HENSOLDT AG — Annual Report 2020

Mar 23, 2021

the world of

PAGE	CHAPTER	TITLE	PAGE	CHAPTER	TITLE
002		Content	074	5	HENSOLDT sustainability report
			076	5.1	Sustainability management
004	1	Preface	076		CEO Statement
		Johannes Huth, Head of KKR EMEA	078		About this report
		Chairman of the Supervisory Board, HENSOLDT AG	080		Corporate Governance
			082		Strategy, vision, materiality analysis
006	2	Letter to Shareholders	086	5.2	Responsible business practices and business integrity
		Thomas Müller	088		Compliance and anti-corruption
		Chief Executive Officer, HENSOLDT AG	092		Corporate Digital Responsibility
			096	5.3	Our people
010	3	HENSOLDT Business Update	098		Workforce
012	3.1	Report from the Divisions	100		Management approach: training, continuing education and talent promotion
012		Radar, IFF & Comms	104		Management approach: diversity and equal opportunity
014		Spectrum Dominance & Airborne Solutions	108		Management approach: health and safety
016		Optronics	112	5.4	Social engagement
018		Customer Service	114		Corporate Citizenship
020	3.2	HENSOLDT International	116	5.5	Planet, environment and resources
022		HENSOLDT France	118		Management approach: resources and environmental protection
024		HENSOLDT South Africa	120		Resource protection
026		HENSOLDT United Kingdom	122		Environmental protection
028	3.3	Cross-Divisional projects	124		Management approach: product responsibility
030		Eurofighter	126		Product responsibility
032		FCAS	130	5.6	GRI content index and GRI performance data
034		MGCS	132		GRI content index
036		MAWS	138		GRI performance data
038		European projects
040		HENSOLDT's space business	140		Limited Assurance Report of the Independent Auditor regarding
042	3.4	Supply Chain Management			the separate non-financial group report
044	3.5	Procurement
046	3.6	Digitalization	142		Imprint
048	4	Innovations at HENSOLDT
050	4.1	HENSOLDT Ventures
052	4.2	HENSOLDT Cyber
054	4.3	Cross-Divisional innovation solutions
056		Innovation management within Optronics
058		Cross-Divisional AI activities
062		Mission management for helicopter upgrades
064		Hydrogen strategy
066		Electronic 3D printing
068		AESA EW antenna
070		Manta NEO
072		Integrated maritime solutions

1 PREFACE

004 | 005

Preface Looking back at the past year, it is only fair to say that 2020 was exceptional in many ways. While we all had to grapple with the new reality of a world beset by a global pandemic, HENSOLDT has held course and reached a significant milestone with the company's IPO and listing in the Prime Standard of the Frankfurt Stock Exchange. In a year of extraordinary circumstances, the achievement of such a transformational step cannot be overstated. Therefore, I would like to thank all employees on behalf of the Supervisory Board for their dedication and exceptional work.

We started the HENSOLDT journey in 2016, with its partial carve-out from Airbus, reaching the first significant milestone two years later by becoming a fully independent company. From the outset, we had a clear and ambitious growth plan. Our objective was to accelerate HENSOLDT's growth, to optimize its product portfolio and footprint as well as to transform the company into a stand-alone business with a global brand. Together, we set out to achieve these goals by mobilizing the company's inventive and entrepreneurial spirit and by leveraging the power of innovation.

We look back at the past three and a half years with pride. Not only has HENSOLDT generated and maintained unparalleled growth momentum, further accelerated by strategic acquisitions, it has also increased the number of employees by more than 30 percent. At the same time, HENSOLDT has substantially enhanced its profitability through driving operational excellence and significantly raised investment, especially in R&D. We have won sizeable orders like the recent contract to develop and produce a new AESA-radar for the German and Spanish Eurofighter fleets. These contract wins underline HENSOLDT's position as driver of innovation in its industry and pave the way for future growth.

The successful IPO, the subsequent share price development, and the admission to the SDAX are a clear confirmation that we have chosen the right strategy for HENSOLDT. We were able to achieve all these milestones thanks to a very good and close cooperation between the company and KKR: while KKR supported the growth and development of the company with its financial resources, international network, and long-standing expertise in carve-outs and the global industrial sector, HENSOLDT's management team brought in high-tech know-how, entrepreneurial spirit and broad industry expertise. The collaboration and cooperation in the partnership works exceptionally well and supported HENSOLDT in becoming the leading defence and security sensor solutions provider headquartered in Germany.

With the IPO, the company has laid the foundation for the next phase of growth. It is now ready to take the next step and does not only have ambitious plans to drive future growth, it also aims to further broaden its product portfolio and develop its sales network. Its customers will continue to benefit from cutting-edge technologies for the next generation of defence and security equipment as a publicly listed company. KKR is looking forward to continue to support HENSOLDT in this endeavour.

Johannes Huth Chairman of the Supervisory Board HENSOLDT AG

In an eventful and extremely challenging market environment, we continued to pursue our worldwide growth strategy, strengthened our now globally recognised brand even further, grew our company and its portfolio in all our markets and took HENSOLDT public on the Frankfurt Stock Exchange. I wish to sincerely thank all our employees – all over the world – for these shared successes over the past year and for their commitment under often difficult circumstances during the COVID-19 crisis.

HENSOLDT has demonstrated extraordinary durability throughout the COVID-19 pandemic. Our business model has proved resilient and we started preparing for a global

crisis early on – in January 2020. With a wide range of actions coordinated by our dedicated COVID-19-Task Force, we succeeded in safeguarding the health of our employees, customers and partners while astutely maintaining our business operations even during lockdowns. In the course of this process, we made enormous progress in the digitalization of our enterprise, from which we will also benefit in future. Our international business also remains on track, despite the global pandemic. We opened the door to a key market through our first-ever order from the US armed forces for our laser range finder, and generated additional new business in all regions of the world.

Dear Shareholders, Dear Ladies and Gentlemen,

2020 was an extremely successful year for HENSOLDT. We achieved all our targets and at the same time unlocked new business opportunities. At around 1.5 billion euros, the order from our German and Spanish customers for the ECRS Mk1 Eurofighter radar is not just the largest in the history of our enterprise – it also positions HENSOLDT as a systems leader in the area of combat aircraft radar systems. Our TRS-4D naval radar systems were selected for the new multi-role warship MKS 180, and we submitted our proposal for the Pegasus signal intelligence system at the end of the year. Our Xpeller counter-UAV system won over new customers and protected major high-profile events. These positive developments – along with many others – made 2020 a superlative year for HENSOLDT.

Munich, 14 April 2021

Thomas Müller Chief Executive Officer HENSOLDT AG

Letter to Shareholders

Future sustainability plays a special role at HENSOLDT, and we continually invest in our innovation capabilities and our high-performance portfolio. With our initial public offering on 25 September 2020, we also demonstrated HENSOLDT's capital-market capability to investors. We achieved this milestone in our development amidst an extremely difficult market environment. The initial public offering of approximately 33 million shares generated proceeds of around 400 million euros, of which around 300 million euros accrued to the company. As of the end of the fiscal year, 32 percent of our shares were in free float and our market capitalisation totalled around 1.5 billion euros.

We are especially proud that the Federal Republic of Germany plans to acquire a strategic shareholding in HENSOLDT, as this emphasises our significance as a key technology partner and strategic supplier to Germany. As a leading supplier of electronic sensor solutions, we develop critical elements for the next generation of security and defence applications. We are looking forward to further expanding our long-standing, trust-based partnership with our most important customer in the years to come.

Thanks to its innovative power and its resilient, crisis-proof business model, HENSOLDT was able to insulate itself from the turbulent market environment in the 2020 fiscal year. The numbers affirm this assertion: In 2020, HENSOLDT increased its revenues to 1.2 billion euros and its EBITDA margin is at a similar level as the year before. In this context, the growth of the adjusted free cash flow before interest and taxes to 196 million euros is particularly gratifying. We can all be extremely satisfied with this performance.

Our growth is driven by the intention of various countries to increase their defence budgets in order to close equipment shortfalls in their armed forces. In line with this trend, HENSOLDT has geared its strategy to focus more on offering complete solutions, with the aim of enhancing the performance capability of new defence systems by intelligently networking electronic and sensor systems. To cite just one example, our colleagues in France have developed LYNCEA DEFEND, an integrated 360-degree, multi-domain self-defence command and control system

more than 350 of them – and we will continue to grow. Our employees are highly motivated and proud of their company – as is impressively demonstrated by multiple top rankings on "best places to work" websites.

It is owing to the hard work of our employees that HENSOLDT can continue to innovate throughout our strong organic growth. Their entrepreneurial spirit is a key component in our identity and thus the driver of our innovative capability. I'm incredibly proud of them!

Our French subsidiary NEXEYA is working on developing green off-grid/microgrid hydrogen energy supply systems, opening the door to new markets and applications. HENSOLDT has become a global leader in the area of 3D printing of electronic circuits. Together with our Israeli partner Nano Dimension, last year we debuted the first ten-layer 3D printed PC board, impressively demonstrating the potential of this technology. In our joint venture HENSOLDT Cyber, we concluded development of our RISC-V-based, secure MiG-V processor and the "TRusted ENTity Operating System" (TRENTOS), which equips us with key components for protecting military and civilian systems against the steadily increasing threats in cyberspace.

With the acquisition of Austrian technology company SAIL LABS, we are expanding our existing capabilities in the area of signal intelligence to include the ever more important element of open source intelligence, as well as acquiring pivotal capabilities in the area of artificial intelligence.

At HENSOLDT, we have always taken special pride in our reputation for fulfilling our social responsibilities and safeguarding the well-being of our employees – long-before our first concrete proactive responses to the COVID-19 crisis. Among other efforts, we support the "Initiative Chefsache" of the German Ministry of Defence to promote diversity and a scholarship programme for women in South Africa – as well as the German civil-society initiative "Lachen helfen e.V.", which enables German soldiers to personally support children in war and crisis zones.

that comprises a wide range of sensors aboard a naval vessel to identify and combat land-based, airborne, underwater and surface threats.

The integrated radar system delivered last year for the Philippine naval frigate BRP Jose Rizal, consisting of our multi-mode TRS-3D naval radar, the MSSR2000I secondary radar and a SharpEye Mk11 navigation radar, underscores this approach. HENSOLDT is also actively deploying this networking expertise in Europe's major future-facing programmes, such as the "Future Combat Air System" (FCAS), the "Maritime Airborne Warfare System" (MAWS) and the "Main Ground Combat System" (MGCS). Together with consortium partners, we have already received orders for studies and demonstrators. As an independent solution provider, we benefit from our direct access to and information-sharing with key customers.

We are also consistently working to enhance and expand our high-performance product portfolio to serve other segments and markets. In doing so, we systematically leverage the advantages of mature HENSOLDT base technologies and modify them in line with new requirements. For example, our new NESIS 4000 identification friend-foe system grants vessels equipped with it a 360-degree view with just a single antenna. The digitalization of our Spectrum Dominance sensors and jammers enables early detection and neutralisation of even state-of-the-art air defence systems. We have equipped our MUSS self-protection system with an expanded sensor suite and significantly more powerful software to protect vehicles on the battlefield even more effectively. This approach has ideally prepared us for our steady evolution to become a provider of integrated sensor solutions.

With a focused and clearly defined M&A strategy, we have acquired a total of seven companies in recent years and integrated them in the HENSOLDT Group. These acquisitions strengthen our product portfolio, open up new markets and secure access to new, disruptive technologies.

To energetically drive this development process forward, we created over 500 new jobs in 2020, and have already filled

In the area of compliance, we continually communicate our zero-tolerance strategy for preventing corruption to our employees through targeted processes and mandatory training seminars. At HENSOLDT, innovation and sustainability go hand in hand. For example, as of last year, we have been using electricity from renewable sources at all our main German facilities, and one of our operations in France is powered 100 percent by renewable hydrogen power. Wildlife protection is especially important to us: besides rhinoceroses, our technology is also used to protect abalones in South Africa against poachers, and we are constantly looking out for new projects that will allow us to use our know-how and commitment to further expand these activities.

Such topics as social commitment, sustainability and compliance are thus nothing new for our Group. However, as a publicly traded corporation, it is important for us to express HENSOLDT's commitment to sustainable business practices and expand our reporting on our performance in environmental, social and governance matters. This is why, for the first time, this Annual Report also contains a separate chapter devoted wholly to sustainability at HENSOLDT.

Dear shareholders, on behalf of my entire management team, I assure you that, as new arrivals on the stock exchange, we are entirely conscious of this special new responsibility to you. We are fully aware of this responsibility every single day, and we place a high priority on fulfilling it. And we understand that we must earn your trust. Thus, I would like to expressly thank all our shareholders who have placed their trust in us since our IPO. We will do everything in our power to justify your confidence.

Yours truly,

Thomas Müller Chief Executive Officer HENSOLDT AG

3 HENSOLDT BUSINESS UPDATE

010 | 011

REPORT FROM THE DIVISIONS

3 HENSOLDT BUSINESS UPDATE

Erwin Paulus Head of Radar, IFF & COMMS

One of the high points of the fiscal year under review was the closing of the contract for the development and production of a new active electronically scanned array (AESA) radar for the approximately 130 aircraft of the German and Spanish Eurofighter fleets. This is not merely on account of the order volume of around 1.5 billion euros, but also because we as the system designer are members of a Spanish-German industrial consortium under German leadership, and because the project is supported by the Eurofighter nations the UK and Italy. This enhances our international reputation and will have a positive impact on other large future projects. As the core component, the new Mk1 radar will be equipped with a new digital multi-channel receiver and the latest generation of antenna-mounted transmit/receive modules, along with other enhancements. We will create around 400 new, highly qualified jobs in development and production over the entire project period.

This new role in the Eurofighter also positions us ideally for the "Future Combat Air System" (FCAS), enabling us to present ourselves as an equal partner for the new radar system to be developed for this project.

Our excellent standing with our customers also benefited us in 2020 in other major, important projects. The best example: our TRS-4D radar, which the German Navy is already deploying in the non-rotating variant on the F125 frigate and as a rotating system on the K130 corvette. On the basis of the German Navy's positive experience with this radar, the procurement of the radar for the future multi-role warship MKS 180 was not put out to public tender, and we have received a concrete product target as part of the MKS 180 development. This means our radar has a chance of being designated the standard radar of the German Navy.

At the same time, we also continued to expand our international business in 2020. One important milestone here was the contract signed in July with the South African high-tech vendor Tellumat – a manufacturer of defence and security solutions in the area of identification friend-foe (IFF) systems, tactical communications (including radio and video links), unmanned aerial systems (UAS) and data links and avionics – to acquire their Air Traffic Management (ATM) and Defence & Security business units. This lays the foundation for establishing our own radar business unit in South Africa, in which we want to develop and manufacture the successor product to our

TRS-3D radar for international markets, among other ventures. This step enables us to unite competence and cost efficiency while also allowing greater flexibility in our export business.

Finally, we also made significant strides last year on the product level. Our new TRML-4D radar is now fully developed and has been mounted on a truck for test operation, so that we can now subject it to operational test conditions for the first time. Our new non-rotator IFF solution was delivered to its first customer, the Norwegian Navy. Our new Spexer 2000 3D antiaircraft radar is currently being integrated in a vehicle for our German customer. In the UK, we are testing the Spexer 600 radar, the successor to the Spexer 500, for both military and civilian applications. The Manta NEO, our new, integrated display and navigation system for use at sea, is also in test operation. And those are just the large-scale projects.

In 2020, the Sensors segment achieved revenues of more than 920 million euros. And with our well-filled product pipeline, numerous novel developments and our integration in numerous major national and international projects, we are also ideally positioned for the future.

Our business model remains tightly focused on passive radar and tactical air defence radar applications. Additionally, however, we are increasingly assuming the role of a lead systems enterprise for aircraft radar systems, which enables us to position ourselves significantly more advantageously in platform business thanks to our new role. The HENSOLDT name is thus acquiring ever greater influence – both at home and internationally. In addition to important product highlights and new product developments, some key orders contributed to our enhanced prominence in 2020:

Radar, IFF & Comms

Successful product and systems vendor

3 HENSOLDT BUSINESS UPDATE

Celia Pelaz Head of Spectrum Dominance & Airborne Solutions

Our field of competence Spectrum Dominance offers our customers modular, scalable, customised solutions for gathering, evaluating and preparing data in both the electromagnetic and cyber information spectra. Highly specialised sensors together with the evaluation of raw data using artificial intelligence deliver the information superiority that is often decisive on today's battlefields. This makes it possible to identify dangers and neutralise threats early on – in both the civilian and military sectors. With our comprehensive airborne portfolio, we are at the forefront of the market in multiple segments today and – as for example with our mission management solutions – are increasingly positioning ourselves as an integrated sensor solution house in the field of competence Airborne Solutions. In 2020, we achieved key milestones in both sectors.

At Airborne Solutions, we pursue our tasks in a highly integrative, cross-Divisional working approach. With our eyes firmly focused on our customers' requirements, we continually improve and optimise existing products and present new, innovative solutions.

In 2020, as a part of the project "Maritime Airborne Warfare System" (MAWS) – the German-French airborne naval warfare system of the future – we not only founded the civil law company German-MAWS-GbR together with ESG and Diehl Defence, but also acquired initial contracts for the study phase with the civil law company and our consortium partner Thales. This enables us as the sensor system supplier to help define the system architecture requirements, which will subsequently form the basis for the actual development of the aircraft, together with our partners,

We have assumed a leading role in the "Future Combat Air System" (FCAS) for developing a next-generation combat aircraft, right now Europe's largest strategic defence programme. With our assumption of the leadership role in the German "Future Combat Mission System" (FCMS) Consortium, we can exercise a decisive influence on shaping the solutions on both the technological and programme levels, ensuring that we remain deeply integrated in the ongoing strategic development over the long term. This keeps us in close contact with our customer and ensures extensive business with stable earnings. In the FCMS Consortium with Diehl Defence, ESG and Rohde & Schwarz, we are additionally bundling all major core competences of national key technologies under a single umbrella.

The German-Czech exercise "Timber Express" provided one striking example of the recognition that we enjoy from our customers. At the express request of the Bundeswehr, we demonstrated our competence in the integration of datalinks and mission systems in helicopters.

Our modular Kalætron product family impressively showcases how successfully we at Spectrum Dominance develop and refine existing products, optimise them and create innovations for our customers. This formed a special focus in 2020:

Thanks to its leading-edge sensor technology, our Kalætron Integral is already able to detect radar-based threats at an early stage and at great stand-off distances today. Consequently, this year our German customer asked us to present a comprehensive proposal, on the basis of the Kalætron Integral and as general contractor, for the integration of reconnaissance capability in carrier platforms.

In 2020, we expanded the already extensive capabilities of the Kalætron product family to include active jamming. Now, our new Kalætron Attack can, for the first time, not only localise threats but also blind or spoof them using targeted jamming signals. This means that the system can, for instance, localise anti-aircraft installations in fractions of a second and successfully jam even the most modern systems over an extreme frequency range using artificial intelligence. This significantly expands the deployment potential of combat aircraft to comprise not only an active electronic combat role (ECR) but also escort and stand-off jamming.

Our Kalætron radar warner for diverse helicopter platforms also successfully mastered all test scenarios in 2020. We have already submitted multiple proposals for this product in national and international projects and are receiving an extremely positive response.

This creates ideal prerequisites for our future business. In 2020, the division achieved revenues of 253 million euros. For 2021 we are expecting numerous new orders both on the product level and as part of major European research and defence projects.

Spectrum Dominance & Airborne Solutions

The partner of choice

Andreas Hülle Head of HENSOLDT Optronics

Our combined Land and Security business generates the greatest sales revenues. Our electro-optics and periscopes for military vehicles and for border surveillance are in wide use and high demand as leading-edge technology. In 2020 alone, we posted an order intake of around 100 million euros in this sector. Product highlights included a new sensor package for the Puma armoured assault vehicle and its "Very High Readiness Joint Task Force" (VJTF) upgrade programme, which delivers colour imaging for enhanced operational readiness. Additionally, all Puma assault vehicles are being upgraded with our MUSS multifunctional self-protection system. We have received orders to equip further Leopard and Marder tanks as well as the Dutch Fennek light armoured reconnaissance vehicle with optics. And we succeeded in placing our innovative "See Through Armour System" (SETAS) for armoured vehicles as an upgrade with multiple customers. SETAS will also play a major role in the future "Main Ground Combat System" (MGCS). Additionally, HENSOLDT's US subsidiary HENSOLDT Inc. won its first major order, to deliver around 450 HENSOLDT Optronics laser range finders for the M1 Abrams tank of the US armed forces.

Internationalisation is accelerating in the Maritime sector. We acquired South Korea and Pakistan as new customers for various versions of our optronics masts. The first deliveries to Taiwan are scheduled for 2021. In addition to Germany and multiple European nations, India is also one of our customers in this segment. The German Navy placed initial orders for our surface ship surveillance system MEOS II. And together with NEXEYA, we are pursuing the development of integrated bridge systems in France.

In Aerospace, our "Airborne Missile Protection System" (AMPS) for helicopters is proving an unqualified success. We thus hope to be able to equip all NH90 transport helicopters and participate in the Tiger Mk3 upgrade. Additionally, we have already signed a framework contract with Airbus Helicopters to equip multiple helicopter models. This makes our system the international standard. HENSOLDT South Africa also played a substantial part in our business success by acquiring orders for around 80 of our airborne ARGOS II surveillance systems for military, border and naval patrol missions for the coming two years alone. In future, ARGOS II will be deployed in police helicopters on three different helicopter platforms – not only by the German Federal Police but by the State Police of Thuringia as well. Finally, we delivered the first models of our new infrared "Missile Approach Warning System" (MAWS) in 2020.

We are also impressively demonstrating our innovative capability in space. For the first time, we certified a new fabrication technology that will enable us to fabricate a 1.4 meter mirror for a key customer.

And of course we cannot fail to mention our Target Optics, which represent an unbroken chain of technological progress reaching back to Moritz Carl Hensoldt, our company's founder. In this sector, we will equip MG5 machine guns of the German Bundeswehr with an additional 5,000 of our optical sights from our Wetzlar plant. With our comprehensive internationalisation strategy, we also want to continue opening up further markets for our products.

And finally, our Industrial Solutions business continues to develop extremely successfully. We are currently on track to become the preferred supplier to one of the world's largest vendors of semiconductor photolithography systems with our "Final Focus Metrology" (FFM) systems for production control. The overhaul of our cleanroom fabrication in Oberkochen in 2020 not only enabled us to meet the extremely exacting quality standards of this industry but also made it possible to double our production at this facility.

In 2020, Optronics posted over 300 million euros in new orders and achieved sales of around 290 million euros. Our book-to-bill ratio is thus greater than 1, and overwhelming evidence of our continuing successful growth. Our supply chain optimisation also contributed to our business success by significantly improving our cash flow.

Our optronic and optical products and solutions are a part of HENSOLDT's core competence. They deliver vital "insight" in numerous defence and security-relevant sectors. Our customers appreciate the user-friendliness, dependability and broad, individually customisable diversity of our products at sea, under water, on land, in armoured vehicles, aboard manned and unmanned airborne platforms and even in space. 2020 saw us making great strides in internationalisation and in our strategic orientation toward positioning ourselves as a systems provider with intelligent surveillance and reconnaissance sensors:

Optronics

Keeping an eye on everything

Temur Karbassioun Head of Customer Service

How can we better network our country subsidiaries and link the markets more effectively? In 2020, we originally wanted to tackle these questions in a large international meeting. On account of the pandemic, the in-person meeting was transformed into an online event that showed beyond a doubt how our superior digital competence can also aid us internally. Represented as avatars in digital breakout rooms, participants used virtual reality (VR) tools to prepare a comprehensive service portfolio that covers our entire global organisation and forms the foundation for our future integrated offering.

This foundation provides the basis for our services for our own, ever-growing product portfolio and third-party products as well as our "above and beyond" special services. We are learning a lot about the latter two from our French NEXEYA colleagues, who have always been strong in this area. We are also supported by our extensive technological expertise. Specifically, we not only possess all required certificates, but also the know-how to master the technology of products that others are afraid to touch. On account of this enormous potential, we at HENSOLDT now even operate our own sales unit to market corresponding services.

At the same time, we are continuing to exploit the advantages of the HENSOLDT domain approach in the Customer Service area as well. This makes it possible to present our services to customers right from the start as an integral part of our system solutions and product offerings, which enhances our reliability for customers and secures sustainable business.

One particularly noteworthy event in the fiscal year under review was the Bundeswehr's participation in the NATO Baltic Air Policing mission, in which Eurofighter units were assigned to the Baltic region. We dispatched our specialists to Estonia under extremely strict pandemic safety protocols to provide consultation and support on site, fully integrated in the mission. We received a great deal of praise and recognition for this.

In pretty much all respects, the pandemic has once again put the spotlight on our strengths. Naturally, we were initially unable to perform many on-site call-outs. But within an incredibly short time, we developed computer-based training offerings – often using VR and AI – as well as new methods for remote maintenance and troubleshooting and, together with our IT experts, found alternatives and built digital bridges for services to our customers. We definitively showed that we are "mission-ready" and capable of finding solutions even in extreme stress situations. And in doing so we scored bonus points with a lot of our customers.

2020 was thus an important year for us. It enabled us to underscore once more what makes HENSOLDT and our Services unit so special: Where others just give up, we go the extra mile. Whether a 35-year-old radar installation in Pakistan or obsolescent subsystems on the Tornado, whether on the ground, in the air or at sea, under extreme conditions on site or remotely and digitally. And even though the latter now generally works extremely well, our aim remains to further expand our on-site activities systematically and globally, in order to get even closer to our customers.

Traditionally a high-margin segment, Customer Service continues to grow strongly. One important driver here is our greater integration with the divisions and the international business units. The ongoing pandemic affirmed the rightness of the focused digitalization efforts that we have been pursuing for years in many of our service activities. Here are just some of the highlights of 2020:

Customer Service

On a growth trajectory

3 HENSOLDT BUSINESS UPDATE

020 | 021

The acquisition of NEXEYA in autumn 2019 marked the start of a comprehensive integration process that was completed extremely rapidly. The focus is now on realising synergies. With HENSOLDT's sensor competence and NEXEYA's system solutions, we can now jointly gain new customers and conquer new markets – and even more besides!

The French defence market is among the most attractive in all of Europe. The national projects and projects planned with Germany total several billion euros in the coming years alone. Together with NEXEYA, the HENSOLDT Group can leverage its larger German-French footprint to make the decisive difference – particularly in projects such as FCAS (see 3.3), MGCS (see 3.3) and the EuroMALE UAS.

Integration: mission accomplished

The post-merger integration (PMI) process at NEXEYA kicked off right away. The PMI enabled us to synchronise processes in the minimum possible time and, even more importantly, brought together key employees from France with the stakeholders of the entire Group in order to enhance collaboration.

We can now jointly leverage synergies, enhance existing products and develop new ones. HENSOLDT products are continually being adapted to meet French requirements while NEXEYA products are being integrated into the HENSOLDT world – with the Group's global network providing NEXEYA with access to the world's markets.

The next step: on to new horizons

At the same time, the merger improves HENSOLDT's access to the French market – enabling a significantly broader industrial and technological base in the French defence sector. In this connection, NEXEYA's portfolio of services is receiving special attention. With NEXEYA's expertise in the areas of MRO, reproduction and repair, obsolescence management and life cycle management in the broader sense, the future joint offerings of both companies open up entirely new markets for HENSOLDT.

Our innovativeness: powering tomorrow

NEXEYA also brings the Group ground-breaking expertise on hydrogen-based solutions. As environmental concerns are now more critical than ever in both the defence and civilian sectors, NEXEYA's existing solutions for generating and storing hydrogen represent a decisive competitive advantage for the Group. Aside from that, this segment plays a major role in strengthening the Group's sustainability initiatives.

The vision: one united system provider

Technical complementarity is a further key advantage, as the combination of the Group's comprehensive range of sensors with NEXEYA's maritime battle management system and aeronautic ISR solution offers customers strong unique selling points and single-source solutions.

All in all, the acquisition of NEXEYA levels up the HENSOLDT Group to a pivotal German-French player in the defence sector – and one that plays a key role in pioneering bilateral programmes and thus in international markets as well.

HENSOLDT FRANCE –

VIVE LA FRANCE

Jérôme Giraud Managing Director HENSOLDT France and NEXEYA

Introduced in 2019, HENSOLDT South Africa is playing an increasingly important role in the company's universe. Expanded competencies have led to new products and new markets to be conquered.

"Sawubona" is one of the typical South African greetings – it means "I see you" in Zulu, the most common language spoken as a first language in South Africa. It is certainly an appropriate greeting at a company that has made a notable impression in a very short time. The new brand – created in 2019 from the merger of GEW and Optronics – is establishing itself as the leading South African brand in defence and security electronics. With currently the largest industrial base outside Europe, HENSOLDT South Africa is already making a significant contribution to further increasing the company's global reach. And this is just the beginning.

One brand – one strategy

2020 was marked by the integration of the two formerly independent business units under one new brand umbrella. Now successfully transformed into a joint organisation with an overarching structure, the centralised key functions such as Finance, Human Resources, Legal & Compliance and Communications support the business. New business units are now being created within the legal entities, such as the Radar Business Unit that is being introduced. A joint development centre pools resources and expertise. New technologies are to be developed here for local and international HENSOLDT companies and customers. Today, and together as HENSOLDT SA, decades of experience and competence of GEW, HENSOLDT Optronics and the Radar Business Unit (previously Tellumat) contribute an important building block to the international growth of the company.

Innovative products – new markets

The foundation for this is the innovative products, which are well established in the market. As host of the "Sovereign Security Conference", HENSOLDT SA presented its integrated security solutions in 2020 to a broad audience. Due to the pandemic situation, the conference was held purely virtually for the first time – also the first event of its kind in the South African industry. More than 300 decision makers, technology experts and business leaders from Africa informed themselves about the latest solutions in the areas of security, IT and defence. More recently, the company also presented a selection of its defence solutions at a capability demonstration day to key delegates from the industry.

New orders also generated additional sales. The South African Air Force and the helicopter fleet of the German Federal Police were equipped with the airborne ARGOS II surveillance system. The South African Communications Regulatory Authority ICASA received an automated spectrum management system from GEW, the authority's preferred supplier since 2000. And a new fleet of armoured personnel carriers equipped with HENSOLDT SA's "Force Protection Jammer" has been delivered to the African Armed Forces for peacekeeping missions. The company's biggest contract of its kind is also being delivered for a nationwide spectrum management system in the Middle East, establishing HENSOLDT SA's market leadership in this domain. Already in use today throughout Africa and in many countries of the world, the innovative products and solutions of HENSOLDT SA form a solid foundation for future business.

Further acquisition – additional division

With the acquisition of Tellumat's Air Traffic Management (ATM) and Defence & Security divisions in 2020, HENSOLDT SA has laid the foundation for the establishment of its own radar business unit in South Africa.

With a history of more than 50 years, Tellumat is considered one of the leading manufacturers in this field in Africa. Long-term partnerships with customers and more than 100 employees in development, production and sales at the locations in Cape Town and Pretoria form a solid basis for its integration into the HENSOLDT Group. In a joint incubation project, the company now intends to further expand its leading position with innovative 3D land and marine radars.

SAWUBONA SOUTH AFRICA –

Plenty of action – one goal

In a year characterised by a lot of change, HENSOLDT SA has not only managed to successfully bring a new brand to the African market. This new brand has also reinforced its position as a heavyweight on the international market for defence and security authorities with applications for vessels, submarines, land vehicles, helicopters and jets – contributing to the global business success of the HENSOLDT Group with additional export business.

HENSOLDT SOUTH AFRICA

Rynier van der Watt Managing Director HENSOLDT South Africa

For centuries, Britain has been considered a proud seafaring nation. HENSOLDT UK continues this tradition with its maritime navigation and monitoring systems and is gradually expanding its portfolio to include land-based solutions.

Following the acquisition of Kelvin Hughes – now renamed HENSOLDT UK – the company continues to focus on the development and production of maritime navigation and surveillance systems. In doing so, the company is pursuing a multi-level strategy. One focus is the British defence market, which is after all the second largest in the NATO world in terms of absolute expenditure. Against the background of the pandemic and Brexit, increased investment in projects for the Ministry of Defence is expected here in the coming years. In addition, HENSOLDT UK also has its sights set on the global market for maritime solutions, contributes its products to systems of the group and extends access to the UK for the parent company.

Investing in people and markets

2020 was a year of strategic investment. In Great Britain, HENSOLDT is already considered an established and strong market participant – also due to the acquisition of Kelvin Hughes. The foreseeable developments and the programmes already underway open up new opportunities. From a newly created management position, HENSOLDT UK is therefore specifically monitoring all current developments in the British defence market – also and especially with regard to the other products from the HENSOLDT universe.

In addition, a further focus was placed on international growth and the related sales force was strengthened. After all, the maritime world market offers a wide range of potential, which now needs to be exploited together with the HENSOLDT parent company. After all, the UK has already proved to be a springboard to the USA on several occasions in the past.

New products for new target groups

One option is the proven SharpEye technology, which due to its flexibility can be used for a wider range of applications from its naval roots – for coastal surveillance and in port traffic control centres, for border surveillance, but also for the protection of critical infrastructure and other security applications on land.

Together with the land and coastal surveillance radars of the HENSOLDT SPEXER series, which are particularly suitable for the detection of and protection against drones, a comprehensive security and surveillance portfolio is thus created for sensitive and protected areas such as warehouses, perimeters, infrastructures and borders. To this end, HENSOLDT 2020 has, for example, further developed the SPEXER 500 entry model into the SPEXER 600.

The success of the strategy was already reflected in the first new contracts in 2020, including the protection of wind farms in the US.

HENSOLDT UNITED KINGDOM

– RULER OF THE SEAS

Overarching cooperation for new successes

At the same time, HENSOLDT UK is intensifying its cooperation with the company's other locations. For example, British navigation radar was successfully integrated into the new LYNCEA combat guidance system from NEXEYA in France and the MSSR2000 IFF Solution from Germany. The first units are scheduled for delivery to the French Navy in 2021, where they will enable tactical data links on six new deep-sea patrol vessels and – thanks to HENSOLDT UK – ensure enhanced situational awareness.

Opening up new opportunities

With participation in a large number of current tenders, a well-filled product pipeline and the necessary staffing, all signs of progress and success at HENSOLDT UK are thus clear. As a fully integrated part of the HENSOLDT Group of companies, additional new opportunities and markets are opening up, which now need to be developed together.

Russell Gould Group Managing Director HENSOLDT UK and Head of International Business Development

3 HENSOLDT BUSINESS UPDATE

028 | 029

With over 550

• aircraft delivered,
• the Eurofighter Typhoon forms the backbone of numerous air forces in Europe. Starting in 2025, German and Spanish aircraft will be fitted with an essential update: the ECRS Mk1 radar from HENSOLDT. An order worth billions that paves the company's way to the future.

THE EYE OF THE TYPHOON

Since the 1960s, a HENSOLDT radar has been behind the nose cone of virtually every combat aircraft in Germany and in many other European nations as well. From the Starfighter to the Phantom and Tornado, and even the three Eurofighter tranches to date, they serve as the pilots' "third eye" when flying missions. For the first time, however, HENSOLDT will not merely develop and produce the hardware components for the next iteration of the radar for the Eurofighter Typhoon, Rather, the company holds responsibility for the entire system design of the follow-on model, the "Eurofighter Common Radar System" (ECRS) Mk1. This marks HENSOLDT's transition from a supplier to a system provider for fighter radar systems, and the ECRS Mk1 opens the door to future projects such as the "Eurofighter Long Term Evolution" (LTE), the "Future Combat Air System" (FCAS) and the "Maritime Airborne Weapon System" (MAWS).

The project

As soon as it became clear that the Eurofighter was to receive a new radar system, HENSOLDT began working behind closed doors to develop the system and to support the necessary political decisions. Preparations were made in collaboration with our Spanish partner INDRA, and supplementary discussions were conducted with further partners in the UK and Italy.

In June 2020 the waiting was over: the Budget Committee of the German Bundestag granted its approval for the project. The order was awarded shortly thereafter by Airbus. Having assumed responsibility for system design, HENSOLDT immediately commenced the full-scale development of the entire radar system as a HENSOLDT product.

The system

The ECRS Mk1 radar system will represent a significant improvement over currently available solutions. To date, the various Eurofighter tranches have used radar systems with purely mechanically scanning antennas (CAPTOR-M) – built with radar antennas and various components from HENSOLDT from day one. The next development stage culminated in the rollout of active electronically scanning array (AESA) technology in the form of the CAPTOR-E.

But the ECRS Mk1 will eclipse even the already significantly enhanced transmission and receiving performance of the CAPTOR-E: with its digital multichannel receiver and novel transmitter and receiver modules, the ECRS Mk1 will deliver a further dramatic increase in reconnaissance and fire control performance – even in the initial "Step 1" configuration. As a national key technology and main sensor of the Eurofighter, the significance of the new radar can scarcely be overstated.

The mission

Development of the new digital multichannel receiver will now continue through to 2025. This will even permit an upgrade of the "Step 0" radar systems to be delivered in advance starting from 2023.

In a future iteration of the system (the "Step 2" radar), the digital receiver will then be able to evaluate and process data from an even greater number of channels thanks to extensive software enhancements. The result: ultra-high-resolution imaging, even further enhanced target recognition and novel functions for electronic warfare.

As a complete HENSOLDT system, the new Eurofighter radar will impart decisive momentum to the group's growth strategy and lay the groundwork for a new, strategic role for the enterprise – from supplier to system provider, placing us on a par with the major players in the industry.

"This is a once-in-a-century opportunity for HENSOLDT that will transform our entire radar business and unleash enormous growth potential. It will open the way to future markets that we cannot yet even begin to quantify. Our new role guarantees the growth of our radar business for the next 15 to 20 years, and thus makes a key contribution to stabilising the enterprise as a whole." Erwin Paulus, Head of Radar, IFF & Comms

It is Europe's largest strategic defence programme. The "Future Combat Air System", or FCAS for short, is much more than merely the combat aircraft of tomorrow. It stands for cooperation between nations and partners, and between the new aircraft and other mission participants.

The days in which individual gifted pilots like Manfred von Richthofen could single-handedly decide the outcome of aerial combat are long past. Air superiority over tomorrow's complex mission areas will be won by tactically networked manned and unmanned aerial vehicles linked with other units on the ground and at sea via a combat cloud.

At the heart of this vision is the "Future Combat Air System" (FCAS), one of the most significant single programmes in Europe right now, both technologically and politically. The participating countries are seeking to jointly develop an aircraft that, flanked by unmanned aerial systems and constantly exchanging data with other units, will far surpass the capabilities of any known combat aircraft and guarantee Europe's defensive capabilities.

Challenge 1: the political level

None of the participating nations either can or is willing to carry out a programme of this magnitude and importance alone. Development, currently being conducted by Germany, France and Spain, must pass numerous consultations, and could also be of interest to other countries in future. Sweden and Italy have signed on with the concurrent British Tempest concept for a new stealth aircraft. Possible cooperation or pooling initiatives cannot be ruled out.

Challenge 2: the technology

Before the actual development can even start, the German participants have formed a consortium to tackle one of the core tasks: the interaction of networked sensors and effectors. This "Future Combat Mission System" (FCMS) consortium, led by HENSOLDT, includes the companies Diehl Defence, ESG and Rohde & Schwarz. Their mission is to jointly develop one of the key pillars of the project: detecting, localising and neutralising targets and threats so as to ensure air superiority – both nationally and jointly with allies.

The seven pillars of FCAS

The development of the airborne weapon system of the future rests on seven pillars, for which initial orders have already been placed to define the necessary technologies:

1. Testing of concepts in virtual space

2. Networked sensors

EUROPE'S

SKY SOVEREIGN

Experience: the HENSOLDT advantage

In this connection, HENSOLDT stands out with its extensive and oft-proven experience in the area of sensor technology for combat aircraft. Whether airborne radar and signal intelligence systems, fire control sensors or identification friend-foe, target acquisition and neutralisation or combating threats – HENSOLDT sensors are already delivering the information needed by numerous manned and unmanned aircraft types, day and night, for surveillance, identification and target acquisition in the airspace and ground terrain of operation areas.

The challenge now is to analyse this ever-swelling flood of data and make it usable in real time with the aid of artificial intelligence – not least in order to enable coordination of the planned unmanned systems. Because in future missions, milliseconds will be decisive. With its Airborne Solutions competence, HENSOLDT already possesses the necessary hardware and software, which it continually develops further.

Right now, more than 50 employees are already working on future solutions for FCAS and the "Maritime Airborne Weapon System" (MAWS) (see 3.3). And these teams will continue to grow.

Together with its partners, HENSOLDT is already working to make the technology needed for the sixth pillar – networked sensors – a reality in the planned sensor-effector integration. Following further defined development phases, current planning calls for the rollout of the first flying demonstrator in 2027, with FCAS itself to be mission-ready starting around 2035.

INTELLIGENT ADVANCES

Even though it will – probably – look that way at first glance, the vision of the "Main Ground Combat System" (MGCS) is to be much more than "just" a tank. As the successor to the German Leopard 2 and the French Leclerc, its main strength will be its intelligent networking and collection of widely diverse information in a single system. This is the only way to unlock capabilities of which today's tank crews can scarcely dream.

Battlefield omniscience with artificial intelligence

This is possible thanks to the diverse sensor, radar and communication technologies that are already available today along with those expected to emerge in the coming years. These deliver the information needed to allow the MGCS crews to manoeuvre their vehicles safely and effectively in enemy terrain, either alone or in combined operations.

Highly versatile sensors and radar systems on the vehicle generate the necessary base data. Unmanned drones that autonomously self-organise as swarms deliver additional reconnaissance. The most important breakthrough: these data will not only be available to the vehicle's crew, but will instead be fed into a central system via jamming-proof laser links and additional drones that operate as relays.

The result: the crew of each vehicle can see what every other crew sees. And they also receive a complex complete situational picture across all vehicles made up of all available information, analysed using artificial intelligence and prepared so as to be intuitively understandable. Navigation under poor visual conditions and even autonomous driving in difficult terrain, automatic warning of impending danger and automatic combating of both physical and cyber threats could thus become a reality.

Direct from stock

The MGCS project plays to HENSOLDT's strengths in many ways, as we already possess virtually all capabilities that the system requires. We can simply take what we need "direct from stock".

HENSOLDT Optronics can deliver the necessary sensors. From thermal imaging, night vision and targeting devices to laser range-finders and communication systems and even automatic self-protection and fire control systems. Our radar portfolio offers systems for air and ground surveillance. HENSOLDT Ventures offers protection against cyber attacks. And SETAS – the "See Through Armour System" from HENSOLDT – can pool, analyse and represent all data in a comprehensible 360-degree view.

Implementation

The next step is to develop technical demonstrators for the various components of the MGCS – chassis, armaments and sensor system. The last one – internally designated "Main Technology Demonstrator 12" (MTD 12) – is of special importance in ever more complex mission areas. Only those combatants who can track and analyse all targets and threats rapidly in an understandable situational picture in real time will be able to respond effectively.

In the "Main Ground Combat System" (MGCS) jointly envisioned by Germany and France, HENSOLDT aims to operate as a systems house and offer all capabilities, intelligently networked, from a single source.

In future, the "Maritime Airborne Warfare System" will guarantee security at sea. HENSOLDT is laying the foundation for this together with German and French partners. In 2018, it was decided at German-French level to jointly develop a replacement for the ageing marine patrol aircraft Brequet Atlantique 2 of the French Navy and the P-3C Orion of the German Navy. What's special: for the first time, military system vendors are to conduct a feasibility study with respect to future requirements, before the orders for the development of a suitable weapon system can be placed on the basis of the study's results.

New threats – new requirements

In recent years, the threat situation has not only intensified generally due to technological advancement, but has also become significantly more complex and requires exponentially faster response times. Though proven over many decades in service, the current maritime patrol aircraft will not be able to fulfil all future requirements without restrictions. The future lies in networked operating/airborne platforms that can detect, track and neutralise threats on and below the surface across extensive maritime zones. These will collaborate and share relevant data with other manned and unmanned systems, naval and other forces as well as e.g. with satellites in real time.

To this end, Germany and France resolved to first define the manifold requirements for the system architecture and only then begin the actual development on the basis of these requirements – an unprecedented course in the history of military aeronautics. HENSOLDT is laying the necessary groundwork together with its three consortium partners ESG, Diehl Defence and Thales.

Two studies – one objective

HENSOLDT and its partners were jointly awarded the contract for the first MAWS feasibility study at the end of 2020. Over the next two years, the team is, in the wording of the order, tasked to "determine the optimum combat system" that "can perform all types of missions", on the basis of the current state of the art and the resulting possibilities.

Concurrently, in 2020 HENSOLDT and its German MAWS partners were also commissioned to conduct a national supplementary study in 2020. Its purpose is to determine how MAWS can be integrated in the German military system environment and what national guidelines – including those relating to certification – must be complied with.

HENSOLDT experts occupy key roles in both studies, including the MAWS Chief Engineer, a Combat Mission System Architect and the Anti-Surface Warfare Architect. Additionally, more than 20 experts from other divisions are providing the necessary background work for this project, which is important to our enterprise on its path to becoming a military systems house.

2018 Germany + France Decision for the joint development of a new airborne maritime reconnaissance system End 2022 MAWS Identification of the optimal combat system

End of 2020 Feasibility study Optimal combat system

End of 2020 Supplementary study Integration of MAWS into German command and control systems

SAFE AT SEA

On the European level, HENSOLDT is teaming up with other enterprises and organisations to research systems and solutions to make our future more secure.

TEAMING UP FOR TOMORROW

We can only be strong together. Only by working together can we master the complex technological challenges for a secure future. There is also broad political agreement on this across Europe. In multilateral research and development projects, HENSOLDT is working with other leading enterprises and organisations to place major projects for tomorrow's diverse defence on a shared technological basis. For it is only through innovation and a competitive European industry that the European Defence Union can function effectively and jointly master the crises of tomorrow. To present just three examples:

CROWN – the ultimate in electronic interaction

How can the most critical radar and communication functions of an aircraft be optimally combined with electronic warfare capabilities in a single system? The joint EU research and technology project "Combined Radar, Communications and Electronic Warfare Functions" (CROWN) is seeking to find the answer. The objective: to define an overarching system architecture including the requisite components. This will not only offer an innovative solution for tomorrow's aircraft that is smaller, lighter, more cost-effective and more powerful. It will also create a foundation on which future ground and maritime systems can build.

To execute this project, eleven enterprises and research organisations, including the Fraunhofer Society, the Netherlands Organisation for Applied Scientific Research (TNO) and the Swedish defence research agency Forskningsinstitut (FOI) have formed a consortium. This project is funded with a budget of 10 million euros.

Within this framework, HENSOLDT is primarily supporting the development of the system concept and the architecture design as well as the necessary digital radar and communication systems.

EUDAAS (EDIDP) – safeguarding the European MALE RPAS

UAS technology is considered one of the paramount fields of future security policy. Together with France, Italy and Spain, Germany plays a leading role in the European MALE RPAS ("Eurodrone") project. This system will provide important real-time reconnaissance at medium altitudes.

The "European Detect And Avoid Function Based on New Sensors" project (EUDAAS) aims to ensure that such remotely piloted systems can safely share airspace with other manned and unmanned aircraft. With a budget of 27.5 million euros, ten international enterprises and research institutions are working on the necessary technologies. The sensors that the aircraft use to constantly monitor their environment and their reconnaissance area will perform a key role here. For this undertaking, HENSOLDT offers the only fully integrated sensor for identifying and tracking potential threats.

REACT (EDIDP) – protection through jamming

Electronic attacks will constitute some of the most severe threats of the future. The EU's "Responsive Electronic Attack for Cooperation Tasks" (REACT) project seeks to provide member states with the technology needed to execute such attacks themselves in order to neutralise potential threats.

This will enable mainly unmanned combat aerial vehicles in an escort role to neutralise ground-based, maritime and airborne threats. In this project, which operates on a budget of 14.8 million euros, HENSOLDT is making an important contribution to preparing the operational concept and developing future jammers.

HENSOLDT

has been amassing experience in space since 1962, and today provides key components for optical and radar systems intended for use under space conditions.

AN INFINITE FRONTIER FOR NEW BUSINESS

Whether civilian or military – space has been the object of steadily increasing interest in recent years. High-tech from HENSOLDT has been an essential mission partner since the first manned lunar landing of Apollo 11. Today, our Space Division develops solutions for earth/planetary observation, communications, security and space exploration in collaboration with the industry's major players. Thus, new business potential is being opened up from existing radar and optical competences – commissioned by NASA, ESA and DLR.

From earth to orbit – and beyond

The aim here is essentially to adapt proven technologies from terrestrial air and ground applications so that they can withstand the high demands of space environments, where they must be able to function reliably and with no maintenance for at least ten years under the most extreme conditions.

HENSOLDT boasts two advantages here: Firstly, the technologies have already often proven their potential in military and civilian use. Secondly, only those technologies for which a potential market exists are subjected to the rigorous and time-consuming certification process required for space deployment. With its enormous expertise, HENSOLDT Space Consulting can assist in successfully implementing these space-related qualification processes.

Serving by protecting

In space, protection is of paramount importance.

Our applications cover the areas of Radar, Optronics, Cyber and Spectrum Dominance. To this end, we are developing new sensor technology solutions in the areas of synthetic aperture radar (SAR), telescopes, optical instruments and hardware/software solutions to counter cyber attacks. In line with our company motto, "Detect and Protect", innovative HENSOLDT technology helps protect satellites sometimes costing hundreds of millions of euros against a broad spectrum of threats in space. For one thing, this means protection against the 20,000 pieces of space debris larger than ten centimetres and over 700,000 pieces larger than one centimetre that currently orbit the earth at a velocity of around 25,000 kilometres per hour. Each of these tiny particles has the potential to damage or even destroy an expensive satellite. This also means protection against possible cyber attacks against the satellite's hardware or software.

Here too, proven HENSOLDT technology can make a decisive contribution, as is recognised by leading space agencies such as NASA, ESA and DLR.

Current space projects

HENSOLDT's space business is focused on the three main areas of planet and space observation, optical communication in space and protection in space. The following are four examples of current satellite projects and missions that are realised using HENSOLDT technology:

• Optical instruments for weather satellites (MetOp, METImage)
• Sensors for modern SAR satellites (TanDEM-X, PAZ, KOMPSat-6)

Components for reconnaissance satellites

Instruments for exploration missions (James Webb Space Telescope, Bepi Colombo, Juice)

3 HENSOLDT BUSINESS UPDATE

Innovation and product cycles are becoming ever shorter, and enterprises must constantly adapt and improve if they are to secure their existence over the long term. On its path to becoming a system provider, HENSOLDT is meeting this challenge

with a cultural change that strives for an integrated perspective on the product and project management within all departments and business units.

With the rollout of an enterprise-wide, cross-functional supply chain management (SCM) system, HENSOLDT is striving to optimise the fl ow of information, materials and capital by integrating suppliers, internal processes and customer requirements. The key is the dynamic interaction between the various links in the supply chain that became essential due to the reduction of the production depth and the increasing division of labour. The process synchronises Sales, project management in the divisions, Customer Service, and Purchasing with current production planning, and consequently procurement plans as well. This enables us to largely avoid ineffi ciencies.

A process that has long been standard practice in the industry has now also made managing ongoing projects at HENSOLDT signifi cantly more effi cient and is strengthening the interaction between a wide range of enterprise functions. Jointly developed and optimised lean processes will in future form the basis for an integrated digital implementation of supply chain management. This also entails planning of a phased extension and expansion to institutionalise the new processes for the "HENSOLDT Management System" (HMS). The key advantage here is that the enterprise-wide supply chain management can be scaled in such a way that it can grow with us going forward.

Developed in 2020 by an interdisciplinary HENSOLDT team, the new supply chain management concept is now being rolled out in the various divisions – in particular with an eye toward optimising product specifi cations. Even the initial actions generated signifi cant successes shortly following their deployment and had a positive impact on HENSOLDT's net working capital and the cash situation.

Our customers

The current needs of our customers are always our highest priority. The divisions align their production strictly along these needs on the basis of monthly end-to-end (E2E) planning circles. Data on production status, shortages or disruptions in the deliveries of specifi c contractors are also disclosed and tracked using KPIs. A digital SCM cockpit helps to avoid excessive inventories and to estimate work in progress.

Our production

This has enabled us to stabilise our production planning and signifi cantly reduce the number of nonconforming parts. We can gradually reduce the necessary production buffers and thus cut throughput times. As a result, HENSOLDT reduced its fi xed capital while increasing its fl exibility. We are now seeking to include our supplier systems in this process in order to reduce our production throughput times by analysing them together with the suppliers' resupply times.

Our suppliers

The tremendous dynamic with which HENSOLDT brings products to market today also demands exceptional fl exibility from our suppliers. Renegotiated framework contracts offer the necessary adaptability for call-ups as of the requirement date. Ever more such contracts are being negotiated, which contributes not only to a culture of just-in-time deliveries but also to a gradual reduction of inventories.

Our outcome

HENSOLDT's success speaks for itself: the intensive collaboration between production, suppliers and quality management also reduced incoming-goods inspections, testing and storage substantially. With savings in the high double-digit millions in 2020, supply chain management actions not only made a signifi cant contribution to improving our company's cash situation. The interdisciplinary collaboration of diverse specialisations was also decisively enhanced and both the fl exibility and responsiveness of the enterprise were greatly increased. The supply chain management activities are now to be expanded further, with the ambitious aim of realising further cash potential amounting to several million euros. This is the only way that the company can reduce its cash conversion cycle to the target 200 days in the medium term.

CASH IS KING

HENSOLDT's rapid growth is only possible with partners we can depend on. As the pivotal player in our supply chain management, Procurement centrally oversees and monitors project procurement as well as all direct and indirect merchandise groups. One key focus is on the selection and management of suppliers.

RELIABLE PARTNER FOR DEPENDABLE RELATIONSHIPS

HENSOLDT has grown successfully in recent years both organically and through acquisitions. The product portfolio has been continually expanded, and numerous major projects cast their shadows on our road to becoming a systems provider. The challenges which this presents for our suppliers can only be mastered through a partnering relationship on a basis of equality.

Strategic cooperation

This starts with the early, cross-departmental involvement of Procurement in all procurement-relevant processes, ensuring that this unit works directly with all units within the enterprise that are important for the project. Proving the old saying that "knowledge is power", this enables Procurement to establish itself as a welcome partner both internally and externally. The collaboration with a network of preferred suppliers has given rise to reliable strategic cooperation relationships. A strict assessment system forms the basis for flexible, forward-looking purchasing. It enables minimisation of risks – among other ways by involving possible alternative suppliers at an early stage.

HENSOLDT's Procurement unit assures the stability of the supply chain through the systematic assessment of all suppliers and their importance for production that also takes into account sustainability aspects and strict adherence to compliance guidelines.

The whole is more than just the sum of its parts

HENSOLDT places extremely high priority on truly partnering relationships with all suppliers. Regular planning circles ensure transparency. Long-term cooperation agreements make it possible for suppliers to grow together with HENSOLDT. This pays off, both in terms of our high quality standards and with respect to the flexibility often demanded for small quantities and short delivery times.

Going forward, our rapid growth will make the question as to which (sub-) products are produced in-house and which ones are to be bought in ever more important. This offers dependability to both HENSOLDT and its suppliers and opens up new perspectives which ultimately benefit all parties.

With its comprehensive, company-wide digitalization programme at the end of 2019, HENSOLDT laid the groundwork that proved its worth in the pandemic year 2020. Our digital agenda focuses not just on internal processes, but also actively involves customers and Services.

DIGITAL IS THE NEW NORMAL

Much sooner than many companies, HENSOLDT recognised the opportunities that digitalization offers. The declared objective of the digitalization programme launched at the end of 2019 was to develop new products, improve customer support and implement new internal functions. Planning for the future instead of reacting to crises once again proved the wiser course in the pandemic year 2020 as HENSOLDT was able to rapidly and flexibly adapt to the sudden changes in its parameters.

The programme

HENSOLDT's digitalization programme comprises multiple stages. It began at the start of 2020 with an analysis of the current state of the enterprise's digital development. Close to 90 existing digital initiatives testified to an already impressive situation. New ideas were rapidly developed on this basis and almost 200 additional concrete application scenarios were defined.

Ideas covered such applications as digital customer service and maintenance, the establishment of a digital partner landscape and an ecosystem, complete end-to-end processes, technology and configuration management, fabrication and logistics and even new, networked products, services and the digital workplace.

The crisis

Then the pandemic struck, impressively highlighting how essential digitalization has already become. Within a very short time, HENSOLDT rolled out a stable IT landscape and the digital collaboration tools needed for the sudden majority of employees that were working from home.

New remote maintenance possibilities were explored and established. The HENSOLDT Academy also transferred concretely scheduled in-person instruction to cyberspace. For example, the customer response to the training on the helicopters of the Bulgarian Air Force equipped with HENSOLDT LTR-400 IFF transponders, shifted to virtual environments on short notice, was so positive that the new digital format will now be offered much more frequently in future.

The vision

The pandemic thus significantly accelerated many planned projects on HENSOLDT's digital agenda. At the same time, however, the key elements remain and will now be implemented in further stages in all divisions.

On the functional level, end-to-end measurement of project and product performance will ensure greater transparency. Advanced analytics supported by artificial intelligence will contribute to automating processes and enhancing efficiency. Data and the potential of digitalization also support management in their planning and enable employees to engage in effective, loss-free collaboration.

On the product side, new, networked and intelligent solutions will open up new markets and market opportunities. The effective utilisation of product data enhances customer orientation and our extremely secure, proprietary HENSOLDT Cyber processor, equipped with our proprietary operating system, will ensure globally unparalleled data security.

With its close contact with and support from enterprise management, digitalization at HENSOLDT not only received a further boost in 2020: it will continue to make a substantial contribution to our business success with its medium and long-term strategy.

Innovativeness has always been a part of HENSOLDT's DNA. This has always been the mainspring of our business success across all departments. But how can we also permanently embed the startup mentality and the urge to look "above and beyond" within our enterprise? The answer: HENSOLDT Ventures.

THE LEADING EDGE OF INNOVATION

Founded in 2018, HENSOLDT's in-house innovation incubator focuses especially on ideas and topics in the cyber, artifi cial intelligence and robotics areas, as well as data analytics. As a prototypical incubator and technology scout, this unit additionally concentrates on innovations that can eventually lead to spinoffs or strategic technology investments. The necessary prerequisites were created in the fi scal year under review. HENSOLDT Ventures also plays a decisive role in supporting innovation across all divisions of our enterprise. The consistent growth and success of our projects to date affi rm the course set here, which will continue and intensify over the next fi scal year with an expanded focus on HENSOLDT Ventures as an investor.

Cyber Security – IT security from a single source

Within an incredibly short time, HENSOLDT Cyber (see 4.2) has achieved what many thought impossible: the development of our own, highly secure operating system including the matching processor. Our efforts to make HENSOLDT products more secure have resulted in the creation of a secure IT basis that stops hackers cold, is drawing broad attention from IT experts outside of HENSOLDT circles and has the potential to form the nucleus for a holistic, secure cyber-ecosystem in Germany.

Analytics – making pictures talk

With the acquisition of a globally leading supplier of open source intelligence systems (OSINT) in 2020, HENSOLDT Ventures laid the groundwork for further AI applications and took the fi rst step toward realising its vision of a "virtual" sensor, and continues to invest in scalable software products. The aim is to develop expanded, combined AI capabilities that leverage speech, image and data analyses, for instance the ability to automatically analyse moving images and summarise important or unusual occurrences in up to 30 different languages. This will enable comprehensive data analysis that delivers information in fractions of a second that can be decisive for targeted situational assessments – a capability of interest both for military and civilian applications (such as event security). Such software-based platforms are also becoming ever more important in the face of increasing attacks based on media manipulation. Alongside conventional signals intelligence, such a capability contributes greatly to resolving the situational picture in the face of future hybrid threats and protecting own forces so as to assure dominance across the entire spectrum.

Further current projects include revolutionary innovations to make 3D printing of printed circuit boards practical in production environments, developing novel infrared jammers and optimizing internal processes to increase added value, and all projects continued uninterrupted throughout the pandemic. Thus, innovations beget new business ideas and models that will contribute signifi cantly to future success at HENSOLDT or in new subsidiaries.

Robotics – artifi cial intelligence for the win

To cite just one typical example for the use of artifi cial intelligence (AI) in a robotics application, HENSOLDT Ventures has developed the interceptor drone solution "Versatile Autonomous Drone Response" (VADR) for the Xpeller family in collaboration with EUROA-VIONICS. As part of the modular drone defence system, VADR can be used as a platform for a wide range of applications and is also able to assume fully or partially automated tasks when unknown drones approach, and capture them with a net. Particularly for Xpeller deployments at airports endangered by drones, this offers a decisive advantage, as jammers are of only limited use here given that they can interfere with other electronic devices. The system is already a part of the Falke drone-defence project of the German Federal Ministry for Transport and Digital Infrastructure, and other European nations have now also expressed interest.

In our era of global digitalization, data security and protection against unauthorised access play an ever greater role – in both the military and civilian sectors. HENSOLDT Cyber offers a highly secure solution with its proprietary hardware and software.

MADE IN GERMANY" "

The threat of hacker incursions is growing daily, and regularly keeps IT managers and administrators awake at night. Besides the highly publicised attacks on government and corporate networks in recent years, the number of criminal attacks has been multiplying every year, while the attackers' professional skills have steadily increased. In the area of malware alone – programs that infiltrate IT systems to spy on or disrupt them – over a billion malware families have been identified to date, with 100 million more new variants appearing every year. To combat this threat, HENSOLDT Cyber developed its own proprietary processor and an extremely secure operating system to series readiness within a very short time. This allows IT specialists to sleep well again at night, while their enterprises can concentrate on their core business without a care.

The processor: logic lock-out

As the core protection element, HENSOLDT Cyber developed the first German high-security multi-purpose processor. The MiG-V – MiG stands for "Made in Germany" – is a RISC-V processor based on a globally unique process that makes it one of the most secure chips of this type. In simple terms, its circuitry is configured during production so that it is encrypted. As an understanding of the circuit logic is a fundamental prerequisite for manipulating it, the circuitry is invulnerable. The processor can only be used by means of an individual key that restores the original intended function. This effectively prevents manipulation – in particular from the design of the subsequent production until its subsequent use – and HENSOLDT Cyber now offers the world's first approach for securing the hardware supply chain.

This process developed by HENSOLDT Cyber offers enormous potential because it can be applied universally to any processors and provided as a service to third parties.

The operating system: the first unhackable software

The primary target of every hacker is the computer's operating system. Originally initiated with the aim of protecting our own products even better, HENSOLDT Cyber developed the "TRusted ENTity Operation System" – TRENTOS for short. Its architecture makes it possible to operate multiple components of the operating system modularly, separated and isolated from each other. This feature, combined with mathematical verification of individual components and the operating system core, makes it the most secure of its type. A corresponding development environment additionally permits third-party developers and users around the world to develop their own operating system modules and applications simply and rapidly on this platform.

The services: getting started made easy

To make adoption of this system as easy as possible for prospective users, HENSOLDT Cyber has put together a "getting started" evaluation kit. Interest has been keen across industries and countries. The separate Service Department that has since been organised additionally offers all services needed to ensure a smooth transition to secure IT.

With this vision of creating a holistic IT ecosystem for the defence and security industry, HENSOLDT Cyber wants to herald a new era of cybersecurity in Germany and also in Europe. At the same time, this opens up the door for commercial applications, as Industry 4.0 and other applications such as autonomous vehicles also increasingly demand highly secure IT.

4 INNOVATIONS AT HENSOLDT

054 | 055

Through systematic innovation management, HENSOLDT supports its employees in creating a culture of "constructive disruption": one that motivates them to focus constantly on our customers and look beyond the obvious.

SUCCESS THROUGH NEW IDEAS

"An invention by itself is not an innovation, it must also be successfully implemented and brought to market," believes Dr Stefanie Schrader, Optronics' Innovation Manager. And she is following through by implementing a new innovation management system to bring the "HENSOLDT Way of Innovation" to everyone across all departments. Because there are a lot of good ideas. But they can only be realised and brought to market in a team.

Five steps to new business

Experimentation and invention may be a part of HENSOLDT's DNA, but it takes courage to envision and test what is often initially a very rough basic idea. A five-step concept supports employees in becoming innovative: In the first step, they are encouraged to think more creatively and generate new ideas. In the second step, Dr Schrader supports her colleagues in compiling the information they need to flesh out their idea. Once the idea has been passed by the Optronics Idea Board, it is implemented as an innovation project. The idea takes on further contours as a business model concept or minimum viable product (MVP), is modified or is released back into the ideas pool. It is only when an idea has acquired concrete form that it finally advances to become a successful new product or business model – often in collaboration with other business units and customers – in the fifth and final step.

In the process, employees also learn how to use the preferred innovative working and development methods of start-ups, including lean start-up, design thinking, Scrum and kanban boards, and are actively inducted into innovation project teams. The mostly interdisciplinary innovation items give rise to new networks and utilise HENSOLDT's swarm intelligence. Existing solutions are jointly enhanced, new solutions and application areas are discovered, or innovations serve emerging customer and user needs.

Innovation Expedition

The first successes were not long in coming. More and more employees are utilising the newly created opportunities to activate the rich latent innovation potential inherent in our enterprise. And in summer 2020, a HENSOLDT team even embarked on its first-ever Innovation Expedition. On account of the pandemic, HENSOLDT employees from a wide range of divisions met virtually with representatives of companies from other industries, exchanging experiences and obtaining insights into how innovations are developed there.

The most important insight: working innovatively requires the courage to jointly embark on an innovation journey and generate new momentum. Thanks to this new innovation concept, HENSOLDT Optronics is taking new paths in order to establish an innovation ecosystem to successfully implement new ideas.

One key feature of our new innovation ecosystem at HENSOLDT Optronics is the imperative to look beyond the obvious and into the future. Active, regular idea scouting, involving surveys of various external academic and business networks, as well as active exchanges with start-ups and associations, play an enormous role in this endeavour. In particular, our regular dialogues with start-up entrepreneurs from a range of industries as well as participation in national and international research consortia

enable us to identify future trends and discover new ideas. Our close cooperation with a research institute to explore novel laser applications and our collaboration with start-ups on topics such as smart sensoring and mesh networks for creating sensor arrays are initial tangible successes for HENSOLDT Optronics. Additionally, we expect to strengthen our internal know-how for quantum technology and other future technologies through our membership in the innovation network "Optische Technologien – Photonics BW".

New networks and future technologies

HENSOLDT is

already deploying artifi cial intelligence in many of its products. Our divisions work together to continually improve and enhance our applications, pooling and sharing the benefi ts of their diverse experience and perspectives derived from the intelligent use of data – in the spirit of our motto, "One HENSOLDT".

JOINT LEARNING CREATES INTELLIGENT DATA

The term "artifi cial intelligence" (AI) was fi rst coined back in the 1950s. Today, new methods of data acquisition and analysis offered by machine learning and deep learning are driving AI toward an enormous breakthrough. The system can connect learned knowledge with new information, and, if desired, even keep on learning, thanks to a neural network trained using deep learning technology – in much the same way as a human brain learns. An ideal method for intelligently using the diverse data from the many different HENSOLDT sensors.

Important for every division – successful together

Every HENSOLDT sensor generates data – radar, UV, infrared or visual spectrum, whether terrestrial, marine, air- or spaceborne. And the more advanced the sensors are, the more data they deliver. This wealth of data, often referred to as "big data", provides the foundation: "There's no data like more data". But it is AI-based analysis and evaluation that brings out the true value of these data.

HENSOLDT understood this early on, and responded proactively with cross-Divisional AI initiatives. Direct collaboration with experts outside the company and intensive dialogue with research establishments such as the Karlsruhe Institute of Technology, RWTH Aachen University, the University of Ulm and various Fraunhofer Institutes have enabled us to create new networks, new knowledge and new solutions. This exceptionally transparent dialogue with the scientifi c community has led to highly productive synergies that benefi t all parties and divisions alike.

Numerous challenges – one perspective

Much as in the Internet of Things (IoT), this entails linking sensors with a n ewly emerging IT infrastructure. This infrastructure makes it possible to store enormous quantities of data from millions of discrete cases of actual mission scenarios in a structured and reproducible manner and make them usable for machine-driven learning processes under operational conditions. The system can even integrate data on unknown objects of other forces. This shared infrastructure creates two fundamental prerequisites: the creation of a database in which – if desired – HENSOLDT shares in the customer's data sovereignty and a beachhead to our company's sensor and data specialists, who, thanks to their sensor expertise, are able to analyse the recorded data and make it available for a new training cycle. In the course of this, the sensors learn to autonomously detect situations and threats using broad-based machine learning techniques.

Once the learning phase is complete, the trained models can be implemented for their missions on the sensor level. In future, such "smart sensors", integrated in intelligent overall systems, will enable entirely new, partially autonomous applications. The use of AI will make it possible to analyse even complex situations automatically and identify potential threats in real time. HENSOLDT is thus emerging as more than just a vendor of smart sensors: it is becoming a smart

systems provider.

AI Electronic Warfare

Future fields of application will be characterised by increasingly complex scenarios, in which decisions will need to be made based on large quantities of information within increasingly shorter time frames. Tomorrow's "smart sensors" will have a crucial role to play in this. In a shared "code camp" with Microsoft, HENSOLDT has already demonstrated what this kind of "smart sensor" might look like.

The fields of application are practically unlimited since the systems learn continuously. For example, airborne reconnaissance platforms can be better protected using various sensors. The mix of LiDAR, radar and electro-optical sensors that is utilised here allows a fused situational image to be created, which is therefore significantly more resistant to disruptive processes. On the basis of overlapping tasks, HENSOLDT clearly benefits here from the rapid developments made in the civilian sector.

AI Optronics

Future projects such as the MGCS ("Main Ground Combat System") or the FCAS ("Future Combat Air System") rely entirely on "smart and intelligent" sensors in which the evaluation of photo and video data is supported using AI. On its way to becoming a system supplier, HENSOLDT Optronics is already currently working through various evolutionary stages to settle issues such as which technology to use, how to process vast quantities of data and which software and hardware architectures are required.

However, AI is also already being implemented in existing solutions. In the SETAS ("See Through Armour System"), for example, AI combines all-round 360-degree visibility with additional assistance information and automatically recognises objects and anomalies. With "Wide Area Motion Imagery" (WAMI), a combination of cameras and sensors suspended from a balloon evaluates aerial photos directly in the sensor. This allows a surface area of up to 50 square kilometres to be monitored from the air. At the same time, the system records activities on the ground, which may remain undiscovered by even the most attentive observer since there are so many of them happening at once.

AI HENSOLDT Ventures

As a "spearhead of innovation" in the company, the increased use of AI is also at the heart of the range of HENSOLDT Ventures activities (see 4.1). As an integral part of many projects and products, the technology has proven its potential a long time ago. In this way, the use of AI in counter-UAV systems allows a higher level of automation, making the operator's work easier. A further application can be found in Edge AI applications – for instance for the close-range control of an interceptor drone.

Working closely alongside specialist departments, AI experts at HENSOLDT Ventures also provide targeted support for other group projects with the goal of pioneering ground-breaking new AI applications. HENSOLDT Ventures sees the development of an overlapping centre for big data and AI as one of its core tasks at present. Accordingly, it intends to continue supporting internal group projects, as well as developing new applications, such as open-source intelligence. The focus here is on using deep learning to evaluate large quantities of data in the fields of speech, text and imagery.

AI Radar

Radar systems provide images of the air or ground even when visibility is compromised by clouds, smoke or rain. The high quality of HENSOLDT radars allows an increasing number of objects to be identified. Without the support of AI, the situational imagery produced in this way rapidly becomes confusing or requires a lot of human intervention. Nowadays, automatic target recognition through radar signatures already provides the operator with important support, helping them to focus directly on drones, for example, without being distracted by birds. The tracks of moving targets can be identified more easily and efficiently and can be distinguished from false tracks (false track recognition).

Like visual aerial or satellite photos, SAR radars allow high-resolution ground imagery to be recorded during daylight hours, regardless of weather conditions. Until now, however, these images had to be interpreted by specially trained personnel. This is where AI comes into play. With the help of real and simulated training data, vast areas of land surface can be automatically scanned for relevant target objects to provide a picture of the current threat situation. In this way, simple sensor data can result in high-resolution annotated radar images, which no longer require analysis by trained personnel and can instead be used by just about anyone.

HENSOLDT's

mission management system for helicopters is an unqualified success. Over 5,000 such systems have already been integrated in helicopters, because they offer so much that other systems just can't.

"IQ" FOR HELICOPTERS

A system is truly intelligent when it can take and process data from a wide range of different sources to create a complete situational picture. A picture that ideally delivers all important information that the user needs at that instant – and not a single bit more. This is HENSOLDT's objective in developing mission management systems for helicopters. The system can be flexibly customised with a broad range of software modules to precisely meet application requirements. It automatically delivers to each crew member the information that they need. Developed to meet civilian certification standards and platform-independent, it can be used in both military and civilian environments. It can digitally communicate and exchange data with other systems. Helicopter pilots around the world know how important this is.

"Mission possible"

For helicopter crews, the coordinated execution of a mission is exceptionally demanding on account of the wide variety of tasks they must perform. Complex mission scenarios in particular intensify the stress on crews. Yet such complex civilian and military mission scenarios, subject to extensive, mission-specific additional parameters, are the rule rather than the exception.

To ensure that pilots, copilots and other crew members are optimally supported, HENSOLDT's mission management system pulls together all necessary data in a single system. Video, radar and information from a wide range of flight, surveillance, identification, night vision and other sensors are combined with external data such as weather data or data on other aircraft in the operational area to form a coherent whole. The result is a holistic overall system that can network with other systems on the ground, at sea or in the air.

Each crew member receives the information they need "right now" for their respective task via their head-down display or projected directly in the helmet. Pilots are supported in flying the aircraft, copilots have an overview of all sensors, and a third crew member can, for instance, focus entirely on tasking an escort drone. This makes even the most difficult operations a "mission possible".

Mission accomplished

HENSOLDT's mission management system excels not only because of its ability to compile data and information from widely diverse sources. It also offers a flexible link to existing communication systems. Whereas a link to 4G or 5G wireless networks is often sufficient for civilian applications, the current generation of military-grade mission management can communicate via tactical datalinks (TDL) to share data in real time with other mission actors.

Thus, mission management brings previously inconceivable situational awareness to helicopter cockpits in real time – regardless of the helicopter type and its military, paramilitary or civilian deployment profile. This system already plays a mission-critical role in over 5,000 helicopters today, and HENSOLDT is currently developing future platform upgrades e.g. for the H145M and Tiger Mk3: a blueprint for the military mission management of tomorrow. Mission accomplished.

4 INNOVATIONS AT HENSOLDT

Hydrogen is considered a key element for a successful energy transition. With the innovative – and in many areas leading – technologies of NEXEYA, HENSOLDT has now secured access to this strategically important market of the future.

THE ELEMENT TOMORROW

IS MADE OF

Energy transition plays a core role in all international climate protection efforts. However, we can only succeed here by securing energy sources that are at the same time reliable, affordable and environmentally compatible. One major issue is that renewable energy technologies deliver power irregularly. However, innovative hydrogen technologies make it possible to store this energy in a climate-neutral manner so it can be fed into the grid as needed. The end result is sector coupling – of power, heating and mobility.

NEXEYA – an international leader

NEXEYA – a HENSOLDT company since 2019 – is a global leader in the development and production of hydrogen-based energy storage solutions and supply stations. NEXEYA's "Smart Energy Storage Stations" reliably supply remote locations, radar installations, communications antennas and weather stations with energy or serve as local (interim) storage for solar, wind and hydroelectric power. Intelligently integrated in local-area smart microgrids, they bring carbon-neutral energy to buildings, entire industrial plants, ports, airports and districts. Installed aboard emission-free energy ships and being a part of NEXEYA's GreenHarbour project they supply ships in ports with CO 2 -neutral electricity. In the defence sector, they guarantee the autonomous operation of data centres and entire bases.

And that's just the beginning. As members of the French Association for Hydrogen and Fuel Cells (France Hydrogène), HENSOLDT and NEXEYA have their fi ngers constantly on the pulse of development both nationally in France and Germany, and also at EU level. New regulations and strategies open the doors to new markets and applications. The necessary solutions can be implemented and offered rapidly and targeted precisely.

New products for new markets

Current projects with great potential include the autonomous complete systems for producing, storing and providing energy, which are already in service. With their vast storage capacity, they offer months of independence from external supply grids. They can be modularly integrated in existing networks even under extreme weather conditions and generate "green" hydrogen with virtually no environmental impact. Linked to form hydrogen microgrids, they additionally offer an economical alternative that can be used e.g. to build a high-performance charging infrastructure for the e-mobility of the future. The integration of fuel cells and the formation of whatever logistics infrastructure may be necessary to transport hydrogen can also open up new lines of business.

While presently still on a modest level, the hydrogen business offers numerous expansion opportunities for the future. With the current political encouragement and support, all signs point to growth, as the energy transformation is moving forward at a rapid pace. HENSOLDT and NEXEYA are not only keeping up, but are blazing the trail to tomorrow.

"Green" hydrogen as the key to the energy transition (Source: "Die Nationale Wasserstoffstrategie – Schlüsselelement der Energiewende" of the German Federal Government) Hydrogen generated using renewable energy sources is often referred to as "green" hydrogen. It opens up a range of possible applications for a sustainable future:

• It can store renewably generated energy and thus help to balance supply with demand.
• "Green" hydrogen can contribute decisively to sector coupling in areas where power from renewable energy sources cannot be used directly.
• Used in fuel cells, it can enable hydrogen-based mobility and serve as a basis for synthetic fuels.
• It can replace the conventional hydrogen already essential to numerous chemical and industrial processes and be used as a raw material for future production processes.
• In the long term, hydrogen will make it possible to decarbonise process-related emissions, e.g. by converting CO to valuable precursor substances.

emissions

Major high-tech players around the world are experimenting with 3D printing. At HENSOLDT, we are already deploying it for development and production – in some applications even as a global innovation leader.

THE PROOF IS IN THE PRINTING

Already, three-dimensional printing of parts and high-performance electronic components is being recognised as a technological revolution that will reshape the world. Although it plays a largely subordinated role in the general perception, enterprises around the world – including the big names in the consumer electronics, computer, automotive and aerospace industries – are experimenting with the possibilities, processes and materials.

HENSOLDT recognised this potential early on, and has since integrated 3D printing successfully in a wide range of development and production processes.

Innovation leader in the additive fabrication of electronic 3D structures

Today, HENSOLDT has risen to become a global leader in the printing of electronic 3D structures. Our collaboration with the Israeli enterprise Nano Dimension – the number-one in additively manufactured electronics (AME) and printed electronics (PE) – that commenced in 2016 means that HENSOLDT has been playing an active role in signifi cantly improving the stability of the processes for use in future products. However, the actual focus is on developing and fabricating three-dimensional structures within circuit carriers. Even now, it is apparent that the jointly enhanced technology will enable entirely novel functions and products.

What sounds like one small step will potentially culminate in one giant leap for HENSOLDT, as military sensor solutions demand extremely high levels of performance and reliability, far beyond the capability of commercial-grade components. The new process not only makes it possible to utilise the available PC board space much more effi ciently. The electronic structures themselves can also be fi tted to the available space without restrictions. The printed components are more compact, yet their performance and integration density are enhanced.

3D printing of metals and plastics

Concurrently, HENSOLDT has for several years been 3D printing plastics to create prototypes. True-to-scale models can be printed simply and rapidly to enable review of design and functionality. This accelerates the entire development process.

HENSOLDT is also using the extremely cost-intensive and time-consuming 3D metal printing regularly in production today. For example, this technology makes it possible to create aluminium radiator elements for radar transmitters that simply cannot be fabricated by conventional means. With their complex cavity structures, they cool more effi ciently while at the same time providing electromagnetic screening.

Fit for the future

Thus, HENSOLDT is already deploying 3D printing and additive manufacturing processes in producing parts of its current air surveillance radar (ASR) system, and for its ground-based radar units Spexer, TRML-4D and the Cobra radar. These technologies are also being used successfully to support production, e.g. for fi xtures and tools.

HENSOLDT has been recognised as a global technology leader for radar systems for many years now. On the ground, at sea, in the air and even in space, they perform reliably in innumerable civilian and military surveillance, reconnaissance, defence and air traffi c control applications. With its new "Active Electronically Scanned Array Electronic Warfare" (AESA EW) antenna, HENSOLDT is once more proving that ongoing research and continuing development pay off. HENSOLDT has succeeded in designing an antenna as a core element of the Kalætron Attack product family, that can not only transmit and receive signals but can also actively jam when electronically scanned.

Three functions – one antenna

Particularly in the military sector, and in aircraft especially, radar antennas are more often "off" than "on". They transmit and receive only briefl y because their signals can be localised. Additionally, a constant transmission power output requires larger device footprints and extensive cooling.

Problem defi ned – problem solved. The new HENSOLDT AESA EW is equipped with the necessary radiator elements, fabricated in an innovative metallic 3D printing process. Boasting an environmentally friendly coolant, it is also only marginally larger than conventional antennas.

Yet its performance spectrum is signifi cantly expanded. It can not only transmit and receive brief signals, as before. It can receive constantly, and thus intercept enemy signals and even deliberately jam them.

One antenna – diverse applications

Multiple NATO member states and allies have already expressed keen interest in HENSOLDT's latest innovation, the product of several years of development backed by decades of experience. Starting with the extremely complex certifi cation process for use aboard aircraft, ship-board and ground deployment are also conceivable.

In the currently planned Eurofi ghter update, the AESA EW antenna, installed e.g. in an escort jammer pod, could effectively disrupt enemy radar signals to protect the aircraft itself, but also, for example, to shield other manned or unmanned aircraft and ground units from missile attacks by jamming their detection radar. As a low-cost, fi xed-location ground installation, the antenna could also function as a stand-off jammer, disrupting radar and communication signals while remaining out of range of attacks.

In sum, the AESA EW antenna bundles the three functions of the Kalætron Attack product family (stand-off jammer, escort jammer and self-protection jammer) together with the conventional receiver

function in a single antenna.

Thus, once again, HENSOLDT technology ensures that potential attackers remain truly "blind and deaf".

068 | 069

Antennas are usually designed to transmit and receive signals. The new AESA EW from HENSOLDT goes a critical step further. Electronically scanned, it can even jam enemy radar.

SEEING AND JAMMING

The Manta NEO developed by HENSOLDT UK turns the currently existing philosophy for marine radars on its head. The focus is no longer on displaying as much data as possible, but on concentrating on collision warning. This attracts worldwide attention and is well received.

ENHANCING SITUATIONAL AWARENESS

In today's congested shipping lines, maintaining situational awareness is of utmost importance for the navigator. Manta NEO offers precise mapping of all maritime activities and is the perfect tool to support navigators of large merchant and cruise ships or super yachts. While on previous navigation screens, the radar display required for this purpose was "only" visible as part of numerous other pieces of information and somewhat hidden, HENSOLDT's Manta NEO focuses primarily on this particular display. Everything else can – if required – be blended in and out as an additional element.

Simple and clear

What appears simple at a first glance led to enormous challenges for the developers at HENSOLDT UK. In order to make the current status quo of a "locked" screen display containing a variety of information more flexible, our developers decided to implement a completely new software structure. Based on the Android platform and mobile phone processors, a simplified menu structure has been created. On new multifunctional displays, it provides users quick and easy access to all important information they are accustomed to from using their smartphone displays. More than that, Manta NEO is also suitable for guiding autonomous ships from land.

The primary focus is on the radar display – taking up the entire screen. Via an app-based, intuitive and easy to learn approach, additional navigation devices and data from other sensors can be integrated, configured and displayed as needed.

New markets, new target groups

For HENSOLDT, the Manta NEO opens up access to new markets and target groups in the non-defence sector. In addition to cruise ships, in which the system can also be retrofitted, a first focus is on the booming sector of mega and luxury yachts. With its user-friendly design, Manta NEO meets the wishes of many owners and at the same time satisfies the clients' high security and safety requirements.

As a next step, the market for merchant ships will be targeted, as the system can be integrated on all ships that meet the requirements of the International Maritime Organisation (IMO). As the predecessor of HENSOLDT UK, Kelvin Hughes has very good access to and an excellent, long-standing, reputation in the market: one that offers enormous potential, with around 30,000 ships worldwide.

Following preliminary presentations at trade fairs and to potential customers and shipyards with a correspondingly positive response, the market launch of Manta NEO is planned for the second quarter of 2021.

The market is changing. Whereas it used to be driven by the demand for individual systems, such as radars, customers today increasingly want complete solutions. Comprising multiple products, such combined overall systems offer decisive added value for customers thanks to the seamless interaction of the individual components together with data analytics and evaluation and connection to tactical datalinks.

On and beneath the waves

Here too, HENSOLDT's segment approach once again proves superior. All departments take a cross-divisional approach to work and act with their focus firmly on customers and prospects and their needs. Long before individual products are selected, our experts systematically discuss operational requirements with customers before offering a corresponding solution spectrum.

Particularly in the area of integrated maritime solutions, HENSOLDT's acquisitions in France (NEXEYA) and the UK (Kelvin Hughes) have opened up new market potential and customer groups. In addition to the major, broad-spectrum system solutions of the future, smaller, innovative integration of various surface and underwater sensors is now also possible.

Compact solutions for small vessels

LYNCEA, the flexible mission system from NEXEYA, is a perfect example. Modular in design and expandable in steps, it generates a tactical situational picture on the basis of a broad range of inputs: from radar and optronic devices to sonar and electronic warfare elements, and even permits optional integration in NATO datalinks. With its ergonomic, easy-to-use user interface, it is ideal for an extremely wide range of mission scenarios, such as surveillance of maritime areas, combating human trafficking, rescue missions and much more. Available in a range of base versions, LYNCEA is thus ideal for deployment aboard fast patrol boats, deep sea patrol vessels and surveillance units as well as command centres on shore. This flexibility is paying off, as in 2020, NEXEYA became the chosen vendor in its home market, receiving an order to equip deep sea patrol vessels of the French Navy.

Rapid and close to customers

Alongside solutions that can be flexibly and efficiently configured to match customer needs, customer intimacy with potential prospects also plays a decisive role. Because in spite of today's intense globalisation, it remains an advantage when, for instance, a North African customer can be served directly from France (NEXEYA) and an Irish customer from the UK (HENSOLDT UK).

Our integrated maritime solutions are already proving what will in future be true for all our products and projects under HENSOLDT's domain approach: a comprehensive understanding across all domains makes it possible to offer a broad spectrum of options across all divisions. To the benefit of our customers and our enterprise as a whole.

072 | 073

HENSOLDT is a leading supplier in the areas of radar, identification friend-foe, datalinks, electro-optics and defence electronics. High-performance sensors are a key part of maritime mission systems and thus play a vital role in the success of challenging naval missions. Integrated maritime solutions consisting of highly diverse sensor combinations are a prime example of this.

OCEAN-GOING ADDED VALUE

5 HENSOLDT SUSTAINABILITY REPORT

074 | 075

5 HENSOLDT SUSTAINABILITY REPORT

Thomas Müller Chief Executive Officer HENSOLDT AG

Dear readers,

The last fiscal year was characterised by a global pandemic that confronted the world with extraordinary challenges that have still not abated. The COVID-19 virus has revealed enormous social and economic disparities and dramatically highlighted how vulnerable our society is and we as individuals are. The moments of deceleration have brought home to me how unique and precious our lives and our environment are.

The priorities of our company have in no way changed. Proportion, mindfulness and decency have always been HENSOLDT's bedrock. We assume responsibility to our employees, our customers, our business partners and our shareholders. This is not merely to assert our standing; we also contribute actively toward developing a more sustainable world.

For our enterprise as well, 2020 was a year of great changes. In September, HENSOLDT launched its successful IPO. But a company's capital-market capability is not decided by hard numbers alone. If there is one thing that 2020 taught us, it is that a sustainable and responsible approach by companies to issues of environmental, social and corporate governance (ESG) is a highly valued attribute in today's world.

With this first-ever sustainability report, we at HENSOLDT are taking a further step towards providing accountability for our business activities within these three dimensions. As you can read in the following pages, protection of natural resources, the responsible treatment of our employees and ethical enterprise management have always been key elements of our corporate culture. But you will also learn what goals we have set ourselves and what obligations we have undertaken to protect our planet, strengthen our social cohesion, help our employees realise their potential and to preserve and promote a corporate culture of integrity.

We have already achieved a great deal together. But we must continue to improve and grow if we are to fully meet your demanding expectations of us. We have thus developed a dedicated sustainability strategy in order to expand our sustainability management even further in the coming years.

I hope you find this report as enlightening as I did.

Yours truly,

Thomas Müller Chief Executive Officer HENSOLDT AG

Sustainability is a core part of HENSOLDT's corporate culture. In April 2021, HENSOLDT is publishing its fi rst-ever sustainability report to inform its stakeholders of all activities of the HENSOLDT Group in the areas of environmental, social and corporate governance.

In future, HENSOLDT will publish a group-wide sustainability report on the company's activities. The report can be found online at https://www.hensoldt.net.

With this report, HENSOLDT is fulfi lling its obligation to disclose non-fi nancial information pursuant to Sec. 289, 315 German Commercial Code (HGB). In addition to the HGB requirements, HENSOLDT chose to prepare its sustainability report in orientation with the Global Reporting Initiative (GRI) standards (2016). The reporting period corresponds to the 2020 fi scal year.

To determine the material sustainability criteria, a materiality analysis was conducted according to the GRI standards and the CSR Directive Implementation Act (CSR-RUG) requirements. All relevant stakeholders were involved, i.e. management, employees, the sustainability team, customers, banks, investors and suppliers (see 5.1).

Our business model is set out in the Management Report under I.1 Business model and I.2 Organisation and infrastructure.

Material non-fi nancial information pursuant to Sec. 289c HGB has been audited by KPMG AG Wirtschaftsprüfungsgesellschaft (limited assurance) and highlighted in light green in the body text and the GRI Performance Table.

About this report

Sarah Sterzl Group Sustainability Offi cer HENSOLDT AG "Sustainability is in our DNA. Our corporate culture enables all HENSOLDTians to actively make a contribution to our planet, animals and humankind. We stand for creating a change in our mindsets

and making a difference together." Sarah Sterzl, Group Sustainability Offi cer

Cooperation, excellence, responsibility and innovation – these are the pillars on which HENSOLDT's long-term business success rests. They are considered immutable values for all employees, and are exercised by top management in their role-model function.

LIVING OUR VALUES

At HENSOLDT, corporate governance comprises all leadership structures, processes and directives. The principles of good corporate governance act as a binding element to ensure that the management and controlling of our enterprise remain consistently oriented toward ensuring a responsible, transparent and sustainable growth of the value of our enterprise. These principles unify our enterprise as a cohesive entity and, with their emphasis on sustainability, ethical responsibility and the integrity of our business practices and leadership, ensure our future success. Firmly embedded in our enterprise strategy and activities, they promote the trust of investors and financial markets, business partners, employees and the public in the HENSOLDT Group.

Our company also complies with the recommendations and suggestions of the German Corporate Governance Code.

Practised and exemplified every day

An enterprise can only function, succeed and abide with strong leadership. HENSOLDT has firmly embedded the issues of environmental, social and corporate governance in its corporate culture under the motto, "set an example every day". The holistic sustainability programme, launched under consideration of such multinational frameworks as the GRI and the SASB ("Sustainability Accounting Standards Board"), is pursuing ambitious goals:

Corporate integrity forms a core pillar of HENSOLDT's business success. To this end, our Code of Conduct sets out the ground rules for productive, respectful collaboration within the enterprise as well as with customers, suppliers and other partners. It also forms the basis for our enterprise-internal system to safeguard against corruption and other illegal actions.

The excellence of our enterprise is to be assured by a quality strategy and quality policy that is conveyed throughout the enterprise by means of effective business and quality management as well as efficient configuration and data management.

HENSOLDT takes responsibility for its employees, the environment and society in its risk management and day-to-day business practices. To this end, a new risk management category was implemented to assess external impacts.

In addition to competitive working conditions and corresponding remuneration, HENSOLDT makes a special effort to offer and promote diversity and equal opportunities within the enterprise and has set itself the goal of significantly increasing the proportion of women in executive positions. The aim is to increase the proportion of women on the Executive Committee to 35 percent and the proportion of women in our global leadership team to 25 percent by 2024.

As a responsible employer, HENSOLDT has set itself the goal of supporting initiatives and talents world-wide. For example, we are currently supporting local engineers in South Africa in their career training and continuing education so that they can attain a long-term perspective in their home country.

HENSOLDT places a high priority on protecting the environment and climate. Our enterprise has committed to using and handling resources and hazardous substances mindfully and responsibly. This is naturally being implemented throughout our enterprise and rigorously monitored in all divisions.

Actions to avoid and reduce emissions are to be implemented in all relevant enterprise processes. In addition to investing in renewable energy sources, this includes energy saving actions as well as the reduction of waste flows, along with the consumption of paper and hazardous component substances. Compliance with all statutory and operational regulations is monitored continually and rigorously on the basis of our internal HSE-manual ("Health, Safety and Environment").

HENSOLDT not merely strives to meet tomorrow's national and international standards of good and sustainable corporate governance. The company's corporate governance today is already making an important contribution to HENSOLDT's success. Enterprise management is fully aware that the significance of value-oriented corporate governance will only increase further in the coming years.

Strategically identifi ed enterprise values that are fi rmly embedded in all processes and practised daily form the basis for acting responsibly in all situations at HENSOLDT. Because our slogan "HENSOLDT provides solutions" applies not only to our products but to our enterprise-wide sustainability management system as well.

GREAT EXPECTATIONS

Comprehensive sustainability management that covers all ESG elements has always been an integral part of all activities at HENSOLDT. This was expanded dramatically in 2020, with the aim of being among the best here, too.

From good to better – HENSOLDT's sustainability management

With the support of the Board and the divisions, the newly created function Group Sustainability Manager now oversees all activities jointly with a Steering Committee, under the Board's leadership, as a central coordinating body. The emphasis is on improving the collaboration between the various line departments within the enterprise and between our international sites. A comprehensive materiality analysis covering all major sustainability issues was prepared for the fi rst time, in close communication with all of the company's stakeholders – employees, management, investors, customers, suppliers, associations and local governments. HENSOLDT's vision, objectives, priorities and obligations were set out in a Sustainability Charter. Finally, the company is publishing its fi rst sustainability report, based on the GRI standards, in 2021.

HENSOLDT's sustainability management is to be continually refi ned and improved through substantial investments and deep commitment.

The HENSOLDT materiality analysis

The purpose of the current materiality analysis is to ensure that the issues where HENSOLDT's activities have the greatest impact on the economy, society and the environment, and those most affected by the decision-making processes of the stakeholder groups, are accorded the highest priority. Additionally, the analysis identifi es the issues that HENSOLDT deems relevant to business, clearly sets out the relevance of individual areas, and examines how they interact with each other. The three-dimensional matrix of the materiality analysis was prepared in orientation with the GRI standards and the CSR-RUG, carried out with the involvement of all relevant stakeholders, and fi nalised on the basis of the results of a management meeting.

As a guide for future action, the matrix serves as an important decisionmaking aid and as the foundation for HENSOLDT's sustainability strategy.

Concepts were prepared for the material issues identifi ed in the matrix, and risks and opportunities were analysed by means of an enterprise risk management (ERM) process. With respect to the material issues, the risk analysis did not identify any signifi cant risks as of the date of reporting arising from our own business activity or from any business relationships or products that have or will have a high likelihood of severe negative impacts on the non-fi nancial aspects.

In the current iteration of the analysis, business integrity and health and safety were identifi ed as key issues. Further areas of emphasis include product responsibility and ongoing employee development as well as diversity within the enterprise.

"We are passionate about the pioneering work we're doing in developing competitive premium sensors and are striving to support our customers' success as a preferred global partner. We want to make a major contribution to protecting nations, people and global biodiversity through innovative solutions for defence and security. Our people are our most valuable resource, and we take pleasure in working in an exciting international high-tech environment. We offer them a broad selection of individualized options for every phase of their personal lives and careers and are actively concerned for their well-being." Thomas Müller, Chief Executive Offi cer, HENSOLDT AG

5 HENSOLDT SUSTAINABILITY REPORT

The HENSOLDT Sustainability Charter

The new HENSOLDT Sustainability Charter defi nes the purpose, objectives, priorities and obligations of the enterprise.

"We at HENSOLDT exist to pioneer technologies and human potential that promote the protection of all kind of species worldwide. Our activities shall serve the higher purpose of securing the freedom and future of our planet, our nature, and our lives."

The materiality analysis will be continuously assessed, updated and adapted.

HENSOLDT's self-concept

The objectives and priorities of our enterprise

At HENSOLDT, sustainability management pursues three clearly defi ned objectives:

• 1. Expanding our product and solutions portfolio by combining state-of-the-art innovation and sustainability.
• 1. Creating a platform for ingenuity and excellence by leveraging our human potential and captivating the pioneers of tomorrow.
• 1. Minimizing our ecological footprint and answering societal demands by fi nding solutions to conserve our resources.

From these objectives, HENSOLDT derives clear priorities. The company is committed to protecting the planet, making our societies more resilient, realising the potential of our employees, preserving and promoting a corporate culture of integrity and supporting social interaction and cohesion.

Product Responsibility

Our products shall detect threats, secure safety, and further, protect those, who committed to protect us. Through our strict export compliance, we take responsibility for the use of our products. Constant safety improvements, the management of materials and the promotion of innovation ensure that we achieve our goal. In addition, we are keen to use our technology to protect our nature or contribute to the development of our society.

People Development, Training and Education

We encourage our people to grow personally and professionally and pave the way for pioneers and inventive spirits. We embrace joyful and individual learning experiences throughout all stages of life.

Equal Opportunities

We secure equal opportunities and value each individual because uniqueness in an inclusive work environment nurtures creativity, ingenuity and high performance.

Respect for Human Rights

We ensure high standards of labor conditions and respectful conduct towards one another. The well-being of all people involved is key to us, we protect people and the business through health & safety initiatives as well as our internal Compliance and other rules and processes.

Compliance, Anti-Corruption and Bribery

Our compliance program seeks to ensure that HENSOLDT's business practices are not only in line with laws and regulations but also with our high ethical standards at all times. Guided by principles of transparency and integrity, our management commits to implement a culture of responsibility down to the individual employee living this culture every day.

Corporate Citizenship

Eager to foster relationships with communities close to our sites, we support local organizations around the globe and also encourage our employees to engage in voluntary work.

Environment

We are committed to reduce environmental impacts of our operations and products, conserve our resources and even to develop solutions that contribute to the protection of the planet.

The entrepreneurial obligations

In line with our corporate values, HENSOLDT undertakes the following commitments:

5 HENSOLDT SUSTAINABILITY REPORT

086 | 087

RESPONSIBLE BUSINESS PRACTICES AND BUSINESS INTEGRITY

ZERO

HENSOLDT's business is not only based on the four principles of cooperation, excellence, responsibility, and innovation. These four pillars themselves stand on the unshakeable foundation of a comprehensive compliance programme. As the basis for all business activities and a core element of our Group culture, it protects our employees, the company and its reputation, as well as HENSOLDT's customers, through a rigorous zero-tolerance approach. The aim is to ensure ethically correct action on all levels of our business and systematically prevent violations of laws and regulations.

Our foundation: The HENSOLDT Code of Conduct

The same Code of Conduct applies to all employees of HENSOLDT companies, regardless of their location, position in the enterprise, or division. It sets out their general rights and obligations and defi nes mandatory basic rules for internal cooperation. The Counterparty Due Diligence Directive (CDDD) applies for dealings with customers and partners, while the CSR Sourcing Policy governs our supplier relationships. As one of its main tenets, the Code of Conduct also challenges all employees to communicate openly. In addition to reporting possibly suspicious activities directly to their supervisors, employees also have the option of reporting them via the HENSOLDT OpenLine, a platform that permits anonymous reporting 24 hours a day. No serious cases were reported in the year under review. The results of the analysis are presented to the Board and the Executive Committee.

All employees regularly receive information and training as to the content and requirements of the Code of Conduct and other compliance regulations. One key aspect is to strengthen the individual responsibility of each employee and heighten their awareness so that they can better recognise risks. Executives are involved in all facets of our compliance programme and are called to actively communicate the signifi cance of the programme to their subordinates.

TOLERANCE HENSOLDT's products are, by their technical and physical nature, always subject to tolerances – miniscule though they may be. When it comes to compliance and anti-corruption, our attitude is diametrically opposed: the company pursues a strict zero-tolerance approach.

Respect for human rights

HENSOLDT places a high priority on complying with our international obligations to protect human rights. As a generally applicable codex, the Code of Conduct asserts HENSOLDT's commitment to upholding human rights – both within and outside the enterprise. The values and practices to which HENSOLDT is committed correspond to internationally recognised standards as set out in charters, declarations and guidelines, including the Universal Declaration of Human Rights, the OECD Convention on Combating Bribery of Foreign Public Offi cials in International Business Transactions, the OECD Guidelines for Multinational Enterprises and the International Labour Organisation Declaration on Fundamental Principles and Rights at Work.

The supplier self-assessment according to the directives of the International Labour Organisation and the Counterparty Due Diligence Directive additionally apply to ensure compliance with international standards in our dealings with business partners. Within the enterprise as well, dealing respectfully with one another across all levels and regions is of paramount importance: HENSOLDT's values are not merely window dressing, but an essential part of our daily practice.

"We're convinced that a culture of integrity contributes decisively to increasing our global competitiveness." Thomas Müller, Chief Executive Offi cer, HENSOLDT AG

"HENSOLDT's Code of Conduct is the keystone of our commitment to integrity. It describes minimum standards to which each of our employees must adhere world-wide. We consider ourselves obligated to conform to the highest professional standards." Solms Wittig, General Counsel, HENSOLDT AG

		.
		ising our global competitiveness."
		.

5 HENSOLDT SUSTAINABILITY REPORT

1. Anti-corruption

HENSOLDT has realized the risk of corruption in the defence segment, which receives particular public scrutiny, as high. HENSOLDT rejects all forms of corruption, regardless of whether public or private, active or passive, through an uncompromising zero tolerance policy. With a special focus on corruption risks arising from dealings with commercial agents and third parties, we have developed a special system for assessing the risk of non-compliance with anti-corruption guidelines practically and with due care. This is effected through HENSOLDT's Counterparty Due Diligence Directive (CDDD) along with internal audits. The aim is to minimize corruption risks at all times.

Deals that are irreconcilable with HENSOLDT's values and our strict risk tolerance are declined – even where this means waiving (new) business. Extremely strict prerequisites apply for contingency-fee agreements; they are monitored strictly and avoided wherever possible. The same applies for every form of compensation agreement. All employees must also adhere to identical, clearly defined rules regarding gifts and invitations.

The Counterparty Due Diligence Directive, implemented in as early as 2018, forms the basis for all dealings with business partners and contains special rules of conduct and duties of care with respect to the specific regional and transaction-related risks of a case.

To ensure compliance with all rules and the implementation of the CDDD, HENSOLDT has expanded its internal Compliance Team substantially in recent years and provided it with the necessary resources. A validation committee has also been formed especially to review particularly risky transactions. Consisting of the CEO, CFO, Head of International Business Development, General Counsel and Head of Compliance, this body assesses proposed transactions and commitments with respect to the applicable CDDD and compliance rules.

2. Data protection

At HENSOLDT, data protection means more than just complying with legal requirements: it is also an expression of morally above-board and extremely mindful dealings with employees and business partners. Our own, globally valid Data Protection Directive, which complies with the EU General Data Protection Regulation (GDPR), demands all employees to protect data and information systems against attacks.

Employees are supported in this by our own Data Protection Officers as the main points of contact for all issues relating to IT and data protection.

3. Export compliance

HENSOLDT's international business is subject to numerous sales and export restrictions and controls. To comply with government approval requirements and moratoriums, Group Export Compliance disseminates the generally applicable regulations, monitors the individual transactions from the perspective of export control and risks of economic sanctions on the Group level, and forwards individual applications for export permits to the responsible authorities.

Compliance with all necessary directives and procedures, including an anti-boycott guideline, an anti-corruption directive, the CDDD and all other compliance regulations and standards for business conduct, aims to ensure successful export business within the parameters of the respectively valid rules.

4. Monopoly and competition law

HENSOLDT is subject to a wide variety of competition and monopoly statutes that protect diverse and free competition and are overseen by national and supranational authorities. Compliance with these laws is the task and duty of all HENSOLDT employees and forms the basis for every business transaction. The Compliance and Legal units have published mandatory requirements and guidelines; they advise and train all employees to ensure compliance with all monopoly and competition regulations.

5. Involvement of our supply chain

HENSOLDT also expects and actively demands of all its business partners that they comply with the global standards that the company has adopted with respect to issues such as human rights and labour law. To this end, the guidelines for the purchasing terms and conditions contain the international regulations and conventions of the OECD and the International Labour Organization (ILO), such as the prohibition of forced labour, child labour and discrimination. National provisions, such as the United Kingdom Modern Slavery Act 2015* to prevent the criminal exploitation of labour, form a further pillar. Additional defined, strict requirements apply in the areas of occupational safety, health, environmental protection and hazardous substances.

While these are currently queried and monitored via a supplier self-assessment, an additional Supplier Code of Conduct as an integral part of Supply Chain Management will in future develop the supply chain further to make it even more sustainable. In 2020, there were no cases on record in which suppliers were excluded on the basis of their self-assessments.

6. Focus on the human element

HENSOLDT consistently places the focus of all its compliance activities on its employees, as comprehensive integrity can only be achieved if each individual does their part. The aim is to ensure the long-term success of the company, in line with the motto "Only honest business is sustainable business".

* The Modern Slavery Act Statement of HENSOLDT AG can be found under Sustainability | HENSOLDT

Core areas of the HENSOLDT Compliance Programme

Data and IT infrastructure play an ever-increasing, and in many sectors decisive, role in HENSOLDT's numerous digitalization actions. Securing our digital viability and thus also protecting the intellectual property of the company and its customers is a vital task. At the same time, digitalization is being utilised to enhance sustainability in many areas.

KEEPING DATA SECURE

Within a framework defi ned by numerous legal obligations, national and international directives, conventions and commercial practices, data security has a high priority at HENSOLDT. Within the context of a comprehensive data protection management approach, numerous actions contribute to the continual monitoring and documentation of compliance with the defi ned data protection principles. Actions include, for instance, the defi ned protection objectives and classes, along with HENSOLDT's documentation management. These enable us to guarantee protection of often particularly critical data in the security and defence sector and to prevent violations.

In addition to the technical prerequisites, the focus is on sensitising employees to handle data responsibly and sustainably and on the (new) challenges of data-driven business models. Because the human factor presents the greatest risk potential. To make employees even more mindful of possible risks, HENSOLDT launched a comprehensive cybersecurity awareness campaign in 2020. Mandatory training modules were also posted on the intranet, and success was documented by means of tests that simulated phishing attacks.

HENSOLDT's data protection policies and measures are based on legal requirements and in line with the European General Data Protection Regulation, forming the basis for the company's high standard of global data protection.

"All employees are expected to be constantly mindful of data protection when performing their day-to-day tasks. All executives are obligated to ensure and verify that their subordinates comply with the data protection regulations. Every employee who identifi es a vulnerability in the area of data protection is obligated to report this to his or her supervisor or the Group Data Protection Offi cer." Excerpt from the HENSOLDT Data Protection Policy

New business models – new risks

In the context of continually advancing and accelerating digitalization and networking, new business models and digitalization concepts are constantly emerging at HENSOLDT. Data make possible new products, product applications and innovative services, as well as altered work models. The pandemic gave further momentum to this trend in 2020. Remote maintenance and services are increasingly becoming the rule, Industry 4.0 is transforming manufacturing, artificial intelligence has reached the tipping point and mobile working has now become the norm for many employees. At the same time, opportunities for enhancing efficiency and improving the use of resources are opening up along the entire value creation and production chain.

To minimise the resulting potential risks, the Data Protection Management team, which reports to Legal, is continuously developing the HENSOLDT Data Protection Management programme in compliance with all regulatory requirements and our own integrity standards using a risk-based approach. Under the Board's oversight, the team is developing and deploying processes and systems intended to ensure that our information processing is effective and efficient, secure yet powerful. These include the protection objectives and classes as well as HENSOLDT's documentation management. In this way, we are safeguarding the data of all employees and customers as well as those of our other stakeholders.

Our aim is to ensure the protection of data meets the high level of international standards and to prevent or defeat any intrusions.

In addition to defined principles for handling data, the action framework applicable world-wide at HENSOLDT under consideration of market-specific and regional differences also comprises issues such as transparency, self-determination and general data security.

Digitalization and sustainability

At the same time, increasing digitalization and the use of digital technologies present new opportunities for sustainable living and business. In harmony with the sustainability strategy of the German Government, HENSOLDT further reduced its ecological footprint in 2020 by means of various digital sustainability initiatives.

The optimisation of mobile working during the pandemic made a substantial contribution here. Even after the pandemic is resolved, HENSOLDT intends to integrate mobile working as a normal part of our future day-to-day enterprise operations. New applications will be reviewed before their rollout to determine whether they can concurrently be made available to mobile users, e.g. via their phones. The rollout of Microsoft Teams as the central communication and data exchange platform of the HENSOLDT Group also plays a role here. The use of dashboards also makes it possible to visualise and track KPIs.

Concurrently, HENSOLDT has developed and implemented new solutions for remote maintenance and remote customer service as well as for customer education services and presentations. These leverage the potential of virtual reality and 3D simulations and not only improve customer service, but also significantly reduce business travel, and thus CO2 emissions.

In addition to reducing its ecological footprint, HENSOLDT also places a high priority on the responsible use of core technologies such as artificial intelligence (AI). Today, AI technologies are in use at HENSOLDT across all divisions. This means that HENSOLDT must ensure that ethical principles are complied with in both the development and the application of AI. Ultimately, HENSOLDT's technologies are all about people.

Thus, secure, protected information technology together with the responsible behaviour of all employees form the basis for a HENSOLDT future that is both digital and sustainable. The principle that "the data are secure" creates scope for added value – to the benefit of our employees, our customers, the enterprise, and the environment.

5 HENSOLDT SUSTAINABILITY REPORT

096 | 097

OUR PEOPLE

HENSOLDT is headquartered in Taufkirchen, an important German centre of defence-related innovation not far from Munich. HENSOLDT is represented around the world – in Europe, Asia, North and South America and Australia.

HENSOLDT can strategically serve its growing customer base from close to 40 locations world-wide. Outside of Germany, HENSOLDT is mainly active in France, South Africa and the UK.

As of 31 December 2020, the Company employed 5,227 persons. Just over 70 percent of our employees work at sites in Germany, followed by just under ten percent in South Africa and France and approximately three percent in the UK.

Women account for roughly 22 percent of employees. On management level in the global leadership team, this proportion is just under 15 percent respectively 22 percent in the Executive Committee.

The age distribution of employees is very balanced and is as follows: approx. 26 percent of employees are under 35 years of age, approx. 25 percent are aged 35 to 44, another quarter is between 45 and 54, and just under 25 percent are over 55 years of age.

All fi gures in this chapter pertain to the headcount of all HENSOLDT companies within the scope of consolidation. Sales Representative Offi ces are excluded. Deviations in the (employee) fi gures may therefore occur in the Management Report.

HQ/production (industrial sites): Germany, South Africa, France, UK Sales representations: Spain, Finland, Belgium, USA, Chile, Brazil, Singapore, Australia, South Korea, India, UAE, Saudi Arabia, Turkey

MANAGEMENT APPROACH

The ongoing training and continuing education of employees and the targeted promotion of talents are a dynamic part of HENSOLDT's enterprise strategy and philosophy. The HENSOLDT Academy and internal development programmes aim to ensure the continual development of the capabilities and competences of all employees within the enterprise. The HENSOLDT Academy offers a modern, technically sophisticated portfolio that optimally supports the continuing development of the operational departments.

HENSOLDT is striving to master present and future challenges even better. These challenges include issues such as recruiting talents in an ever tighter market, new work and fl exible working time models as well as new requirements for employees in general. To this end, HENSOLDT is developing an initiative-based, self-guided learning culture and continually expanding the accessibility and fl exibility of its learning offerings. Today's education portfolio already includes numerous needs-based e-learning offerings and blended-learning concepts that combine in-person and e-learning. New formats for informal learning and target-group-specifi c learning paths

are currently in preparation.

We continually refi ne the quality of our educational offerings to ensure success and guarantee the transfer of the learned skills to practice. To enable this, a systematic "hot" feedback session takes place directly at the end of every activity. The transfer to practice is verifi ed six weeks later through a second, "cold" feedback cycle. The HENSOLDT Academy regularly reports on the assessment rate and the return rate in audits and to the Supervisory Board.

As a part of our strategic human resources planning and development, continuing education and talent promotion at HENSOLDT play a major role in fostering employee loyalty, increasing their satisfaction and performance and realising hidden potential. At the same time, this heightens our

attractiveness on the labour market.

5 HENSOLDT SUSTAINABILITY REPORT

Our people – our capital

HENSOLDT recognises the value of its employees. In line with this understanding, the HENSOLDT Academy offers employees a wide range of development formats and continuing education offerings. These include in-depth specialist training in relevant areas such as engineering as well as in soft skills and global leadership, in a manner appropriate to each career and life phase. The world of work is changing at breath taking speed – and accelerated further in 2020 on account of the pandemic. In spite of the exceptional situation, just under 3,500 employees in Germany were able to take part in a range of training and continuing education offerings last year, amounting to more than 47,000 training hours. The objective is to interest new talents for HENSOLDT and foster loyalty among all employees. Consequently, we need to make sure that they are on board with the programme, involve them closely in the upcoming changes and prepare them for new challenges.

Finding and developing talents

To enhance our attractiveness as a place to work, HENSOLDT's efforts start with our youngest employees: for example, students who take part in development programmes concurrently with their studies receive special coaching, can get to know multiple sites and are closely integrated in existing teams.

On their subsequent path to executive management at HENSOLDT, they, like all managers, have the opportunity to take part in the internal, cross-hierarchic and crossfunction leadership programme iLEAD@Hensoldt, which during the pandemic shifted ad-hoc to virtual environments and continued without a missing a beat. This programme enables agile, constructive communities of managers to emerge. Their testimonials confi rm the programme's success. Two examples: "Change begins with oneself! iLEAD made it possible for me." Or: "iLEAD is an excellent roadmap for discovering what's important in life, both personally and career-wise."

Utilising the opportunities of digitalization

Already a key part of every job, digitalization is changing day-to-day work, but also the possibilities for acquiring new skills or learning new kinds of leadership. Digital networking is now a regular part of everyone's workday, and wherever possible and productive, it is also used increasingly extensively at HENSOLDT for talent development and continuing education. Agile working methods are developed and promoted. Entrepreneurial thinking is placed at the focus of all actions. This generates inspiration and innovation.

This again proved true during the pandemic, when employees had the opportunity to advance their careers through a broad range of e-learning offerings even while working from home. Access to course materials in digital form and digital instructional media such as videos, web-based training and web conferences made learning fl exible and independent of time and place. Thus, 47 percent of all training and continuing education offerings were held virtually in 2020.

Youthful enthusiasm and lifetimes of experience

As our response to demographic change, technological and social developments and sociological trends, HENSOLDT is placing increasing emphasis on a life phase-oriented human resources policy. It focuses on the different life and career phases. The aim is to enable all employees to reconcile their careers and personal lives through individualised solutions. Because at HENSOLDT, satisfi ed, healthy, committed and motivated employees form the capital for our future.

New trends in the work sector make it necessary, new technologies make it possible. HENSOLDT's most important capital, its employees, are the focus of a future-oriented human resources policy that centres on life phases.

Students Pioneer Club: This development programme, running concurrently with academic studies, integrates particularly talented and motivated students in existing HENSOLDT teams and provides coaching and training to bind talents to the enterprise early on.

HENSOLDT Connect: This network links dedicated employees in all Divisions and age groups both with each other and with the managing directors and other interest groups. This communication fosters an innovation culture in which the participants develop their potential through various projects and coaching-oriented oversight.

iLEAD@HENSOLDT: This cross-hierarchic, cross-function global leadership programme for executives from all business units communicates key knowledge and aspects of employee management, with the aim of achieving a shared HENSOLDT leadership and value culture

Executive Education Programmes: These management courses at Munich's TUM School of Management, adapted to HENSOLDT's specifi c requirements, are open to all executives. Offerings cover areas such as employee management, communication, sustainability, innovation, fi nance and change management.

iDARE: This programme, offered in cooperation with the TUM Technology and Entrepreneurship Center, aims to foster a leadership culture that promotes inspiration. The focus is on acquiring digital leadership skills and agile working styles – iDARE stands for Innovation, Digitalization, Agility, Refl ection and Entrepreneurship.

HENSOLDT's development programmes

From students to managers, HENSOLDT offers appropriate continuing education and development programmes

for all employees. Some examples:

Overview of HENSOLDT's development programmes

HENSOLDT Group Leadership Team (HGLT)

Commitee (ExCo)	Exeutive Leadership Team (ELT)	Leadership Team (LT)
	Executive Education Programmes TUM School of Management		skills2

iDARE TUM School of Management Leadership Development Journey Development

iLEAD

HENSOLDT understands diversity management as a comprehensive, enterprise-strategic task. The aim is to establish structures and practices that ensure true equality of opportunity, which will enable us to maximise the advantages of diversity irrespective of gender, nationality, sexual orientation, religion or culture. One key focus here is on promoting women managers, inclusion and international diversity. In an integrative working environment, uniqueness enhances creativity, inspiration and the desire to excel.

With respect to the strategic objectives of ensuring competitive working conditions and promoting true diversity and equal opportunity in all its aspects, HENSOLDT has defi ned three focus areas:

Creating a corporate culture that appreciates each individual employee and consciously promotes diversity. Managers serve as active role models for this culture and carry it into all areas of the enterprise by means of various initiatives. Regular updates serve to verify success; the presentation of diversity awards can promote internal and external awareness.

Talent management that routinely invites at least one comparably qualifi ed woman to selection interviews to increase the diversity in the global leadership team as part of succession management. Additionally, all employees receive mandatory training in the diversity areas and are encouraged to take advantage of individual continuing education.

Increasing the public perception of HENSOLDT as a great place to work that both appreciates diversity and promotes modern, fl exible work models such as part-time work, mobile working and an inclusive working environment. Female talents in particular are addressed through targeted image campaigns and participation in joint projects with schools and universities, as well as through private-sector initiatives.

The success of all actions is reviewed regularly on the basis of defi ned performance indicators, adapted as necessary and taken into account in management remuneration. In this way, HENSOLDT realises the potential inherent in diversity and creates added value through appreciation.

5 HENSOLDT SUSTAINABILITY REPORT

OBJECTIVES SHARE OF FEMALE EMPLOYEES AT HENSOLDT 2020 22%

TARGET SHARE OF FEMALE EMPLOYEES IN: EXECUTIVE COMMITTEE

22.2%
35%

TARGET SHARE OF FEMALE EMPLOYEES IN: GLOBAL LEADERSHIP TEAM

2020	14.5%
2024	25%
2026	30%

MANAGEMENT APPROACH

5 HENSOLDT SUSTAINABILITY REPORT

Top management for equal opportunity

As an international enterprise, HENSOLDT has always promoted diversity and equal opportunity for its employees as a matter of course. New initiatives such as "Elevate" aim to increase the proportion of women in executive positions even further.

International studies* have found that enterprises with a vibrant culture of diversity and equal opportunity are up to eight times as successful, six times as innovative and agile and can generate three times the performance, and achieve or exceed their financial targets twice as often as companies without such a culture. Reason enough for HENSOLDT to not just settle for what it has already achieved.

HENSOLDT promotes talents – regardless of their age, ethnic and social origin, nationality, religion, ideology, gender/gender identity or sexual orientation – through numerous initiatives world-wide. Targeted actions focus on specific target groups. Two examples: For some years now, HENSOLDT South Africa has been supporting previously disadvantaged individuals and local engineers in their pursuit of career training and continuing education through the Black Economic Empowerment Programme. And as a member of the industry-wide initiative Women in Defence, HENSOLDT supports women engineering students as prospective hires.

The most recent programme, HENSOLDT Elevate, additionally seeks to increase the proportion of women in executive positions.

* Juliet Bourke (2016) Which two heads are better than one? How diverse teams create

breakthrough ideas and make smarter decisions, Australian Institute of Company Directors, in: "https://www2.deloitte.com/content/dam/insights/us/articles/ 4209_Diversity-and-inclusion-revolution/DI_Diversity-and-inclusion-revolution.pdf" Deloitte Review (22) The diversity and inclusion revolution: Eight powerful truths.

More than just a promise

Women are under-represented in executive positions, particularly in the traditionally male-dominated defence industry. At HENSOLDT, just under a quarter of all current employees are female, and women occupy a total of 15 percent of executive positions. The Elevate programme, launched and overseen by the Board, will develop concepts and actions intended to double the proportion of women in executive positions by 2026.

This programme rests on three pillars that will transform our entire enterprise. A new corporate culture will recognise and promote diversity as added value even more strongly. A strategic career development approach will specifically address women managers, recruit them to our company and provide them the opportunity to further develop their skills. Finally, new, flexible work models and support for families will make it possible to overcome traditional role images.

New training programmes and mentoring formats promote women, but also generally support and motivate all employees in our enterprise. New hiring will focus more intensively on female talents. Going forward, HENSOLDT wants to create a community with Elevate. This new platform aims to organise events for sharing experiences and to stimulate new ideas and a cultural debate.

Diversity in thought and action

Additionally, HENSOLDT joined the initiative "Chefsache" in June, 2020. This network, founded under the patronage of Chancellor Angela Merkel, is made up of executives from business, academia, the public sector and media. It aims to promote a balanced ratio of women and men in executive positions.

"We want more diversity in thought and action at HENSOLDT – that promotes creativity, innovative spirit and satisfaction within the enterprise. Women account for less than 15 percent of our leadership team – we are going to change this!" Thomas Müller, Chief Executive Officer, HENSOLDT AG

s i o n

Respect

Cooperation

p m^ent

We are dedicated to give our time and energy to make our vision come true

We continuously challenge stereotypes realizing that some of our believes about others might be limiting us from achieving greatness Commitment nc lu De^v e l o Fairness HENSOLDT Elevate We take the necessary steps to ensure We shall treat others as we would like to be treated

We shall work together to create a company that encourages all employees to be their best and succeed

In our difference we see our strength

gender balanced leadership becomes a reality

HENSOLDT Elevate

HENSOLDT's activities relating to employee health and safety far exceed the legal requirements. Compliance with these is continually monitored by the Health, Safety & Environment (HSE) site managers and coordinated with Board Members and the Executive Committee. On account of COVID-19, it was not possible to initiate all actions, but this will be remedied in 2021.

One special focus here is on supporting employees with targeted health and screening programmes that focus on both the working environment and individual behaviours. All employees are continually motivated to take responsibility for their own health. Attractive offers create additional incentives. HENSOLDT aims to expand this "be well, feel well" culture in future. This comprises not only safety and ergonomics in the workplace, but also offers health campaigns and addresses dealing with mental stress.

All relevant, mandatory environmental protection and work safety obligations must be fulfi lled, occupational safety requirements and statutorily mandated working conditions must be complied with and potential dangers minimised. To achieve this, HENSOLDT implements actions such as infl uenza vaccinations, psychological risk assessments and consultations for psychosomatic problems.

The target attainment level of all HSE programmes is determined and monitored through internal inspections on the business unit level as well as by external certifi cation audits, and HSE Management and the HSE Management System Offi cer report on these to Board Members and the Executive Committee at regular intervals. Health surveys and internal audits help to identify any defi cits and eliminate them early on. Management assesses the suitability, appropriateness and effectiveness of the integrated HSE management system at regular intervals, thus ensuring that it is continually refi ned (last assessment June 2020). The audit report describes strengths and improvement potential, which leads for instance to extensions of the HSE programme or actions to heighten employee awareness.

In this way, we create a working environment in which employees stay healthy, feel safe and enjoy working.

MANAGEMENT APPROACH

Health and safety – overcoming the pandemic together

When a company like HENSOLDT is in the business of protecting other people, the health and safety of its own employees naturally also plays a key role. Stringent occupational safety standards, organised across the entire Group, have always applied in all divisions. Regular health check-ups and comprehensive fitness and sport programmes are standard practice.

The pandemic challenge

In light of the global pandemic situation, HENSOLDT immediately adapted and intensified its health-related efforts in 2020 to protect the health of our employees and business partners. As early as February 2020, HENSOLDT began putting together a COVID-19 task force. Through a process of ongoing, intensive consultation, this task force succeeded in finding robust solutions to reconcile health protection and the continuation of business from the outset. The comprehensive concept includes the hygiene measures that have since become standard practice, the development of clear parameters for day-to-day work, a huge expansion of mobile working and even site shut-downs in Germany at the beginning of April. In addition to organising online conferences, the task force came up with an array of innovative solution approaches for the diverse challenges posed – in the fields of product acceptances, service and support for partner enterprises, to name just a few. Clear, constant communication with employees is a key element in HENSOLDT's crisis management strategy.

Flexible solutions for additional protection of employees were also found in Production. Rules for staggered working times were hammered out in record time. Further protection measures included the installation of Plexiglas shields between individual workplaces, reducing indoor traffic and in-person meetings and implementing general distancing measures. Dealing with the pandemic brought to the fore the wealth of ideas and volunteer spirit of HENSOLDT's employees. On the initiative of individual employees, 3D printing processes were used to develop frames for face shields to reduce the risk of infection. Particularly in times of crisis, mutual support and protection is vital for HENSOLDT.

Free flu jabs were additionally offered at all sites in accordance with the recommendations of the Standing Committee on Vaccinations (STIKO) at the Robert Koch Institute.

Safety in the workplace

HENSOLDT has always emphasised health and safety, not only during crises. A comprehensive occupational safety programme safeguards the well-being of all our employees. The HSE Notice Laws and Regulations form the legal framework for this. Elected representatives from the various locations oversee compliance with the HSE policies. Low accident figures at HENSOLDT show that this pays off (LTIFR 0.49*). To ensure that HENSOLDT's safety management remains effective in preventing accidents, HENSOLDT has implemented an ideas management tool. This system logs near-accidents, analyses the causes and develops possible actions, with the aim of making it possible to continue to safeguard employees' safety in future.

Fit and healthy

Regular exercise is one of the keystones of a healthy lifestyle. At HENSOLDT for instance in the in-house gym at our Ulm site, which boasts over 300 active members. Or at our Taufkirchen site, which has entered into agreements with a network of gyms throughout the region. Additional movement breaks enable movement, exercise, stretching and relaxation, and are being received enthusiastically as a welcome diversion. Additionally, HENSOLDT is promoting healthy posture of employees at their desks with its "Ergonomics in the Workplace" project.

Regular talks on such topics as "vision in the digital age", "modern addictions and addictive behaviour", as well as on "living wills and lasting medical powers of attorney", provide further valuable information. Surveys on health in the workplace, generally conducted on an annual basis, reveal weak points. In the year under review, weak points were found mainly in the areas of project work and interfaces. Diverse steps, such as team-building actions or simplification of work steps, were initiated to address these.

Free back and diabetes check-ups additionally help to identify problems at an early stage. At our British sites, this preventive health programme is complemented by general health check-ups and an information hotline.

Reducing mental stress

Increasingly, our focus is shifting toward the potential for mental stress in the workplace. From 2018 to 2020, all of HENSOLDT's German sites took part in the study "Mental Health in the World of Work", which was funded by the German Federal Ministry of Labour and Social Affairs. This study focused in particular on mental stressors, the reconcilability of career and family life, job satisfaction, sense of purpose, appreciation and support from colleagues and supervisors. Surveys conducted at regular intervals serve to automatically verify the success of implemented actions. It was also possible to integrate specific questions on dealing with the pandemic, enabling our enterprise to respond to the answers.

Because physical and mental health are inextricably linked. And at HENSOLDT, the health and safety of all our employees is a top priority.

* Lost Time Injury Frequency Rate: number of lost-time injuries (accidents leading to at least one day of absence) x 200,000/number of hours worked.

At HENSOLDT, our employees' health and safety has always had a high priority – in line with the company motto, "Detect and Protect". But in the pandemic year 2020, no other area was nearly as critical.

5 HENSOLDT SUSTAINABILITY REPORT

112 | 113

SOCIAL ENGAGEMENT

A GOOD NEIGHBOUR

Corporate citizenship – the commitment of an enterprise above and beyond its narrow obligations – has a long tradition in Germany and Europe. Practised and modelled by the titans of industrialisation, it is now a part of the normal business behaviour of virtually every company. As it has been for HENSOLDT for many years.

Local, regional – sustainable

HENSOLDT focuses on supporting local and regional initiatives. As a consequence, a broad portfolio of individual initiatives has emerged over the years with the aid of and in close cooperation with not-for-profi t and charitable organisations and public institutions. All with the aim of helping people, and often the weakest among them, supporting children in their vocational training and giving them access to education in the fi rst place, promoting enthusiasm for technology among young people, and quite often simply extending a helping hand in emergency situations.

As, for example, in 2020 during the COVID-19 pandemic, when HENSOLDT spontaneously helped out with a variety of actions where help was needed most. Our Ulm site provided face shields for the Bundeswehr hospital and the local university hospital. We donated laptops to the local diaconical welfare organisation Diakonieverband Ostalp to support home schooling. We donated fever thermometers and masks at short notice in Algeria, and food and personal protection equipment for a childcare centre in South Africa. And much more. During a crisis, social cohesion is more important than ever.

Consequently, HENSOLDT continually motivates its employees to volunteer their time. Driven by our own corporate values, this creates a harmony of cooperation, excellence, responsibility and innovation in the area of corporate citizenship.

Here are just a few examples:

In the UK, HENSOLDT offers local schools the opportunity to let their pupils work in various projects for two days. One or two-week internships enable an even better understanding of the world of work at HENSOLDT. We offer university graduates six or twelve-month internships. On the social level, we assist former military personnel to return to the civilian workforce, provide leave subsidies for reservists, and support a children's hospice through a volunteer programme and fi nancial assistance.

Education also represents a special focus in South Africa. Here, HENSOLDT grants scholarships to women who wish to study engineering. We give local engineers a long-term perspective in their home country – including job and career opportunities with HENSOLDT – by providing career training and continuing education. Our employees also regularly teach in schools as part of HENSOLDT's commitment. Additional donations in the social sector – for instance for children in need or to fund school sports facilities – help the often disadvantaged youngest members of this society.

In Germany as well, actions range from local offers of assistance – to such organisations as fi re services, hospices and (children's) hospitals – to membership in and funding of "Lachen helfen e.V." a Germany-wide initiative of the Bundeswehr to aid children in confl ict and crisis regions.

In the education sector, HENSOLDT's efforts include sponsoring the German youth research contest "Jugend forscht e.V." at multiple sites, as well as the Karlsruhe Institute of Technology (KIT). HENSOLDT supports exceptional students who contribute socially at the University of Applied Sciences Neu-Ulm and future managers at TU Munich.

Much like a jigsaw puzzle, the widely varied individual actions all fi t together to form a unifi ed picture of HENSOLDT's efforts to promote communities and community cohesion at all its locations around the world. As a good neighbour does.

"In addition to supporting numerous initiatives in the areas of politics, sport, education, science and industry with donations and sponsorships, HENSOLDT's commitment to the communities and regions in which our operations are located is a key focus of our CSR activities. Being on site means being in touch with what's happening, and we're able to motivate the people at our facilities, who are also extremely enthusiastic about taking part." Thomas Müller, Chief Executive Offi cer, HENSOLDT AG

As an internationally active enterprise, HENSOLDT takes the associated social responsibility extremely seriously. We take pride in acting as a good neighbour on the local and regional level and are always ready to pitch in and help out wherever our assistance is most needed.

5 HENSOLDT SUSTAINABILITY REPORT

116 | 117

Protection of our environment and conservation of natural resources are at the core of HENSOLDT's sustainability management. To this end, environmental management tracks energy consumption, the use of resources, emissions, traffi c, wastes, and water. The resulting overview of all processes at all of the company's sites forms the basis for continuous improvement of our environmental performance. The assessment is conducted using clearly defi ned parameters and processes. We use stringent national and international requirements (ISO14001, Energy audit DIN16247) as our guidelines for environmental objectives.

5 HENSOLDT SUSTAINABILITY REPORT

"As an enterprise with production facilities around the globe, we acknowledge our responsibility to reduce the impact of our activities on the environment. The mindful use of the earth's natural resources is thus standard practice for us. We are pursuing our objective of reducing our ecological footprint and protecting our planet through numerous initiatives."

Peter Fieser, Member of the Board and Chief Human Resources Offi cer

The HSE Group Policy sets out mandatory guidelines for all employees for fulfi lling all relevant obligations in the areas of environmental protection, occupational safety and energy. The sites implement this Group Policy in the form of HSE guidelines as well as strategic objectives and concrete actions for achieving them. At HENSOLDT, environment, health protection and safety are strategically controlled and centrally coordinated on the Group level and implemented operationally by local HSE teams world-wide. The Head of HSE, FM and Security reports directly to the Board and the Executive Committee on attainment of the HSE targets and compliance with the policies. Our aim is to continually improve HENSOLDT's entrepreneurial action with respect to environmentally harmful impacts, energy-related performance, all environmental aspects, and the higher-level sustainability strategy. It is viewed as a sustainable means for achieving sustained, profi table growth.

In Germany, HENSOLDT has committed itself to increasing the proportion of renewable energy to 70 percent and reducing CO2 emissions and the use of volatile organic compounds (VOCs) by at least 20 percent each by 2024. In the coming year, these targets are to be extended to the Group level and defi ned according to the principle of science-based targets.

Beyond that, the requirements of our HSE Group Policy apply. Among other objectives, these commit us to:

Complying with the applicable legal and other requirements to which our organisation has committed and which relate to its environmental aspects.

Creating a framework for defi ning and reviewing environmental targets and individual objectives as a continuous improvement programme. The targets and individual objectives are documented and updated on a regular basis.

Applying design standards that promote the use of environmentally friendly processes and materials. Our aim here is to promote the development of products that can be reused, recycled or safely disposed of.

Reducing CO2 emissions (as of today: 96,970 t CO2 ) by increasing the proportion of renewable energy, optimising energy effi ciency and reducing business travel and business fl ights.

Promoting the reduced consumption of all materials and concurrently their reuse and recycling, as well as the use of recycled materials wherever possible.

Increasing the energy effi ciency of new products, services and facilities, and the effi ciency of energy use in all divisions.

Promoting environmental awareness, responsibility and the use of appropriate technologies among all employees and other persons working on behalf of HENSOLDT, and including these topics in training programmes throughout the enterprise (including by means of suitable e-learning).

Mitigating the impact of our enterprise on the local environment and striving to be a good neighbour in our communities at all times.

Largely avoiding waste that must be disposed of as landfi ll, as well as appropriately handling hazardous substances

Developing a comprehensive environmental awareness among all employees.

Because for HENSOLDT, our motto "Detect and Protect" applies not only to protecting people, but equally to protecting our environment and nature as the basis for all life.

ENVIRONMENTAL TARGETS

Emissions Renewable energies

Volatile organic compounds (VOC)

-20%

70%

-20%

↓

↑

↓

MANAGEMENT APPROACH

HENSOLDT naturally considers itself challenged and obligated to use scarce resources wisely. Reduction of CO 2 emissions is a clearly defi ned requirement world-wide. Detailed concepts and innovative ideas lead to numerous individual actions.

LESS IS MORE

Climate change is one of the greatest challenges of our time and has major consequences world-wide. That is why for HENSOLDT, too, the effi cient use of our earth's natural resources and a reduction of CO emissions are key tasks for limiting global warming and its impacts.

In Germany, several actions are already under way in this area, with more in planning. For example, in future, HENSOLDT aims to obtain all of its electricity from renewable sources. All employees are encouraged to use public transport and receive transport fare subsidies. PCs are largely switched off centrally at night. Additionally, the enterprise will voluntarily pay for carbon offsetting in cases where no reduction in CO possible. A detailed analysis of our CO balance and the corresponding compensation is planned for 2021. A new mobility concept that covers all company vehicles and provides for the construction of a charging infrastructure at our facilities is intended to promote transitioning to electric vehicles. A new lighting concept, a carpooling app for employees and our own photovoltaic systems at our sites will all reduce our CO 2 footprint further.

HENSOLDT has also committed to substantially reducing CO emissions in the United Kingdom. Business travel is to be avoided wherever possible, with newly implemented videoconferencing technologies to be used instead. Local suppliers are to be preferred in order to reduce delivery traffi c. Employees are encouraged to start cycling to work – among other things through the installation of additional shower facilities at the sites.

The requirement to minimise business travel and fl ights as much as possible applies in France as well. This, combined with signifi cantly reduced energy consumption, has already lowered greenhouse gas emissions. At the same time, HENSOLDT France is a shining example for the use of green electricity from hydrogen. Through its development and production of hydrogen-based energy storage, NEXEYA – a HENSOLDT company since 2019 – has brought an important component of tomorrow's energy transition to market and HENSOLDT France one giant step closer to CO neutrality (see 3.2).

Additionally, HENSOLDT is taking actions to substantially reduce the use of natural resources in production and administration at all its sites around the world. This includes comprehensively reducing water consumption as an important basis for life, among other things by converting our (washing) machines in production to closed recirculation and reducing the consumption of hot water at our sites.

In its efforts to preserve natural resources and minimise consumption, HENSOLDT is pursuing a holistic approach: to protect our environment and preserve it for future generations.

At HENSOLDT, responsible stewardship of the environment is a key, core and undisputed principle. In particular, preventing waste and hazardous substances and saving energy contribute greatly to sustainable business.

THE BASIS OF ALL LIFE AND OUR ENTERPRISE

HENSOLDT regards the protection of our environment as a self-evident obligation to future generations and an act of entrepreneurial reason, without which long-term business is not possible. In addition to mandatory directives and requirements for all business units and employees, HENSOLDT currently considers the prevention of waste and hazardous substances and the reduction of energy consumption in particular as powerful levers for sustainable, environmentally friendly business activity, and is contributing to these goals through a range of actions.

In recent years, for instance, we have replaced the coolants in our AESA antennas with environmentally friendly variants. Optimised production helps reduce hazardous substances. Strict waste sorting is just as much normal procedure as energy-aware behaviour on the part of our employees. The use of motion sensors to control lighting and the installation of energy-saving LED illuminants realise additional energy-saving potential.

At our German sites, a comprehensive consumption analysis is expected to lead to further optimisations in 2021. Planned roof refurbishments, insulation actions, a new lighting concept and a new cooling system in Production are expected to enable further savings.

HENSOLDT's UK sites have also set themselves challenging environmental targets. HENSOLDT UK aims to meet the new, extremly stringent requirements of ISO 14001 with a recycling rate of 65 percent, systematic waste sorting and 100 percent prevention of landfill waste. The use of alternative cooling systems reduces energy consumption. Energy efficiency is already a key criterion for the development of new products and services.

The requirements set out in the directives of the HSE Group Policy additionally apply at all HENSOLDT sites around the globe. In this way, we are reducing our environmental footprint and protecting the environment wherever and however we can. Naturally in full compliance with all legal requirements and with strict monitoring of same. And with enormous commitment on the part of all our employees.

As a supplier of high-quality electronic sensors and solutions in the defence sector, HENSOLDT takes its responsibility for its products extremely seriously. Product development is guided profoundly by HENSOLDT's understanding of sustainability – namely furthering the protection of all people and life world-wide (see 5.1). HENSOLDT is aware of the risks posed by its products and their use. As part of our understanding of product responsibility, the sale of HENSOLDT's products is subject to a rigorous internal export compliance system to ensure conformity with national, European and international export regulations, thus preventing compliance risks. Goods and technologies subject to approval are only delivered with corresponding export permits following a review of all contract parties through the CDDD process. Final destination clauses ensure that customers may not transfer HENSOLDT products to non-approved recipients.

Governed by our understanding that our business success depends primarily on the superior quality of our products, we use advanced technologies and exploit their potential fully. We continually review and adapt our product portfolio in compliance with national and international laws and regulations as well as export regulations (see 5.2) and with a focus on customer requirements. All aspects of product safety are formally reviewed on a regular basis throughout the entire development process. The product safety fi le is released by the head of development on the management level. HENSOLDT's long-term, sustainable technology strategy is driven by the ongoing evaluation of the necessary core technologies of the enterprise. Responsible technology managers anticipate future developments, defi ne development requirements and monitor their implementation in technology development projects along with possible impacts on people and the environment.

New possibilities and applications are constantly being developed in close collaboration with research institutes and partners. This includes both fabrication processes and materials research.

Numerous applications around the world affi rm that multiple HENSOLDT products are able to protect nature and the environment even beyond their originally intended purpose.

MANAGEMENT APPROACH

HENSOLDT develops its products and solutions according to the requirement that they comply with all applicable laws and regulations. HENSOLDT also supports their responsible use through our adherence to export regulations. Additionally, our Company's products actively protect nature and contribute to social improvement.

PROTECTING PEOPLE, ANIMALS AND NATURE

Requirements with regard to product liability are increasing throughout our society. The acceptance of potential risks is steadily declining – particularly in air transport. HENSOLDT is continually responding to these trends: by rigorously monitoring compliance with all laws, regulations and export requirements; through the ongoing qualifi cation of our employees; and by adapting all associated processes within the enterprise – from development to production and feedback from our customers during the generally long service lifetimes of our products.

HENSOLDT takes responsibility – from the fi rst day of the product lifecycle to the last.

Safe for people and the environment

Our enterprise has identifi ed the ongoing monitoring of its products and the processes used in their manufacture with regard to their possible impacts on people and the environment as a primary task. As part of HENSOLDT's Product Environmental Compliance (PEC) process, an internal team of experts analyses the products, production procedures and processes, improves them and then rolls out these improvements enterprise-wide.

This includes in particular monitoring the restriction of the use of certain hazardous substances in electrical and electronic equipment (Restriction of Hazardous Substances Directive RoHS), the registration, evaluation, authorisation and restriction of chemicals (REACH Directive) and restrictions on the use of substances of very high concern (SVHC) and biohazards.

This enables us to identify and replace hazardous substances and processes at an early stage, which helps make HENSOLDT products future-proof.

Lightweight = environmentally friendly

Innovation is essential to enable HENSOLDT to operate sustainably. Investments in key technology play a vital role here. In addition to sensor technology, this also means lightweight structures. The development of extremely lightweight products is considered a key technology for sustainable, climate-friendly development. Here, less truly is more. Lightweight technologies make it possible to save resources when manufacturing products and fabricating materials, and in subsequent use. In addition to resource savings, lightweight technologies also represent enhanced value for HENSOLDT's customers.

Going forward, HENSOLDT has thus set itself the target of integrating lightweighting in its development processes right from the start – for example in the form of virtual design, new lightweight materials and collaboration with research institutes – so that we can offer customers lighter and thus more sustainable products. In this way, we can further optimise the technological, economic, and above all ecological aspects of our product development.

HENSOLDT products safeguard nature and animals

HENSOLDT not only takes responsibility for people and the environment with its "regular" products – its technologies also help to protect endangered species.

Rhinoceros haven

Around 1,800 rhinoceroses roam the 8,000 hectare Buffalo Dream Ranch in South Africa – protected 24/7 by high-tech from HENSOLDT. This specially developed system combines surveillance of the rhinoceroses, the terrain and the surrounding landscape with day and nightvision cameras, radar technology and sensors. The system is to be developed even further going forward. The deployment of drones and artificial intelligence will help protect rhinoceroses throughout South Africa even more effectively in future. Further plans involve establishing a high-tech wildlife fund to recruit additional partners for endangered-species protection.

Protecting polar bears

Climate change is destroying the natural habitat of many polar bears. At the same time, the number of encounters between these apex Arctic predators and humans is increasing, often ending with the animals' deaths. The global polar bear population has declined dramatically over recent decades. To prevent encounters with humans, HENSOLDT has developed an early warning system that is already being used at a research station of the East Greenland Ice-Core Project (EastGRIP). Using HENSOLDT's radar systems, polar bears can be detected at a distance of several kilometres. The members of the international research team are warned of approaching bears by phone, enabling them to avoid an encounter. This protects both polar bears and people. Encouraged by its success in Greenland, HENSOLDT plans to contribute to polar bear protection in other Arctic regions as well.

No chance for poachers

Overfishing and pirate fishing represent a global challenge that urgently needs to be resolved. HENSOLDT's SBS radar systems now play an important role in protecting maritime areas. For instance, they are used to surveil shellfish farms and national parks in Costa Rica in order to protect biodiversity and functioning ecosystems.

The Hangklip Conservatory close to Cape Town, one of the most biodiverse coastal regions in South Africa, is now also virtually "poacher-proof". HENSOLDT technology originally developed for border security applications detects poachers long before they can do damage, while at the same time helping to monitor the legal harvesting of abalones, a type of mollusc highly prized as a delicacy. The once-rampant illegal harvests are now literally a thing of the past.

Protecting birds around the world

Recent years have seen a sharp increase in oil sand mining in Canada. Separation of the oil leaves behind large quantities of contaminated water, which is impounded in tailing ponds. HENSOLDT's radar technology is used to keep birds from landing on the oily surfaces of these ponds. The radar systems detect flocks of birds, which are driven off by deterrent devices. This prevents numerous species from meeting a gruesome end in the tailing ponds.

Climate-friendly technologies such as wind turbines can also endanger biodiversity. Birds and bats can be injured during both the erection and operation of such turbines. Endangered species require special protection. HENSOLDT's radar systems are used to track the flight paths of endangered bird species, making it possible to control and stop wind turbines when flocks of birds approach.

HENSOLDT solutions and products detect threats to people, animals and nature, ensure safety and security, and protect those who dedicate themselves to protecting us.

GRI CONTENT INDEX AND GRI PERFORMANCE DATA

132 133

5 HENSOLDT SUSTAINABILITY REPORT

GRI Indicator GRI Standards Page number/URL/Explanation

GRI 101: Foundation

GRI 102: General Disclosures

Organizational Profile

GRI 102-1 Name of the organization Hensoldt AG

GRI 102-2 Activities, brands, products, and services Annual Report (2020) p. 11

GRI 102-3 Location of headquarters Hensoldt AG, which is entered in the Commercial Register of the Munich Local Court (HRB 258711), has its registered office in Taufkirchen, Germany.

GRI 102-4 Location of operations Annual Report (2020) p. 12 and Annual Report (2020) p. 117

GRI 102-5 Ownership and legal form Annual Report (2020) p. 12 and Annual Report (2020) p. 117

GRI 102-6 Markets served Annual Report (2020) p. 14 f.

GRI 102-7 Scale of the organization Annual Report (2020) p. 13 and Annual Report (2020) p. 26 f.

GRI 102-8 Information on employees

and other workers

Sustainability Report (2020) p. 98 and Annual Report p. 12

GRI 102-9 Supply chain Sustainability Report (2020) p.91

GRI 102-10 Significant changes to the organization and its supply chain

Information on business performance: Annual Report (2020) p. 25 f., Information on legal structure: Annual Report (2020) p. 12 f.

GRI 102-11 Precautionary principle or approach Annual Report (2020) p. 39 ff.

GRI 102-12 External initiatives Sustainability Report (2020) p. 113 ff.

GRI 102-13 Membership of associations HENSOLDT is active in the CSR groups of the BDSV (Bund deutscher Sicherheits- und Verteidigungsindustrie) and ASD (Aerospace and Defense), as well as involved in other associations and interest groups.

Strategy

GRI 102-14 Statement from senior decision-maker Sustainability Report (2020) p. 76 f.

GRI 102-15 Values, principles, standards,

and norms of behavior

Annual Report (2020) p. 39 f. and Sustainability Report (2020) p. 82 f.

Ethics and integrity

GRI 102-16 Values, principles, standards,

and norms of behavior

Sustainability Report (2020) p. 80 f.

Governance

GRI 102-18 Governance structure Annual Report (2020) p. 82 ff.

GRI 102-19 - GRI 102-39 Corporate governance disclosures Information on corporate governance is provided in the Sustainability Report (2020) p. 80 f., a more comprehensive descroption is currently not provided due to the application of "in accordance with GRI".

GRI Indicator GRI Standards		Page number/URL/Explanation
Stakeholder engagement
GRI 102-40	List of stakeholder groups	Sustainability Report (2020) p. 79 and p. 82 f.
GRI 102-41	Collective bargaining agreements	For us, it is a matter of course that we join collective bargaining agreements or similar agreements whenever possible. Additional information can be retrieved in GRI 405-2.
GRI 102-42	Identifying and selecting stakeholders	Sustainability Report (2020) p. 82 f.
GRI 102-43	Approach to stakeholder engagement	Sustainability Report (2020) p. 82 f.
GRI 102-44	Key topics and concerns raised	Sustainability Report (2020) p. 82 ff.
Reporting practice
GRI 102-45	Entities included in the consolidated financial statements	Annual Report (2020) p. 143 f.
GRI 102-46	Defining report content and topic boundaries	Sustainability Report (2020) p. 82 ff.
GRI 102-47	List of material topics	Sustainability Report (2020) p. 84
GRI 102-48	Restatements of information	n/a
GRI 102-49	Changes in reporting	n/a
GRI 102-50	Reporting period	Sustainability Report (2020) p. 79
GRI 102-51	Date of most recent report	n/a
GRI 102-52	Reporting cycle	Sustainability Report (2020) p. 79
GRI 102-53	Contact point for questions regarding the report	Sarah Sterzl (sarah.sterzl@hensoldt.net)
GRI 102-54	Claims of reporting in accordance with the GRI Standards	Sustainability Report (2020) p. 79
GRI 102-55	GRI content index	Sustainability Report, Appendix. The GRI Content Index is currently not published seperately on the homepage.
GRI 102-56	External assurance	Sustainability Report (2020) p. 79
MATERIAL TOPICS
Anti-Corruption
GRI 103: Management approach
GRI 103-1	Explanation of the material topic and its boundary
GRI 103-2	The management approach and its components	The handling of compliance and anti-corruption is described in the Sustainability Report (2020) p.88 f.
GRI 103-3	Evaluation of the management approach
GRI 205 (2016): Anti-Corruption
GRI 205-1	Operations assessed for risks related to corruption	Sustainability Report (2020) p. 88 ff.
GRI 205-2	Communication and training about anti-corruption policies and procedures	Sustainability Report (2020) p. 88 ff.
GRI 205-3	Confirmed incidents of corruptions and action taken	Sustainability Report (2020) p. 89 ff.

Energy GRI 103:

Water GRI 103:

GRI Indicator GRI Standards Page number/URL/Explanation Management approach GRI 103-1 Explanation of the material topic and its boundary The management approach – resources and environmental protection is described in the Sustainability Report (2020) p. 118 f. GRI 103-2 The management approach and its components GRI 103-3 Evaluation of the management approach GRI 302 (2016): Energy GRI 302-1 Energy consumption within the organization Sustainability Report (2020) p. 121, GRI performance data Management approach GRI 103-1 Explanation of the material topic and its boundary The topic "water" was not identified as a material issue. The management approach – resources and environmental protection is described in the Sustainability Report (2020) p. 118 f. GRI 103-2 The management approach and its components GRI 103-3 Evaluation of the management approach GRI 303 (2018): Water and effluents 303-1 Interactions with water as a shared resource Sustainability Report (2020) p. 121 303-5 Water consumption GRI performance data Emissions Management approach GRI 103-1 Explanation of the material topic and its boundary The management approach – resources and environmental protection is described in the Sustainability Report (2020) p. 118 f. GRI 103-2 The management approach and its components GRI 103-3 Evaluation of the management approach GRI 305 (2016): Emissions GRI 305-1 Direct (Scope 1) GHG emissions Sustainability Report (2020) p. 122, GRI performance data GRI 305-2 Energy indirect (Scope 2) GHG emissions GRI performance data GRI 305-6 Emissions of ozone-depleting substances (ODS) GRI performance data Management approach GRI 103-1 Explanation of the material topic and its boundary The topic of "sewage and waste" was not identified as a material issue. The management approach – resources and environmental protection is described in the Sustainability Report (2020) p. 118 f. GRI 103-2 The management approach and its components GRI 103-3 Evaluation of the management approach GRI 306 (2016):

GRI 103:

Waste GRI 103:

Waste

	age number/URL/Explanation

306-2 Waste by type and disposal method Sustainability Report (2020) p. 123, GRI performance data

GRI Indicator	GRI Standards	Page number/URL/Explanation
Employment
GRI 103: Management approach
GRI 103-1	Explanation of the material topic and its boundary
GRI 103-2	The management approach and its components	Sustainability Report (2020) p. 98 f.
GRI 103-3	Evaluation of the management approach
GRI 401 (2016): Employment
GRI 401-1		New employee hires and employee turnover Sustainability Report (2020) p. 99, GRI performance data
GRI 401-3	Parental leave	GRI performance data
Occupational health and safety
GRI 103: Management approach
GRI 103-1	Explanation of the material topic and its boundary
GRI 103-2	The management approach and its components	Sustainability Report (2020) p. 108 f.
GRI 103-3	Evaluation of the management approach
GRI 403 (2018): Occupational health and safety
GRI 403-1	Occupational health and management system	Sustainability Report (2020) p. 109 ff.
GRI 403-2	Hazard identification, risk assessment, and incident investigation	Sustainability Report (2020) p. 110 f.
GRI 403-3	Occupational health services	Sustainability Report (2020) p. 110 f.
GRI 403-4	Worker participation, consultation, and communication on occupational health and safety	Sustainability Report (2020) p. 109 ff.
GRI 403-5	Worker training on occupational health and safety	Sustainability Report (2020) p. 110 f.
GRI 403-6	Promotion of worker health	Sustainability Report (2020) p. 109 ff.
GRI 403-9	Work-related injuries	GRI performance data

Sustainability Report (2020) p. 102, GRI performance data

GRI Indicator	GRI Standards	Page number/URL/Explanation
Training and Education
GRI 103: Management approach
GRI 103-1	Explanation of the material topic and its boundary
GRI 103-2	The management approach and its components	Sustainability Report (2020) p. 100 f.
GRI 103-3	Evaluation of the management approach
GRI 404 (2016): Training and education
GRI 404-1	Average hours of training per year per employee
GRI 404-3	Percentage of employees receiving regular performance and career development reviews	GRI performance data
Diversity and equal opportunities
GRI 103: Management approach
GRI 103-1	Explanation of the material topic and its boundary
GRI 103-2	The management approach and its components	Sustainability Report (2020) p. 104 f.
GRI 103-3	Evaluation of the management approach
GRI 405 (2016): Diversity and equal opportunity
GRI 405-1	Diversity of governance bodies and employees
GRI 405-2	Ratio of basic salary and remuneration of women to men
Further topics

Sustainability Report (2020) p. 104 ff., GRI performance data

For us, it is a matter of fact, that the provisions of collective agreements, just like the remuneration principles, are independent of gender and that there are no systematic differences. In the companies covered by collective agreements, respective collective compensaton agreements are applied. The compensation systems are company-specific, so a ratio analysis can only be made for selected individual companies of employee groups and not for the Group as a whole. Total compensation can also be made up of other additional components in addition to the monthly salary, which is why it is not comparable as an overall figure. An analyses of compensation is carried out both at company level and holistically.

Further topics
	Corporate Digital Responsibility	Sustainability Report (2020) p. 92 ff.
	Social engagement	Sustainability Report (2020) p. 112 ff.
	Product responsibility	Sustainability Report (2020) p. 122 ff.

GRI Standards		Indicator	Performance
Environment
GRI Standards		Indicator	Performance
Energy	302-1	Energy consumption within the organization
		Diesel & Fuel oil	137,276 kwH
		Natural gas	637,540 t CO e
		Electricity (non-renewable energies)	2 16,159,353 kWh
		Electricity (renewable energies)	28,464,381 kWh
		District heating	27,265,094 kWh
Water	303-5	Water consumption	81,571 m 3
Emissions	305-1	Direct GHG emissions (Scope 1, market-based approach)	34,913 t CO 2
	305-2	Indirect GHG emissions (Scope 2, market-based approach)	62,057 t CO 2
	305-6	Emissions of ozone-depleting substances (ODS)	1,339 kg
		Volatile organic compounds (VOC)	5,168 kg
Waste	306-2	Waste
		Non-hazardous waste	1,135 metric ton
		Hazardous waste	113 metric ton
		Perimeter: HENSOLDT, consolidated companies (sales representations excluded, site Aalen excluded due to new site established in fall 2020) incl. Cyber GmbH
Social
Employment		GRI 401-1 New employee hires and employee turnover
		Voluntary fluctation	147
		Non-voluntary fluctation*	152
		Active workforce by contract type*
		Permanent	5,115
		Temporary	112
		Percentage of part-time employees	6 %
		Employees by geographical area
		Hensoldt total	5,227
		Germany	3,842
		France	578
		South Africa	624
		UK	183
		GRI 401-3 Paternity/maternity leave taken in the reporting period	214
		Total female paternity/maternity leave taken	87
		Total male paternity/maternity leave taken	127
Health & Safety		GRI 403-9 Work-related injuries
		Number of work-related injuries	29
		Lost Time Injury Frequency Rate (LTIFR)	0.49
		Fatalities	0
		Number of reportabel work-related illness cases	1
Training & Education		GRI 404-1 Average hours of training and development per year per employee
		Total number of training hours	47,868
		Training provided by Hensoldt Academy	90 %
		(compared to external providers)
		GRI 404-3 Percentage of employees receiving regular performance and professionel development revies	94 %
Diversity & Equal Opportunity		GRI 405-1 Diverstiy in control bodies and among employees
		Percentage of women in the active workforce	22 %
		Percentage of women in management positions (senior manager positions)	10 %
		Percentage of women in management positions (executive positions) 13 %
		Percentage of women in the Executive Commitee	22 %

GRI Standards		Indicator	Performance
Environment
GRI Standards		Indicator	Performance
Energy	302-1	Energy consumption within the organization
		Diesel & Fuel oil	137,276 kwH
		Natural gas	637,540 t CO e 2
		Electricity (non-renewable energies)	16,159,353 kWh
		Electricity (renewable energies)	28,464,381 kWh
		District heating	27,265,094 kWh
Water	303-5	Water consumption	81,571 m 3
Emissions	305-1	Direct GHG emissions (Scope 1, market-based approach)	34,913 t CO 2
	305-2	Indirect GHG emissions (Scope 2, market-based approach)	62,057 t CO 2
	305-6	Emissions of ozone-depleting substances (ODS)	1,339 kg
		Volatile organic compounds (VOC)	5,168 kg
Waste	306-2	Waste
		Non-hazardous waste	1,135 metric ton
		Hazardous waste	113 metric ton
		Perimeter: HENSOLDT, consolidated companies (sales representations excluded, site Aalen excluded due to new site established in fall 2020) incl. Cyber GmbH
Social
Employment		GRI 401-1 New employee hires and employee turnover
		Voluntary fluctation	147
		Non-voluntary fluctation*	152
		Active workforce by contract type*
		Permanent	5,115
		Temporary	112
		Percentage of part-time employees	6 %
		Employees by geographical area
		Hensoldt total	5,227
		Germany	3,842
		France	578
		South Africa	624
		UK	183
		GRI 401-3 Paternity/maternity leave taken in the reporting period	214
		Total female paternity/maternity leave taken	87
		Total male paternity/maternity leave taken	127
Health & Safety		GRI 403-9 Work-related injuries
		Number of work-related injuries	29
		Lost Time Injury Frequency Rate (LTIFR)	0.49
		Fatalities	0
		Number of reportabel work-related illness cases	1
Training & Education		GRI 404-1 Average hours of training and development per year per employee
		Total number of training hours	47,868
		Training provided by Hensoldt Academy (compared to external providers)	90 %
		GRI 404-3 Percentage of employees receiving regular performance and professionel development revies	94 %
Diversity & Equal Opportunity		GRI 405-1 Diverstiy in control bodies and among employees
		Percentage of women in the active workforce	22 %
		Percentage of women in management positions (senior manager positions)	10 %
		Percentage of women in management positions (executive positions) 13 %
		Percentage of women in the Executive Commitee	22 %

Perimeter: HENSOLDT, consolidated companies (sales representations excluded) incl. Cyber GmbH * including retirement, leave after partial retirement, mututal agreement, early termination, end of limited contract) **students excluded

138 | 139

5 HENSOLDT SUSTAINABILITY REPORT

To the Supervisory Board of Hensoldt AG, Taufkirchen

We have performed an independent limited assurance engagement on the separate non-financial group report as well as the sections "Business modell" and "Organisation and infrastrcture" of the group management report, that are qualified as a part by reference, (further "Report") of Hensoldt AG, Taufkirchen (further "company" or "Hensoldt AG") according to § 315b and 315c in conjunction with 289c to 289e of the German Commercial Code (HGB), for the period from January 1 to December 31, 2020.

Management's Responsibility

The legal representatives of the company are responsible for the preparation of the report in accordance with §§ 315b, 315c in conjunction with 289c to 289e HGB.

This responsibility of the legal representatives includes the selection and application of appropriate methods to prepare the report and the use of assumptions and estimates for individual disclosures which are reasonable under the given circumstances. Furthermore, the legal representatives are responsible for the internal controls they deem necessary for the preparation of the report that is free of – intended or unintended – material misstatements.

Practitioner's Responsibility

It is our responsibility to express a conclusion on the report based on our work performed within a limited assurance engagement.

We conducted our work in the form of a limited assurance engagement in accordance with the International Standard on Assurance Engagements (ISAE) 3000 (Revised): "Assurance Engagements other than

• Inquiries of group-level personnel who are responsible for determining disclosures on concepts, due diligence processes, results and risks, performing internal control functions and consolidating disclosures
• Inspection of selected internal and external documents
• Analytical procedures for the evaluation of data and of the trends of quantitative disclosures as reported at group level by all sites
• Evaluation of local data collection, validation and reporting processes as well as the reliability of reported data based on a sample of the site Ulm in Germany.
• Assessment of the overall presentation of the disclosures

In our opinion, we obtained sufficient and appropriate evidence for reaching a conclusion for the assurance engagement.

Independence and Quality Assurance on the Part of the Auditing Firm

In performing this engagement, we applied the legal provisions and professional pronouncements regarding independence and quality assurance, in particular the Professional Code for German Public Auditors and Chartered Accountants (in Germany) and the quality assurance standard of the German Institute of Public Auditors (Institut der Wirtschaftsprüfer, IDW) regarding quality assurance requirements in audit practice (IDW QS 1).

Audits or Reviews of Historical Financial Information", published by IAASB. Accordingly, we have to plan and perform the assurance engagement in such a way that we obtain limited assurance as to whether any matters have come to our attention that cause us to believe that the report of the company for the period from January 1 to December 31, 2020 has not been prepared, in all material respects, in accordance with §§ 315b and 315c in conjunction with 289c to 289e HGB. We do not, however, issue a separate conclusion for each disclosure. As the assurance procedures performed in a limited assurance engagement are less comprehensive than in a reasonable assurance engagement, the level of assurance obtained is substantially lower. The choice of assurance procedures is subject to the auditor's own judgement.

1. Within the scope of our engagement we performed, amongst others, the following procedures:

2. Inquiries of group-level personnel who are responsible for the materiality analysis in order to understand the processes for determining material topics and respective reporting boundaries for Hensoldt AG

3. A risk analysis, including media research, to identify relevant information on Hensoldt Group's sustainability performance in the reporting period
4. Assessment of the suitability of internally developed definitions
5. Evaluation of the design and the implementation of systems and processes for the collection, processing and monitoring of disclosures, including data consolidation, on environmental, employee and social matters, respect for human rights, and anti-corruption and bribery matters

Conclusion

Based on the procedures performed and the evidence obtained, nothing has come to our attention that causes us to believe that the separate non-financial group report of Hensoldt AG for the period from January 1 to December 31, 2020 has not been prepared, in all material respects, in accordance with §§ 315b and 315c in conjunction with 289c to 289e HGB.

Recommendation

Without affecting the conclusion above, we recommend a further formalization of the (local) data collection, validation and reporting processes.

Restriction of Use/General Engagement Terms

This assurance report is issued for purposes of the Supervisory Board of Hensoldt AG, Taufkirchen, only. We assume no responsibility with regard to any third parties.

Our assignment for the Supervisory Board of Hensoldt AG, Taufkirchen, and professional liability as descriped above was governed by the General Engagement Terms for Wirtschaftsprüfer and Wirtschaftsprüfungsgesellschaften (Allgemeine Auftragsbedingungen für Wirtschaftsprüfer und Wirtschaftsprüfungsgesellschaften) in the version dated January 1, 2017 (https://www.kpmg.de/bescheinigungen/lib/aab_english.pdf). By reading and using the information contained in this assurance report, each recipient confirms notice of the provisions contained therein including the limitation of our liability as stipulated in No. 9 and accepts the validity of the General Engagement Terms with respect to us.

Munich, March 8, 2021

KPMG AG Wirtschaftsprüfungsgesellschaft [Original German version signed by:]

Limited Assurance Report of the Independent Auditor regarding the separate non-financial group report1

Our engagement applied to the German version of the separate non-financial group report 2020.

This text is a translation of the Independent Assurance Report issued in German, whereas the German text is authoritative.

Publication details

Published by HENSOLDT AG Willy-Messerschmitt-Straße 3 82024 Taufkirchen Germany

Content written by

Kekst CNC Leopold-Palais Leopoldstraße 10 80802 München Germany

Designed by

Guido Bentner Branding Häldäckerstraße 11 78052 Villingen-Schwenningen Germany

Printed by Druckerei Leute GmbH Wehrstraße 3 78050 Villingen-Schwenningen Germany

Image copyright

P. 1/140/141/142 – Brotz Medien
P. 6/7/8/9/12/13/14/15/16/17/18/19/22/
23/24/25/26/27/50/51/66/67/98/99 – Joachim Schranzhofer
P. 30/31/32/33/34/35/36/37/62/63/68/69/72/73 – Büro Beder
P. 38/38 – symbiot@www.shutterstock.com
P. 40/41 – Merydolla@www.shutterstock.com
P. 42/43/44/45 – Jaroslav Neliubov@www.shutterstock.com
P. 46/47 – greenbutterfly@www.shutterstock.com
P. 52/53/70/71 – HENSOLDT AG
P. 56/57 – ESB Professional@www.shutterstock.com
P. 58/59/60/61 – Rost9@www.shutterstock.com
P. 64/65 – peterschreiber.media@www.shutterstock.com
P. 74/75 – biletskiyevgeniy.com@www.shutterstock.com
P. 76/77/78/79 – Armin Brosch, Fotograf
S. 80/81 – fizkes@www.shutterstock.com
P. 82/83/84/85 – ParamePriizma@www.shuttershock.com
P. 86/87 – SJ Travel Photo and Video@www.shutterstock.com
P. 88/89/90/91 – travelview@www.shutterstock.com
P. 92/93/94/95 – Alexander Supertramp@www.shutterstock.com
P. 96/97 – Creative Travel Projects@www.shutterstock.com
P. 100/101/102/103 – Rawpixel.com@www.shutterstock.com
P. 104/105/106/107 – Flamingo Images@www.shutterstock.com
P. 108/109/110/111 – Rawpixel.com@www.shutterstock.com
P. 112/113 – ER_09@www.shutterstock.com
P. 114/115 – blvdone@www.shutterstock.com
P. 116/117 – Konstanttin@www.shutterstock.com
P. 118/119 – matkub2399@www.shutterstock.com
P. 120/121 – Smileus@www.shutterstock.com
P. 122/123 – r.classen@www.shutterstock.com
P. 124/125 – Party people studio@www.shutterstock.com
P. 126/127 – Stock-Asso@www.shutterstock.com
P. 128/129 – Ondrej Prosicky@www.shutterstock.com

P. 130/131/132/138 – Smileus@www.shutterstock.com