1,700 JOBS, $230 million of OUTPUT impact and $28 million of TAX IMPACT

RE-ENGAGEMENT AND GROWTH in the Aerospace Industry

2016 Annual Report

First and foremost, I extend our sincerest appreciation to Dr. Mike Heil for his steadfast commitment to the Ohio Aerospace Institute (OAI), and for his service to our country through the United States Air Force. In partnership with our executive team, Mike navigated OAI through a period of significant environmental turbulence that required a reinvigoration of OAI’s organizational culture and behavior. Mike retired from OAI on June 30, 2016, following nine years of dedicated service.

OAI continued to strengthen its performance in 2016, growing revenue by more than 20 percent. We expanded and won new research and collaborative technology development work with the Air Force Research Laboratory, much of which is carried out in partnership with our members. In addition, we performed award-winning research with the NASA Glenn Research Center, achieved major national recognition for our assistance to aerospace businesses – large and small – in growing their opportunity space, and supported the development of a strong aerospace workforce throughout Ohio and nationwide through our education programs. We grew into promising areas of innovation for aerospace applications, co-hosting the first annual Biomimicry Summit in Northeast Ohio.

With the support of the Cleveland Foundation, OAI turned to Cleveland State University’s Maxine Goodman Levin College of Urban Affairs to independently assess OAI’s economic impact on Ohio from 1998 to 2015. According to the study, OAI’s work resulted in more than 1,700 jobs, $230 million of output impact and $28 million of tax impact. These contributions to Ohio’s aerospace industry, universities and government laboratories cultivated from OAI’s programs and services. However, as our colleagues in the aerospace industry are well aware, resting on our past achievements is not an option if we are to remain fresh and relevant to our stakeholders.

As we look forward to 2017, we will aggressively act on the environmental changes we see both from the normal course of business, as well as from the feedback we solicited and received from many of you – our constituents. We have already begun an associate-driven process for strategy deployment to review and refresh our charter fundamentals, 3-5 year objectives, annual improvement priorities and associated SMART FY17 goals, aligned across all functions and associates. The overarching theme emerging from this effort is re-engagement and business growth, built on the solid tradition of our legacy research. Initiatives under the theme include

exploration of new revenue streams leveraging our people and assets, collaborative research, symposia, incubation, and business-to-business-to-federal-assets forums. Furthermore, based on a candid reflection and your feedback, we are reinvigorating the membership program as a means to deliver the value you came to expect from OAI since its inception.

We are excited that Ohio, economic development organizations and our largest stakeholders have asked us to formally re-engage in the leadership and messaging for the Ohio aerospace community. Our associates have identified the goal of achieving a ”Best Workplace” award as key to our culture and focus. Although we have great pride in our incredible facility, we’re even more proud of the talented people that make up OAI. We are thrilled with the involvement of you, our valued customers and colleagues, as we continue on our journey of re-engagement and growth. I hope that as you read this letter, you’ll reach out to me or our team to discuss your thoughts.

Sincerely, Jeffrey Rolf President and CEO

PRES IDENT’S LETTER

Re-engagement & Growth in the Aerospace Industry

In fiscal 2016, OAI’s Research, Innovation, Technology and Education (RITE) team increased revenue by more than 22 percent. New opportunities were garnered for OAI’s partners through research and technology breakthroughs, successful collaborations and business assistance services. The RITE team’s actions continue to play an integral role in putting OAI on a path to profitable growth. Leveraging a focused business pursuit strategy, OAI expanded sponsored research, secured new opportunities in next-generation aerospace technologies, provided our first-rate services to current and new customers, and transferred knowledge between aerospace and related industries.

RESEARCH

Our researchers advance knowledge and support the missions of our customers, enabling OAI to identify, assess and act on opportunities for innovation. During fiscal 2016, our experts contributed significantly to technical milestones for NASA, the Air Force and industry. OAI researchers drove advances in materials, structures, computational modeling, propulsion, instrumentation and controls, communications and aircraft safety. OAI won a five-year, $13-million contract to provide integration of fluid dynamics, aerodynamics, physics, mathematics and computer science for applications that include current and future aerospace systems and support the Air Force Research Laboratory at Wright Patterson Air Force Base in Dayton, Ohio.

In addition, OAI continued its research support to NASA Glenn Research Center (GRC) under the $20-million Advanced Research and Technology Support (ARTS) subcontract with Universities Space Research Association, and carried out more than 20 different tasks supporting GRC’s Research and Engineering Directorate during its third contract year. OAI also supported NASA GRC research through a subcontract with Vantage Partners, LLC. Increasingly, our researchers are taking on leadership roles within OAI’s public/private partnerships and being honored for their achievements.

Highlights during fiscal 2016 include:

• Darrell Gaydosh received the NASA Exceptional Public Achievement Medal for his contributions to NASA research in shape memory alloys. He was also recognized as a member of the Shape Memory Alloy Development team, which received a NASA Group Achievement Award.

• Dr. Mrityunjay (Jay) Singh, OAI’s chief scientist, was recognized as an honorary fellow of the European Ceramic Society, received the International Dresden Barkhausen Award and J.S. Minhas Memorial Award of the Indian Ceramic Society, and continued to serve as president of the American Ceramic Society.

• Dr. Eugene Shin initiated a new NASA Convergent Aeronautics Solutions Project in high voltage insulations for high voltage hybrid electric propulsion. He also led successful efforts to evaluate and validate organic materials for the Advanced Stirling Converter flight hardware development.

• Dr. Andrew Gyekenyesi, OAI’s associate chief scientist, served as program chair of the 40th International Conference on Advanced Ceramics & Composites. The prestigious conference, with more than 1,000 presentations, is hosted by the American Ceramic Society (ACerS) and Engineering Ceramics Division, where Dr. Gyekenyesi is currently chair-elect.

• Dr. Baochau Nguyen and Dr. Haiquan (Heidi) Guo made major contributions to the development of aerogel materials with NASA GRC, which will lead to broader commercialization through its licensing arrangements with industry. Two new patents were issued for aerogel-related joint inventions between NASA and Dr. Guo. In addition, Dr. Nguyen and NASA colleagues received an “R&D 100” award for their development of a polyimide aerogel-based antenna.

• In collaboration with NASA colleagues, Paula Heimann, Linda McCorkle and Andrew Ring were recognized with a NASA Group Achievement Award for Structural Carbon Nanotube Development.

• Dr. Sreeramesh Kalluri led international efforts to develop consensus standards on fatigue testing of materials.

• Dr. Paul Tsao made major contributions to NASA icing research, including representing NASA at the Ice Crystal Consortium and Engine Icing Working Group, supporting NASA-NRC Canada joint testing efforts, the 1st fundamental ice crystal test, and successfully conducting the world’s first freezing drizzle bimodal cloud simulation icing test.

• Joseph Flatico was recognized as part of the NASA Materials International Space Station Experiment team with an International Space Station Space Flight Awareness Award.

• Dr. Matthew Tufts was a member of an Air Force Office of Scientific Research “Star Team,” a designation only 10 percent of AFOSR-sponsored research efforts achieve.

• Dr. Tim Leger received the Chairman’s Award from AIAA for his support of the annual Dayton-Cincinnati Aerospace Sciences Symposium.

• Dr. George Williams led wear testing of the HERMeS precursor Hall thruster for the Asteroid Redirect Mission.

In addition, OAI’s research achievements included more than 55 NASA, conference or journal publications and/or presentations; 11 book chapters and/or journal editorships; five technical society special awards or international honors; 21 international committees, technical society leadership roles, or service as a conference/symposium/session chair or organizer; five Air Force or NASA Group Achievement or other special awards; two new awarded patents; and four new patent applications or disclosures.

INNOVATION AND TECHNOLOGY

During fiscal 2016, OAI engaged with its extensive network to address critical industry needs and create new business opportunities. OAI was recognized by the U.S. Department of Commerce with a President’s “E” Award for expanding business opportunities for Ohio aerospace businesses in exporting. In addition,

OAI continued its work under the Advanced Manufacturing Technology Consortium for Aerospace (AMTCA), a public-private partnership funded by the National Institute of Standards and Technology that aims to close critical technology gaps in order to accelerate the utilization of additive manufacturing (AM) for aerospace products. In collaboration with Airbus SAS, Boeing Company, Bombardier Inc., Embraer S.A. and Textron, Inc., OAI continued work on the formation of the Halon Alternatives for Aircraft Propulsion Systems (HAAPS) Consortium, which aims to identify a common, environmentally acceptable non-halon fire extinguishing solution for use in engines and auxiliary power unit fire zones.

OAI’s Versatile, Affordable Advanced Turbine Engine III contract with the Air Force Research Laboratory also experienced rapid growth this year. The Joint Collaboration Agreement under the Probabilistic Analysis Consortium for Aerospace (PACE) was signed, and the consortium is moving forward with its research agenda. OAI executed a new delivery order, under which Texas A&M will develop software to support the GUIde consortium. OAI submitted a proposal for Delivery Order 6, under which both additively repaired/manufactured fan blades and high-temperature instrumentation will be tested in a Williams F112 engine. As administrator of the Distributed Engine Controls Working Group (DECWG®) consortium, OAI established new subcontracts with BAE Systems, DfR Solutions, Honeywell International, Tennessee State University and UTAS through the VAATE III contract for a $4-million project. The DECWG® consortium is conducting pre-competitive research and development on distributed control architectures for gas turbine engines, focusing on cost-effective solutions for the high-temperature engine environment. Additionally, OAI kicked off a $4.9-million, 48-month Digital Thread/Digital Twin program in November 2015 for advanced research and development of DT/DTw applications for next-generation and legacy aerospace systems and engines.

Under the AFRL Engineered Surfaces, Materials and Coatings for Drag Reduction Program, OAI solicited white papers through a Technical Challenge. Ninety-five responses were received worldwide, from which only 10 winners were selected and three subcontracts awarded. Phase I work is currently underway. Now in its 16th year, OAI’s Aeroacoustics Research Consortium developed new outreach materials and strategies to invite acoustics researchers to propose new projects. AARC brings together Honeywell, NASA GRC, Pratt & Whitney and Rolls-Royce to sponsor cutting-edge efforts in jet engine noise prediction and mitigation.

Partnering with JobsOhio and Ohio’s Development Services Agency, OAI coordinated a delegation including NASA, University of Cincinnati Research Institute, University of Dayton Research Institute, MakerGear, Parker Aerospace and the United States Commercial Service to attend the Airtec International Supply Fair in Munich, Germany. The Small Business Administration’s (SBA) Federal and State Technology Partnership program awarded OAI a 2017 grant to expand its services to small businesses servicing the aerospace and defense sectors. Special emphasis will be given to companies owned by women, minorities and veterans. OAI also engaged with small businesses through its collaboration with Jumpstart’s Entrepreneurial Network. OAI hosted seminars and webinars for small businesses on SBIR/STTR proposal preparation, and played a key role in the NASA agency-wide Women Owned Small Business Conference hosted by NASA GRC by leading a panel discussion and SBIR workshop. OAI also supported the new Ohio Federal Research Network by hosting a workshop for the Technology Transfer and Workforce Center of Excellence partners, Lorain County Community College and Cleveland State University, where best practices were shared.

In addition, OAI participated in the 2016 Propulsion Sustainability and Safety conference in Texas, allowing us to connect with Air Force and industry customers in a new setting. OAI was joined by Safran, Boeing, NASA and Aviation Week for

a Technology Engagement and Supply Chain Symposium, and participated in NASA GRC’s Technology Days event. OAI assisted members in gaining an edge in winning government contracts through its October workshop, offered in partnership with Reed Integration (itself an OAI small-business member). OAI explored new partnership opportunities for its members with the Department of Defense by attending the U.S. Army Tank Automotive Research, Development and Engineering Center Industry Days in April and entering into a Partnership Intermediary Agreement with the Naval Surface Warfare Center, Crane Division, in May.

EDUCATION AND WORKFORCE PREPAREDNESS

OAI vigorously supports workforce preparedness within the aerospace and aviation sectors. It provides career development for professionals, supports students and faculty in higher education and through aerospace-focused K-12 programs, and advocates for aerospace and aviation focused STEM workforce development initiatives. During fiscal 2016, OAI made significant education program contributions to NASA, AFRL and other partners. NASA’s learning management system, System for Administration, Training, and Educational Resources for NASA (SATERN), provides web-based access to training and career development resources. OAI played a key role in the effective, efficient delivery of safety and mission assurance course and curriculum content, as well as shaping NASA’s next-generation system. The innovative AFRL “Senior Capstone” project, devised by OAI, received recognition in “Stars and Stripes,” the international news publication of the U.S. Armed Forces, for three student projects transforming a commercially available wheelchair into a mobile sentry unit.

At a State level, OAI continued to co-chair the Workforce and Education Committee of the Ohio Aerospace and Aviation Council and collaborated with the Workforce and Education Working Group of the Ohio Aerospace and Aviation Technology Committee. OAI hosted six Distinguished Lectures, many in partnership with the AIAA’s Northern Ohio Section and two “Brown Bag” symposia. In partnership with NASA GRC and the Cleveland Water Alliance, OAI hosted a presentation by Dr. Jay Famiglietti from UC – Irvine/NASA JPL that attracted more than 80 attendees.

OAI serves as home of the Ohio Space Grant Consortium (OSGC), whose mission is to advance the nation’s capabilities in science, technology, engineering and math. The OSGC awarded 59 undergraduate scholarships and five graduate fellowships in 2015-2016, and has impacted more than 1,260 students to date. Plus, under OAI’s OSGC CC-STARS (Community College – STEM Training and Retention of Students) program, 20 scholarships and four internships at NASA GRC were awarded, and funds were provided for Bridge Programs to Cuyahoga Community College, Cleveland State University and the University of Toledo. Two statewide Unmanned Aircraft Systems (UAS) Workshops were also held. OAI hosted 11 summer faculty at NASA GRC, seven Multidisciplinary Aeronautics Research Team Initiative (MARTI) students and seven Space Academy students through the Glenn Academy, under our contract with Paragon TEC, Inc.

Partnering with the Toledo Regional Chamber of Commerce, Lourdes University, University of Toledo, Bowling Green State University and BioOhio, OAI sponsored a Talent Attraction Symposium: Building a Regional Strategy to Compete that included a panel discussion on implementing a successful internship program, and an afternoon session where students connected with companies seeking new talent. In addition, OAI supported the 15th Buckeye Regional FIRST Robotics Competition by serving as fiscal agent, involving more than 1,500 high school students in an intensive, hands-on design and build experience. The competition has demonstrated impact on scholastic achievement and STEM career choice.

RESEARCH + INNOVATION + TECHNOLOGY + EDUCATION

ASSETS

CURRENT ASSETS Cash and investments $ 744,503 Funds held for others 38,858 Net receivables and deposits 2,193,970 Total current assets 2,977,331 NET PROPERTY AND EQUIPMENT - AT COST 5,716,674 $ 8,694,005

LIABILITIES AND NET ASSETS

CURRENT LIABILITIES Accounts payable and accrued expenses $ 1,733,605 Funds held for others 38,858 Deferred revenue 1,139,592 Total current liabilities 2,912,055 NET ASSETS Unrestricted $ 915,752 Temporarily restricted 4,866,198 Total net assets 5,781,950 $ 8,694,005

STATEMENT OF FINANCIAL POSITION (AUDITED)REVENUE

OPERATING REVENUES (AUDITED) OPERATING EXPENSES (AUDITED)

After several years of decline, OAI’s gross revenue increased during FY16 by more than 20% over FY15 figures. OAI’s earned federal contract revenue drove FY16 growth as we significantly expanded service offerings to our federal customers. Since our inception in 1990, OAI has maintained an average annual growth rate of more than 10%.

0

5

10

15

20

25

YEAR

$ M

ILLI

ONS

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 14 161513

FEDERALPRIVATESTATE

$6.5NASA

$5.7AFRL

$0.3Other Federal$0.6Membership/Consortia

$0.2Non-Federal

$0.3Office Services

$0.2Other

$0.1Supplies/Equip/Maint

$0.5Student Support

$0.3Travel/Meetings

$0.3Building Operations

$8.1Salary/Fringe

$3.5Research Subcontracts

$0.9Professional/Admin

$6.5NASA

$5.7AFRL

$0.3Other Federal$0.6Membership/Consortia

$0.2Non-Federal

$0.3Office Services

$0.2Other

$0.1Supplies/Equip/Maint

$0.5Student Support

$0.3Travel/Meetings

$0.3Building Operations

$8.1Salary/Fringe

$3.5Research Subcontracts

$0.9Professional/Admin

$13.714 Total Revenues $13.742 Total Expenses

dollars in millions dollars in millions

YEAR ENDED JUNE 30, 2016Financial Report

FY2016 MEMBERSFY2016 BOARD OF TRUSTEES

INDUSTRY SPONSORS Airbus GroupAmerica MakesBattelle Memorial InstituteThe Boeing CompanyGE AviationHoneywell International, Inc.Lockheed Martin Space SystemsMagellan AerospaceMaterion CorporationMeggitt Aircraft Braking SystemsParker Hannifin CorporationPratt & WhitneyRolls-Royce/Liberty WorksThe Timken CompanyUTC Aerospace Systems

SMALL BUSINESS NETWORKAlphaport, Inc.Arisdyne Systems, Inc.BioOhioCatacel CorporationCleveland Electric LabsEagle AeronauticsFORCAM, Inc.McDonald HopkinsNastec, Inc.Noble TekPaulo Products CompanyPDH Applied Physics, LLCProjects Unlimited, Inc.Reed Integration, Inc.Rimeco Products, Inc.SchnellerSierra Lobo, Inc.Spectral Energies, LLCSporian Microsystems, Inc.SSOE GroupStar Precision TechnologiesStride Tool Inc.Techmetals, Inc.USM Precision ProductsVantage Partners, LLCXact SpecZin Technologies, Inc.

UNIVERSITY MEMBERSAir Force Institute of TechnologyBaldwin Wallace UniversityCase Western Reserve UniversityCleveland State UniversityCuyahoga Community CollegeKent State UniversityOhio UniversityThe Ohio State UniversityThe University of AkronUniversity of CincinnatiUniversity of DaytonThe University of ToledoWright State University

FEDERAL LABORATORY NASA Glenn Research Center

OAI BOARD CHAIRMAN

Salvatore J. Miraglia, Jr.Independent Trustee

Eric J. Amis, Ph.D.Interim Dean, College of EngineeringDean, Polymer Science & Polymer EngineeringThe University of Akron

Robert Bianco, Ph.D.FASM – Manager – Materials R&D, Central EngineeringUTC Aerospace Systems

Donald J. CampbellIndependent Trustee

Gary Cates*Senior Vice Chancellor, Innovation & Enterprise DevelopmentOhio Department of Higher Education

Lee Ann CochranVice President and ManagerBattelle Memorial Institute

Wayne V. Denny, Jr.General Manager of Aerospace New Product Development & ManufacturingThe Timken Company

Neil R. GarriganExecutive Manager – Advanced Technology Systems, Programs & StrategyGE Aviation

Awatef HamedDirector, Center for Intelligent PropulsionProfessor, School of Aerospace SystemsCollege of Engineering & Applied ScienceUniversity of Cincinnati

Michael L. HeilPresident and CEOOhio Aerospace Institute

Paul Jackson*Senior Technology Commercialization ManagerOffice of Small Business & EntrepreneurshipOhio Development Services Agency

Dennis Irwin, Ph.D., P.E.Dean and Moss Professor of Engineering Education, Thomas Professor of EngineeringRuss College of Engineering & TechnologyOhio University

John E. LelandDirector, Research Institute and Vice President for ResearchThe University of Dayton

Lester McFawnDirectorWright Brothers Institute

Nagi G. NaganathanProfessor and DeanThe University of Toledo

Raman Ras, Ph.D.Director of Engineering and TechnologyParker Hannifin CorporationAerospace GroupGas Turbine Fuel Systems Division

Heidi R. RiesDean for ResearchAir Force Institute of Technology

Director*NASA Glenn Research Center

* Liaison/Non-voting Trustee

CLEVELAND22800 Cedar Point RoadCleveland, OH 44142440.962.3000

DAYTONWright Point 2 – Suite 3085100 Springfield PikeDayton, OH 45431937.424.3483W W W . O A I . O R G

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EXECUTIVE STAFF

Jeffrey Rolf President and CEO

Ann O. Heyward Executive Vice President

Tony H. Smith, Sr. Vice President, Finance and Operations

2016