Annual Report2011 12

Board of DirectorsSvend-Aage Nielsen, ChairmanFlemming H. Tomdrup, Deputy ChairmanHenrik StenbjerreAnders EldrupBo LaursenPaul-Werner Friis Johnsen

Executive ManagementJens Maaløe, President & CEO

BankersDanske Bank, Holmens Kanal 2–12 1092 Copenhagen K, Denmark

OwnersThrige Holding A/S, Copenhagen

AuditorsKPMG Statsautoriseret RevisionspartnerselskabVærkmestergade 25, 8000 Aarhus C, Denmark

Flemming Brokhattingen State-Authorized Public AccountantJes Lauritzen State-Authorized Public Accountant

©Terma 2012

Production: CBC

Images: David Bering, Royal Danish Air Force (FLVFOT), Royal Danish Navy (SOK), U.S. Navy, ESA (page 10, left: ESA - P. Carril), Lockheed Martin Corporation, U.S. Army (Sgt. 1st Class David K. Dismukes), and Terma

Printing: Baurs Offset

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Financial Highlights – Consolidated - - - - - - - - - - - - - - - - - - 4

Management’s Review 2011/12 - - - - - - - - - - - - - - - - - - - - - 5

Business Areas and International Group Locations - - - - - - - 14

Accounting Policies - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 18

Executive Management’s Statement - - - - - - - - - - - - - - - - - 23

Independent Auditor’s Declarations - - - - - - - - - - - - - - - - - - 24

Statement of Income - - - - - - - - - - - - - - - - - - - - - - - - - - - - 25

Balance Sheet – Assets - - - - - - - - - - - - - - - - - - - - - - - - - - 26

Balance Sheet – Equity and Liabilities - - - - - - - - - - - - - - - - 27

Cash Flow Statement - - - - - - - - - - - - - - - - - - - - - - - - - - - - 28

Notes - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 29

Contents

3

Order intake 1,026 1,390 876 1,194 1,438 Order book, year-end 1,291 1,603 1,629 1,866 1,730

Revenue 1,338 1,416 1,113 1,058 1,039 Operating profit 106 89 2 74 115 Financial items (37) (27) (27) (14) (19) Profit for the year 52 46 (20) 42 84

Non-current assets 785 769 711 596 506 Current assets 724 819 748 742 640 Assets, total 1,508 1,588 1,459 1,339 1,146 Capital stock 18 18 18 18 20 Equity 422 385 330 375 441 Provisions 135 122 93 100 89 Long-term liabilities other than provisions 487 467 246 207 188 Current liabilities other than provisions 464 614 791 658 429

Cash flows from operating activities 153 127 82 101 157 Cash flows from investing activities (80) (123) (222) (219) (117) Portion relating to investments in property, plant, and equipment (42) (57) (85) (70) (28) Cash flows from financing activities 24 222 19 (2) 20 Cash flows, total 97 225 (120) (120) 59

Financial ratios Net profit ratio 7.9 6.3 0.2 7.0 11.1 Return on investments 7.2 6.0 0.1 6.1 11.6 Current ratio 156 133 95 113 149 Equity ratio 28.0 24.3 22.6 28.0 38.4 Return on equity 12.9 13.0 (5.6) 10.2 20.8

Average number of full-time employees 1,195 1,205 1,261 1,183 1,020

DKK million 2011/12 2010/11 2009/10 2008/09 2007/08

4 FINANCIAL HIGHLIGHTS - CONSOLIDATED

Fincancial HighlightsCONSOLIDATED

Definitions

Net profit ratio: Operating profit x 100 Revenue

Return on investments: Operating profit x 100 Average operating assets

Operating assets: Total assets less cash and cash equivalents, other interest-bearing assets (including stock), and equity interest in affiliated companies

Current ratio: Current assets x 100 Current liabilities other than provisions

Equity ratio: Equity at year-end x 100 Total liabilities at year-end

Profit/loss for analytical purposes: Profit for the year

Return on equity: Result for analytical purposes x 100 Average equity, ex minority interests

MANAGEMENT’S REVIEW 2011/12 5

Management’s Review 2011/12The year’s intake of orders was MDKK 1,026 as compared to MDKK 1,390 in 2010/11. Revenue for the fiscal year was MDKK 1,338 as compared to MDKK 1,416 in 2010/11. The order book at year-end was MDKK 1,291.

89% of the revenue is generated internationally (exports), and 11% is gen-erated in Denmark. The defense market constitutes 63% of the revenue, whereas the non-defense market constitutes 37%.

The profit before tax amounted to MDKK 69 as compared to MDKK 62 in 2010/11. Thus, the gross profit has improved compared to last year, despite the lower revenue. The profit margin increase was attained by a streamlin-ing of operations, including production work for the F-35 Joint Strike Fighter in Aerostructures.

The interest-bearing debt has been reduced by MDKK 73 as a result of an optimization of the working capital needs. The Balance Sheet has been adjusted accordingly.

The overall result for 2011/12 was consistent with our expectations, except for the order intake which was adversely affected by changes within the aerospace and defense market. Against this background, the Board of Directors proposes a dividend payment of MDKK 10.

At the end of the fiscal year, total staff was 1,133 employees. The commit-ment and efforts of our employees during a year marked by major changes within the aerospace and defense market are outstanding, and the Board of Directors and the Executive Management are greatly appreciative.

ThE AErOsPACE AnD DEFEnsE MArkETAt a time with continued pressure on public budgets, defense budgets in Europe and North America will be marked by major cuts in the coming years. In Terma’s traditional markets, this situation results in postponement or can-cellation of planned investments and long-term decision-making processes.

However, the demand for and investments in defense materiel in the Middle and Far East are not affected by the global economic crisis to the same extent, and Terma is experiencing a significant increase in interest in and desire for our products and solutions in these markets.

To adjust Terma to this situation, which is coupled with a changed geo-graphical focus and increased competition, a number of measures were initiated in 2011/12 in order to expand Terma’s presence in the Middle and Far East and to further target product development towards competitive standard solutions with a high content of COTS (Commercial Off-The-Shelf) solutions.

An increased focus on development of standardized, modular products has assured that Terma is well prepared to meet our customers’ changed require-ments and acquisition patterns and priorities, where “price” is much more important than previously, and where the life of existing materiel must be extended. Traditionally, Terma has been a strong provider of such solutions, and a large number of Terma’s products, solutions, and integration com-petencies therefore match our customers’ requirements.

To further increase competitiveness, Terma has implemented a reduction of the overall cost of our products and services through an improvement of efficiency within Terma’s business structure. LEAN programs have been implemented in Terma’s two manufacturing centers at Grenaa and Lystrup. This has resulted in reduced costs relative to defects, shorter production times, and improved delivery performance.

nEw sTruCTurETo exploit the opportunities emerging from the changed prioritization of our customers, Terma has decided to focus and optimize the business within the Terma Defense & Security (TDS) Business Area:- Activities within defense and security are combined in Defense & Security.- A new TDS Group Management has been established leading to a

management structure which simplifies and speeds up decision- making processes, reduces the cost level, and improves adaptability to the changed market situation and customer requirements.

- Sales and marketing activities are being centrally coordinated to strengthen our global access to the markets.

Aerostructures and Space continue as independent Business Areas. Further, Terma’s international locations in The Netherlands, Germany, the U.S., and Singapore continue to expand their local presence.

BusInEss ACTIvITIEsThe main Business Area of Defense & Security comprises three Business Lines:1. Airborne, in which Terma supplies self-protection and reconnaissance

solutions for military aircraft and helicopters and radars for environ-mental surveillance from aircraft.

2. Land, in which Terma supplies command and control systems and communications solutions for protection of defense as well as non-defense critical infrastructure and radar systems for coastal surveillance and vessel traffic service in ports and airports.

3. Naval, in which Terma supplies command and control systems and radar and self-protection systems for naval vessels.

The Aerostructures Business Area designs, develops, and produces advanced structures and equipment for defense (fighter aircraft, transport aircraft, and helicopters) as well as non-defense aircraft.

TO ExPlOIT ThE OPPOrTunITIEs EMErgIng FrOM ThE ChAngED PrIOrITIzATIOn OF Our CusTOMErs, TErMA hAs DECIDED TO FOCus AnD OPTIMIzE ThE BusInEss wIThIn ThE DEFEnsE & sECurITy BusInEss ArEA.

6 MANAGEMENT’S REVIEW 2011/12

The Space Business Area develops electronics and software for satellites, control centers, and for test and validation tasks in connection with the development of new satellites.

In the fall of 2011, Terma re-launched its basic human resources values based on Terma’s strategy in a situation with changed geographical focus and increased competition. Further, our website – www.terma.com – was updated to provide a more global and customer-oriented presentation of our competencies, products, and solutions.

The following presents a brief review of the developments within each of Terma’s Business Areas and International Group Locations. DEFEnsE & sECurITy

Airborne Business lineFunds have been allocated in the U.S. Federal Budget for 2012 to implement a Foreign Comparative Testing (FCT) program to test and evaluate Terma’s 3D-Audio and Active Noise Reduction solutions, implying a significant potential for sale of these systems to the U.S. Air Force.

In 2010, Terma was contracted to supply self-protection equipment for Polish helicopters of the MI-17 and MI-24 types, including overall systems responsibility. The task involves Polish subcontractors and training of staff within the Polish Defense. The system has undergone an extensive testing program and is expected to be handed over to the Polish Defense during the summer of 2012.

MANAGEMENT’S REVIEW 2011/12 7

CAsE: Improved Airborne Audio CommunicationWhen flying high performance aircraft, pilots need optimal situational awareness and speech intelligibility. Terma’s audio solutions provide fighter aircraft and helicopter pilots with leading-edge, operationally proven capabilities, including 3D-Audio and digital Active Noise Reduction.

Using Active Noise Reduction, pilots will experience less fatigue as they are no longer exposed to a high level of noise. Furthermore, the reduced noise will increase speech intelligibility, allowing the pilot to get a clearer understanding of radio communication.

Active Noise Reduction provides audio quality for optimum 3D-Audio performance. When using 3D-Audio, the pilots will hear audio threat indications from the direction of the threat, thereby improving pilot reaction time. The Terma 3D-Audio solution is the only available end-to-end solution which optimizes every aspect of spatial separation, thus providing the best performance available.

Terma has entered into an agreement with Lockheed Martin Corporation on self-protection equipment for C-130J Hercules transport aircraft. According to the agreement, Terma’s equipment will be installed in the baseline of new aircraft manufactured from 2013, and will also be included in future major upgrades of the J-model of this aircraft.

In connection with the upgrade of the Norwegian F-16 fighter aircraft, the Norwegian Air Force has entered into an agreement with Terma for the supply of a pylon-based Missile Warning System (MWS). The system cor-responds to the solution which the Danish Air Force has selected, and which is installed in the Danish F-16 fighters.

In 2011/12, Manufacturing Services (MFS) at Lystrup has implemented a broad spectrum of manufacturing services to external customers, including advanced radar electronics for the F-35 program.

land Business lineThe delivery of the T.react Radio Dispatch communications solution for the control rooms of the Danish Police is progressing according to plans. Currently, the solution is deployed in seven police districts in Denmark, and over the coming year, it will be introduced in five additional police districts. The Danish regions also utilize this system.

To Finland, Terma will supply a similar nationwide information system for the emergency response centers of the Finnish police, ambulances, emer-gency preparedness services, etc.

Terma markets the CIP-Flex surveillance solution, which comprises radar and command and control systems for the protection of critical infrastructure such as ports, bridges, or airports. The solution has also been developed for the protection of military camps and installations (CAMP-Flex).

In the proximity of wind farms, it is difficult for existing radars to detect and follow small aircraft. Terma has optimized a radar system, the SCANTER 4200, to solve this problem. A number of aircraft operators have displayed major interest in Terma’s solution, and we are in dialog with the aviation authorities in Denmark and several other countries. We have agreed on test processes relative to the Copenhagen Airports and to the U.S.

Our customers continue to exhibit a keen interest in Terma’s radar systems for major vessel traffic service and coastal surveillance programs, and the new SCANTER 5000 and 6000 Solid State radar products have been well received by the market.

With approx. 150 operational Surface Movement Radar installations, Terma is among the leading suppliers of radar equipment for the monitor-ing of ground traffic at airports. The radar is part of an Advanced Surface Movement Guidance and Control Systems, which is the most widely used system worldwide. The system is used by air traffic controllers to monitor and manage ground-based traffic at airports.

naval Business lineCommand and control systems, self-protection systems, and radar systems have been supplied by this Business Line in support of a number of countries’

8 MANAGEMENT’S REVIEW 2011/12

TErMA hAs EsTABlIshED An OFFICE In hunTsvIllE (Al), usA TO FurThEr DEvElOP Our COllABOrATIOn wITh lOCkhEED MArTIn COrPOrATIOn FOr COMMAnD AnD COnTrOl sysTEMs FOr AIr DEFEnsE AnD BAllIsTIC MIssIlE DEFEnsE PurPOsEs.

Offshore Patrol Vessels. Further, Terma’s new command and control system, C-Raid, for small and medium-sized interceptors has been delivered for demonstration and test, and we are witnessing an increasing interest in the solution from other countries.

The Danish Defence Acquisition and Logistics Organization has initiated an update of the Navy’s four patrol vessels of the Thetis class, which includes Terma’s C-Flex C4I system.

As part of our collaboration with international shipyards, we have entered into contracts for delivery of the self-protection equipment, C-Guard, for a number of countries’ naval vessels.

Terma’s deliveries of a command and control system (C-Series) and a radar system (SCANTER 4000) to the Royal Thai Navy in collaboration with Singapore Technologies have been installed and tested and are now awaiting the final live firing test.

AErOsTruCTurEsThe Aerostructures Business Area continues to participate in the F-35 development and production programs and continues its extensive and demanding transition into a mass producing, high-technology composites plant with state-of-the-art equipment, processes, and quality assurance at the production and manufacturing facility at Grenaa.

The F-35 Joint Strike Fighter is the focal point for the Business Area’s activities at the Grenaa manufacturing facility as well as at the sales and design center in Ft. Worth (TX), USA. Terma has been involved in the F-35 program since 2004 and is involved in seven subprograms.

MANAGEMENT’S REVIEW 2011/12 9

CAsE: new Danish Maritime helicoptersOne of the largest Danish procurements during the current Defense Agreement is the planned acquisition of maritime helicopters to replace the Danish Navy’s aging Lynx helicopters. Terma has signed cooperation agreements with both remaining candidates, the MH-60R Seahawk (Sikorsky/Lockheed Martin Corporation) and the AW159 Wildcat (AgustaWestland).

Terma’s electronic warfare systems, structural parts, and naval solutions are relevant to both suppliers. Terma already provides self-protection systems for several helicopter platforms, including the AH-64D Apache (Royal Netherlands Air Force), the EH-101 Merlin (Royal Danish Air Force), and the HH-60G Pave Hawk (U.S. Air Force).

Internal programs, including LEAN, have been implemented to strengthen reliability of delivery and quality and in support of profitable growth in line with the increasing requirements.

In February 2012, two U.S. F-35 fighter aircraft completed the very first test flights with Terma’s weapon pylons and gun pod installed. These pylons and gun pod were produced under contract with Marvin Engineering and General Dynamics, respectively.

The F-35 Joint Strike Fighter from Lockheed Martin Corporation competes with the F-18 Super Hornet from The Boeing Company and the Gripen NG from Saab to replace the current Danish F-16 Fighting Falcon fighters. In the spring of 2010, a majority of the Danish Parliament decided to postpone the down-selection of a new fighter aircraft. In concert, it was decided that down-selection will take place within the Defense Agreement period, i.e. before the end of 2014.

Further, Denmark continues to participate as a key partner in the F-35 Joint Strike Fighter Program.

Within the Alternate Mission Equipment area, Terma produces customer-specific solutions for electronic self-protection and reconnaissance purposes for a number of aircraft, including the F-16, F-35, Harrier, Tornado, Gripen, C-130, and a number of helicopters.

Further, we have entered into a new multi-year cooperation agreement with Gulfstream Aerospace Corporation for the supply of aerostructures for the company’s business jets.

sPACEIn 2011/12, the Space Business Area is successfully participating in a number of European Space Agency (ESA) projects and has continued the buildup of activities in the U.S. market.

Terma is the main contractor in the ASIM project – The Atmosphere-Space Interactions Monitor – with the objective of measuring high altitude light-ning in the upper atmosphere. The project has now passed the Preliminary Design Review, and the next major milestone is the delivery of development models of the ASIM subsystems, scheduled for late 2012. The observatory will be launched to the International Space Station with a U.S. rocket in 2015.

Terma has entered into a contract for the power module for the future scientific ESA mission ExoMars, a program to land a vehicle on Mars. Terma has supplied the first four power supplies for the Galileo satellite-based navigation system. The first two satellites have been launched, and the next two will follow in 2012. Terma is also contracted to supply the checkout system and a major part of the mission control system which will control the 30 satellites constituting the Galileo constellation.

InTErnATIOnAl grOuP lOCATIOnsIn support of strengthening our global sales, the international locations in the U.S., The Netherlands, and Singapore are continuing to be further expanded. By increasing our sales resources and by increasing the number of local representations in the years to come, we target closer collaboration with our customers. Future plans call for the establishment of an office in New Delhi, India.

10 MANAGEMENT’S REVIEW 2011/12

In FEBruAry 2012, TwO u.s. F-35 FIghTEr AIrCrAFT COMPlETED ThE vEry FIrsT TEsT FlIghTs wITh TErMA’s wEAPOn PylOns AnD gun POD InsTAllED. ThEsE PylOns AnD gun POD wErE PrODuCED unDEr COnTrACT wITh MArvIn EngInEErIng AnD gEnErAl DynAMICs, rEsPECTIvEly.

TErMA nOrTh AMErICA InC. (usA)The U.S. subsidiary, Terma North America Inc., headquartered in Arlington (VA) in the Washington D.C. area, supports and drives Terma’s growth in the U.S. market through its local presence near Terma’s key customers and collaboration partners. The company has a total staff of 60 U.S. employees.

In Warner Robins (GA), Terma North America Inc. – as part of the Defense & Security Business Area – develops and delivers aircraft self-protection systems to the U.S. Air Force, the U.S. Air National Guard, and to Lockheed Martin Corporation and The Boeing Company.

For The Boeing Company’s CH-47F helicopter program in Canada, Terma North America Inc. has implemented and installed a major software update of the self-protection system.

In Fort Worth (TX) – as part of the Aerostructures Business Area – a highly specialized workforce has been established which collaborates with Lockheed Martin Corporation on the F-35 and F-16 programs.

Terma has established an office in Huntsville (AL) to further develop our collaboration with Lockheed Martin Corporation for command and control systems for air defense and ballistic missile defense purposes.

The U.S. radar activities are located in Norfolk (VA), where Terma supplies technical support to the U.S. Coast Guard, the U.S. Navy, the Federal Aviation Authorities, and the Department of Homeland Security.

A contract with Northrop Grumman Corporation for the SCANTER radar systems has secured participation in an international, combined port and coastal surveillance program in Saudi Arabia.

MANAGEMENT’S REVIEW 2011/12 11

CAsE: On Board the F-35Terma is a major strategic supplier to the F-35 Lightning II, which is con-sidered the world’s largest industrial project.

At present, Terma supplies a variety of products and solutions for the F-35, including gun pods, air-to-ground pylons, radar electronics, and different composite aerostructures components. The stealth F-35 is a supersonic, multi-role, 5th generation fighter produced in three variants: Conventional Takeoff and Landing, Short Takeoff/Vertical Landing, and the Aircraft Carrier Variant.

The F-35 Lightning II Program, also known as the Joint Strike Fighter Program, is led by Lockheed Martin Corporation, while Northrop Grumman Corporation and BAE Systems are principal partners. The F-35 System Development and Demonstration (SDD) phase is shared with eight international participants – Denmark, the UK, Italy, The Nether-lands, Turkey, Canada, Australia, and Norway.

12 MANAGEMENT’S REVIEW 2011/12

TErMA B.v. (ThE nEThErlAnDs)Terma’s maintenance and support center for electronic self-protection equipment at the Royal Netherlands Air Force base in Woensdrecht, The Netherlands, is developing according to plans, and the center assists and supports the air forces in a number of European countries.

To the European Space Research and Technology Centre (ESTEC) in Noordwijk, The Netherlands, Terma B.V. provides integration and test procedures on satellites prior to launch and implements in-orbit system assignments relative to ESA missions. These assignments are imple-mented by Terma’s staff of specialists who work at the Terma office in Leiden and at ESTEC. A new multi-annual framework agreement for the collaboration with ESTEC has been secured.

In December 2011, Terma participated with international and national aerospace and defense companies in the well-attended international defense and security exhibition, NIDV, in Rotterdam.

TErMA gMBh (gErMAny)The activities of Terma GmbH in Darmstadt near Frankfurt are primarily related to the European Space Operations Centre (ESOC), the European Space Agency’s control and operations center for all ESA satellites in space.

Terma performs specialized mission control systems tasks, management of satellites (flight dynamics), and operation of space simulators.

TErMA sIngAPOrE PTE. lTD. (sIngAPOrE)As part of the expansion of our local presence, Terma Singapore Pte. Ltd. has expanded its activities to include all elements of the Defense & Security Business Area.

The region is characterized by a high activity level. The staff at the office has participated in a number of targeted sales activities which have secured a continued expansion of contacts and business opportunities.

During the year, new orders and contracts have been secured within the airport area and within self-protection for aircraft as well as naval vessels.

OuTlOOk FOr ThE 2012/13 FIsCAl yEArIn 2012/13, the order intake is expected to exceed the level of 2011/12.

The revenue and profit will be largely marked by the order intake level in 2011/12, and the revenue and profit before tax are therefore expected to be lower in 2012/13 compared to 2011/12.

The expected revenue is primarily covered by known cases, in which Terma is either selected as supplier or is currently concluding negotiations. Thereby, Terma’s order book at the end of the 2011/12 fiscal year constitutes a sound planning horizon for the activities of the year.

The interest-bearing debt is expected to be further reduced during the 2012/13 fiscal year, and no significant credit risks exist relative to indi-vidual customers. Terma has the required credit lines available and the support of our financial partners to implement the planned activities and investments – both in the short term and the long term.

At the end of the 2012/13 fiscal year, total staff is expected to equal the level at the end of the 2011/12 fiscal year, i.e. approx. 1,100 employees. COrPOrATE sOCIAl rEsPOnsIBIlITyTerma is a socially responsible company and endeavors to contribute to society in a most responsible manner. Thus, our activities within Corporate Social

TErMA Is A sOCIAlly rEsPOnsIBlE COMPAny AnD EnDEAvOrs TO COnTrIBuTE TO sOCIETy In A MOsT rEsPOnsIBlE MAnnEr. Thus, Our ACTIvITIEs wIThIn COrPOrATE sOCIAl rEsPOnsIBIlITy (Csr) TAkE PlACE In ClOsE InTErACTIOn wITh Our CusTOMErs, EMPlOyEEs, COllABOrATIOn PArTnErs, ThE lOCAl COMMunITy, AnD ThE wOrlD ArOunD us.

MANAGEMENT’S REVIEW 2011/12 13

Responsibility (CSR) take place in close interaction with our customers, employ-ees, collaboration partners, the local community, and the world around us.

Terma emphasizes that all units within the Group comply with human rights and labor rights, that we avoid corruption, and, when seeking new collaboration partners and suppliers, that we are assured that these con-ditions will be met.

In Europe, Terma is a member of a committee on business ethics within the AeroSpace & Defence Industries Association of Europe (ASD). Our participation focuses on increasing the industry’s objective of countering corruption via joint European harmonization and simplification of ethical guidelines, standards, and principles.

Terma’s anti-corruption policy, including our “Statement on Fight against Corruption”, is available at www.terma.com.

In 2011, as part of our expansion of the CSR activities, Terma has imple-mented the six Performance Standards of the International Finance Corporation of the World Bank. Procedures have been developed, aiming to monitor the conformance of our export projects with these standards and to secure that our suppliers conform to these standards relative to child labor and forced labor.

Terma does not have measurable results for the work with CSR, but we have assessed that the CSR initiatives which the Group has launched in recent years have resulted in an increased focus on and adherence to CSR principles, and it is expected that this will continue in the future.

Additionally, further strengthening of the CSR initiatives and standards is planned.

Our values

Defense & security is Terma’s primary Business Area which globally supplies network and tactical systems, airborne and naval self-protection systems, and electronics manufacturing services for mission-critical de-fense and security applications. The Business Area also encompasses advanced radar systems for a broad range of demanding surveillance and traffic control applications, including coastal surveillance, naval surface and air surveillance, airborne environmental surveillance, critical infrastructure protection, vessel traffic management, and airport surface movement control and guidance.

The Business Area comprises three Business Lines – Airborne, Land, and Naval – and operates out of Denmark (Herlev and Lystrup), The Netherlands (Leiden and Woensdrecht), the U.S. (Warner Robins (GA), Washington D.C., and Huntsville (AL)), and Singapore.

ThE AIrBOrnE BusInEss lInETerma is a global provider of advanced electronic warfare (EW) self-pro-tection solutions for all types of military aircraft. The recognized Electronic Warfare Management System, EWMS ALQ-213, is able to integrate any combination of EW subsystems into a coherent and complete systems solution, on any type of aircraft.

The system includes high-level functions such as sensor fusion, embedded training, and electronic countermeasures adaptive processing. The Advanced Threat Display and 3D-Audio Warning Systems provide maximum situational awareness. An Active Noise Reduction and Electrical Noise System is in-corporated to reduce pilot stress and fatigue.

EW subsystems are typically installed in pods, pylons, or other external fixtures in order to avoid interfering with the aircraft structure and to allow systems to be used across the fleet, thereby significantly reducing the overall cost. Today, more than 2,000 fighters, helicopters, and transport aircraft worldwide are equipped with Terma’s EW self-protection systems.

ThE lAnD BusInEss lInEThe ground solutions range from simple tactical combat systems to ad-vanced integrated air and ballistic missile defense systems. These systems are designed to support ground troops which are dismounted, in armored vehicles, or in camps. The systems provide excellent situational awareness. A key feature of the solutions is to secure an efficient data connectivity across different radio and communication technologies, an element crucial to any operation.

Within this segment, Terma also provides turnkey radio dispatch and critical infrastructure protection solutions.

The T.react Radio Dispatch provides seamless voice and data communi-cation in a modern digitalized TETRA and mobile IP environment.

The T.react Critical Infrastructure Protection system combines radar surveil-lance with advanced command and control systems capable of performing automated surveillance based on computer-aided analyses and decision support tools.

The solutions provide for a safe and secure environment, where protection against terrorist attacks and efficient collaboration during natural disasters and major incidents are of paramount importance.

The Terma SCANTER radar systems are renowned for their unique capability to detect small and minute targets at long distances and under all weather conditions, making these radars the preferred choice for mission-critical border security and traffic safety applications. The SCANTER radar product portfolio comprises SCANTER 5000, SCANTER 6000, SCANTER Ground Surveillance Radar (GSR), SCANTER 2001i, SCANTER 4002, SCANTER 4102, as well as a wide range of high performance antennas.

Terma’s radar systems are preferred by professional and demanding turnkey suppliers and end users worldwide. The unique, high-technology Solid State radar family, the SCANTER 5000, is now operational for all intended appli-cations including coastal surveillance, vessel traffic service, and airport surface movement.

The SCANTER 4002 has proven full interturbine visibility in areas with major wind farms. As most air surveillance radars fail to provide full coverage over and around wind farms, applications for construction of wind farms are increasingly being rejected by authorities worldwide, and this creates an increased need to maintain primary radar coverage in certain areas. Terma’s interturbine visibility featured products enter this market at a time when the green energy trend is stronger than ever.

14 BUSINESS AREAS AND INTERNATIONAL GROUP LOCATIONS

Business Areas and International Group Locations

Jens MaaløePresident & CEO

Defense & security

ThE nAvAl BusInEss lInE The Naval C-Series products are the prime combat system solutions for Offshore Patrol Vessels (OPVs), the highly efficient Patrol Vessels, and interceptors. C-Series is made for the vital naval and coast guard missions such as exclusive economic zone (EEZ) patrolling, counter piracy/terrorism, search & rescue operations, and peacekeeping missions.

The latest C-Series product, C-Raid, providing compact C2 technology to small vessels and interceptors, has successfully been delivered for dem-onstration and test to customers globally, and Terma is experiencing an increasing interest in and need for this unique solution.

Terma is a strong international supplier of naval applications. The C-Series solutions, including the SCANTER 2001, SCANTER 4100, and the SCANTER 6000 Solid State radars for naval surveillance and helicopter guidance, and the proven C-Guard SKWS are in use in navies and coast guards in the U.S., the UK, The Netherlands, Australia, Thailand, Indonesia, Romania, Norway, and Denmark.

ElECTrOnICs MAnuFACTurIng sErvICEsThe Electronics Manufacturing Services unit specializes in the manufacture of high quality, complex electronics and harnesses in low to medium volume for the defense and non-defense markets. The involvement in international military programs has contributed to raising the expertise in the fields of electronics manufacturing, program management, quality assurance, test engineering, environmental stress screening, and configuration management.

Terma supplies advanced power electronics in support of the new Northrop Grumman Corporation APG-81 active electronically scanned array (AESA) radar used on the F-35 Lightning II fighter.

The Aerostructures Business Area, headquartered at Grenaa, specializes in the design and manufacture of advanced structures for military and commercial aircraft. Aerostructures is a one-stop supplier that integrates composites and metallic products including wiring and electronics to form ready-to-install subassemblies. It includes a broad range of products for the F-35 Joint Strike Fighter, the F-16 fighter aircraft, the Gulfstream business jet, as well as pods and pylons for various fixed and rotary wing aircraft.

Aerostructures works closely with customers to develop an in-depth understanding of their critical requirements and provide world-class design and manufacturing to meet customer needs. We have a constant focus on continuous improvements and are striving for maximizing the value perceived by the customer.

The F-35 Joint Strike Fighter (JSF) is a top priority program. Terma has been involved in the JSF program since 2004 and has secured contracts for seven different elements of this important program. Significant investments have been made at our Grenaa facilities to upgrade manufacturing capabilities and infrastructure to meet the demanding and sophisticated technology and delivery requirements. The program is now in phase five of the Low Rate Initial Production phase, and a very satisfactory performance level with regard to quality, delivery, and costs has been achieved during the year.

Alternate Mission Equipment is another key area for which Terma’s Aero-structures Business Area designs and delivers a series of products and customized solutions. Such solutions are often delivered to quick-reaction programs. Solutions may include pods for electronic warfare and aircraft survivability equipment, reconnaissance pods, data acquisition pods for flight testing, fuel pylons, and enhanced weapons pylons. Solutions have been delivered for fighter aircraft including the F-16, F-35, Harrier, Tornado, and Gripen, the C-130 transport aircraft, and Apache helicopters.

The Business Area continues to develop crucial capabilities for the design and manufacture of high quality, complex, and price-competitive aero-structures and strives to deliver high quality products for our long-standing customer base as well as for new customers. Raytheon Company presented Terma with the 4-Star Excellence Award 2011 as a recognition of high quality, reliability in delivery, and a very well-implemented program.

At the facilities at Grenaa, Denmark and Fort Worth (TX), USA, Terma Aerostructures focuses on business development, program management, design, engineering, and technical support performed by highly skilled engineers with aerospace experience.

Terma strives to remain a preferred partner for the development and manu-facture of advanced technical structures for the aerospace industry. Our vision is realized through continued improvements in products and pro-cesses, and we are constantly committed to delivering the promise.

BUSINESS AREAS AND INTERNATIONAL GROUP LOCATIONS 15

Ole graversenSenior Vice President

Aerostructures

The knowledge and technology of Danish space research and Danish companies within this market are world-class. In recent years, an increasing scientific, commercial, and educational interest has manifested itself. New opportunities have been created for re-energizing the Danish business and scientific activities within the space industry.

The space Business Area contributes with mission-customized soft-ware and hardware products as well as services to support a number of in-orbit pioneering European scientific and earth observation missions, such as Rosetta, Mars Express, Venus Express, Herschel, Planck, and CryoSat-2.

Building on this background, Terma secured significant contracts for two key phases of the Galileo European satellite navigation system; the In-Orbit Validation and Full Operational Capability phases. The program is expected to be operational in 2018. This includes the full portfolio of Terma Space products and services including power supplies, check-out and test systems, and mission control and simulation systems. Additional opportunities exist to secure orders for subsystems for the additional satellites when these are procured in subsequent years.

Additionally, Terma is contracted for the development and delivery of soft-ware and hardware systems and services for numerous ongoing and future European, Canadian, Russian, and U.S. satellite missions. Examples of these are BepiColombo with an expected launch in 2016; Galileo with expected launch in 2012; LISA Pathfinder with expected launch in 2013; GAIA with expected launch in 2013; ExoMars with expected launch in 2016; the U.S. JMAPS mission; the Canadian Sapphire mission; and the Russian Kano-pus-V1 mission.

Furthermore, Terma is under contract with ESA for the highly sophisticated man-space ASIM mission. Terma is responsible for the international scien-tific and industrial team developing a structure containing cameras and photometers to be placed outside the International Space Station. The purpose of the mission is to contribute to the study and understanding of how thunderstorms affect the atmosphere and the climate. The launch is expected to take place in 2016.

Terma north America Inc., the U.S. subsidiary, is well established as the interface to U.S. customers for all Terma Business Areas.

Terma North America Inc. (TNA) facilitates the growth of Terma’s business in the U.S. through a local presence near important customers and partners. With the headquarters in the Washington D.C. suburb of Arlington (VA), TNA leads the interface with senior executives in the Department of Defense, the Department of State, the Danish Embassy, the Federal Aviation Ad-ministration (FAA), the Department of Homeland Security, as well as the defense industry’s prime contractors.

A major business development and operations facility is located in Warner Robins (GA) and maintains business with the U.S. Air Force providing electronic warfare systems, including maintenance, procurement, and foreign military sales. Other TNA facilities are located in Fort Worth (TX) in close proximity to Lockheed Martin Corporation F-35 and F-16 program headquarters and in Portsmouth (VA) near the U.S. Coast Guard head-quarters. A facility in Huntsville (AL) to support expansion of opportunities with the Missile Defense Agency and infrastructure protection has been established.

All Business Areas have experienced significant success in the past year, exceeding the annual business plan for U.S. business and resulting in an increased business backlog, employee additions, and increased revenue.

Defense & Security in Warner Robins (GA) successfully expanded its tradi-tional customer base by initiating an in-depth study of helicopter airborne survivability equipment. A significant effort for an Integrated Aircraft Survivability Equipment Demonstration was developed to secure additional business with the U.S. Army. The relationships with The Boeing Company and Lockheed Martin Corporation were strengthened to secure follow-on business in the CH-47 Chinook Helicopter and C-130J Military Transport Aircraft programs. In addition, the unit worked with the U.S. Air National Guard to initiate flight tests on the 3D-Audio system for both the F-16 and the A-10. These activities build on prior work with the F-16 aircraft.

The Aerostructures Business Area is strongly represented at the Fort Worth (TX) facility with a staff of highly trained professionals with competencies in business development, engineering, program and supplier management, quality assurance, production assembly, information technology, and human resource management. The radar systems segment continued servicing U.S. based customers, including Canada and the U.S. Coast Guard, the U.S. Navy, the FAA, and the

Carsten JørgensenSenior Vice President

space

steve gress Jr.President & CEO

Terma north America Inc.

16 BUSINESS AREAS AND INTERNATIONAL GROUP LOCATIONS

Department of Homeland Security. Completion of the SCANTER 6002 radar system installation on an experimental U.S. Navy ship was a significant milestone. This ship is used to demonstrate technologies of important interest to the U.S. Navy.

The Terma and Lockheed Martin Corporation continuing co-development of a command and control product for missile defense has strengthened the TNA role in providing additional applications and engineering services for U.S. participation in the global expansion of integrated air and missile defense systems. The expansion is expected to lead to new opportunities and partnerships while also enabling the exploitation of requirements for infrastructure asset protection.

Terma B.v., the Dutch subsidiary of Terma A/S, focuses on three primary market areas: space, aircraft survivability equipment, and homeland security systems. The past year has seen solid success in expanding the role of Terma B.V. in supporting a range of electronic warfare (EW) products and establishing a presence in the homeland security systems arena.

Space activities include in-house turnkey system integration and develop-ment specializing in spacecraft test, simulation, and in-orbit management systems together with the provision of highly specialized consultants to ESA’s European Space Research and Technology Centre in Noordwijk, The Netherlands. The framework contract with ESA for delivery of these consultants was re-secured in the beginning of the year.

The EW service and support facility established on the Woensdrecht Air Base is fully operational and processes a continually expanding range of equipment from the Terma EW product line. Depot level repair capability has been achieved, further expanding the extent of the service work per-formed. Terma EW equipment operated by other air forces is also being channeled through the facility, supporting the goal of centralizing all EW service and support efforts at one location.

The T.react Radio Dispatch system is attracting significant attention at regional and national levels, supported by the establishment of a product track record in Denmark and Finland. The need to improve both the opera-tional effectiveness and the cost effectiveness of control room operations drives interest at the industrial and civil authority level. Critical Infrastruc-ture Protection solutions are also proving attractive in the Dutch market, and ongoing discussions with partners and end users in this domain will deliver commercial commitments in the coming years.

Terma singapore Pte. ltd., the Asian subsidiary of Terma A/S, provides the region with business development, sales, project management, and after sales service and support for the Airborne, Land, and Naval Business Lines in the company’s Defense & Security Business Area in the Asia Pacific region, through a local presence close to important customers and partners.

The year 2011/12 has shown significant and satisfactory growth throughout the region. The staff has increased, and the local capabilities are continu-ously further developed through active and mutual engagement across all of Terma.

The Land Business Line covers high performance radar systems and system integration solutions. The applications include coastal surveillance, naval air and surface surveillance, airport ground movement surveillance, and vessel traffic services (VTS). This work is implemented in close collaboration with local and international system integrators. The product portfolio con-sists of a proven and flexible selection of systems components to tailor the sensor solution to specific requirements, including the latest solid state and signal processing technologies. A significant general market interest in the latest solid state X-band radar technology creates increasing opportu-nities for Terma to supply the new technology for demanding surveillance applications on land and at sea.

The Naval Business Line covers command and control systems as well as various subsystems including ship self-protection systems, fire control systems, and naval surveillance radar systems forming complete integrated and modular combat management systems. Several vessels have come into active operational service during the past year. The regional naval activi-ties are expected to continue a significant growth market for new-built ships for navies and coast guards as well as modernization programs.

In the field of airborne self-protection, Terma markets its state-of-the-art electronic warfare management suite. Terma Singapore Pte. Ltd. supports this business in collaboration with the Defense & Security Airborne Business Line and with Terma North America Inc.

Jesper TolstrupVice President

Terma singapore Pte. ltd.

richard JonesSenior Vice President

Terma B.v.

BUSINESS AREAS AND INTERNATIONAL GROUP LOCATIONS 17

The Annual Report of Terma A/S for 2011/12 has been prepared in accor-dance with the provisions applying to class C enterprises (large) under the Danish Financial Statements Act. The Consolidated Financial Statements of Terma A/S are consolidated in the Consolidated Financial Statements of the ultimate Parent Company, the Thomas B. Thrige Foundation, Copenhagen.

Accounting policies applied in the preparation of the Annual Report are consistent with those of last year.

Consolidated Financial statementsThe Consolidated Financial Statements comprise the Parent Company, Terma A/S, and subsidiaries in which Terma A/S directly or indirectly holds more than 50 percent of the voting rights or which it, in some other way, controls.

The Consolidated Financial Statements are prepared as a consolidation of the audited financial statements of the Parent Company and subsidiaries, which have all been prepared according to the Group’s accounting policies.

On consolidation, intra-group income and costs, stockholdings, intra-group balances and dividends, and realized and unrealized gains and losses on intra-group transactions are eliminated.

Equity interests in subsidiaries are set off against the proportionate share of the subsidiaries’ fair value of net assets or liabilities at the acquisition date.

Enterprises acquired or formed during the year are recognized in the Con-solidated Financial Statements from the date of acquisition. Enterprises disposed of are recognized in the Consolidated Statement of Income until the date of disposal. The comparatives are not adjusted for acquisitions or disposals.

Acquisitions of enterprises are accounted for using the purchase method, according to which the identifiable assets and liabilities acquired are measured at their fair values at the date of acquisition. Provisions are made for costs related to adopted and announced plans to restructure the acquired enterprise. The tax effect of the revaluation is taken into account.

Any excess of the cost of the acquisition over the fair value of the identifi-able assets and liabilities acquired (goodwill), including restructuring pro-visions, is recognized as intangibles and amortized on a systematic basis in the Statement of Income based on an individual assessment of the useful life of the asset, however, not exceeding 20 years. Any excess of the fair values of the identifiable assets and liabilities acquired over the cost of the acquisition (negative goodwill), representing an anticipated adverse development in the acquired enterprises, is recognized in the Balance Sheet as prepayments and deferred charges and recognized in the Statement of Income as the adverse development is realized. Negative goodwill, not related to any anticipated adverse development, is recognized in the Balance Sheet at an amount corresponding to the fair value of non-monetary assets.

The amount is subsequently recognized in the Statement of Income over the average useful lives of the non-monetary assets.

Goodwill and negative goodwill from acquired enterprises can be adjusted until the end of the year following the acquisition.

Gains or losses on disposal of subsidiaries are stated as the difference between the sales amount or disposal amount and the carrying value of net assets at the date of disposal, including non-amortized goodwill and anticipated disposal costs.

Foreign Currency TranslationTransactions denominated in foreign currencies are translated at the ex-change rates at the transaction date. Foreign exchange differences arising between the exchange rates at the transaction date and at the date of payment are recognized in the Statement of Income as financial income or financial costs.

Receivables, payables, and other monetary items denominated in foreign currencies, which are not settled on the Balance Sheet date, are translated at the exchange rates at the Balance Sheet date. The difference between the exchange rates at the Balance Sheet date and at the date at which the receivable or payable arose or was recognized in the latest financial statements is recognized in the Statement of Income as financial income or financial costs.

Upon recognition of subsidiaries that are foreign entities, the Statements of Income are translated at an average rate of exchange for the month, and the Balance Sheet items are translated at the exchange rates at the Balance Sheet date. Currency translation differences arising upon trans-lation of foreign subsidiaries’ equity at the beginning of the year to the exchange rates at the Balance Sheet date and upon translation of State-ments of Income from the average rates of exchange to the exchange rates at the Balance Sheet date are recognized directly in the equity.

Translation adjustment of balances with foreign entities which are con-sidered part of the aggregate investment in the subsidiary is recognized directly in the equity.

Upon recognition of foreign subsidiaries that are integrated entities, monetary items are translated at the exchange rate at the Balance Sheet date. Non-monetary items are translated at the exchange rate at the date of acquisition or the time of the subsequent revalutation or impairment of the asset. The items in the Statement of Income are translated at the ex-change rate at the date of transaction. However, items derived from non-monetary items are translated at the historical conversion rate of the non-monetary item.

Derivative Financial InstrumentsDerivative financial instruments are initially recognized in the Balance Sheet at cost and are subsequently measured at fair value. Positive and

18 ACCOUNTING POLICIES

Accounting Policies

negative fair values of derivative financial instruments are included in other receivables and other payables, respectively.

Changes in the fair value of derivative financial instruments designated as and qualifying for recognition as a hedge of the fair value of a recognized asset or liability are recognized in the Statement of Income together with changes in the value of the hedged asset or liability.

Changes in the fair value of derivative financial instruments designated as and qualifying for recognition as a hedge of future assets or liabilities are recognized directly in other receivables or other payables and in the equity. If the future transaction results in the recognition of assets or lia-bilities, amounts which were previously recognized in the equity are transferred at the cost of the asset or liability, respectively. If the future transaction results in income or costs, amounts which are recognized in the equity are transferred to the Statement of Income during the period in which the hedge affects the Statement of Income.

Changes in the fair value of derivate financial instruments not qualifying for recognition as a hedging instrument are recognized in the Statement of Income on a continuing basis.

Changes in the fair value of derivative financial instruments used for the hedging of net investments in foreign entities are recognized directly in the equity.

sTATEMEnT OF InCOME

RevenueRevenue comprises the deliveries for the year and the value of construction contracts in process with significant customization.

Revenue from contract work in process with an insignificant degree of customization is recognized in the Statement of Income if delivery and the passing of risk to the customer have taken place. Any discounts allowed are recognized in the revenue.

Construction contracts with significant customization are recognized in the revenue when reaching the stage of completion. Accordingly, revenue corresponds to the sales price of work performed during the year (per-centage of completion method).

Production CostsProduction costs comprise costs, including depreciation, amortization, and salaries, incurred in generating the revenue for the year. Such costs include direct and indirect costs for raw materials and consumables, wages and salaries, depreciation of production plant, and other production costs.

Production costs also comprise research and development costs, which do not qualify for capitalization, and amortization and impairment of capital-ized development costs.

Production costs also comprise provisions for losses on construction contracts.

Distribution CostsCosts incurred in distributing goods sold during the year and in conducting sales campaigns, etc. during the year are recognized as distribution costs. Also, costs relating to sales staff, advertising, exhibitions, and depreciation are recognized as distribution costs.

Administrative CostsAdministrative costs comprise costs incurred during the year for the Executive Management and Administration, including costs related to administrative staff, office premises and office costs, and depreciation.

Other Operating Income and CostsOther operating income and costs comprise items secondary to the principal activities of the Group, including gains and losses on disposal of intangibles and property, plant, and equipment.

Profit in SubsidiariesThe proportionate share of the individual subsidiaries’ profit after tax is recognized in the Statement of Income for the Parent Company following elimination of intercompany gains/losses.

Financial Income and CostsFinancial income and costs comprise interests, gains and losses on pay-ables and transactions denominated in foreign currencies, amortization of financial assets and liabilities as well as additions and reimbursements under the tax prepayment scheme, etc.

Tax on Profit for the YearThe Parent Company is subject to the compulsory Danish joint taxation method for the Thrige Holding Group’s Danish subsidiaries. Subsidiaries are part of the joint taxation from the time of the consolidation in the Group’s financial statements and until the time when they are left out of the consolidation.

Thrige Holding A/S is the administrative company for the joint taxation, and as a consequence, it settles all tax payments with the authorities.

The current Danish corporate income tax is allocated by payment of the joint taxation contribution between the jointly taxed companies relative to the taxable income. In this respect, companies with tax loss receive joint taxation contributions from companies which have used this loss to reduce their own tax profit.

The tax for the year, which consists of the current corporate tax for the year, the joint taxation contribution, and change in deferred tax – as a consequence of the reduction in the tax rate – is recognized in the Statement of Income with the portion relating to the profit for the year, and directly in the equity with the portion relating to items directly in the equity.

ACCOUNTING POLICIES 19

BAlAnCE shEET

Intangibles

Development Projects in ProcessDevelopment projects in process comprise costs, salaries, and amortiza-tion directly or indirectly attributable to the development activities of the enterprise.

Development projects that are clearly defined and identifiable, where the technical utilization degree, sufficient resources, and potential future market or development opportunities in the Group can be established, and where it is intended to produce, market, or use the project, are recog-nized as intangibles, provided that the cost can be measured reliably, and that there is sufficient assurance that future earnings can cover produc-tion costs, sales and administrative costs, and development projects in process. Other development projects in process are recognized in the Statement of Income when incurred.

Capitalized development projects in process are recognized at cost less ac-cumulated amortization/impairments or recoverable amount, if this is lower.

Following the completion of the development work, capitalized development projects in process are amortized concurrently with the sale of the developed products, alternatively on a straight-line basis over the estimated useful life.

Gains and losses on sale of development projects are calculated as the difference between the sales price less selling costs and the carrying value at the time of sale. Gains and losses are recognized in the Statement of Income under other operating income and other operating costs, respectively.

Property, Plant, and EquipmentLand and buildings, plant and machinery, and fixtures and fittings, tools and equipment are measured at cost less accumulated depreciation.

Cost comprises the purchase price and any costs directly attributable to the acquisition until the date when the asset is available for use. The cost of self-constructed assets comprises direct and indirect costs of materials, components, subcontractors, and wages and salaries.

The cost of a total asset is divided into separate elements which are depre-ciated separately if the useful life of the individual elements varies.

Depreciation is provided on a straight-line basis over the expected useful lives of the assets. The expected useful lives are as follows:

Buildings 10-50 yearsPlant and machinery 5-10 yearsFixtures and fittings, tools and equipment 3-7 years

Major production plants used for the production of aircraft components are depreciated based on the units of production method of depreciation, typically over 10 years. The annual depreciation corresponds to the actual units produced during the year. An annual reassessment is made of the expected aggregate units of production.

Depreciation is recognized in the Statement of Income as production costs, distribution costs, and administrative costs, respectively.

Gains and losses on the disposal of property, plant, and equipment are determined as the difference between the sales price less disposal costs and the carrying value at the date of disposal. The gains or losses are recognized in the Statement of Income as other operating income or other operating costs, respectively.

Equity Interests in SubsidiariesEquity interests in subsidiaries are measured according to the equity method.

Equity interests in subsidiaries are measured in the Balance Sheet at the proportionate share of the subsidiaries’ net asset values calculated in ac-cordance with the Group’s accounting policies minus or plus unrealized intra-group profits and losses, and plus or minus the remaining value of positive goodwill or negative goodwill, respectively.

Equity interests in subsidiaries with negative net asset values are measured at DKK 0 (nil), and any amounts owed by such subsidiaries are written down if the amount is uncollectible. If the Parent Company has a legal or construc-tive obligation to cover a negative net asset value which exceeds the amount owed in a subsidiary, the remaining amount is recognized under provisions.

Net revaluation of equity interests in subsidiaries is shown as a reserve for net revaluation according to the equity method under equity to the extent that the carrying value exceeds the cost. Subsidiary dividends are trans-ferred from the net revaluation to the distributable reserves at the time of distribution.

On acquisition of subsidiaries, the purchase method is applied, cf. Consolidated Financial Statements above.

Impairment of AssetsThe carrying value of intangibles and property, plant, and equipment as well as equity interests in subsidiaries are assessed annually for indications of impairment in addition to amortization and depreciation.

If indications of impairments exist, impairment tests are conducted relative to the individual asset or groups of assets, respectively. Assets are written down to the recoverable amount if this is lower than the carrying value.

20 ACCOUNTING POLICIES

The recoverable amount of an asset is the higher of the asset’s value in use and its selling price. The value in use is calculated as the present value of the expected net cash flows from the use of the asset or groups of assets and the expected net cash flows from the sale of the asset or groups of assets at the end of the useful life.

InventoriesInventories are measured at cost in accordance with the FIFO method. Where the net realizable value is lower than the cost, inventories are written down to this lower value. Cost comprises purchase price plus delivery costs.

Finished goods and work in process are measured at cost, comprising the cost of raw materials, consumables, direct wages and salaries, and indi-rect production costs. Indirect production costs comprise indirect materi-als and wages and salaries as well as maintenance and depreciation of production machinery, buildings, and equipment as well as factory admin-istration and management. Borrowing costs are not included in the cost.

The net realizable value of inventories is calculated as the sales amount less costs of completion and costs necessary to make the sale, and is determined taking into account marketability, obsolescence, and development in expected sales price.

receivablesReceivables are measured at amortized cost. Write-down is made to meet expected losses.

Construction ContractsConstruction contracts are measured at the sales price of the work per-formed. The sales price is measured on the basis of the stage of completion at the Balance Sheet date and total expected income from the individual contract work. When the sales price of a contract cannot be measured reliably, the sales price is measured at the costs incurred or at net realizable value, if this is lower.

The individual construction contract is recognized in the Balance Sheet under either receivables or liabilities, depending on the net amount of the sales price less prepayments. Net assets are constituted by the sum of the construction contracts where the sales price of the work performed exceeds the amount which has been invoiced on account. Net liabilities are constituted by the sum of the construction contracts where the amount which has been invoiced on account exceeds the sales price.

Sales costs and costs incurred in securing contracts are recognized in the Statement of Income when incurred.

Prepayments and Deferred ChargesPrepayments and deferred charges, recognized under current assets, com-prise costs incurred concerning subsequent fiscal years.

Equity – DividendsDividends are recognized as a liability at the date when they are adopted at the annual general meeting (time of announcement). The expected dividend payment for the year is disclosed as a separate item under equity.

Current Tax and Deferred TaxAccording to the joint taxation method, as the administrative company, Thrige Holding A/S assumes the liability to the tax authorities for the corporate tax of the Danish subsidiaries, concurrently with the subsidiaries paying their joint tax contribution.

Current tax payable and receivable is recognized in the Balance Sheet as tax calculated on the taxable income for the year, adjusted for tax on the taxable income of previous years, and for tax paid on account.

Payable and receivable joint tax contributions are recognized in the Balance Sheet under balances for the Parent Company.

Deferred tax is measured under the Balance Sheet liability method on all temporary differences between the carrying value and the tax base of assets and liabilities. However, deferred tax is not recognized on temporary differences relative to amortization of goodwill disallowed for tax purposes and other items in which temporary differences – excluding acquisitions – have arisen on the date of acquisition, without affecting the net income or taxable income. Under the circumstances where calculation of the tax base can be made according to alternative taxation rules, deferred tax is measured on the basis of the planned use of the asset or settlement of the liability, respectively.

Deferred tax assets, including the tax base of tax loss allowed for carryfor-ward, are recognized under current assets at the expected value of their utilization, either as elimination in tax on future earnings or offsetting against deferred tax liabilities within the same legal tax entity and jurisdiction.

A readjustment of deferred tax relative to performed eliminations of unreal-ized, intra-group profit and loss will be carried out.

Deferred tax is measured according to the tax rules and at the tax rates applicable in the respective countries at the Balance Sheet date.

ACCOUNTING POLICIES 21

Other ProvisionsProvisions comprise anticipated costs related to warranty commitments, losses related to construction contracts in process, restructuring provi-sions, etc. Provisions are recognized when, as a result of past events, the Group has a legal or a constructive obligation, and it is probable that settle-ment of the obligation will result in an outflow of Group financial resources.

Warranty commitments include obligations to implement repair work within the warranty period. Provisions for warranty commitments are measured at net realizable value and recognized on the basis of experi-ence with warranty work. Provisions with an expected maturity of more than one year at the Balance Sheet date are discounted at the average market rate of interest.

Restructuring provisions in acquired enterprises which are adopted and announced no later than at the date of acquisition are included in the deter-mination of the acquisition price and thereby in goodwill or Group goodwill.

If it is probable that the total costs related to a construction contract will exceed the total income, the expected total loss of the construction contract is recognized as a provision.

Financial liabilitiesAmounts owed to mortgage banks and credit institutions are recognized at the date of borrowing at the net proceeds received less transaction costs paid. In subsequent periods, the financial liabilities are measured at amortized cost, corresponding to the capitalized value using the effective interest rate. Accordingly, the difference between the proceeds and the nominal value is recognized in the Statement of Income over the term of the loan.

Other liabilities are measured at amortized cost.

CAsh FlOw sTATEMEnTThe Cash Flow Statement shows the Group’s cash flows from operating, investing, and financing activities for the year, the year’s changes in cash and cash equivalents as well as the Group’s cash and cash equivalents at the beginning and end of the year.

Cash Flows from Operating ActivitiesCash flows from operating activities are calculated as the Group’s share of the profit adjusted for non-cash operating items, changes in working capital, and corporate tax payable and receivable/joint taxation contribution.

Cash Flows from Investing ActivitiesCash flows from investing activities comprise payments in connection with acquisitions and disposals of enterprises and activities, and acquisitions and disposals of intangibles, property, plant, and equipment, and investments.

Cash Flows from Financing ActivitiesCash flows from financing activities comprise payments to and from the Group’s stockholders and related costs as well as raising of loans and re-payment of interest-bearing debt.

Cash and Cash EquivalentsCash and cash equivalents comprise cash reduced by current bank borrowings and short-term, marketable securities which are subject to an insignificant risk of changes in value.

sEgMEnT InFOrMATIOnGroup revenue has been allocated according to business segments and geographical markets.

FInAnCIAl rATIOsThe financial ratios are calculated in accordance with “Recommendations and financial ratios 2010” of the Danish Society of Financial Analysts. Definitions of the financial ratios appear in Financial Highlights – Consolidated.

22 ACCOUNTING POLICIES

The Board of Directors and the Executive Management have today discussed and adopted the Annual Report of Terma A/S for the 2011/12 fiscal year.

The Annual Report has been prepared in accordance with the Danish Financial Statements Act.

In our opinion, the Consolidated and Parent Company Financial Statements give a fair presentation of the Group’s and Parent Company’s assets, liabili-ties, and financial position at 29 February 2012, as well as of the results of the Group’s and the Parent Company’s activities and the Group’s cash flows for the 2011/12 fiscal year.

Further, we consider the Management’s Review to present a fair disclosure of the development in the Group’s and Parent Company’s activities and finances, the result for the year, and the Group’s and Parent Company’s financial position.

We recommend that the Annual Report be approved at the annual general meeting.

Lystrup, 25 May 2012

From left: Steen M. Lynenskjold, Lars Nissen, Henrik Ibsen, Mariann Linde Sejersen, Jens Maaløe, Gert Munch-Hansen, Birthe H. Rask, and Morten Halskov.

EXECUTIVE MANAGEMENT’S STATEMENT 23

Executive Management’s Statement

Terma Defense & security group Management

Jens Maaløe President & CEO Birthe h. rask Executive Vice President & CFO Morten halskov Executive Vice President, Business Administration

steen M. lynenskjoldSenior Vice President, Sales & Programs

henrik IbsenSenior Vice President, Research & Development

lars nissenSenior Vice President, Operations

gert Munch-hansenSenior Vice President, Quality Management

Mariann linde sejersenSenior Vice President, Human Resources

24 INDEPENDENT AUDITOR’S DECLARATIONS

FOr TErMA A/s sTOCkhOlDErs

report on the Consolidated and Parent Company Financial statementsWe have audited the Consolidated and Parent Company Financial State-ments of Terma A/S for the 1 March 2011-29 February 2012 fiscal year. The Consolidated and Parent Company Financial Statements include Account-ing Policies, Statement of Income, Balance Sheet, disclosures in the Notes of the Group as well as the Parent Company, and the Group’s Cash Flow Statement. The Consolidated and Parent Company Financial Statements are prepared in accordance with the Danish Financial Statements Act.

Executive Management’s responsibility for the Consolidated and Parent Company Financial StatementsThe Executive Management is responsible for the preparation of Consoli-dated and Parent Company Financial Statements that give a fair presenta-tion in accordance with the Danish Financial Statements Act. Further, the Executive Management is responsible for implementing internal controls deemed necessary by the Executive Management for the preparation and presentation of Consolidated and Parent Company Financial Statements, which give a fair presentation free from material misstatements, irrespective of such errors being due to fraud or misstatements.

Auditor’s ResponsibilityIt is our responsibility to provide an opinion on the Consolidated and Parent Company Financial Statements based on the audit performed. We have conducted our audit in accordance with international auditing standards and further requirements according to Danish auditing legislation. These standards require that we live up to ethical requirements and plan and perform the audit with a view to achieving a high degree of certainty that the Consolidated and Parent Company Financial Statements are free from material misstatements.

Auditing includes actions to achieve audit evidence for the amounts and information disclosed in the Consolidated and Parent Company Financial Statements. The selected actions depend on the auditor’s assessment, to include assessment of risk of material misstatements in the Consolidated and Parent Company Financial Statements, irrespective of such errors being

due to fraud or misstatements. In the risk assessment, the auditor considers internal controls relevant to the company’s preparation and presentation of Consolidated and Parent Company Financial Statements, which give a fair presentation with a view to auditing actions appropriate in the circum-stances, however, not to express an opinion on the effectiveness of the company’s internal controls. Furthermore, auditing includes an opinion as to the Management’s adopted accounting policies being appropriate and its accounting estimates fair, and an evaluation of the overall Consolidated and Parent Company Financial Statements presentation.

In our opinion, the audit evidence obtained is sufficient and qualified as a basis for our opinion.

Our audit does not give rise to qualifications.

OpinionIn our opinion, the Consolidated and Parent Company Financial Statements give a fair presentation of the Group’s and the Parent Company’s assets, liabilities, and financial position at 29 February 2012, as well as of the results of the Group’s and Parent Company’s activities and the Group’s cash flows for the 1 March 2011-29 February 2012 fiscal year, in accordance with the Danish Financial Statements Act.

Opinion on the Management’s review We have read the Management’s Review in accordance with the Danish Financial Statements Act. We have not taken any further actions in addition to the audit of the Consolidated and Parent Company Financial Statements. In our opinion, the information disclosed in the Management’s Review is in accordance with the Consolidated and Parent Company Financial Statements.

Aarhus, 25 May 2012

KPMGStatsautoriseret Revisionspartnerselskab

Flemming Brokhattingen Jes LauritzenState-Authorized Public Accountant State-Authorized Public Accountant

Independent Auditor’s Declarations

Note

1, 2 revenue 1,338,071 1,416,476 1,167,119 1,281,514 3 Production costs (1,029,794) (1,136,051) (905,236) (1,046,711) gross profit 308,277 280,425 261,883 234,803 3 Distribution costs (118,879) (111,329) (105,180) (99,073) 3, 4 Administrative costs (80,625) (78,032) (56,902) (56,801) Ordinary operating profit 108,773 91,064 99,801 78,929 Other operating income 175 170 175 170 Other operating costs (3,155) (1,803) (154) (3) Operating profit 105,793 89,431 99,822 79,096 Profit in subsidiaries after tax - - 5,924 8,198 5 Financial income 1,154 1,631 2,247 3,592 5 Financial costs (37,735) (28,835) (39,974) (30,318) Profit from ordinary activities before tax 69,212 62,227 68,019 60,568 6 Tax on profit from ordinary activities (17,190) (15,787) (15,997) (14,128) Profit for the year 52,022 46,440 52,022 46,440

Proposed profit distribution Proposed dividends 10,000 0 Reserve for net revaluation according to the equity method 6,146 8,291 Profit for the year carried forward 35,876 38,149 52,022 46,440

Notes: Pages 29 and 30

DKK thousand 2011/12 2010/11 2011/12 2010/11

STATEMENT OF INCOME 25

CONSOLIDATED PARENT COMPANy

Statement of Income1 MARCH - 29 FEBRUARy

Note

AssETs non-current assets Intangibles Completed development projects 226,257 151,698 229,895 153,915 Development projects in process 175,585 244,616 175,585 246,069 7 401,842 396,314 405,480 399,984

Property, plant, and equipment Land and buildings 227,075 230,993 227,075 230,993 Plant and machinery 135,455 102,931 133,543 100,618 Fixtures and fittings, tools and equipment 13,706 12,446 10,984 9,380 Payment on account and property, plant, and equipment under construction 6,494 26,227 6,494 26,227 8 382,730 372,597 378,096 367,218

Investments 9 Equity interests in subsidiaries - - 73,650 68,740 - - 73,650 68,740 non-current assets, total 784,572 768,911 857,226 835,942 Current assets Inventories Raw materials and consumables 88,166 91,071 88,166 91,071 Work in process 188,098 253,642 170,766 242,194 On-account payments from customers (16,544) (26,731) (16,505) (26,726) Prepayments to suppliers 786 1,623 786 1,623 260,506 319,605 243,213 308,162

receivables Trade accounts receivable 261,063 310,878 214,060 282,826 10 Construction contracts 75,666 68,334 69,582 63,501 Amounts owed by subsidiaries - - 24,163 14,690 14 Corporate tax receivable 542 2,189 0 0 Other receivables 13,801 19,930 11,716 16,813 12 Deferred tax asset 6,339 5,631 0 0 Prepayments and deferred charges 8,473 16,063 8,474 16,063 365,884 423,025 327,995 393,893

15 Cash and cash equivalents 97,185 76,175 90,689 68,008

Current assets, total 723,575 818,805 661,897 770,063

Assets, total 1,508,147 1,587,716 1,519,123 1,606,005

Notes: Pages 30, 31, 32, 34, and 35

DKK thousand 2012 2011 2012 2011

26 BALANCE SHEET - ASSETS

CONSOLIDATED PARENT COMPANy

Balance Sheet29 FEBRUARy

Note

EquITy AnD lIABIlITIEs Equity Capital stock 18,000 18,000 18,000 18,000 Net revaluation according to the equity method - - 12,007 7,097 Profit carried forward 393,541 367,235 381,534 360,138 Proposed dividends 10,000 0 10,000 0 11 Equity, total 421,541 385,235 421,541 385,235

Provisions Warranty commitments 13,049 9,605 13,049 9,605 Provisions made within construction contracts 1,151 3,700 878 3,309 12 Deferred tax 116,367 106,272 117,256 106,277 Other provisions 4,645 2,300 0 500 Provisions, total 135,212 121,877 131,183 119,691 liabilities other than provisions long-term liabilities other than provisions Employee bonds 14,890 18,251 14,890 18,251 Credit institutions 247,774 225,000 247,774 225,000 Mortgage banks 224,552 223,174 224,552 223,174 13 487,216 466,425 487,216 466,425

Current liabilities other than provisions Current portion of long-term liabilities 5,495 1,926 5,495 1,926 Credit institutions 0 75,973 0 75,973 10 Construction contracts 77,429 145,053 75,577 142,969 Prepayments from customers 61,775 91,657 57,138 77,926 Trade accounts payable 70,127 78,374 68,376 74,241 Amounts owed to Parent Company 62 461 62 461 Amounts owed to subsidiaries - - 55,112 60,543 14 Corporate tax payable 1,398 1,012 0 0 Other payables 247,892 219,723 217,423 200,615 464,178 614,179 479,183 634,654

liabilities other than provisions, total 951,394 1,080,604 966,399 1,101,079

Equity and liabilities, total 1,508,147 1,587,716 1,519,123 1,606,005

15 Contingent liabilities and security 16 Related parties

Notes: Pages 32, 33, 34, and 35

DKK thousand 2012 2011 2012 2011

BALANCE SHEET - EQUITy AND LIABILITIES 27

CONSOLIDATED PARENT COMPANy

Profit from ordinary activities before tax 69,212 62,227

Adjustments: Depreciation, etc. 41,726 41,250 Reversed provisions 3,240 11,844 Amortization of development licenses previously transferred to contract work in process 34,215 32,038 Financial items 36,581 27,204 115,762 112,336

Changes in working capital: Inventories 47,342 36,113 Receivables including construction contracts 47,079 (32,062) Construction contracts and prepayments from customers (97,142) 22,193 Trade accounts payable and other payables 7,348 (44,655) 4,627 (18,411)

Cash flows generated from operations (operating activities) before financial items 189,601 156,152 Financial items (36,581) (27,204) Cash flows from operations (ordinary activities) 153,020 128,948 Corporate tax paid (249) (2,396) Cash flows from operating activities 152,771 126,552 Capitalized development costs (38,119) (65,781) Acquisition of property, land, and equipment (41,665) (57,416) Cash flows for investing activities (79,784) (123,197) Changes in long-term liabilities 24,360 221,743 Dividends paid 0 0 Cash flows from financing activities 24,360 221,743 Changes in cash and cash equivalents 97,347 225,098 Cash and cash equivalents and credit institutions at 1 March (63,887) (288,985)

Cash and cash equivalents and credit institutions at 29 February 33,460 (63,887)

The Cash Flow Statement cannot be directly derived from the Balance Sheet and the Statement of Income.

DKK thousand 2011/12 2010/11

28 CASH FLOW STATEMENT

CONSOLIDATED

Cash Flow Statement1 MARCH - 29 FEBRUARy

NOTES 29

Notes

2. rEvEnuE

DKK thousand 2011/12 2010/11 2011/12 2010/11

Goods and services 862,257 945,971 720,558 844,182 Construction contracts 475,814 470,505 446,561 437,332 1,338,071 1,416,476 1,167,119 1,281,514

3. COsTs Parent Company Board of Directors emoluments and remuneration of the Executive Management 4,849 4,095 4,849 4,095 Wages and salaries 578,972 578,001 489,981 497,045 Pensions and other social security costs 57,055 52,333 43,797 40,773 Other staff costs 4,723 4,087 4,325 3,660 645,599 638,516 542,952 545,573 Average number of full-time employees 1,195 1,205 1,023 1,051

4. FEEs PAID TO AuDITOrs Total fees to KPMG can be specified as follows: Statutory audit 836 812 824 800 Consultancy fees: other assurance engagements 53 60 53 60 Consultancy fees: tax and VAT 621 696 448 587 Other non-audit services 284 390 122 164 1,794 1,958 1,447 1,611

Total fees to other auditors can be specified as follows: Audit 273 378 0 0 Consultancy fees: tax and VAT 202 232 83 39 Other non-audit services 820 519 485 0 1,295 1,129 568 39

5. FInAnCIAl InCOME AnD COsTs Included in financial income and costs are: Interest income from subsidiaries - - 1,238 1,983 Interest costs to subsidiaries - - 2,516 2,341

CONSOLIDATED PARENT COMPANy

2011/12 2011/122010/11 2010/11

1. sEgMEnT InFOrMATIOn - rEvEnuE

37%

11%

38%

10%

Non-defense

Denmark

Defense

OutsideDenmark

63%

89%

62%

90%

30 NOTES

6. TAx On ThE PrOFIT FOr ThE yEAr

DKK thousand 2011/12 2010/11 2011/12 2010/11

Joint taxation contribution/current tax 2,282 1,737 (355) (6) Deferred tax 9,535 17,235 10,979 17,319 Tax on the profit for the year, total 11,817 18,972 10,624 17,313

Specified as follows: Tax on profit from ordinary activities 17,190 15,787 15,997 14,128 Tax on changes in equity (5,373) 3,185 (5,373) 3,185 11,817 18,972 10,624 17,313

7. InTAngIBlEs

Completed Development development projects in DKK thousand projects process Total

Cost at 1 March 2011 454,299 244,616 698,915 Additions 511 37,608 38,119 Transfer 106,639 (106,639) 0 Disposals (11,545) 0 (11,545) Cost at 29 February 2012 549,904 175,585 725,489 Amortizations and impairments at 1 March 2011 302,601 0 302,601 Amortizations 1,262 0 1,262 Impairments 8,870 0 8,870 Disposals (11,545) 0 (11,545) Transferred to contract work in process 22,459 0 22,459 Amortizations and impairments at 29 February 2012 323,647 0 323,647 Carrying value at 29 February 2012 226,257 175,585 401,842

Cost at 1 March 2011 456,516 246,069 702,585 Additions 511 37,576 38,087 Transfer 108,060 (108,060) 0 Disposals (11,545) 0 (11,545) Cost at 29 February 2012 553,542 175,585 729,127 Amortizations and impairments at 1 March 2011 302,601 0 302,601 Amortizations 1,262 0 1,262 Impairments 8,870 0 8,870 Disposals (11,545) 0 (11,545) Transferred to contract work in process 22,459 0 22,459 Amortizations and impairments at 29 February 2012 323,647 0 323,647 Carrying value at 29 February 2012 229,895 175,585 405,480

CONSOLIDATED

CONSOLIDATED

PARENT COMPANy

PARENT COMPANy

NOTES 31

8. PrOPErTy, PlAnT, AnD EquIPMEnT

Payment on account and property, plant, Fixtures and and equip- Land and Plant and fittings, tools ment under DKK thousand buildings machinery and equipment construction Total

Cost at 1 March 2011 380,572 257,928 97,996 26,227 762,723 Foreign currency translation adjustments 0 109 176 0 285 Additions 4,198 48,512 8,688 6,494 67,892 Disposals (7,398) (1,305) (8,737) (26,227) (43,667) Cost at 29 February 2012 377,372 305,244 98,123 6,494 787,233 Depreciation and impairments at 1 March 2011 149,579 154,997 85,550 0 390,126 Foreign currency translation adjustments 0 110 113 0 223 Depreciation and impairments 7,930 15,927 7,490 0 31,347 Disposals (7,212) (1,245) (8,736) 0 (17,193) Depreciation and impairments at 29 February 2012 150,297 169,789 84,417 0 404,503 Carrying value at 29 February 2012 227,075 135,455 13,706 6,494 382,730

Depreciated over 10-50 years 5-10 years 3-7 years

Cost at 1 March 2011 302,273 251,147 86,069 26,227 665,716 Additions 4,198 48,300 7,565 6,494 66,557 Disposals (7,398) (1,305) (7,087) (26,227) (42,017) Cost at 29 February 2012 299,073 298,142 86,547 6,494 690,256 Depreciation and impairments at 1 March 2011 71,280 150,529 76,689 0 298,498 Depreciation and impairments 7,930 15,315 5,961 0 29,206 Disposals (7,212) (1,245) (7,087) 0 (15,544) Depreciation and impairments at 29 February 2012 71,998 164,599 75,563 0 312,160 Carrying value at 29 February 2012 227,075 133,543 10,984 6,494 378,096 Depreciated over 10-50 years 5-10 years 3-7 years

CONSOLIDATED

PARENT COMPANy

32 NOTES

9. EquITy InTErEsTs In suBsIDIArIEs

DKK thousand

Cost at 1 March 2011 51,699 Disposals during the year 0 Additions during the year 0 Cost at 29 February 2012 51,699 Net revaluations at 1 March 2011 17,041 Translation adjustment at the beginning of the year 625 Dividends paid (1,639) Profit for the year 5,924 net revaluations at 29 February 2012 21,951 Carrying value at 29 February 2012 73,650

name registered office Ownership Capital stock Terma Ejendomme Skive A/S Aarhus, Denmark 100% DKK 1,150 thousand Terma GmbH Darmstadt, Germany 100% EUR 51 thousand Terma B.V. Leiden, The Netherlands 100% EUR 750 thousand Terma S.r.l. in liquidation Besozzo, Italy 100% EUR 10 thousand Terma North America Inc. Delaware, USA 100% USD 150 thousand Terma Singapore Pte. Ltd. Singapore, Singapore 100% SGD 100 thousand

10. COnsTruCTIOn COnTrACTs

DKK thousand 2012 2011 2012 2011 Sales price of construction contracts 1,163,629 916,565 1,046,688 828,632 Invoiced on account (1,165,392) (993,284) (1,052,683) (908,100) (1,763) (76,719) (5,995) (79,468)

Recognized as follows: Construction contracts (assets) 75,666 68,334 69,582 63,501 Construction contracts (liabilities) (77,429) (145,053) (75,577) (142,969) (1,763) (76,719) 5,995 (79,468)

CONSOLIDATED PARENT COMPANy

NOTES 33

11. EquITy

DKK thousand 2011/12 2010/11

Equity at 1 March 2011 385,235 329,513 Dividends paid 0 0 Profit for the year carried forward 42,022 46,440 Proposed dividends 10,000 0 Translation adjustment relating to foreign entity 403 (274) Changes in value of hedging instruments, etc. (after tax) (16,119) 9,556 Equity at 29 February 2012 421,541 385,235

Net revaluation Profit Capital according to the carried Proposed DKK thousand stock equity method forward dividends Total

Equity at 1 March 2011 18,000 - 367,235 0 385,235 Dividends paid - - - 0 0 Profit for the year carried forward - - 42,022 10,000 52,022 Translation adjustment relating to foreign entity - - 403 - 403 Changes in value of hedging instruments, etc. (after tax) - - (16,119) - (16,119) Equity at 29 February 2012 18,000 - 393,541 10,000 421,541

Equity at 1 March 2011 18,000 7,097 360,138 0 385,235 Dividends paid - - - 0 0 Dividends received from subsidiaries - (1,639) 1,639 - 0 Profit for the year carried forward - 6,146 35,876 10,000 52,022 Translation adjustment relating to foreign entity - 403 - - 403 Changes in value of hedging instruments, etc. (after tax) - - (16,119) - (16,119) Equity at 29 February 2012 18,000 12,007 381,534 10,000 421,541

Capital stock consists of: 1 stock at MDKK 18 The capital stock has been reduced by MDKK 2 in connection with annulment of own stock during the fiscal year 2008/09. The capital stock has remained unchanged during the preceding four years.

CONSOLIDATED

CONSOLIDATED

PARENT COMPANy

34 NOTES

12. DEFErrED TAx

DKK thousand 2011/12 2010/11 2011/12 2010/11

Deferred tax at 1 March 100,641 83,309 106,277 88,958 Foreign currency translation adjustments (148) 97 0 0 Adjustment for the year 9,535 17,235 10,979 17,319 Deferred tax at 29 February 110,028 100,641 117,256 106,277

Recognized as follows: Deferred tax asset (6,339) (5,631) 0 0 Deferred tax 116,367 106,272 117,256 106,277 110,028 100,641 117,256 106,277

Deferred tax relates to: Intangibles 101,370 99,935 101,370 99,935 Property, plant, and equipment 21,066 12,067 20,818 12,111 Current assets 17,628 17,997 17,356 17,552 Provisions (1,161) (575) 0 (125) Liabilities other than provisions (5,050) (4,586) (3,391) (2,863) Tax loss carryforward (23,825) (24,197) (18,897) (20,333) 110,028 100,641 117,256 106,277

13. lOng-TErM lIABIlITIEs OThEr ThAn PrOvIsIOns

Current share Loans Long-term of long-term outstanding DKK thousand liabilities liabilities after 5 years

Employee bonds 14,890 3,361 0 Mortgage banks 247,774 0 0 Credit institutions 224,552 2,134 220,198 487,216 5,495 220,198

Employee bonds 14,890 3,361 0 Mortgage banks 247,774 0 0 Credit institutions 224,552 2,134 220,198 487,216 5,495 220,198

CONSOLIDATED

CONSOLIDATED

PARENT COMPANy

PARENT COMPANy

NOTES 35

14. COrPOrATE TAx PAyABlE

DKK thousand 2011/12 2010/11 2011/12 2010/11

Corporate tax payable at 1 March (1,177) (145) 0 0 Tax for the year/joint taxation contribution 2,282 1,737 (355) (6) Corporate tax paid during the year (249) (2,395) (33) (28) Transferred to intra-group balances 0 (374) 388 34 Corporate tax payable at 29 February 856 (1,177) 0 0

Recognized as follows: Corporate tax receivable (542) (2,189) 0 0 Corporate tax payable 1,398 1,012 0 0 856 (1,177) 0 0

15. COnTIngEnT lIABIlITIEs AnD sECurITy 2012 2011 2012 2011

Contingent liabilities Lease liabilities (operating leases) falling due within five years 22,529 12,094 9,364 5,307 Lease guarantee in the period until 31 March 2014. Annually MDKK 4.2 4,100 11,100 4,100 11,100 The Group’s Danish companies are jointly liable for joint registration of VAT.

security The following assets have been provided as security for mortgage banks: Carrying value of land and buildings 227,075 230,993 227,075 230,993 Terma A/S – acting as the Parent Company – has issued a letter of intent to third parties in connection with the establishment of credit facilities for its subsidiaries at a total amount of DKK 25,014 thousand. Included in cash and cash equivalents are deposit accounts which are released upon delivery to customers 63,725 64,089 63,725 64,089

16. rElATED PArTIEs Terma A/S is a wholly owned subsidiary of Thrige Holding A/S, which is wholly owned by the Thomas B. Thrige Foundation.Terma A/S’ related parties exercising significant influence comprise the Board of Directors, the Executive Management, managerial staff, and their family members. Further, related parties comprise companies in which the above mentioned persons have substantial interests. Apart from the intra-group transactions which have been eliminated in the consolidated financial statements and the usual remuneration and emoluments, no transactions have been concluded relative to the Board of Directors, Executive Management, managerial staff, major stockholders, or other related parties.

CONSOLIDATED PARENT COMPANy

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