1. CEO 360 Degree Perspective on the Global and Middle East Defence Market An assessment on the impact of the global economic recession on Defence Markets Prepared for: GIL Middle East 2009 6-7 October, 2009, Beach Rotana Hotel, Abu Dhabi, UAE

2. . 2. HELP! THE OBJECTIVE - CAPTURE THIS CUSTOMER COMPETITIVE THREAT RABBIT HOLES - VERY TEMPTING TO DIVE DOWN RESTRICTED VISION EXCELLENT VISION Strategic Thinking – A Helicopter Vision

3. . 3. Table of Contents Global Defence Outlook Middle East OverviewRecession AnalysisSectors for Growth in Defence

4. . 4. Global Defence Outlook Recession Analysis

5. . 5. 2008 - 2020 Projected Impact on the Aerospace & Defence Industry High Impact Low Impact Certainty LowHigh The Unexpected Potential issues affecting the global defence market Increasing Importance of After- market Services Adoption of Total Cost of Ownership and TLCM Principles Introduction of new competitors / Partners from Asia-Pacific Markets Stabilisation and re-prioritization of US Defence Budget Afghanisation of security duties in Afghanistan Rapid technology cycles driving system obsolescence Introduction of new competitive forces from weak public finances Rapid growth in China’s military capabilities Strong growth in Asia-Pacific Defence Markets Financial difficulties for Tier-3 sub- component manufacturers on critical supply line affecting delivery Reduction in defence spending in major European markets Major regional war in Middle East

6. . 6. Where are the opportunities? 1 36 9 5 8 7 4 2 Small (<$2 billion) Large (>$5 Billion) Annual Market Size of Vertical Markets Low (0-5%) High (>10%) CAGR for Vertical Markets Medium ($2-$5 Billion) Medium (5-10%) Sectors with highest total growth potential Unmanned Systems 1 Military Airlift 2 Force Protection 3 Combat Aircraft 4 5 Land Combat Systems 6 Soldier Modernisation 7 8 Strategic & Tactical Comms 9 Training and Simulation Command and Control CAGR is calculated from 2008 - 2012 1 Counter-IED 2 Counter Rockets and Mortar 1 2

7. . 7. Economic difficulty is just one of many factors that have an impact on global defence spending – political factors are still more important Global Defence Spending is expected to continue to grow at a steady rate over the next decade, with major growth centred in the Asia-Pacific region, much of which as a result of China’s incredible rise in spending US$1.4 Trillion 2007 46% 23% 21% 7% 3% US$1.65 Trillion 2016 34% 22% 30% 10% 4% 2009-2012 Strong Growth Driven by Afghanistan & Iraq conflict Significant spend on UORs Market unpredictable and driven by events 2013-2016 Market stabilises as forces begin withdrawing from Afghanistan (such as Canada and The Netherlands) Market increasingly driven by Asia-Pac Unclear how futureUS-PRC rivalry will impact

8. . 8. Economic difficulty has an unevenly distributed impact on global defence spending Traditional importers are increasingly looking to develop and support local industry through offset Asia-Pacific is a major importer of defence technology, but local competition are set to become significant competitors on export markets Intra-European sales have ensured the market is a key export market for European companies, but governments tend to be protectionist Oil prices volatility might have an impact on defence imports in the Middle East but growth in this market will be relatively unaffected by global recession *Source: UK DESO Counter Trend – Most European companies are looking to develop a domestic foothold in the US Market Saudi Arabia represents a general trend in the Middle East which is not expected to be signifficantly affected

9. . 9. Growth in Global Defence Spending is largely driven by growth in China, though export restrictions limit export opportunities Strong budgetary growth in markets like South Korea, India, Brazil and Turkey highlight where business opportunities will emerge and continue to drive and support the wider market growth US$1.4 TrillionUS$1.65 Trillion 2009 2018 10% 17% 4.6% 4.1% 4.6% 4.3% 4.5% 4% 3.6% 3.4% 3.1% 2.5% 2.9% 3.7% 2% 2.5% 1.8% 2.9% 1.6% 1.5%

10. . 10. Economic difficulty has had limited impact on global defence spending GDP Growth 2001-2007 Defense/Security Budget 2001-2008 Defense HLS Historical Defense Spending, 1960-2008 Source: Frost & Sullivan