The Market for Anti-Ship Missiles

Product Code #F658 A Special Focused Market Segment Analysis by:

Missile Forecast

2007 August 2007

Analysis 3 The Market for Anti-Ship Missiles

Table of Contents Table of Contents .....................................................................................................................................................1 Executive Summary .................................................................................................................................................2

Introduction................................................................................................................................................................3

Trends..........................................................................................................................................................................5

Competitive Environment .......................................................................................................................................6

Market Statistics .....................................................................................................................................................12

Table 1 - The Market for Anti-Ship Missiles Unit Production by Headquarters/Company/Program 2007 - 2016 ................................................17

Table 2 - The Market for Anti-Ship Missiles Value Statistics by Headquarters/Company/Program 2007 - 2016 .................................................21

Figure 1 - The Market for Anti-Ship Missiles Unit Production 2007-2016 (Bar Graph) .................................................................................25

Figure 2 - The Market for Anti-Ship Missiles Value of Production 2007-2016 (Bar Graph)...........................................................................25

Table 3 - The Market for Anti-Ship Missiles Unit Production % Market Share by Headquarters/Company 2007 - 2016 ....................................26

Table 4 - The Market for Anti-Ship Missiles Value Statistics % Market Share by Headquarters/Company 2007 - 2016 .....................................28

Figure 3 - The Market for Anti-Ship Missiles Unit Production % Market Share by Headquarters 2007-2016 (Pie Chart) .............................30

Figure 4 - The Market for Anti-Ship Missiles Value Statistics % Market Share by Headquarters 2007-2016 (Pie Chart)..............................30

Conclusion ...............................................................................................................................................................31

* * *

Product Code F658 The Market for Anti-Ship Missiles

2007

PROGRAMS The following reports are included in this section: (Note: a single report may cover several programs.)

AGM/RGM/UGM-84 Harpoon Chinese Anti-Ship Missiles Exocet Gabriel Hsiung Feng I/II MILAS OTOMAT Penguin/AGM-119 RBS15 RUR-5A ASROC/Vertical Launch ASROC Russian Anti-Ship Missiles Sea Killer/Marte Mk 1/Marte Mk 2 Sea Skua South African Anti-Ship Missile Type 80 (ASM-1/ASM-2)/Type 88 SSM-1

Product Code F658 The Market for Anti-Ship Missiles

2007

Introduction The anti-ship missile has helped changed the nature of naval warfare. However, the foundation for this shift was laid by the desperate efforts of the Japanese military to stave off impending defeat during World War II.

At the beginning of the Second World War, it was a lucky hit if a single bomb or torpedo was able to sink a major surface combatant, especially an aircraft carrier.

Naval warships proved quite resilient. Adding armored decks to aircraft carriers further improved their durability.

It took two large Japanese aerial attacks on the USS Yorktown during the Battle of Midway to finally put this aircraft carrier out of action. Although severely damaged and set ablaze by these strikes on June 4, 1942, the Yorktown did not sink until June 7.

As the war turned against Japan, its leaders became increasingly desperate. Japan could not keep up with pilot losses. The Great Marianas Turkey Shoot, which occurred during the Battle of the Philippine Sea (June 19-20, 1944), resulted in the loss of 375 Japanese aircraft compared with U.S. losses of 123. Many of the U.S. pilots were rescued and able to return to duty, whereas the majority of the Japanese aircrews were lost. This fighting broke the back of Japans naval air service. Thereafter, the quantity and quality of Japans pilot and flight crews would decline.

In the aftermath of this disaster, the Japanese military leadership realized that desperate times called for desperate measures and turned to a new weapon, the Kamikaze, for salvation.

Imperial Japanese Navy Vice Admiral Takashiro Ohnishi, commander of the First Air Fleet in the Philippines, helped conceive the Kamikazes (but was not the first to order suicide operations). He noted that an aircraft crashing into a carrier caused more damage than 10 planes strafing it. Therefore, he formed suicide units and ordered his pilots to crash their aircraft (loaded with high explosives) into enemy naval vessels, to inflict the maximum amount of damage on American ships with the minimal forces available (the First Air Fleet had 40 aircraft in the Philippines).

This concept was quickly proved on October 25, 1944. On that day, the aircraft carrier USS St. Lo was attacked by five Zero fighters off the Philippine coast. Although only one Kamikaze actually hit the ship, the resulting fire caused the ships bomb magazine to explode, sinking the carrier. The success of attacks like the one

on the St. Lo prompted the Japanese to rapidly expand the program.

Purpose-built Kamikaze aircraft soon appeared, including the Yokosuka MXY7 Ohka. This rocket- powered bomb has been called an anti-ship missile with a human pilot for a guidance system. The first was used in March 1945.

By the end of the Second World War, Japans naval air service had sent 2,525 Kamikaze pilots to their death, with the Army and Air Force adding another 1,387 (numerous other Japanese soldiers and sailors died conducting suicide missions that had little influence on the course of the war).

Japanese records claim Kamikazes sank 81 ships and damaged 195. The U.S. military acknowledges the loss of 34 ships, the damaging of another 368 (including 23 aircraft carriers, 5 battleships, 9 cruisers and 23 destroyers), and the death of 4,900 sailors and the wounding of more than 4,800 servicemen as a result of Kamikaze attacks.

The uncoordinated nature of Japanese Kamikaze attacks and the hording of these resources for the defense of the home islands degraded their effectiveness. Of the Kamikazes sent against the U.S. fleet in Leyte Gulf, about one-quarter scored hits or a damaging near miss.

Even with the use of radar, heavy combat air patrols and massive increases in the number of anti-aircraft guns on U.S. warships, a distressing number of Kamikazes (about 10-15 percent) were able to successfully crash their aircraft into U.S. surface ships in the last days of the war.

Todays anti-ship missile is the Wests emulation of the Kamikaze concept but without the sacrifice in human lives. Fighters and naval surface combatants, even small fast attack craft, can salvo anti-ship missiles at warships with a good chance of scoring a direct hit.

These missiles give relatively small platforms the lethal punch needed to sink almost any foe and the ability to overwhelm local defenses that otherwise would have stopped a more conventional surface attack.

No longer does a naval force need to launch massive airborne attacks to disable or destroy an opponent. Even small helicopters armed with anti-ship missiles can inflict considerable damage on a major surface Continued

Missile Forecast

2007 July 2007

Penguin/AGM-119

Orientation Description. Helicopter-launched, anti-ship missile system.

Sponsor. Penguin was originally sponsored by the Royal Norwegian Navy in conjunction with the Norwegian Defense Research Establishment (NDRE) and Norwegian Naval Logistics Command (NNLC).

Status. Mk 1 entered production in 1972, followed by the Mk 2 in 1980. Mk 2 Mod 7 production is contin-uing, as is fabrication of the air-launched Penguin Mk 3 (AGM-119). Norway has commenced development of a new-generation anti-ship missile, the Nytt Sjomalsmissil (NSM).

Total Produced. As of the end of 2006, approx-imately 264 Penguin Mk 1, 668 Penguin Mk 2

Mod 3/5, 409 Penguin Mk 2 Mod 7, 330 Penguin Mk 3, and 11 NSM missiles of all types (including RDT&E units) had been completed or were in production.

Application. Anti-ship missile for use on several classes of frigates and patrol boats. Penguin has been reconfigured for air and land applications in fixed and semi-mobile (truck-mounted) units, with orientation primarily toward coastal defense.

Price Range. The last known information lists the Mk 2 Mod 7 version of the Penguin for the U.S. Navy at $733,046 in FY90. The missiles price has since fallen to about $481,000 apiece. The new NSM could cost in the area of $800,000 apiece.

Contractors

Prime Kongsberg Gruppen ASA http://www.kongsberg.com, Kirkegardsveien 45, PO Box 1003, Kongsberg, 3601

Norway, Tel: + 47 32 28 82 00, Fax: + 47 32 28 86 20, Email: office.defence-aerospace@kongsberg.com, Prime

Subcontractor Microturbo SA http://www.microturbo/fr, 8, Chemin du Pont de Rup, B.P. 2089, Toulouse, 31019

France, Tel: + 33 5 61 37 55 00, Fax: + 33 5 61 70 74 45 (TRI 40 Turbojet)

Nammo Raufoss AS http://www.nammo.com, PO Box 162, Raufoss, 2831 Norway, Tel: + 47 61 15 36 50, Fax: + 47 61 15 36 60, Email: info@nammo.com (Solid Rocket Motor)

Outlook In production Norway will arm its new frigates with the NSM An air-launched version of NSM will be offered to

equipment combat fighters

Kongsberg hopes to develop an NSM Block II version Penguin remains in service and production 05

10

15

20

25

30

35

40

45

Uni

ts

Unit Production Forecast 2007-2016

Units 34 42 31 36 39 40 40 40 40 40

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Page 2 Missile Forecast

Penguin/AGM-119

July 2007

TDW, Gesellschaft fr verteidigungstechnische Wirksysteme mbH

http://www.eads.net, PO Box 1340, Schrobenhausen, 86523 Germany, Tel: + 49 82 52 990, Fax: + 49 82 52 99 6120 (Warhead)

Comprehensive information on Contractors can be found in Forecast Internationals International Contractors series. For a detailed description, go to www.forecastinternational.com (see Products & Samples/Governments & Industries) or call + 1 (203) 426-0800.

Contractors are invited to submit updated information to Editor, International Contractors, Forecast International, 22 Commerce Road, Newtown, CT 06470, USA; rich.pettibone@forecast1.com

Technical Data Metric Metric Metric U.S. U.S. U.S. Mk 3 Mk 2 Mod 7 Mk 2 Mk 3 Mk 2 Mod 7 Mk 2 Dimensions Length overall 318 cm 300 cm 300 cm 10.43 ft 9.84 ft 9.84 ft Diameter of body 28 cm 28 cm 28 cm 11.02 in 11.02 in 11.02 in Wingspan 100 cm 140 cm 142 cm 3.28 ft 4.59 ft 4.66 ft Weight at launch 347 kg 385 kg 340 kg 770 lb 847 lb 748 lb Performance Speed Mach 0.8 Mach 0.8 Mach 0.8 Mach 0.8 Mach 0.8 Mach 0.8 Range 7-50 km 30+ km 2.5-30 km 3.78-27 nm 16.19+ nm 1.35-16.19 nm Propulsion. Two-stage, solid-propellant rocket motor produced by A/S Raufoss Ammunisjons Fabrikker. This company is now part of Nammo (Nordic Ammunition Company), Propulsion Division. The Mk 3/AGM-119 uses a single-stage solid-fuel sustainer. Atlantic Research Corporation (now Aerojet) has a license to manufacture the Mk 3s propulsion system.

Control & Guidance. Penguin uses inertial en route guidance, with passive infrared homing during terminal flight phase, giving it fire-and-forget capability. The infrared homing system tracks the target and generates signals that direct the missile to the target. Canard fins stabilize Penguin in flight. BAE Systems supplies the canard actuation units. The aerodynamic control surfaces are hydraulically actuated. Kongsberg is said to be working on new seeker technology that is applicable to the Penguin missile.

Launcher Mode. The Mk 1/2 Penguin is fired from a launcher that is built into a container weighing 500 kilograms (1,100 lb), including the missile. Typical shipboard installations consist of four or six deck-mounted launchers. The launch system has been

reconfigured for use in fixed and mobile (truck-mounted) applications. Norway is considering the development of a coastal defense version of its NSM. The mobile NSM system would be known as the Land-based Anti-ship Missile Battery (LAMB).

The airborne rail launcher for the Mk 3 was developed by Nobel Industrier Bofors Ordnance (now Saab Bofors Dynamics). The Penguin Mk 3 can be fired from any F-16A/B aircraft. Software modifications will make the Penguin compatible with the Block 30 F-16C/Ds and with the Block 40 and 50 aircraft in the future. Boeing and de Havilland are offering the Dash 8 with the Penguin as an armament option.

Warhead. The Penguin has a 120-kilogram (264-lb) semi-armor-piercing warhead, designated Mk 19, with impact fuze. The warheads for the Australian buy were manufactured under license from Kongsberg by ADI Ltd, Sydney, Australia. Australian Defence Industries is the former state-owned defense supplier to the Australian defense forces. Work on the Penguins warhead will take place at its facility at Mulwala, New South Wales.

Variants/Upgrades In addition to the original, the Penguin missile family includes the Improved Penguin Mk 2 shipborne system; the Penguin Mk 2 Mod 7, which is a development of the Penguin Mk 3, for helicopters; and the Penguin Mk 3, which will be deployed by fixed-wing fighter aircraft.

The NSM (Penguin Mk 4) is in the preliminary stages of development, with studies continuing.

The Norwegian government signed a contract with Kongsberg Gruppen for the service life extension of its Penguin missile inventory. The contract was worth

Missile Forecast Page 3

Penguin/AGM-119

2007 July 2007

NOK123 million ($17.4 million) and focused on the Penguin Mk 2 Mod 5 missiles used on Norways fast patrol craft. The missiles are expected to remain in service until 2015.

For additional information, please see the pertinent entries in the Program Review section.

Penguin Source: Kongsberg

Program Review Background. Development of the Penguin anti-ship missile was begun in the early 1960s by A/S Kongsberg Vapenfabrikk, in conjunction with the Norwegian Defense Research Establishment. It was in support of a Norwegian Navy requirement for small, fast patrol boats with a powerful, striking capability against much larger ships. Aid from the United States and the Federal Republic of Germany was provided to this program in the form of bilateral agreements. Technical and test support facilities were provided by the U.S. Navy.

Penguin was originally designed for use on small vessels, but has since been selected for use on larger ships such as the five Oslo class frigates of the Royal Norwegian Navy. The missile is mounted on a launcher built into a container that also protects the missile and serves as packaging during transit. The entire unit, including missile, weighs approximately 500 kilograms

(1,100 lb). The box-launchers are deck-mounted and are ready for immediate firing. Automatic testing is performed from the missile control panel in the operations room.

Missile Models. Three versions of the Penguin are in production, and another is believed to be under develop-ment by Kongsberg. The Penguin missile for shipboard use is designated Mk 1 or Mk 2, with the latter having been produced in several subvariants or mods. It is of fairly conventional design, with four wings to the rear and four movable canard control surfaces. Propulsion is provided by a two-stage solid rocket the first stage is the boost motor, and the second is the sustainer. The design criteria for Penguin stated that the missile had to be able to inflict serious, disabling damage to a destroyer-size ship. The following provides a description of the various Penguin versions.

Page 4 Missile Forecast

Penguin/AGM-119

July 2007

Improved Penguin Mk 2. The Mk 2 Mod 3 version of Penguin was developed in a joint effort with Sweden and is fitted with an enhanced-performance rocket motor. This longer range version allows for indirect attack profiles for enhanced launch platform maneuvering and survivability. The Mk 2 Mod 3 Penguin equips 14 Hauk class patrol boats of the Norwegian Navy, eight Kartal class fast attack boats of the Turkish Navy, and 16 Hugen class fast attack boats of Swedens Navy. Greece has deployed the Penguin on six La Combattante class fast attack boats. Australia has expressed interest in this version to complement the Harpoon missiles purchased from the United States.

Penguin Mk 2 Mod 7. The Mk 2 Mod 7 Penguin incorporates an infrared seeker able to discriminate decoys from the real thing and then deliver a 112-kilogram (265-lb) warhead at Mach 0.8. This version is being procured by the U.S. Navy for the current Block I upgrade of the SH-60B Anti-Submarine Warfare (ASW) helicopter. The Mk 2 Mod 7 is a development of the Penguin Mk 3 fixed-wing aircraft capable missile and not a derivative of the shipborne Mk 2. The Penguin Mk 2 Mod 7 has been designated AGM-119B by the U.S. Navy.

Penguin Mk 3. Kongsberg continues to develop the Penguin for various airborne applications, for which only minor modifications are reported necessary. The Penguin can be deployed on an F-16 using an adapter for its pylon and the incorporation of various software modifications. A modified Penguin, designated Mk 3 without the booster motor and with a smaller wingspan, is to be used by the Norwegian Air Force F-16s. Norway ordered 139 F-16s for deliveries through 1987, including about 30 two-seat trainer versions.

The Mk 3 incorporates a new digital control system, which enables it to be compatible with the F-16s existing control system. The Penguin has a new single-chamber solid-propellant motor and newly designed, smaller wings that obviate the need for a wing-folding mechanism that otherwise would be necessary for the missile to be carried at the F-16 under-wing station.

The Penguin is roll-controlled and has canard control surfaces that are free-floating during the first 0.3 seconds of its ejection launch from the F-16. The missile retains the same 119.86-kilogram (264-lb) bullpup warhead but has a modified Harpoon fuze to make it more effective against ships. It has a range of 40.23 kilometers (25 miles) and an initial launch speed of Mach 0.5. The seeker is a passive infrared design that uses a one-shot argon cooler and incorporates a spectral discrimination capability to enable the seeker to differentiate between targets and various decoys. The

high-resolution seeker is designed to allow the missile to select a well-defined aiming point on the target. For en route guidance, the Mk 3 relies on the same semi-strapdown inertial platform as the Mk 2 Mod 7. However, a radar altimeter has replaced the earlier laser altimeter to provide improved altitude control at acceptable costs.

Land-Based Version Proposed Norway has proposed adapting the Mk 3 to a mobile, land-based launcher for coastal defense. The system would consist of a six-missile launcher mounted on a truck or other vehicle. The missile would have to be modified with folding wings and an external booster. In addition to Norway, Spain is a potential customer for the Penguin Mk 3. The Mk 3 has been designated the AGM-119A by the U.S. Air Force.

NSM: Penguin Mk 4. Since March 1990, Kongsberg has been engaged in a developmental program aimed at designing a follow-on to the Penguin. This is an attempt by the company to counter the rather low interest in the current Mk 2 and to provide the Royal Norwegian Navy with a next-generation missile under the Structure 2012 plan.

The new ship-to-ship missile, known as the New Sea Target Missile (NSM, or Nytt Sjomalsmissil) and defined in the Norwegian staff requirement SMP 6026, will feature a pair of external boosters that will improve the systems overall 30-kilometer range out to 100+ kilometers. The sustainer motor will be a turbojet. In addition, the new version will make extensive use of composites, to reduce weight, and will be equipped with a new, more powerful computer. Although this version will not be supersonic-capable, future versions might be.

Kongsberg also proposed the addition of millimeter- wave guidance, a semi-active laser system, and dual-mode infrared and laser seekers. Various alternative warheads or payloads, including submunitions for use against land targets, have also been identified for upgrading. Other modifications include improved electronic countermeasures and an imaging infrared seeker to replace the current IR area seeker. Kongsberg has been studying the extent to which Penguin can be incorporated into the NSM.

An 18-month concept definition study began in late 1992 and was completed before the end of 1994. A seven-year, NOK1.2 billion NSM full-scale development contract was awarded in early 1997. The first trials of the NSM were conducted in late 2000 and continued into 2001. The next series commenced in 2002. Testing continued into 2006.

Missile Forecast Page 5

Penguin/AGM-119

2007 July 2007

The NSM is planned to be considerably less expensive than the in-service Penguin and would be deployed in shipborne and coastal defense configurations. The NSM is not initially intended to replace the fixed-wing, aircraft-launched Penguin Mk 3 or the helicopter-borne Mk 2 Mod 7. Nevertheless, the NSM will be light enough to be carried by future shipborne helicopters such as the NH90. The Royal Norwegian Navys new frigates will be the first surface combatants armed with the NSM.

The company has been seeking foreign partners to develop this new missile system. Negotiations were under way with Matra to cooperate in NSMs development, but in late 1997, Kongsberg announced that it had teamed instead with Aerospatiale (which merged with Matra to form Aerospatiale Matra and is now part of MBDA). A memorandum of understanding between MBDA and Kongsberg was signed in early 1999.

MBDA is expected to take a 10 percent stake in the NSM program and will help to integrate the missile with the NH90 if it is selected for the medium-range, anti-ship missile requirement. Besides international marketing, MBDA will be involved in technical engineering consultancy, propulsion, and signature reduction. Microturbo will provide the missiles turbojet propulsion system, the TRI 40, under subcontract to MBDA.

NSM Estimated Technical Data Length, with Booster 3.95 meters Wingspan 1.4 meters Wingspan, with Wings Folded 0.69 meters

NSM Estimated Technical Data Weight, at Launch 412 kg Weight, Flight 347 kg Weight, Warhead 120-125 kg Speed Mach 0.9 Range 120-180 km Cruise Guidance GPS/INS Terminal Guidance IIR

In 2000, Kongsberg revealed that it had teamed with DASA (now part of EADS) and TDW (also part of EADS) to promote the NSM to the German Navy. The team was offering improvements to the NSM, including a TDW-developed warhead (TDW is part of LFK and is based in Schrobenhausen). Kongsberg hoped to win the contract to meet the anti-shipping requirements of the German Navys K-130 corvettes. This contract was ultimately awarded to Saab Bofors Dynamics, however, and its RBS15.

A pre-production contract for the NSM was awarded at the end of 2004. Full-scale production of the NSM started in 2006. Missile deliveries are to begin before 2010.

Further improvements are being examined, as well as the development of an air-launched version. This further improved NSM has been referred to as Block II, as well as Norseman and Norwegian Multi-Role Missile. Among the enhancements under consideration are extending of the NSMs maximum range to 250 kilometers. This range extension could be achieved by stretching the missiles airframe. A new multipurpose warhead and a new seeker are also being studied.

Significant News Lockheed Martin to Market Kongsbergs NSM Kongsberg Defence & Aerospace and Lockheed Martin have signed a joint marketing agreement for an aircraft-version of the new Naval Strike Missile (NSM), formerly called New Sea Target Missile. This weapon will be known as the Joint Strike Missile (JSM). This version of the missile will be adapted for deployment on the U.S. F-35 Joint Strike Fighter (JSF). This aircraft is being developed by Lockheed Martin. Funded by Norway and Australia, a study for making adaptations to both the missile and the fighter craft is already in progress. It is expected that the adaptations will take three years to reach the technological maturity required for the missile to be an option for deployment on the JSF. (Kongsberg Gruppen, 2/07)

Kongsberg Conducts Tests of NSM in U.S. Over the January 13 weekend, Kongsberg conducted two successful test firings of the NSM in California, USA.

The test firings were part of the Norwegian Navys final approval of the development phase. The tests were conducted in the U.S. because the Americans have a test-firing range that allows the missile to be tested over both land and sea. This is essential for testing several of the missiles functions.

Those successful test firings confirmed the missiles highly sophisticated features and capabilities, above what is currently demonstrated by any anti-ship missile.

As planned, the missile is ready for deployment on board the new Nansen class frigates and on the new missile torpedo boats. (Kongsberg Gruppen, 1/07)

Page 6 Missile Forecast

Penguin/AGM-119

July 2007

Turkey Orders 17 S-70B Seahawk Helicopters Sikorsky Aircraft announced on November 6, 2006, that it has signed an agreement, making effective a contract with the Ministry of National Defense, Undersecretariat for Defense Industries (SSM) of the Government of Turkey for 17 new S-70B Seahawk helicopters. First deliveries are scheduled to begin in 2009. The contract is a Lot 2 agreement, which adds to seven S-70B Seahawk helicopters currently in the inventory of the Turkish Navy.

The S-70B helicopter is an international derivative of the U.S. Navy SH-60B Seahawk. The S-70B has a fully integrated glass cockpit with smart multifunction liquid crystal displays and a mission-management system. Its flexible mission package includes dipping sonar, electronic surveillance measures, forward-looking infrared (FLIR), multimode radar, aircraft survivability equipment, and Penguin and HELLFIRE missiles.

Multimission capable, the S-70B can perform search and rescue, medical evacuation, surveillance, vertical replenishment, and utility missions. The S-70B is powered by twin General Electric T700-GE-401C turboshaft engines. (Sikorsky, 11/06)

Market Intelligence Service Subscribers: For additional news, go to the online E-Market Alert page located in the Intelligence Center at www.forecastinternational.com and click on the links to the products you subscribe to.

Funding A contract for the full-scale development of the NSM has been awarded (see the discussion of the NSM above for details). The costs of this program have been slowly rising. The full-scale development contract was to cost NOK1.6 billion. In 2004, the Norwegian government estimated that the development phase of this program would cost a further NOK150 million to complete. Kongsberg will provide this funding.

Contracts/Orders & Options In December 2004, Norway and Kongsberg signed a contract to prepare for and begin production of the NSM. The contract is worth NOK200 million and will run for two years. Full-scale production will not begin until after the formal completion of the development phase.

In July 2004, Australia announced that it would procure additional Penguin missiles from Kongsberg. The contract is worth NOK70 million ($10.4 million). Kongsberg will provide Penguin missiles to arm the SH-2 Seasprite helicopters operated by the Royal Australian Navy (RAN). Australia had signed two earlier contracts with Kongsberg for Penguin missiles: one in 1998 and another in 1999. Deliveries of the new Penguins will bring the total value of the Australian program to about NOK950 million ($142.4 million).

In August 1998, Kongsberg Defence and Aerospace received a $5.3 million contract to meet FY98 production requirements for the Penguin Mk 2 Mod 7 missile. This contract included the production of four missiles, 45 missile control test sets, canards/wings, umbilical release units and cables, interconnecting cables, wing lanyards, power unit cables, alignment power units, and missile power units. Work was to be completed by January 2000. Contract Number N00019-97-C-0026

In July 1997, Kongsberg Gruppen Aerospace AS received a $6.1 million firm-fixed-price contract for the procurement of six Penguin Mk 2 Mod 7 missiles for the U.S. Navy. Work was to be completed by April 1999. Contract Number N00019-97-C-0026

In 1996, the Norwegian military signed a contract with Kongsberg for the development of the NSM. This contract was worth NOK1.6 billion.

Missile Forecast Page 7

Penguin/AGM-119

2007 July 2007

Timetable Year Major Development 1960 Design conceived 1963 Research initiated 1964 RDT&E funding allocated with assistance of the U.S. and the Federal Republic of Germany 1967-72 Engineering development begun 1970 First flight tests 1972-73 Operational evaluation 1975 Initial Operational Capability of first version, in Norway 1976 Full-scale production 1980 R&D work begun on air-launched Mk 3 version 1980 Mk 3 ordered by Norway 1984 Initial U.S. Navy procurement announced 1987 Low-rate production of Mk 3/AGM-119 1989 Initial Operational Capability of Mk 3/AGM-119 in Norway 1990 Kongsberg begins research on new version of Penguin (NSM/Mk 4) 1997 Aerospatiale Matra (MBDA) selected to work on NSM with Kongsberg 2000-2007 Penguin production continuing 2006-2007(a) NSM production commenced (a) Estimate

Worldwide Distribution/Inventories The number of countries interested in the Penguin has been declining over the last few years. Brunei and Oman had mentioned an interest in acquiring anti-ship missiles for their maritime patrol helicopters. Also, the Polish Navy is interested in upgrading its anti-shipping capability with the acquisition of a new weapon system.

The South African Navy is developing a requirement for a helicopter-launched anti-ship missile as part of its larger program to acquire new surface combatants. Six companies have already offered proposals to meet its requirement for six shipborne helicopters.

In 2005, Turkey announced it will upgrade its F-16 fleet. Those upgraded fighters will be capable of carrying the Penguin anti-ship missile. There was no indication from the Turkish government whether this agreement includes the purchase of additional missiles from Kongsberg.

User Countries. In addition to Norway, the Penguin missile is in service with the following countries: Australia, on its SH-2G(A) helicopters; Greece, on six La Combattante III class patrol boats and its S-70B helicopters; Sweden, on Hugen class patrol boats; Turkey, on eight Kartal class patrol boats; Spain; and the United States.

Forecast Rationale Kongsberg plans to remain independent even as the rest of Europe races to consolidate. MBDA, the European tactical missile megacorp, has made noise about bring-ing similar firms on the continent into its fold. Yet any merger would make Kongsberg a very small part of a much larger entity, thereby erasing the unique features of the former. Such an event Kongsberg wants to avoid.

Focused on Niche Market, Forming Alliances

To succeed, Kongsbergs strategy is to focus on niche rather than mass markets. The company sees the

strategy as the best way to survive in an industry that includes giants like MBDA and Raytheon. Yet Kongsberg has also cultivated relationships with both firms. In the case of the former, Kongsberg is cooperating with MBDA in the development of the NSM.

The NSM is an important program for Kongsberg, and it plans an unmatched export push. The company hopes this weapon will enable it to hold on to a share of the anti-ship/strike missile market in the future.

Page 8 Missile Forecast

Penguin/AGM-119

July 2007

Initially, the NSM will arm Royal Norwegian Navy surface combatants, such as the Nansen class frigates and Skjold class fast attack craft. The Nansen class frigate program is very important to Norway, being the first new frigate procured in almost 40 years and one of its most expensive. Later, maritime patrol aircraft, combat fighters and helicopters may also carry this missile. Adding the NSM to the weapons suite of the Lockheed Martin F-35 JSF is a huge boost for this program: expanding its marketing scope and sales opportunities.

Now, Kongsberg is looking for foreign partners to develop this so-called Block II version. Australia was mentioned as a potential partner, but its selection of the Joint Air-to-Surface Stand-off Missile (JASSM) for its fighters has ended its interest in an air-launched NSM.

Development difficulties have set back the start of NSM production. Deliveries of production missile are to be under way by 2010. Additional program delays could easily push back further this missiles introduction. Oslo is also struggling with a tight defense budget.

Despite the pending introduction of the NSM, Norway plans to keep the Penguin in service to 2015, longer than once anticipated. The Penguin Mk 2 Mod 7 missile is still in production. Kongsberg says this helicopter-launched missile remains in demand due to its advanced capabilities, especially in the littoral warfare environment. The company is also seeking new customers in new markets. New orders could possibly keep the Penguin line active through the end of the decade.

Ten-Year Outlook

ESTIMATED CALENDAR YEAR UNIT PRODUCTION

Designation or Program High Confidence Good Confidence Speculative

Thru 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Total

Kongsberg Gruppen ASA

NSM 11 19 27 31 36 39 40 40 40 40 40 352

Penguin MK 2 MOD 7 409 15 15 0 0 0 0 0 0 0 0 30

Subtotal 420 34 42 31 36 39 40 40 40 40 40 382

Total 420 34 42 31 36 39 40 40 40 40 40 382

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U.S. World Market Intelligence Services (pages 6-24) Binder $40 $80 DVD $45 $90 Binder & DVD $85 $170 Binder & RT $40 $80 Worldwide Inventories aerospace/engine systems (page 11) CD $45 $90 Weapons systems (page 22) Hard Copy $40 $80 CD $45 $90 power systems (page 25) Hard Copy $40 $80 Focused Market Segment Analyses (pgs. 30-33) Hard Copy $20 $40

U.S. World Market Intelligence Libraries (pages 26-28) complete library (military & civil) Binder $1,440 $2,880 DVD $45 $90 Binder & DVD $1,485 $2.970 Binder & RT $1,440 $2,880 complete military library Binder $1,280 $2,560 DVD $45 $90 Binder & DVD $1,325 $2.650 Binder & RT $1,280 $2,560 intermediate military library Binder $480 $960 DVD $45 $90 Binder & DVD $525 $1,050 Binder & RT $480 $960 basic military library Binder $280 $560 DVD $45 $90 Binder & DVD $325 $650 Binder & RT $280 $560 civil library Binder $360 $720 DVD $45 $90 Binder & DVD $405 $810 Binder & RT $360 $720

U.S. World Market Intelligence Group Libraries (page 29) aerospace DVD $45 $90 Binder & DVD $365 $730 Binder & RT $320 $640 military markets subset DVD $45 $90 Binder & DVD $285 $570 Binder & RT $240 $480 governments & industries DVD $45 $90 Binder & DVD $525 $1,050 Binder & RT $480 $960 electronics DVD $45 $90 Binder & DVD $365 $730 Binder & RT $320 $640 Weapons DVD $45 $90 Binder & DVD $205 $410 Binder & RT $160 $320 Naval DVD $45 $90 Binder & DVD $125 $250 Binder & RT $80 $160 power DVD $45 $90 Binder & DVD $125 $250 Binder & RT $80 $160

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