HAVELSAN

HAVELSAN started growing at the beginning of the new millennium and continued to do so in 2009. The company achieved its strategic objectives by having a backlog totalling 1 billion US dollars. Despite the global financial crisis and changing dynamics in recent years, this growth was realized with correct strategies, proactive measures, synergy created within the company and the strong relationship established with our stakeholders.

Over the last three years, in the lifetime of the current executive committee, we have gone through an exceptional period for HAVELSAN where we had to manage both great opportunities and great change. I am proud to say that, over these three years, our executive committee has led this great change. We, the executive committee, acted upon the knowledge that HAVELSAN is of critical importance in adding value to the defence and IT sectors. However, awareness is achieved not through preserving the company's current position, but through taking proactive measures, closely following global technological trends as well as the dynamics in our own country, and creating a competitive HAVELSAN taking a leading role in technology and industry.

Today, doing more business with fewer resources is an inescapable reality for all companies. Companies have to adapt to a smarter world to be able to meet this challenge and utilise the means offered by technology for both civil sectors and defence industries. This situation creates huge opportunities for HAVELSAN. In such an environment, HAVELSAN is rapidly moving forward to offer both comprehensive and greater value added services. However the position we aim to reach and the mission we have taken on require HAVELSAN to become a more competitive, more dynamic company and to be in line with the company vision with all its processes and employees.

We, the executive committee, initiated and in most part completed a process of change to create new HAVELSAN taking bolder steps on the way to its vision by making the most of opportunities.

To realize the growth target we have set, in line with issues expressed above, in HAVELSAN;

We took on board the strategy of expanding into foreign markets, resulting in an increase in our foreign sales to 57 Million US Dollars in 2009. The Undersecretariat for Defence Industries played an important role in this success through its Industrial Participation/Offset strategy giving a vital push for HAVELSAN to fulfil its targets and to increase its technological and managerial competences.
We formed a business ecosystem and in line with a strategy of cooperation rather than competition, we formed new collaborations with companies of the Turkish Armed Forces Foundation (TAFF), and then with foreign and domestic global and local companies.
We have increased the value created for shareholders and customers, thus bringing about a dramatic leap in financial growth and backlog despite the financial crisis. In 2009, HAVELSAN increased its sales to 190.1 Million TL, its net profit to 29.1 Million TL, its foreign sales to 57 Million US Dollars, and assets to 394.4 Million TL. Despite the crisis, and without lowering the tempo, we also went ahead with the necessary investments to ensure the future growth of the company.

In line with our strategic aim, "Strong Financial Structure and Growth", other major developments in 2009 that demonstrate our performance can be listed as follows:

We strengthened our relations with our customers and stakeholders, and signed new project contracts, and national and international collaboration agreements. Some example of these are;

The contract for the Electronic Warfare Training System (EWTS) was signed with the Defence Acquisition Program Administration for the Air Force of Republic of Korea.
Project contracts were signed with the Undersecretariat for Defence Industries for T-38 Operational Training Aircraft Simulators (ARISİM), Basic Training Aircraft Simulators (TESİM), Cougar Helicopter Simulator (HELSİM-COUGAR), F-16 Simulator and the MİLGEM Combat Management System.
A contract was signed with ATLAS GmbH on the New Type Submarine Project, for the maintenance and development of command control systems and software of submarines, during their life span.
A teaming agreement was signed with RAYTHEON for cooperation in marketing the GENESIS Ship Integrated Combat Management System for G class frigates.
A Memorandum of Understanding (MoU) was signed with

KAI, to seek to utilise industrial, technological and commercial opportunities in the aircraft simulator section of the market.
FINMECCANICA, to pursue industrial, technological and commercial opportunities in Command and Control Systems, Naval Systems, Air Defence, Electronic Warfare and Homeland Security Systems in the Turkish, Italian and other markets.
RHEINMETALL for cooperation in submarine control simulators and a submarine command team training simulator.

A Strategic Cooperation Protocol was signed with ROKETSAN for joint work on defence projects.

As an indication of its place within the sector and its success in becoming a brand HAVELSAN achieved the following:

Was ranked 258th in the list of the 500 largest industrial companies in Turkey in 2008, published by the Istanbul Chamber of Industry.
Was ranked 31st out of the top 500 Information Communication Technology (ICT) Companies in 2008 as chosen by İNTERPRO and was also ranked 15th in the "50 Best Performing Companies in the Last 10 years".
Was listed in the top 12 largest simulation companies in the world in the "A Global Strategic Business Report 03/08" published in 2008 by "Global Industry Analysts, Inc.", one of the leading research companies in the world in the commercial and military simulation sector, based in California, USA.
On the 4th of November 2009, HAVELSAN succeeded once again in entering the "Fast 50 List" compiled by DELOITTE to rank the fastest growing technology companies in Turkey, and in 2009 was placed in the newly added "Big Stars" category.

HAVELSAN not only succeeded in financial growth but also paid attention to its own company structure, carrying out a restructuring of the macro and micro organization of the company in order to increase the value it creates for its stakeholders. As a result HAVELSAN carries out its activities through a strategy focused on organisational structure by reinforcing the structure of its corporate governance, and increasing transparency, equality, integrity, delegation of authority, accountability and the effectiveness of the internal control system. In this period, organizational changes were made to support and accelerate this change and our R & D Centres became Ministry of Industry and Trade certified. As a result of the aforementioned, we increased our profitability by decreasing the production costs of our products and our operating costs.

In 2009;

The combat management systems capabilities HAVELSAN gained with its Command Control - Communications - Computers - Intelligence - Surveillance and Reconnaissance Systems (C4ISR) projects; and its leadership in the field of "combat management system software and integration" in all underwater/surface platforms was certified with the Undersecretariat of Defence Industries' "2009-2016 Defence Industry Sectoral Strategy Document".
In line with one of its fundamental strategic aims, entitled "growth and getting stronger", HAVELSAN continued to make use of its existing products and capabilities with innovative approaches allocating a significant amount of resources for R & D investments and innovations to develop new/derivative products while obtaining patents and certificates for its research in
R & D Centres established in the framework of the Law on Supporting Research and Development Activities, Law no 5746.
The "2010-14 Strategic Company Plan" and "Business Plans of Strategic Business Units" were drawn up, the group performances of Strategic Business Units were evaluated using the Balanced Scorecard method, and based upon this the staff from each directorate who were to receive performance bonuses were selected.
R & D investments were concentrated on areas that will develop technologies and new systems to meet the future needs of the country's defence and security institutions with R & D also adopting a product line approach instead of a project based approach.
With the R & D projects, especially for the Turkish Armed Forces;

We begun to develop real-time, integrated, interoperable network supported national command control systems, and new generation combat management systems required by underwater/surface platforms.
And we focused on developing real-time, integrated operation simulator and training, simulation, test and evaluation systems to provide virtual reality.

After the transition to ISO 9001:2008 standards, ISO 9001 and AS 9100 Quality Management System certificates were renewed, BOEING gave BQMS (Boeing Quality Management System) Approval registering the compatibility of the HAVELSAN Corporate Management System with the BOEING Management System, and HAVELSAN was also accredited with the Project Management and Industry Security Compatibility Certificates by the Undersecretariat of the Defence Industry. The ISO 14001 Environment Management System was set up, developed and extended. Foundations were laid for the ISO 18001 Occupational Health and Safety Management System and works was carried out to improve the efficiency of the system.
One of the major investment areas in line with strategic targets is the field of strategic human resources management. Throughout the company role, task and competency definitions were re-determined and technical domain of expertise were redefined. Technical expertises were organized in order to combine technologic expertise and field expertise to meet technological developments and related customer needs. Functional expertises were reorganized in order to assure that new corporate governance methodologies could be applied. Career management system projects were carried out to provide 360-degree performance management, competencies compatible with strategic targets, and business performance management.
We invested in information technologies to provide information management within the company, to strengthen institutional memory, increase efficiency, to take fast and correct decisions and to provide management support. Within the framework of Corporate Governance Automation, the number of production and management processes in automation was increased.
The Document Management System went into operation with the system being enhanced though an e-signature application.
"Ethical codes", "Ethical Structuring" and "Ethical Training", were all brought in the previous year bring about a further strengthening of corporate identity.

In 2010 HAVELSAN will continue to develop reliable and original systems to meet the needs of existing and potential customers by keeping abreast of domestic and international developments and by strengthening its relations with its shareholders. In the up and coming future, with the same passion and synergy, we are absolutely certain we will have a successful working period.

We would like to express our sincere thanks to our investors, esteemed customers, the executive committee members who form the biggest strategic power of the company, our dear employees and all our shareholders who have given us their support through their collaboration and who have made a vital contribution to HAVELSAN becoming one of the leading companies in the Turkish defence and IT sectors.

Best regards,

Hayrettin UZUN
Chairman of the Board