrot aims to support the penetration of its product ranges, while opening up to new professional (OEM) and retail markets. BREAKDOWN OF REVENUES BY PRODUCT 000,000 and% of revenues Q Q Q Installed handsfree systems % % % Plug & play products 3.7 7% 5.4 8% 2.7 5% Multimedia products (1) 1.0 2% % % Other (2) % 3.9 6% 2.8 5% Total revenues for Retail Products % % % Total revenues for OEM Products % % % Group total % % % (1) Multimedia products: Parrot By products and Parrot AR.Drone. (2) 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. BREAKDOWN OF REVENUES BY REGION 000,000 and% of revenues Q Q Q EMEA (Europe, Middle East, Africa) % % % US 1.5 3% % 1.8 3% Asia 0.6 1% 2.5 4% 2.2 4% Total revenues for Retail Products % % % Total revenues for OEM Products % % % Group total % % % 75

76 2010 Reference document CONDENSED INCOME STATEMENT Consolidated accounts under IFRS - unaudited ( '000,000) Q Q Q Annual change REVENUES % Of which, navigation products (1) Cost of sales % GROSS MARGIN % % of revenues 48.5% 49.4% 51.4% Research and development costs % % of revenues -12.7% -10.5% -12.2% Sales and marketing costs % % of revenues -16.1% -18.7% -15.8% General costs % % of revenues -5.8% -4.1% -5.3% Production and quality % % of revenues -3.3% -3.6% -3.6% INCOME FROM ORDINARY OPERATIONS % EBIT % % of revenues 10.5% 12.5% 14.5% Cost of net financial debt % Other financial income and expenses % Share in income from equity affiliates Corporate income tax % EARNINGS FOR THE PERIOD - Attributable to Parrot S.A. shareholders % % of revenues 10.7% 12.8% 11.0% 2% Earnings per share (2) % Diluted earnings per share (3) % (1) Percentage of revenues from navigation products distributed by Parrot Iberia S.L. (2) The average number of ordinary shares outstanding represents a weighted average over the period, adjusted for the number of ordinary shares redeemed or issued during the period and calculated based on the issue date for shares over the year (12,881,718). (3) The weighted average number of shares outstanding, factored in when calculating earnings per share, is adjusted for the effects of all potentially dilutive ordinary shares (13,267,090). On May 13th, 2011, following the board meeting held May 12th 2011, Parrot announced the acquisition of a technological component. The release is reproduced here after: Parrot, a global leader in wireless devices for mobile phones, finalized the acquisition of a 100% stake in Varioptic SA. Based in Lyon, France, Varioptic is a pioneer and the global market leader for programmable miniature optics, particularly with high performance autofocus, stabilization and zoom applications. Varioptic's major technological edge in optics will enable Parrot to add to its portfolio of digital signal processing solutions, incorporating advanced image processing technologies. Founded in 2002 by Bruno Berge, a PhD in physics, Varioptic develops, designs and markets electrically-controlled miniature optics based on its proprietary and patented programmable liquid lens technology. With two global patents and a series of related patents, the ranges of technological solutions developed by Varioptic are aimed at a number of markets in the miniature digital camera sector (biometric and industrial micro-cameras, mobile phones, general consumer and medical cameras). With the acquisition of this technological component, Parrot is setting out its commitment to accelerating its capacity for innovation, by developing its presence on the professional and consumer markets. The combination of Parrot's signal processing expertise and Varioptic's work on image processing research marks a further step forward with the development of the value chain, on both its existing products and new applications. Over the short term, further advances will support the solutions and products based on the Parrot AR.Drone. Subsequently, the roadmap will be extended to include automotive product ranges, as well as home products. At the same time, Parrot will also focus on supporting the development of Varioptic's to better serve its customers. Drawing on Parrot's OEM expertise for the design, industrialization and marketing of BtoB solutions, the Group aims to support Varioptic's future growth, focusing in particular on industrial applications for its optics solutions. 76

77 A flagship for French technology, Varioptic has developed solutions based on the research work carried out since the early 1990s on electrosensitive liquid lenses in the Joseph-Fourier University's Physics Spectrometry laboratory in Grenoble, then the Ecole Normale Supérieure de Lyon's physics laboratory, both partners of the French national center for scientific research (CNRS). Since it was founded, the company's progress has been supported in particular by FIST, OSEO Innovation and the French ministry for research, as well as leading French and international investment funds. Varioptic employs 19 people and recorded 0.6 million euros in revenues in Varioptic's fabless business model will facilitate its integration within Parrot. The technical and operational synergies resulting from the business combination between the two companies are expected to enable Varioptic's operations to break even in This acquisition is financed with 0.6 million euros in cash, Varioptic has 2.6 million euros in net financial debt. In addition, there is a potential earn-out of up to 3 million euros linked to Varioptic's revenues for FY At the same time, Parrot is subscribing to a 4 million euro capital increase benefiting Varioptic. In 2011, the operation will have little impact on the Group's earnings given the fair value of the assets. For reference, Parrot s revenues came to million euros in 2010, with an operating margin of 13.1%. At March 31st, 2011, Parrot had 96.4 million euros in cash or cash equivalents (net of debt). Further information on Varioptic: On March 16th 2011 Parrot published a release on the actual impact of the Japanese events. The release is reproduced here after. Suppliers: no critical issues identified On hundreds of suppliers worldwide, only 15 are located in Japan, and these do not supply strategic components to the Group. Although one of these suppliers has been directly affected by the recent natural disaster, this supplier has another production facility located outside Japan. Moreover, as with all suppliers, Parrot has an alternative source of supply which can be implemented quickly. Customers: OEM customers do not have production plants in the affected areas Japan The majority of the production plants of Parrot OEM customers are located in China and Eastern Europe. While some tensions could be felt on the automotive industry supply chain, for its part Parrot considers it will be able to continue to deliver its products to its clients. In the medium term visibility remains limited on the overall consequences of the tragic events taking place in Japan. However, faced with expected disruptions on supply chains and components markets, Parrot has solid processes, including components inventory, to enable the Company to effectively withstand crises. 77

78 XIII Reference document On February 11th, 2011, when publishing its full-year earnings for 2010, Parrot indicated in its press release: Following a year marked by the new dimension achieved by the OEM business and the Parrot AR.Drone's first successes in 2010, Parrot returned to growth, overcoming the impacts of the economic crisis to a great extent. In order to continue moving forward in 2011, Parrot expects to see: Continued growth in the OEM business, made possible by (i) a favorable basis for comparison due to the new customers brought on board, primarily during the second half of 2010, (ii) an increase in the equipment rate linked to the expected improvement in the penetration rate for in-car connectivity solutions, (iii) the gradual expansion of the vehicle ranges equipped among existing customers, (iv) the first orders from major new customers around half year 2011; The gradual stabilization of automotive product sales, in light of (i) the acceleration in the product renewal rate, (ii) the ramping up of marketing efforts, (iii) the increase in the number of points of sale, (iv) the unpredictable economic situation in certain regions, and particularly in Spain; Ongoing moves to ramp up the Home business, with: (i) the third phase in the deployment of the Parrot AR.Drone targeting new distributors and countries, (ii) the launch of innovative products and the maintenance of R&D investments in this area. Without repeating the performance from 2010 over the short term, all of these elements aim to support a long-term growth strategy which will be illustrated by: Continued R&D efforts, and more specifically the integration of the new teams recruited during the second half of 2010, in order to focus on the opportunities opened up by the gradual integration of internet connectivity into vehicles; The ramping up of the Group's communications on its products (all ranges combined), notably drawing on the experience of Natalie Rastoin, currently CEO of Ogilvy France, whose appointment to serve on the Group's Board of Directors will be proposed at Parrot's next general meeting; Initiatives looking into the possibilities for diversification on OEM targets with the technologies developed for the Parrot AR.Drone; With a clear vision of its development plan for the coming years, driven by a daring innovation strategy and ready to devote new resources to help ensure the penetration of all product ranges, Parrot is embarking on this new phase in its development with drive and dedication. On May 13th, 2011, while publishing its earnings for first quarter of 2011 (see of this Document), Parrot detailed the main trends of the second quarter of The outlook for FY 2011 remain unchanged: Over the second quarter of 2011, Parrot notably intends to step up its marketing investments in order to support the penetration of new automotive products (Parrot Minikit Smart, Parrot Asteroid) and give itself the means to benefit from a positive summer season for sales of the Parrot AR.Drone, its Wifi-controlled quadricopter which is ideal for use outside. In view of the events in Japan, Parrot is continuing to carry out ongoing assessments on its sources of supplies in order to protect itself against any possible consequences for its business. Within this framework, the Group is more specifically ramping up its component storage strategy. In terms of its automotive customers, the Group has not seen any orders being put back by its OEM customers to date. The development plan announced previously for 2011 aims to enable the Group to continue growing, while moving forward with its retail communications strategy. 78

79 XIV. 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 7 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 18th, 2009 for a six-year period. In addition, on June 19th, 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 31st, Mr. Edward Planchon was reappointed as a director at the ordinary general meeting on June 9th, 2010 for a six-year period. Mr. Edward Planchon's term of office as a director will end after the ordinary general meeting convened to approve the financial statements for the year ended December 31st, Mr. Marco Landi's term of office as a director ended at the ordinary general meeting on June 9th, Mr. Marco Landi does not wish to be reappointed. Mr. Geoffroy Roux de Bézieux, Mr. Olivier Legrain and Mr. Stéphane Marie are independent directors. At the general meeting convened to approve the annual financial statements for 2010, held on May 31st, 2011, the Board of Directors proposed to appoint Mrs. Natalie Rastoin and the resolution was adopted by the shareholders. Her experience of the world of brands and brand communication will make it possible to further strengthen the analytical capabilities concerning the Company's marketing strategy. Director's name, age and professional address Henri Seydoux 51 years old quai de Jemmapes Paris, France Jean-Marie Painvin 59 years old 1633 Broadway, Suite 1804 New York NY Edward K. Planchon 77 years old 38, rue de Berri Office and term Other offices Company name Chairman of the Board of Directors and Chief Executive Officer 6 years from Jun 18, 2009 Date first appointed: Jan 31, 1994 Director 6 years from Jun 18, 2009 Date first appointed: Jan 31, 1994 Director 6 years from June 9, 2010 Date first appointed: May Director Director Director Chairman Director Director Director Director Manager Director Chairman and CEO Chairman Director Director Director Chairman of the 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) Vignal Systems (office 79

80 75008 Paris, France 4, 2004 Supervisory Board Director, Vice Chairman and Treasury Secretary Director Director Chairman & CEO Director Jean-Yves Helmer 65 years old 18, rue de Penthièvre Paris, France Olivier Legrain 58 years old 8, passage Saint Ferdinand Neuilly sur Seine, France Geoffroy Roux de Bézieux 47 years old 42, rue Edouard Nortier Neuilly sur Seine, France Geoffroy Roux de Bézieux 48 years old OMER TELECOM 12, rue Belgrand Levallois Perret, France Stéphane Marie 46 years old COREVISE 3.5 rue Scheffer Paris, France Director 6 years from Jun 4, 2007 Date first appointed: Jun 4, 2007 Director 6 years from Sep 14, 2006 Date first appointed: Sep 14, 2006 Director 6 years from Sep 14, 2006 Date first appointed: Sep 14, 2006 Director 6 years from Sep 14, 2006 Date first appointed: Sep 14, 2006 Director 6 years from Jun 18, 2009 Date first appointed: Jun 18, Chairman and /or Director and/or Manager Chairman and CEO and Director Director Chairman Chairman Director Board member Board member Director Chairman Director Director Chairman Director Chairman Director Director Chairman Director Deputy Chief Executive Officer and Director Deputy Chief Executive Officer and Director Co-manager 2010 Reference document ended in 2009) Parrot, Inc. (USA) Parrot UK Ltd (UK) Parrot Iberia, S.L. (Spain) EKP Consult LLC (USA) Holding Enricau SAS Alpen Tech SAS Materis and Group companies in France and Luxembourg Kerneos SA Parex Lanko SA Solaire SAS Trèfle SAS, Trèfle II Rhodia Terreal Holding SAS Financière K2 (Kiloutou) SAS Mécénat Ballas OMER TELECOM Ltd Seloger.com PSA FINANCOM IMS OMER TELECOM Ltd Seloger.com PSA FINANCOM IMS Corevise FINDINTER Nathalie Rastoin 51 years old OGILVY 32/34 rue Marbeuf Paris Director 6 years from May 31, 2011 Date first appointed: May 31, 2011 Chairman Director SCI Lak Vest Ogilvy France Ogilvy One 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. 80

81 Jean-Marie Painvin Jean-Marie Painvin was appointed as a Company director on June 24th, 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 4th, 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 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 14th, 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 14th, 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 4 brands and more than 1.9 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 4th, 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 81

82 2010 Reference document 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 18th, 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. Natalie Rastoin Natalie Rastoin was appointed as a Company director on May 31st, 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. 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 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 82

83 Geoffroy Roux de Bézieux Jean-Yves Helmer Stéphane Marie Natalie Rastoin Chief Operating Officer of Carphone Warehouse Director of Budget Telecom Director of Micromania Director of Sporever Director of Nocibé NA NA NA 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, 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. At least two (2) of the directors must be independent. 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 (5) 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. 83

84 XV Reference document Executive officers Henri Seydoux Chairman and CEO Start of office: Jun 24, 2003 End of office End of office: Jun 9, 2010 Employment contract Supplementary pension scheme Allowances or benefits due or likely to be due as a result of ending or changing functions Allowances due to a no-compete clause No No No No Summary of the executive officer's compensation (Table 1 of the AMF recommendation) FY 2008 FY 2009 Henri Seydoux Compensation due for the year (detailed in Table 2) 509, ,000 Value of options awarded during the year (detailed in Table 4) Value of options awarded during the year (detailed in Table 6) TOTAL 509, ,000 Summary of the executive officer's compensation (Table 2 of the AMF recommendation) Executive officer FY 2009 Amounts FY 2009 Amounts FY 2010 Amounts FY 2010 Amounts due paid due paid Fixed compensation 210, , , ,000 Variable compensation (1) 274, , ,000 (2) 400,000 Exceptional compensation NA NA NA NA Attendance fees 25,000 25,000 25,000 25,000 Benefits in kind NA NA NA NA TOTAL 509, , , ,000 (1) Variable compensation for 2009 was determined with a target of 100% based on a progressive scale combining a criterion for achieving revenues and a criterion for the level of the gross margin and EBIT. Variable compensation for 2010 was determined with a target of 130% 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, 292,500 euros paid in Stock options or warrants, share warrants and company founder equity warrants awarded during the year to each executive officer by the issuer and any Group company (Table 4 of the AMF recommendation) Executive officer Scheme date and number Nature of options (stock options or warrants) Value of options based on the method retained for the consolidated accounts Number of options and/or warrants awarded during the year Exercise price Henri Seydoux NA NA NA NA NA NA TOTAL NA NA NA NA NA NA Exercise period 84

85 Stock options or warrants, equity warrants and company founder equity warrants exercised during the year by each corporate officer (Table 5 of the AMF recommendation) Executive officer Scheme date Number of options and/or warrants and number exercised during the year Exercise price Henri Seydoux NA NA NA Edward Planchon NA NA NA TOTAL NA NA NA History of stock options or warrants awarded and information on stock options or warrants 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 0 25,000 Remaining company founder equity warrants or share warrants at year-end 2,400,000 NA Name Office Compensation and benefits Jean-Marie Painvin Company director From Jan 1, 2010 to Dec 31, 2010: Attendance fees: 25,000 euros Edward Planchon Company director and Chairman of the Audit Committee From Jan 1, 2009 to Dec 31, 2010: Attendance fees: 25,000 euros for participating in the Board and 15,000 euros for chairing a specialized committee 6, 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. Marco Landi Company director From Jan 1, 2010 to Dec 31, 2010: Attendance fees: 12,500 euros Olivier Legrain Company director From Jan 1, 2010 to Dec 31, 2010: Attendance fees: 25,000 euros 85

86 Geoffroy Roux de Bézieux Company director and Chairman of the Compensation Committee 2010 Reference document From Jan 1, 2010 to Dec 31, 2010: Attendance fees: 25,000 euros for participating in the Board and 15,000 euros for chairing a specialized committee Jean-Yves Helmer Company director From Jan 1, 2010 to Dec 31, 2010: Attendance fees: 25,000 euros Stéphane Marie Company director From Jan 1, 2010 to Dec 31, 2010 Attendance fees: 25,000 euros * Please refer to Section 16.2 for details on services provided. No provisions were recorded in this respect. # of Company shares held at 12/31/2009 % of capital and voting rights # of Company shares on a diluted basis % of capital and voting rights Founder Henri Seydoux 4,586, % 6,946, % Founder subtotal 4,586, % 6,946, % Directors Jean Marie Painvin % % Edward Planchon 5, % 13, % Geoffroy Roux de Bézieux 1 0.0% 1 0.0% Olivier Legrain % % Jean-Yves Helmer % % Stéphane Marie 1 0.0% 1 0.0% In 2010, none of the executives carried out any operations to acquire, sell off, subscribe for or exchange securities on the stock market. However, in 2010, Henri Seydoux donated 40,000 of the Parrot shares he held to his children. 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. Certain corporate officers hold company founder equity warrants or share warrants awarded during previous years. In 2010, none of the corporate officers were awarded any stock options and/or warrants. Company founder equity warrants awarded to Mr. Henri Seydoux The following table summarizes the number and the main characteristics of the company founder equity warrants awarded and still to be exercised by Mr. Henri Seydoux. Warrants able to be Shares which holders Exercise Exercise Scheme Date awarded exercised during are entitled to with price ( ) period exercise period these warrants HS 2006 (extraordinary general meeting: May 4, 06) Board of Directors: June 12, ,400,000 2,400, (50%) (30%) (20%) Total 2,400,000 2,400,000 Jun 12, 2006 to Jun 12,

87 XVI. 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. Details on the Company's management are presented in Sections 14.1 "Board of Directors" and "Executives" in the present reference document. Mr. Edward Planchon, appointed as a Company director on May 4th, 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 2010, 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 6, US dollars by Parrot S.A. for the reimbursement of costs. No other agreements governed by Article L of the French commercial code were entered into in 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. 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. The Appointments and Compensation Committee is chaired by Mr. Geoffroy Roux de Bézieux, appointed at the Board of Directors meeting on April 10th, 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 10th, In accordance with the bylaws, two of the members are independent directors. 87

88 2010 Reference document 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 18th, 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 8th, 2008 concerning the makeup of audit committees. The Chairman's report, presented hereafter, incorporates the Company's governance principles. CHAIRMAN'S REPORT ON 2010 AS PROVIDED FOR UNDER ARTICLE L OF THE AMENDED FRENCH COMMERCIAL CODE In accordance with the provisions of Article L of the French commercial code, amended by Law of July 3rd, 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 Board of Directors At December 31st, 2010, the Board had seven members: Mr. Henri Seydoux, Chairman and Chief Executive Officer Mr. Jean-Marie Painvin, Director Mr. Edward Planchon, Director Mr. Olivier Legrain, Director Mr. Geoffroy Roux de Bézieux, Director Mr. Jean-Yves Helmer, Director Mr. Stéphane Marie, Director Messrs Legrain, Roux de Bézieux and Marie have been appointed as independent directors. Board's operations In 2010, the Board of Directors met four times in accordance with the bylaws, which require the Board of Directors to meet at least four times a year. It may also meet if required by the economic situation or any specific event. Each director is invited to attend all Board of Directors meetings at least five days before the session in question. The agenda for the Board meeting and the draft minutes from the previous meeting are appended to each invitation to attend. Prior to each meeting, a file containing the documents relating to the various points included on the agenda is sent to each director. The attendance rate within the Board of Directors remained constant over 2010, with seven out of eight directors present, then six out of seven directors further to Mr. Landi's departure. 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. 88

89 Mr. Gilles Labossière, Chief Administrative and Financial Officer, is invited to and attends the Board of Directors' sessions. Ms. 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. In 2010, the Chairman of the Appointments and Compensation Committee encouraged the Company to comply with the provisions of the AFEP-MEDEF code concerning gender parity within boards of directors. A review was launched with a view to identifying a profile, leading to the proposal made by the Board during its meeting on February 10th, 2011 for the general meeting on May 31st, 2011 to appoint Mrs. Natalie Rastoin as a new director. Thanks to this appointment, the Company is able to count on additional expertise in the world of communications, while further strengthening its analytical capabilities for its marketing strategy. 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 at the general meeting on June 18th, 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 8th, 2008 concerning the makeup of audit committees. The Audit Committee meets four times a year: during these meetings, the Committee examines the consolidated accounts and reviews the Group's business and risk management. 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 Financial Officer 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, For 2011, variable compensation has been determined with a target of 130% based on a progressive scale combining three criteria: Performance in terms of revenues, accounting for 25%, Ratio of EBIT to revenues, accounting for 25% 89

90 2010 Reference document General performance criterion, accounting for 50% and notably concerning (i) the product launches during the year, (ii) the growth strategy, (iii) the progress made in relation to the 2012 roadmap, and (iv) the creation of value for shareholders. The Company has also expressed its support for the AFEP-MEDEF recommendations from October 6th, 2008 relating to executive pay. The corporate governance code is available on the company website ( Conditions for the performance of executive management: Mr. Henri Seydoux was reappointed as a director at the ordinary general meeting on June 18th, 2009 for a six-year period. In addition, on June 19th, 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. 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 31st, Approach for the prevention of insider trading The Company is looking to apply the recommendation issued by the French securities regulator (AMF) on November 3rd, 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. Within this framework, Parrot is introducing 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 will only be authorized to trade in the Company's securities from the day after the information in question has been published. This new policy will be proposed and submitted to Parrot's Board of Directors in order to be incorporated into the bylaws during its session on May 12, 2011, and applied with immediate effect Internal control scope The Group's internal control rules apply to all of the Company's subsidiaries 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 the 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; 90

91 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. 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. At the beginning of 2010, the Internal Control and Audit function was created in order to further strengthen the Group's internal control organization. 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. A report is drawn up on the risk management and analysis work and will be reviewed every quarter in order to enable the Group to map out its risks. 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 procedure concerning customers, Administrative Manager for the procedure concerning travel, assignment and entertainment costs Head of Management Control for supplier commitment and inventory management procedures 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 accounting procedures is currently being drawn up 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. 91

92 Information system 2010 Reference document The Company uses a comprehensive information system for its general and cost accounting, fixed asset management, commercial management and invoicing, inventories and production (supplies) management. It uses an ERP management system (SAP Business One) and draws on this management system in all the subsidiaries, harmonizing the accounting rules, charts of accounts and use of IFRS. Links between the subsidiaries' SAP systems and the parent company are automated with the ibolt mechanism in order to ensure the reliability of information exchanges. Since 2009, the Company has had a paid leave management system, while a reporting and planning system (SAP BPC) has been rolled out across the Group. In 2010, the Company also deployed the timesheet management software TimeS in connection with its project management procedure. At the end of 2010, the Group information system's infrastructure was audited. The recommendations from the audit report are part of the Company's action plan for 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 manual of Group accounting procedures 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 1st, 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. 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. 92

93 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 hereafter: 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. 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. 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 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. 93

94 2010 Reference document Statutory auditors report, drawn up in accordance with Article L of the French commercial code, on the Chairman of the Board of Directors' report KPMG Audit Deloitte Marque & Gendrot 1, cours Valmy 185, Avenue Charles de Gaulle Paris La Défense Cedex Neuilly sur Seine 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 31st, 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 Paris La Défense, April 29th, 2010 Neuilly sur Seine, April 29th, 2010 KPMG Audit Deloitte Marque & Gendrot Department of KPMG S.A. Jean-Pierre Valensi Nahid Sheikhalishahi Jean-Claude Berriex 94

95 XVII. The Group's success stems among other things from the quality of its executives, 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, please refer to Section "Executive managers" in the present reference document. At December 31st, 2010, the Group employed 519 people (versus 443 people at December 31st, 2009), including 369 people within the Company (versus 317 people at December 31st, 2009), representing 71% of the Group's workforce. Breakdown of the Group's workforce by function 95

96 Breakdown of the Group's workforce internationally at December 31st, 2009 and Reference document The average headcount (calculated over the full year) for the Group's sales functions covering the countries listed below was as follows: At December 31st France US Italy Germany UK Hong-Kong Spain Total The changes in the Company's workforce over the past three years are presented below At December 31st Administration Procurement Purchases Marketing Research and development Production Quality Total Manager-status staff accounted for 88% of Parrot France's workforce in 2010, giving a total of 325 managers out of 369 people. 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 28 engineering providers under contract at December 31st, The Company also draws up a HR report, which is available on request from Parrot, Investor Relations Department, 174 quai de Jemmapes, Paris, France. The main executive managers who are part of the Group's management committee are as follows: Chris Roberts 96

97 Chris Roberts has been VP Sales EMEA since January He was previously VP Sales and Marketing for Parrot UK from February 2006, then Country Manager from April Before that, Chris was the founder and Chief Executive Officer of a startup (ICE UK) specialized in selling mobile communication systems and mobile electronic systems to professionals, as well as their installation and technological development. Chris developed his passion for the industry when very young, working in his family's car phone and radio stores in London. He has an MBA from Adelaide University (Australia), with a focus on strategic management, global brand image and business performance improvement. In 2005, Chris was awarded honors by Adelaide University for his achievements in operational management. 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). Christophe Sausse 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). 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 97

98 2010 Reference document 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. Philippe Poussin Philippe Poussin joined the company in 2005, and after overseeing production and logistics, is currently the chief production and quality officer. After graduating from the INSA and Institut d Administration des Entreprises de Rennes, he began his career in 1991 as an industrialization engineer within the Océ group. In 1996, he joined Num, a subsidiary of Schneider Electric, working first as a methods engineer and then as head of production. In 2003, he joined ISS, a subsidiary of EADS, where he was in charge of industrialization. Samuel Grand Samuel Grand joined Parrot in September 2005 as Chief Procurement Officer. With a post-graduate DESS in procurement from Bordeaux University, he validates the modules for the A.P.I.C.S. C.P.I.M. certificate. He began his career in a telecoms technology company in Portugal, where he was tasked to put in place a tool for assessing buyer performance. Between 1998 and 2001, he worked as a buyer and senior buyer respectively for Beta Electronics then ACT Manufacturing, with both these companies based in Ireland. Between 2001 and 2005, he became head of procurement, first within Eurologic then NCR. Stéphane Piquet Since 2009, Stéphane Piquet has been the Group's Chief Quality Officer. With a post-graduate DESS in production management from Montpellier I University, he held various quality positions in the automotive sector from Matra Automobiles, Autoliv and Johnson Control - before joining Parrot in Xavier Bosgiraud Xavier Bosgiraud has been Chief Validation Officer since March He joined Parrot in October 2003 as a quality engineer, then he became head of validation in February With a post-graduate DESS in electronics and automations from UPMC, he began his career in the consulting sector with Altran Technologies. 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 The table hereafter summarizes the number and the main characteristics of the various company founder equity warrant allocations made by the Company for its staff: Scheme Date awarded by Board of Directors Number of warrants awarded Number of warrants able to be exercised in 2010 Shares which holders are entitled to with these warrants Exercise price ( ) 2004 Jul 6, ,300 2,318 2, ii Oct 18, ,000 53,526 53, Dec 14, ,000 64,910 64, Feb 28, ,000 40,633 40, ii Jun 12, , , , (50%) (50%) Total 829, , ,387 In 2010, 128,745 company founder equity warrants were exercised. 98

99 The following table summarizes the number and the main characteristics of the company founder equity warrants awarded to the Company's 10 members of staff with the highest number of company founder equity warrants on the filing date for the present reference document. Name of beneficiary Plan Date awarded by BoD Number of warrants awarded Number of warrants able to be exercised in 2010 Shares which holders are entitled to with these warrants E. Tchen /12/06 75,000 75,000 75,000 N. Besnard /12/06 25,000 25,000 25,000 Ex. price ( ) G. Pinto /28/06 25,000 25,000 25, /12/06 25,000 25,000 25, E. Riyahi /12/05 25,000 25,000 25, /12/06 25,000 25,000 25, S. Grand /12/05 25,000 25,000 25, H. Belkhoudja F. Chanal H. Magniez F. Pirat L. Samut 2004 ii 2004 ii 2004 ii 2004 ii 2004 ii 10/18/05 3,000 3,000 3, /18/05 3,000 3,000 3, /18/05 3,000 3,000 3, /18/05 3,000 3,000 3, /18/05 3,000 3,000 3, In 2010, 8 people exercised a total of 77,315 company founder equity warrants. Exercise period 06/12/06 06/12/11 06/12/06 06/12/11 02/28/06 02/28/11 06/12/06 06/12/11 12/14/05 12/14/10 06/12/06 06/12/11 12/14/05 12/14/10 10/18/05 10/18/10 10/18/05 10/18/10 10/18/05 10/18/10 10/18/05 10/18/10 10/18/05 10/18/ SOP Extraordinary general meeting on December 14th, 2005 The Company's extraordinary general meeting on December 14th, 2005 decided to authorize the Board of Directors to award up to 175,000 options entitling holders to subscribe for Company shares. Under this delegation, the Board of Directors decided on December 14th, 2005 to award 80,000 options to certain staff from the Company's foreign subsidiaries entitling them to subscribe for 80,000 Company's shares at a unit price of 8.12 euros. These options are valid from December 14th, 2005 to December 13th, 2010, 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 options at the end of each quarter during the 36 months following the first 12-month period. On April 18th, 2006, the Board of Directors acknowledged that 10,000 stock warrants had become null and void further to a member of staff resigning. The Board of Directors on February 28th, 2006, under the delegation granted by the extraordinary general meeting on February 28th, 2006 (partially rectifying the decisions of the extraordinary general meeting on December 14th, 2005) The Company's extraordinary general meeting on February 28th, 2006 decided (i) to partially cancel the authorization given by the extraordinary general meeting on December 14th, 2005 for the Board of Directors to award stock warrants entitling holders to subscribe for up to 175,000 new shares, and (ii) to reduce the maximum number of shares that may be issued further to the exercising of stock warrants that have been or are to be granted down to 107,000. As such, the extraordinary general meeting on February 28th, 2006 acknowledged that, in view of the number of stock options already awarded by the Board of Directors on December 14th, 2005, the number of stock warrants that might still be awarded was 27,

100 2010 Reference document On February 28th, 2006, the Company's Board of Directors decided to award 27,000 options to certain staff from foreign subsidiaries entitling them to subscribe for 27,000 Company shares at a unit price of euros. These options are valid from February 28h, 2006 to February 27th, 2011, 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 options at the end of each quarter during the 36 months following the first 12-month period. On July 31st, 2007, the Board of Directors acknowledged that 3,000 stock warrants had become null and void further to the departure of a member of staff. To date: 107,000 stock warrants have been awarded 13,000 stock warrants have become null and void There are no more stock warrants to be awarded under this scheme SOP Extraordinary general meeting on May 4th, 2006 (thirteenth resolution) Board of Directors on June 12th, 2006 under the delegation granted by the said general meeting The Company's extraordinary general meeting on May 4th, 2006 decided to authorize the Board of Directors to award 25,000 options entitling holders to subscribe for Company shares to one employee from a foreign Company subsidiary and gave it the broadest powers with a view to implementing this authorization. Under this delegation, the Board of Directors decided on June 12th, 2006 to award 25,000 options to the employee in question, entitling him to subscribe for 25,000 Company shares at a price of: euros for 12,500 warrants; euros for 12,500 warrants. These warrants are valid from June 12th, 2006 to June 11th, 2011, 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 options at the end of each quarter during the 36 months following the first 12-month period. Extraordinary general meeting on May 4th, 2006 (twenty fourth resolution) Board of Directors on November 10th, 2006 under the delegation granted by the said general meeting The Company's extraordinary general meeting decided on May 4th, 2006 to authorize, under the suspensive condition of the Company's shares being admitted for trading on the Eurolist by Euronext TM market, the Board of Directors to award, on one or more occasions, Company stock options or warrants, with the total number of options or warrants that may be granted making it possible to subscribe for or acquire a number of shares representing no more than 6% of the Company's capital at May 4th, 2006, and gave it full powers with a view to implementing this authorization. Under this delegation, the Board of Directors on November 10th, 2006 awarded 260,000 stock warrants out of the 530,994 options (representing 6% of the capital on the general meeting date, i.e. May 4th, 2006) to staff from the Company or related companies entitling them to subscribe for 260,000 shares at a price of euros. These options are valid from November 10th, 2006 to November 9th, 2011, 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 options at the end of each quarter during the 36 months following the first 12-month period. At the Board meetings on July 31st, 2007 and November 13th, 2007, the Directors acknowledged that 7,000 stock warrants awarded on November 10th, 2006 had become null and void, further to the departure of two staff beneficiaries. At the Board meetings on April 10th, 2008, July 31st, 2008 and November 13th, 2008, the Directors acknowledged that 56,000 stock warrants awarded on November 10th, 2006 had become null and void, further to the departure of staff beneficiaries. At the Board meetings on February 12th, 2009 and July 30th, 2009, the Directors acknowledged that 8,000 stock warrants awarded on November 10th, 2006 had become null and void, further to the departure of staff beneficiaries. At the Board meetings on February 11th, 2010, May 12th, 2010 and November 10th, 2010, the Directors acknowledged that 16,000 stock warrants awarded on November 10th, 2006 had become null and void, further to the departure of staff beneficiaries. 100

101 2007 SOP Decision by the Chairman and Chief Executive Officer on March 1st, 2007, as subdelegated by the Board of Directors on February 14th, 2007, under the delegation granted by the extraordinary general meeting on May 4th, 2006 (twenty fourth resolution) Under the delegation granted to it by the extraordinary general meeting on May 4th, 2006 as indicated above, on February 14th, 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 14th, 2007, on March 1st, 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 1st, 2007 to February 28th, 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 31st, 2007 acknowledged that 3,000 stock warrants awarded on March 1st, 2007 had become null and void, further to the departure of a staff beneficiary. The Board of Directors on July 31st, 2008 acknowledged that 10,000 stock warrants awarded on March 1st, 2007 had become null and void, further to the departure of staff beneficiaries. The Board of Directors on February 12th, 2009 acknowledged that 25,000 stock warrants awarded on March 1st, 2007 had become null and void, further to the departure of staff beneficiaries. At the Board meetings on February 11th, 2010 and November 10th, 2010, the Directors acknowledged that 9,000 stock warrants awarded on March 1st, 2007 had become null and void, further to the departure of staff beneficiaries. Decision by the Chairman and Chief Executive Officer on May 30th, 2007, as subdelegated by the Board of Directors on May 15th, 2007, under the delegation granted by the extraordinary general meeting on May 4th, 2006 (twenty fourth resolution) Under the delegation granted to it by the extraordinary general meeting on May 4th, 2006 as indicated above, the Board of Directors on May 15th, 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 1st, 2007, under the aforementioned subdelegation from the Board of Directors on February 14th, to employees of the Company or affiliated companies. As subdelegated by the Board of Directors on May 15th, 2007, on May 30th, 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 30th, 2007 to May 29th, 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 12th, 2009 acknowledged that 4,000 stock warrants awarded on May 30th, 2007 had become null and void, further to the departure of a staff beneficiary. Decision by the Chairman and Chief Executive Officer on August 15th, 2007, as subdelegated by the Board of Directors on July 31st, 2007, under the delegation granted by the extraordinary general meeting on May 4th, 2006 (twenty fourth resolution) Under the delegation granted to it by the extraordinary general meeting on May 4th, 2006 as indicated above, the Board of Directors on July 31st, 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 30th, 2007, under the aforementioned subdelegation from the Board of Directors on May 15th, to employees of the Company or affiliated companies. As subdelegated by the Board of Directors on July 31st, 2007, on August 15th, 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 15th, 2007 to August 14th, 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. 101

102 2010 Reference document 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 1st, 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 10th, 2008 and July 31st, 2008 acknowledged that 13,000 stock warrants awarded on August 15th, 2007 had become null and void, further to the departure of staff beneficiaries. The Board of Directors on November 10th, 2010 acknowledged that 7,000 stock warrants awarded on August 15th, 2007 had become null and void, further to the departure of staff beneficiaries. Decision by the Chairman and Chief Executive Officer on November 28th, 2007, as subdelegated by the Board of Directors on November 13th, 2007, under the delegation granted by the extraordinary general meeting on May 4th, 2006 (twenty fourth resolution) Under the delegation granted to it by the extraordinary general meeting on May 4th, 2006 as indicated above, the Board of Directors on November 13th, 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 15th, 2007, under the aforementioned subdelegation from the Board of Directors on July 31st, to employees of the Company or affiliated companies. As subdelegated by the Board of Directors on November 13th, 2007, on November 28th, 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 28th, 2007 to November 27th, 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 12th, 2009, May 14th, 2009 and July 31st, 2009 acknowledged that 17,000 stock warrants awarded on November 28th, 2007 had become null and void, further to the departure of staff beneficiaries. The Board of Directors on November 10th, 2010 acknowledged that 7,000 stock warrants awarded on August 15th, 2007 had become null and void, further to the departure of staff beneficiaries. Decision by the Board of Directors on April 10th, 2008, under the delegation granted by the extraordinary general meeting on May 4th, 2006 (twenty fourth resolution) Under the delegation granted to it by the extraordinary general meeting on May 4th, 2006 as indicated above, the Board of Directors on April 10th, 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 28th, 2007, under the aforementioned subdelegation from the Board of Directors on November 13th, 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 10th, 2008 to April 9th, 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 29th, 2008, as subdelegated by the Board of Directors on May 13th, 2008, under the delegation granted by the extraordinary general meeting on May 4th, 2006 (twenty fourth resolution) Under the delegation granted to it by the extraordinary general meeting on May 4th, 2006 as indicated above, the Board of Directors on May 13th, 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 10th, 2008, to employees of the Company or affiliated companies. As subdelegated by the Board of Directors on November 13th, 2007, on May 29th, 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. 102

103 These warrants are valid from May 29th, 2008 to May 28th, 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 12th, 2009 and May 14th, 2009 acknowledged that 61,700 stock warrants awarded on May 29th, 2008 had become null and void, further to the departure of staff beneficiaries SOP Extraordinary general meeting on June 11th, 2008 (seventh resolution) The Company's extraordinary general meeting on June 11th, 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 11th, 2008, and gave it full powers with a view to implementing the said authorization. Decision by the Chairman and Chief Executive Officer on August 15th, 2008, as subdelegated by the Board of Directors on July 31st, 2008, under the delegation granted by the extraordinary general meeting on June 11th, 2008 (seventh resolution) Under the delegation granted to it by the extraordinary general meeting on June 11th, 2008 as indicated above, the Board of Directors on July 31st, 2008 approved the principle for awarding 55,000 stock warrants out of the 266,376 warrants (representing 2% of the capital at June 11th, 2008) to be awarded to employees of the Company or affiliated companies. As subdelegated by the Board of Directors on July 31st, 2008, on August 15th, 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 15th, 2008 to August 14th, 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 11th, 2010 and November 10th, 2010, the Directors acknowledged that 20,000 stock warrants awarded on August 15th, 2008 had become null and void, further to the departure of staff beneficiaries. Decision by the Chairman and Chief Executive Officer on November 28th, 2008, as subdelegated by the Board of Directors on November 13th, 2008, under the delegation granted by the extraordinary general meeting on June 11th, 2008 (seventh resolution) Under the delegation granted to it by the extraordinary general meeting on June 11th, 2008 as indicated above, the Board of Directors on November 13th, 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 15th, 2008) to employees of the Company or affiliated companies. As subdelegated by the Board of Directors on November 13th, 2008, on November 28th, 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 28th, 2008 to November 27th, 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 10th, 2010, the Directors acknowledged that 7,000 stock warrants awarded on November 28th, 2008 had become null and void, further to the departure of staff beneficiaries. Decision by the Chairman and Chief Executive Officer on March 2nd, 2009, as subdelegated by the Board of Directors on February 12th, 2009, under the delegation granted by the extraordinary general meeting on June 11th, 2008 (seventh resolution) Under the delegation granted to it by the extraordinary general meeting on June 11th, 2008 as indicated above, the Board of Directors on February 12th, 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 15th, 2008 and 45,000 on November 28th, 2008) to employees of the Company or affiliated companies. 103

104 2010 Reference document As subdelegated by the Board of Directors on February 12th, 2009, on March 2nd, 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 2nd, 2009 to March 1st, 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 30th, 2009 acknowledged that 1,250 stock warrants awarded on March 2nd, 2009 had become null and void, further to the departure of staff beneficiaries. At the Board meetings on February 11th, 2010, May 12th, 2010 and November 10th, 2010, the Directors acknowledged that 6,500 stock warrants awarded on March 2nd, 2009 had become null and void, further to the departure of staff beneficiaries. Decision by the Chairman and Chief Executive Officer on June 2nd, 2009, as subdelegated by the Board of Directors on May 14th, 2009, under the delegation granted by the extraordinary general meeting on June 11th, 2008 (seventh resolution) Under the delegation granted to it by the extraordinary general meeting on June 11th, 2008 as indicated above, the Board of Directors on May 14th, 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 15th, 2008, 45,000 on November 28th, 2008 and 107,000 on February 12th, 2009) to employees of the Company or affiliated companies. As subdelegated by the Board of Directors on May 14th, 2009, on June 2nd, 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 15th, 2009 to May 14th, 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 11th, 2010, May 12th, 2010 and November 10th, 2010, the Directors acknowledged that 7,500 stock warrants awarded on June 2nd, 2009 had become null and void, further to the departure of staff beneficiaries SOP Extraordinary general meeting on June 18th, 2009 (ninth resolution) The Company's extraordinary general meeting on June 18th, 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 18th, 2009, and gave it full powers with a view to implementing the said authorization. Decision by the Chairman and Chief Executive Officer on August 14th, 2009, as subdelegated by the Board of Directors on July 30th, 2009, under the delegation granted by the extraordinary general meeting on June 18th, 2009 (ninth resolution) Under the delegation granted to it by the extraordinary general meeting on June 18th, 2009 as indicated above, the Board of Directors on July 30th, 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 30th, 2009, on August 14th, 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 30th, 2009 to July 29th, 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 27th, 2009, as subdelegated by the Board of Directors on November 12th, 2009, under the delegation granted by the extraordinary general meeting on June 18th, 2009 (ninth resolution) Under the delegation granted to it by the extraordinary general meeting on June 18th, 2009 as indicated above, the Board of Directors on November 12th, 2009 approved the principle for awarding 5,000 stock warrants out of the 62,

105 warrants still to be awarded (following the allocation of 2,000 warrants on August 14th, 2009) to employees of the Company or affiliated companies. As subdelegated by the Board of Directors on November 12th, 2009, on November 27th, 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 12th, 2009 to November 11th, 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 26th, 2010, as subdelegated by the Board of Directors on February 11th, 2010, under the delegation granted by the extraordinary general meeting on June 18th, 2009 (ninth resolution) Under the delegation granted to it by the extraordinary general meeting on June 18th, 2009 as indicated above, the Board of Directors on February 11th, 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 14th, 2009 and 5,000 warrants on November 27th, 2009) to employees of the Company or affiliated companies. As subdelegated by the Board of Directors on February 11th, 2010, on February 26th, 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 26th, 2010 to February 25th, 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 9th, 2010 (eighth resolution). The Company's extraordinary general meeting on June 9th, 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 9th, 2010, and gave it full powers with a view to implementing the said authorization. Decision by the Chairman and Chief Executive Officer on August 13th, 2010, as subdelegated by the Board of Directors on July 29th, 2010, under the delegation granted by the extraordinary general meeting on June 9th, 2010 (eighth resolution) Under the delegation granted to it by the extraordinary general meeting on June 9th, 2010 as indicated above, the Board of Directors on July 29th, 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 29th, 2010, on August 13th, 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 13th, 2010 to August 12th, 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 30th, 2010, as subdelegated by the Board of Directors on November 10th, 2010, under the delegation granted by the extraordinary general meeting on June 9th, 2010 (eighth resolution) Under the delegation granted to it by the extraordinary general meeting on June 9th, 2010 as indicated above, the Board of Directors on November 10th, 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 10th, 2010, on November 30th, 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. 105

106 2010 Reference document These warrants are valid from November 30th, 2010 to November 29th, 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 25th, 2011, as subdelegated by the Board of Directors on February 10th, 2011, under the delegation granted by the extraordinary general meeting on June 9th, 2010 (eighth resolution) Under the delegation granted to it by the extraordinary general meeting on June 9th, 2010 as indicated above, the Board of Directors on February 10th, 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 10th, 2011, on February 25th, 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 25th, 2011 to February 24th, 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. The following table summarizes the number of stock warrants awarded to the Group's 10 members of staff who received the highest number in 2009: Beneficiary Date awarded by the BoD &/or Chairman (1) Number of warrants awarded Corresponding share allocation Subscription price ( ) Exercise period (2) 1 Mar 2, ,000 15, Mar 2, 2009 to Mar 1, Mar 2, ,000 15, Mar 2, 2009 to Mar 1, Mar 2, Mar 2, 2009 to 7,000 7,000 Mar 1, Mar 2, Mar 2, 2009 to 5,000 5,000 Mar 1, Mar 2, Mar 2, 2009 to 5,000 5,000 Mar 1, Mar 2, Mar 2, 2009 to 5,000 5,000 Mar 1, June 2, ,000 3, June 2, 2009 to June 1, June 2, 2009 June 2, 2009 to 3,000 3, June 1, June 2, 2009 June 2, 2009 to 2,000 2, June 1, Nov 27, ,000 5, June 2, 2009to June 1, 2014 (1) Date awarded by the Chairman as subdelegated by the Board of Directors on May 13th, 2008, July 31st, 2008 and November 13th, 2008 (2) 25% of the warrants may be exercised by the earliest at the end of a 12-month period following their allocation date for warrants awarded as authorized by the combined general meeting on May 4th, % 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 11th, 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. 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 Out of all the stock warrants awarded, i.e. 173,300, the breakdown is as follows: Parrot S.A. staff 107,200 stock warrants. Staff from foreign subsidiaries 66,100 stock warrants. Corporate officers NA. Number and price of shares subscribed for or purchased in 2009 NA. 106

107 The following table summarizes the number of stock warrants awarded to the Group's 10 members of staff who received the highest number in 2010: Beneficiary Date awarded by the BoD &/or Chairman (1) Number of warrants awarded Corresponding share allocation warrants Subscription price ( ) Exercise period (2) 1 Aug 13, ,000 25, Aug 13, 2010 to Aug 12, Aug 13, Aug 13, 2010 to 9,000 9,000 Aug 12, Aug 13, Aug 13, 2010 to 9,000 9,000 Aug 12, Aug 13, Aug 13, 2010 to 9,000 9,000 Aug 12, Aug 13, Aug 13, 2010 to 9,000 9,000 Aug 12, Aug 13, Aug 13, 2010 to 9,000 9,000 Aug 12, Aug 13, Aug 13, 2010 to 9,000 9,000 Aug 12, Aug 13, Aug 13, 2010 to 5,000 5,000 Aug 12, Aug 13, Aug 13, 2010 to 5,000 5,000 Aug 12, Aug 13, Aug 13, 2010 to 3,000 3,000 Aug 12, 2015 (1) Date awarded by the Chairman as subdelegated by the Board of Directors on July 29th, (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 9th, 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. In any case, warrants may be exercised up to eight days prior to the end of the fiveyear period following the date of their issue. Breakdown of stock warrants awarded Out of all the stock warrants awarded, i.e. 169,800, the breakdown is as follows: Parrot S.A. staff 125,500 stock warrants. Staff from foreign subsidiaries 29,500 stock warrants. Corporate officers NA. Number and price of shares subscribed for or purchased in 2010 NA. Decision by the Board of Directors on May 13th, 2008 under the delegation granted by the extraordinary general meeting on May 4th, 2006 (twenty third resolution) Under the delegation granted by the extraordinary general meeting on May 4th, 2006, as indicated above, on May 13th, 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 28th, 2007) to employees of the Company or affiliated companies. These bonus shares are subject to a two-year vesting period from April 10th, 2008 and a two-year lock-in period running from the end of the vesting period. On February 12th, 2009, the Board of Directors acknowledged that 25,000 bonus shares awarded on May 13th, 2008 had become null and void, further to the departure of the staff beneficiary. Decision by the Board of Directors on July 31st, 2008 under the delegation granted by the extraordinary general meeting on May 4th, 2006 (twenty third resolution) Under the delegation granted by the extraordinary general meeting on May 4th, 2006, as indicated above, on July 31st, 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 28th, 2007 and 25,000 on May 13th, 2007) to employees of the Company or affiliated companies. 107

108 2010 Reference document These bonus shares are subject to a two-year vesting period from July 31st, 2008 and a two-year lock-in period running from the end of the vesting period. At the Board meetings on February 12th, 2009 and May 14th, 2009, the Directors acknowledged that 2,000 bonus shares awarded on July 31st, 2008 had become null and void, further to the departure of staff beneficiaries. At the Board meetings on May 12th, 2010 and November 10th, 2010, the Directors acknowledged that 3,000 bonus shares awarded on July 31st, 2008 had become null and void, further to the departure of staff beneficiaries. Decision by the Board of Directors on November 13th, 2008 under the delegation granted by the extraordinary general meeting on May 4th, 2006 (twenty third resolution) Under the delegation granted by the extraordinary general meeting on May 4th, 2006, as indicated above, on July 31st, 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 28th, 2007, 25,000 on May 13th, 2008 and 81,000 on July 31st, 2008) to employees of the Company or affiliated companies. These bonus shares are subject to a two-year vesting period from November 13th, 2008 and a two-year lock-in period running from the end of the vesting period. Decision by the Board of Directors on February 12th, 2009 under the delegation granted by the extraordinary general meeting on May 4th, 2006 (twenty third resolution) Under the delegation granted by the extraordinary general meeting on May 4th, 2006, as indicated above, on February 12th, 2009 the Board of Directors determined the principle for awarding 11,000 out of the 37,892 bonus shares still to be awarded (following the allocation of 5,106 on November 28th, 2007, 25,000 on May 13th, 2008, 81,000 on July 31st, 2008 and 28,000 on November 13th, 2008) to employees of the Company or affiliated companies. These bonus shares are subject to a two-year vesting period from February 13th, 2009 and a two-year lock-in period running from the end of the vesting period. At the Board meeting on November 10th, 2010, the Directors acknowledged that 1,000 bonus shares awarded on February 12th, 2009 had become null and void, further to the departure of staff beneficiaries. Decision by the Board of Directors on May 14th, 2009 under the delegation granted by the extraordinary general meeting on May 4th, 2006 (twenty third resolution) Under the delegation granted by the extraordinary general meeting on May 4th, 2006, as indicated above, on May 14th, 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 28th, 2007, 25,000 on May 13th, 2008, 81,000 on July 31st, 2008, 28,000 on November 13th, 2008 and 11,000 on February 12th, 2009 and following the reintegration of 26,000 and 46,042 bonus shares as decided by the Chairman on March 2nd, 2009) to employees of the Company or affiliated companies. These bonus shares are subject to a two-year vesting period from May 15th, 2009 and a two-year lock-in period running from the end of the vesting period. At the Board meetings on February 11th, 2010 and November 10th, 2010, the Directors acknowledged that 2,500 bonus shares awarded on May 12th, 2009 had become null and void, further to the departure of staff beneficiaries. Extraordinary general meeting on June 18th, 2009 The Company's extraordinary general meeting on June 18th, 2009 (tenth resolution) decided to authorize, subject to the suspensive condition of the Company's shares being admitted for trading on the Eurolist by Euronext TM market, 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 18th, 2009, and gave it full powers to implement the said authorization. Decision by the Board of Directors on July 30th, 2009 under the delegation granted by the extraordinary general meeting on June 18th, 2009 (tenth resolution) Under the delegation granted by the extraordinary general meeting on June 18th, 2009, as indicated above, on July 30th, 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 31st, 2009 and a two-year lock-in period running from the end of the vesting period. Decision by the Board of Directors on November 12th, 2009 under the delegation granted by the extraordinary general meeting on June 18th, 2009 (tenth resolution) Under the delegation granted by the extraordinary general meeting on June 18th, 2009, as indicated above, on November 12th, 2009 the Board of Directors determined the principle for awarding 2,000 out of the 62,956 bonus shares 108

109 still to be awarded (following the allocation of 2,000 on July 30th, 2009) to employees of the Company or affiliated companies. These bonus shares are subject to a two-year vesting period from November 13th, 2009 and a two-year lock-in period running from the end of the vesting period. Decision by the Board of Directors on February 11th, 2010 under the delegation granted by the extraordinary general meeting on June 18th, 2009 (tenth resolution) Under the delegation granted by the extraordinary general meeting on June 18th, 2009, as indicated above, on February 11th, 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 30th, 2009 and 2,000 on November 12th, 2009) to employees of the Company or affiliated companies. These bonus shares are subject to a two-year vesting period from February 12th, 2010 and a two-year lock-in period running from the end of the vesting period. At the Board meeting on November 10th, 2010, the Directors acknowledged that 2,000 bonus shares awarded on February 11th, 2010 had become null and void, further to the departure of staff beneficiaries. Decision by the Board of Directors on May 12th, 2010 under the delegation granted by the extraordinary general meeting on June 18th, 2009 (tenth resolution) Under the delegation granted by the extraordinary general meeting on June 18th, 2009, as indicated above, on May 12th, 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 30th, 2009, 2,000 bonus shares on November 12th, 2009 and February 11th, 2010) to employees of the Company or affiliated companies. These bonus shares are subject to a two-year vesting period from May 12th, 2010 and a two-year lock-in period running from the end of the vesting period. Extraordinary general meeting on June 9th, 2010 The Company's extraordinary general meeting on June 9th, 2010 (ninth resolution) decided to authorize, subject to the suspensive condition of the Company's shares being admitted for trading on the Eurolist by EuronextTM market, 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 9th, 2010, and gave it full powers to implement the said authorization. Decision by the Board of Directors on July 29th, 2010 under the delegation granted by the extraordinary general meeting on June 9th, 2010 (ninth resolution) Under the delegation granted by the extraordinary general meeting on June 9th, 2010, as indicated above, on July 29th, 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 29th, 2010 and a two-year lock-in period running from the end of the vesting period. Decision by the Board of Directors on November 10th, 2010 under the delegation granted by the extraordinary general meeting on June 9th, 2010 (ninth resolution) Under the delegation granted by the extraordinary general meeting on June 9th, 2010, as indicated above, on November 10th, 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 10th, 2010 and a two-year lock-in period running from the end of the vesting period. Decision by the Board of Directors on February 10th, 2011 under the delegation granted by the extraordinary general meeting on June 9th, 2010 (ninth resolution) Under the delegation granted by the extraordinary general meeting on June 9th, 2010, as indicated above, on February 10th, 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 10th, 2011 and a two-year lock-in period running from the end of the vesting period. 109

110 2010 Reference document The following table summarizes the number of bonus shares awarded to the Group's 10 members of staff who received the highest number in 2009: Beneficiary Date awarded by the Chairman Number of shares awarded Vesting period Lock-in period 1 Feb 12, ,000 2 years from Feb 12, years from vesting 2 May 14, ,000 2 years from May 14, years from vesting 3 May 14, ,000 2 years from May 14, years from vesting 4 May 14, ,000 2 years from May 14, years from vesting 5 May 14, ,000 2 years from May 14, years from vesting 6 May 14, ,000 2 years from May 14, years from vesting 7 May 14, ,000 2 years from May 14, years from vesting 8 May 14, ,000 2 years from May 14, years from vesting 9 May 14, ,000 2 years from May 14, years from vesting 10 Nov 12, ,000 2 years from Nov 12, years from vesting In 2009, none of the 10 people exercised any options awarded to them in 2009 or previously. Breakdown of bonus shares awarded by category Out of all the bonus shares awarded, i.e. 68,892, the breakdown is as follows: Parrot S.A. staff 68,892 bonus shares. Staff from foreign subsidiaries NA. Corporate officers NA. The following table summarizes the number of bonus shares awarded to the Group's 10 members of staff who received the highest number in 2010: Beneficiary Date awarded by the Chairman Number of shares awarded Vesting period Lock-in period 1 Feb 11, ,000 2 years from Feb 11, years from vesting 2 Feb 11, ,000 2 years from Feb 11, years from vesting 3 Feb 11, ,000 2 years from Feb 11, years from vesting 4 Feb 11, ,000 2 years from Feb 11, years from vesting 5 Feb 11, ,000 2 years from Feb 11, years from vesting 6 Feb 11, ,000 2 years from Feb 11, years from vesting 7 Feb 11, ,000 2 years from Feb 11, years from vesting 8 May 12, ,000 2 years from May 12, years from vesting 9 May 12, ,000 2 years from May 12, years from vesting 10 May 12, ,000 2 years from May 12, years from vesting In 2010, 100,000 bonus shares awarded in 2008 were recorded on a registered basis for the staff beneficiaries. Breakdown of bonus shares awarded by category Out of all the bonus shares awarded, i.e. 101,150, the breakdown is as follows: Parrot S.A. staff 101,150 bonus shares. Staff from foreign subsidiaries NA. Corporate officers NA. 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 2nd, 2006 between the Company's management and the sole staff representative office, notably looking to introduce a special profit-sharing reserve calculated based on 110

111 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 2010, the amount of the special profit-sharing reserve to be paid out represents 505,084 euros (compared with nothing in 2009). A voluntary performance-related bonus agreement was signed on June 29th, 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 1st, The performance-related bonus is calculated based on elements from the Group's income from ordinary operations and revenues. 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 2010, the amount of the performance-related bonus to be paid out is 2,189,370 euros (versus 1,217,941 in 2009). 111

112 XVIII Reference document The following table presents the breakdown of the capital interests and voting rights of the Company's main shareholders at December 31st, 2010 (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, 2010 % of capital % of voting rights Number of Company shares on a diluted basis % of capital % of voting rights Number of shares 12,867,599 16,126,384 Founder & Chairman and CEO Henri Seydoux (1) 4,546, % 36.4% 6,946, % 44.0% Founder, Chairman subtotal 4,546, % 36.4% 6,946, % 44.0% Directors Jean Marie Painvin % 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% Directors subtotal 6,086 NS NS 6,086 NS NS Parrot staff Staff on registered basis 275, % 2.2% 1,133, % 7.2% Parrot staff subtotal 275, % 2.2% 1,133, % 7.2% Historical investor Seventure Partner (2) 941, % 7.5% 941, % 6.0% Historical investor subtotal 941, % 7.5% 941, % 6.0% Parrot S.A. treasury shares 418, % 3.2% 418, % 2.6% GENERAL TOTAL 6,187, % 49.5% 9,446, % 59.8% (1) For details on transactions carried out by executives to acquire, sell, subscribe for or exchange securities on the stock market, please refer to Section of this reference document. (2) Shares spread across various innovative technology investment funds (FCPI). Mr. Henri Seydoux, as presented in the table above, is the Company's main shareholder in terms of both his share in the capital and the voting rights, serving as its Chairman and Chief Executive Officer. As indicated in the Chairman of the Board of Directors' report on internal control included in the present reference document, the Company has put in place the provisions required to comply with the corporate governance system in force in France. 112

113 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 three financial years: Position at Feb 28, 2009 Position at Dec 31, 2009 Position at Dec 31, 2010 Number of shares % of capital % of voting rights Number of shares % of capital % of voting rights Number of shares % of capital % of voting rights Total number of 13,377,213,, 12,923,747,, 12,867,599,, shares Founder (1), Henri Seydoux 4,586, % 34.3% 4,586, % 35.5% 4,546, % 35.2% Founder total 4,586, % 34.3% 4,586, % 35.5% 4,546, % 35.2% Directors Jean Marie Painvin 100 NS NS 100 NS NS 100 NS NS Edward Planchon 5,183 NS NS 5,.183 NS NS 5,.183 NS NS Geoffroy Roux de 732 NS NS 732 NS NS 732 NS NS Bézieux Olivier Legrain 20 NS NS 20 NS NS 20 NS NS Jean-Yves Helmer 50 NS NS 50 NS NS 50 NS NS Stéphane Marie NA 1 NS NS 1 NS NS Directors total 6,085 NS NS 6,086 NS NS 6,086 NS NS Parrot staff Staff on registered basis 299, % 2.2% 318, % 2.5% 275, % 2.1% Staff subtotal 299, % 2.2% 318, % 2.5% 275, % 2.1% Historical investors Seventure Partners S.A. 941, % 7.0% 941, % 7.3% 941, % 7.3% Historical investors 941, % 7.0% 941, % 7.3% 941, % 7.3% subtotal Other investors Covea Finance (2) 683, % 5.1% 1,209, % 9.4% 891, % 6.9% MN Services 1,211, % 9.4% 0 0.0% 0.0% Other investors 683, % 5.1% 2,421, % 18.7% 891, % 6.9% total Treasury Shares Parrot S.A. 934, % 7.0% 417, % 3.2% 418, % 3.2% Total treasury stock 934, % 7.0% 417, % 3.2% 418, % 3.2% GENERAL TOTAL 7,451, % 55.7% 8,691, % 67.3% 7,078, % 54.8% NS: Not significant.. NA: Not applicable. (1) For details on transactions carried out by executives to acquire, sell, subscribe for or exchange securities on the stock market, please refer to Section of this reference document. (2) COVEA Finance: formerly MMA Finance. At December 31st, 2010, the estimated float therefore represented 51.47% of the capital (with "other investors" considered to be part of the float). 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. 113

114 2010 Reference document On the filing date for the present reference document, the Company's main shareholder was Mr. Henri Seydoux, holding 35.2% 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 in force in France, more specifically setting up an Audit Committee and an Appointments and Compensation Committee, which report on their work directly to the Board of Directors. Furthermore, three of the seven 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. 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. The following chart presents the change in Parrot's share price from its initial public offering (June 27th, 2006) to June 6th,

115 XIX. At the Board meeting on June 12th, 2006, the Directors decided to declassify all of the following agreements and no longer subject them to the procedure governing regulated agreements, it being understood that any identical agreements to be entered into with new subsidiaries will be considered to be current in the same way and entered into under normal conditions: The current account agreements under which the Company and the subsidiaries grant one another cash advances depending on their financial possibilities and needs, and are able to make payments for shared costs; The supply agreements under which the parent company supplies the subsidiaries concerned with the products they are to market in the countries where they are present. The declassification of the abovementioned agreements was possible on account of the shorter timeframes for reimbursement and/or payment, which are no longer exceptional but standard practice in this area. In 2007, a cash pooling agreement, under which the Company and the subsidiaries grant one another cash advances depending on their financial possibilities and needs, and are able to make payments for shared costs, was put in place and replaced the current account agreements which had been in place up until then between the Company and the subsidiaries. An addendum to the cash management agreement was signed on September 30th, 2008 in order to include Parrot Asia Pacific Ltd. The cash management agreements put in place between on the one hand Parrot S.A. and, on the other hand Parrot GmbH, Parrot Italia SrL, Parrot UK Ltd and Parrot Iberia SL, and Parrot Asia Pacific Ltd respectively, were maintained in A current account agreement was put in place between Parrot S.A. and its subsidiary Parrot Japan K.K. on June 30th, 2009 and continued to be applied in The current account agreement between Parrot S.A. and Parrot Inc. was reviewed and updated on December 29th, 2009 and all of its provisions replaced the previous agreement in force. In 2010, the current account agreement between Parrot S.A. and Parrot Inc., reviewed on December 29th, 2009, factored in the offsetting of a Parrot S.A. trade receivable relating to Parrot Inc following payment of an 8,000,000 dollar subsidy. The Group has reviewed and updated all of its agreements between Group companies in order to cover the new flows relating to its business. The supply agreements signed by the Company with each one of its subsidiaries (Parrot, Inc., Parrot Italia S.r.l., Parrot GmbH, Parrot UK Ltd, Parrot Asia Pacific Ltd, Parrot Iberia) were updated on January 1st, 2009, with all of their provisions replacing the agreements previously in force. These agreements were maintained in On January 1st, 2009, a supply agreement was entered into between Parrot Asia Pacific Ltd and Parrot Inc, in addition to a supply agreement between Parrot Trading Shenzhen Ltd and Parrot Asia Pacific Ltd. These agreements were maintained in 2010 Furthermore, the Group decided to put in place a management fees agreement between Parrot S.A. and its distribution subsidiaries on January 1st, 2009, as well as two agreements between Parrot S.A. and its subsidiary Parrot Asia Pacific Ltd relating to the use of industrial and intellectual property rights, with one agreement concerning the license for using patents and the other relating to the license for using Parrot brands dated January 1st, These agreements were maintained in A service agreement was signed for the OEM business between all of the Group's entities on January 1st, 2009 and continued to be applied in

116 2010 Reference document KPMG Audit Deloitte Marque & Gendrot 1, cours Valmy 185, Avenue Charles de Gaulle Paris La Défense Cedex Neuilly sur Seine France France Dear Shareholders, In our capacity as your company's statutory auditors, please find hereafter our report on regulated agreements and commitments. We are required to report to you, based on the information provided, on the main terms and conditions of agreements and commitments that we have been informed of or that we have become aware of in connection with our audit, without making any judgment relative to their utility or legitimacy, or looking into the possible existence of any other agreements and commitments. It is your responsibility, under the terms of Article R of the French commercial code, to evaluate the benefits of concluding such agreements and commitments with a view to their approval. As relevant, it is also our responsibility to provide you with the information required under Article R of the French commercial code relative to the implementation during the past year of any agreements and commitments already approved by the general meeting. We have performed the procedures that we have deemed necessary in view of the French national statutory auditors board (Compagnie Nationale des Commissaires aux Comptes) professional standards relative to this mission. These standards require that we perform procedures to verify that the information given is consistent with the underlying documents. Agreements and commitments approved during the past year We have not been informed of any agreements or commitments approved during the past financial year and to be submitted for approval by the general meeting as provided for under Article L of the French commercial code. Agreements and commitments approved during previous years whose performance continued over the last financial year In accordance with Article R of the French commercial code, we have been informed that the performance of the following agreements and commitments, which were approved at general meetings in previous financial years, continued during the last financial year. Service delivery agreement Nature and purpose: Provision of services by Mr. Edward Planchon to Parrot Inc. through the company EKP Consult, LLC, to Parrot Inc. Terms: Amount of services invoiced to the Group in 2010: NA. Amount of costs reimbursed by Parrot S.A. in 2010: 6, US dollars. The statutory auditors Paris La Défense, April 29th, 2011 Neuilly sur Seine, April 29th, 2011April 15th, 2011 KPMG Audit Deloitte Marque & Gendrot Department of KPMG S.A. Jean-Pierre Valensi Nahid Sheikhalishahi Jean-Claude Berriex 116

117 XX. '000 Note Dec 31, 2009 Dec 31, 2010 Revenues 4 168, ,666 Cost of sales 5-88, ,449 GROSS MARGIN 79, ,217 % of revenues 47.30% 49.7% Research and development costs 5-23,801-28,724 % of revenues % 11.9% Sales and marketing costs 5-32,054-41,247 % of revenues % 17.1% General costs 5-9,151-10,709 % of revenues -5.40% 4.4% Production and quality 5-7,362-7,884 % of revenues -4.40% 3.3% INCOME FROM ORDINARY OPERATIONS 7,405 31,653 % of revenues 4.40% 13.1% EBIT 7,405 31,653 % of revenues 4.40% 13.1% Income from cash and cash equivalents Cost of gross financial debt Cost of net financial debt Other financial income 7 6, Other financial expenses and taxes 7-6, Share in income from equity affiliates (net of tax) -994 Tax 8 1,651-2,842 EARNINGS FOR THE PERIOD Group share 9,577 14,024 Minority interests Earnings for the period (Group share) as % of revenues 5.70% 6.80% Note Dec 31, 2009 Dec 31, 2010 Weighted average number of ordinary shares 13,075,787 12,866,574 Basic net earnings per share ( ) Weighted average number of ordinary shares (diluted) 13,137,686 13,197,030 Diluted net earnings per share ( )

118 2010 Reference document '000 Dec 31, 2009 Dec 31, 2010 Exchange gains or losses Change in value of derivative hedging instruments Change in actuarial differences concerning employee benefits Taxes Net income booked directly against shareholders' equity Earnings for the period - Group share 9,577 14,024 Total income and expenses booked for the period 9,597 27,886 ASSETS Note Dec 31, 2009 Dec 31, 2010 Non-current assets 30,933 34,723 Goodwill 9 21,125 21,076 Other intangible fixed assets 9 5,482 8,786 Tangible fixed assets 10 3,797 4,122 Interests in equity affiliates 12 and 23 - Financial assets Deferred tax assets Current assets 137, ,643 Inventories 14 12,239 30,509 Trade receivables 15 42,123 48,401 Other receivables 16 6,952 4,927 Other current financial assets 17 27,961 Cash and cash equivalents 17 76,035 62,844 Total assets 168, ,367 SHAREHOLDERS' EQUITY AND LIABILITIES Note Dec 31, 2009 Dec 31, 2010 Shareholders' equity Share capital 1,970 1,962 Issue and contribution premiums 18 57,768 57,159 Reserves excluding earnings for the period 57,003 64,558 Earnings for the period 9,577 27,831 Exchange gains or losses Equity attributable to Parrot S.A. shareholders 126, ,140 Minority interests -- - Non-current liabilities 5,029 3,785 Pension provisions and related commitments Deferred tax liabilities 13 3,851 2,021 Other non-current liabilities ,087 Current liabilities 36,591 53,441 Current financial liabilities Current provisions 23 1,041 7,519 Trade payables 24 24,658 30,955 Current tax liability ,953 Other current liabilities 24 10,770 13,015 Total shareholders' equity and liabilities 168, ,

119 '000 Dec 31, 2009 Dec 31, 2010 Operating cash flow Earnings for the period 9,577 27,831 Share in income from equity affiliates 6, Depreciation and amortization 0 13,106 Capital gains and losses on disposals -1, Tax charges - 2,842 Cost of share-based payments 1,740 1,647 Cost of net financial debt Cash flow from operations before cost of net financial debt and tax 15,106 45,928 Change in working capital 17,571-20,260 Tax paid 3,896 2,770 CASH FROM OPERATING ACTIVITIES (A) 36,573 28,437 Investing cash flow Interest received - - Acquisition of tangible and intangible fixed assets -4,319-9,998 Acquisition of subsidiaries, net of cash acquired - - Acquisition of long-term financial investments Increase in other current financial assets - - Disposal of tangible and intangible fixed assets - - Disposal of subsidiaries, net of cash divested - - Disposal of long-term financial investments - - CASH FLOW FROM INVESTMENT ACTIVITIES (b) -4,417-10,577 Financing cash flow Equity contributions (1) 124 1,106 Dividends paid - - Receipts linked to new loans - - Other financing - - Cash invested for over 3 months * - -27,961 Cost of net financial debt Exchange hedging instruments ** Repayment of short-term financial debt (net) -1,001 - Repayment of other debt - - Acquisition of treasury stock (2) ,207 CASH FLOW FROM FINANCING ACTIVITIES (C) ,678 NET CHANGE IN CASH POSITION (D = A+B+C) 31,601-13,817 Impact of change in exchange rates CASH AND CASH EQUIVALENTS AT YEAR-START 44,606 76,035 CASH AND CASH EQUIVALENTS AT YEAR-END 76,035 62,844 The net cash position can be broken down as follows: Cash and cash equivalents for the period 76,035 62,844 Other current financial assets - 27,961 Cash, cash equivalents and other current financial assets at year-end 76,035 90,806 (1) Capital increase through exercising of option. (2) Treasury share buyback. Also see Note (*) Not meeting the IFRS criteria for recognition under cash or cash equivalents (**) Relating to exchange hedging instruments (cf. Note 26.4) 119

120 2010 Reference document Capital Issue and contribution premiums Treasury stock (2) Reserves excluding earnings for the period Earnings for the period Shareholders' equity (Group share) Position at end December ,035 60,468-8,166 46,705 13, ,936 Appropriation of earnings for N-1 13,894-13,894 0 Income and expenses booked for the period 9,597 9,597 Change in capital -65-2,269 4,454-1, Reclassification Treasury stock Share-based payments 1,740 1,740 Other / reclassification Position at end December 2,035 60,468-8,166 46,705 13, , Appropriation of earnings for 9,597-9,597 0 N-1 Comprehensive income for 27,886 27,886 the period Change in capital (1) ,554-1,345-4,039 Reclassification Share-based payments 1,632 1,632 Position at end December ,962 57,159-6,633 71,766 27, ,140 (1) The change in capital during 2010 primarily reflects: - A capital reduction through the cancellation of 211,376 shares approved by the Board of Directors on July 29th, 2010 totaling 289,000 euros (capital: 32,000 euros; issue premium: 1 257,000 euros) - A capital increase through the creation of 3,039 shares relating to payment of the Waveblue earnout approved by the Board of Directors on June 1st, 2010 totaling 41,000 euros (capital: 1,000 euros: issue premium: 40,000 euros) - A capital increase through the exercising of options and share warrants for 24,000 euros. (2) The change in treasury stock during 2010 primarily reflects purchases of treasury stock held. NOTE 1 THE COMPANY The appended consolidated financial statements present the operations of Parrot S.A. and its subsidiaries (referred to collectively as the Group ). Parrot S.A. is a French-law company that was listed in Its registered office is in Paris. The financial statements for the year ended December 31st, 2010 were approved by the Board of Directors on February 10th, They will be submitted for approval at the general meeting on May 31st, The financial statements are presented in euros. All the financial data are rounded off to the nearest thousand euros. NOTE 2 - ACCOUNTING METHODS AND RULES The consolidated financial statements for 2010 have been drawn up in accordance with International Financial Reporting Standards (IFRS), as adopted within the European Union at December 31st, The new standards which must be applied as of January 1st, 2010 and concern the Group are as follows: IFRS 3 (revised) Business Combinations, IAS 27 (amended) Consolidated and Individual Financial Statements, Amendment to IFRS 2: Group Cash Settled Share-based Payment Transactions, Amendments to IFRIC 9 and IAS 39 Embedded Derivatives, 120

121 Amendment to IAS 39 Eligible Hedged Items, IFRIC 16 Hedges of a Net Investment in a Foreign Operation, IFRIC 17 Distributions of Non-cash Assets to Owners, IFRIC 18 Transfers of Assets from Customers, Annual IFRS improvements published in The application of these standards has not had any material impact on the presentation of the consolidated financial statements. Certain non-mandatory standards and interpretations adopted by the International Accounting Standards Board (IASB) or International Financial Reporting Interpretations Committee (IFRIC) and the European Union at December 31st, 2010 have not been applied in advance. More specifically, this concerns: IAS 24 Related Party Disclosures, Amendment to IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments, Amendment to IFRIC 14 Prepayments of a Minimum Funding Requirement, Amendment to IFRS 1 Limited Exemption from Comparative IFRS 7 Disclosures. Certain standards, amendments to standards and interpretations adopted by the IASB or IFRIC, but not yet adopted by the European Union at December 31st, 2010, have not been applied early. This concerns the following standards: IFRS 9 Financial Instruments (Phase 1: Classification and Valuation of Financial Assets), Standards and interpretations adopted by the EU which are not mandatory and those which have not yet been adopted by the EU are not expected to have any significant impact on the consolidated accounts. Management does not expect the application of these standards to have any significant impact on the consolidated financial statements. The main accounting principles applied by the Group are as follows: A) Consolidation methods The financial statements for the various companies over which Parrot S.A. has direct or indirect control are fully consolidated. This control exists when Parrot S.A. has the power to directly or indirectly control the company's financial and operational policies so as to benefit from its activities. Parrot S.A. is deemed to have control when it owns more than half of the voting rights in the controlled company. The financial statements for controlled companies are included in the Group's consolidated financial statements as of the date on which control has effectively been transferred over, up until the date on which it ceases to have control. The Group's consolidated companies drew up their financial statements at December 31st, 2008 and 2009 in line with the accounting rules and methods applied by the Group. Transactions between consolidated companies, and any inhouse profits are eliminated. Affiliates are entities in which the company has a significant influence over their financial and operational policies, although without having control over them. Significant influence is presumed to exist when the Group holds between 20 and 50% of an entity's voting rights. Interests in affiliates are recognized in line with the equity method and initially recorded at cost. The Group does not control any ad hoc entities. B) Use of estimates To draw up the financial statements, management is required to make judgments and use estimates and assumptions that have an impact on the amounts of assets and liabilities at the close of accounts, as well as on items for earnings over the period. These estimates factor in economic data which are liable to change over time, and include various random elements. The underlying estimates and assumptions are based on past experience and other factors that are deemed to be reasonable in view of the circumstances, particularly with regard to the current economic and financial crisis. In this way, they serve as a basis for the judgments required in order to determine the book values of assets and liabilities, which may not be obtained directly from other sources. Actual values may be different from the estimated values. The underlying assumptions and estimates are reexamined on an ongoing basis. The impacts of changes in accounting estimates are recorded during the period of the change if they only affect this period or during the period of the change and subsequent periods if they are also affected by the change. 121

122 2010 Reference document They primarily concern the recognition of revenues on service delivery contracts, business combinations, the recognition of deferred tax assets, notably resulting from deferrable tax losses, value tests on current and non-current assets, the valuation of share-based payments, the valuation of financial instruments and current and non-current provisions. C) Conversion methods: Transactions denominated in foreign currencies Transactions in foreign currencies are converted into euros based on the exchange rate in force on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies on the closing date are converted based on the exchange rate in force on the closing date. Any exchange rate differences resulting from such transactions are recorded under income or expenses unless they arise from long-term inter-company financing operations that can be considered as capital transactions: in this case, they are recognized through equity under exchange gains or losses. Non-monetary assets and liabilities denominated in foreign currencies are recorded and kept at the historical rate in force on the transaction date. Financial statements denominated in foreign currencies The Group s consolidated financial statements are presented in euros. The assets and liabilities of consolidated companies expressed in foreign currencies are converted into euros based on the exchange rate in force on the closing date, except for the net position, which is recorded at its historical value. These companies income and expenses are converted into euros based on rates close to the exchange rates in force on the transaction dates. Any exchange gains or losses on conversions are booked under conversion reserves as a separate shareholders equity component. The conversion rates for the main currencies used within the Group over 2009 and 2010 were as follows: Closing rate Dec 31, Dec 31, Dec 31, Opening Dec 31, Dec 31, Average rate Dec 31, rate US Dollar US Dollar US Dollar HK Dollar HK Dollar HK Dollar Pound Pound Pound Sterling Sterling Sterling Chinese Chinese Chinese Yuan Yuan Yuan Japanese Yen Japanese Yen Japanese Yen D) Income statement In order to understand the specific characteristics of the Group's business more effectively, it presents an income statement for each function, highlighting the following elements: the cost of sales (costs linked directly to the products sold), research and development costs (including costs not recognized as assets on the balance sheet incurred during the year, as well as the depreciation of development costs recorded as assets on the balance sheet), commercial expenses, overheads and production and quality costs (operating costs for dedicated supply and quality management departments, primarily including wages for the staff concerned). With the cost of sales, these four items represent operating expenses, which, deducted from revenues, make it possible to obtain the level of EBIT, the main performance indicator for the Group s business. In order to provide more comprehensive information, these operating expenses are broken down by kind in Note 5 Operating expenses by type in these notes. The level of net income is then obtained by taking the following items into account: The cost of net financial debt, including interest on financial debt calculated based on the effective interest rate, less income from cash and cash equivalents, Other financial income and expenses, which include exchange gains and losses, The current and deferred tax expense. Non-current income and expenses, comprising significant income and expenses considered to be nonrecurring, such as capital gains or losses on the disposal of consolidated companies or activities, restructuring costs approved by management and having been communicated on externally, costs relating to business combinations, impairments of assets and goodwill, and the recalculation of the fair value of the interest previously held by the Group in the company acquired through a business combination achieved in stages, considered to be non-recurrent. 122

123 E) Earnings per share The information presented is calculated in line with the following principles: F) Revenues Basic earnings per share: earnings for the period (Group share) are considered in relation to the weighted average number of ordinary shares outstanding over the period, after deducting treasury stock held during the period. The average number of ordinary shares outstanding represents a weighted annual average, adjusted for the number of ordinary shares redeemed or issued during the period and calculated based on the issue date for shares over the year; Diluted earnings per share: earnings for the period (Group share) and the weighted average number of shares outstanding, factored in when calculating basic earnings per share, are adjusted for the effects of all potentially dilutive ordinary shares: share warrants (Note 18.3 Share warrant and company founder equity warrant schemes) and bonus shares. Income from the sale of goods is recorded on the income statement when the significant benefits and risks inherent in ownership of the goods have been transferred to the buyer. Income from the provision of services is recorded on the income statement based on the level of progress made with the service on the closing date. The level of progress made is determined with reference to the costs incurred. No income is recorded when there is a significant level of uncertainty surrounding the collectability of the counterparty due, the costs incurred or to be incurred in relation to the sale or the possible return of goods in the event of the right to cancel the purchase, and when the Group remains involved in the management of the goods in question. Revenues generated with specialized distributors are recognized net of any referencing or volume-based discounts. The amount of any referencing or volume-based discounts granted is recorded on the shipment date for goods based on past experience and the contractual conditions in force. G) Operating lease payments Payments for operating leases are booked as expenses on a linear basis over the term of the lease in question. The benefits received represent an integral part of the net total for lease charges and are booked under income in line with the same rule. H) Cost of net financial debt The cost of net financial debt includes interest to be paid on loans (calculated based on the effective interest rate method), less interest to be received on investments and income from other dividends. Interest-related income is recorded on the income statement when acquired under the effective interest rate method. Income from dividends is recorded on the income statement as soon as the Group becomes entitled to receive the payments in question. I) Corporate income tax Corporate income tax (expense or income) comprises the tax expense (income) due and any deferred tax expenses (income). Tax is recorded on the income statement if it concerns items that are booked directly against shareholders equity; in which case, it is booked against shareholders equity. The tax due is (i) the estimated amount of tax due relative to taxable profit for a given period, determined based on tax rates that have been adopted or virtually adopted on the closing date, and (ii) any adjustments to the amount of tax due relative to previous periods. The research tax credit is booked against corporate income tax for the year. For deferred tax, see section N of the present note. New tax regulations in France, applicable from January 1st, 2010 The 2010 French finance bill (Loi de finances), approved on December 30th, 2009, introduced a regional economic levy (CET) to replace the Taxe Professionnelle (TP) business tax. The CET tax consists of two components: the business property levy (CFE) and the tax on business added value (CVAE). Following the changes to the tax system, the Parrot Group has reviewed the accounting treatment of tax in France in view of IFRS, and more specifically IAS 12 Income Taxes. As far as business tax is concerned, the Group records the CVAE component under corporate income tax for the following reasons: 123

124 2010 Reference document The basis for calculating the CVAE tax is consistent with the definition given by the IFRIC for a tax to be included within the scope of IAS 12: it is calculated on an amount net of income and expenses, and this net amount may be different from the net accounting income; To ensure consistency with the accounting treatment of similar taxes in other countries internationally. J) Segment reporting A segment is an entity component likely to generate revenues, whose earnings are those taken from the entity's internal reporting system. The Group tracks its activity based on only one reporting segment in light of the Group's new organization. K) Intangible fixed assets Goodwill Business combinations are recorded in accordance with the acquisition method on the acquisition date, which is the date when control is transferred to the Group. Goodwill is valued at cost, less any aggregate impairments in value. Goodwill is allocated to cash generating units and is not depreciated, but subject to an impairment test (cf. "Depreciation of tangible and intangible fixed assets"). For affiliates and joint ventures, recorded on an equity basis, the book value of the goodwill is included in the book value of the interest in the affiliate or joint venture. For acquisitions made since January 1st, 2010, the Group applies IFRS 3 (revised) Business Combinations and IAS 27 (revised) Consolidated and Individual Financial Statements. The main changes concern: Business combinations carried out since January 1st, 2010: Business combinations are now recorded as follows: The identifiable assets acquired and liabilities assumed are measured at their fair value on the acquisition date, The interest not giving control over the acquired company (non-controlling interest) is measured either at fair value, or based on the share of the identifiable net assets of the entity acquired. This option is applied on a case-by-case basis for each business combination operation. The costs relating to the acquisition are recorded under expenses, as they are incurred. Any eventual price adjustments for the business combination are measured at fair value on the acquisition date. After the acquisition date, price adjustments are measured at fair value at each close of accounts. After a one-year period from the acquisition date, any change in this fair value will be recognized through profit and loss. Within this one-year period, any changes to this fair value that are explicitly linked to events after the acquisition date will also be recognized through profit and loss. The other changes will be booked against goodwill. On the acquisition date, goodwill corresponds to the difference between: The fair value of the counterparty transferred, plus the amount of non-controlling interests in the company acquired and, for a business combination achieved in stages, the fair value on the acquisition date of the interest previously held by the acquiring party in the company acquired, revalued in this way through profit and loss under other operating income and expenses, and, The net balance of the amounts of identifiable assets acquired and liabilities assumed on the acquisition date. Additional acquisition of securities after gaining exclusive control: For an additional acquisition of securities in an entity that is already exclusively controlled, the difference between the acquisition price of securities and the additional share of consolidated equity acquired is recorded under the equity attributable to the Group parent company owners, while keeping the consolidated value of the subsidiary's identifiable assets and liabilities, including goodwill, unchanged. Recognition of acquisitions of non-controlling interests: Under IAS 27 (revised), acquisitions of non-controlling interests are recorded as transactions with the owners acting in this capacity and, as a result, such transactions do not result in any goodwill. Adjustments to non-controlling interests are determined based on the share in the subsidiary's net assets. Business combinations carried out between January 1st, 2004 and January 1st, 2010 are still recorded in accordance with IFRS 3 Business Combinations. 124

125 Within this framework, goodwill represents the difference between the acquisition price, plus related costs, of securities in consolidated companies and the Group share in the fair value of their net assets after deducting liabilities and contingent liabilities on the date when the interest was acquired, at the end of a measurement period for this fair value that may reach 12 months after the acquisition date. When the acquisition price, plus related costs, is lower than the fair value of the identified assets and liabilities and contingent liabilities acquired, the difference is immediately recognized through profit and loss. Research and development costs Research costs are recorded as expenses when they are incurred. Research spending made with a view to acquiring new scientific or technical knowledge or understanding is booked as an expense when incurred. Development costs, i.e. costs resulting from the application of research findings for a plan or model with a view to producing new or substantially improved products or techniques are recorded as fixed assets if the Group is able to demonstrate that it simultaneously fulfils the criteria for the technical and commercial feasibility of the product or technique, the availability of sufficient resources to complete the development, the commitment to complete the intangible fixed asset, the capacity to use or sell this intangible fixed asset, the capacity to generate future economic benefits, the capacity to reliably value the various expenses attributable to the intangible fixed asset during its development. The expenditure capitalized in this way notably includes direct labor costs and outsourcing costs. Other development costs are recorded as expenses when they are incurred. Any capitalized development costs are recorded at cost less any aggregate depreciation and possible impairments in value. They are depreciated over two to three years. Other intangible fixed assets Fully-owned software and user rights are capitalized and depreciated over their useful life, i.e. three years for software and one to four years for user rights. L) Tangible fixed assets Tangible fixed assets are recorded under assets on the balance sheet at their depreciated historical cost, less any impairments in value. They are not revalued. Subsequent expenditure (spending to replace assets and ensure their compliance) is capitalized and depreciated over the remaining useful life for the corresponding fixed asset. Regular upkeep and maintenance costs are booked as expenses when they are incurred. Depreciation is calculated on a straight-line basis in view of the estimated useful life of the various categories of fixed assets. It is calculated based on the acquisition price less any residual value. Fixed assets are depreciated based on their useful life as follows: Fixtures and fittings 3 to10 years Technical facilities 10 years Plant and equipment 3 years Office equipment and IT 3 years Transport equipment 3 years. The residual values and estimated useful lives are revised at each close of accounts. Capital gains or losses stem from differences between the sales price and the net book value of assets sold off. M) Depreciation of tangible and intangible fixed assets The book value of tangible and intangible fixed assets is tested if there are any signs of impairment in value on the reporting date, and at least once a year for goodwill and other intangible fixed assets with an indefinite lifespan, in addition to fixed assets under development. The value test is based on determining the recoverable value of each unit generating its own cash (cash generating unit, CGU). These units correspond to subsidiaries or regions in which the Group is established, whose continuous activity generates cash inflows that are largely independent from cash inflows generated by other assets or groups of assets. The recoverable value of a cash generating unit represents the higher of its fair value less costs of sale and its going concern value. The going concern value of each cash generating unit is determined in line with the net discounted cashflow method, based on parameters resulting from the budgetary and forecasting process, spread over a five-year period, including rates of growth and profitability that are deemed to be reasonable. 125

126 2010 Reference document The long-term growth rate for beyond the five-year period is assessed based on analyses of the sector in which the Group operates, for each region in question. Discounting is applied at a rate corresponding to the average cost of capital on the valuation date plus a risk premium based on the region in question. When the recoverable value of a cash generating unit is lower than its net book value, the corresponding impairment in value is allocated in priority to goodwill, then to reducing the unit s other assets on a pro rata basis in line with the book value of each one of the unit s assets, and recognized under EBIT. With regard to development costs, an impairment is recognized if one of the conditions indicated in Section 2K) is no longer met. This impairment is determined based on a comparison between the asset's book value and the expected economic benefits relating to the asset in question. Any impairments in value recorded on goodwill cannot be written back. N) Deferred tax Deferred taxes are recorded on the income statement and on the balance sheet in order to factor in any timing differences between the book values and the tax values of certain assets and liabilities. Deferred taxes are recorded in line with the asset-liability approach for the accrual method. Deferred taxes are valued factoring in known changes in tax rates (and tax regulations) that have been adopted or virtually adopted on the closing date. The impact of any changes in the tax rate on deferred taxes booked previously on the income statement or against shareholders equity is recorded respectively on the income statement or under shareholders equity during the year when such rate changes come into force. Deferred taxes are recorded respectively on the income statement or under shareholders equity during the year depending on whether they concern items that are themselves booked on the income statement or under shareholders equity. Deferred tax assets are recorded once it is likely that taxable profits will be generated, making it possible for any deferred tax assets to be used. The book value of deferred tax assets is reviewed at each close of accounts, and may be reduced if it is no longer likely that sufficient taxable profits will be available to make it possible to use the benefit of all or part of such deferred tax assets. Conversely, such a reduction will be written back if it becomes likely that sufficient taxable profits will be available. Deferred tax assets and liabilities are offset if and only if subsidiaries are entitled to offset tax assets and liabilities due and when these concern income tax deducted by the same tax authorities and at the same time. O) Inventories The cost of inventories is determined in line with the weighted average price method, and comprises the acquisition costs for inventories and the costs incurred for transporting them in the state and to the place where they are located. Inventories are valued at the lower of their cost or their net realizable value. The net realizable value represents the estimated sales price during the normal course of business, less the estimated costs for completion and the estimated costs required for making the sale. P) Non-derivative financial instruments P1) Trade and other receivables Trade and other receivables are valued at their fair value when initially recorded in the accounts, and then at their amortized cost less the amount of any impairments in value. P2) Trade and other payables All such accounts payable are initially recorded at their fair value, and then at their amortized cost. Following their initial recording, the Parrot Group values all financial liabilities other than those held for trading at their amortized cost. P3) Cash and cash equivalents Cash and cash equivalents comprise cash in hand and demand deposits, in addition to undertakings for collective investment in transferable securities (UCITS) that are compliant with the definition under IAS 7. Any UCITS that do not comply with the definition of cash and cash equivalents are recorded under other current financial assets. Bank overdrafts that are repayable on demand and are an integral part of the Group's cash management represent a cash and cash equivalent component for the purposes of the cash-flow statement. P4) Cash-flow hedging 126

127 When derivative instruments are allocated for hedging commercial operations in foreign currencies, they are marked to market on the balance sheet on the closing date. Any change in the market value of such derivative instruments is recorded under: The cost of sales for the effective portion of hedging for receivables and payables recorded on the balance sheet on the closing date; Shareholders' equity, under revaluation gains or losses, for the effective portion of hedging for future cash flows, with this amount transferred over to the cost of sales when the hedged receivables and payables are recognized. Q) Other current financial assets Financial instruments classed as other current financial assets are recorded in accordance with IAS 39 based on the categories which they correspond to. Any unrealized profit or loss resulting from them is recognized either directly through profit and loss, or temporarily through equity until the financial instrument is divested. Investments that are not consistent with the IAS 7 definition are classed as other current financial assets. R) Net cash The concept of net cash used by the Group corresponds to the aggregate for other current financial assets, cash and cash equivalents, less bank overdrafts. S) Treasury stock When Company securities are held by the Company itself or by consolidated entities, they are deducted against consolidated shareholders' equity based on their acquisition cost. Conversely, income from any sale of treasury stock is recorded directly under shareholders' equity for the impact net of tax. As a result, the capital gain or loss recorded in this way does not affect earnings for the year. T) Share-based payments Stock warrants may be granted to a certain number of the Group's staff, entitling them to subscribe for Parrot S.A. shares over a four or five-year period at a fixed exercise price, set at the time they are awarded. Bonus shares may also be awarded to the Group's staff. Warrants and bonus shares are valued based on the fair value of the benefits granted to staff on the allocation date. They are recognized under staff costs on the income statement over the vesting period, booked against shareholders equity. In connection with the function-based presentation of the income statement, the corresponding staff costs are broken down based on the functions of the employees concerned. The fair value of options is determined in line with the "Black and Scholes" model, the parameters for which notably include the exercise price for options, their term, the reference share price on the allocation date, the implied volatility for the share price, and the risk-free interest rate. The expense recorded also factors in assumptions for the turnover of staff benefiting from the allocation of options. In 2005, and in accordance with IFRS 1 First Adoption of International Financial Reporting Standards, only schemes allocated after November 7th, 2002 and for which the vesting date is after January 1st, 2005, had been valued and recorded under operating expenses. Schemes prior to November 7th, 2002 and those allocated after November 7th, 2002 and for which rights are vested prior to January 1st, 2005, had not been valued and were still not recorded in the accounts. U) Employee benefits Pension scheme: The Group is primarily subject to pension systems with defined contributions. Defined contribution systems are subject to payments by staff and by Group companies to various organizations authorized to manage such pension funds. The Group's obligations are limited to the payment of such contributions, which are therefore recorded on the income statement as they are incurred. The Group is also subject to various defined benefit systems, notably for end-of-career benefits paid to staff. Since the Group applies the revised version of IAS 19, any actuarial differences relating to defined benefit pension schemes are booked under other comprehensive income items. Long-term benefits The Group's net obligation for long-term benefits other than pension schemes is equal to the value of the future benefits acquired by staff in return for services rendered during the present and subsequent periods. The amount of the 127

128 2010 Reference document obligation is determined using the projected credit unit method. The discount rate is equal to the rate on the closing date based on obligations under the first category for which the due dates are close to those for the Group's commitments. V) Provisions A provision is recorded on the balance sheet when the Group has a current legal or implied legal obligation resulting from a past event and when it is likely that an outflow of resources representative of economic benefits will be necessary in order to fulfill the obligation. Warranty provisions A provision is intended to cover future expenses linked to product warranty claims concerning the aftermarket products sold by Parrot. It is calculated statistically based on real company information provided by its various departments. In this way, the following elements are calculated for each product category: Return rate Exchange rate Repair rate Repair costs Other warranty provisions A provision for supplier commitments is recorded and intended to cover the risk of any loss in value of products ordered from suppliers as a result of sales prospects. Employment tribunal provisions A provision for disputes is estimated on a case-by-case basis in view of an analysis of the situations with help from the legal advisors in charge of monitoring them. NOTE 3 - BASIS FOR CONSOLIDATION The Parrot Group s basis for consolidation comprises nine fully-consolidated companies, all fully owned, and one 39.5%- owned company that is consolidated on an equity basis, with the consolidation methods presented below: PARENT COMPANY Parrot S.A. CONSOLIDATED SUBSIDIARIES Parrot Iberia S.L. Parrot Inc. Parrot Italia Srl. Parrot GmbH. Parrot UK Ltd Parrot Asia Pacific Ltd Parrot Shenzhen (Parrot Asia Pacific Ltd subsidiary) Parrot Japan KK Waveblue LLC (Parrot Inc. subsidiary) Name Address Country 174, Quai de Jemmapes, Paris Augustin Duran, Madrid Franklin Road Southfield, MI Via Lattanzio Milan Leopoldstrasse Munich MGI Wenham Major LLP 89, Cornwall street, Birmingham B7 4EJ Suite 501B, 5th Floor, Ocean Centre, 5 Canton Road, Tsim Sha Tsui, Kowloon, Hong Kong Room , Centres Commerce Building, 88 Fuhua Yi Road, Futian Centers District, Shenzhen PMC Building Higashi- Azabu, Minato-ku, Tokyo 1919 Broadway Street, Santa Monica, CA France Spain 100% US 100% Italy 100% Germany 100% UK 100% Hong Kong Parrot S.A. stake (%) 100% China 100% Japan 100% US 100% Consolidation method Fully consolidated Fully consolidated Fully consolidated Fully consolidated Fully consolidated Fully consolidated Fully consolidated Fully consolidated Fully consolidated 128

129 Da Fact 174, Quai de Jemmapes Paris France 39.5% Equity consolidated NOTE 4 SEGMENT REPORTING Following the review carried out in 2009, the Group recognizes the existence of only one reporting segment in view of the Group's new organization since January 1st, Breakdown of Group sales by region '000 Dec 31, 2009 Dec 31, 2010 EMEA 130, ,359 USA 6,015 16,095 Asia 3,273 5,892 Retail products 139, ,346 OEM products 28,630 81,320 Total revenues 168, ,577 The top 10 customers represented around 31.8% of the Group's consolidated revenues in 2010, compared with 31% in NOTE 5 BREAKDOWN OF OPERATING EXPENSES Expenses by kind can be broken down as follows: '000 Dec 31, 2009 Dec 31, 2010 Consumption of raw materials and goods, and outsourcing purchases 74, ,776 Other external expenses 38,251 50,805 Staff costs 32,736 36,460 Tax 2,234 2,012 Depreciation and amortization 9,926 14,931 Stored production 3,546-6,402 Other operating income and expenses Total operating expenses 181, ,012 Staff costs can be broken down as follows: '000 Dec 31, 2009 Dec 31, 2010 Salaries and wages 20,351 20,869 Payroll taxes 9,671 11,249 Employee profit sharing 974 2,694 Share warrant expenses 1,740 1,647 Total staff costs 32,736 36,460 Staff costs are restated for the portion of such costs allocated to capitalized research and development projects (IFRS). NOTE 6 NON-RECURRING OPERATING EXPENSES NA NOTE 7 - NET FINANCIAL RESULT '000 Dec 31, 2009 Dec 31, 2010 Cost of gross financial debt Income from investments Other Cost of net financial debt Exchange gains 6,440 8,197 Exchange losses -6,476-8,684 Other -46 Other financial income and expenses Total

130 NOTE 8 TAX Tax expense The tax expense can be broken down as follows: 2010 Reference document '000 Dec 31, 2009 Dec 31, 2010 Current tax -2,674 4,698 Deferred tax 1,023-1,856 Total -1,651 2,842 The 2010 current tax expense includes a 4,808,000 euro research tax credit. The deferred tax expense for 2010 primarily concerns the depreciation of financial receivables relative to the US subsidiary, the cancellation of the depreciation of treasury stock, the cancellation of profits on inventories recognized with the Spanish, Hong Kong, Italian and German subsidiaries, the cancellation of the provision for the depreciation of Group inventories, the recognition of foreign exchange liabilities under income, as well as other timing differences. The reconciliation between the theoretical tax expense and the effective tax expense is as follows: '000 Dec 31, 2009 Dec 31, 2010 Earnings for the period 9,577 27,831 Tax charges -1,651 2,842 Pre-tax earnings 7,927 30,674 Theoretical tax expense (33.33% in N, 33.33% in N-1) -2,642-10,858 Reconciliation: Permanent differences Reduced tax operations 682 2,249 Tax rate difference 532 1,691 Non-capitalized tax losses Recognition of prior losses ,323 Research tax credit (1) 4,338 4,808 Additional contributions (2) - -2,351 Actual tax expense 1,651-2,842 (1) Including 874,000 euros in income in 2009 for a dispute on the research tax credit provisioned in 2008 (2) Including the reclassification of the share relating to the CVAE tax on business added value (-906,000 euros) and the Hong Kong withholding tax (-1,397,000 euros). NOTE 9 - INTANGIBLE FIXED ASSETS '000 Dec 31, 2009 Increase Decrease Exchange gains or losses Dec 31, 2010 Gross values Goodwill (1) 21, ,076 Development costs 17,072 5,723 22,796 Patents and brands 3, ,585 Software 1, ,302 Fixed assets under construction Other intangible assets 8 8 Subtotal excluding goodwill 22,642 6, ,885 Total 43,767 6, ,961 Depreciation and amortization Goodwill (1) Development costs -12,201-2,224-14,425 Patents and brands -3,315-1,108-4,424 Software -1, ,248 Fixed assets under construction Other intangible assets Total -16, ,748-20,097 Net book values Goodwill (1) 21, ,

131 Development costs 4,872 5,723-2,224 8,371 Patents and brands , Software Fixed assets under construction Other intangible assets 8 8 Subtotal excluding goodwill 5,720 7,436-4,368-8,788 Total 26,845 7,436-4, ,864 (1) The change in goodwill corresponds to the recognition of an adjustment to the cost for the acquisition of WAVEBLUE at the end of The development costs recorded as assets on the balance sheet over the year correspond to the development of the Group's new product ranges, and primarily comprise staff costs. Impairment testing: The main assumptions used to determine the recoverable value of goodwill are as follows: Cash generating unit Parrot EMEA Parrot Inc Net book value of goodwill ( '000,000) 18,546 2,530 Valuation method for the cash generating unit Going concern value Going concern value Number of years over which cash-flow is estimated 5 years 5 years Long-term growth rate 1.00% 1.00% Discount rate at December 31st, 2010 after tax (1) 12.00% 12.00% (1) The application of a pre-tax discount rate for pre-tax cash-flow gave an identical valuation for the cash-generating unit. The net book value of goodwill at December 31st, 2010 has been tested based on the procedure put in place by the Group when controlling the value of this asset. With this procedure, the going concern value determined with the net discounted cash-flow method is based on determining the recoverable value of the unit generating its own cash-flow. These units correspond to the American and EMEA markets for the Group. All the activities from the former European regions are now conducted in line with a common investment and operational strategy aimed at developing these activities within a coherent economic area, enabling significant commercial and operational synergies. As a result, the EMEA region represents a new cash generating unit (CGU). In this way, cash inflows generated on the previous CGUs are no longer largely independent from one another. The Parrot Inc. cash generating unit stems from the acquisition of Waveblue LLC in Revenue growth and the percentage margin in relation to revenues have been determined based on past performance and the outlook for growth for these cash generating units. They are consistent with the forward-looking data issued by the Group. An analysis of the sensitivity of the calculation to a combined variation in key parameters (discount rate and long-term growth rate) based on reasonably possible assumptions does not reveal any probable scenario in which the cash generating unit's recoverable value would fall below its book value. At December 31st, 2008, intangible fixed assets can be broken down as follows: '000 Dec 31, 2008 Increase Decrease Exchange gains or losses Dec 31, 2009 Gross values Goodwill (1) 21, ,528 Development costs 11,133 4,197 15,331 Patents and brands 3, ,503 Software 1, ,174 Fixed assets under construction Other intangible assets 8 8 Subtotal excluding goodwill 15,800 4, ,454 Total 36,817 5, ,982 Depreciation and amortization Goodwill (1) Development costs -5,178-3,381-8,560 Patents and brands -2, ,291 Software ,108 Fixed assets under construction 131

132 2010 Reference document Other intangible assets Total -8,839-4, ,959 Net book values Goodwill (1) 21, ,528 Development costs 5, ,771 Patents and brands Software Fixed assets under construction Other intangible assets 8 8 Subtotal excluding goodwill 6, ,495 Total 27, ,023 (1) The change in goodwill corresponds to the recognition of an adjustment to the cost for the acquisition of Waveblue LLC at the end of NOTE 10 - TANGIBLE FIXED ASSETS '000 Dec 31, 2009 Increase Decrease Exchange gains or losses Dec 31, 2010 Gross values Buildings Plant and equipment 5,075 1, ,890 Other tangible fixed assets 6,156 1,928-1, ,720 Total 11,245 3,183-1, ,624 Amortization -1-1 Buildings -4, ,471 Plant and equipment -3,542-1,632 1, ,031 Other tangible fixed assets -7,684-2,384 1, ,503 Total -1-1 Net book values Buildings Plant and equipment ,420 Other tangible fixed assets 2, ,689 Total 3, ,122 The significant changes in tangible fixed assets concern France and the development of the Group. No tangible fixed assets have been pledged as collateral for any financial debt. At December 31st, 2009, tangible fixed assets can be broken down as follows: '000 Dec 31, 2008 Increase Decrease Exchange gains or losses Dec 31, 2009 Gross values Buildings Plant and equipment 4, ,075 Other tangible fixed assets 5, ,156 Total 10,296 1, ,245 Amortization Buildings Plant and equipment -3, ,141 Other tangible fixed assets -2,596-1, ,542 Total -5,748-2, ,684 Net book values Buildings Plant and equipment 1, Other tangible fixed assets 3, ,614 Total 4, ,

133 NOTE 11 - FINANCIAL ASSETS Receivables relating to equity interests, loans and other financial assets can be broken down as follows: '000 Dec 31, 2009 Increase Decrease Exchange gains or losses Dec 31, 2010 Security deposits Other long-term financial investments Total Financial assets do not include any equity securities. NOTE 12 EQUITY AFFILIATE In 2010, Da Fact's revenues came to 7,000 euros, with a loss of -310,000 euros. The Group's share in the earnings of the equity affiliate Da Fact represented -122,000 euros for ,000 euros in goodwill has been calculated factoring in Parrot's investment in this company. Goodwill depreciation has been recorded, totaling -870,000 euros. The negative equity-consolidated securities have been reclassified under provisions for contingencies and liabilities for 230,000 euros. Furthermore, in the investment agreement signed on December 22nd, 2009, Parrot S.A. made a commitment to subscribe for a capital increase to be carried out by January 31st, 2013 at the latest for a total of 325,000 euros. NOTE 13 DEFERRED TAX Change in deferred tax assets: '000 Dec 31, 2009 Dec 31, 2010 At January Income (expense) for the year -1, Impact on reserves Other changes (1) 1, At December (1) Corresponds to the offsetting of deferred tax assets by tax entity. Change in deferred tax liabilities: '000 Dec 31, 2009 Dec 31, 2010 At January 1 3,799 3,852 Income (expense) for the year ,442 Impact on reserves Other changes (1) 1, At December 31 3,852 2,021 (1) Corresponds to the offsetting of deferred tax liabilities by tax entity. The deferred tax results primarily from Parrot S.A. 133

134 A detailed breakdown of deferred tax assets and liabilities by kind is presented below: 2010 Reference document Assets Liabilities Net At Dec 31 ( 000) Dec 31, Dec 31, Dec 31, Dec 31, 2009 Dec 31, 2009 Dec 31, 2009 Intangible fixed assets Tangible fixed assets Depreciation of treasury stock Inventories ,045 Capitalization of development 1,624 1,945-1,624-1,945 costs Short-term financial debt Other current financial liabilities Other assets Provisions: ,212 1,675-2, Of which, pensions Of which, other social provisions Of which, depreciation of 3,178 1,638-3,178-1,638 subsidiary receivables Of which, other provisions Other liabilities Tax losses carried forward Net deferred tax assets (liabilities) 1,131 1,782 4,846 3,664-3,715-1,882 Deferred tax assets on the balance sheet Offset --> Deferred tax liabilities on the balance sheet Offset --> -3,852-2,021 NOTE 14 INVENTORIES '000 Dec 31, 2009 Change Exchange gains or losses Dec 31, 2010 Gross values Raw materials and goods 15,324 13,746 29,070 Intermediate and finished goods 3,708 5, ,535 Total 19,032 19, ,605 Depreciation Raw materials, intermediate and finished goods (1) 6,793 1,304 8,097 Total 6,793 1,304 8,097 (1) Also see Note 6. The change in the net value of inventories is representative of the change in business and the improvement in management. NOTE 15 - TRADE RECEIVABLES Trade receivables can be broken down as follows: '000 Dec 31, 2009 Dec 31, 2010 Trade receivables 42,984 49,791 Depreciation of trade receivables ,390 Total 42,123 48,401 Receivables do not bear interest and are in general due to be paid within 30 to 90 days. 134

135 NOTE 16 OTHER RECEIVABLES '000 Dec 31, 2009 Dec 31, 2010 VAT receivables 1,206 2,028 Tax receivables 4, Prepaid expenses Sundry debtors Advances and deposits paid 534 1,348 Social security receivables 6 31 Current-account receivables Other receivables 1,033 - Total 6,952 4,927 At December 31st, 2010, VAT receivables correspond to VAT that may be deducted on purchases, primarily in France. At December 31st, 2009, tax receivables primarily comprise the research tax credit for 3.4 million euros and the profit sharing tax credit for 0.3 million euros. NOTE 17 - NET CASH '000 Dec 31, 2009 Changes in scope Change Exchange gains or losses Reclassifications Dec 31, 2010 Financial receivables and short-term investments 61,900-7,371-27,961 41,310 Bank current accounts 14,135-6, ,534 Cash and cash equivalents 76,035-14, ,961 62,844 Bank overdrafts Cash-flow 76,035-14, ,961 62,844 Other current financial assets -27,961 27,961 Total net cash position 76,035-14, ,805 For the Group, the net cash position corresponds to cash that is immediately available, as per IAS 7 and the cash-flow statement (see Note 2 Accounting rules and methods), plus any other current financial assets held by the Group in connection with its cash management. The increase in cash flow primarily reflects the management of working capital needs. Financial receivables and short-term investments primarily comprise risk-free investments, such as tradable certificates of deposit and term deposits maturing within a maximum of three months, in addition to conventional money market funds, for which the fair value retained is the market value at December 31st, Other current financial assets consist of one-year investments for 10 million euros and part of the investments allocated to foreign exchange hedging for the period from the second quarter to the fourth quarter of 2011 for a total of 17.9 million euros. NOTE 18 - SHAREHOLDERS' EQUITY At December 31st, 2010, the capital comprised 12,867,599 fully paid-up ordinary shares, representing 1,961,660 euros, with an issue premium of 57,158,736 euros. Changes in the number of shares outstanding can be broken down as follows: Share capital and issue premium At December 31st, 2010, the capital comprised 12,923,747 fully paid-up ordinary shares, representing 1,970, euros, with an issue premium of 57,768,042 euros. Changes in the number of shares outstanding can be broken down as follows: '000 Dec 31, 2009 Issues Reductions Dec 31, 2010 Number of securities 12,923, , ,376 12,867,599 Rounded off par value ( ) Total 1, ,

136 The increase in capital and issue premiums reflects the following events: 2010 Reference document At the Board meeting on May 12th, 2010, the Directors acknowledged that the holders of marketable securities (giving access to the capital with the characteristics of company founder equity warrants, share warrants and stock options) exercised their rights to subscribe for 21,241 new shares to be issued in connection with a capital increase, representing a total issue of 66, euros; the subscribers paid up their subscriptions in cash; in this way, 21,241 new shares were subscribed for and then paid up for any sums due in accordance with the conditions in force for the issue, with a capital increase of 3, euros. The issue premium totaled 63, euros. At the Board meeting on June 1st, 2010, the Directors acknowledged the capital increase by 3,039 shares relating to the payment of the Waveblue earnout. At the Board meeting on July 29th, 2010, the Directors acknowledged the capital reduction through the cancellation of 211,376 shares for a total of 1,288, euros (32, euros capital and 1,256, euros) At the Board meeting on November 10th, 2010, the Directors acknowledged that the holders of marketable securities (giving access to the capital with the characteristics of company founder equity warrants, share warrants and stock options) exercised their rights to subscribe for 70,647 new shares to be issued in connection with a capital increase, representing a total issue of 448,809 euros; the subscribers paid up their subscriptions in cash; in this way, the new shares were subscribed for and then paid up for any sums due in accordance with the conditions in force for the issue, with a capital increase of 10,766 euros. The issue premium totaled 438,043 euros. Share warrant scheme Characteristics of schemes in 2010: On February 11th, 2010, as authorized at the general meeting on June 18th, 2009, the Board of Directors of Parrot S.A. approved a scheme to award 20,500 stock options at a price of euros. On February 11th, 2010, as authorized at the general meeting on June 18th, 2009, the Board of Directors of Parrot S.A. approved a scheme to award 52,000 bonus shares. On May 12th, 2010, as authorized at the general meeting on June 18th, 2009, the Board of Directors of Parrot S.A. approved a scheme to award 37,450 stock options at a price of euros. On May 12th, 2010, as authorized at the general meeting on June 18th, 2009, the Board of Directors of Parrot S.A. approved a scheme to award 8,950 bonus shares. On July 29th, 2010, as authorized at the general meeting on June 9th, 2010, the Board of Directors of Parrot S.A. approved a scheme to award 95,000 stock options at a price of euros. On July 29th, 2010, as authorized at the general meeting on June 9th, 2010, the Board of Directors of Parrot S.A. approved a scheme to award 39,400 bonus shares. On November 10th, 2010, as authorized at the general meeting on June 9th, 2010, the Board of Directors of Parrot S.A. approved a scheme to award 6,000 stock options at a price of euros. On November 10th, 2010, as authorized at the general meeting on June 9th, 2010, the Board of Directors of Parrot S.A. approved a scheme to award 800 bonus shares. Change in warrant and share schemes over the period: In number of options FY 2009 FY 2010 Number of options at Jan 1 3,651,159 3,497,279 Options awarded during the year 242, ,100 Options exercised during the year -59, ,745 Options maturing during the year -336, ,307 Number of options at year-end 3,497,279 3,423,327 Fair value of share schemes Parrot S.A. has determined the fair value of goods and services received over the period based on the fair value of the equity instruments awarded. The share's starting value is taken on the allocation date. 136

137 Before the initial public offering, volatility was taken into consideration based on the average historical volatility seen for stocks on the IT CAC index. For schemes awarded after the IPO, it is based on the actual volatility of the Parrot S.A. share. The interest rate curve is calculated based on the risk free euro-swap rates with corresponding maturities (five years) on each allocation date (source: Bloomberg). Conditions for exercising options All the schemes for company founder equity warrants, share warrants and stock options, except for the scheme for 2,400,000 company founder equity warrants on June 12th, 2006, have the following characteristics (conditions for presence within the company): Beneficiaries may subscribe for 25% of the warrants awarded at the end of the first year following allocation. At the end of each quarter, beneficiaries may then subscribe for 6.25% of the warrants or options awarded over the following three-year period. For the scheme for 2,400,000 company founder equity warrants on June 12th, 2006, they may be exercised immediately. With regard to bonus shares, shares are only definitively vested after the end of a two-year period and provided that beneficiaries are still employed by the Parrot Group on this date. The assumptions used during 2010 to determine the fair value are presented in the tables on the following pages:. 137

138 Reference document Date and type of scheme Reference price Exercise price Expected volatility Maturity Unit fair value on allocation date Board meeting on Feb 11, 10: stock options (Tranche 1) % Board meeting on Feb 11, 10: stock options (Tranche 2) % Board meeting on Feb 11, 10: stock options (Tranche 3) % Board meeting on Feb 11, 10: bonus shares Board meeting on May 12, 10: stock options (Tranche 1) % Board meeting on May 12, 10: stock options (Tranche 2) % Board meeting on May 12, 10: stock options (Tranche 3) % Board meeting on May 12, 10: bonus shares Board meeting on Jul 29, 10: stock options (Tranche 1) % Board meeting on Jul 29, 10: stock options (Tranche 2) % Board meeting on Jul 29, 10: stock options (Tranche 3) % Board meeting on Jul 29, 10: bonus shares Board meeting on Nov 10, 10: stock options (Tranche 1) % Board meeting on Nov 10, 10: stock options (Tranche 2) % Board meeting on Nov 10, 10: stock options (Tranche 3) % Board meeting on Nov 10, 10: bonus shares The fair value retained for bonus shares is the Parrot stock price on the day they are awarded to staff as decided by the Board of Directors. Date and type of scheme Term (1) Price (2) Outstandin g (3) Employees Extraordinary general meeting on Jul 6, 04: company founder equity warrants 4 years , ,318 Extraordinary general meeting on Dec 7, 04: company founder equity warrants 4 years , ,526-47,500 2,318 4 years Extraordinary general meeting on Dec 14, 05: company founder equity warrants 4 years ,500 64,910-61,410 4 years Extraordinary general meeting on Dec 14, 05: stock options 4 years ,500 4 years Extraordinary general meeting on Feb 28, 06: company founder equity warrants 4 years ,981 40,633-19,835-5, years Extraordinary general meeting on Feb 28, 06: stock options 4 years ,875-3, years Board meeting on Jun 12, 06: company founder equity warrants. (Tranche 1) 4 years , ,000 4 years Board meeting on Jun 12, 06: share warrants 4 years ,000 4 years Awarde d (4) Exercise d (5) Cancelle d (6) Dec 31, 09 Existing (7) Awarde d (8) Exercise d (9) Cancelle d (10) 2010 Dec 31, 10 Existing (11) 138

139 Board meeting on Nov 10, 06: stock options 4 years , , ,000 4 years Board meeting on Feb 14, 07: stock options 4 years ,000 41, ,000 0 years Board meeting on May 15, 07: stock options 4 years ,000 43,000-25,000 4 years Board meeting on Jul 31, 07: stock options 4 years ,000 22,000-12, ,000 4 years Board meeting on Nov 13, 07: stock options 4 years ,000 45,000-5,000 36,000 4 years Board meeting on Nov 13, 07: bonus shares 2 years 5,106-4,000 39,000 4 years Board meeting on Apr 10, 08: stock options 4 years ,500-11,000 11,000 4 years Board meeting on May 13, 08: stock options 4 years ,000 11,700-7,000 38,000 4 years Board meeting on May 13, 08: bonus shares 2 years 25,000 2 years Board meeting on Jul 31, 08: stock options 4 years ,000 38,000 1,500 4 years Board meeting on Jul 31, 08: bonus shares 2 years 2,000 79,000-74,000 11,700 4 years Board meeting on Nov 13, 08: stock options 4 years ,000 38,000 2 years Board meeting on Nov 13, 08: bonus shares 2 years 28,000-28,000-9,000 29,000 4 years Board meeting on Feb 12, 09: stock options 4 years ,000 4, ,000-5,000 2 years Board meeting on Feb 12, 09: bonus shares 2 years 11,000 11,000 38,000 4 years Board meeting on May 14, 09: stock options 4 years ,300 1,200 58,100 2 years Board meeting on May 14, 09: bonus shares 2 years 53, ,592-5,250 97,750 4 years Board meeting on Jul 30, 09: stock options 4 years ,000 2,000-1,000 10,000 2 years Board meeting on Jul 30, 09: bonus shares 2 years 2,000 2,000-6,300 51,800 4 years Board meeting on Nov 12, 09: stock options 4 years ,000 5,000-2,200 51,392 2 years Board meeting on Nov 12, 09: bonus shares 2 years 2,000 2,000 2,000 4 years Board meeting on Feb 11, 10: stock options 4 years 5 20,500 2,000 2 years Board meeting on Feb 11, 10: bonus shares 2 years 52,000 5,000 4 years Board meeting on May 12, 10: stock options 4 years 1 37,450 2,000 2 years Board meeting on May 12, 10: bonus shares 2 years 8,950 20,500 4 years Board meeting on Jul 29, 10: stock options 4 years 0 95,000 Board meeting on Jul 29, 10: bonus shares 2 years 39,400 Table captions: (1) Weighted average term (in years) (2) Weighted average exercise price ( ) (3) Number of options awarded during the period (4) Number of options exercised during the period (5) Number of options cancelled or rendered null and void (6) Number of existing options at December 31st, 2009 (7) Number of options awarded during the period (8) Number of options exercised during the period (9) Number of options cancelled or rendered null and void (10) Number of existing options at December 31st,

140 Impact on the financial statements 2010 Reference document Based on the calculation parameters used to determine the fair value in line with the Black and Scholes method, the expense recognized for the allocation of stock options, warrants and bonus shares totaled 1,647,000 euros for 2010, compared with 1,740,000 euros at December 31st, Treasury stock '000 Dec 31, 2009 Acquisitions Disposals Cancellation Delivery Dec 31, 2010 Number of 424, , , , , ,266 securities Value (1) 4,080,424 6,633,414 The general shareholders' meeting on June 9th, 2010 authorized a share buyback program. The shares bought back may be used with a view to: Continuing to implement the liquidity agreement, Awarding stock options and/or bonus shares to the Parrot Group's employees or corporate officers, Reducing the Company's capital. Liquidity agreement Transaction date Quantity (shares) Acquisition/sale price ( '000) Number of securities at Dec 31, 09 6, Purchases in Year N 410,464 5,726 Sales in Year N 411,034 5,653 Number of securities at Dec 31, 10 5, Share buyback programs 2009 balance Value ( '000,00 0) Cancelle d 2010 Value ( '000,000) Shares bought back Value ( '000,000) Number of shares remaining Value ( '000,00 0) Program Program Program Program Program 5 (1) TOTAL (1) The program was still underway at December 31st, Dividends There are no plans to pay out any dividends relative to NOTE 19 - FINANCIAL DEBT NA NOTE 20 - EARNINGS PER SHARE Basic earnings per share The level of basic earnings per share is obtained by dividing earnings (Group share) by the weighted average number of ordinary shares outstanding during the period, less any treasury stock, as relevant. The weighted average number of ordinary shares represents an annual average calculated based on the issue or redemption date for shares over the period. Dec 31, 2009 Dec 31, 2010 Net income (Group share, ) 9,577,180 27,831,458 Weighted average number of shares outstanding 13,075,787 12,866,574 Basic net earnings per share ( )

141 Diluted earnings per share Diluted earnings per share factor in any diluting instruments outstanding at the end of the period. Dec 31, 2009 Dec 31, 2010 Net income (Group share, ) 9,577,180 27,831,458 Diluted weighted average number of shares 13,137,686 13,197,030 Diluted net earnings per share ( ) NOTE 21 - MINORITY INTERESTS At December 31st, 2010, there were not any minority interests, since all of Parrot S.A.'s fully-consolidated subsidiaries were fully-owned (see Note 3 "Basis for consolidation"). NOTE 22 - PROVISIONS FOR PENSIONS AND RELATED COMMITMENTS Introduction Employee benefits primarily comprise pension benefits concerning Parrot S.A. The Group is also subject to defined benefit pension systems for the end-of-career benefits paid to staff. These systems are not financed in any way by the Group. Financial information Supplementary employee benefits primarily concern provisions for retirement benefits. At December 31st, 2010, these provisions totaled 655,000 euros, compared with 368,000 euros in Main actuarial assumptions Dec 31, 2009 Dec 31, 2010 Discount rate 5.10% 3.25% Turnover rate low Low Wage growth rate (average) 6% decreasing 6% decreasing Provisions recorded on the balance sheet ( 000) Actuarial value of commitments not covered by financial assets Expense for the year ( 000) Cost of benefits provided during the year Other comprehensive income items ( '000) Actuarial gains/losses recognized over the year NOTE 23 - OTHER NON-CURRENT PROVISIONS The change in other non-current provisions over the year can be broken down as follows: '000 Dec 31, 2009 Allowance Reversals used Reversals not used Changes in scope or reclassification Dec 31, 2010 Provisions for individual training entitlements Provisions for disputes Equity-consolidated securities (1) Total non-current provisions (1) Refer to Note 12 Equity-consolidated securities. NOTE 23 - CURRENT PROVISIONS The change in current provisions over the year can be broken down as follows: '000 Dec 31, Reversals Reversals not Changes in Dec 31, Allowance 2009 used used scope 2010 Provisions for social security liabilities and contingencies Provisions for client warranties 463 3, ,635 Provisions for contingencies and 428 3, ,885 liabilities Total current provisions 1,041 7,588-1, ,

142 2010 Reference document A provision for supplier commitments is recorded and intended to cover the risk of any loss in value of products ordered from suppliers as a result of sales prospects. NOTE 25 - TRADE PAYABLES, CURRENT TAX LIABILITIES AND OTHER CURRENT LIABILITIES '000 Dec 31, 2009 Dec 31, 2010 Trade payables 24,658 30,955 Current tax liability 122 1,953 Advances and deposits paid on orders Tax and social security liabilities 8,735 10,913 Other liabilities 1,685 1,962 Other current liabilities 10,770 13,015 NOTE 26 - FINANCIAL INSTRUMENTS Category and fair value of financial assets and liabilities Fair value Assets through Loans and '000 available profit and receivables for sale loss (1) Debt at amortized cost Derivatives Balance sheet value Fair value Trade receivables 48,401-48,401 48,401 Other current receivables 4,927-4,927 4,927 Other current financial - assets 27,961 27,961 27,961 Cash and cash equivalents 62,844-62,844 62,844 Total financial assets ,805 53, , Other short-term financial - - debt Trade payables ,955 30,955 30,955 Other current liabilities ,015 13,015 13,015 Total financial liabilities , ,970 43,970 (1) Financial assets at fair value through profit and loss. '000 Fair value through profit and loss (1) Assets available for sale Trade receivables Other current receivables Cash and cash equivalents Total financial assets Other short-term financial debt Loans and receivables Debt at amortized cost Derivatives Balance sheet value Fair value ,123 42, ,952 6, ,035 76, , , Trade payables* ,658-24,658 24,658 Other current ,770-10,770 10,770 liabilities* Total financial liabilities , ,428 35,428 (1) Financial assets at fair value through profit and loss ; * After reallocation Schedule for financial debts NA Analysis of trade receivables and their seniority At December 31st, 2010, the analysis of trade receivables and their seniority can be broken down as follows: '000 Trade receivables for which the payment due date has passed 142

143 Current months months months >1 year Trade receivables Total financial assets Of which, COFACE cover Trade receivables not covered Overdue receivables concern a limited number of customers, which are closely monitored and analyzed. As relevant, provisions for depreciation have been recorded for a total of 1,390,000 euros, with trade receivables representing a net total of 48,401,000 euros. The Group's policy for trade receivables is based on managing cover under the existing COFACE policy and regularly monitoring trade receivables. At December 31st, 2009, the analysis of trade receivables and their seniority can be broken down as follows: '000 Trade receivables for which the payment due date has passed Current months months months >1 year Trade receivables Total financial assets Of which, COFACE cover Trade receivables not covered Hedging instruments In connection with its activity, the Company is exposed to a foreign exchange risk relating to the /$ exchange rate. To hedge this position, the Company has made spot dollar purchases since the beginning of 2010 in order to protect itself against exchange rate fluctuations. The Company has decided to apply cash flow hedge accounting since January 1st, The hedging instrument is an external non-derivative financial element. It corresponds to all or part of the Parrot Group's surplus cash position in US dollars. The management horizon for the hedging policy is one year, divided into four equal periods. At December 31st, 2010, the amount of hedging in dollars represented 34,227,000 dollars, concerning quarterly operating flows for At the end of 2010, the IFRS cash flow hedge reserve showed a credit balance of 120,000 euros, with the amount recycled over the period through profit and loss giving a credit balance of 1,576,000 euros. NOTE 27 MARKET 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 translation, for drawing up the consolidated accounts, of the foreign currency accounts of consolidated subsidiaries with a different functional currency from the euro, and on the other hand, operational risks on operating or financial flows not denominated in the entities' operating currencies. In 2010, 45% of the Group's revenues, 90% of its cost of sales and 8% of its operating costs were denominated in USD or currencies linked to the dollar, with the Group exposed to this currency's fluctuations against the euro. The Group does not hedge its net exposure to changes in the USD. In order to limit the impact of changes in the USD on its profitability, the Group has been developing the amount of sales denominated in this currency since At the end of December 2010, 56.9% of the Group's net cash position was in US dollars or related currencies. Rate risk Cash invested during the year in risk-free vehicles with underlying rates of up to three months. The impact of a 1% variation in the average rate of return would represent a (623,000) 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. 143

144 2010 Reference document Risk relating to treasury stock 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 upwards and downwards. 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 market. The value of treasury stock reclassified as equity represents 6,633,000 euros for 418,266 shares, with an average share price of euros. 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 31st, 2010 At December 31st, 2010, financial assets primarily comprised: 48.4 million euros in trade receivables, in line with the Group's normal operating cycle; 27.9 million euros in other current financial assets; 62.8 million euros in cash and cash equivalents; 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 31st, 2010, the maximum credit risk exposure can therefore be broken down as follows: Trade receivables: 48.4 million euros. Other receivables: 7 million euros Cash and cash equivalents: 76 million euros In 2010, the Parrot Group's policy was to diversify its counterparty risk management by distributing investments among first-rate banking institutions and over short 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 treasury 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 Italia S.r.l., Parrot UK Ltd, Parrot Iberia S.L. and Parrot Asia Pacific Ltd. The amount of the cover represents 90% of the net debt covered excluding VAT. Financial debts at December 31st, 2010 The Parrot Group did not have any financial debts at December 31st, NOTE 27 - EXECUTIVE COMPENSATION The total amount of compensation paid to members of the management committee can be broken down as follows: '000 Dec 31, 2009 Dec 31, 2010 Fixed pay 1, Variable pay Short-term benefits 2, Post-employment benefits Payments in shares Total 2,

145 The management committee is made up of 11 people who perform the following functions: Chairman and Chief Executive Officer, VP research office, Deputy VP research office, VP, Business Units, VP sales EMEA, Chief marketing officer, Chief validation officer, Chief production officer, Chief procurement officer, Chief administrative and financial officer, Chief human resources officer. NOTE 29 - RELATED PARTIES No significant operations were carried out over FY 2010 with: Shareholders with significant voting rights in the Company's capital representing more than 2.5% of the capital. Members of the executive management bodies, including any directors and observers, with the exception of the agreement entered into between the Company and Mr. Edward Planchon, a Company director. For 2010, Mr. Edward Planchon did not invoice for any services through EKP Consult LLC, the American-law company he controls, to the American subsidiary Parrot, Inc. and was reimbursed for a total of 6, US dollars for the costs he incurred. Entities over which one of the main executives exercises control, joint control or a significant influence or holds a significant number of voting rights. NOTE 30 - COMMITMENTS GIVEN OR RECEIVED Commitments given At December 31st, 2010, the Company had commitments for future payments relating to operating leases that may not be terminated: Year 2009 gross value , and later 4 Total 2,608 In addition, a bank guarantee has been given for a total of 300,000 euros. At December 31st, the amount of firm orders placed with our main suppliers came to a total of 47.3 million euros. Parrot S.A. signed an agreement to acquire shares (Membership Interest Contribution Agreement) on November 29th, 2007 with Barataria Inc. and Mr. Jon Elliott relating to the acquisition of all the capital of the American-law company Waveblue LLC. An earnout consideration, payable in Parrot S.A. shares, has been estimated and recorded under liabilities. The basis for calculating the earnout consideration corresponds to 5% of the sales achieved (net revenues) in 2008, 2009 and 2010 in California State (USA). In an investment agreement signed on December 22nd, 2009, Parrot S.A. made a commitment to subscribe for a capital increase to be carried out by Da Fact by January 31st, 2013 at the latest for a total of 325,000 euros. Commitments received In connection with the acquisition of Parrot Iberia, our company benefits from a common liability guarantee clause. 145

146 2010 Reference document NOTE 31 - GROUP FEES FOR THE STATUTORY AUDITORS AND MEMBERS OF THEIR NETWORK FOR FY 2009 Amount Amount % (, net of tax) (, net of tax) % Auditing Statutory auditing, certification, review of individual and consolidated accounts - Issuer 193, ,933 67% 65% 110, ,300 59% 60% - Fully-consolidated subsidiaries 97,000 72,382 33% 35% 78,700 69,930 41% 40% Other audits and services linked directly to the statutory auditing assignment Issuer Fully-consolidated subsidiaries Subtotal 290, , % 189, , % Other services provided by networks to fully-consolidated subsidiaries Legal, tax, social 36,616 15, % 13,941 Other Subtotal 36,616 15, % 100% 0 13,941 0% 100% Total 327, , % 100% 189, , % 100% NOTE 32 - POST-BALANCE SHEET EVENTS NA 146

147 KPMG Audit Deloitte Marque & Gendrot 1, cours Valmy 185, Avenue Charles de Gaulle Paris La Défense Cedex Neuilly sur Seine France France Dear Shareholders, Pursuant to the mandate given to us by your general meeting, please find hereafter our report on the financial year ended December 31st, 2010 relative to: The audit of Parrot S.A.'s consolidated financial statements, as appended to this report; The basis for our opinions; The specific procedures and information required under French law. The consolidated financial statements are the responsibility of your Board of Directors. Our responsibility is to express an opinion on these accounts based on our audit. Opinion on the consolidated financial statements We conducted our audit in accordance with the industry standards applicable in France. These standards require that we plan and perform the audit to obtain reasonable assurance that the consolidated financial statements are free from any material misstatements. An audit includes examining, on a test basis or using other methods for selection, evidence supporting the amounts and information contained in the consolidated accounts. An audit also involves assessing the accounting principles used and the significant estimates made, as well as the overall presentation of the financial statements. We believe that the elements we have collected are sufficient and appropriate to form a basis for our opinion. We certify that the consolidated financial statements present fairly, in all material respects, the assets, liabilities and financial position of the group comprising the consolidated companies, in addition to the results of its operations, in accordance with IFRS as adopted in the European Union. Basis for our opinions Pursuant to the provisions of Article L of the French commercial code relative to the forming of our opinions, we would like to draw your attention to the following elements: In connection with our assessment of the accounting principles applied by your company, we have reviewed the conditions for recording development costs as assets, as well as the conditions retained for their depreciation and for checking their recoverable value, and we have ensured that Notes 2K, 2M and 9 provide appropriate information. The company systematically carries out impairment tests on goodwill and assets with an indefinite lifespan at each close and, if there are signs of any impairment, values long-term assets under the conditions set out in Note 2M "Depreciation of tangible and intangible fixed assets" to the consolidated financial statements. Based on the information available to date, we have reviewed the conditions for implementing this impairment test, as well as the cash flow forecasts and assumptions used. We have also ensured that Note 9 provides appropriate information. The assessments made in this way are part of our audit of the consolidated financial statements in general and therefore contributed to the formation of our opinion expressed in the first part of this report. Specific procedures and information In accordance with the industry standards applicable in France, we also verified the information given relative to the Group in the management report, as required under French law. 147

148 2010 Reference document We do not have any observations to make regarding the accuracy of this information or its application for the consolidated financial statements. The statutory auditors Paris La Défense, April 29th, 2011 Neuilly sur Seine, April 29th, 2011 KPMG Audit Deloitte Marque & Gendrot Department of KPMG S.A. Jean-Pierre Valensi Nahid Sheikhalishahi Jean-Claude Berriex Partner Partner Partner 148

149 France Export Dec 31, 2010 Dec 31, 2009 Production sold: goods 27,921, ,619, ,540, ,148,617 Production sold: services 99,248 2,395,100 2,494,348 4,227,231 NET REVENUES 28,020, ,014, ,034, ,375,849 Stored production 6,395,919-3,595,244 6,395,919-3,595,244 Capitalized production Operating subsidies Reversal of depreciation and provisions, transferred 1,989,926 5,355,215 1,989,926 5,355,215 expenses Other income 29,352,651 8,967,298 29,352,651 8,967,298 OPERATING INCOME 176,773, ,103,118 External expenses Purchases of goods 433, ,268 Change in inventories of goods Purchases of raw materials and other supplies 78,349,075 42,791,506 Change in inventories (raw materials and supplies) (6,711,516) Other purchases and external expenses 41,618,019 28,697, ,689,021 86,215,351 Tax and related 2,801,178 2,181,761 Staff costs Salaries and wages 18,390,251 16,732,546 Social security costs 11,776,326 8,613,101 30,166,577 25,345,647 Operating provisions Provisions for depreciation on fixed assets 4,407,872 2,377,104 Provisions on fixed assets Provisions on current assets 1,665,763 4,182,545 Provisions for contingencies and liabilities 5,623, ,415 11,697,399 7,376,063 Other operating expenses -115,257 1,346,104 OPERATING EXPENSES 158,238, ,464,927 EBIT 18,534,562 6,638,191 Allocated profit or transferred loss - Loss incurred or transferred profit - Financial income Financial income from equity interests 5,229,030 Income from other marketable securities and fixed asset receivables - Other interest and related income 92, ,194 Reversal of provisions and transferred expenses 7,397,643 1,306,059 Foreign exchange gains 7,439,357 2,040,262 Net income from disposal of marketable securities 427, ,357,240 9,596,190 Financial expenses Financial depreciation and provisions 2,823,626 3,856,724 Interest and related expenses 26, ,715 Foreign exchange losses 5,686,030 1,584,852 Net expenses on sale of marketable securities 74, ,610,595 5,736,958 FINANCIAL RESULT 6,746,645 3,859,232 INCOME FROM ORDINARY OPERATIONS BEFORE TAX 25,281,207 10,497,423 Non-recurring income Non-recurring income on management transactions 746,940 Non-recurring income on capital transactions - Reversal of provisions and transferred expenses 1,416,509 1,605,182 1,416,509 2,352,

150 2010 Reference document Non-recurring expenses Non-recurring expenses on management transactions 5,763,899 1,898,854 Non-recurring expenses on capital transactions 1,698, ,416 Non-recurring depreciation and provisions ,462,531 2,269,483 NON-RECURRING INCOME (LOSS) -6,046,022 82,639 Employee profit-sharing 505,084 Corporate income tax 1,257,652 (4,006,195) Total income 193,547, ,051,430 Total expenses 176,074, ,465,173 PROFIT OR LOSS 17,472,449 14,586,257 ASSETS GROSS Depreciation and Net Net provisions Dec 31, 2009 Dec 31, 2008 Concessions, patents and related 7,388,471 5,412,666 1,975, ,966 Goodwill 7,622 7,622 7,622 Other intangible fixed assets 1,749,504 1,274, , ,654 Intangible fixed assets: 9,145,598 6,686,824 2,458, ,242 Technical facilities, plant and equipment 6,250,169 4,513,899 1,736, ,334 Other tangible fixed assets 3,639,707 2,396,353 1,243,354 1,734,583 Fixed assets under construction 5,300 5,300 47,345 Tangible fixed assets: 9,895,177 6,910,252 2,984,925 2,687,262 Other equity interests 26,107,563 2,960,342 23,147,220 23,110,384 Equity interest-related receivables 8,748,760 4,761,413 3,987,347 4,111,756 Other long-term financial investments 375, ,207 1,553,488 Long-term financial investments: 35,231,529 7,721,755 27,509,774 28,775,628 Fixed assets 54,272,304 21,318,831 32,953,473 32,250,132 Inventories of raw materials 13,429,862 5,696,233 7,733,629 7,733,629 Inventories of intermediate and finished 1,506, ,452 1,323,723 1,323,723 products Inventories and work-in-progress: 14,936,037 5,878,685 9,057,352 9,057,352 Advances and deposits paid on orders 711, , ,208 Trade receivables and related 43,214, ,270 42,895,168 31,989,344 Other receivables 2,666,135 2,666,135 5,275,897 Capital subscribed and called, not paid Receivables: 46,591, ,270 46,272,559 37,589,449 Marketable securities 75,922,722 75,922,722 64,662,890 Cash at bank and in hand 1,740,614 1,740,614 4,412,566 Prepaid expenses 595, , ,086 Cash, cash equivalents and other: 78,258, ,258,438 69,224,542 Current assets 152,893,739 6,916, ,977, ,871,343 Deferred expenses over several years Bond redemption premiums Translation gains 237, , ,116 Total assets 207,404,003 28,235, ,168, ,590,

151 LIABILITIES Net Dec 31, 2009 Net Dec 31, 2009 Net position Share or individual capital, of which 1,961,660 paid 1,961,660 1,970,217 Issue, merger, contribution premiums 57,158,736 57,291,587 Revaluation differences Legal reserve 203, ,512 Statutory or contractual reserves Regulated reserves Other reserves Retained earnings 44,015,218 29,795,695 Earnings for the year 17,472,449 14,586,259 Shareholders' equity 120,811, ,847,270 Provisions for contingencies 5,693,336 1,635,243 Provisions for liabilities 1,768,154 1,207,436 Provisions for contingencies and liabilities 7,461,489 2,842,679 Convertible bonds Other bonds Borrowings and debt with credit institutions Sundry borrowings and financial debt 19,488,001 14,939,811 Financial liabilities 19,488,001 14,939,811 Trade payables and related 19,416,431 17,935,696 Tax and social security liabilities 10,063,685 7,112,552 Fixed asset payables and related Other liabilities 1,110, ,447 Sundry liabilities 30,590,413 26,032,695 Liabilities 40,972,506 40,972,506 Translation losses 817, ,136 Total liabilities 179,168, ,590,591 Note 1.1. Main events over the year Revenues totaled 139,035,000 euros, compared with 118,376,000 euros one year earlier, up 17.45%. Revenues for 2010 include 2,395,000 euros in management fees invoiced to Parrot S.A. subsidiaries. More specifically, the 29,353,000 euros in other income includes a transfer-costing of royalties to Parrot Asia for 23,939,000 euros. These royalties relate to the use of industrial and intellectual property rights, with one concerning the license to use OEM and AFM patents, and the other the use of Parrot brands. The margin on the consumption of raw materials and goods came to 66,964,000 euros, representing 48.16%, compared with 59,748,000 euros and 50.4% in EBIT totaled 18,535,000 euros, compared with 6,638,000 one year earlier. Non-recurring items show a loss of 6,046,000 euros, compared with an 83,000 euro profit. This result factors in a debt write-off granted by Parrot S.A. to its American subsidiary Parrot Inc for a total of 8,000,000 dollars (5,840,000 euros). Net income totaled 17,472,000 euros, representing 12.57% of revenues. Two share buyback programs were carried out in 2010, with the latest program currently underway, resulting in 314,128 shares being bought back for 5,270,000 euros over On July 31st and June 19th, 2009, 211,276 Company shares were cancelled for 1,289,000 euros. 151

152 Note 1.2. Post-balance sheet events There are no significant post-balance sheet events to report Reference document The financial statements for the year ended December 31st, 2010 have been prepared and presented in accordance with French accounting principles and rules (French general chart of accounts), including the French accounting standards board's (Comité de règlementations comptable) new accounting rules. Generally accepted accounting principles have been applied in accordance with the fundamental accounting principles and core assumptions: Continuous operations, Consistent accounting methods from one year to the next, with the exception of the recognition of the provision for retirement benefits since 2010, Independent financial years. And in accordance with the general rules applicable for drawing up and presenting annual financial statements. The main methods used are presented hereafter: Note 2.1. Intangible fixed assets Fully-owned software and user rights are capitalized and depreciated on a straight-line basis over their useful life, i.e. Patents, licenses, brands 1 to 3 years Software 1 to 3 years Research and development costs are booked directly under operating expenses. Fixed assets under construction, totaling 440,000 euros, correspond to SAP licenses which have not yet been used. A provision for depreciation is recorded in the event of any impairment in value on fixed assets. Note 2.2. Tangible fixed assets Tangible fixed assets are recorded under assets on the balance sheet at their historical cost. Subsequent expenditure (spending to replace assets and ensure their compliance) is capitalized and depreciated over the remaining useful life for the corresponding fixed asset. Regular upkeep and maintenance costs are booked as expenses when they are incurred. Depreciation is calculated on a straight-line basis in view of the estimated useful life of the various categories of fixed assets. It is calculated based on the acquisition price less any residual value. Fixed assets are depreciated based on their useful life as follows: Fixtures and fittings and technical facilities 3 to 10 years Plant and equipment 3 years Office equipment and IT 2 to 3 years Transport equipment 3 years Furniture 5 years Capital gains or losses stem from differences between the sales price and the net book value of assets sold off. Note 2.3. Long-term financial investments Equity securities are valued based on their acquisition cost, which comprises the purchasing cost and related expenses. If the inventory value is lower than the acquisition cost, a provision for depreciation is recorded and supplemented if necessary with a provision for depreciation for current accounts and a provision for contingencies and liabilities. The inventory value corresponds to the going concern value of securities. The going concern value is based on the portion of shareholders equity held, as well as the future outlook if the subsidiary has demonstrated its capacity to be profitable. 152

153 Note 2.4. Inventories The cost of inventories is determined in line with the weighted average price method, and comprises the acquisition costs for inventories and the costs incurred for transporting them in the state and to the place where they are stored. A provision for slow turnover is recorded if the realizable value is lower than the weighted average price. Finished and other products: Slow turnover is calculated by comparing the quantities in stock at the end of the period and the quantity sold over the last 12 months (year-on-year). Any surplus quantity in stock compared with sales for the last 12 months is 100% provisioned. For new products launched within the last 12 months, no depreciation is recorded. Note 2.5. Receivables Trade receivables are subject to a provision for depreciation, estimated in line with the risk of non-collection based on a case-by-case analysis and taking any credit insurance facilities into consideration. Note 2.6. Foreign currency transactions Transactions in foreign currencies are converted into euros based on the exchange rate in force on the date of the transaction. Assets and liabilities denominated in foreign currencies on the closing date are converted at the exchange rate in force on the closing date. Any exchange differences resulting from such operations are recorded under translation gains for unrealized exchange losses and translation liabilities for unrealized exchange gains. A provision for contingencies and liabilities is booked for translation gains. Note 2.7. Cash, cash equivalents and marketable securities Cash and cash equivalents comprise cash in hand and demand deposits. Marketable securities are valued at their acquisition cost. When the inventory value is lower than the gross value, a provision for depreciation is recorded for the amount of any difference. Cash flow hedging When derivative instruments are allocated for hedging commercial operations in foreign currencies, they are marked to market on the balance sheet on the closing date. Any change in the market value of such derivative instruments is recorded under: Financial income for the hedging of accounts receivable and payable recorded on the balance sheet at the closing date; Sundry debtors and creditors under revaluation gains for future cash-flow hedging, with this amount transferred over to financial income when the hedged receivables and payables are recognized. Note 2.8. Provisions for contingencies and liabilities A provision is recorded on the balance sheet when the Group has a current legal or implied legal obligation resulting from a past event and when it is likely that an outflow of resources representative of economic benefits will be necessary in order to fulfill the obligation. A provision for free shares awarded is booked in line with a depreciation schedule spread over two years from the allocation date decided on by the Board of Directors. Warranty provisions A provision is intended to cover future expenses linked to product warranty claims concerning the aftermarket products sold by Parrot. It is calculated statistically based on real company information provided by its various departments. In this way, the following elements are calculated for each product category: Return rate Exchange rate Repair rate Repair costs 153

154 2010 Reference document Other provisions A provision for supplier commitments is recorded and intended to cover the risk of any loss in value of products ordered from suppliers as a result of sales prospects. Employment tribunal provisions A provision for disputes is estimated on a case-by-case basis in view of an analysis of the situations with help from the legal advisors in charge of monitoring them. Provisions for retirement benefits Since January 1st, 2010, a provision for retirement benefits has been recorded in the corporate accounts, with commitments valued in line with the national wage bargaining agreement for the metalworking industry, based on the following assumptions: Retirement age: 65 Rate of wage growth: 6% Discount rate: 3.25% Rate for social security costs: 45% The commitment represented a total of 656,000 euros at the end of 2010, with 289,000 euros recognized through profit and loss and 367,000 euros through equity. Note 2.9. Revenues Income from the sale of goods is recorded on the income statement when the significant benefits and risks inherent in ownership of the goods have been transferred to the buyer. Income from the provision of services is recorded on the income statement based on the level of progress made with the service on the closing date. The level of progress made is determined with reference to the costs incurred. Revenues generated with specialized distributors are recognized net of any listing or volume-based discounts. The amount of any listing or volume-based discounts granted is recorded on the shipment date for goods based on past experience and the contractual conditions in force. Note Breakdown of corporate income tax The tax expense comprises: Tax calculated at the common law rate; Tax subject to the discount rate of 15% calculated on royalties for industrial property right concessions; Hong Kong withholding tax (tax agreement between France and Hong Kong is not yet applicable); Research tax credit. Note Transactions between related parties Transactions carried out with related parties have been subject to an analysis making it possible to conclude that they are consistent with normal market operations. 154

155 Note 3.1. Assets Fixed assets Gross value at yearstart Revaluation gains Acquisitions, contributions, creations, transfers Concessions, patents and related rights 3,733,280 3,655,191 Goodwill 7,622 Other intangible fixed assets 1,720, ,772 Total intangible fixed assets 5,461,404 4,256,963 Technical facilities, plant and equipment 4,982,824 1,685,663 Other tangible fixed assets 2,216, ,818 Transport equipment 6,019 3,000 Office equipment and furniture 2,164, ,564 Total tangible fixed assets 9,369,591 2,521,045 Other equity interests 25,593, ,974 Loans and other long-term financial investments 15,200, ,638 Total long-term financial investments 40,794, ,612 General total 55,625,509 7,605,620 Reduction through transfers Reduction through disposals and retirements Gross value at year-end Concessions, patents and related rights 7,388,471 Goodwill 7,622 Other intangible fixed assets 572,770 1,749,504 Total intangible fixed assets 572,770 9,145,597 Technical facilities, plant and equipment 418,318 6,250,169 Other tangible fixed assets 629,047 2,051,347 Transport equipment 9,019 Office equipment and furniture 948,095 1,584,641 Total tangible fixed assets 1,995,460 9,895,176 Other equity interests 26,107,562 Loans and other long-term financial investments 6,390,597 9,123,967 Total long-term financial investments 6,390,597 35,231,529 General total 8,958,827 54,272,301 Legal revaluations Depreciation Gross value at yearstart Increase, provisions Decrease, writebacks Amount at yearend Concessions, patents and related 3,301,315 2,111,351 5,412,665 Goodwill Other intangible fixed assets 1,372, , ,770 1,274,159 Total intangible fixed assets 4,674,163 2,585, ,770 6,686,824 Technical facilities, plant and 4,077, , ,318 4,513,899 Other tangible fixed assets 681, , ,106 1,127,602 Transport equipment 5,950 1,069 7,019 Office equipment and furniture 1,917, , ,095 1,261,

156 2010 Reference document Total tangible fixed assets 6,682,329 1,822,441 1,594,519 6,910,252 General total 11,356,492 4,407,872 2,167,289 13,597,076 Breakdown of depreciation over the year Straight-line depreciation Concessions, patents and related rights 2,111,351 Goodwill Other intangible fixed assets 474,080 Total intangible fixed assets 2,585,431 Technical facilities, plant and equipment 854,726 Other tangible fixed assets 673,831 Transport equipment 1,069 Office equipment and furniture 292,815 Total tangible fixed assets 1,822,441 General total 4,407,872 Declining balance depreciation Exceptional depreciation Research and development costs Research and development costs were recorded under expenses for 22,478,000 euros. Subsidiaries and equity interests Subsidiaries Parrot ASIA PACIFIC Ltd Parrot GmbH Parrot, Inc. Parrot SRL Parrot UK Ltd Parrot IBERIA S.L. Parrot JAPAN, KK Da Fact Capital Shareholde rs' equity excluding earnings Cap ital stak e ,770, % 25,000-6, % 2,653,891-4,761, % 10, , % 105 3,498, % 63,036 17,450, % 75, , % Net book value of securities (gross) Net book value of securities (net) Loans and advances Revenues Earnings 1,092 1, ,173,772 7,760,452 25,000 25,000 6,062, ,511 2,233,204-8,564,682 17,288,455 5,775,339 10,000 10,000 8,160, , ,712, ,652 22,996,160 22,996,160 46,517, ,309 77,950 77, , ,428 42,546 61, ,639 34% 764,011 36,873 7, ,170 Di vi de nd The securities and receivables held on Parrot Inc. were depreciated in view of this subsidiary's negative net position, with 2,233, euros in depreciation for securities and 4,761, euros for receivables at December 31st, Inventories At year-end At year-start Change in inventories: increase Raw materials and other supplies. 20,141,378 13,429,862 6,711,516 Finished products 7,902,094 1,506,175 6,395,919 Total 28,043,472 14,936,037 13,107,435 Change in inventories: decrease 156

157 Changes in marketable securities Number Unit price Total Unrealized capital gain/loss AXA 1-year term account 2 5,000,000 10,000, ,014 HSBC Monétaire Etat 6,800 2,167 14,732,418 7,398 LCL CAT Garanti 3 2,180,306 6,540,917 5,795 CDN Palatine 3 months Mar 2, ,000,000 5,000,000 5,500 BNP Insticash USD 50, ,612,932 1,587 HSBC US Dollar Liquidity Fund 1,959, ,788, CDN Lazard US Dollar 6 4,269,168 25,615,007 30,905 Total ,289, ,420 Share buyback program Number Buyback value Depreciation Net Value Shares being cancelled 6,000 83,324 83,324 Treasury stock allocated 169,042 2,191,652 2,191,652 Treasury stock to be allocated 123,571 1,685,374 1,685,374 Current buyback program 120,119 2,623,481 2,623,481 Shares delivered 102,000 1,416,510 1,416,510 TOTAL 520,732 8,000,341 8,000,341 Liquidity agreement Transaction date Quantity Acquisition/sale price Capital gain Number of securities at Dec 31, 09 6,104 59, purchases 410,464 5,726, sales 411,034 5,653,207 Number of securities at Dec 31, 10 5, , Accounts receivable Breakdown of accounts receivable on the balance sheet Amount Long-term financial investments Equity interest-related receivables Other long-term financial investments Receivables 681,988 Trade receivables and related 681,988 Staff & social organizations State Sundry receivables & other receivables Marketable securities Cash and cash equivalents Total 681,988 Prepaid expenses Expenses Income Operating income or expenses 595,103 Financial income or expenses Non-recurring income or expenses Total 595, Note 3.2. Liabilities Change in shareholders' equity Dec 31, 2009 Change Dec 31, 2010 Capital (1) 1,970,217-8,557 1,961,

158 2010 Reference document Issue premium 57,291, ,851 57,158,736 Legal reserves 203, ,512 Unavailable reserves 0 Retained earnings 29,795,695 14,219,523 44,015,218 Total 89,261,011 14,078, ,339,126 (1) The change in the capital and issue premium over 2010 primarily reflects: - A capital reduction through the cancellation of 211,376 shares approved by the Board of Directors on July 29th, 2009 totaling 1,289,000 euros (capital: 32,000 euros; issue premium: 1,257,000 euros) - A capital increase through the creation of 3,039 shares relative to the payment of the Waveblue earnout approved by the Board of Directors on June 1st, 2010 for 41,000 euros (capital: 1,000 euros; issue premium: 40,000 euros). - A capital increase through the creation of 17,887 shares through the exercising of equity warrants for 149,000 euros (capital: 3,000 euros; issue premium: 146,000 euros). - A capital increase through the exercising of options for 958,000 euros (capital: 20,000 euros; issue premium: 938,000 euros). - Profits for the year ended December 31st, 2009 were allocated in full to retained earnings. No dividend was paid out. Share capital Number Par value 1-Shares or rights comprising the capital at year-start 12,923, Shares or rights issued during the year 155, Shares or rights cancelled during the year -211, Shares or rights comprising the capital at year-end 12,867,

159 Number of company founder equity warrants, share warrants, stock options and bonus shares at December 31st, 2010 Company founder equity warrants Decision date Unit value Exercisable Situation at end- Expired Exercised Situation at end- Amount Deadline for in in 2010 in exercising Jul 6, ,500 2,318 2,318 4,080 Jul 6, 09 Oct 18, ,000 47,969-47, ,684 Oct 18, 10 Dec 14, ,000 64,910-3,000-61, ,060, Dec 14, 10 Feb 28, ,633-19,835 20, ,622 Feb 27, 11 Jun 12, ,200,000 1,200,000 37,440,000 Jun 11, 11 Jun 12, , ,000 29,952,000 Jun 11, 11 Jun 12, , ,000 24,960,000 Jun 11, 11 Jun 12, , ,000 3,900,000 Jun 11, 11 Jun 12, ,000 25,000 1,040,000 Jun 11, 11 TOTAL 3,293,300 2,705,830, -3, ,745 2,574,085, 97,573,445 No new scheme in Share warrants Decision date Unit value Situation at end-2009 Expired Exercised in 2010 in 2010 Situation at end-2010 Amount Deadline for exercising Jun 12, ,500-12, Jun 11, 11 Jun 12, ,500-12, Jun 11, 11 TOTAL 25,000-25,

160 2010 Reference document Stock options Decision date Situation at end-2009 Expired in 2010 Exercised in new schemes Situation at end-2010 Deadline for exercising Nov 10, ,000-12, ,000 Nov 9, 2011 Feb 14, ,000-5, ,000 Feb 13, 2012 May 15, ,000-4, ,000 May 14, 2012 Jul 31, ,000-11, ,000 Aug 14, 2012 Nov 13, ,000-7, ,000 Nov 12, 2012 Apr 10, , ,500 Apr 9, 2013 May 13, , ,700 May 12, 2013 Jul 31, ,000-9, ,000 Jul 30, 2013 Nov 13, , ,000 Nov 12, 2013 Feb 12, ,000-5, ,750 Feb 11, 2014 May 14, ,100-6, ,800 May 13, 2014 Jul 30, , ,000 Jul 29, 2014 Nov 12, , ,000 Nov 11, 2014 Feb 11, ,500 20,500 Feb 10, 2015 May 12, ,450 37,450 May 11, 2015 Jul 29, ,000 95,000 Jul 28, 2015 Nov 10, ,000 6,000 Nov 9, 2015 TOTAL 585,300-59, , ,700 Bonus shares Decision date Exercisable in 2005 Situation at end-2009 Expired in 2010 Exercised in new schemes Situation at end-2010 Deadline for exercising Jul 31, 2008, 79,000-5,000-74,000, 0 Jul 31, 2013 Nov 13, 2008, 28, ,000, 0 Nov 12, 2013 Feb 12, 2009, 11,000-1,000,, 10,000 Feb 11, 2014 May 14, 2009, 53,592-2,200,, 51,392 May 13, 2014 Jul 30, 2009, 2,000 0,, 2,000 Jul 29, 2014 Nov 12, 2009, 2,000 0,, 2,000 Nov 11, 2014 Feb 11, 2010,, -2,000, 52,000 50,000 Feb 10, 2015 May 12, 2010,, 0, 8,950 8,950 May 11, 2015 Jul 29, 2010,, 0, 39,400 39,400 Jul 28, 2015 Nov 10, 2010,, 0, Nov 9, 2015 TOTAL 51, ,592-10, , , ,

161 Provisions Amount at year-start Increase, provisions Decrease, write-backs Other changes Amount at year-end Prov. for client warranties 420,370 2,096, ,370 2,096,836 Prov. for supplier commitments 1,991,209 1,991,209 Prov. for fines and penalties Prov. for exchange rate loss 469, , , ,960 Prov. for depreciation schedule on shares distributed 1,207, , ,766 1,112,740 Prov. for disputes 1,207,042 1,207,042 Prov. for retirement benefits 288, , ,414 Other prov. for contingencies and liabilities 745,757 40, , ,289 Prov. for contingencies and liabilities 2,842,679 6,684,795 2,432, ,736 7,461,490 Prov. on intangible fixed assets Prov. on tangible fixed assets Prov. on fixed assets: equityconsolidated securities Prov. on other long-term financial investments 12,018,886 1,762,596 6,059,728 7,721,754 Prov. on inventories and work-inprogress 5,878,685 1,633, ,263 6,596,954 Prov. on trade receivables 315,863 32,231 28, ,270 Other prov. for depreciation (1) 45,729 45,729 0 Prov. for depreciation 18,259,163 3,428,359 7,049,544 14,637,977 General total 21,101,842 10,113,153 9,482, ,736 22,099,467 A provision for supplier commitments is recorded and intended to cover the risk of any loss in value of products ordered from suppliers as a result of sales prospects. A provision for disputes is estimated on a case-by-case basis in view of an analysis of the situations with help from the legal advisors in charge of monitoring them. Since January 1st, 2010, a provision for retirement benefits has been recorded in the corporate accounts, with commitments valued in line with the national wage bargaining agreement for the metalworking industry, based on the following assumptions: Retirement age: 65 Rate of wage growth: 6% Discount rate: 3.25% Rate for social security costs: 45% The commitment represented a total of 656,000 euros at the end of 2010, with 289,000 euros recognized through profit and loss and 367,000 euros through equity. Accrued expenses Accrued expenses included under the following balance sheet items Amount Convertible bonds Other bonds Borrowings and debt with credit institutions Sundry borrowings and financial debt Trade payables and related 9,547,766 Tax and social security liabilities 8,691,518 Debt on fixed assets and related Cash, cash equivalents and accrued expenses Other liabilities 185,475 Total 18,424,760

162 Translation gains or losses Translation gains or losses on accounts receivable and payable in foreign currencies Type of gain or loss Amount assets: unrealized loss Difference offset through foreign exchange hedging Provision for foreign exchange loss 2010 Reference document Amount liabilities: unrealized gain On non-financial fixed assets On long-term financial investments On receivables 138, ,963 On financial debt On operating debt 99, ,960 12,505 On fixed assetrelated debt Total 237, , ,468 Recap: provision for foreign exchange loss -237,960 Breakdown of revenues Breakdown by market: Amount Handsfree kits (Installed systems and Plug & Play) 105,358,970 Home: Designer Collection 3,332,509 Parrot AR.Drone 10,986,258 Other sales 19,357,249 Total 139,034,985 Breakdown by regional market Amount Europe excluding France 78,792,960 France 25,875,358 Other countries 34,366,668 Total 139,034,985 Non-recurring items Non-recurring income Amount Transferred expenses 1,416,509 Total 1,416,509 Non-recurring expenses Amount Penalties 45,829 Losses from share buybacks 1,416,509 Subsidy awarded to Parrot Inc 5,809,728 Retirement of fixed assets 283,123 Total 7,462,531 Breakdown of corporate income tax Breakdown Pre-tax earnings Tax Income from ordinary operations 25,281,207 Common law tax -4,338,390 Discount rate tax -1,367,531 Withholding tax -1,397,507 Tax credit 4,808,246 Non-recurring income / loss (excluding profit-sharing) -6,046,022 1,037,530 Pre-tax earnings 19,235,

163 Tax -1,257,653 Profit-sharing -505,084 Net income 17,472,449 Unrealized tax Base Tax Temporarily taxable transactions Employee profit-sharing 505,084 ORGANIC (national fund for the independent organization of oldage 268,636 insurance for non-salaried industrial and commercial workers) Unrealized capital gains on UCITS 189,420 Exchange gains 817,468 Total 1,780,608 Future tax saving 593,476 Total Due dates for accounts payable and receivable Accounts receivable Gross Under 1 year Over 1 year Fixed assets Equity interest-related receivables 8,748,760 8,748,760 Loans Other long-term financial investments 375, ,207 Total 9,123,967 8,748, ,207 Current assets Bad or disputed receivables 335, ,541 Other trade receivables 42,878,898 42,878,898 Receivables representative of loaned securities Staff and related 1,545 1,545 Social security and related 12,650 12,650 State - corporate income tax 437, ,458 State - value-added tax 2,020,906 2,020,906 Group and related 15,327 15,327 Sundry receivables 706, ,165 Total 46,408,490 46,408,490 Prepaid expenses 595, ,103 General total 56,127,559 55,752, ,207 Accounts payable Gross Under 1 year 1 to 5 years Over 5 years Sundry borrowings and financial debt Trade payables and related 19,416,431 19,416,431 Staff and related 5,529,416 5,529,416 Social security and related 2,912,143 2,912,143 Corporate income tax 519, ,051 Value-added tax 66,472 66,472 Surety bonds Other taxes and related 1,036,603 1,036,603 Fixed asset payables and related Group and related 19,488,001 19,488,001 Other payables 1,110,296 1,110,296 Debt representative of borrowed securities Prepaid income 163

164 Total 50,078,414 50,078, Reference document Breakdown of accounts receivable and payable between the parent company and subsidiaries Assets Liabilities Financial expenses Financial income Long-term financial investments 27,134, ,716 Group trade receivables 23,787,369 Group trade payables 5,594,712 Loan on interest 91,289 91,289 Accrued interest Total 51,013, ,005 Off-balance sheet commitments Customs guarantee: 300,000 outstanding Office leasing: 2011: 1,059,000 euros 2012: 1,033,000 euros 2013: 534,000 euros In the investment agreement signed on December 22nd, 2009, Parrot S.A. made a commitment to subscribe for a capital increase to be carried out by Da Fact by January 31st, 2013 at the latest for a total of 325,000 euros. Commitments received: for the acquisition of Parrot Iberia, our company was covered by a common liability guarantee clause. Retirement benefits Commitments relative to retirement benefits have been valued in line with the national wage bargaining agreement for the metalworking industry, based on the following assumptions: Retirement age: 65 Rate of wage growth: 6% Discount rate: 5% Rate for social security costs: 45% At the end of 2009, the commitment totaled 366,000 euros. Individual training request The number of hours training for beneficiaries totaled 18,523 hours. Headcount At December 31 st Employees, technicians and supervisors Managers Total Executive compensation In 2010, compensation for administrative and management bodies totaled 527,500 euros, with 25,000 euros in attendance allowances. 164

165 KPMG Audit Deloitte Marque & Gendrot 1, cours Valmy 192, Avenue Charles de Gaulle Paris La Défense Cedex Neuilly sur Seine France France Dear Shareholders, Pursuant to the mandate given to us by your general meeting, please find hereafter our report on the financial year ended December 31st, 2010 relative to: The audit of Parrot S.A.'s annual financial statements as appended to this report; The basis for our opinions; The specific procedures and information required under French law. The annual financial statements are the responsibility of your Board of Directors. Our responsibility is to express an opinion on these accounts based on our audit. Opinion on the annual financial statements We conducted our audit in accordance with the industry standards applicable in France. These standards require that we plan and perform the audit to obtain reasonable assurance that the annual financial statements are free from any material misstatements. An audit involves examining, on a test basis or using other selection methods, evidence supporting the amounts and information contained in the annual financial statements. An audit also involves assessing the accounting principles used and the significant estimates made, as well as the overall presentation of the financial statements. We believe that the elements we have collected are sufficient and appropriate to form a basis for our opinion. We certify that the annual financial statements present fairly, in all material respects, the financial position of the Company, its assets and liabilities, and the results of its operations for the year ended in accordance with the accounting rules and principles in force in France. Without calling into question the opinion expressed above, we would like to draw your attention to Note 2, presenting a change of accounting method concerning retirement benefits, which have been provisioned since January 1st, Basis for our opinions Pursuant to the provisions of Article L of the French commercial code relative to the forming of our opinions, we would like to draw your attention to the following point: The net value of equity securities and related receivables came to 27,135,000 at December 31st, Note 2.3 "Longterm financial investments" presents the accounting rules and methods for determining the evaluation of long-term financial investments. In connection with our assessment of the accounting rules and principles applied by your company, we have verified the legitimacy of the approach retained and ensured that it has been applied correctly. The assessments made in this way are part of our audit of the annual financial statements in general and therefore contributed to the formation of our opinion expressed in the first part of this report. Specific procedures and information In accordance with the industry standards applicable in France, we also performed the specific procedures required under French law. We have no observations to make regarding the fair presentation and consistency with the annual financial statements of the information given in the Board of Directors management report and the documents provided for shareholders with respect to the financial position and the annual financial statements. With regard to the information supplied in accordance with the provisions of Article L of the French commercial code concerning the compensation and benefits paid to corporate officers, as well as the commitments made in relation to them, we have checked that it is consistent with the accounts or with the data used for drawing up such accounts and, as relevant, with the elements collected by your company from companies controlling or controlled by your company. On the basis of this work, we certify that such information is true and accurate. 165

166 2010 Reference document As required by law, we have ensured that the various items of information relating to acquisitions of interests and control, as well as the identity of shareholders have been provided to you in the management report. The statutory auditors Paris La Défense, April 29th, 2011 April 15th, 2010 Neuilly sur Seine, April 29th, 2011 KPMG Audit Deloitte Marque & Gendrot Department of KPMG S.A. Jean-Pierre Valensi Nahid Sheikhalishahi Jean-Claude Berriex Partner Partner Partner NA. The Company has not paid out any dividend over the last three years. On the filing date for the present reference document, the Company intends to use its operational cash flow to finance its business over the short and medium term. The Company does not intend to pay out dividends to its shareholders in the near future. Over the last 12 months, there were not any governmental, judicial or arbitration proceedings (including any proceedings which are pending or which the Company is aware of or threatened by) which could have or have recently had any significant impacts on the financial position or profitability of the Company or Group. The Group has not seen any significant change in its commercial or financial position since December 31st,

167 XXI. On the filing date for the present reference document, the Company is a French-law limited company (société anonyme) governed by the laws and regulations in force, as well as its status as a publicly traded company whose shares are admitted for trading on a regulated market. This section presents information concerning the financial authorizations and the bylaws as on the date of the present reference document. On the filing date for the present reference document, the Company's share capital represented 1,961, euros, split into 12,867,599 fully paid-up shares, all of the same category, with a par value of euros. On the filing date for this reference document, the Company had not issued any securities that are not representative of its capital. Liquidity agreement and buyback mandates with NATIXIS SECURITIES With the general meeting on June 19th, 2010 renewing the authorization to implement a share buyback program for a period ending further to the general meeting convened to approve the financial statements for the year ended December 31st, 2010, the Company signed a liquidity agreement with NATIXIS SECURITIES on July 29th, Number of shares bought and sold during the year: ,464 shares bought 411,034 shares sold Average price for purchases and sales: Average purchase price: euros Average sales price: euros Amount of trading costs: Annual flat rate: 30,000 euros Number of shares registered in the Company's name at year-end 2010 and value based on the purchase price, as well as the par value: 5,534 shares registered Value based on the purchase price: 132,908 euros Par value: euros Reasons for acquisitions made: market making or liquidity of the Company's share Percentage of the capital they represent: not significant Number of shares registered in the Company's name at year-end 2010 acquired in connection with share buyback programs 412,732 shares registered Reasons for acquisitions made: allocation of stock options and/or bonus shares to Company or Group staff or corporate officers and/or capital reduction Percentage of the capital they represent: 3.20% Company founder equity warrants 167

168 2010 Reference document At December 31st, 2010, Henri Seydoux still held 2,400,000 company founder equity warrants, and he did not exercise any of them during In 2010, certain members of the Group's staff held 311,387 company founder equity warrants, and they exercised 128,745 of them during the course of 2010 (cf "Company founder equity warrants" in this reference document). Stock options On the filing date for the present reference document, the Company had issued 585,300 stock options for certain Company employees. (cf "Stock options" in the present reference document). The breakdown of the Company's capital and voting rights on the filing date for the reference document following the exercising of securities entitling holders to access the Company's capital is indicated in Section "Current breakdown of the share capital and voting rights" in the present reference document. Bonus shares Au cours de l année 2010, la Société a procédé à l inscription au nominatif des comptes de certains salariés de la Société de actions gratuites qui leur avaient été attribuées (cf «Attributions gratuites d'actions» du présent Document de référence). Ces actions avaient été acquises dans le cadre de programme de rachat d actions mis en œuvre par la Société en In 2010, the Company recorded 100,000 bonus shares awarded to certain Company employees in the accounts on a registered basis (cf "Bonus shares" in the present reference document). These shares were acquired in connection with the share buyback program implemented by the Company in The following table summarizes the valid delegations granted by general shareholders' meetings, as well as the uses made of them during previous financial years and Extraordinary general meeting on June 11th, 2008 Delegation given to Board of Directors 1 Delegation of authority for the Board to issue ordinary Company shares and marketable securities entitling holders to access ordinary Company shares, with preferential subscription rights maintained for shareholders 2 Delegation of authority for the Board to issue ordinary Company shares and marketable securities entitling holders to access ordinary Company shares, with preferential subscription rights waived for shareholders and based on a public offering 3 In the event of a capital increase with preferential subscription rights waived, authorization for the Board to increase the number of securities to be issued 4 Delegation of authority for the Board to issue ordinary Company shares and marketable securities entitling holders to access ordinary Company shares in the event of a public exchange offer initiated by the Company Term of the delegation 26 months from Jun 11, 2008, i.e. through to Aug 11, months from Jun 11, 2008, i.e. through to Aug 11, months from Jun 11, 2008, i.e. through to Aug 11, months from Jun 11, 2008, i.e. through to Aug 11, 2010 Maximum nominal amount of capital Use made in 2010 increase (1) 609, euros NA In accordance with the provisions of Article L Paragraph 2 of the French commercial code, this authorization has been void since June 9th, , euros NA In accordance with the provisions of Article L Paragraph 2 of the French commercial code, this authorization has been void since June 9th, % of the initial issue for each one of the issues decided on under the delegation given to the Board in Point 3 above * NA In accordance with the provisions of Article L Paragraph 2 of the French commercial code, this authorization has been void since June 9th, , euros * NA In accordance with the provisions of Article L Paragraph 2 of the French commercial code, this authorization has been void since June 9th,

169 5 Delegation of authority for the Board to issue ordinary Company shares and marketable securities entitling holders to access ordinary Company shares in return for contributions in kind made to the Company and comprising capital securities or marketable securities with an equity component 6 Delegation of authority for the Board to increase the Company's capital through the incorporation of reserves, profits or premiums *(1) Within the overall nominal cap set at 900,000 euros. 26 months from Jun 11, 2008, i.e. through to Aug 11, months from Jun 11, 2008, i.e. through to Aug 11, % of the Company's capital at June 11th, 2008*, i.e. 200, euros 100,000 euros NA 66,229 shares created as decided by Chairman on Jun 3, 2009 (Board's subdelegation from February 12th, 2009) In accordance with the provisions of Article L Paragraph 2 of the French commercial code, this authorization has been void since June 9th, 2010 Extraordinary general meeting on June 18th, 2009 Delegation given to the Board of Directors 1 Authorization for the Board to grant Company stock options or warrants 2 Authorization for the Board to freely award Company shares 3 Delegation of authority for the Board to issue ordinary Company shares and marketable securities entitling holders to access ordinary Company shares, with preferential subscription rights maintained for shareholders 4 Delegation of authority for the Board to carry out capital increases reserved for employees who are members of a company savings scheme 5 Authorization for the Board to reduce the capital through the cancellation of shares Term of the delegation 12 months from Jun 18, 2009, i.e. through to Jun 18, months from Jun 18, 2009, i.e. through to Jun 18, months from Jun 11, 2008, i.e. through to Aug 11, months from Jun 11, 2008, i.e. through to Aug 11, months from Jun 18, 2009 i.e. through to Dec 18, 2010 Maximum nominal amount of capital increase (1) 0.5% of the Company's capital at Jun 18, 2009, i.e. 64,956 options 0.5% of the Company's capital at Jun 18, 2009, i.e. 64,956 bonus shares Use made in ,000 share warrants awarded (Decided by the Chairman on Aug 14, 2009) 5,000 warrants awarded (decided by the Chairman on Nov 27, 2009). 20,500 share warrants awarded (decided by the Chairman on Feb 26, 2010) 37,450 share warrants awarded (decided by the Chairman on May 26, 2010) Balance of 6 warrants has not been awarded 2,000 bonus shares awarded (decided by the Board of Directors on Jul 30, 2009) 2,000 bonus shares awarded (decided by the Board of Directors on November 12th, 2009). 52,000 bonus shares awarded (decided by the Board of Directors on Feb 11, 2010). 8,956 bonus shares awarded (decided by the Board of Directors on May 12, 2010) All the bonus shares have been awarded 609, euros NA In accordance with the provisions of Article L Paragraph 2 of the French commercial code, this authorization has been void since June 9th, ,000 euros NA In accordance with the provisions of Article L Paragraph 2 of the French commercial code, this authorization has been void since June 9th, % of the capital NA In accordance with the provisions of Article L Paragraph 2 of the French commercial code, this authorization has been void since June 9th,

170 * (1) Within the overall nominal cap set at 900,000 euros Reference document Extraordinary general meeting on June 9 th 2010 Delegation given to the Board of Directors 1 Authorization for the Board to grant Company stock options or warrants 2 Authorization for the Board to freely award Company shares 3 Delegation of authority for the Board to issue ordinary Company shares and marketable securities entitling holders to access ordinary Company shares, with preferential subscription rights maintained for shareholders 4 Delegation of authority for the Board to issue ordinary Company shares and marketable securities entitling holders to access ordinary Company shares, with preferential subscription rights waived for shareholders 5 Delegation of authority for the Board to issue ordinary shares or marketable securities in connection with an offer covered under Section II of Article L of the French monetary and financial code 6 In the event of a capital increase with preferential subscription rights waived, authorization for the Board to increase the number of securities to be issued 7 Delegation of authority for the Board to issue ordinary Company shares and marketable securities entitling holders to access ordinary Company shares in the event of a public exchange offer initiated by the Company 8 Delegation of authority for the Board to issue ordinary Company shares and marketable securities entitling holders to access ordinary Company shares in return for contributions in kind made to the Company and comprising capital securities or marketable securities with an equity component Term of the delegation 12 months from Jun 9, 2010, i.e. through to Jun 9, months from Jun 9, 2010, i.e. through to Jun 9, months from Jun 9, 2010, i.e. through to Aug 9, months from Jun 9, 2010, i.e. through to Aug 9, months from Jun 9, 2010, i.e. through to Aug 9, months from Jun 9, 2010, i.e. through to Aug 9, months from Jun 9, 2010, i.e. through to Aug 9, months from Jun 9, 2010, i.e. through to Aug 9, 2012 Maximum nominal amount of capital increase (1) 1% of the Company's capital at Jun 9, 2010, i.e. 129,413 options 1% of the Company's capital at Jun 9, 2010, i.e. 129,413 shares 915,000 euros NA 915,000 euros NA 20% of the capital/year NA 915,000 euros NA 915,000 euros NA 10% of the capital on Jun 9, Delegation of authority for the 26 months from 915,000 euros NA Use made in ,000 share warrants awarded (decided by the Chairman on Aug 13, 2010) 6,000 share warrants awarded (decided by the Chairman on Nov 26, 2010), 39,400 bonus shares awarded (decided by the Board of Directors on Jul 29, 2010) 800 bonus shares awarded (decided by the Board of Directors on Nov 10, 2010), i.e. 40,200 bonus shares awarded during the year and 89,213 available NA 170

171 Board to increase the Company's capital through the incorporation of reserves, profits or premiums 10 Delegation of authority for the Board to carry out capital increases reserved for staff who are members of a company savings scheme 11 Authorization for the Board to reduce the capital through the cancellation of shares (1) Within the overall cap on authorizations: 915,000 euros Jun 9, 2010, i.e. through to Aug 9, months from Jun 9, 2010, i.e. through to Aug 9, months from Jun 9, 2010, i.e. through to Dec 9, ,000 euros NA 10% of the capital per 24-month period 211,376 shares cancelled as decided by the Board of Directors on Jul 29, 2010, i.e. 1.63% of the capital NA. Date Feb 12, 2009 May 14, 2009 May 14, 2009 Jun 3, 2009 Jun 19, 2009 Jul 30, 2009 Nov 12, 2009 Nov 12, 2009 May 12, 2010 June 1, 2010 Jul 29, 2010 Nov 10, Operation Exercising of company founder equity warrants Exercising of company founder equity warrants Number of shares issued Par value of shares ( ) Nominal amount of change in capital ( ) Issue, contribution or merger premium ( ) Aggregate amount of share capital ( ) Aggregate number of shares 3, ,055 2,035,113 13,349,573 29, ,558 63,864 2,039,670 13,379,479 Capital reduction -454, ,276-2,702,383 1,970,395 12,924,915 Payment of 66, , ,057 1,980,488 12,991,144 Waveblue earnout Capital reduction -96, ,725-1,327,085 1,965,763 12,894,523 Exercising of company founder equity warrants 10, ,568 16,536 1,967,331 12,904,809 Exercising of 5, ,968,109 12,909,915 bonus shares Exercising of 2, ,359 1,968,528 12,912,663 company founder equity warrants Exercising of 21, ,237 63,458 1,971,765 12,933,904 company founder equity warrants Waveblue earnout 3, ,516 1,972,228 12,936,943 Capital reduction -211, ,214-1,256,630 1,940,014 12,725,567 Exercising of company founder equity warrants 70, , ,043 1,950,781 12,796,214 The principal bylaw provisions were adopted by the extraordinary general shareholders' meeting on May 4th, 2006 and have been in force since the Company's shares were admitted for trading on the Eurolist by Euronext market. Furthermore, with the French employee savings law of December 30th, 2006 coming into force, and in accordance with Article 32 of this law, the combined general meeting on June 4th, 2007 approved the amendment to Article 20 of the bylaws, including a paragraph on the conditions under which candidates for the Board of Directors will need to be 171

172 2010 Reference document appointed, as relevant, from among the employee shareholders if the management report indicates that the staff of the Company and affiliated companies hold at least 3% of the capital through a company mutual fund or company savings scheme at year-end; Article 20 of the bylaws was also amended to take into consideration the application of the French Decree of December 11th, 2006, amending Article 136 of the Decree of March 23rd, 1967, relating to access to general meetings and powers in order to bring it into line with the new regulatory provisions. The Company s purpose, both in France and abroad, is to: Design, manufacture, market and distribute electronic and IT products; Carry out and market technical and economic research in the electronics and IT sectors; Directly or indirectly, on its own behalf or on behalf of third parties, either alone or with third parties, through the creation of new companies, contributions, partnerships, subscriptions, purchases of securities or corporate rights, mergers, alliances, joint ventures, or taking or placing under lease or management any property or rights, or otherwise; And generally, any financial, commercial, industrial, civil, real estate or property operations that may be directly or indirectly related to any of the specific purposes or any similar or related purposes, or likely to facilitate the development of corporate assets. Board of Directors (Articles 14, 15, 16 and 17 of the Company's bylaws) The Company's administration is handled by a Board of Directors made up of a minimum of three and a maximum of 12 members. For the duration of their term-of-office, each director must own at least one share. Directors are appointed for a six (6) year term of office. In accordance with the bylaws, directors appointed to replace another director will remain in office for the time left to run on their predecessor s term. In the event of one or more director seats becoming vacant further to their death or resignation, the Board of Directors may, between two general meetings, make provisional appointments as provided for under French law. However, when the number of directors in office falls below the minimum legally required, the directors still in office or, failing that, the statutory auditors must immediately convene an ordinary general shareholders' meeting with a view to completing the Board's headcount. The provisional appointments made by the Board of Directors are submitted to be ratified at the next general meeting. If provisional appointments are not ratified by the general meeting, the deliberations and proceedings carried out by the directors appointed provisionally, or with their support, will nevertheless remain valid. Directors appointed to replace another member will remain in office for the time left to run on their predecessor s term. All outgoing members may be reappointed. Notwithstanding the previous provisions, the number of individual directors and permanent representatives of corporate bodies over the age of 70 may not exceed one third of the directors in office (rounded up to the nearest whole number, as relevant) further to each ordinary annual general meeting convened to approve the corporate financial statements. Board of Directors' deliberations Board meetings may be convened by any means, including verbally, either at the registered office or at any other location indicated in the notice to attend. Deliberations are subject to the quorum and majority conditions provided for under French law. In the event of a tie, the Chairman of the session has a casting vote. Except when the Board is convened to carry out the operations provided for under Articles L and L of the French commercial code, the Board of Directors' bylaws may consider directors participating in the meeting using videoconferencing or other telecommunications facilities enabling their identification and guaranteeing their effective participation, under the legislative and regulatory conditions in force, to be present for calculating the quorum and majority. 172

173 Powers of the Board of Directors The Board of Directors determines the strategies for the Company's business and oversees their implementation. Subject to the powers expressly granted for shareholder meetings and in accordance with the corporate purpose, it reviews all matters concerning the Company's effective operations and rules on the affairs concerning it through its deliberations. In dealings with third parties, the Company is committed by actions taken by the Board of Directors that do not fall within the corporate purpose, unless it is able to prove that the third party knew that the actions in question exceeded this purpose or that it could not be unaware of this in view of the circumstances, with the publication of the bylaws alone not enough to constitute such proof. The Board of Directors carries out the controls and verifications that it deems necessary. All directors receive all the information required for their missions and may be provided with any documents that they believe necessary. The Board of Directors may adopt a set of bylaws specifying the conditions under which it operates. The Board of Directors may decide to create committees tasked with looking into matters submitted to them by the Board or its chairman for their opinion and review. It determines the makeup and remits of the committees operating under its responsibility. It also determines any compensation to be awarded to the people making up such committees. Chairman of the Board of Directors From among its individual members, the Board of Directors elects a Chairman and sets his or her term-of-office and compensation. The Chairman is appointed for a term of office that may not exceed the term of his or her directorship, and may be reappointed. The age limit for serving as Chairman of the Board of Directors is 65. The Chairman of the Board of Directors organizes and oversees its work, which he or she reports on at the general meeting. He or she ensures that the Company's various bodies operate effectively and more specifically that the directors are able to perform their missions. The Chairman of the Board of Directors is informed by the party concerned about agreements concerning day-to-day operations and entered into under normal conditions. The Chairman provides the Board members and the statutory auditors with a list and an indication of the purpose of such agreements. Executive Management and Deputy Chief Executive Officers (Article 18 of the Company's bylaws) Conditions for performance The Company's executive management is performed, under his or her responsibility, either by the Chairman of the Board of Directors, or by any other individual appointed by the Board of Directors, serving as the Chief Executive Officer. The Board of Directors chooses between the two executive management options available, under the following conditions: The choice is made by the Board of Directors ruling based on a majority of its members; The option selected will only be able to be called into question when reappointing or replacing the Chairman of the Board of Directors or at the end of the Chief Executive Officer's term of office. The shareholders and third parties are informed about the Board's choice under the legal conditions in force. When the Company's executive management functions are performed by the Chairman of the Board of Directors, the following provisions relative to the Chief Executive Officer are applicable for the Chairman. As proposed by the Chief Executive Officer, the Board of Directors may appoint one or more individuals to support the Chief Executive Officer, serving as Deputy Chief Executive Officers. Up to five Deputy Chief Executive Officers may be appointed. The age limit for serving as Chief Executive Officer or Deputy Chief Executive Officer is set at 65. Dismissal The Chief Executive Officer may be dismissed by the Board of Directors at any time. The same is true, as proposed by the Chief Executive Officer, for Deputy Chief Executive Officers. If the dismissal decision is taken without any reasonable grounds, it may result in damages, unless the Chief Executive Officer is serving as Chairman of the Board of Directors. 173

174 2010 Reference document When the Chief Executive Officer ceases or is unable to perform these functions, the Deputy Chief Executive Officers maintain, unless decided otherwise by the Board, their functions and remits until the new Chief Executive Officer is appointed. Compensation The Board of Directors determines the compensation for the Chief Executive Officer and any Deputy Chief Executive Officers. Remits The Chief Executive Officer has the broadest powers to act under any circumstances on behalf of the Company. He or she exercises these powers within the limits of the corporate purpose and subject to the powers expressly applicable for shareholder meetings and the Board of Directors under French law. He or she represents the Company in its dealings with third parties. The Company is committed by actions taken by the Chief Executive Officer that do not fall within the corporate purpose, unless it is able to prove that the third party knew that the actions in question exceeded this purpose or that it could not be unaware of this in view of the circumstances, with the publication of the bylaws alone not enough to constitute such proof. Any decisions by the Board of Directors limiting the Chief Executive Officer's powers are unenforceable against third parties. As agreed with the Chief Executive Officer, the Board of Directors determines the scope and term of any powers granted to the Deputy Chief Executive Officers. In relation to third parties, the Deputy Chief Executive Officers have the same powers as the Chief Executive Officer. The Chief Executive Officer or the Deputy Chief Executive Officers may, within the limits set by the legislation in force, delegate the powers that they deem appropriate, for one or more given purposes, to any representatives, even from outside of the Company, taken individually or grouped together in a committee or commission. Such powers may be permanent or temporary, and may or may not include an option to stand in for the person in question. The delegations granted in this way remain fully in force despite the end of office for the person who awarded them. Each share entitles the holder to a part of the profits and corporate assts proportional to the share in the capital that it represents. In addition, it gives the holder the right to vote and be represented at general meetings, under the legal conditions provided for under French law and the Company bylaws. Shareholders are only liable for up to the nominal amount of the shares that they own; beyond this, no further funds may be requested. The rights and duties associated with shares correspond to the holder at all times. Owning one share entitles holders as of right to be covered by the Company's bylaws and decisions taken by the general meetings. Heirs, creditors, legal claimants or other representatives of a shareholder may not request the stamping of seals on the Company's assets, request the sharing or licitation of such assets, or interfere in the administration of the Company. For the exercising of their rights, they must do so with reference to the corporate inventories and the decisions of the General Meeting. Whenever it is necessary to own several shares to exercise any right, in the event of an exchange, consolidation or allocation of shares, or further to a capital increase or reduction, merger or other corporate operation, the owners of isolated shares, or shares below the number required, will only be able to exercise such rights if they personally ensure the consolidation and, as relevant, the acquisition or sale of any shares required. After having approved the financial statements and noted the existence of a distributable profit as defined by French law, the general meeting decides to allocate this profit to one or more reserve accounts, for which it determines their allocation or use, distributing or carrying it forward. After deducting previous losses if relevant, at least five percent (5%) of the profit for the year is deducted to make up the legal reserves fund. This deduction is no longer compulsory when the amount of the reserve fund is equal to one tenth of the share capital. In addition, the general meeting may decide to pay out any sums deducted against the reserves available to it, expressly indicating the reserve headings against which deductions are carried out. However, dividends are deducted primarily against distributable profit for the year. 174

175 The general meeting may grant each shareholder, for all or part of the dividend or interim dividends paid out, an option between payment of the dividend or interim dividends in cash or in shares. The rights of shareholders as presented in the Company's bylaws may only be amended at an extraordinary general meeting of the Company's shareholders. Any decision to increase shareholders' commitments must be taken unanimously. Ordinary general meeting The ordinary general meeting receives the Board of Directors' management report and the statutory auditors' reports, approves the annual financial statements, rules on the appropriation of earnings and the distribution of profits. It appoints and dismisses directors and sets their compensation under the legal and bylaw conditions in force. It appoints the statutory auditors. The ordinary general meeting rules on the appointment of candidates for the Board of Directors as nominated based on a secret ballot with a simple majority by the employee shareholders, convened to a general meeting on the initiative of the Chairman and Chief Executive Officer, with the option to delegate to the head of HR, whenever the staff of the Company and affiliated companies hold at least 3% of the capital at year-end through a collective management structure. The term of office for the director representing employees is identical to that for the other members of the Board of Directors, it being understood however that the termination of the person's employment contract renders the office null and void. The ordinary general meeting grants the Board of Directors the authorizations which the latter deems relevant to request and which are not reserved for the extraordinary general meeting. In general, the ordinary general meeting rules on all matters that do not concern amendments to the bylaws. An ordinary general meeting is held each year within six months of the previous year-end, except for in the event of a court ruling extending this timeframe. Extraordinary general meeting The extraordinary general meeting may amend any of the provisions of the bylaws. However, it may not increase the commitments of shareholders or change the Company's nationality, except for under the conditions set out by French law or international agreements. Only the extraordinary general meeting is authorized to check and approve any contributions in kind and specific benefits. Convening and assembly of general meetings General meetings are convened and deliberate under the conditions set by French law. They are held at the registered office or any other venue indicated in the notice to attend. Agenda The agenda for the general meeting is set by the author of the notice to attend. However, one or more shareholders or the works' council may, under the conditions determined by the legislative and regulatory provisions in force, ask for draft resolutions to be included on the agenda. The meeting may not deliberate on any matters that are not included in the agenda. Nevertheless, it may at any time dismiss and replace one or more directors. The agenda for a general meeting may not be modified when meetings are convened for a second time. Access to general meetings proxies 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. 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; 175

176 2010 Reference document Vote by correspondence using a paper or electronic form, in accordance with regulatory requirements, 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 proxy 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. 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 cancel the timeframes set out above. The Board of Directors may, if it deems it relevant, provide shareholders with personal admission cards in their names and require them to produce these cards. Attendance sheet Office Minutes An attendance sheet is filled out for each general meeting containing the information required under French law. The attendance sheet must be signed by the shareholders that are present and the proxies. It must be certified as accurate by the meeting office. The proxies given to representatives must be appended to the attendance sheet. The attendance sheet and the proxies appended to it must be kept at the registered office and disclosed upon request under the legal and regulatory conditions in force. Meetings are chaired by the Chairman of the Board of Directors or, in his or her absence, by the longest-standing director present at this meeting. For meetings convened by the statutory auditors or a representative of the courts, the meeting is chaired by the party that convened it. Failing that, the meeting elects its Chairman itself. The role of scrutineer is performed by the two present and willing shareholders with the largest number of votes, both through themselves and as proxies. The office created in this way appoints a secretary, who may be chosen from outside of the shareholders. The members of the office are responsible for checking, certifying and signing the attendance sheet, ensuring that discussions take place effectively, resolving any incidents during sessions, checking the votes made, ensuring that they are compliant, and ensuring that the minutes are drawn up. Minutes are drawn up and copies or extracts from deliberations are issued and certified in accordance with French law. Quorum and voting at meetings At general meetings, each member of the meeting is entitled to one voting right for each share owned or represented, without any restrictions. An ordinary general meeting's deliberations may only be valid if the shareholders present or represented, or voting by correspondence, own at least one fifth of the shares entitled to voting rights at the first meeting convened. No quorum is required when convened for the second time. It rules subject to a majority of votes of the shareholders present, represented or voting by correspondence. The quorum is calculated based on all the shares comprising the share capital, after deducting any shares not entitled to voting rights under the legal or bylaw provisions in force. The extraordinary general meeting's deliberations may only be valid if the shareholders present, represented or voting by correspondence, own at least one quarter of the shares entitled to voting rights at the first meeting convened, and one 176

177 fifth when convened for a second time. In the event of failure to reach the latter quorum, the second meeting may be postponed by up to two months as of the date on which it had been convened. It rules subject to a two-thirds majority of the votes of the shareholders present, represented or voting by correspondence. In the event of a capital increase through the incorporation of reserves, profits or issue premiums, the meeting rules under the quorum and majority conditions required for ordinary general meetings. Any shareholders taking part in general meetings using videoconferencing or other telecommunications resources making it possible to identify them under the regulatory conditions in force will be deemed to be present for calculating the quorum and majority. The Company's bylaws do not provide for any arrangements making it possible to delay, defer or prevent a change of control. With a view to identifying holders of securities on a bearer basis, the Company, under the legal and regulatory terms and conditions in force, may at any time ask, in return for remuneration, the organization responsible for clearing the securities for the name or, if this concerns a legal entity, the corporate name, the nationality and the address or, as relevant, the registered office of holders of securities entitling them immediately or at a later time to vote at its general meetings, as well as the quantity of securities held by each one, and if necessary, any restrictions which may apply to the securities. In addition to the legal disclosure requirement set out in Article L of the French commercial code, any individuals or legal entities acting alone or in concert that directly or indirectly acquire a number of shares representing 2.5% of the Company's capital or voting rights, or any multiple of this percentage, is required to inform the Company of the total number and the percentage of shares and voting rights that they hold, indicating its identity and that of any parties acting in concert with it, by fax, confirmed on the same day with a letter sent recorded delivery with delivery receipt to the Company's registered office, within five trading days of any such thresholds being exceeded. This obligation applies under the same conditions as those set out in the previous paragraph each time the fraction of the share capital or voting rights drops below one of the thresholds mentioned in the previous paragraph. In the event of failure to comply with the requirements stipulated in the previous two paragraphs, any shares exceeding the fraction that should have been disclosed will forfeit their voting rights for any general meeting held until the end of a two-year period following the date when the disclosure issue was resolved. With the exception of cases when one of the thresholds provided for under Article L of the French commercial code are exceeded, voting rights will only be suspended further to a request by one or more shareholders holding at least 2.5% of the Company's capital and voting rights, recorded in the general meeting's minutes. The share capital may be increased, reduced or redeemed by any means and in any way authorized under French law. 177

178 XXII Reference document The Group has not entered into any significant contracts over the past three years other than those signed within the normal framework of its business, with the exception of the following contract: Contract to acquire Waveblue The Company signed a Membership Interest Contribution Agreement on November 29th, 2007 with Barataria Inc. (company fully owned by Mrs. Cristina Sanz and Mr. Jesus Olivares Abad) and Mr. Jon Elliott relating to the Company's acquisition of all of the capital of the American-law company Waveblue LLC. Under the terms of the contribution agreement: Mr. Jon Elliott simply contributed 25% of his membership interests in Waveblue LLC; Barataria Inc. simply contributed 37.5% of its membership interests in Waveblue LLC; Barataria Inc. contributed 37.5% of its membership interests in Waveblue LLC in return for remuneration. The Company made its payment, representing 2,125,000 US dollars, with part in cash and part in Parrot shares, on November 29th, For the share-based payment, 18,838 Company shares were recorded in a registered account for Mr. Jon Elliott and 28,257 Company shares were recorded in a registered account for Barataria Inc. at a price of euros. For the cash payment, Barataria Inc. received 796,875 US dollars. An earnout consideration, payable in Company shares and corresponding to 5% of the sales recorded (net revenues) in 2008, 2009 and 2010 in California State is due to be paid to the sellers. Under a deed with the same date, the equity securities were transferred to Parrot Inc. With 11,947, US dollars in revenues recorded in California in 2008, an amount of 597, US dollars, corresponding to 5% of the aforementioned revenues, was paid in Parrot shares to the former partners in Waveblue, with 49,672 shares awarded to Barataria Inc. and 16,557 shares awarded to Mr. Jon Elliott. With 1,004, US dollars in revenues recorded in California in 2009, an amount of 50, US dollars, corresponding to 5% of the aforementioned revenues, was paid in Parrot shares to the former partners in Waveblue, with 2,279 shares awarded to Barataria Inc. and 760 shares awarded to Mr. Jon Elliott. Contract to acquire the company Da Fact The Company has acquired a minority interest in Da Fact, a French start-up which designs digital musical instruments. The investment made by the Company represents 1,000,560 euros, giving it access to 49% of Da Fact's capital. The rest of the capital is split between Da Fact's two cofounders. A first stage is based on financing in three tranches, which may be paid between 2010 and 2013, with the first tranche (300,560 euros) subscribed for on January 29th, 2010 and the second (375,440 euros) subscribed for on July 19th, 2010 under the terms of the agreement entered into between the two companies. For the second stage, Parrot has a call option on the remaining 51% of the capital between 2013 and If this option is not exercised, the cofounders have an option to buy back the 49% capital stake held by Parrot. Furthermore, in the investment agreement signed on December 22nd, 2009, Parrot S.A. made a commitment to subscribe for a capital increase by January 31st, 2013 at the latest for a total of 325,000 euros. 178

179 XXIII. The external sources referred to in the present reference document are detailed as footnotes whenever an external source is given for reference. 179

180 XXIV Reference document Copies of this reference document are available free of charge from the Company, or may be downloaded from the internet sites of the Company ( and the AMF ( All of the Company's legal and financial documents that must be made available to shareholders in accordance with the regulations in force may be consulted at the Company's registered office. Copies may be sent out free of charge after submitting a request to Parrot, Investor Relations, 174 quai de Jemmapes, Paris, France. 180

181 XXV. The Company has equity interests in Parrot Inc. (which in turn owns Waveblue LLC), Parrot UK Ltd, Parrot GmbH, Parrot Asia Pacific Ltd (which in turn owns Parrot Trading Ltd), Parrot Italia S.r.l., Parrot Iberia, S.L. and Parrot Japan, KK (cf. Section VII. "Structure", Section XX. "Financial information concerning the Company's assets, liabilities, financial position and earnings" - Note 3 to the consolidated financial statements concerning the basis for consolidation, as well as the table of subsidiaries and equity interests presented in Note to the corporate financial statements in the present reference document). In January 2010, Parrot acquired a minority interest in Da Fact, with Parrot investing 1,000,560 euros, entitling it to access 49% of Da Fact's capital. The rest of the capital is split between Da Fact's two cofounders. The financing is planned in three tranches, which may be paid between 2010 and 2013, with the first two tranches subscribed for on January 29th, 2010 (300,560 euros) and July 19th, 2010 (375,440 euros), representing 39.5% of the capital. The third tranche (325,000 euros) will be subscribed for by January 31st, 2013 at the latest, reaching 49% of the capital. Subsequently, Parrot has a call option on the remaining 51% of the capital between 2013 and If this option is not exercised, the cofounders have a call option on the 49% of the capital held by Parrot (cf. Chapter XX. "Financial information concerning the Company's assets, liabilities, financial position and earnings" - Note 31 to the consolidated financial statements). 181

182 XXVI Reference document The information is available on the Parrot internet site ( under Investor Relations, Press Releases. Date Title Feb 12, full-year earnings May 12, first-quarter earnings Jun 1, 2010 Audi offers Parrot technology in its upcoming cars June 15, 2010 Parrot unveils AR.Drone at E3 Expo Jul 6, 2010 Parrot & S1nn to equip VW Group in handsfree technology Jul 30, second-quarter earnings Aug 02, 2010 Capital reduction cancellation of treasury stock Sept 21, 2010 BMW to offer Parrot Connectivity Solutions Oct 11, 2010 Parrot Minikit Smart: a new Plug & Play product Nov 15, 2010 Jan 06, third-quarter earnings Parrot ASTEROID, the new generation of connected car receiver Feb 11, fourth-quarter earnings Feb 14, 2011 Natalie Rastoin put forward to join the Board of Directors Mar 16, 2011 Parrot: Events in Japan Apr 07, 2011 Parrot announces its partnership with e.solutions GmbH May 13, first-quarter earnings May 13, 2011 Acquisition of a technological component in the optics sector May 31, 2011 Report on Parrot's general shareholders' meeting January 2010 Parrot AR.Drone project, when video games become reality Parrot Zikmu in Color by Philippe Starck February 2010 Parrot MINIKIT Primavera, offer your mobile phone flowers! March 2010 For Mother's Day and Father's Day, Parrot has selected some outstanding gifts, for all budgets Hyundai-Kia launches models with integrated Parrot OEM technology in Europe April 2010 Zikmu 2.0, free software upgrade for an enhanced user experience - April 7th, 2010 June 2010 Audi offers Parrot technology in its upcoming cars - June 1st, 2010 Parrot AR.Drone: The invasion has started - June 25th, 2010 July 2010 Parrot & S1nn to equip VW Group in handsfree technology 182

183 September 2010 BMW to offer Parrot Connectivity Solutions October 2010 Parrot MINIKIT Smart: Get the best out of your Smartphone! Parrot Zikmu limited edition: November 2010 AR.Pursuit, the first augmented reality game developed specifically for the AR.Drone December 2010 DIA Parrot by Nodesign, the essence of your photos Furthermore, since the start of the year and before the date on which the present reference document was published, the following information was released: January 2011 Parrot ASTEROID, the new generation of connected car receiver Zikmu Dragon Red Parrot by Starck March 2011 Mothers' Day and Fathers' Day: outstanding gifts with Parrot April 2011 Parrot ASTEROID, the car connects to the Internet Parrot announces its partnership with e.solutions GmbH AR.FlyingAce: a futuristic combat game for the AR.Drone in augmented reality and free May 2011 Parrot newsflash: total peace of mind for the summer! Parrot supports the 15th "Rêves de Gosse" operation June 2011 Parrot CK3100 LCD: free software update for enhanced compatibility Parrot AR.Drone: enhancing the flying experience Parrot AR.Drone: control possible with Android, bada or Symbian AR.Drone Challenges: pit yourself against the best! Parrot AR.Race: customizable single or multiplayer racing game for the AR.Drone Parrot AR.Drone: when video gaming takes on a whole new dimension NA. Date Title BALO notice number May 3, 2010 Convening of the shareholders' meeting Jul 21, 2010 Periodic disclosures annual accounts Apr 20, 2001 Convening of the shareholders' meeting Items published in the official gazette are available on the internet site: 183

184 XXVII Reference document I. FIRST RESOLUTION Approval of the corporate financial statements for the year ended December 31st, 2010 The general meeting, ruling under the quorum and majority conditions required for ordinary general meetings, having reviewed the Board of Directors' report on the Company's management and its appendices, its special reports on the option and warrant schemes and bonus shares awarded, and on the share buyback program, as well as the statutory auditors' report on the Company's annual financial statements, approves the balance sheet and the financial statements for the year ended December 31st, 2010, as presented, with the accounts for the year showing a profit of 17,472,449 euros. It also approves the transactions reflected in these accounts or summarized in these reports. As such, the general meeting discharges the directors and statutory auditors from any liability in respect of their offices for the past year. Participating in the vote: 9,532,728 shares / votes (76.93% of the capital): resolution adopted with 99.97%. SECOND RESOLUTION Approval of the consolidated financial statements for the year ended December 31st, 2010 The general meeting, ruling under the quorum and majority conditions required for ordinary general meetings, having reviewed the Board of Directors' report on the management of the Group formed by the Company and its subsidiaries and the corresponding appendices, as well as the statutory auditors' report on the consolidated financial statements for the year ended December 31st, 2010, approves, as presented, the consolidated financial statements as per Article L of the French commercial code, drawn up in accordance with IFRS, showing a profit of 27,831,458 euros. As such, the general meeting discharges the directors and statutory auditors from any liability in respect of their offices for the past year. Participating in the vote: 9,532,728 shares / votes (76.93% of the capital): resolution adopted with 99.97%. THIRD RESOLUTION Appropriation of earnings The general meeting, ruling under the quorum and majority conditions required for ordinary general meetings, approves the Board of Directors' proposal and decides to allocate the profit for the year ended December 31st, 2010, totaling 17,472,449 euros, to "retained earnings", which will in this way be increased from 44,015,218 euros to 61,487,667 euros. In addition, the general meeting acknowledges that no dividends were paid out over the last three years. Participating in the vote: 9,532,728 shares / votes (76.93% of the capital): resolution adopted with 97.55%. FOURTH RESOLUTION Approval of agreements covered under Article L of the French commercial code The general meeting, ruling under the quorum and majority conditions required for ordinary general meetings, takes note of the special statutory auditors report, drawn up in accordance with Article L of the French commercial code, and approves its findings. 184

185 Participating in the vote: 9,532,728 shares / votes (76.93% of the capital): resolution adopted with 92.53%. FIFTH RESOLUTION Appointment of Mrs. Natalie Rastoin as a new Director The general meeting, ruling under the quorum and majority conditions required for ordinary general meetings, approves the Board of Directors' proposal and decides to appoint Mrs. Natalie Rastoin, born January 15th, 1959 and residing at 40 avenue Georges V, Paris, France, as a Company director for a six-year period ending further to the ordinary annual general meeting convened in 2017 to approve the financial statements for the year ending December 31st, The general meeting acknowledges that Mrs. Natalie Rastoin has confirmed that she would accept the directorship if she was appointed and that she does not hold any offices and is not concerned by any measures that might forbid her from taking on this office. Participating in the vote: 9,532,728 shares / votes (76.93% of the capital): resolution adopted with 83.81%. SIXTH RESOLUTION Participating in the vote: 9,532,728 shares / votes (76.93% of the capital): resolution adopted with 99.45%. SEVENTH RESOLUTION Renewal of the authorization given to the Board of Directors to implement a program to acquire the Company's shares The general meeting, ruling under the quorum and majority conditions required for ordinary general meetings and in accordance with the legal provisions in force, and more specifically Articles L et seq of the French commercial code, having reviewed the Board of Directors' report, Authorizes once again the Board of Directors, for 18 months as of the present meeting, to acquire or get the Company to acquire its own shares, under the conditions set out in Articles L et seq of the French commercial code and those set by the present resolution. 1. The maximum unit price for purchases may not exceed euros. The Board of Directors may however adjust the abovementioned purchase price in the event of the incorporation of premiums, reserves or profits, resulting in either an increase in the par value of shares, or the creation and free allocation of shares, as well as in the event of a stock split or consolidation, or any other operation modifying the share's par value or relating to shareholders' equity, in order to take into consideration the impact of such operations on the share's value. The maximum amount of funds set aside for the implementation of this program to buy shares is 20,000,000 euros. 2. Such shares may be acquired or transferred at any time, including during a public offering period, subject to this being paid for in cash in full under the conditions and within the limits, particularly in terms of the volumes and prices, provided for under the laws and regulations in force on the date of the operations in question, by any means, notably on the market or on an over-the-counter basis, including through block acquisitions or sales, through the use of derivative financial instruments traded on a regulated market or over-the-counter, or through a public offering, under the conditions set out by the market authorities and at the times deemed relevant by the Board of Directors or the party acting under the Board of Directors' delegation. The acquisitions made by the Company under the present authorization may not under any circumstances result in the Company directly or indirectly holding more than 10% of the shares comprising its capital. 3. Such share purchases may be made with a view to any allocation permitted under French law or that might be permitted by French law and regulations in the future, notably with a view to: Implementing the market practices approved by the French securities regulator (AMF), such as (i) the purchasing of Company shares to be kept and issued again subsequently in exchange, in payment or otherwise in connection with any external growth operations, it being understood that the number of shares acquired with a view to being issued again subsequently in connection with a merger, spin-off or contribution operation may not exceed 5% of its capital, or (ii) the coordination of the market or liquidity of the Company's share by an investment service provider acting under a liquidity agreement in accordance with the compliance charter recognized by the AMF, as well as (iii) any market practices that might be approved subsequently by the AMF or under French law; Awarding shares further to the exercising of rights associated with marketable securities entitling holders to access Company shares by any means, immediately or in the future, as well as carrying out any hedging 185

186 2010 Reference document operations relating to the obligations of the Company (or any of its subsidiaries) linked to such marketable securities, under the conditions set out by the market authorities and at the times deemed relevant by the Board of Directors or the party acting under the Board of Directors' delegation, Covering stock option schemes granted to the staff or corporate officers of the Company or its Group in accordance with the eighth resolution for the present general meeting, subject to its adoption, and any option schemes authorized subsequently; Freely awarding Company shares to the staff or corporate officers of the Company or its Group under the conditions set out in Articles L et seq of the French commercial code in accordance with the ninth resolution for the present general meeting, subject to its adoption, and any subsequent authorization; Awarding shares to employees in connection with the profit-sharing agreement, enabling them to share in the Company's growth, and implementing company savings schemes under the conditions provided for under French law, notably Articles L et seq of the French labor code; Reducing the Company's capital in accordance with the eleventh resolution for the present general meeting, subject to it being adopted. 4. Each year, the Board of Directors will report to the general meeting on any operations carried out under the present resolution, in accordance with Article L of the French commercial code. 5. The general meeting grants full powers to the Board of Directors, with an option to subdelegate under the legal conditions in force, to implement the present delegation and more specifically carry out any orders on the stock market, enter into any agreements, draw up and amend any documents, particularly in terms of information, perform all formalities, including allocating or reallocating the shares acquired for the various purposes set, and making any filings with the French securities regulator (AMF) and any other bodies and, more generally, doing whatever is necessary. The general meeting acknowledges that the authorization given under the present resolution cancels and replaces, as of this day and, as relevant, for the section not used by the Board of Directors, the authorization granted previously under the seventh resolution at the ordinary general meeting on June 9th, Participating in the vote: 9,532,728 shares / votes (76.93% of the capital): resolution adopted with 71.87%. II. EIGHTH RESOLUTION Authorization for the Board of Directors to grant Company stock options or warrants The general meeting, ruling under the quorum and majority conditions required for extraordinary general meetings and in accordance with the legal provisions in force, and more specifically Articles L et seq of the French commercial code, having reviewed the Board of Directors' report and the special statutory auditors' report, (i) Authorizes the Board of Directors for a 12-month period as from the present general meeting, i.e. through to May 31st, 2012, to award, under the conditions set by the present resolution, on one or more occasions, Company stock options or warrants. (ii) Acknowledges that the number of options able to be awarded under the previous authorization from June 9th, 2010 is insufficient to meet the Company's profit-sharing objectives. (iii) Therefore acknowledges, subject to the present resolution being adopted, that the previous authorization from June 9th, 2010 will be cancelled and replaced as of this day, in accordance with the provisions of Article L Paragraph 2 of the French commercial code. 1. Each option will entitle holders to subscribe for or acquire one new or existing ordinary share, as relevant. The total number of options that may be awarded under the present resolution may not entitle holders to subscribe for or acquire a number of shares representing more than 1% of the Company's capital on the date of your general meeting. 2. The beneficiaries will be eligible employees or corporate officers (subject to compliance with the new provisions of Articles L and L of the French commercial code further to the Law of December 3rd, 2008) or certain employees or corporate officers (as per Article L Paragraph 4 of the French commercial code) from the Company or related companies or groups as per Article L of the French commercial code. The Board of Directors may award the options to some or all of these people. 186

187 3. The shares which may be obtained by exercising stock options awarded under the present resolution will need to be acquired by the Company in accordance with Article L of the French commercial code or Article L of the French commercial code. 4. The exercise price for stock options or warrants will be set by the Board of Directors on the day when options are awarded, under the conditions set out by Article L of the French commercial code for stock warrants and Article L of the French commercial code for stock options. 5. The options awarded will need to be exercised within maximum 10 years of the date when they were awarded by the Board of Directors. 6. The general meeting acknowledges and decides, as required, that under the present delegation, the shareholder beneficiaries of stock warrants expressly waive their preferential subscription right for shares that would be issued as such warrants are exercised. 7. The general meeting grants full powers to the Board of Directors to implement the present resolution and more specifically: Set, under the legal conditions and limits in force, the dates when options will be granted; Determine the timeframe during which beneficiaries may exercise their options, as well as the exercise periods for options, for up to a maximum of 10 years; Determine the list of beneficiaries for options, the number of options awarded to each one of them, the conditions for options to be awarded and exercised; Set the conditions for exercising options, and more specifically, limit, restrict or forbid (a) the exercising of options or (b) the sale of shares obtained by exercising options, during certain periods or as of certain events, with this decision able to concern (i) all or part of the options and (ii) all or part of the beneficiaries; Setting the dividend entitlement date, even on a retroactive basis, for new shares resulting from the exercising of warrants; Take, in the cases provided for under French law, any measures required to protect the interests of beneficiaries of warrants in accordance with the conditions set out in Articles L and L of the French commercial code; More generally, with the option to delegate and subdelegate under the legal conditions in force, enter into any agreements, draw up any documents, acknowledge capital increases further to the exercising of warrants, amend the bylaws accordingly, as relevant, perform all the formalities required, notably for listing the securities issued in this way, handling all filings with all relevant bodies and doing whatever else may be necessary. 8. Each year, the Board of Directors will be required to report to the ordinary general meeting on any operations carried out under the present resolution, in accordance with Article L of the French commercial code. Participating in the vote: 9,532,728 shares / votes (76.93% of the capital): resolution adopted with 76.60%. NINTH RESOLUTION Authorization for the Board of Directors to freely allocate Company shares The general meeting, ruling under the quorum and majority conditions required for extraordinary general meetings and in accordance with the legal provisions in force, and more specifically Articles L et seq of the French commercial code, having reviewed the Board of Directors' report and the special statutory auditors' report: Acknowledges, subject to the present resolution being adopted, that the previous authorization from June 9th, 2010 is cancelled and replaced as of this day, in accordance with the provisions of Article L Paragraph 2 of the French commercial code. Authorizes the Board of Directors for a period of 12 months from the day of the present general meeting, i.e. through to May 31st, 2012, to freely allocate, under the conditions set by the present resolution, existing Company shares or Company shares to be issued on one or more occasions under the following conditions. 1. The total number of existing Company shares or Company shares to be issued and freely awarded under the present resolution may not represent more than 3% of the Company's capital on the date of the present meeting. 2. The beneficiaries will be eligible employees or corporate officers (as per Article L II Paragraph 1 of the French commercial code, and subject to compliance with the new provisions of Articles L and L of the commercial code further to the Law of December 3rd, 2008) from the Company or related companies or groups as per Article L of the commercial code, or certain categories of them. 187

188 2010 Reference document 3. The Board of Directors will set, under the legal conditions in force, at the time of each allocation decision, the vesting period further to which any shares will be definitively awarded. This period must be at least two years from the allocation. 4. The Board of Directors will set, under the legal conditions in force, at the time of each allocation decision, the mandatory period for Company shares to be held by beneficiaries, with this period commencing from the definitive allocation of the shares. This period may be no less than two years. 5. The existing shares that may be awarded under the present resolution will need to be acquired by the Company, either within the framework of Article L of the French commercial code, or, as relevant, within the framework of the share acquisition program authorized by the seventh resolution submitted at the present general meeting relative to Article L of the commercial code, or any share acquisition program that may apply subsequently. 6. The general meeting acknowledges and decides, as required, that under the present delegation, shareholder beneficiaries of free allocations of existing shares or shares to be issued waive (i) their preferential subscription right to the shares that will be issued as shares are definitively awarded, (ii) any entitlement to shares freely awarded under the present delegation, and (iii) any entitlement to the amount of reserves and premiums, against which, as relevant, the sum required to free up any new shares will be booked. 7. The general meeting gives full powers to the Board of Directors, within the limits set out above, to implement the present authorization and more specifically: Determine the identity of beneficiaries, the criteria for allocation, the number of shares awarded to each one of them, the terms and conditions for awarding shares, and more specifically the vesting and holding periods for shares awarded in this way; Set, within the legal conditions and limits in force, the dates when bonus shares will be awarded; Decide on the dividend entitlement date, even on a retroactive basis, for newly issued shares; Decide on the conditions under which the number of shares freely awarded will be adjusted in order to safeguard the rights of beneficiaries; and, More generally, with the option to delegate and subdelegate under the legal conditions in force, enter into any agreements, draw up any documents, acknowledge capital increases further to definitive allocations, amend the bylaws accordingly, as relevant, perform all formalities and filings with all relevant bodies, and do whatever else may be necessary. 8. Each year, the Board of Directors will report to the ordinary general meeting on any allocations carried out under the present resolution, in accordance with Article L of the French commercial code. Participating in the vote: 9,532,728 shares / votes (76.93% of the capital): resolution adopted with 76.78%. TENTH RESOLUTION Delegation of authority for the Board of Directors to carry out capital increases reserved for staff who are members of a company savings scheme The general meeting, ruling under the quorum and majority conditions required for extraordinary general meetings and in accordance with the legal provisions in force, and more specifically Articles L , L , L I and II and L of the French commercial code and Articles L et seq of the French labor code, having reviewed the Board of Directors' report and the special statutory auditors' reports, Delegates to the Board of Directors, for a 26-month period from the day of the present general meeting, its authority to decide, under the conditions set by the present resolution, to increase the share capital on its decisions alone, on one or more occasions, and at the times and under the conditions it deems relevant, through the issuing of shares or marketable securities entitling holders to access Company shares which already exist or are to be issued, reserved for the current and former staff of the Company and affiliated French or foreign companies or groups in accordance with the regulations in force, who are members of a company savings scheme; as relevant, such issues may be combined with a free allocation of shares or marketable securities entitling holders to access Company shares which already exist or are to be issued, notably through the incorporation of reserves, profits or premiums into the capital, within the legal and regulatory limits applicable, partially or totally replacing the discount under the conditions set out below. 1. The maximum nominal amount of the increase in the Company's capital which may be carried out, immediately or in the future, as a result of all the issues carried out under the present delegation is set at 50,000 euros, it being understood that this cap does not include the nominal value of Company shares to be issued, as relevant, relative to any adjustments made in accordance with French law and the contractual stipulations in order to protect the holders of rights associated with marketable securities entitling them to access Company shares. 188

189 2. The general meeting acknowledges that if subscriptions have not accounted for the entire issue of securities, the capital increase will only be carried out for the amount of the securities subscribed for. 3. For the current and former staff referred to in the second paragraph of the present resolution, the general meeting decides to waive the preferential subscription rights for shareholders to the shares or marketable securities entitling them to access shares to be issued under the present delegation, with such shareholders also waiving any entitlement to the shares or other marketable securities awarded freely under the present delegation. The general meeting acknowledges that under the present delegation shareholders waive their preferential subscription right to the actions which the marketable securities issued under the present delegation may entitle them to. 4. The general meeting decides that: The subscription price for new shares will be equal to the average listed prices recorded over the 20 trading days prior to the day of the decision setting the subscription start date, less the maximum discount provided for under French law on the day of the Board of Directors' decision, it being understood that the Board of Directors may reduce this discount if it considers this to be relevant. The Board of Directors may also replace all or part of the discount by awarding shares or other marketable securities in accordance with the provisions set out below; The Board of Directors may plan for the free allocation of existing shares or marketable securities entitling holders to access Company shares which already exist or are to be issued to replace all or part of the aforementioned discount, it being understood that the total benefit resulting from this allocation and, as relevant, the discount mentioned in the paragraph above may not exceed the legal limits in force; and provided that taking into consideration the equivalent cash value of any shares awarded freely, valued at their subscription price, does not result in the legal limits being exceeded. 5. The Board of Directors will have full powers to implement the present resolution, and more specifically with a view to: Determining the characteristics, amount and conditions for any issue or free allocation of securities; Determining that subscriptions may be carried out directly by beneficiaries or through collective bodies; Determining, under the legal conditions in force, the list of companies or groups whose current and former staff will be able to subscribe for the shares or marketable securities issued and, as relevant, receive the shares or marketable securities awarded freely; Determining the nature and conditions for the capital increase, as well as the conditions for the issue or the free allocation; Setting the subscription price for shares and the duration of the subscription period; Setting the seniority conditions required for the beneficiaries of new shares or marketable securities resulting from the capital increase or increases or securities subject to each free allocation covered under the present resolution; Setting the terms and conditions for shares or marketable securities to be issued under the present delegation, and more specifically their dividend entitlement date (even backdated), as well as the conditions for them being fully paid-up; Setting the subscription start and end dates, and collecting subscriptions; Acknowledging the performance of the capital increase through the issuing of shares for the amount of shares effectively subscribed for; Determining, as relevant, the nature of any securities awarded freely, as well as the terms and conditions for this allocation; Determining, as relevant, the amount of sums to be incorporated into the capital, within the limit set out above, the equity heading or headings against which they are drawn, and the dividend entitlement date for the shares created in this way; Based solely on its decision, and if it deems this relevant, booking the costs for capital increases against the amount of the corresponding premiums for such increases and deducting the sums required to take the legal reserve up to one tenth of the new capital after each increase against this amount; Taking any measures for the definitive performance of capital increases, carrying out the resulting formalities, notably those relating to the listing of any securities created, amending the bylaws accordingly further to such capital increases, and more generally doing whatever may be necessary. 6. The Board of Directors may, within the limits it has determined beforehand, delegate the authority granted under the present resolution to the Chief Executive Officer or, as agreed with the latter, to one or more Deputy Chief Executive Officers. 189

190 2010 Reference document The Board of Directors will be required to report at the following ordinary general meeting on the use made of the present delegation of authority in accordance with the legal and regulatory provisions in force. The present resolution cancels and replaces the eighteenth resolution from the ordinary and extraordinary meeting on June 9th, Participating in the vote: 9,532,728 shares / votes (76.93% of the capital): resolution rejected with 70.37%. ELEVENTH RESOLUTION Authorization for the Board of Directors to reduce the capital through the cancellation of shares The general meeting, ruling under the quorum and majority conditions required for extraordinary general meetings and in accordance with the legal provisions in force, and more specifically Article L of the French commercial code, having reviewed the Board of Directors' report and the special statutory auditors report, Delegates to the Board of Directors, for an 18-month period from the day of the present general meeting, i.e. through to November 31st, 2012, full powers with a view to cancelling, on one or more occasions and for up to 10% of the Company's capital per 24-month period, all or part of the Company shares acquired in connection with the share buyback program authorized by the seventh resolution as presented above or even share purchase programs authorized prior to or following the date of your general meeting. The general meeting decides that the Board of Directors will have full powers, with the option to delegate under the legal conditions in force, to reduce the capital further to the cancellation of shares, and more specifically determine the definitive amount of the capital reduction, set the corresponding conditions, record the difference between the book value of the shares cancelled and their par value against any reserve or premium accounts, acknowledge their performance and amend the bylaws accordingly, and perform any formalities required. The present resolution cancels and replaces the nineteenth resolution from the combined ordinary and extraordinary meeting on June 9th, TWELFTH RESOLUTION Powers for formalities The general meeting, ruling under the quorum and majority conditions required for ordinary general meetings, grants full powers to the bearer of an original or duplicate copy of or extract from the minutes for the present meeting to perform all the legal filing or disclosure formalities. Participating in the vote: 9,532,728 shares / votes (76.93% of the capital): resolution adopted with %. 190

191 For the convenience of readers of this reference document, the following index, drawn up in accordance with the provisions of Article I/ of Title II of the AMF's general regulations (as per the Decrees from January 4th and February 26th, 2007), makes it possible to determine which sections in the annual report correspond to the sections required by Regulations (EC 809/2004 of April 29th, 2004). ANNUAL REPORT Location in the reference document Main financial data Chapter 3 Presentation of the Parrot Group Chapter 7, Part 1 Consolidated financial statements at December 31st, 2010 Chapter 20, section 1 Annual financial statements at December 31st, 2010 Chapter 20, section 3 Analysis of the change in the Company's business, earnings and position Chapter 6 section 1.2 Section 9 Debt position Chapter 10 Description of the main risks Chapter 4 Capital increase delegations Chapter 21, section Share capital structure and elements likely to have an impact in the event of a public offering Chapter 4, 15, 16 and 18 Treasury stock transactions Chapter 21, section 1.3 Chairman's report on internal control Chapter 16 Resolutions presented by the Board of Directors at the Combined General Meeting on May 31st, 2011 Page 184 Declaration by the person responsible Chapter 1 Statutory auditors' reports on the consolidated financial statements Chapter 20, section 2 Statutory auditors' reports on the annual financial statements Chapter 20, section 4 Statutory auditors' fees Chapter 2, section 3 Annual disclosure document Chapter