Annual Report 2012 13 - terma

Annual Report
2012 13

Board of Directors
Svend-Aage Nielsen, Chairman
Flemming H. Tomdrup, Deputy Chairman
Henrik Stenbjerre
Anders Eldrup
Bo Laursen
Kirsten Kahr Ovesen
Executive Management
Jens Maaløe, President & CEO
Bankers
Danske Bank, Holmens Kanal 2–12
1092 Copenhagen K, Denmark
Owners
Thrige Holding A/S, Copenhagen
Auditors
KPMG
Statsautoriseret Revisionspartnerselskab
Værkmestergade 25, 8000 Aarhus C, Denmark
Jesper Ridder Olsen
State-Authorized Public Accountant
Jes Lauritzen
State-Authorized Public Accountant
©Terma 2013
Production: CBC
Images: Jan Bauer-Jensen, Fighter Wing Skrydstrup; Lockheed Martin
Corporation; David Bering; and Terma
Printing: Baurs Offset
2

Contents
Financial Highlights – Consolidated ------------------ 4
Management’s Review 2012/13 --------------------- 5
Business Areas and International Offices -------------- 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
3

Financial Highlights
Consolidated
DKK million 2012/13 2011/12 2010/11 2009/10 2008/09
Order intake 2,037* 1,026 1,390 876 1,194
Order book, year-end 2,188* 1,291 1,603 1,629 1,866
Revenue 1,140 1,338 1,416 1,113 1,058
Operating profit 73 106 89 2 74
Financial items (30) (37) (27) (27) (14)
Profit for the year 29 52 46 (20) 42
Non-current assets 785 785 769 711 596
Current assets 747 724 819 748 742
Assets, total 1,532 1,508 1,588 1,459 1,339
Capital stock 18 18 18 18 18
Equity 440 422 385 330 375
Provisions 137 135 122 93 100
Long-term liabilities other than provisions 399 487 467 246 207
Current liabilities other than provisions 557 464 614 791 658
Cash flows from operating activities 128 153 127 82 101
Cash flows from investing activities (52) (80) (123) (222) (219)
Portion relating to investments in property,
plant, and equipment (12) (42) (57) (85) (70)
Cash flows from financing activities (13) 24 222 19 (2)
Cash flows, total 63 97 225 (120) (120)
Financial ratios
Net profit ratio 6.4 7.9 6.3 0.2 7.0
Return on investments 5.3 7.2 6.0 0.1 6.1
Current ratio 134 156 133 95 113
Equity ratio 28.7 28.0 24.3 22.6 28.0
Return on equity 6.8 12.9 13.0 (5.6) 10.2
Average number of full-time employees 1,080 1,195 1,205 1,261 1,183
* Including five-year framework agreements relating to the F-35 Joint Strike Fighter program.
Definitions
Net profit ratio:
Operating profit x 100
Revenue
Current ratio:
Current assets x 100
Current liabilities other than provisions
Return on investments:
Operating profit x 100
Average operating assets
Equity ratio:
Equity at year-end x 100
Total liabilities at year-end
Operating assets:
Total assets less cash and cash
equivalents, other interest-bearing
assets (including stock), and equity
interest in affiliated companies
Return on equity:
Profit for the year x 100
Average equity
4 Financial Highlights - Consolidated

Management’s
Review 2012/13
Jens Maaløe, President & CEO
Result for 2012/13
The year’s intake of orders was MDKK 2,037 as compared to MDKK 1,026
in 2011/12. Revenue for the fiscal year was MDKK 1,140 as compared to
MDKK 1,338 in 2011/12. The order book at year-end was MDKK 2,188.
The order intake developed positively. Multi-year agreements associated
with the F-35 Joint Strike Fighter program were entered into with the U.S.
companies Lockheed Martin Corporation and Northrop Grumman
Corporation.
88% of the revenue was generated internationally (exports), and 12%
was generated in Denmark. The defense market constitutes 63% of the
revenue, whereas the nondefense market constitutes 37%.
The profit before tax was MDKK 43 as compared to MDKK 69 in 2011/12.
The profit was impacted by onetime expenses related to the streamlining
of Terma’s internal structures and processes.
The interest-bearing debt has been reduced by MDKK 66, primarily as a
result of reduced working capital.
The Board of Directors proposes a dividend payment of MDKK 10.
At the end of the fiscal year, total staff was 1,057.
The overall result for 2012/13 was consistent with our expectations in a
difficult market characterized by major changes and low visibility. The
commitment and efforts of our employees during the year are outstanding,
and the Board of Directors and the Executive Management are greatly
appreciative.
The Aerospace & Defense Markets
The Aerospace & Defense (A & D) markets in Europe and the U.S. are
marked by continued pressure on defense budgets. Added to this is the
“sequestration” in the U.S. which – in the shorter term – will result in further
defense budget cuts and delays in ongoing projects. The only regions
which are experiencing fair growth in defense budgets are parts of the
Middle and Far East and Brazil. For our U.S. and European customers, this
situation results in longer-term decision making, increased competition,
and increased uncertainty as to the timing of contract execution.
In the United Arab Emirates, Saudi Arabia, India, Korea, and Malaysia, a
number of positive events during the year confirm our more positive outlook
and opportunities for growth in the Middle and Far East. However,
we must invest significantly more time in these emerging markets compared
to our existing markets in Europe. Further, the financial risk is higher
as these new markets constitute a different business culture.
Terma’s response to this global market trend is an expansion of our global
presence and a strengthening of our competitiveness with a streamlining
of Terma’s internal structures and processes.
Management’s Review 2012/13 5

Selective coating equipment
for circuit card assemblies
6 Management’s Review 2012/13

Danish Air Force pilot inspecting
chaff/flare magazines on an
F-16 fighter aircraft
Business Activities
Terma consists of three Business Areas:
1. Terma Defense & Security
2. Terma Space
3. Terma Aerostructures
Terma’s largest Business Area, Terma Defense & Security, comprises
three Business Lines:
- Airborne, in which Terma supplies self-protection, audio, and reconnaissance
solutions for military aircraft and helicopters as well as
radars for environmental surveillance from aircraft.
- Land, in which Terma supplies command, control, and communications
solutions for protection of defense and nondefense critical infrastructure
and radar systems for coastal surveillance and vessel traffic
control in seaports and airports.
- Naval, in which Terma supplies command and control, radar, and selfprotection
systems for naval vessels.
The Terma Space Business Area develops electronics, software, and services
for satellites, control centers, and for test and validation tasks in
connection with the development of new satellites.
The Terma Aerostructures Business Area supplies advanced aerostructures
for fighter aircraft, military transport aircraft and helicopters, as
well as for nondefense aircraft.
Effective 1 March 2013, Terma Aerostructures was separated as an independent
subsidiary under the name of Terma Aerostructures A/S, wholly owned
by Terma A/S. This separation is based on the fact that the requirements for
management and business structure in Terma Aerostructures A/S differ significantly
from Terma A/S. The competition in the aerospace industry calls for a
production capability to deliver high quality products in large volumes, at competitive
prices, and within the agreed time frame. The remainder of Terma A/S
is more project-oriented, providing high-tech products in smaller volumes.
In 2012, the Danish Parliament selected Sikorsky’s MH-60-R Seahawk
helicopter as the replacement for the current Lynx helicopters for maritime
surveillance, fisheries inspection, and search and rescue missions. Terma
has entered into cooperation agreements with the suppliers of the helicopters,
Sikorsky Aircraft Corporation and Lockheed Martin Corporation.
Contract negotiations have been initiated with Terma Aerostructures and
Terma Defense & Security.
In the fall of 2012, Terma implemented a global employee survey targeting
job and career satisfaction. Based on the results of the survey, new activities
have been initiated to better ensure the continued satisfaction among the
employees and thereby support the continued development of the Group.
The response rate of 93.7% indicates a strong commitment to this initiative.
At the beginning of 2013, a strategy was implemented to enhance the
presence and marketing of the Group and its products in the social media.
This is consistent with other companies in the defense industry.
In 2012, Terma formulated five long-term goals which function as points
of reference for the Group’s future business-driven Corporate Social
Responsibility (CSR) activities. See below section about CSR.
The following presents a brief review of the developments within each of
Terma’s Business Areas and geographic Regions.
Terma Defense & Security
Airborne
A new version of Terma’s AN/ALQ-213(V) Electronic Warfare Management
System has been introduced into the market, presenting a number of
technological improvements.
Terma received a contract for a Foreign Comparative Testing Program of
Terma’s 3D-Audio and Active Noise Reduction solution for U.S. Air
National Guard’s aircraft, and equipment has been installed on a demonstration
aircraft for the testing of Terma’s solution. Further, U.S. Army
Aeromedical Research Laboratory and Terma entered into a Cooperative
Research and Development Agreement which allows the laboratory to
assess our 3D-Audio technology for pilots. This is a breakthrough for
Terma’s audio business in the U.S.
Terma entered into a contract for the supply of self-protection equipment to the
Royal Danish Air Force’s TTT Westland 101 Merlin helicopters (EH-101). This is
an extensive systems integration task which involves Terma Aerostructures
and Terma Defense & Security. The Air Force has 14 EH-101 helicopters which
are used for tactical troop transport and search and rescue missions.
Terma won a multi-year agreement with Northrop Grumman Corporation
for production and delivery of electronics modules for all three variants of
the F-35 Joint Strike Fighter.
Management’s Review 2012/13 7

In 2012, the political parties behind the Danish Defense Agreement decided
that Denmark would re-enter NATO’s Alliance Ground Surveillance project
(AGS). The AGS project is based on industrial contributions from the participating
countries, proportional to the countries’ co-financing of the project.
Terma has a leading role in securing industrial assignments relative to an
agreed Danish “work share” in close collaboration with main contractor
Northrop Grumman Corporation and the Danish authorities. In addition,
Terma, in collaboration with the Danish Defence and Security Industries
Association, must keep Danish industries informed about the project.
Land
Delivery of the T.react Radio Dispatch communications solution to the
Danish police control centers has been completed with deployment in the
Bornholm police district. The solution is now deployed in the country’s 11
police districts and the Danish National Police. The Danish regions also
utilize this system. The collaboration with the police continues in the form
of support and maintenance of the supplied systems.
To Finland, Terma will supply a similar nationwide information system for
the emergency response centers of the Finnish police, ambulances, and
other emergency preparedness services.
Terma markets the T.react CIP surveillance solution, which comprises
radar and command and control systems for the protection of critical
infrastructure such as seaports, plants, or airports.
In the proximity of offshore 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. At Copenhagen Airport, Terma has
installed a test radar. Additionally, the Group has implemented a test program
using these radars in the U.S. with promising results.
Another issue with the constantly increasing height of wind turbines is
the flashing red marking lighting on the wind turbine towers, which can
be a nuisance for the surrounding environment. With the SCANTER 5202,
Terma offers a solution which ensures that the marking lighting is active
only when aircraft are in the proximity of the wind farm.
Terma’s customers continue to exhibit a keen interest in the Group’s radar
systems for vessel traffic service and coastal surveillance applications.
The new SCANTER 5000 and 6000 Solid State radar products are increasingly
replacing older products. We have entered into new contracts for
the supply of these radar systems to Norway, a number of Eastern
European countries, and several African countries.
With the Group’s Surface Movement Radar technology, Terma is a global
supplier of radar equipment for the monitoring of ground traffic at airports.
The radar is part of the Advanced Surface Movement Guidance and
Control Systems, used by air traffic controllers to monitor and
manage ground-based traffic at airports. Terma has supplied radars to
most major airports in the world and most recently the new SCANTER
5000 to international airports in Oslo, Helsinki, Berlin, and Paris.
Naval
Terma develops command and control systems, self-protection systems,
and radar systems for naval vessels with a specific focus on the requirements
raised by Offshore Patrol Vessels and coast guard operations. All
over the world, this type of vessel is increasingly deployed for the fight
against crimes at sea, such as illegal fishery, illegal immigration, and
smuggling of weapons and drugs. These issues pose specific requirements
on radar technology and tailored command and control systems as
well as the vessels’ self-protection capability.
2012/13 documented the value of persistent market cultivation, nationally
as well as internationally, and we have entered into contracts with
customers at a satisfactory level.
Terma has supplied C-Guard self-protection systems for naval vessels in a
number of countries in South East Asia, a market of growing importance.
Terma’s delivery of a command and control system (C-Series) and the
SCANTER 4100 radar to the Royal Thai Navy’s Landing Platform Dock has
been completed following successful live firing tests.
Several contracts have been secured as part of collaboration agreements
and relations which Terma has built up with international shipyards.
Terma entered into contracts with the Danish Defence Acquisition and
Logistics Organization for an upgrade of the Royal Danish Navy’s Patrol
Vessels of the Thetis class with the command and control system C-Flex
and installation of new radar systems.
Terma’s SCANTER 4100 radar, which has been supplied to the Royal
Danish Navy’s Offshore Patrol Vessels of the Knud Rasmussen class, has
been selected in an international tender. This selection underscores the
international competitiveness of Terma’s naval products.
For the French Navy’s FREMM frigate program, Terma has secured a contract
for radar systems for four frigates in addition to the seven which
were previously supplied in collaboration with a Norwegian and a French
partner. The radars are used for navigation and surveillance purposes and
for helicopter landing on the frigates.
Terma Space
From a Terma perspective, the European space market is developing positively.
At the 2012 ministerial conference, the activities of the European
Space Agency (ESA) for the next three years were established, and the continuation
of the ASIM project was secured with a new funding allocation.
Terma is the main contractor in the ASIM project – The Atmospheric Space
Interactions Monitor – with the objective of measuring high altitude lightning
in the upper atmosphere. The observatory will be launched to the
International Space Station onboard a U.S. rocket in 2015.
Terma has entered into a contract to supply the power module for the
future scientific ESA mission ExoMars.
The development of a new generation of Star Trackers has been funded
by ESA. The new Tracker is based on technology which reduces the size
and weight of the camera and computer.
Terma has designed the Processing and Scheduling Facility which is part of
the ground segment for the Canadian satellite Sapphire, a program which
will track space junk – a growing problem in space. Terma’s contribution is
a computer system responsible for scheduling observations and subsequent
processing of images resulting from these observations.
8 Management’s Review 2012/13

Testing of power
supply for ESA’s
BepiColombo mission
Radar electronics
Terma command and
control system on board
the HDMS ABSALON
Management’s Review 2012/13 9

Composites bonding
Terma develops the software which controls the Solar Orbiter’s positioning
and orbit. The mission is part of the scientific exploration of the sun. The
Solar Orbiter will implement observations close to the sun, and Terma’s
software is crucial for the satellite’s correct positioning relative to the sun.
Terma Aerostructures
The Terma Aerostructures Business Area’s focused participation in the
U.S. F-35 Joint Strike Fighter program resulted in two long-term contracts
with Lockheed Martin Corporation and Northrop Grumman Corporation.
The contract with Lockheed Martin Corporation encompasses the manufacture
and assembly of the Horizontal Tail Leading Edges for all three
variants of the F-35. The overall agreement has a value of more than
MDKK 500 (MUSD 95) and includes equipment for all F-35 aircraft manufactured
through 2019. Terma entered into a similar long-term agreement
with Northrop Grumman Corporation for Center Fuselage parts for all
three variants of the F-35 aircraft. The value and time frame of this overall
agreement is similar to the agreement with Lockheed Martin Corporation.
With these two important contracts, Terma has established a reliable
basis for our future investments and for the Terma Aerostructures
employment level and business during the next six years.
The F-35 Joint Strike Fighter from Lockheed Martin Corporation competes
with the F-18 Super Hornet from The Boeing Company, the Gripen
NG from Saab, and the Eurofighter Typhoon to replace the current Danish
F-16 Fighting Falcon fighter aircraft. In March 2013, a majority of the
Danish Parliament decided to resume the dialog with the candidates, targeting
down-selection before mid-2015.
As a result of strengthened efforts to secure the required quality in the
composites products supplied to the F-35 program, the Terma Aerostructures
Business Area was granted the authority to conduct self inspections. This
was the result of having achieved the maximum quality score during the
preceding four quarters.
Within the Alternate Mission Equipment area, Terma produces customer-specific
solutions for electronic self-protection and reconnaissance applications
for a number of different aircraft and helicopters, including the F-16, F-35,
Tornado, Gripen, C-130, and the Chinook, EH-101, and Apache helicopters.
Terma’s Global Sales Structure
In 2012/13, 88% of the order intake was generated from international
customers, while sales, project implementation, and maintenance are
increasingly handled regionally. From a geographic market perspective,
Terma has divided the world into five regions:
1. Europe, the Middle East, and Africa (EMEA), managed out of Denmark
2. The U.S. and Canada, managed out of Washington D.C., USA
3. Asia Pacific, managed out of Singapore
4. India, managed out of New Delhi
5. Rest of World, managed out of Denmark
The Terma Defense & Security Business Area is responsible for the strategy
development and day-to-day management of the global sales efforts.
The new structure and the continued expansion of Terma’s international
presence in the U.S., The Netherlands, Germany, Singapore, and India
strengthen these global efforts. The target is closer collaboration with the
customer via increased sales and service activities at the current locations.
The next local representation is expected to be established in the Middle
East as part of EMEA.
10 Management’s Review 2012/13

The F-35 Joint Strike
Fighter equipped with
Terma Gun Pod and pylons
Terma North America Inc. (USA)
The U.S. subsidiary is increasingly contributing to the aggregate business.
Ten years ago, Terma – as the first non-U.S. company – entered into a
Public Private Partnership agreement with the U.S. Air Force. The Terma
North America headquarters in the Washington D.C. area facilitates
growth due to proximity to key customers and partners. In the past year,
the Company has strengthened its sales organization in the Naval market
area and optimized the organization of its Fort Worth-based operation.
The Company has a total staff of approximately 50 U.S. employees.
In Warner Robins, Georgia, Terma North America Inc. – as part of the
Terma 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. In Warner
Robins, Terma North America moved to new and larger facilities in 2012.
Through participation in Foreign Military Sales programs, Terma North
America, in collaboration with the U.S. Air Force, has supplied self-protection
equipment to several international aircraft update programs.
Another milestone was reached with a successful critical design review
of the deliveries of the self-protection equipment for the Boeing
Company’s Chinook CH-47F helicopter program in Canada.
Partnering with Northrop Grumman Corporation, Terma North America
has installed and commissioned a SCANTER radar system for the surveillance
of the critical infrastructure in Saudi Arabia.
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.
During the international defense and security exhibition, NIDV, in
Rotterdam in 2012, Terma and Fokker Services B.V. signed a collaboration
agreement targeting a helicopter service agreement with the Royal
Netherlands Air Force.
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 implemented
under multi-year framework contracts by Terma’s staff of specialists
who work at the Terma office in Leiden and at ESTEC.
Terma GmbH (Germany)
The activities of Terma GmbH in Darmstadt 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.
For the ESA satellite Meteosat Second Generation 3, Terma developed the
Mission Control System used for controlling the satellite during launch and
early orbit operations. Terma also provided on-site support staff at ESOC.
The satellite is one of four geostationary meteorological satellites.
Management’s Review 2012/13 11

Production of space
electronics in clean
room facility
The contract with the European Southern Observatory (ESO) in Garching
near Munich has been extended until 2014. Terma provides a team of 20
experts for the management of astronomical data from telescopes and
observations at ESO in Chile.
Terma Singapore Pte. Ltd. (Asia Pacific)
As part of the expansion of our local presence, Terma Singapore Pte. Ltd.
has expanded its activities to include all elements of the Terma 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, including a
growing number of international exhibitions and expansion of contacts
and business opportunities.
During the year, new orders and contracts have been secured for radar
systems and self-protection systems for aircraft and naval vessels.
Terma India
Terma is in the process of establishing a representative office at the
Danish Embassy in New Delhi. The aim is to move closer to the Indian end
users and companies in one of the largest Aerospace & Defense markets.
Terma provides radar systems for coastal surveillance and information
systems for airports in India. New business opportunities are currently
being explored, including the Indian Navy.
Risks
Terma’s most important operational risk is assessed to be the unpredictable
decision-making processes in our traditional markets, which are affected
by cuts in public budgets, including defense budgets. Adding to this uncertainty
is the “sequestration” in the U.S. which – in the shorter term – will
result in further defense budget cuts and delays in ongoing projects. The
Group seeks to reduce this risk by a tight financial control.
The interest-bearing debt is expected to be further reduced during the
2013/14 fiscal year, and no significant credit risks exist relative to individual
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.
Terma is minimally exposed to changes in the interest rate level. The interest
risk is hedged via fixed-rate mortgage loans and interest contracts.
The Group primarily sells and buys in DKK, EUR, and USD currencies. In
agreement with a policy approved by our Board of Directors, risks relative
to USD are hedged by entering into forward exchange contracts in connection
with the acceptance and conclusion of contracts.
Outlook for the 2013/14 Fiscal Year
In 2013/14, we expect a modest increase in revenue and profit. The
expected revenue is reasonably secured by current contracts. Further,
additional contracts, which have been in negotiation for a long time, are
expected to be concluded and signed.
At the end of the 2013/14 fiscal year, total staff is projected to have
increased to 1,100.
Corporate Social Responsibility
Terma endeavors to contribute to society in a most responsible manner.
Thus, our activities within the Corporate Social Responsibility program
(CSR) take place in close interaction with our customers, employees, collaboration
partners, the local community, and the world around us.
12 Management’s Review 2012/13

Terma’s five goals for
ensuring good corporate
social responsibility
Customers
Organizational governance
Fair operating practices
Suppliers
Fair operating practices
Human rights
Employees
Labor practices
Human rights
Environment
The environment
Community
Community involvement
ASPIRATIONAL GOAL
The aim of corporate governance
at Terma is to build a culture of
integrity and ethical behavior in
countries where we do business.
Our values and principles provide
fundamental guidance for our
actions and govern the relationship
with our employees, customers,
suppliers, and communities.
We take pride in our zero
tolerance of corruption
ASPIRATIONAL GOAL
To ensure safe working conditions
throughout the supply chain, that
business operations are environmentally
sound, and that business
is conducted in accordance with
internationally recognized
principles for business ethics and
human rights. We expect and
require that our suppliers, and
their supply chain, adhere to the
same high standards as Terma.
We take pride in having a
responsible supply chain
ASPIRATIONAL GOAL
To be recognized as a company
with a second to none professional
working environment. To provide
our employees with challenges
that make them “Best in class”.
To develop talents that are in high
demand in our fields of expertise.
We take pride in our
employees and their passion
ASPIRATIONAL GOAL
To ensure a sustainable production
line and daily business operations
by optimizing the use of natural
resources.
We take pride in
constantly improving our
environmental impact
ASPIRATIONAL GOAL
To support educational programs
in local communities within Terma’s
Business Areas in order to ensure a
recruitment of qualified employees
while supporting the local economy
and employment market. To ensure
the successful integration of foreign
Terma employees and their families
when moving to a new country.
We take pride in taking part
in the local community
Anticorruption
For many years, Terma has worked actively to counter corruption. Terma’s
anticorruption policy has been made known to all employees and aims to
prevent that Terma is involved in or may be associated with corruption of any
kind. Collaboration partners, acting as agents or representatives of Terma,
are obliged to adhere to and comply with Terma’s anticorruption policy.
There are no examples of violation or breach of Terma’s rules to prevent
corruption.
Suppliers and Export Projects
At the end of 2011, as part of our expansion of the CSR activities, Terma
implemented policies intended to ensure compliance with the
International Finance Corporation’s 10 Performance Standards on
Environmental and Social Sustainability (www.IFC.org).
Within supply chain and procurement activities, this includes Performance
Standards 2 and 6, where we examine the working conditions of our suppliers
outside the OECD area to ensure that their employees receive fair
and equitable treatment, including protection against discrimination and
unsafe and disorderly conditions. We also examine whether or not our suppliers
protect the environment and consider biodiversity.
For suppliers within the OECD area, there are a number of standards and
principles for responsible business conduct, available since 1976, with
which multinational corporations must comply. The most important areas
are human rights, environment, working conditions, and anticorruption,
which we assure that these suppliers comply with.
As a result of our careful supplier selection, we have not experienced
suppliers who do not comply with the stated Performance Standards in
the 2012/13 fiscal year.
During the proposal phase of export projects, we carry out an examination of
whether or not the projects can be carried out in compliance with all of the
specified 10 Performance Standards. As a result of our proposal process, we
have not seen evidence which would not comply with these standards.
The implementation ensures that we will continue to systematically
focus on the observation of the 10 Performance Standards.
The Group’s procedures for compliance with CSR are incorporated into
our certified quality management system, which is subject to regular
internal and external auditing.
New Measures
In early 2013, Terma – inspired by the industry’s approach to CSR – formulated
five long-term goals, which in the future will act as points of reference for
ensuring that the Group’s business activities comply with good corporate
social responsibility. The five goals include customers, suppliers, employees,
environment, and community, as was detailed above.
Terma believes that the CSR initiatives launched by the Group over the
years have had the desired outcome, and we expect that this area can be
further strengthened as a result of our updated new goals.
Events after the Balance Sheet Date
Following the end of the fiscal year, no significant events have occurred
which affect the assessment of the Group’s and Parent Company’s financial
position on 28 February 2013 and the 2012/13 Annual Report.
Effective 1 March 2013, Terma Aerostructures was separated from the
Parent Company as an independent subsidiary, as was detailed above.
Management’s Review 2012/13 13

Business Areas and International Offices
Terma Defense
& Security
Steen M. Lynenskjold
Senior Vice President
Terma Defense & Security is Terma’s primary Business Area which
globally supplies network and tactical systems, airborne and naval selfprotection
systems, and electronics manufacturing services for missioncritical
defense 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, Georgia,
Washington D.C., and Huntsville, Alabama); Singapore; and India.
The Airborne Business Line
Terma is a global provider of advanced electronic warfare (EW) selfprotection
systems 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 incorporated 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 Line
The Land Business Line globally provides high performing surveillance
SCANTER radar systems to worldwide markets for security and safety
applications and mission-critical solutions for homeland security, defense,
and civilian applications.
The homeland security solutions range from simple tactical combat systems
to advanced integrated air and ballistic missile defense systems. The systems
provide excellent situational awareness and secure an efficient data connectivity
across different radio and communication technologies.
The T.react Radio Dispatch system provides turnkey radio dispatch protection
systems combining radar surveillance with advanced command
and control systems capable of performing automated surveillance based
on computer-aided analyses and decision support tools. T.react Radio
Dispatch provides seamless voice and data communication in a modern
digitalized TETRA and mobile IP environment.
T.react CIP provides critical infrastructure protection for a safe and secure
environment, where protection against intruders and efficient collaboration
during natural disasters and major incidents are of paramount importance.
T.react CIP combines Terma’s capabilities in mission-critical command and
control solutions and radar surveillance.
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. Terma is the preferred choice for surface surveillance,
mission-critical border security, and traffic safety applications amongst
suppliers and end users worldwide. The SCANTER radar product portfolio
comprises SCANTER 5000, SCANTER 6000, SCANTER 1002 Ground
Surveillance Radar (GSR), SCANTER 2001 i , SCANTER 4002, SCANTER
4102, as well as a wide range of high performance antennas.
The unique, high-technology Solid State radar family, the SCANTER 5000
and SCANTER 6000, has successfully taken over the market leader position
from its predecessor, the SCANTER 2001 family. The SCANTER Solid State
radars have been received extremely well among system integrators and
end users. More than 100 units have been ordered with several operational
systems functioning in all intended applications including coastal
surveillance, vessel traffic services, and airport surface movement.
The Naval Business Line
Within the Naval Business Line, the core segment is navies and coast
guards operating Offshore Patrol Vessels (OPV), Patrol Vessels, and
interceptors around the world. The C-Series is a turnkey tactical solution
for these customers offering C-Flex command and control (C2), SCANTER
radars, C-Fire Electro Optics, and C-Raid compact C2, ready for the vital
day-to-day missions such as territorial and Economic Exclusive Zone
patrolling, counter piracy/terrorism, search and rescue operations, and
peacekeeping missions.
The SCANTER radars are world-leading naval 2D radars providing longrange
detection of small surface contacts like smugglers and illegal immigration
in all weather conditions. The newest SCANTER 4100 radar
provides a full air picture ranging beyond 100 km.
The C-Guard decoy system is a best seller in its class and has recently
been updated with the capability to defend naval ships from torpedoes in
addition to the existing anti-missile capability.
Terma markets these solutions and products to shipyards, system integrators,
and naval customers worldwide.
14 Business Areas and International Offices

Electronics Manufacturing Services
Electronics Manufacturing Services manufactures high quality, complex
electronics equipment for the defense market. Terma provides manufacturing
capabilities for high efficiency power supplies and high frequency
products for avionics and space applications. Terma has participated in
many international programs with the manufacturing of electronics for
avionics and missile purposes.
In-house processes such as vacuum/autoclave bonding, parylene coating,
vacuum soldering, extensive electrical testing, and environmental stress
screening are available to achieve flexible and competitive manufacturing
with a short lead time.
Terma is a supplier of advanced electronics for the APG-81 radar on the
F-35 Joint Strike Fighter.
Integrated Logistics
Integrated Logistics supports, maintains, and provides repair of Terma
products in the global defense and security markets. Integrated Logistics
consists of off-the-shelf service concepts that can be tailored according
to customer requirements.
Sustainability is key in a market where component availability and
lifespan is getting shorter and shorter. Based on decades of experience,
Integrated Logistics offers Through Life Support agreements to secure
the product’s lifespan.
With a large, constantly growing, installed base, Terma supports more
than 1,500 radar systems, 2,000 aircraft, and several navies worldwide.
Terma Space
The Space Business Area contributes with mission-customized software
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
four satellites are now launched and operational.
Additionally, Terma is contracted for the development and delivery of
software 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;
LISA Pathfinder with expected launch in 2015; GAIA with expected
launch in 2013; ExoMars with expected launch in 2016; Solar Orbiter with
expected launch in 2017, MTG with first launch set in 2017, the U.S.
JMAPS mission; and the Russian Kanopus-V1 mission.
Furthermore, Terma is under contract with ESA for the highly sophisticated
man-space ASIM mission. Terma is responsible for the international
scientific 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
Aerostructures A/S
Ole Graversen
Senior Vice President & General Manager
Carsten Jørgensen
Senior Vice President
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.
Following the ESA ministerial conference in November 2012, new opportunities
have been created for re-energizing the Danish business and scientific
activities within the space industry.
The Aerostructures Business Area, headquartered in Grenaa, Denmark,
provides world-class design and manufacture of advanced aerostructures
for the global aerospace and defense markets. The Business Area has a
constant focus on continuous improvements and a unique approach to
affordability that yields maximum value for the customers.
Terma Aerostructures is a one-stop supplier that integrates composite
and metallic products, including wiring, harnesses, and electronics to form
ready-to-install complex subassemblies. The Business Area provides a
broad range of products for the F-35, F-16, and Gulfstream business jets as well
as missionized pods and pylons for various fixed and rotary wing aircraft.
Business Areas and International Offices 15

The F-35 Joint Strike Fighter is one of our largest and most exciting
programs. Terma Aerostructures has been participating in the F-35 development
since 2004 to provide complex composite structures to the
program’s prime contractors as well as pods and pylons to Tier 1 companies.
Significant investments have been made at the Grenaa facilities to
upgrade manufacturing capabilities and infrastructure to meet the
demanding tolerances and sophisticated technologies of the Joint Strike
Fighter program.
In 2012, Terma Aerostructures entered into a major long-term contract with
Lockheed Martin Corporation for complex horizontal tail assemblies for all
three variants of the F-35 aircraft. A second major long-term contract was
entered into in 2012 to supply Northrop Grumman Corporation composite
skins and assemblies for the center fuselage, also for all variants of the F-35
aircraft. Depending on the total number of F-35 aircraft produced in the
Low Rate Initial Production (LRIP) phases 6-11 of the program, the order will
have an aggregate value of up to DKK 1 billion. These long-term contracts
provide a stable and more predictable business base and more secure
investment coverage.
Terma Aerostructures is now producing parts for the sixth phase of the
LRIP program, and a majority of these products have been fully qualified
and are flying on delivered aircraft. The production environment has
matured and has performed with very satisfactory performance; meeting
quality, delivery, and cost targets.
The Alternate Mission Equipment market segment is another key area for
Terma Aerostructures for which complex products and customized solutions
are designed, manufactured, and assembled. These products include pods for
electronic warfare and aircraft survivability equipment, reconnaissance pods,
data acquisition pods for flight testing, fuel pylons, and enhanced weapons
pylons. Terma Aerostructures’ in-house designed and manufactured Multi-
Mission Pod (MMP), developed for the F-35, was introduced at the
Farnborough Air Show and attracted great interest from visitors.
The Aerostructures Business Area’s journey from a model shop to a
world-class facility for design and manufacturing of advanced composite
structures has been successful. Affordability requirements and a lean
thinking philosophy are the cornerstones of the manufacturing model,
and every employee is committed to delivering the promise.
Terma North
America Inc.
Steve Gress Jr.
President & CEO
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 Administration (FAA), the Department of
Homeland Security, as well as the defense industry’s prime contractors and
other companies relevant to our business.
A major business development and operations facility is located in Warner
Robins, Georgia, 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,
Texas, in close proximity to Lockheed Martin Corporation F-35 and F-16
program headquarters, and in Portsmouth, Virginia, near the U.S. Coast
Guard headquarters. An engineering presence is located in Huntsville,
Alabama, to support expansion of opportunities with the Missile Defense
Agency and infrastructure protection.
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 and revenue.
Terma Defense & Security in Warner Robins successfully expanded its
traditional customer base by continuing an in-depth study of helicopter
airborne survivability equipment. 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. The Group also established a position as the
baseline EW system for the Air Force Combat Rescue Helicopter program
and in Foreign Military Sales programs.
The Aerostructures Business Area is strongly represented at the Fort
Worth facility with a staff of highly trained professionals.
The Land and Naval Business Lines continued servicing North American-based
radar customers, including Canada, the U.S. Coast Guard, the U.S. Navy, the
FAA, and the 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 Group also conducted a test with the
Department of Energy that demonstrated the capability of the SCANTER 4000
series radar to reduce the effects of the Windfarm Interference Patterns.
16 Business Areas and International Offices

Terma B.V.
Richard Jones
Senior Vice President
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 development
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 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. A depot level repair capability
has been achieved, further expanding the extent of the service work
performed. 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
operational effectiveness and the cost effectiveness of control room
operations drives interest at the industrial and civil authority level.
Critical Infrastructure 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.
Through an increasing network expansion of regional partners, Terma is solidly
established as a regional partner and supplier of high performance and reliable
defense and security solutions in the expanding and developing Asian markets.
During 2012/13, go-to-market strategies have been implemented and
information tools further developed providing the Terma Group with
continuously updated market intelligence.
The year 2012/13 has shown satisfactory growth throughout the region
with contract awards in the airborne and naval domain as well as sensor
systems for critical safety applications throughout the region.
In 2012, the first of the new SCANTER Solid State radars was installed
and commissioned in Asia for a high-profile project. Down-selection for
several similar applications is encouraging and a sign that the market has
confidence in Terma as a trusted partner, capable of delivering multiple
high performance radar systems and critical infrastructure solutions in all
of the major Asian countries.
During the fiscal year, four new naval vessels were commissioned in the
region for two different regional navies. These vessels are equipped with the
Terma C-Flex command and control system interfacing the Terma C-Search,
air and surface surveillance radar, the Terma C-Guard anti-ship missile
defense system, and the Terma C-Link. These systems provide interoperability
among the fleet vessels and full integration of the vessels’ weapons systems.
Contracts for Terma aircraft survivability solutions have been awarded
and will be introduced in Asia through two new aircraft programs.
Terma India
Anupam Narain Mathur
Managing Director
Terma Singapore
Pte. Ltd.
Jesper Tolstrup
Vice President
Terma Singapore Pte. Ltd., the Asian subsidiary of Terma A/S, provides
an Asia Pacific market presence for the Terma Defense & Security
Business Area through business development, project management, and
after sales service and support.
In September 2012, Terma opened an office in New Delhi, India. This facility
will initially operate as a Liaison Office, and, as the business grows
and matures, the structure will be upgraded to accommodate the business
environment.
India has an increasing defense budget with an increased focus on
developing its defense industry through partnerships with foreign OEMs.
The key to this market is the transfer of technology and partnerships with
the Indian defense industry. A number of identified opportunities are
currently being pursued in India, particularly within the radar and
electronic warfare market areas.
Business Areas and International Offices 17

Accounting Policies
The Annual Report of Terma A/S for 2012/13 has been prepared in accordance
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 Statements
The 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 Consolidated
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 identifiable
assets and liabilities acquired (goodwill), including restructuring provisions,
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.
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 Translation
Transactions denominated in foreign currencies are translated at the exchange
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 translation
of foreign subsidiaries’ equity at the beginning of the year to the
exchange rates at the Balance Sheet date and upon translation of Statements
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 considered
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 exchange
rate at the date of transaction. However, items derived from nonmonetary
items are translated at the historical conversion rate of the
non-monetary item.
Derivative Financial Instruments
Derivative financial instruments are initially recognized in the Balance
Sheet at cost and are subsequently measured at fair value. Positive and
negative fair values of derivative financial instruments are included in
other receivables and other payables, respectively.
18 Accounting policies

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 liabilities,
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
Revenue
Revenue 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 when the passing
of risk to the customer has taken place. Any discounts allowed are deducted
from 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 (percentage
of completion method).
Production Costs
Production 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 capitalized
development costs.
Distribution Costs
Costs 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 Costs
Administrative 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 Costs
Other 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 Subsidiaries
The 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 Costs
Financial income and costs comprise interests, gains and losses on payables
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 Year
The 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.
Production costs also comprise provisions for losses on construction contracts.
Accounting policies 19

Balance Sheet
Intangibles
Development Projects in Process
Development projects in process comprise costs, salaries, and amortization
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 recognized
as intangibles, provided that the cost can be measured reliably, and
that there is sufficient assurance that future earnings can cover production
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 accumulated
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 Equipment
Land 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 depreciated
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
Plant and machinery
Fixtures and fittings, tools and equipment
10-50 years
5-10 years
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 Subsidiaries
Equity 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 accordance
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.
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 transferred
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 Assets
The 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.
Inventories
Inventories 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 indirect
production costs. Indirect production costs comprise indirect materials
and wages and salaries as well as maintenance and depreciation of
production machinery, buildings, and equipment as well as factory administration
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.
Receivables
Receivables are measured at amortized cost. Write-down is made to meet
expected losses.
Construction Contracts
Construction contracts are measured at the sales price of the work performed.
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 Charges
Prepayments and deferred charges, recognized under current assets, comprise
costs incurred concerning subsequent fiscal years.
Equity – Dividends
Dividends 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 Tax
According 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 carryforward,
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 unrealized,
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 Provisions
Provisions comprise anticipated costs related to warranty commitments,
losses related to construction contracts in process, restructuring provisions,
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 settlement
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 experience
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 determination
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 Liabilities
Amounts 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 Statement
The 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 Activities
Cash 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 Activities
Cash 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 Activities
Cash flows from financing activities comprise payments to and from the
Group’s stockholders and related costs as well as raising of loans and repayment
of interest-bearing debt.
Cash and Cash Equivalents
Cash and cash equivalents comprise cash reduced by current bank borrowings.
Segment Information
Group revenue has been allocated according to business segments and
geographical markets.
Financial Ratios
The 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

Executive Management’s
Statement
The Board of Directors and the Executive Management have today discussed
and adopted the Annual Report of Terma A/S for the 2012/13 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, liabilities,
and financial position at 28 February 2013, as well as of the results of
the Group’s and the Parent Company’s activities and the Group’s cash
flows for the 2012/13 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.
Herlev, 24 May 2013
Executive Management
Jens Maaløe
President & CEO
Board of Directors
Svend-Aage Nielsen, Chairman
Flemming H. Tomdrup, Deputy Chairman
Henrik Stenbjerre
Anders Eldrup
Bo Laursen
Kirsten Kahr Ovesen
Group Management (from left): Birthe H. Rask, Executive Vice President & CFO; Morten Halskov, Executive Vice President, General Counsel; and Jens Maaløe, President & CEO
Executive Management’s Statement 23

Independent Auditor’s
Declarations
For Terma A/S Stockholders
Report on the Consolidated and Parent Company
Financial Statements
We have audited the Consolidated and Parent Company Financial Statements
of Terma A/S for the 1 March 2012-28 February 2013 fiscal year. The
Consolidated and Parent Company Financial Statements include Accounting
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 Statements
The Executive Management is responsible for the preparation of Consolidated
and Parent Company Financial Statements that give a fair presentation
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 Responsibility
It 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 Group’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 circumstances,
however, not to express an opinion on the effectiveness of the
Group’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.
Opinion
In 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 28 February 2013, 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 2012-28 February 2013 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, 24 May 2013
KPMG
Statsautoriseret Revisionspartnerselskab
Jesper Ridder Olsen
State-Authorized Public Accountant
Jes Lauritzen
State-Authorized Public Accountant
24 Independent auditor’s Declarations

Statement of Income
1 March - 28 february
Consolidated
Parent company
DKK thousand 2012/13 2011/12 2012/13 2011/12
Note
1,2 Revenue 1,139,628 1,338,071 954,994 1,167,119
3 Production costs (875,148) (1,029,794) (739,421) (905,236)
Gross profit 264,480 308,277 215,573 261,883
3 Distribution costs (114,386) (118,879) (100,234) (105,180)
3,4 Administrative costs (75,493) (80,625) (51,340) (56,902)
Ordinary operating profit 74,601 108,773 63,999 99,801
Other operating income 182 175 180 175
Other operating costs (1,728) (3,155) (229) (154)
Operating profit 73,055 105,793 63,950 99,822
Profit in subsidiaries after tax - 8,101 5,924
5 Financial income 3,155 1,154 3,684 2,247
5 Financial costs (32,997) (37,735) (35,025) (39,974)
Profit from ordinary activities before tax 43,213 69,212 40,710 68,019
6 Tax on profit from ordinary activities (13,751) (17,190) (11,248) (15,997)
Profit for the year 29,462 52,022 29,462 52,022
Proposed profit distribution
Proposed dividends 10,000 10,000
Reserve for net revaluation according to the equity method 7,442 6,146
Profit for the year carried forward 12,020 35,876
29,462 52,022
Notes: Pages 29 and 30
Statement of Income 25

Balance Sheet
28 February
Consolidated
Parent company
DKK thousand 2013 2012 2013 2012
Note
Assets
Non-current assets
Intangibles
Software 5,682 0 5,682 0
Completed development projects 327,075 226,257 330,420 229,895
Development projects in process 94,330 175,585 94,330 175,585
7 427,087 401,842 430,432 405,480
Property, plant, and equipment
Land and buildings 220,222 227,075 220,222 227,075
Plant and machinery 124,602 135,455 123,153 133,543
Fixtures and fittings, tools and equipment 12,040 13,706 9,456 10,984
Payment on account and property, plant,
and equipment under construction 1,377 6,494 1,377 6,494
8 358,241 382,730 354,208 378,096
Investments
9 Equity interests in subsidiaries - - 74,140 73,650
- - 74,140 73,650
Non-current assets, total 785,328 784,572 858,780 857,226
Current assets
Inventories
Raw materials and consumables 79,333 88,166 79,333 88,166
Work in process 154,046 188,098 144,781 170,766
On-account payments from customers (7,580) (16,544) (6,382) (16,505)
Prepayments to suppliers 822 786 822 786
226,621 260,506 218,554 243,213
Receivables
Trade accounts receivable 250,492 261,063 213,187 214,060
10 Construction contracts 81,201 75,666 75,140 69,582
Amounts owed by subsidiaries - - 0 24,163
14 Corporate tax receivable 287 542 0 0
Other receivables 11,893 13,801 7,659 11,716
12 Deferred tax asset 5,403 6,339 0 0
Prepayments and deferred charges 8,338 8,473 8,339 8,474
357,614 365,884 304,325 327,995
15 Cash and cash equivalents 162,742 97,185 159,077 90,689
Current assets, total 746,977 723,575 681,956 661,897
Assets, total 1,532,305 1,508,147 1,540,736 1,519,123
Notes: Pages 30, 31, 32, 34, and 35
26 Balance Sheet - Assets

Consolidated
Parent company
DKK thousand 2013 2012 2013 2012
Note
Equity and liabilities
Equity
Capital stock 18,000 18,000 18,000 18,000
Net revaluation according to the equity method - - 15,811 12,007
Profit carried forward 411,873 393,541 396,062 381,534
Proposed dividends 10,000 10,000 10,000 10,000
11 Equity, total 439,873 421,541 439,873 421,541
Provisions
Warranty commitments 8,535 13,049 8,535 13,049
Provisions made within construction contracts 339 1,151 132 878
12 Deferred tax 125,464 116,367 126,580 117,256
Other provisions 2,435 4,645 0 0
Provisions, total 136,773 135,212 135,247 131,183
Liabilities other than provisions
Long-term liabilities other than provisions
Employee bonds 7,381 14,890 7,381 14,890
Credit institutions 167,799 247,774 167,799 247,774
Mortgage banks 223,692 224,552 223,692 224,552
13 398,872 487,216 398,872 487,216
Current liabilities other than provisions
13 Current portion of long-term liabilities 91,171 5,495 91,171 5,495
10 Construction contracts 101,325 77,429 100,159 75,577
Prepayments from customers 55,855 61,775 52,401 57,138
Trade accounts payable 68,054 70,127 63,692 68,376
Amounts owed to Parent Company 197 62 197 62
Amounts owed to subsidiaries - - 60,646 55,112
14 Corporate tax payable 1,545 1,398 0 0
Other payables 238,640 247,892 198,478 217,423
556,787 464,178 566,744 479,183
Liabilities other than provisions, total 955,659 951,394 965,616 966,399
Equity and liabilities, total 1,532,305 1,508,147 1,540,736 1,519,123
15 Contingent liabilities and security
16 Related parties
Notes: Pages 32, 33, 34, and 35
Balance Sheet - Equity and Liabilities 27

Cash Flow Statement
1 March - 28 february
Consolidated
DKK thousand 2012/13 2011/12
Profit from ordinary activities before tax 43,213 69,212
Adjustments:
Depreciation, etc. 34,593 41,726
Reversed provisions (7,536) 3,240
Amortization of development licenses previously transferred to contract work in process 22,372 34,215
Financial items 29,842 36,581
79,271 115,762
Changes in working capital:
Inventories 28,187 47,342
Receivables including construction contracts 7,079 47,079
Construction contracts and prepayments from customers 15,782 (97,142)
Trade accounts payable and other payables (12,968) 6,542
38,080 3,821
Cash flows generated from operations (operating activities) before financial items 160,564 188,795
Financial items (30,061) (35,775)
Cash flows from operations (ordinary activities) 130,503 153,020
14 Corporate tax paid (2,512) (249)
Cash flows from operating activities 127,991 152,771
7 Capitalized development costs (39,775) (38,119)
8 Acquisition of property, land, and equipment (12,185) (41,665)
Cash flows for investing activities (51,960) (79,784)
Changes in long-term liabilities (2,668) 24,360
Dividends paid (10,000) 0
Cash flows from financing activities (12,668) 24,360
Changes in cash and cash equivalents 63,363 97,347
Cash and cash equivalents and credit institutions at 1 March 33,460 (63,887)
Cash and cash equivalents and credit institutions at 28 February 96,823 33,460
The Cash Flow Statement cannot be directly derived from the Balance Sheet and the Statement of Income.
Notes: Pages 30, 31, and 35
28 Cash Flow Statement

Notes
1. Segment information - Revenue
37%
37%
Nondefense
12%
11%
Denmark
24%
24%
14% 11%
Terma
Aerostructures
Terma Space
63%
63%
Defense
88%
89%
Outside
Denmark
62%
65%
Terma Defense
& Security
2012/13 2011/12 2012/13 2011/12 2012/13 2011/12
2. Revenue
Consolidated
Parent company
DKK thousand 2012/13 2011/12 2012/13 2011/12
Goods and services 671,117 862,257 505,689 720,558
Construction contracts 468,511 475,814 449,305 446,561
1,139,628 1,338,071 954,994 1,167,119
3. Costs
Parent Company Board of Directors emoluments
and remuneration of the Executive Management 4,465 4,849 4,465 4,849
Wages and salaries 540,182 578,972 444,858 489,981
Pensions and other social security costs 57,856 57,055 42,999 43,797
Other staff costs 4,740 4,723 4,294 4,325
607,243 645,599 496,616 542,952
Average number of full-time employees 1,080 1,195 909 1,023
4. Fees paid to auditors
Total fees to KPMG can be specified as follows:
Statutory audit 836 836 824 824
Consultancy fees: other assurance engagements 48 53 48 53
Consultancy fees: tax and VAT 941 621 792 448
Other non-audit services 1,919 284 1,749 122
3,744 1,794 3,413 1,447
Total fees to other auditors can be specified as follows:
Audit 271 273 0 0
Consultancy fees: tax and VAT 206 202 72 83
Other non-audit services 827 820 244 485
1,304 1,295 316 568
5. Financial income and costs
Included in financial income and costs are:
Interest income from subsidiaries - - 1,201 1,238
Interest costs to subsidiaries - - 2,321 2,516
Interest costs to Parent Company 248 - 248 -
Notes 29

6. Tax on the profit for the year
Consolidated
Parent company
DKK thousand 2012/13 2011/12 2012/13 2011/12
Joint taxation contribution/current tax 3,047 2,282 1,422 (355)
Deferred tax 10,202 9,535 9,324 10,979
Tax on the profit for the year, total 13,249 11,817 10,746 10,624
Specified as follows:
Tax on profit from ordinary activities 13,751 17,190 11,248 15,997
Tax on changes in equity (502) (5,373) (502) (5,373)
13,249 11,817 10,746 10,624
7. Intangibles
Consolidated
Completed Development
development projects in
DKK thousand Software projects process Total
Cost at 1 March 2012 0 549,904 175,585 725,489
Additions 1,936 1,044 36,795 39,775
Transferred from property, plant, and equipment 4,568 0 0 4,568
Transfer 0 118,050 (118,050) 0
Disposals 0 (19,695) 0 (19,695)
Cost at 28 February 2013 6,504 649,303 94,330 750,137
Amortizations and impairments at 1 March 2012 0 323,647 0 323,647
Amortizations 822 1,601 0 2,423
Disposals 0 (19,695) 0 (19,695)
Transferred to contract work in process 0 16,675 0 16,675
Amortizations and impairments at 28 February 2013 822 322,228 0 323,050
Carrying value at 28 February 2013 5,682 327,075 94,330 427,087
Parent company
Cost at 1 March 2012 0 553,542 175,585 729,127
Additions 1,936 1,044 36,795 39,775
Transferred from property, plant, and equipment 4,568 0 0 4,568
Transfer 0 118,050 (118,050) 0
Disposals 0 (19,695) 0 (19,695)
Cost at 28 February 2013 6,504 652,941 94,330 753,775
Amortizations and impairments at 1 March 2012 0 323,647 0 323,647
Amortizations 822 1,894 0 2,716
Disposals 0 (19,695) 0 (19,695)
Transferred to contract work in process 0 16,675 0 16,675
Amortizations and impairments at 28 February 2013 822 322,521 0 323,343
Carrying value at 28 February 2013 5,682 330,420 94,330 430,432
30 Notes

8. Property, plant, and equipment
Consolidated
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 2012 377,372 305,244 98,123 6,494 787,233
Foreign currency translation adjustments 0 134 222 0 356
Transferred to intangibles 0 0 0 (4,568) (4,568)
Transferred 0 888 0 (888) 0
Additions 1,268 5,530 5,048 339 12,185
Disposals 0 (2,970) (8,138) 0 (11,108)
Cost at 28 February 2013 378,640 308,826 95,255 1,377 784,098
Amortizations and impairments at 1 March 2012 150,297 169,789 84,417 0 404,503
Foreign currency translation adjustments 0 123 169 0 292
Amortizations 8,121 16,890 6,767 0 31,778
Disposals 0 (2,578) (8,138) 0 (10,716)
Amortizations and impairments at 28 February 2013 158,418 184,224 83,215 0 425,857
Carrying value at 28 February 2013 220,222 124,602 12,040 1,377 358,241
Depreciated over 10-50 years 5-10 years 3-7 years
Parent company
Cost at 1 March 2012 299,073 298,142 86,547 6,494 690,256
Transferred to intangibles 0 0 0 (4,568) (4,568)
Transferred 0 888 0 (888) 0
Additions 1,268 5,320 3,695 339 10,622
Disposals 0 (2,970) (8,057) 0 (11,027)
Cost at 28 February 2013 300,341 301,380 82,185 1,377 685,283
Amortizations and impairments at 1 March 2012 71,998 164,599 75,563 0 312,160
Amortizations 8,121 16,206 5,223 0 29,550
Disposals 0 (2,578) (8,057) 0 (10,635)
Amortizations and impairments at 28 February 2013 80,119 178,227 72,729 0 331,075
Carrying value at 28 February 2013 220,222 123,153 9,456 1,377 354,208
Depreciated over 10-50 years 5-10 years 3-7 years
Notes 31

9. Equity interests in subsidiaries
DKK thousand
Cost at 1 March 2012 51,699
Disposals during the year (3,314)
Cost at 28 February 2013 48,385
Net revaluations at 1 March 2012 21,951
Translation adjustment at the beginning of the year 823
Dividends paid (4,014)
Disposals (1,106)
Profit for the year 8,101
Net revaluations at 28 February 2013 25,755
Carrying value at 28 February 2013 74,140
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 North America Inc. Delaware, USA 100% USD 150 thousand
Terma Singapore Pte. Ltd. Singapore, Singapore 100% SGD100 thousand
10. Construction contracts
Consolidated
Parent company
DKK thousand 2013 2012 2013 2012
Sales price of construction contracts 1,068,601 1,163,629 986,272 1,046,688
Invoiced on account (1,088,725) (1,165,392) (1,011,291) (1,052,683)
(20,124) (1,763) (25,019) (5,995)
Recognized as follows:
Construction contracts (assets) 81,201 75,666 75,140 69,582
Construction contracts (liabilities) (101,325) (77,429) (100,159) (75,577)
(20,124) (1,763) (25,019) (5,995)
32 Notes

11. Equity
Consolidated
DKK thousand 2012/13 2011/12
Equity at 1 March 421,541 385,235
Dividends paid (10,000) 0
Profit for the year carried forward 19,462 42,022
Proposed dividends 10,000 10,000
Translation adjustment relating to foreign entity 376 403
Changes in value of hedging instruments, etc, (after tax) (1,506) (16,119)
Equity at 28 February 439,873 421,541
Consolidated
Net revaluation Profit
Capital according to the carried Proposed
DKK thousand stock equity method forward dividends Total
Equity at 1 March 2012 18,000 - 393,541 10,000 421,541
Dividends paid - - - (10,000) (10,000)
Profit for the year carried forward - - 19,462 10,000 29,462
Translation adjustment relating to foreign entity - - 376 - 376
Changes in value of hedging instruments, etc, (after tax) - - (1,506) - (1,506)
Equity at 28 February 2013 18,000 - 411,873 10,000 439,873
Parent company
Equity at 1 March 2012 18,000 12,007 381,534 10,000 421,541
Dividends paid - - - (10,000) (10,000)
Dividends received from subsidiaries - (4,014) 4,014 - 0
Profit for the year carried forward - 7,442 12,020 10,000 29,462
Translation adjustment relating to foreign entity - 376 - - 376
Changes in value of hedging instruments, etc. (after tax) - - (1,506) - (1,506)
Equity at 28 February 2013 18,000 15,811 396,062 10,000 439,873
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.
Notes 33

12. Deferred tax
Consolidated
Parent company
DKK thousand 2012/13 2011/12 2012/13 2011/12
Deferred tax at 1 March 110,028 100,641 117,256 106,277
Foreign currency translation adjustments (169) (148) 0 0
Adjustment for the year 10,202 9,535 9,324 10,979
Deferred tax at 28 February 120,061 110,028 126,580 117,256
Recognized as follows:
Deferred tax asset (5,403) (6,339) 0 0
Deferred tax 125,464 116,367 126,580 117,256
120,061 110,028 126,580 117,256
Deferred tax relates to:
Intangibles 106,188 101,370 106,188 101,370
Property, plant, and equipment 26,494 21,066 26,348 20,818
Current assets 21,698 17,628 21,728 17,356
Provisions (609) (1,161) 0 0
Liabilities other than provisions (4,194) (5,050) (2,059) (3,391)
Tax loss carryforward (29,516) (23,825) (25,625) (18,897)
120,061 110,028 126,580 117,256
13. Long-term liabilities other than provisions
Consolidated
Current share Loans
Long-term of long-term outstanding
DKK thousand liabilities liabilities after 5 years
Employee bonds 7,381 7,509 0
Mortgage banks 167,799 80,556 0
Credit institutions 223,794 3,106 199,231
398,974 91,171 199,231
Parent company
Employee bonds 7,381 7,509 0
Mortgage banks 167,799 80,556 0
Credit institutions 223,794 3,106 199,231
398,974 91,171 199,231
34 Notes

14. Corporate tax payable
Consolidated
Parent company
DKK thousand 2012/13 2011/12 2012/13 2011/12
Corporate tax payable at 1 March 856 (1,177) 0 0
Tax for the year/joint taxation contribution 3,047 2,282 1,422 (355)
Corporate tax paid during the year (2,512) (249) (1,289) (33)
Transferred to intra-group balances (133) 0 (133) 388
Corporate tax payable at 28 February 1,258 856 0 0
Recognized as follows:
Corporate tax receivable (287) (542) 0 0
Corporate tax payable 1,545 1,398 0 0
1,258 856 0 0
15. Contingent liabilities and security 2013 2012 2013 2012
Contingent liabilities
Lease liabilities (operating leases) falling due within five years 25,943 22,529 9,338 9,364
Lease guarantee in the period until 31 March 2014 2,000 4,100 2,000 4,100
The Group’s Danish companies are jointly liable for
joint registration of VAT
Terma A/S and thereby the Terma Group is a party in individual
controversies with customers. It is the opinion of the Executive
Management that the outcome of these proceedings will not affect the
Group’s and Parent Company’s financial position apart from the assets
and liabilities recognized in the Balance Sheet at 28 February 2013.
Security
The following assets have been provided
as security for mortgage banks:
Carrying value of land and buildings 220,222 227,075 220,222 227,075
Other property, plant, and equipment estimated to be comprised by the
collateral, cf. the provisions of the Danish Registration of Property Act 132,609 144,527 132,609 144,527
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 25,701 thousand.
Included in cash and cash equivalents are deposit accounts which
are released upon delivery to customers 65,919 63,725 65,919 63,725
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 Managers, managerial staff, major
stockholders, or other related parties.
Notes 35

www.terma.com