Israel Aerospace Industries Ltd

Making a Difference

Breaking Walls Innovation at a Government owned, Defense & Security Giant Zvi Maayan, Corporate VP Business Development February 2018 UNCLASSIFIED This document contains proprietary information of Israel Aerospace Industries Ltd. and may not be reproduced, copied, disclosed or utilized in any way in whole or in part, without the prior written consent of Israel Aerospace Industries Ltd Who we are?

▪ Largest Defense and Aerospace company in Israel ▪ Government owned ▪ Established in 1953 ▪ Cutting edge technologies and solutions for: Space, Air, Land, Sea and Cyber ▪ Develops & manufactures advanced systems for the Israel Defense Forces and foreign customers worldwide ▪ Active in both the defense and commercial markets ▪ Active in over 90 countries

UNCLASSIFIED This document contains proprietary information of Israel Aerospace Industries Ltd. and may not be reproduced, copied, disclosed or utilized in any way in whole or in part, without the prior written consent of Israel Aerospace Industries Ltd IAI – Israel Aerospace Industries

▪ Employees: ~15,000 ▪ Sales 2016: ~ $4B ▪ Export: 80% of total sales ▪ Backlog: ~$10.5B ▪ Reporting company (TASE) ▪ IMOD/IDF House for strategic capabilities

 Largest employer of engineers in Israel - about 6,000 engineers ▪ National Aeronautical, Space & Radar Center ▪ Unique innovation centers ▪ Awarded many Israel Defense Prizes

Engineering Commercial Systems BEDEK Aviation Military Aircraft ELTA Systems & Development Aircraft Missiles & Space

World leader in World’s 1st UAV World leader in high World leader in World leader in pioneer and World leader in Cyber, EW, Radar performance developing developing world leader in spearhead and mid size aircrafts super mid size autonomous technologies communication satellites and conversions business jets unmanned systems pioneer in systems missiles defense UNCLASSIFIED This document contains proprietary information of Israel Aerospace Industries Ltd. and may not be reproduced, copied, disclosed or utilized in any way in whole or in part, without the prior written consent of Israel Aerospace Industries Ltd Leader in Patent Registration for 2016

30 29

19 18 18 14 13 12

IAI (Including Elta) BioSense Yeda Ben-Gurion Rafael Technion Verint Systems Inc The Hebrew Elbit University University

Patents – Creativity, Innovation and Strategic Assets

SOEs are highly bureaucratic and Technology is rapidly chancing suspicious of changes. Making conceptual changes is very s-l-o-w

while

Highly dynamic “booming” startup arena Big organizations have schematic long term creating newly emerging technologies R&D process, taking few years from a without certainty re the future market concept to a product, while flexibility being practice, requiring flexible and adjusting restricted by conservative procedures ecosystem Gantt

while PDR CDR

Drones UAVs C4I Shifting Navigation Autonomous Cars Command & Control Rooms New Space Cyber

Imaging Unmanned IoT & Data fusion Systems

Safe / Smart City Real Time Datalinks

Historically, government funded R&D, New players such as Google and Amazon are funneled through the A&D industry has led penetrating into traditional defense areas - the development of cutting-edge such as Satcom, autonomous vehicles, technologies, agnostic to design costs and robotics, augmented reality etc. deploying time to market huge budgets - and are becoming more adapt at selling into defense markets creating a highly competitive new landscape Shifting

The global A&D market is changing; failing to adapt poses significant risks to traditional players

▪ Although it is obvious that out-of-the-box innovative approach is a “Must Do”, big organizations like IAI are still far from being real players in this arena.

Why?

NIH Introducing outsourced new emerging technology would crash into the first barrier – the NIH syndrome – “we can do anything better, cheaper and faster”, syndrome “they are just kids and have a lot to learn”, “that will never work”…

As a govt. owned comp. IAI is VERY heavily regulated. Even a minor seed investment in a startup requires the approvals of the Government Owned Regulations Companies Authority, Ministry of Defense and IAI’s Board. That can never meet an investment round schedule

(i) Part of IAI’s R&D serves national security issues. Hence, deploying an Security innovative 3rd party technology could be irrelevant; (ii) investment in and co- Clearance development of technologies for military or dual use purposes, or by a defense comp., would “contaminate” it as a military technology subject to export controls

IAI as a govt. owned A&D comp. with strong military content, has a patriotic and DNA & conservative DNA, being suspicious and over protective on the one hand, and Culture with strong empathy to the organization on the other. In addition, most of IAI officers are ex-generals or engineers with no familiarity with the startups scene UNCLASSIFIED This document contains proprietary information of Israel Aerospace Industries Ltd. and may not be reproduced, copied, disclosed or utilized in any way in whole or in part, without the prior written consent of Israel Aerospace Industries Ltd Making a Change What do we do from here?

▪ Adopting new approach at IAI requires communication, vision and organizational cultural change ▪ Communication with all stakeholders inside the company ▪ Education: ecosystem intro ▪ Communication with all outside stakeholders ▪ Vision: being a long-distance runner  We shall start with “dating” approach  Establish a CVC  Commence investing cash and In-Kind  Commence spinoff activities through a dedicated fund

▪ IAI has launched its activity with . From there we burst! https://youtu.be/OnOtLbYtGL0

… So, I’ve got a feeling thatUNCLASSIFIED today is going to be a good day! This document contains proprietary information of Israel Aerospace Industries Ltd. and may not be reproduced, copied, disclosed or utilized in any way in whole or in part, without the prior written consent of Israel Aerospace Industries Ltd Thank You