TZ LIMITED — Management Reports 2010

May 17, 2010

TZ Limited ABN 26 073 979 272

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18 May 2010

Lodged by ASX Online

The Manager Company Announcements Office ASX Ltd Level 4, 20 Bridge Street Sydney, NSW 2000

Dear Sir/Madam

Shareholder Update

A Message From Your Directors

Firstly, we’d like to thank the shareholders for their patience and on-going support of TZ Limited (the “Company” or “TZ”). We fully recognize the need to provide better communication as to the direction of the company moving forward and we remain committed to doing so.

As you know, much has been communicated about the significant challenges of the past year since the new Board was appointed. The Company has dealt with litigation on numerous fronts, however several disputes have been finally resolved and the only material litigation still on foot consists of the litigation involving former directors of the Company which has previously been disclosed by the Company to the ASX. The Company’s financial position has also been substantially strengthened in that we have managed to reduce our debt by half, through the debt to equity swap with QVT. The events of June 2009 obviously seriously damaged the Company’s reputation in our market segments and in that regard, both senior management and all Board members have met with major suppliers, joint development partners and customers to bring back confidence in our on-going relationships with them. We are pleased to advise that all relationships are now on a steady footing and are moving forward at a manageable pace. We have also managed to secure interim funding to enable the development of new product offerings to support current market participation. This investment has been a valuable one and has made the significant difference between TZ being a viable company going forward and being the company in June 2009 that was teetering on failure.

Chicago (Operational Headquarters) ASX: TZL 520 West Erie Street, Suite 210 Web: www.tz.net Chicago, IL 60654 United States Email: info@tz.net

Sydney (Registered Office) Level 11, 1 Chifley Square Sydney, NSW 2000 Australia

We believe that TZ has a sustainable business proposition to go forward with. All of the above was endorsed at our AGM in late February 2010 with TZ achieving the necessary capital restructure at that meeting.

Since the AGM and over the month of March, we have faced the challenge of re-listing and to securing an additional facility with QVT to allow us to continue to fund our operations. Having addressed these challenges, our focus has turned to the TZI business, to developing a business strategy for moving forward which involved fully scrutinizing past strategies, identifying resource needs to capitalize on the growth opportunities and marshalling the right leadership with the capacity, backbone and most of all, determination to make a company we can be proud of.

To this end, over the month of April and May, your Board has overseen a detailed strategic review of all aspects of the business, finishing only last week after an intensive strategic planning workshop in Chicago where we worked with management and external consultants to examine the business, the technology, the efficacy of the organization and the opportunities for growth. We believe we now have a clear picture for the future.

It is absolutely striking as to the depth of intellectual property and technology that this Company has created over the last ten years. In total, US$28M has been invested in IP and technology, clearly demonstrated by the 178 current pending patent applications filed in 16 countries around the world. A total of 49 patents have been granted and a further 33 are in national phase applications in a number of countries.

Much of this intellectual property and technology footprint was created well ahead of the enabling technologies of the time. Since the original vision was conceived, the infrastructure that powers the internet, mobile communications and the software driven world we live in has now become a ubiquitous and accepted part of everyday life. It is now taken for granted how these technologies allow us unprecedented freedom and control of our lives anywhere and anytime. Back then, the concept of remotely actuated fasteners embedded into manufactured objects controlled by software was a stretch beyond known technology boundaries – today the technology elements to enable it are emerging everywhere.

Ten years ago, TZ was an IP company ahead of its time with a big vision for the future. Today, TZ’s intellectual property and platform technology can be demonstrated by real products and systems that bring this vision alive, from intelligent devices that live on the edge of the network to the software that controls them. Whether it’s a data center, an industrial enclosure or an aircraft interior, this broad set of capabilities offer a new “infrastructure” of hardware and software solutions that provide an integrated and cost effective means of remotely securing, controlling, and auditing globally dispersed assets that can no longer be affordably managed by using people and traditional processes.

Today, we are not an intelligent fastener or lock company, but rather we have discovered that we offer something significantly more valuable ... TZI delivers integrated hardware and software infrastructure that can control and protect assets in any place, at any time.

Turning to the business, we need to recognize the reasons why TZ has failed to deliver on the potential over the past few years:

1. Since 2006, the business has had a total of four CEOs for varying periods, all with differing views in terms of business strategy, execution focus, technology development and areas for participation. Couple this with the significant change in business direction from the original technology licensor approach to becoming a device manufacturer with the acquisition of the Intevia business, this lack of consistent leadership and focus has significantly impacted the organization with resources lacking clarity as to the fundamental purpose and drivers for the business. There is a need to rally and align resources around a common vision, purpose and to drive consistent and strategic objectives across technology, marketing, and business development.

2. The TZI business has lacked the technical and marketing capability at the management level which is needed to successfully commercialise the technology. In earlier years, this depth of technology understanding coupled with business and marketing orientation led to many of the licensing relationships and development partnerships on which the business was built. The TZI business has in recent years migrated to a focus around selling fastening and locking devices rather than having a clear participation strategy defined by market segmentation, customer needs and a clear and compelling value proposition to those segments. We need to align the marketing and sales approach to delivering clearly articulated value propositions under the leadership of a technically and commercially strong management team.

3. Given the constraints on funding and resources in recent years, the business has relied too heavily on its distribution channels and partner relationships to drive the rate of business growth. At this early stage of business establishment, we need to control our marketing and sales message to our customers and build brand positioning and awareness and establish a clear competitive leadership position in the market. Furthermore, we need to better manage our partnerships strategically and leverage the potential opportunities and value that can be generated from that cooperation and collaboration.

To be successful, we must get closer to our targeted market segments and clearly communicate compelling value propositions that we can deliver to customers with problems that we can solve for them cost effectively. We need focus on diligent implementation and execution under solid technical/commercial leadership.

For this reason we are announcing today a major re-organisation of TZI with the creation of three autonomous business units around the global markets we serve and the distinct needs of those customers. Each business unit will share common resources like accounting, legal and administration, but in the business sense will be empowered to make their own customer driven decisions. The businesses will each draw from the same IP and technology pool but will be able to customize offerings to meet specific segment requirements. The business units are explained in detail later on in this update.

With this significant change, emphasis will be placed on better exploiting the synergies with PDT and to leveraging PDT’s multi-disciplinary engineering services capability to support TZI’s on-going product development needs. Current engineering capability within TZI will be redeployed to PDT to provide for more effective utilization, to support PDT increasing resource needs and to deliver improved cost management.

As a result of our reorganization, we have also made major changes to our management structure with far greater accountability placed on those allocated to the roles of managing the operations. We will constantly manage our cost structure to ensure that cost will not run away from us as they have done in the past and that our focus remains firmly on revenue generation and business growth.

This is a significant departure from the previous broad base approach to technology adoption and sales generation. With execution focus, the right leadership and the availability of operating funds through new capital raising efforts, we will build an accountable and responsible team culture dedicated to the achievement of objectives and the delivery of defined business results that will support new business implementation.

Appointment of interim TZI CEO

The Directors are pleased to announce in conjunction with this restructure, the recruitment of John Wilson as interim CEO of TZI.

What this company needs today is someone that has a solid understanding of the company’s IP and technology and the technical and commercial business skills and competencies to re-build this business after the significant turmoil of the previous year. John originally founded this company with Dickory Rudduck and helped to take the company to ASX listing in 2004, the establishment of the US operations and the technology licensing agreement with Textron Fastening Systems. He left the company in 2007.

Right now, TZI needs micro-management at every level of the organization particularly given we have a new business strategy. We recognize that one of John’s strengths is that he is capable of operating at all levels of the organization, can communicate effectively to the Board and has the determination to get the job done. We are only interested in outcomes from here on in. Too much money in the past has been spent on conceptual development and speculative opportunity. John will be changing that culture.

Since leaving TZI, John has established a successful management consulting company helping a number of early stage technology companies commercialise technology and expand internationally. He has successfully negotiated and secured licensing agreements and strategic alliance partnerships with major companies in Australia, US and Europe for his clients across a diverse range of industries including consumer electronics, food packaging and sports products. John is also an Audit Member with Queensland Government’s Ulysses Program which is designed to assist Queensland businesses to commercialise innovation.

New TZI Business Units

The following is an overview of each of the three new operating business units and their proposed trading names. It is anticipated that each business unit will, in the coming weeks, develop their operational plans defining business objectives, goals and priorities as well as identifying significant milestones.

1. Infrastructure Protection, Inc .

This business is dedicated to delivering solutions to targeted customers in the data centre market, oriented around new levels of physical security, protection and remote control over global IT assets. It is estimated the market for security solutions in the IT infrastructure space is large and growing with over USD$1.5 Billion in sales each year. This spending is being driven by evolving regulations and compliance requirements in the industry and the need for companies to integrate physical and information security with increasingly microlevels of protection.

Maarten Van Duijn, the newly appointed head of this business unit, said “TZ solutions which are enabled by their compact form and remote and aggregated software control, can effectively extend physical security to the cabinet and to the asset level, offering significant capability and cost savings over and above what current offerings can deliver”.

The business will be initially characterized by its Praetorian and Centurion system offerings and further planned extensions to this platform together with the on-going strategic distribution relationship with Anixter International Inc.

Anixter is a leading global supplier of communications and security products, electrical and electronic wire and cable, fasteners and other small components. The TZ Praetorian™ Locking System was recently noted in Anixter’s annual report as one of the two innovative new solutions delivered by Anixter’s Infrastructure Solutions Lab based on feedback from their customers.

Maarten van Duijn is a highly successful software business consultant with over 17 years international experience in the IT and Telecom industries. Prior to establishing his own consultancy in 2003, Maarten held several executive roles across product development, sales, marketing and systems support in large multinationals including SAP, Global Crossing and Exact Software. Maarten holds a Master of Science degree in Business Administration from the Erasmus University of Rotterdam.

2. Packaged Asset Delivery, Inc.

This business is focused on offering automated “last mile” parcel delivery infrastructure to targeted market segments. The initial TZ InBox offering is specifically targeted at the corporate mail client.

“There is a gap in the market today for a system solution that can manage the increasing volume of parcel delivery and provide a modular and efficient system that offers improved chain of custody, reduced costs and improved access.” said Anthony White, newly appointed business unit leader. “We have an opportunity to establish a strong first mover advantage in this market segment and are in the process of collaborating with the world’s leading provider of integrated mail and document management systems to support market introduction. We will be in a position to announce more details of this relationship in the near future. We are also actively working in other market segments where similar customer needs prevail including offerings to the high density residential market and to community mail hubs.”

Anthony White is an experienced executive with a broad range of expertise across business development, strategic business analysis, international marketing, project management, and software development. Anthony has held senior management roles within Vision Systems Limited in subsidiaries Invetech, Vision Fire and Security (now Xtralis) and Vision BioSystems. Most recently Anthony was Vice President of Business Development at Genetic Technologies (ASX:GTG, NASDAQ Global Market: GENE). Anthony has a Bachelor of Computer Science, Bachelor of Engineering (Mechatronics) with Honours and a Postgraduate Diploma in Management from the University of Melbourne.

3. Aerospace Asset Maintainability, Inc.

A lot has been discussed in previous years about our aerospace opportunities and there has been significant investment in the development of aerospace compliant intelligent latching and fastening systems and in establishing relationships with OEM and tier suppliers. After a long study of these opportunities, your Board has decided that given the onerous engineering and product qualification requirements of this segment, the imperative for this business unit is to seek out partnership and licensing relationships with OEM suppliers to support market entry and adoption.

TZI is moving quickly to reactivate technology licensing opportunities that were reasonably well advanced prior to the activity in this segment being put on hold in May of last year. A business unit leader will be announced in due course.

Closer Integration with PDT

It is clearly inefficient to run engineering teams out of both TZI and PDT. Accordingly as mentioned earlier, we will be moving TZI engineering resources to PDT where we can more effectively utilize them and exploit the service disciplines that have been so successfully deployed within the PDT business. TZI will still retain specialist technical resources where needed.

John Freese will head up the management of TZI new product development and oversee the engineering needs of the TZI business. John has the perfect balance of PDT disciplines through his years as General Manager of PDT’s Chicago operation and his deep understanding of the technology and technical business requirements of TZI. We thank John and his team for the great job they have done in successfully delivering the product development initiatives over the last 12 months.

An Update on PDT Inc.

The Directors are also pleased to report that PDT had an excellent third quarter with revenues at 123% of plan at $4,073,139, and a resultant EBITDA of $516,539 for the quarter against a plan of $326,073.

PDT is a healthy and mature operating business that under Mark Schwartz’s leadership can operate autonomously to achieve its targeted financial objectives. The Board would like to thank Mark and his dedicated team around the world on exceeding their third quarter targets.

This is an outstanding result given that many operators in the same space during the GFC, have either exited the market or downsized their business. PDT's backlog continues to build on the strength of a diverse roster of blue chip clients. The medical, military and public safety sectors have proven more recession-resistant than most and on the back of a number of large turnkey product development programs in first quarter of this year, PDT has been able to grow headcount despite the soft economy.

“The sales pipeline is also strong and growing which may indicate that product development outsourcing will be at the front end of the economic recovery as firms begin to innovate again” said Mark Schwartz. “Bolstered by a continuing economic recovery, I am confident PDT is well positioned for continued growth.”

PDT's design and development work has continued to win recognition and awards, including Design Journal's Platinum "Award for Design Excellence" (ADEX) for the S1 Audio NxSET (tm) Neck Level Headphone Set, and Design Journal's Platinum "Award for Design Excellence" (ADEX) for the Chiron Technology Iris Touch 200 IP Security Dialler Interface, bringing the total awards to nine for the fiscal year.

Appointment of Dickory Rudduck to the Board

Finally and further to our recent announcement on the 14[th] May regarding Dickory Rudduck’s appointment to the Board, we wish to add that Dickory’s appointment will serve a number of purposes:

1. It provides a US based director, given the nature of our US centric operations;

2. It ensures that the Company’s technology vision continues to underpin long term strategic business direction and provide technology thinking at the Board level complimentary to the other Directors’ skills; and

3. It ensures that technology development is strategic and outside the focus of the business units.

We also would like to reinforce our thanks to Willem de Vlugt and his support of the Company during a very difficult time.

Establishment of Australian based Technology Showcase

We are also pleased to confirm the establishment of a technology showcase at our Australian TZ headquarters at Chifley Square. Available for demonstration is our TZ Praetorian and Centurion Systems, our InBox Accountable Mail System and various other technology and product applications.

We have essentially focused our activities on the US and European markets in the past but it is clear there are equally attractive opportunities emerging here in Australia and in the Asian markets. Our sole US presence has limited our opportunity to showcase what we do in this part of the world and to demonstrate the significant technology capability that we have created. This facility is a tremendous asset that allows us to communicate the value of our offerings to prospective customers, investors, analysts and to also provide a beachhead for exploiting local and regional business opportunities across the data centre, corporate and community mail segments.

The Directors feel the constructive developments outlined above are a significant first step towards building the TZI business fitness, supporting PDT growth and to delivering positive near term results for the Company.

Yours faithfully

TZ LIMITED

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Mark Bouris Chairman