While the basic aircraft have been completed for several years and nine have been provisionally accepted by the Commonwealth, they have lacked the full ITAS system. The company has reported on the substantial charges it has taken to provide the funding to complete the program, and has reported its progress toward the ITAS completion in its quarterly releases and public filings.

Kaman has been working closely with the RAN and believes the program is close to completion. In May 2006, the company finished the last of approximately 400 pre-qualification software tests of the ITAS software, and is in preparation for the final qualification testing to be witnessed by the Commonwealth. This process is expected to be followed by acceptance of the fully capable helicopters.

In its press release of May 2, 2006, the company reported that the Royal Australian Navy had encountered an anomalous flight condition on one of its training aircraft that was attributed to the aircraft's airspeed sensor. This anomaly, involving a small component from a supplier, is not impacting the development process for the ITAS. The company also reported that the Australian Navy's Operations Airworthiness Authority had suspended flying operations pending resolution and that final acceptance of the aircraft would not occur until the issue had been resolved. The company believes that it has determined the cause of the anomaly and has a plan for resolution of the issue.

Paul Kuhn, Chairman, President and CEO said, "Early this week, articles appeared in the Australian media that are critical of the program. At least one article questioned the safety of the aircraft. In fact, there is a significant history of safe operations for this aircraft type with the U.S. Navy and currently with several other naval services including the Royal New Zealand Navy. We are confident that the same will be the case for the Australian aircraft, and believe that working through the remaining technical issues is the most timely and cost-effective route to fulfilling the RAN's mission requirements. We look forward to the introduction of the fully- capable SH-2G(A) helicopters into service with the Royal Australian Navy.

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