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ANNUAL REPORT

2007

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ShiPPiNg

wiTh PRidE

Table of conTenTs

6 Introduction 10 Fiveyearskeyfigures 11 2007highlights 12 outlookfor2008 16 tankerdivision 20 bulkdivision 22 thenewtorm 32 torm2008-2010–“greaterearningpower2.0” 34 Supplyanddemand–producttankers 36 Supplyanddemand–panamaxbulkvessels 38 cSr–corporateSocialresponsibility 42 Humanresources 44 managingriskandexposure 50 corporategovernance 55 Shareholderrelations 62 Financialreview 67 consolidatedincomestatement 68 consolidatedbalancesheet 70 consolidatedstatementofchangesinequity 71 consolidatedcashflowstatement 72 notes102 boardofdirectorsandmanagement106 management’sandauditors’report107 parentcompany115 glossary116 Fleetoverview117 newbuildings

basic informaTion:

nameandaddress:A/Sdampskibsselskabettorm·tuborgHavnevej18·dK-2900Hellerup·denmark·tel.:+4539179200·www.torm.comFounded:1889·cVr:22460218·boardofdirectors:n.e.nielsen(chairman)·christianFrigast(deputychairman)·peterAbildgaard(electedbytheemployees)·LennartArrias(electedbytheemployees)·margrethebilgaard(electedbytheemployees)·gabrielpanayotides·Stefanos-nikoZouvelos·management:KlausKjærulff,ceo·mikaelSkov,coo.

theprofitbeforerestructuringcostsandtaxwasUSd819million,whichisinlinewiththelatestforecastofUSd810-820millionexcludingrestructuringcostsofUSd15millioninconnectionwiththeacquisitionofomI.2007wastheyearwhenwesoldourstakeinA/Sdampskibssel-skabetnorden(norden),whichyieldedanetprofitofUSd643millionbeforetax.novesselsweresoldin2007,althoughthisisanaturalelementoftorm’sbusiness,andexcludingtheprofitfromthesaleofthesharesinnorden,theprofitbeforetaxwasUSd161million.Unlikethepreviousyears,producttankerfreightrateswerenotaffectedbyanyone-offevents.themanynew-buildingscontinuedtoputpressureonfreightrates,butthispressureisexpectedtoeaseasweapproach2010,whensingle-hulledtankersaretobephasedoutandthedemandforproducttankerswillbepositivelyaffectedbynewrefineriescomingonstream,andwhichwillbelocatedfarawayfromthemainconsumingmarkets.

contrarytomarketexpectations,freightratesforbulkcar-riersroseforthefirsttenmonthsoftheyear,attheendoctoberreachingahistoricalhighofapproximatelyUSd95,000/dayforapanamaxvessel.Asthecompany’sbulkcarriersarecharteredoutonlong-termcontractsofonetotwoyears’duration,ourearningsdidnotseethefullbenefitoftherisingfreightrates.

theyearwascharacterizedbymajorstructuralchangesandinitiatives.oursaleofthenordensharesallowedustoaccelerateour“greaterearningpower”strategy,leadingustoacquireomIincollaborationwiththecanadianship-pingcompanyteekay.WiththesaleofthenordensharesandtheacquisitionofomI,aninactiveinvestmentwascon-vertedintoanactiveinvestmentintorm’skeybusinessarea–producttankers.Halfoftheproceedsfromthesaleofthenordenshares,ordKK2,002million(USd369.3mil-lion)weredistributedasanextraordinarydividendinSeptember,correspondingtodKK27.5pershare(USd5.1pershare).FollowingtheacquisitionofomIinJune,thesecondhalfoftheyearwasatimeforintegration–ofcolleaguesaswellasofsystems.twolargeorganizationshavegottoknoweachother.colleagueswhowereoncecompetitorsarenowworkingtogetherandtwofleetsandshippingsystemshavebeenjoined.today,theintegrationprocessiscom-pleteandhasstrengthenedtheorganization.

theacquisitionofomIandtheachievementof“greaterearningpower”havepromptedustoimplementanewstrategyatthebeginningof2008called“greaterearningpower2.0”,andourambitionremainsthesame:tormistogroworganicallyaswellasthroughacquisitions,butneverattheexpenseofourfinancialratios.Againstthisbackground,wehaveconcludedthatthenumberofvesselsistoincreasetoatotalof225-250,includingvesselsinpools,overthecomingthreeyears.Attheendof2007,torm’sfleetconsistedof86vesselsand42poolvessels–atotalof128vessels.

thenewstrategynotonlyaddressesfinancialgoalsandfleetgrowth,butalsothedevelopmentoftheorganization,particularlystrengtheningthetechnicaldivisioninordertohandlethegrowingfleet.ouremployees–ashoreandatsea–arethemostimportantprerequisiteforfuturegrowthandourabilitytomeetthestrategicchallengesofthefuture.Wearethereforeincreasinglyfocusingonstaffdevelopment.

Wewishtooperatethetormbusinessinaresponsiblemanner.therefore,wehaveanintegratedsafety,qualityandenvironmentalmanagementsystem.In2007,itwasdemonstratedthatourenvironmentaleffortsmakeadifferenceasourworktoreducetheenvironmentalimpactofouractivitiesobtainedISo14001certification.Inthecourseof2008,wewillassesshowwecanfurtherstrengthentorm’scontributiontosustainableglobaldevelopmentthroughthequality,safety,environmentalandoccupationalhealth–workthatisalreadyunderway.

Atthebeginningof2008,earningswereinlinewithexpec-tations.Weexpectloweroverallproducttankerratesthanin2008,whileearningsfromthecompany’sbulkcarriersareexpectedtorise.theforecastprofitbeforetaxfor2008isUSd210-230million.

2007wasaverybusyone,andIthankallourcolleagues–ashoreandatsea–fortheirenormouseffortsduringtheyear.theimplementationofourambitiousstrategyistheresultofyourfantasticperformance.

KlausKjærulff ceo

In many ways, 2007 was a landmark year. The acquisition of OMI meant that 2007 was the year when we realized the greatest growth in terms of fleet as well as organization in TORM’s recent history. We also achieved our best performance ever with a net profit for the year of USD 792 million. The Company’s new strategy focuses on continued growth, employee development and the environment.

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KlausKjærulff,ceo

Shippingistheultimateglobalbusiness,andforthisrea-sonaswellitisessentialthatweattormremainattheforefrontintermsofoperatingresultsandaccountability–inlinewithourlongestablishedobjectiveofbeing‘bestinclass’.Society’sdemandsofthewayinwhichweconductourbusinessareincreasing,andmaintainingapoleposi-tioninthemarketcontinuouslyplacesnewandgreaterdemandsonus.therefore,torm’svalues

• entrepreneurship• professionalism• respect

haveneverbeenmorecentral,anditisoftheutmostimportancetoeveryonewithaninterestintormthatourambitionsremainhigh.

tormisfortunatetobebasedinacountrywhereshippingenjoysrecognitionandunderstandingfromsocietyatlargeaswellasfromsuccessivedanishgovernments.Forthesakeofourcontinuedrecruitmentofcompetentemployeesandthedevelopmentoftheshippingbusinessitispleasing,becauseitisvitaltothefuturedevelopmentoftormandtheshippingbusinessindenmark.

Intorm’sAnnualreportfor2006,Iexplainedthepointsthattheboardofdirectorsandboardofmanagementwouldfocusoninordertoacceleratetorm’s”greaterearningpower”strategy.thisledto:

• thesaleofthecompany’ssharesinnordenataprofitofjustoverdKK4billion.

• theacquisitionofomIincollaborationwithteekay,andaresultingincreaseofapproximately50%intorm’sfleetandthenumberofearningdays.

• throughtheomIacquisition,theestablishmentofaglobal,integratedtormorganizationwithcontinuouslyhigherlevelsofcompetenceandeducation.

• Anincentiveprogrammeforthecompany’smanagementandemployeesasdetailedinnote4onpage80oftheAnnualreport.

• Anextensionoftheboardofmanagement,whichinfutureconsistsofaceo,acooandacFo.

• AnordinarydividendofdKK4.5(USd0.89)persharecorrespondingto42%oftheprofitfortheyearexcl.theproceedsfromthesaleofthenordenshares.Inaddi-tionanextraordinarydividendofdKK27.5(USd5.1)persharewasdistributedinSeptember2007asaresultofthesaleofthenordenshares.

In2007,A/Sdampskibsselskabettorm’smajorshare-holderinagreementwiththeboardofdirectorsexpresseditswishtomakeavailableforthemarketupto7,280,000shares(equalling10%ofthecompany’ssharecapital)inordertoincreasetheliquidityinthetormshare.Asaconsequenceofthecompany’sandstockmarket’sdevelopment,theboardofdirectorsdidnotmakeuseofthisopportunity.

torm’snewstrategyplanforthecomingthreeyears,”greaterearningpower2.0”,isalsoambitious,butrealis-tic.thestrategyisdescribedonpage32oftheAnnualreport.Withthisstrategy,ithasbeenimperativetousthatourvisionandhighambitionsshouldbecombinedwithfunctional,achievablestrategiesfurtheralongthevaluechain.

Wehavealsofocusedagreatdealonourawarenessofourresponsibilityasagloballyoperatingshippingcompanytoconductourbusinessinaresponsibleandpropermanner.

Atthisyear’sAnnualgeneralmeeting,aresolutionwillbeproposedtoincreasethenumberofdirectorsontorm’sboardandtherebyaddfurthercompetences.theboardofdirectorsverymuchlooksforwardtothis.

thankyoutoallshareholders,ouremployeesandpartnersforahighlysatisfactory2007.

n.e.nielsenchairmanoftheboard

A focused strategy, dedicated employees and a strong balance sheet provide results. Although the markets in themselves have contributed to TORM’s performance, there is every reason to highlight the enormous efforts of everyone in the organization – ashore as well as at sea.

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n.e.nielsen,chairmanoftheboard

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five years key figures

USdmillion danishgAAp

income sTaTemenT 2007 2006 2005 2004 2003*) revenue 819 604 586 442 308timecharterequivalentearnings(tce) 645 455 464 350 198grossprofit 358 271 315 240 98ebItdA 304 301 351 215 87operatingprofit 205 242 303 179 60Financialitems 599 -1 -4 26 100profit/(loss)beforetax 804 241 299 205 160netprofitfortheyear 792 235 299 187 160 balance sHeeT

non-currentassets 2,704 1,968 1,528 1,056 700totalassets 2,967 2,089 1,810 1,240 821equity 1,081 1,281 905 715 414totalliabilities 1,885 808 905 524 408Investedcapital 2,606 1,299 1,176 618 535netinterestbearingdebt 1,536 662 632 272 285cashandbonds 118 33 157 124 80 casH floW

Fromoperatingactivities 205 233 261 228 75Frominvestingactivities -364 -118 -473 -187 -153thereofinvestmentintangiblefixedassets -291 -262 -636 -187 -170Fromfinancingactivities 243 -239 303 -3 72totalnetcashflow 85 -124 91 38 -7 key financial figures **)

grossmargins: tce 78.8% 75.3% 79.2% 79.2% 64.5%grossprofit 43.7% 44.9% 53.8% 54.3% 31.9%ebItdA 37,1% 49.8% 59.9% 48.6% 28.2%operatingprofit 25.0% 40.1% 51.7% 40.5% 19.5%returnonequity(roe) 67.1% 21.5% 36.9% 33.1% 49.6%returnonInvestedcapital(roIc)***) 10,5% 19.6% 33.8% 31.0% 12.8%equityratio 36.4% 61.3% 50.0% 57.7% 50.3%exchangerateUSd/dKK,endofperiod 5.08 5.66 6.32 5.47 5.96exchangerateUSd/dKK,average 5.44 5.95 6.00 5.99 6.59 sHare relaTeD key figures **)

earningspershare,epS(USd) 11.4 3.4 4.3 2.7 2.3dilutedearningspershare,epS(USd) 11.4 3.4 4.3 2.7 2.3cashflowpershare,cFpS(USd) 3.0 3.3 3.7 3.3 1.1proposeddividendpershare(USd)****) 0.89 1.02 1.82 1.37 0.50proposeddividendpershare(dKK) 4.50 5.75 11.50 7.50 3.00extraordinarydividendpershare(dKK) 27.5 0.0 0.0 0.0 0.0SharepriceindKK,endofperiod(pershareofdKK5each) 178.2 186.0 152.6 112.9 45,1numberofshares,endofperiod(million) 72.8 72.8 72.8 72.8 72.8numberofshares(excl.treasuryshares),average(million) 69.2 69.4 69.7 69.6 69.3

*) thegroupFinancialHighlightfiguresfor2004-2007havebeenpreparedinaccordancewithIFrSasadoptedbyeU.thecomparativefiguresfor2003haveaccordingtoIFrS1notbeenrestatedinaccordancewithIFrS,butarepreparedinaccordancewiththepreviousgAApbasedontheprovisionsofthedanishFinancialStatementsActapplicableforlistedcompaniesinAccountingclassdandthethedanishaccountingstandards.

**) KeyfiguresarecalculatedinaccordancewithrecommendationsfromthedanishSocietyofFinancialAnalysts. thecompararativefiguresarerestatettoreflectthechangeinthedenominationofthecompany’ssharesfromdKK10persharetodKK5inmay2007. ***) returnonInvestedcapital.definedas:operatingprofitdividedbyaverageInvestedcapital,definedasaverageofbeginningandendingbalancesof (Shareholders’equityplusnetinterestbearingdebtlessnon-operatingassets). ****) proposeddividendpersharehasbeentranslatedtoUSdusingtheUSd/dKKexchangerateatyearendfortheyearinquestion.

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• theprofitbeforerestructuringcostsandtaxwasUSd819million,whichisinlinewiththelatestforecastofUSd810-820millionexcludingrestructuringcostsofUSd15millioninconnectionwiththeacquisitionofomI.novesselshavebeensoldin2007.theboardofdirectorsconsiderstheprofittobehighlysatisfactory.

• ebItdAwasUSd304million(dKK1,654million).

• cashflowfromoperatingactivitieswasUSd205mil-lion(dKK1,115million).cashflowbeforefinancingactivitieswasUSd-159million(dKK-865million),whilecashflowfrominvestingactivitieswasUSd-364million(dKK-1,980million).

• At31december2007,equityamountedtoUSd1,081million(dKK5,491million),correspondingtoUSd15.6pershare(dKK79.3)excludingtreasuryshares.

• themarketvalueofthecompany’sfleetasof31december2007exceededthebookvaluebyUSd1,578million(2006:USd1,061million),equallingUSd22.8pershare(dKK115.8)excludingtreasuryshares.tothisshouldbeadded44charteredvessels.thecompanyhaspurchaseoptionson19ofthese.

• returnonInvestedcapital(roIc)was10.5%(2006:19.6%),andreturnonequity(roe)was67.1%(2006:21.5%).

• Inmarch2007,tormsolditsstakeinnordenatapriceofdKK3,987million(USd713million),andinSeptemberhalfoftheproceedsweredistributedasanextraordinarydividend,correspondingtodKK27.5pershare(USd5.1pershare).

• InJune2007,tormtookovertheUSshippingcom-panyomIincollaborationwiththecanadianshippingcompanyteekay.InconnectionwiththeacquisitionofomI,tormtookover26producttankersincl.onenewbuildingfordeliveryin2009.Fourofthesewerecharteredvessels.

• Attheendof2007,thecompanyowned62vessels,56ofwhichwereproducttankersandsixbulkcarriers.InadditiontothevesselstakenoverfromomI,thecompanytookdeliveryoffivevesselsduringtheyearandcontractedsevennewbuildingsnotyetdelivered.

• bytheendof2007,tormhad21vesselsonorderandhadexercisedonepurchaseoption.consequently,thecompany’sfleetofownedandcharteredvesselswillby2011consistof143vesselsincl.poolvesselsbasedonexistingcontracts.

• theforecastprofitbeforetaxfor2008excl.saleofvesselsisUSd210-230million.theprofitbeforetaxin2007wasUSd161million,excludingaprofitofUSd643millionfromthesaleofthenordenshares.

• theboardofdirectorsrecommends,subjecttoapprovalbytheAnnualgeneralmeeting,thata

dividendofdKK4.50(USd0.89)persharebepaid,correspondingtoatotaldividendpaymentofdKK327.6million(USd64.5million)andequivalenttoareturnof2.5%inrelationtotheclosingpriceofthecompany’ssharesonthelastbusinessdayof2007.IncludingtheextraordinarydividendofdKK27.5(USd5.1)persharepaidoutinSeptember2007,theaccumulateddividendfor2007was55%ofthenetprofitequivalenttodKK2,330million(USd434million).

comparativesfor2003havenotbeenrestatedinaccordancewithIFrS.

2007 HigHligHTs

SELECTED KEY FIGURES 2003-2007

At the end of 2007, TORM’s Board of Directors and Management developed a new strategy, “Greater Earning Power 2.0”, which was approved in January 2008. The strategy focuses on continued growth over the next three years, which means that the number of vessels in the fleet has to grow to 225-250 incl. pool vessels. The organ-ization’s resources should reflect these ambitions, and therefore the next three years will focus on the develop-ment of competences and growth as well as to operate the Company in a socially responsible manner.

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ouTlook for 2008

theforecastprofitbeforetaxfor2008isUSd210-230mil-lion.

torm’sfinancialresultsprimarilydependonthenumberofearningdaysanddevelopmentsinfreightrates.Asof1march,47%oftheremainingearningdaysinthetankerdivisionfor2008hadbeencoveredatanaveragerateofUSd/day21,470vs.37%atanaverageofUSd/day25,640atthesametimein2007.Asof1march,74%oftheremain-ingearningdaysinthebulkdivisionfor2008hadbeencoveredatanaveragerateofUSd/day45,706vs.89%atanaveragerateofUSd/day24,575atthesametimein2007.

thisforecastissubjecttoadegreeofuncertaintyinasmuchasanumberoffactorscouldsignificantlyimpactfreightratesandconsequentlytheearningsofboththeproducttankersandthebulkcarriers.

For2008,thefollowingexternalfactorsareexpectedtohavethegreatestinfluenceonearnings:

• globaleconomictrends.• consumptionofrefinedoilproducts.• transportofrawmaterials,mainlyironore,coaland

grain,toAsiainparticular.• theeconomicdevelopmentintheUSA.• Additionsandscrappingofvessels.• one-offeventssuchasstrikes,politicalinstabilityinthe

oil-exportingcountries,weatherconditions,shut-downofrefineries,etc.

• potentialnationalorinternationalinterventionsagainstshippingcompanies’energyconsumptionorco2emission.

thechartbelowshowstheeffectthatvariationsintheexpectedfreightrateswillhaveonthefullyearpre-taxprofitfor2008.AtachangeinfreightratesofUSd/day1,000,theimpactequatestoUSd14.2million.theestimateisbasedonthenumberofearningdaysin2008duringwhichthecompany’svesselshavenotalreadybeencharteredoutatfixedrates.

tormhasinJanuary2008enteredintoanagreementofbuying50%oftheshippingcompanyFr8forUSd125mil-lion.Fr8controls25vesselsincludingthreeLr2newbuild-ingsfordeliveryin2008.theseller,projector,aninterna-tionaloiltrader,willcontinueasco-ownerofFr8andwillinthefutureprovideoilcargoestotorm.Inaddition,theacquisitionwillenhancetorm’sinsightintothedemandparametersinfluencingtheproducttankermarket.

In 2008, TORM expects a profit before tax of USD 210-230 million against a profit before tax of USD 161 million in 2007, excluding the profit from the sale of the Norden shares, which amounted to USD 643 million before tax.

safe Harbour sTaTemenT – forWarD looking sTaTemenTs

mattersdiscussedinthisreleasemayconstituteforward-lookingstate-ments.Forward-lookingstatementsreflectourcurrentviewswithrespecttofutureeventsandfinancialperformanceandmayincludestatementsconcerningplans,objectives,goals,strategies,futureeventsorperformance,andunderlyingassumptionsandotherstatements,whichareotherthanstatementsofhistoricalfacts.

theforward-lookingstatementsinthisreleasearebaseduponvariousassumptions,manyofwhicharebased,inturn,uponfurtherassumptions,includingwithoutlimitation,management’sexaminationofhistoricaloperatingtrends,datacontainedinourrecordsandotherdataavailablefromthirdparties.Althoughtormbelievesthattheseassumptionswerereasonablewhenmade,becausetheseassumptionsareinherentlysubjecttosignificantuncertaintiesandcontingencieswhicharedifficultorimpos-sibletopredictandarebeyondourcontrol,tormcannotassureyouthatitwillachieveoraccomplishtheseexpectations,beliefsorprojections.

Importantfactorsthat,inourview,couldcauseactualresultstodiffermateriallyfromthosediscussedintheforward-lookingstatementsincludethestrengthofworldeconomiesandcurrencies,changesincharterhireratesandvesselvalues,changesindemandfor“tonnemiles”ofcrudeoilcarriedbyoiltankers,theeffectofchangesinopec’spetroleumproduc-tionlevelsandworldwideoilconsumptionandstorage,changesindemandthatmayaffectattitudesoftimechartererstoscheduledandunscheduleddry-docking,changesintorm’soperatingexpenses,includingbunkerprices,dry-dockingandinsurancecosts,changesingovernmentalrulesandregulationsincludingrequirementsfordoublehulltankersoractionstakenbyregulatoryauthorities,potentialliabilityfrompendingorfuturelitigation,domesticandinternationalpoliticalconditions,potentialdisruptionofshippingroutesduetoaccidentsandpoliticaleventsoractsbyterrorists.

risksanduncertaintiesarefurtherdescribedinreportsfiledbytormwiththeUSSecuritiesandexchangecommission,includingthetormAnnualreportonForm20-FanditsreportsonForm6-K.Seepage44intheAnnualreport.

CHANGE IN PROFIT BEFORE TAX DUE TO CHANGE IN FREIGHT RATES

mikaelSkov,coo

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tormexpectsthecompany’sproducttankerratestobeapproximately10%lowerin2008thanin2007.thelowerforecastistheresultofaweakwintermarketattheoutsetof2008andthesubstantialadditionofnewproducttankers.Seasonalfluctuationsmeanthatthefirstandthefourthquartersaretraditionallythestrongestduetothewinterseason.Itisanassumptionthatthemarketisnotaffectedbyone-offeventsduringtheyear.

thefollowingfactorswillaffectthedevelopments:

Tonnage supply• theglobalproducttankerfleetwillbeexpandedasa

resultofalargeorderbookofvesselsfordeliveryin2008.onthisbasis,anetadditionofapproximately18%isexpectedinthebusinessareasinwhichtormoperates(source:IngeSteenslandASShipbrokers).

• thephase-outofvesselsisexpectedtobelimitedin2008.ontheotherhand,asignificantnumberofvesselsareexpectedtobescrappedleadingupto2010,whenallsingle-hulledvesselswillbephasedout.

• thehighratesinthebulksegmenthavemadeitfinan-ciallyviabletoconvertoiltankersintobulkcarriers.Itistorm’sevaluationthatsuchconversionsofexistingfleetsaswellasnewbuildingswilllimittheadditiontothefleetby10-15%in2008,althoughitshouldbenotedthatcalculatingthenumberofconversionsissubjecttoconsiderableuncertainty.

Tonnage DemanD• energyInformationAdministration(eIA)expectsan

increaseinglobaloilconsumptionofapproximately1.6%in2008.

• ton-miles,whichillustratesthetotaldemandforcapacityforseabornetransportsofoilproducts,isexpectedtoincreaseby4.0%in2008.theincreaseintransportofrefinedoilproductsisexpectedtobe5.9%(source:marsoft).calculatingthesefiguresissubjecttoconsiderableuncertainty.

• USgasolineconsumption,whichgrewby0.8%in2007,isexpectedtogrowby0.8%in2008(source:eIA).

• europeanfuelconsumptionischangingassalesofdieselvehiclesincrease,thuscreatinganopportunitytoexportgasolinefromeuropetotheUSAanddieselfromtheUSAtoeurope.

• theextensionofrefinerycapacityinIndiaandthemiddleeastupto2011willsignificantlyexceedtheimmediateconsumptionintheseareas,andasharpincreaseinexportsofrefinedoilproductsisexpectedasaresult.thiswillhaveapositiveimpactonthemarketforproducttankers.

Asinpreviousyears,tormhasdecidednottoannounceitsexpectationsofspecificfreightratesinindividualbusinessunitsandinsteadchoosestostatethemarketexpectationsasof1march2008.

Asof1march2008,tormhadcoveredapproximately47%oftheremainingearningdaysin2008atanaveragerateofUSd21,470,whichensuresreasonableearningsforthetankerdivision.

ouTlook – Tanker Division

HeDging in THe Tanker Division as of 1 marcH 2008 totaldays dayscovered 2008 2009 2010 2008 2009 2010

lr2 4,205 4,897 4,928 533 406 159 lr1 6,426 7,886 8,500 3,706 2,258 1,153mr 9,790 14,093 16,734 4,362 2,402 773 sr 3,672 4,684 4,015 2,622 2,195 662 Total 24,093 31,560 34,177 11,223 7,261 2,747 coveredin% coveredinUSd/day 2008 2009 2010 2008 2009 2010

lr2 13 8 3 27,182 28,310 29,320 lr1 58 29 14 23,825 21,922 19,840mr 45 17 5 21,566 22,033 22,128 sr 71 47 16 16,819 16,573 16,775 Total 47 23 8 21,470 20,699 20,294

expecTeD Tce raTes in THe proDucT Tanker markeT for 2008 2007 2008 USd/day realized Q1 Q2 Q3 Q4 lr2 24.988 20,361 18,857 19,059 23,600lr1 27.621 21,670 20,300 21,410 23,853mr 23.949 17,490 17,796 16,676 18,063sr 16.726 - - - -thereisnoefficientforwardSWApmarketforSrvessels. Source:ImAreX

thebulkmarketrosesharplyin2007andexperiencedveryhigh,butalsohighlyvolatilefreightrates.tormexpectsthebulkmarkettobecharacterizedbyhigh,butvolatilefreightratesin2008aswell.

Asaresultofthisexpectedgreatvolatility,tormcontinuesitspracticeofhedgingasignificantpartofitsexposurebycharteringoutvesselsonlong-termcontractsoftypicallyonetotwoyears’duration.

thedevelopmentinthebulkmarketwillremainhighlydependentonglobaleconomictrends.However,freightrateswilldependparticularlyonchineseeconomicgrowth,andthustheconsumptionofsteelandcoalinchina.Freightrateswillalsodependonwaitingdays–inparticularinAustralianports.In2007,upto10%(source:Howerobinsonandco.Ltd.)oftheglobalbulkfleethadtowaittoloadcargoes–especiallycoal–inAustralianports.

Asinpreviousyears,tormhasdecidednottoannounceitsexpectationsofspecificfreightratesandinsteadchoosestostatethemarketexpectationsasof1march2008.

Asof1march2008,tormhadcoveredapproximately74%oftheremainingearningdaysforitspanamaxvesselsatanaveragerateofUSd/day45,706,whichensuressatisfac-toryearningsfor2008.

ouTlook– bulk Division

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HeDging in THe bulk Division as of 1 marcH 2008 totaldays dayscovered 2008 2009 2010 2008 2009 2010

panamax 5,230 6,075 6,580 3,868 596 -

coveredin% coveredinUSd/day 2008 2009 2010 2008 2009 2010

panamax 74 10 - 45,706 37.300 -

expecTeD Tce raTes in THe bulk markeT anD THe number of earning Days in 2008 2007 2008 realized Q1 Q2 Q3 Q4 panamaxtcerates(USd/day) 25,762 58,681 71,486 68,028 66,778

Source:ImAreX

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Tanker Division

theacquisitionofomI,whichwascompletedjointlybyteekayandtorminJune,wasanimportantelementintherealizationoftorm’s“greaterearningpower”strate-gydatingfrom2005.Withtheacquisition,thecompanytookoveraverymodernandhomogenousfleetof22ownedvessels,includingonenewbuildingfordeliveryin2009,andfourcharteredvessels.thetakeoverofomI’svesselsalmostdoubledthenumberofownedvesselsandaddedmorethan100land-basedstaffand1,500seafarers.

theintegrationofomIisthusamajorprocess–notleastforthetankerdivisionthatamongstotherprojectsvisitedanumberofcustomerswhohadcontractswithomIandagreedhowtocontinuethesecontracts.thecompany’sphysicalpresenceinmumbai,IndiaandStamford,USAisofgreatimportance.Forinstance,tormwillin2008introduce24-hourshiftsmeaningthattheUSofficewilltakeoverresponsibilitywhenthecopenhagenofficeclos-es,theninturnSingaporeandmumbaibeforereturningtocopenhagen.

themarketfortorm’sproducttankerswascharacter-izedbytwoverydifferentperiodsin2007.Inthefirsthalfof2007,themarketintheWesternHemisphereperformedbetterthanexpected,whilerateswerelowerthanexpecteduptotheendofthefourthquarter.IntheeasternHemisphere,rateswerelowinthefirsthalf,butstabilizedinthesecondhalfandstartedrisingtowardtheendoftheyear.

2007wasalsomarkedbyhighlyunstableandrisingoilpriceswhich,combinedwitharisingUSgasolineconsumptioninthefirsthalf,promptedthecompany’scustomerstofavourthesmaller,moreflexiblemrtankers.thisunexpectedgreaterdemandmeantthattorm’smrtankersperformedfarbetterthanexpectedin2007.

Fortorm’slargestvessels,theLr2tankershowever,earningswerelowerthanexpectedin2007.thiswasduetothefactthatthevesselsprimarilytransportednaphthafromthemiddleeasttotheFareast,wheredemandwaslowerthanexpected.duetothesizeofthevessels,theyarenotveryflexible,andthereforetheirearningsoptionsarelimitedincertainsituations.

earningsfortorm’smediumsizedvessels,theLr1tankers,wereasexpected,whichmeantthattotalearn-ingsforthethreevesseltypeswereasexpected.

therisingcrudeoilpricescausedanincreaseinfuelcostswhichputpressureonearningsfor2007.bunkercostsaveragedUSd371pertonbunkerin2007againstUSd321pertonin2006,anincreaseof16%,whichcorrespondstoanaverageadditionalexpenseofapproxi-matelyUSd2,000perdayofoperation.

therelativelyweakUSdalsomeantrisingportandcanalexpensesoutsidetheUSA.

towardtheendof2007,approximately70employeesofthetankerdivisionwerebroughttogethertoworkontheculturalintegrationaswellastopreparethenewstrategy“greaterearningpower2.0”.

InadditiontotheacquisitionofomI,tormin2007con-tractedthreemrproducttankers(50,500dwt)fordeliveryin2010andcharteredinoneandahalfproducttanker.

In2008,thecompanycharteredanaverageof14.7producttankersatanaverageofUSd/day21,076.Inall,thecompanyhaspurchaseoptionsonthreeproducttankers,whichcanbeexercisedfrom2009.

Attheendof2007,tormowned56producttankersandhad17newbuildingsonorderfordeliveryupuntil2010.

In 2007, the Tanker Division was affected by highly fluctuating freight rates and, not least, by the acquisition of OMI.

Andersengholm,executiveVicepresident,tankerdivision

18

Tanker Division

vessels cHarTereD in 2008 2009 2010 2011 2012DaysLr2 373 360 360 360 -Lr1 3,930 3,735 2,475 1,830 1,125mr 270 1,740 2,160 2,160 2,160Sr 720 690 30 - -

rate usD/day Lr2 24,551 24,500 24,500 24,500 -Lr1 20,775 20,177 20.395 20,880 20,510mr 16,864 15,859 15,908 15,908 15,908Sr 22,500 22,500 22,500 - -

options Lr2 - - - - -Lr1 - 0.5 - 0.5 -mr - - - - 1Sr - - - - -

average option price (usD million) Lr2 - - - - -Lr1 - 15.5 - 14.2 -mr - - - - 38.4Sr - - - - -

Forfurtherinformation,seenotes29and30onpage100and101.

FREIGHT RATES IN THE PRODUCT TANKER MARKET IN 2007

PRICES ON SECOND-HAND PRODUCT TANKERS

FREIGHT RATES IN THE PRODUCT TANKER MARKET IN 2007

PRICES ON SECOND-HAND PRODUCT TANKERS

19

USdmillion

Tanker Division 2006 2007 total Q1 Q2 Q3 Q4 total

income sTaTemenT netrevenue 494.0 133.2 146.8 165.5 194,7 640,2portexpenses,bunkersandcommissions -143.8 -35.8 -37.4 -43.9 -47,4 -164,5Freightandbunkersderivatives 0.6 1.0 -0.8 0.3 2,4 2,9Time charter equivalent earnings 350.8 98.4 108.6 121.9 149,7 478,6charterhire -58.5 -19.0 -20.0 -25.6 -27,8 -92,4operatingexpenses -64.6 -20.3 -21.2 -27.3 -37,1 -105,9gross profit/(loss) (net earnings from shipping activities) 227.7 59.1 67.4 69.0 84,8 280,3profit/(loss)fromsaleofvessels 3.1 0.0 0.0 0.0 0,0 0,0Administrativeexpenses -29.1 -9.6 -10.9 -12.4 -15,0 -47,9otheroperatingincome 9.7 2.5 3.1 2.9 6,0 14,5depreciationandimpairmentlosses -50.8 -13.3 -13.9 -22.2 -34,0 -83,4operating profit 160.6 38.7 45.7 37.3 41,8 163,5

pool parTners as of 31 December 2007 pool manager lr2 lr1 mrLr2: A.p.møller-mærsk/torm A.p.møller-mærsk bWShippingmanagerspte.Ltd. primorskShippingcorporationLr1:torm primorskShippingcorporation difkoA/S rederiAbgotlandmr: torm rederiAbgotland mitsuio.S.K.LinesLtd. SanmarShippingLtd. torm nordictankersA/S torm rederiAbgotland reederei“nord”Klause.oldendorff SkagerackInvestLimited torm WaterfrontShippingAS

tothesurpriseoftormandthemarketingeneral,freightratestookasharpupwardturninthefirsttenmonthsoftheyearasaresultofgreatlyincreasingdemandformain-lyironore,coalandgrain.thiscausedlongwaitsinports,principallyinAustralia.Fortransportationofironore,thewaitingdaysinAustralianportshaveledtoincreasedtransportdistancesastheironoreistransportedfrombraziltochinaandtoalesserdegreefromAustraliatochinawhenthewaitistoolong.

Inthelasttwomonthsoftheyear,ratessuddenlydroppedafterhavingreachedUSd/day95,000attheendofoctober.Attheendoftheyear,panamaxratesstoodatUSd/day67,000,whichwasstillveryhigh.

Intorm’sassessment,thatthefreightratevolatilityforbulkcarrierswillnarrow–withalowertopandahigherbottom–asthebulkmarketinthefutureadjuststothestrongdemandforrawmaterials.

Inthebulkdivision,itistorm’sstrategytocoverearningsbycharteringoutvesselsoncontractsofonetotwoyears’duration.themajorityofthelong-termcontractswereenteredintointhefourthquarterof2006andthefirstquar-terof2007,andearningsin2007thereforedidnotseethefulleffectoftherisingratesduringtheyear.Ithas,however,meantthatearningsfor2008areofftoagoodstart.

thepricesofsecond-handbulkcarriersroseconsiderablyoverthefirsttenmonthsoftheyearasaresultoftherising

freightratesduringtheperiod.towardtheendoftheyear,second-handpricesfell,however,inlinewiththedropinfreightrates.Atyearend,ahistoricallylargedifferencewasseenbetweenthepriceofsecond-handtonnageandthepriceofnewbuildings,asthelatterdidnottothesameextentkeepupwithfreightrates.tormexpectsthegapbetweenthepricesofsecond-handtonnageandnew-buildingstonarrow.

In2007,thecompanyexerciseditspurchaseoptionsfortormAnholtandtormbornholmatanaveragepurchasepriceofUSd22.7million,whichwasconsiderablylowerthanthemarketpriceofsimilarvessels,standingatsomeUSd95millionattheendof2007.

bytheendof2007,tormhadcontractedfourKamsarmax(82,000dwt)bulkcarriersfordeliveryin2010and1011respectively,atatotalpriceofUSd207.5million.In2007,tormcharteredsevenbulkcarriersonlong-termcon-tractswithsixpurchaseoptions.thevesselswillbedeliveredin2008-2010.bytheendof2007,tormownedsixpanamaxdrybulkvessels.

vessels chartered in 2008 2009 2010 2011 2012days 3,270 2,775 3,150 3,240 3,960ratesUSd/day 17,376 15,857 15,494 15,48715,810options 4 1 - 1 1AverageoptionpriceUSdmillion 36.3 23.0 - 28.7 26.5

Forfurtherinformation,seenotes29and30onpage100and101.

bulk Division

bulk Division 2006 2007 USdmillion total Q1 Q2 Q3 Q4 total

income sTaTemenT netrevenue 109.7 28.8 32.6 35.6 37.3 134.3portexpenses,bunkersandcommissions -5.1 -1.1 -1.4 -1.6 -2.2 -6.3Freightandbunkersderivatives 0.0 0.0 0.0 0.0 0.0 0.0Time charter equivalent earnings 104.6 27.7 31.2 34.0 35.1 128.0 charterhire -47.8 -15.4 -14.8 -15.7 -13.1 -59.0operatingexpenses -13.1 -2.3 -2.6 -2.6 -2.9 -10.4gross profit/(loss) (net earnings from shipping activities) 43.7 10.0 13.8 15.7 19.1 58.6 profit/(loss)fromsaleofvessels 51.3 0.0 0.0 0.0 0.0 0.0Administrativeexpenses -5.5 -1.6 -2.0 -1.9 -1.7 -7.2otheroperatingincome 0.1 0.0 0.0 0.0 0.0 0.0depreciationandimpairmentlosses -8.1 -1.5 -1.5 -1.6 -1.9 -6.5operating profit 81.5 6.9 10.3 12.2 15.5 44.9

Freight rates for bulk carriers were at a historical high and continued their almost unbroken rise throughout 2007. The bulk market is driven by major growth in the transportation of iron ore, coal and grain which increased pressure on infrastructure and required additional vessel capacity.

20

FREIGHT RATES FOR PANAMAX DRY BULK CARRIERS IN 2007

PRICES ON PANAMAX DRY BULK CARRIERS IN 2007

FREIGHT RATES FOR PANAMAX DRY BULK CARRIERS IN 2007

PRICES ON PANAMAX DRY BULK CARRIERS IN 2007

Sørenchristensen,SeniorVicepresident,chartering,bulkdivision Kimrasmussen,SeniorVicepresident,operations,bulkdivision

22

tormwasfoundedin1889andoperatesglobally.tormislistedonomXthenordicexchangeandonnASdAQ.theheadofficeinHelleruptodayhousessome143employees.theseniormanagementconsistsofKlausKjærulff,ceoandmikaelSkov,coo.

thebuildingattuborgHavn,Hellerupcomprisestorm’scommercialtankerandbulkdivisionsaswellasstafffunctions.tormoperatesatotalfleetof128modernvessels,someofwhichareoperatedinpoolarrangementswithothershippingcompaniessharingthecompany’shighsafety,environmentalandcustomerservicestandards.

Inrecentyears,tormhasseenstrongperformancegrowthintermsofspecificresults,theexpansionofthefleetaswellastheincreaseinstaff.

thekeyobjectiveoftorm’sformerstrategy,“greaterearningpower”,wastogenerategrowthinthecompanyforthebenefitofallstakeholders.Inordertoachievethisobjective,thestrategywasbasedontwooverallthemes:Acquisitionandorganicgrowth.theformerstrategyisnowreplacedbyanupdatedstrategycalled“greaterearningpower2.0”.

Agoodexampleofthiswasdemonstratedasthecompany,inahighlysuccessfulcollaborationwiththecanadianshippingcompanyteekay,acquiredtheUSshippingcompanyomIinJune2007.WiththeacquisitionofomI,tormtrulyfulfilledthecompany’sambitionofacquisitivegrowth.duringtheintegrationprocess,manyspecificexperienceshaveconfirmedourbeliefthatthetwocompaniesmakeaperfectmatch.

moreover,theacquisitionofomImeansthattormhasnowbecomeaglobalcompanyinearnest–thenewtorm.Withofficesindenmark,India,theUSA,Singapore,thephilippinesandnorwaytormistodayabletoprovidethecustomerswith24-hourservice,sevendaysaweek.Itisnotonlyonpaperthattormhasgrown,however.theneedtodeveloptheemployees’competences,theorganizationalstructure,theproce-duresandprocesseshavegrownaswell.thecustomersshouldstillfindauniformserviceandthesamehightormstandards,nomatterwhereintheworldtheymeetus.

THe neW Torm

Alexpatanareyes,bosun,tormHelvig

“Igna faccumsan eum incipiscing erit irilla faccums and.”Shridhar Bharatan, President/CEO TORM India

24

Torm inDia

InFebruary2008,theformerorinocomarineconsultancyIndiaprivateLimited(omcI)changeditsnametotormShippingIndiaprivateLimited.

WiththeacquisitionofomI,tormbecametheownerofthisshipmanagementofficeinmumbai,India.throughthegreatcommitmentandprofessionalismofthealmost100employees–manyofthemformerseafarers,includingcaptainsandengineers–thetaskofintegrat-ing26additionalvesselsintotorm’sexistingfleetbecamepossible.

thecompanyomcIwasestablishedin1996asamanningoffice,andshortlyafteromcIhandledthefullmanningandoperationofvessels.Atthetimeoftheacquisition,thecompanywascertifiedaccordingtotheISo9000–2000(quality),ISo14001(environment),oSHAS18001(occupationalhealthandsafety)andSA8000(humanandemployeerights)standards.theSA8000certificationwasoneofthefirstofitskindinthemaritimesector.

themainactivitiesofthemumbaiofficeare:marineHr,whichisthemanningfunction,handlingcontactwiththesea-basedcrewsandcoordinatingitineraries,wagesand–notleast–contactwithfamilies.thetechnicalandSafetydepartmentsaretwoothermainactivityareasoftheIndianorganization.theseareasensuretheefficientoperationofthefleetwiththegreatestpossibleconsiderationforsafetyandenvironment.thetechnicalandSafetydepartmentsmaintainaclosecollaborationwithandissupportedbythefollowingdepartments:procurement,newbuilding,training,financeandIt.

thenewcolleaguesinmumbaibasetheirworkonasolidfoundationofvalues,strongteamworkand,notleast,greatprofessionalcompetences.

thebigchallengesnowaretomarketthetormnameamongseafarersinIndia,tointegratetheshipmanage-mentsystemsandtogettorm’sandomcI’svaluesandculturestomeetandinteractinfuture.

Withintheorganization,tormIndiareportstoclausUsenJensen,executiveVicepresident,technicaldivision.

Shridharbharatan,director,tormShippingIndia

26

Torm pHilippines

tormShippingphils.,Inc.wasestablishedin2004.thecompany’smainobjectiveistorecruitphilippineseafarersfortorm.

Sinceitsestablishment,torminthephilippineshasgrownintooneofthemainemployersofphilippinesea-farers.In2007,thecompanyofficiallyopeneditsownbuildinginmakaticity,thephilippines.thebuildingisknownunderthenameof“tormHouse”andhousestheentirestaffofhighlycompetentemployeeshandlingtheday-to-dayoperationsandtheemployingofseafarersfortorm’sfleet.

AttheestablishmentoftormShippingphils.,Inc.in2004,thecompanyhadfiveemployeesand18registeredvessels.today,thecompanyrecruitsofficersandcrewsfor38tormvessels.theofficehas20employeeshandlingalmost1,100seafarers,725ofwhomareatseaatanygiventime.theirworkalsoincludesmaintainingrela-tionswiththeseafarerswhileashore.moreover,thecompanytakescareoftheseafarers’families,amongotherthingsbymeansofhealthcareschemes.

thecompanyconsistsofthreedepartments:themanningdepartment,thetrainingdepartmentandtheFinancedepartment.Inaddition,aninsuranceemployeeensurescompliancewithtorm’squalitysystem.

Asaconsequenceoftorm’sfocusonsocialresponsi-bility,tormShippingphils.,Inc.intheautumnof2007establishedthetormphilippineseducationFoundation.theFoundationwillbeofficiallylaunchedinmarch2008,anditsinitialobjectivewillbetosupport25studentsfromdisadvantagedbackgroundseachyear–primarilyyoungsterswhoneedhelptoobtainaneducation.Inthisway,tormwishestodemonstrateitslong-termcom-mitmentinthephilippines.

Withintheorganization,tormphilippinesreportstoclausUsenJensen,executiveVicepresident,technicaldivision.

Alfonsodelcastillo,president,tormphilippines

28

Torm singapore

theofficeinSingaporewasestablishedin2003asalocalofficeforthemrpool–especiallygivenadiscern-ibletrendtowardsmoreandmorecargoesbeingfixedinSingaporebyseveraloftorm’skeycustomers.thefollowingyear,theofficeanditsareaofactivitywereexpandedtoincludeownershipofvessels,technicalmanagementandsafety,aservicecentreandanopera-tionsdepartment.

today,tormSingaporeownsafleetof14vessels,withafurtherfivenewbuildingsonorderfordeliveryin2009-2010.

In2006,itwasdecidedtoexpandthecompany’scom-mercialactivities,andtormSingaporebecamerespon-sibleforthecommercialbrandingoftheLr1poolintheregion.thecompanycontractssome90transportsayearfortheLr1poolandthemrpool.twoemployeeshandlecharteringandthreehandleoperationsforthetwopools.therearealsotwoA.p.møller–mærskemployeesattheoffice,responsibleforcharteringandoperationsfortheLr2pool.

tormtechnicalServicecentreconsistsoffivepeoplehandlingassignmentsonbehalfoftorm’stechnicaldivisionandSafetyincopenhagenandmumbai.theyalsohandlethemanningofthevesselssailingundertheSingaporeflag.

esbenpoulsson,president&ceo,tormSingapore

30

Torm usa

partoftorm’slong-termstrategyistobeclosertotheAmericanmarketandcommerciallydevelopthebusi-nessinnorthaswellasSouthAmerica.Untiltheacqui-sitionofomI,thecompanyplannedtosetupanofficeintheUSA,butthisplanbecameobsoletewhentormacquiredomI.IncludedintheacquisitionwasafullyoperativeheadofficeintheUSAwithanumberofquali-fiedmaritimespecialists,someofwhomhavesubse-quentlybeenemployedwithtormUSALLc.

thecompany’snewUSofficeisinomI’sformerhead-quartersinStamford,connecticut,northofnewYork.theStamfordofficetodayhas22employees.

FollowingtheacquisitionofomIandtheestablishmentoftheofficeintheUSA,tormisnowequippedtomeetthegrowingcommercialandtechnicaldemandsfromcustomersandauthoritiesinthelocaltimezone.Inadditiontothecommercialbusinessdevelopment,whichistoattractcargoesandvesselsfromnorthandSouthAmericatotorm,theofficeundertakestheoperationalandcommercialroleinconnectionwiththeoperationofthefleet.InternalaccountingandItfunctionsarealsohandledbytheUScompany,whichinadditioncoordi-natestorm’sgrowingandconsiderableenvironmentalprogrammeincollaborationwiththeofficeindenmark.

tomaintaintorm’sculturesandvaluesandensurethesuccessfulintegrationofemployeesintheUSA,twoexperiencedemployeesfromtheofficeindenmarkhavebeensecondedtotheoffice.oneofthesehasbeenappointedthenewmanageroftheoffice,inchargeofthecommercialbusinessdevelopmentinnorthandSouthAmerica,andtheotherisincludedintheteamhandlingthecommercialoperationofthefleet.

Withintheorganization,tormUSAreportstoAndersengholm,executiveVicepresident,tankerdivision.

JesperboHansen,president,tormUSA

32

Torm 2008-2010 – “greaTer earning poWer 2.0”

themostimportantelementsofthestrategyare:

• ensureasolidreturnoninvestedcapital.• takeadvantageofthestrongbalancesheetfor continuedinvestment.• Achievestronggrowthinproducttankersaswellas inbulkbyincreasingthenumberofvesselsto225-250

incl.poolvesselsoverthecomingthreeyears.bytheendof2007,torm’sfleetconsistedof128vesselsincl.42poolvessels.

• growthshouldprincipallybefocusedontheproducttankerarea,althoughinvestmentwillalsobemadeinbulkcarriers.

• Inordertoreducetied-upcapitalandincreaseflexibility,thecompanyseeksafleetcompositionofapproximately70%ownedvesselsand30%charteredvessels.

• takeadvantageoftheglobalpresence.• expandanddeveloppoolarrangements.• continuedevelopinginternalanalysisandbusiness

development.• Strengthenstaffrecruitment,developmentandreten-

tion.

thebasisofthenewstrategyisthattheprevious“greaterearningpower”strategyfrom2005hasbeenachievedthroughtheacquisitionofomIandanactivenewbuildingprogramme.

In2007,thecompanythereforedecidedtostartaprocessaimedatsettingoutanewstrategyforthecomingthreeyears.Inthisconnection,theexternalmarketwasanalyzedintheformofcompetitors,shipyards,marketdrivers,thesupplyanddemandsituation,etc.toobtainanoverallsolidandwell-foundedpictureofthestrategiccontextinwhichtormwillfinditselfinthecomingyears,internalstrengthsandweaknesseswereidentified.

morethan200employeesworldwidewereinvolved,inparttoexploitthegreatamountofknowledgefoundintheorganizationaboutourmarkets,inparttoensurethatthenewstrategyisexecutedthroughactiveownershipbykeyemployees.

therearemanyattractivebusinessopportunitiesinthesegmentsinwhichthecompanyisactivetoday.moreover,withregularstrategicadjustments,thecurrentbusinessmodelhasproveneffectiveathighaswellaslowratelevels.tormwillcontinuallydevelopthestrategy,includingcon-sideringnewbusinessareas,butthecompanydoesnotexpecttomakeanydramaticchangestothestrategyinthecomingyears.

Allinvestmentopportunitiesaredividedintofourareasofwhichproducttankersandpanamaxdrybulkcarriersarefocusareasthataremonitoredclosely.chemicaltankers,gastankersandotherdrybulkvesselsaremonitoredforcapitalinvestments.technicalmanagementandcrewingaremonitoredformarketdevelopments.directinvest-mentsinshipyardsarenotconsideredtoberelevant.

thevisionin“greaterearningpower”wastoensuretormaleadingandprofitablepositionwithaprimaryfocusonproducttankersand,onasmallerscale,drybulk.thenewstrategyiscalled“greaterearningpower2.0”becauseitinmanywaysrepresentsacontinuationanddevelopmentoftheformerstrategy.“greaterearningpower2.0”maintainsthevisionandfurtherdevelopsthisvisioninthenewtormwithspecialfocusoncompetencedevelopmentandresponsibilityacrosstheentireglobalorganization.

At the beginning of 2008, TORM’s Board of Directors approved a new and very ambitious three-year strategy “Greater Earning Power 2.0”. The strategy is a continuation of the previous strat-egy, “Greater Earning Power”, which had already been achieved by the end of 2007 – one year ahead of schedule. The strategy is primarily a functional strategy.

ANTAL SKIBE I DE TRE PRODUKTTANKSKIBSPOOLS

ANTAL SKIBE I DE TRE PRODUKTTANKSKIBSPOOLS

33

“greaterearningpower2.0”isafunctionalstrategythatwillgiveacompetitiveadvantagebycombininganincreasedvolumewithanoptimizationoftheseparatepartsofthecompany.tormstillhasbiggrowthambitionsforthetypeofproducttankerswhichcurrentlyplayaroleforetorm.Inaddition,tormexpectstostepupgrowthinthebulkbusiness,whilemaintainingthecurrentpositionasaqualityproviderofpanamaxvessels.

ourbusinessmodelisbasedonacombinationofexperi-enceanddataandourconstantfocusonperformancethroughtheglobalorganization.thebusinessmodelisbasedonourvalues,leadershipandculture.“greaterearningpower2.0”willrefinethisbusinessmodelevenfurthernotonlybydevelopingitsindividualelementsbutalsobycontinuouslystrengtheningtheprocessescreatingcoherencebetweenthecolumnsinthechart.theseincludemanagementsystems,educationandtrainingaswellascommunication.

Tanker DivisionItistorm’sobjectivetofurtherconsolidatetheproducttankermarket,mainlybyincreasingthenumberofearningdaysforthesmallervesseltypes.thisdevelopmentistocomeaboutthroughgrowthintheindividualpools,butfirstandforemostthroughorganicandacquisitivegrowth.tormbelievesthatbyofferingthecustomersincreasedflexibilitythecompanywillbeabletostrengthenitsmarketpositionandimproveearnings.Improvingtheutilizationofthevesselswillstrengthentheefficiency,leadingtoaddi-tionaleconomiesofscaleintermsofprocurement,man-ningandoperations.

Ifitisdeemedbeneficialtothecompany’sdevelopment,thetankerfleetwillbeexpandedbycontinuingtheexten-sivenewbuildingprogrammeandbyacquiringexistingves-selsandfleets,possiblyincludingacquisitionsormergerswithothercompanies.tormwillalsochartermorevesselsonlong-termcontracts.

bulk DivisionIfitisdeemedcommerciallyviable,thecompanywillincreaseitspresenceinthebulkmarket.growthwillprin-cipallycomeaboutbycharteringvessels,unlesspotentiallyinterestinginvestmentopportunitiesarise.

thecompanywillmaintainitspolicyofhedgingamajorproportionofitsriskrelatedtofreightratefluctuationsbycharteringoutvesselsoncontractsofonetotwoyears’duration.

QualiTytormisknownforitshighqualityofvesselsaswellasoftechnicalandoperationalservices.tormaimstoexceedmarketexpectationsintheseareas.tormwantsthecustomerstoexperienceahighlevelofqualityinallareasofthistrading-andforthistohappenconsistentlyandwithagreatdealofinsightintotheindividualexpectationsofthecustomers.

financial sTraTegythecompany’sstrategyisbasedonaverysolidfinancialfoundation,ensuringthatthereiscapacityavailableforfur-therprofitableexpansion.

thetimingofinvestmentandassumptionofliabilitiesisessentialinshipping.Inlightofthehightonnagepricescombinedwithtorm’scriteriaforreturnsoninvestment,prudenceandcautionistheproperapproach.Itisagainstthisbackgroundthattormwishestoretainasignificantfinancialcapacitytoundertakeinvestmentswhenthetimingisright.

34

supply anD DemanD

– proDucT Tankers

Intorm’sassessment,supplyanddemandinthetankermarketwillbeinbalanceupto2011.thefigurebelowshowstheconclusiontoacomparisonmadeoftheglo-balorderbookswiththefactorsaffectingdemand.theexpecteddemandisbasedonincreasedrefinerycapacityinareasfarawayfromtheconsumptionareas,thephase-outofsingle-hulledproducttankers,continuedincreasedglobaldemandforoil,moreportdaysandarbitrageinproductsfromtheincreasedoildemandandfromnewrefineriesinIndiaandthemiddleeast.theindividualelementsintheexpecteddemandaredetailedbelowcomparedtosupply.

supply

FLeetSIZeAndorderbooKShipyardactivityhasincreasedsharplyinrecentyearsasaresultoftheverypositivedevelopmentintheindustrialshippingmarket.thedemandfornewbuildingshasledtomajorgrowthinthenumberofshipyardsandanexpansionofthecapacityofexistingyardsinthemajorshipbuildingnations,particularlychinaandKorea.nonetheless,itisassessedthattheproducttankerfleet’sexpansionwillbelessthanimmediatelyindicatedbytheincreasedcapacity.

SeveralofthenewAsianshipyardsarepresentlynotabletobuildadvancedtonnagesuchasproducttankers.Inaddition,theperiodoftimefromcontractingtodeliveryofavesselhasbecomeconsiderablylonger.Whereasthecontractingperiodusedtobe18-24months,since2004ithasbeenextendedto36-42months.moreover,thedeliverydatesofvesselsfromnewshipyardsaresubjecttosignificantuncertainty.Increasingorderbookshavealsodrainedthesupplyofmainenginesandcrankshafts,astheproducersoftheseproductshavenot

increasedtheircapacitycorrespondingly.themostimportantconsequenceofthisisthatevenifefficiencyintheyards’productionprocessisimproved,thisisnotlikelytoresultinmorevesselsbeingbuiltthanthosealreadyonorderfortheperiod.

Intheproducttankerareas,inwhichtormoperates,theexistingglobalfleetat31december2007stoodat1,039vesselsconsistingof693mr,227Lr1and119Lr2vessels(source:IngeSteenslandASShipbrokers).

thetotalorderbookofproducttankersfordeliveryintheperiod2008-2011currentlystandsat684vessels,whichconvertedintomrvessels,equals935unitscor-respondingtoa66%increaseoftheexistingfleet.thefleetisconvertedintomrunitsbyadjustingforsizeandsailingpattern.theeffectofthisonindividualsegmentsisthatthemrfleetwillbeincreasedby68%overtheperiod,Lr1by52%andLr2by78%.

2009isexpectedtobetheyearwiththegreatestnew-buildingprogramme.Subjecttosomeextenttodevelop-mentsinfreightrates,theImoregulationsonthephas-ing-outofsingle-hulledtankersin2010will,however,meanagradualreductionoftheolderpartofthefleet,tothebenefitoftheoverallfleetdevelopment.Some17%oftheexistingproducttankerfleetisexpectedtobephasedoutintheperiodupto2011equaling226mrunits.

therateatwhichtheoldertonnageisphasedoutcouldwellincreasefurtherinthecomingyearsascertainmajoroilcompanieschoosenottousetonnagethatismorethan20yearsold.Lessfavorablefreightmarketdevelopmentscouldalsoaffecttherateatwhichthevesselsarephasedout.

PRODUCT TANKERS BY YEAR OF CONCTRUCTION

REFINERY EXPANSIONS VERSUS FLEET ORDER BOOK 2008-2011

ORDER BOOK VERSUS EXPECTED DEMAND 2008-2011

EXPECTED REFINERY EXPANSIONS 2008-2011





35

DemanD

eXpAnSIonoFreFInerYcApAcItYthecapacityoftheworld’srefineriesisexpectedtobeincreasedbysome11millionbarrels/dayintheperiod2008-2011,equalinga12.5%increaserelativetothepresentcapacityofapproximately88millionbarrels/day(source:pvmrefineryoutlook).theincreasedcapacityisprincipallyduetothegrowingdemandforrefinedoilproductsandtherefineries’reducedoperatingcosts.

Asmallerproportionofthenewrefinerieswillbelocatedinthemajorconsumptionareas,theUSAandeurope.themajoritywillbeplacedinIndiaandthemiddleeast,whichisexpectedtoleadtoincreasedoveralltransportneedsupto2011,asalimitedamountofIndia’sandthemiddleeast’sproductionofrefinedoilproductsisfordomesticconsumptionbecausehighermarginsmakeitpossibletocompetewiththeoldrefineriesintheareasofconsumption.

theUSAisthelargestimporterandconsumerofrefinedoilproductsintheworldandisthereforeofgreatimpor-tancetothedevelopmentoftheoveralltransportneed.AsthenewrefineriesarelocatedmainlyinIndiaandthemiddleeast,thedevelopmentinUSconsumptionwillcauseanincreasedtransportneedandthusabsorbthecapacityofadditionalnewbuildings.In2009,themiddleeastisexpectedtoproduceanadditionalonemillionbarrelsofrefinedoilproductsperday.transportingthisincreasedproductiontotheUSAwouldrequiresome150mrvessels.

experienceshowsthatsomeoftherefineryexpansionswillbeabandonedorputoff,andtheactualexpansionofcapacityisthereforeexpectedtobelessthanforecast.Iftheexpectedrefineryexpansionistranslatedintovesselequivalents,itwouldutilizeapproximately48%oftheglobalorderbook.

expansionoftherefinerycapacityisexpectedtoequal449mrunits.

IncreASeInoILdemAndthedevelopmentoftheglobaloilconsumptionisessen-tialtotheproducttankermarket,andin2007theglobaloilconsumptionamountedto85.8millionbarrelsofoil/day.energyInformationAdministration,eIA,expectstheyearlyincreaseintheoildemandtobeapproximately1.7%from2008to2011,equalinganannualincreaseof1.5millionbarrels/day.

thegrowthinoildemandisexpectedtoabsorb112mrunits.

nUmberoFportdAYSthenumberofportdaysfortorm’sfleethasincreasedbyapproximately6%peryearsince2003andhasbeenanimportantfactorinthebalancebetweensupplyanddemand.goingforward,anannualincreaseinthenumberofportdaysof3%isexpected.

thegrowthinportdaysisexpectedtoabsorb92mrunits.

ArbItrAgeArbitrageshipping,eveningoutpricedifferencesofrefinedoilproductsbetweenloadinganddischargeport,hasbecomeincreasinglyimportantinrecentyearsforthedemandforproducttankers.In2007,arbitrageship-pingaccountedforsome30%oftorm’sproducttankertransports.

thedevelopmentinarbitrageshippingisexpectedtoabsorb56mrunits.

otHerFActorSotherfactors,suchasconversiontobulkvessels,envi-ronmentalrestrictions,etc.,arealsoimportant,buttheyaredifficulttoquantifyandarethereforenotpartofthisanalysis.









36

supply anD DemanD

– panamax bulk vessels

thechineseand,tosomeextent,theIndianeconomyareessentialtodevelopmentsinthebulkmarkets.thesetwocountries’increasedtradingwiththerestoftheworldhasmeantasharpincreaseinthetransportationofrawmate-rialsand,consequently,inthedemandforbulkcarriers.thishasresultedinanincreasednumberofwaitingdaysinanumberofports,primarilyinAustralia,astheydonothavesufficientcapacitytohandlevesselsattherequiredspeed.Itseemsthattheinfrastructureintermsofports,roadsandrailwaysisnotbeingdevelopedatthesamerateastheexpansionoftheglobalfleet.thissituationisthere-foreexpectedtocontinueforsometimetocome.

theincreaseddemandfortransportationofironoreandcoalistheprincipaldriverbehindtheveryhighfreightratesseeninrecentyears.In2008,transportationofironoreandcoalisexpectedtoaccountfor31%and32%ofthetotalbulkmarketrespectively(source:mSI),withanexpectedgrowthrateof6.6%.In2009,thegrowthintransportationofbulkproductsisexpectedtobe5.6%.othershippinganalystshowever,expectthegrowthratetobeashighas7%.

thecontractingactivityin2007wasextraordinarilyhighinthebulksegment,includingpanamax,whichisthetypeofvesselthattormoperates.panamaxvesselsarebulkcar-rierswithasizeof60-100,000dwt.Atyearend2007,theglobalfleetcomprised1,484panamaxvessels(source:Fearnleys),andinthepanamaxmarketalone,292newvesselswerecontractedin2007,correspondingtoapproxi-mately20%ofthetotalpanamaxfleet.thetotalorderbookofpanamaxnewbuildingsattheendof2007was483ves-sels,equaling33%oftheexistingfleet.Attheendof2006,thepanamaxorderbookequaled16%oftheexistingfleet.

themanynewshipyardsbeingestablishedinchinaarestillexpectedtoprimarilybuildbulkcarriers,includingpanamaxvessels,andtheorderbookisthusexpectedtoincreasefurther,althoughprimarilyfordeliveryafter2011.theextraordinarilyhighfreightratesin2007meantthatmanysingle-hulledoiltankerswereconvertedintobulkcarriers.Similarly,partoftheglobaltankerorderbookisbeingconvertedintobulkcarriers.However,estimatesofconversionsaresubjecttoconsiderableuncertainty.

Withthehugeincreaseinthenumberofbulkcarrierscon-tractedin2007,theglobalorderbookiscurrentlyatahis-toricalhighof2,153vessels(source:Fearnleys)intotal,equaling32%ofthetotalfleet.duetotheeconomicgrowthinchinaandIndiacombinedwiththephasing-outofoldvesselsdatingfromtheearly1980s,supplyanddemandarenonethelessexpectedtoremainbalancedattheendof2009,howeverwithsupplyslightlyexceedingdemand.

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PANAMAX FLEET BY YEAR OF CONSTRUCTION

BULK: SUPPLY VERSUS DEMAND

GROWTH IN TRANSPORTATION OF BULK<



GROWTH IN TRANSPORTATION OF BULK

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GROWTH IN TRANSPORTATION OF BULK

Janmechlenburg,executiveVicepresident,ShipowningandSale&purchasedivision

38

csr – corporaTe social responsibiliTy

susTainable DevelopmenTtormtakesactiveresponsibilityforcontributingtoaglobalsustainabledevelopment.Intorm,agoodfinancialper-formancethereforegoeshandinhandwiththewishtobeaccountabletoourshareholders,customers,employees,businesspartnersandotherswhoareaffectedbytorm’sactivities.

Accountabilityisanintegralpartoftorm’sbusiness,whetherintermsofcorporategovernance(seethesectiononp.50),intermsofenvironmentalconcernsorintermsofsocialandsafetyissues.thisisreflectedinthecompany’smissionaswellasinthefactthatallvesselsareoperatedaccordingtothehigheststandards,regardlessofwhichflagtheyaresailingunder.therefore,thevesselsareamongstotherthingsrequiredtomeetrigoroussafety,qualityandenvironmentalstandards.

thethreeareaswhich,incombinationwithfinancialper-formance,areparticularlyrelevanttoassessingthesus-tainabilityoftorm’sbusinessaresafetyandquality,work-ingconditionsforouremployeesandthoseofourbusinesspartnersandenvironment.protectingcrew,environment,cargoandvesselisessentialtothecompany,andtormhasthereforeimplementedacertifiedmanagementtoolcoveringsafety,qualityaswellasenvironmentalconcerns.

safeTy anD QualiTyItistorm’sobjectivethattheoperationofthecompany’svesselsshouldmeetthemoststringentsafetyrequire-ments.throughsystematicsafetyreviewsashoreandatsea,thecompanyassessesallaspectsofoperationsandthusminimizerisk.thevessels’operatingproceduresareregularlyevaluatedandimprovedinordertoensurethatthevesselsareoperatedassafelyaspossible.

torm’sownriskassessmentsandexperienceplayakeyroleinconnectionwithreviewsanddevelopmentoftheoperatinginstructions.moreover,therearealargenumberofexternalpartieswhocontributetosettingoperatingstandards.InadditiontothestatutoryrequirementssetoutbytheInternationalmaritimeorganization(Imo),thevari-ousflagstates,torm’scustomersandtheoilcompaniesplayamajorroleinthattheyallmakespecificsafetydemands.tormconsiderstheoilcompaniesitsbusinesspartnersandthereforesharesallrelevantsafetyinforma-tionwiththeminordertocontinuouslyexpandknowledgeandawarenessofsafetyintheindustry.

However,systemsalonedonotoperatethevessels.Withoutthehighlyexperiencedandresponsibleofficersandcrews,thevesselswouldnotbeabletomeettorm’shighstand-ards.Assafetyrequirementscontinuouslygrowstricter,sodothetrainingdemands.tormhasdevelopedamajortrainingprogrammethatsetsnewstandardsfortrainingofallseafarers,fromordinaryseafarerstoseniorofficers.thetrainingprogrammeisdevelopedinclosecollaborationwiththetrainingcentresresponsiblefortrainingourseafarers.

Working conDiTionsWorkingconditionsonthecompany’svesselsareaperma-nentfocusarea,andthisproactiveapproachlimitstheriskofincidentsandaccidents.thenumberofindustrialacci-dentspermillionhoursofworkwas1.9in2007(1.3in2006).

thesystematicapproachtomanagingworkingconditionsmeetstherequirementsoftheoHSAS18001occupationalhealthandsafetystandard,andthecompanywillregularlyassesswhethercertificationshouldbeobtained.

tormbelievesthatthecompany’saccountabilitygoesbeyonditsownemployees.Accordingly,thecompanywillin2008performaself-assessmentinaccordancewiththeSA8000standard.SA8000makesdemandsoftheconductofboththecompanyanditssuppliersintheemployeerightsandhumanrightsareas.

Inadditiontothis,tormhassetupahealthinsuranceplanforemployeeswhoarenotcoveredbyanationalhealthplanandfortheirfamilies.theseincludeemployeesfromtheUSA,Indiaandthephilippines.

thetormFoundationin2007madeamajordonationtotheestablishmentofthetormphilippineseducationFoundation.theobjectiveofthenewfoundationistosup-portthechildrenoftormemployeesorpoorstudentsinthephilippineswhoareinterestedintrainingintheshippingbusinessorwouldliketoengageinamaritimeeducation.

environmenTIn2007,thecompanywascertifiedaccordingtotheISo14001environmentalmanagementstandard,underwhichtormisrequiredtoconstantlyreduceitsenvironmentalimpact,andthecompany’scompliancewiththisiscontrol-led.Asaresultofthisrecentcertification,tormhasthisyeardecidedtofocusparticularlyontheenvironmentintorm’saccountabilityreporting.

torm’sprincipalactivity,shipping,canbesplitintothreephases,eachofwhichhasitsownenvironmentalimpacts:construction,operationandresale/recycling.

themostsignificantenvironmentalissuesandimpactsofshippingactivitiesare:

• consumptionoffuelanduseofsubsidiarymaterialscausingglobalwarming,acidification,waterpollution,smoganddepletionofnaturalfossilresources.

• releaseofsubstancesfrombottompaintthatmayhaveatoxiceffectonhumanbeingsandecosystems.

otherissuesincludedischargeofballastwater,useofchemicalsforcoolingandfireprotection,wastehandling,spillsandlossofcargo.

clausUsenJensen,executiveVicepresident,technicaldivision

40

csr – corporaTe social responsibiliTy

Althoughseatransportsgenerallyconsumelessenergyandemitfewersubstancestotheenvironmentthancom-parablerailandroadtransports,tormcontinuallyseekstoreduceitsenvironmentalimpactthroughmeasuresatallthreestagesofavessel’slife.

consTrucTionthedesignofthevesselandchoiceofenginehaveasigni-ficanteffectonitsresourceconsumptionandenvironmentalimpactsduringoperation.therefore,torm’senvironmentaleffortsalreadybeginduringthevessel’sdesignphase.

torm’sownedvesselsareconstructedatlarge,recognizedandinternationally-orientedshipyardssuchasguangzhouanddalianinchina.Ateachoftheshipyards,tormhassecondedateamtosupervisethatthecompany’shighnewbuildingstandardsaremet.Avoidingerrorsanddefectsduringtheconstructionphasereducestheuseofresourcesandminimizestheriskofsubsequentaccidents.

tormwishestomaintainamodernfleet.thecompanythereforecontinuallyrenewsthefleet,allowingittoimprovetheenginesforthebenefitoftheenvironmentaswellasthebusiness.

In2007,tormsignedanagreementfordeliveryofsevenenginesforaseriesofproducttankersfromtheguangzhoushipyardinchina.theengines,ofmodel6550me-b,aresuppliedbymAndieselandarethemostfueleconomicintheirengineclass.theimprovedfueleconomyisexpectedtoleadtoa4.5%reductionofco2emissions.

Alltorm’svesselsareequippedwithdouble-hulledcargoholds,andthecompanywasamongthefirsttousedouble-hulledfueltanks.

operaTionthegreatestenvironmentalimpactduringtheoperatingphaseistheconsumptionoffossilfuelsforpropulsion,electricityandheating.consumptionandemissionsdependonsuchfactorsasdraughtandtrim,propellerslip,theconditionofthehullandthedegreetowhichtheengineisoptimized.

In2007,tormcarriedoutanumberofactivitiesexpect-edtofurtherimprovetheefficiencyofthevessels.themostimportantoftheseare:

• thefittingoftorsionmeterson12vessels.thismakesiteasiertoincreasetheefficiencyoftheengineandthusreducefuelconsumptionandemis-sions.theplanisforalloftorm’svesselstohavetorsionmetersfittedbytheyear2009.

• electroniccylinderlubricationhasbeenfittedontenvessels.thisisexpectedtoreducecylinderoilcon-sumptionbyupto40%.this,inturn,meansareducedreleaseofparticle-richmaterials.thesystemwillgraduallybefittedonallvesselsastheydock.

• theuseofsilicone-basedbottompaint,whichimprovespropulsionandthusreducesfuelcon-sumption.theeffectismostapparentonrelativelyhigh-speedvessels,however,andtorm’stestsontwovesselshavenotyetdemonstratedanycleareffect.nonetheless,theexperimentwillcontinuein2008-2010.bottompaintsusedtocontaintributyltin(tbt),buttorm’sfleetofownedvesselshasbeentbt-freesince2004.

Inaddition,tormhasstartedamajormaintenancepro-grammetoensurethatthefleet’spropellersandhullsareinoptimalcondition.Alongwitheffectiverouteplanning,thisfurtherreducesfuelconsumption.tormarealsoexperimentingwithaddingadditivestothefuel,whichreducestheamountofsludgeandimprovesfueleconomy.

operatingvesselsproducesvariouskindsofwaste,andasitisnotknowninadvanceinwhichportthevesselwilldisposeofthewaste,strictwastehandlingrequire-mentsapplyonboardtorm’svessels.theseincludesorting,disposalandrecycling.

overall,tormassessesthatchoosingefficientmachin-ery,continuallyoptimizingthefleetandplanningroutesefficientlyleadtoanexpectedannualreductionofco2emissions.

accounTabiliTy over THe life of a vessel

consTrucTion operaTion resale/recycling choiceofsupplier Fuelconsumptionandairemissions recyclingchoiceofrawmaterials bottompaint clean-upchoiceofengine ballastwater WasteWorkingconditions Waste Hazardouswastehandling noise Workingconditions Spills maintenance routeplanning Workingconditions

41

resale/recyclingtheaveragelifeofatormvesselis25years.tormoperatesinthetopsegmentofshipping,inwhichcustom-ersmakehighqualitydemands.tormthereforetypicallysellsitsvesselsafter5-10yearsofoperation.thismeansthatthevesselshaveanumberofyearslefttooperatebeforebeingrecycled.

Attheendofavessel’slife,themajorityofitsweightwillberecycledforthebenefitoftheenvironment,butalltoooftenthehandlingofhazardoussubstancesisinade-quateintheplaceswherethevesselsarepreparedforrecycling.consequently,tormhasintroducedaschemedemandingthatallnewbuildingsmustbeprovidedwithagreenpassport,whichisadetailed,class-approvedlistofthevessel’shazardoussubstances.thegreenpass-portfollowsthevesselthroughoutitslifeandwillcon-tributetoensurethatitisrecycledinanenvironmentallyresponsibleandsafemanner.

Acomprehensivediscussionoftorm’senvironmentaleffortswillbeavailableintheenvironmentalreportfor2007,whichwillbeavailableatthecompany’swebsitein2008.

merger of managemenT sysTemstheintegrationofomIalsomeanscombiningthetwocom-panies’managementsystems.Atthetakeover,omIhadcertifiedmanagementsystemscoveringquality(ISo9000:2000),environmentalmanagement(ISo14001),occu-pationalhealthandsafety(oHSAS18001)andhumanandemployeerights(SA8000).thesecertificatescannotbetransferreddirectlytotorm,butthemanagementsystemswillbemaintainedandduringthecourseof2008tormwillassesstowhatextentcertificationshouldbeobtainedfortheareascurrentlynotcertified.

tormhasboughtagreencow,designedbytheIcelandicartistthora

piaFinnsdottir.themoneypaidforthecowwasdonatedtoredbarnet,

thedanishdivisionofSavethechildren,andthecowisnowtouringall

departmentsinconnectionwiththeestablishmentofenvironmental

targetsforthecomingyear.

”Weboughtthecowwhenourenvironmentaleffortswerecertifiedunder

ISo14001.theaimistoremindusallinavisibleandentertainingwaythat

itcanmakeadifferenceifeachofuscontributestoimprovingtheenviron-

ment”,saysKlausKjærulff,ceo.

number of acTive vessels in THe perioD incluDeD in THe reporT (in months) vessels from omi 2007 3) 2006

Srtankers 50 0 0mrtankers 0 153.5 132.5Lr1tankers 10 102.3 95.0Lr2tankers 55 113.5 101.0bulkvessels 0 63.0 0.0totalnumberofvesselsmonths 115 432.3 328.5 emissions from fuel in tonsFueloiluse(HFo) 58,263.1 347,357.6 299,437.1Fueloiluse(LowSulphurHFo) 36,030.5 23,308.9 4,345.,3motorgasoil 2,382.5 10,590.2 7,837.8Lubricatingoil - 2,982.8 2,409.6co2emissions 304,629.9 1,199,668.0 969,283.0Soxemissions 4,093.2 19,863.6 18,273.3noxemissions 8,962.0 35,065.1 28,323.9 emissions per tonkm (1 ton goods transported 1 km) co2emissions 6.17g/tonkm 5.88g/tonkmSoxemissions 0.10g/tonkm 0.11g/tonkmnoxemissions 0.18g/tonkm 0.17g/tonkm truckco2 109.6g/tonkmtrainco21) 28.0g/tonkm2000tbulkvesselsco21) 16.0g/tonkmcargoplaneco22) 537.0g/tonkm operational aspects Waitingin% 2.40 2.20Inharbourin% 34.56 33.06ballastvoyagein% 25.60 25.46Ladenvoyagein% 37.45 39.28

1)referenceKey2green.dk2)Lufthansa3)excl.vesselstakenoverfromomI

Human resources

asHorethecompany’ssignificantgrowthin2007resultedinmanynewemployees.thisexpansiongaverisetoanumberofnewpositions,andtormsucceededinattract-ingapplicantsandfillingthesepositionswithcompetentandhighlyqualifiedpeople.In2007tormwasalsosatis-fiedtonotealowstaffturnoverof6.8%.Attheendof2007,thecompanyhad296employeesashore,ofwhich143wereemployedincopenhagen,97inIndia,14inSingapore,22intheUSAand20inthephilippines.

InIndiaandtheUSA,theacquisitionofomImeantamajoradditionnotonlyofvesselsbutalsoinparticularofhighlycompetentemployeesatseaaswellasashore.thispresentednewopportunitiesintermsofhowtormusesthehumanresources,butalsonewdemandsastohowtormperceivestheorganizationandemployees.Inthesecondhalfof2007,thecompanyfocusedontheinte-grationoftheomIorganizationand,hadmanypositiveresultsfromthisintegrationwork.torm’svalues(profes-sionalism,entrepreneurship,respect)havebeen,andwillcontinuetobe,anessentialpartoftheintegrationwork.

Inordertohandlethecontinuedgrowthstrategy,thefocusonHumanresourceswillbegreatlystrengthenedin2008.Withtheintensecompetitionforcompetentemployeesintheshippingindustry,itisofcourseessen-tialthattormstillsucceedsinattractingthebesttalents.therefore,torm’sfocusoncorporatebrandingwillcon-tinueinfuturewiththeaimofmakingtormanamethatissowellknownthatitbecomesnaturalforcareerseek-erstolookforjobswithtorm.

Incollaborationwithotherleadingshippingcompanies,thecompanywillcontinuetoofferatwo-yeartraineeshipcombiningpracticaltrainingwithasolidtheoreticaledu-cationthelatterisorganizedincollaborationwithesbjergHandelsskoleandcopenhagenbusinessSchoolintheformofanHdgraduatedegreewiththepossibilityofasubsequentmbAdegree.

torm’semployeesaregenerallyofferedgoodopportuni-tiesforcompetencebuilding,and2007wasnoexception.enhancingemployeeskillsisnotonlypartoftorm’sretentionpolicy,itisalsoakeyelementinthedevelop-mentofthebusinessaswellastheemployee.Inthecourseof2008,tormwillimplementanewperformancemanagementprocesswhichisdesignedtosignificantlyincreasetheattentiontothisareaaswellastofocusevenmoreonthemosttalentedemployeesandonrobustsuc-cessorplanninginkeypositions.

theHrdepartmentspentthelastfewmonthsof2007onplanninganambitious,internationalleadershipdevelop-mentprogrammeforalloftorm’sland-basedmanagers.tormconsidersgoodleadershipakeyfactor,andthe

individualmanagerhasabigresponsibilityforprofes-sionallyhandlingHr-relatedtasks.thelaunchingoftheleadershipdevelopmentprogrammeinthefirstquarterof2008isthereforeeagerlyawaited.

Animportantelementoftorm’ssuccessisthecompany’scultureandvalues,whichreflectthewayinwhichtormconductsbusiness.cultureandvaluesarealsoimportantfactorsintheintegrationworkwithomI.Allemployees,ashoreandatsea,attendedcultureandvalueseminarsin2007.theseseminarswillin2008befollowedupbyfurtherinitiativeswhicharemeanttocontinuallyensurethatallemployeeshaveacommonunderstandingofthecompany’scultureandvaluesandthatthesevaluesbecomeanaturalpartofouractionsandourlanguage.

aT seatormisadynamic,growingcompany,andhighpriorityisgiventorecruitingmotivatedseafarersatalllevelssothatthecompany’svesselsare,andremain,operatedaccord-ingtothehigheststandards.competitivepay,developedwiththeaimofretainingandinspiringtheverybestemployees,recognitionandstaffbenefitsareimportantparametersinourfuturerecruitment–alsoforthecompany’sconsiderablenewbuildingprogramme.

Allseafarersareofferedcareerdevelopmentandpromo-tionopportunitythroughtraininganddevelopmentpro-grammes.Whenatsea,theseafarershavecomputer-basedtrainingprogrammesattheirdisposal,allowingthemtotrainattheirownpace.

tormisparticularlyproudoftheseniorofficers’semi-narsheldtoensurethattheentirefleetreceivescontinualtraininginthecompany’spoliciesandpractices.Inrecentyears,tormhasheldseniorofficers’seminarsindenmark,India,thephilippinesandcroatia.

thecompanyhasregularlylaunchedmanyinitiativesaimedatofferingchiefofficersandsecondengineersamanagingtrainingprogramme,andthusanopportunityforpromotion.Atotalof20peoplehavecompletedthefour-moduletrainingprogramme.

Inrecentyears,thecompanyhasincreasedthenumberofapprenticeofficers,andtormiscurrentlytakingonabout50eachyear.

thecompany’sapproximately3,000seafarershavemanydifferentnationalities,includingdanish,Indian,philippineandcroatian,andtheyaremanagedfrommanningofficesinIndia,thephilippinesanddenmark.

In a dynamic, international and competitive market it is important for TORM to be able to attract and retain the best commercial and technical employees.

42

christianriber,SeniorVicepresident,Hr

44

managing risk anD exposure

theboardandmanagementactivelyidentifyandevalu-atethecompany’ssignificantriskswiththeobjectiveofmanagingthesensitivityoftheresultsandfinancialpositiontothoserisksinaccordancewiththecompany’sstrategyandriskpolicies.managementassessestherisksconsideredtobemostsignificantforthesuccessofthecompanyonatleastayearlybasisandplansanyactiondeemedrelevanttoadjustthesensitivitytothoserisks.riskandactionsarediscussedwiththeAuditcommitteeandtheboardofdirectorsonatleastayearlybasis.torm’sriskmanagementalsoentailsiden-tifyingtheopportunitiesassociatedwiththoserisks,suchasvolatilefreightrates.

theriskscangenerallybedividedintothreecategories:Industryandmarketrelatedrisks,operationalrisksandfinancialrisks.torm’smostsignificantrisksaredescribedbelow.pleaserefertopage12andnote21forsensitivityanalyses.

inDusTry anD markeT relaTeD risksIndustryandmarketrelatedriskfactorsrelatetochangesinthemarketsandinthepolitical,economicalandphysicalenvironmentthatmanagementcannotcontrolandonlyinfluencetoaverylimiteddegree,butneverthelessmustconsiderinthelong-termstrategyplanningforthebusi-nessandtheshort-termexecutionofthestrategy.

poLItIcALAndmAcroeconomIcrISKSShippingisahighlycyclicalindustry.thecargoesthattorm’svesselscarryaroundtheworldincluderefinedoilproducts,ironore,coalandotherproducts,forwhichthedemandishighlydependentonmacroeconomicdevelopmentsandpoliticaldecisions.thesedecisionsanddevelopmentsalsoaffectthepriceofbunkersandsteelaswellastherulesunderwhichtormoperates.changesindemandforthecargoesthattormcarriesaffectourrevenues,changesinbunkerpricesaffecttheoperatingexpensesandchangesinsteelpricesaffectthepricesofvessels.changesintherulesgoverningtheshippingindustry,e.g.Imoregulations,affectthemarketparticipantsinthewaytheyorganizethemselvesandcarryouttheiroperations,andallofthesefactorsulti-matelyaffectthecompany’searningsandthevalueofthecompany.

tormmonitorsproducttankerandbulkmarkettrendsaswellastheglobaleconomictrendsthatarelikelytoaffectthecompany’sbusinessareas.theanalysisofsupplyanddemandonpage34-36isanexamplehereof.theseongoingeffortsaredesignedtoensurethatthecompany’sstrongcommercialexpertiseiscomplement-edwiththoroughanalysesinordertoimprovethebasis

forthecompany’sdecisions,andtherebyreducerisksandcapitalizeonpotentialbusinessopportunities.thepoliticalandmacroeconomicrisksaretypicallyofageneralnatureandareassessedtoaffectallmarketparticipantsinamoreorlesssimilarfashion.

FreIgHtrAteVoLAtILItYthecompany’sincomeisprincipallygeneratedfromvoyagescarriedoutbyitsfleetofvessels.Assuch,tormisexposedtotheconsiderablevolatilitythatcharacterizesthefreightrates.

Inthetankersegment,torm’sprimaryriskobjectiveaspartofthepoolconceptistoreducethesensitivitytothevolatilityoffreightratesnotbyenteringintolong-termagreementsatfixedfreightrates,butratherbyachievingeconomiesofscaleandoptimizingtheofferingtothecustomerandusingthecompany’sknowledgeofthemarketandgoodgeographicalcoveragetoachievethehighestpossibleearningsunderanygivenmarketcondi-tions.therefore,voyagesareprimarilyfixedatratesreflectingprevailingmarketconditionswithanaveragedurationof20-40days.

Withinthetankerpools,freightincomeistoacertainextentcoveredagainstvolatilitythroughtheuseofphys-icalcontracts,suchascargocontractsandtimecharteragreements,andfinancialinstruments,suchasforwardfreightagreements(FFAs)andsynthetictimechartercontracts.coverageistypicallymade6to12monthsforward.Inadditiontothecoveragearrangedinthepools,tormmaysupplementwithadditionalcoverageonthebasisonmarketexpectationsandinaccordancewiththecompany’sriskmanagementpolicies.

In2007,50%offreightearningsderivingfromthecompany’stankersweresecuredinthisway.timecharterpartiesaccountedfor70%ofoverallhedging,asthishedginginstrumentresultedinhigherratesthanthoseofferedbytheforwardmarket.In2007,thecompanyenteredintoFFAswithacontractvalueofUSd264million.

FFAtradeandotherfreightrelatedderivativesaresub-jecttospecificriskpoliciesandguidelinesapprovedbytheboardofdirectorsincludingtradinglimits,stop-losspolicies,segregationofdutiesandotherinternalcontrolprocedures.transactionsareregisteredinanindustrydevelopedItsystem,whichprovidesdailymarketreportstomanagementandinputforfinancialreporting.onalimitedscaleandwithintheboundariessetoutbytheboardofdirectors,thecompanyfromtimetotimeentersintoFFAcontractsasasupplementtothephysi-calpositionsinvessels.

Shipping is an industry highly sensitive to macroeconomics and changes in political and legal circumstances. Furthermore, TORM is exposed to the risks associated with owning and operating vessels globally with a primary focus on the spot freight market.

torbenbager,SeniorVicepresident,Finance

46


Inordertocontrolthecompany’sFFApositions,thecompanyappliesariskmanagementsoftwarebasedontheValue-at-riskmethod.

Inthebulksegment,tormisarelativelysmallmarketparticipant,andthecompanyreducessensitivitytothevolatilityoffreightratesprimarilybyenteringintotimecharteragreements,typicallyof12to24months’duration.

SALeSAndpUrcHASeprIceFLUctUAtIonSItisacoreelementoftorm’sstrategytomaintainandexpandalargefleetofmodernvessels,particularlyinthetankersegment,throughcontractingnewbuildingsandthroughtransactionsinthesecond-handmarket.Asaresult,thecompanyisexposedtoriskassociatedwithchangesinthevalueofthevessels,whichcanvarycon-siderablyduringtheirlifetime.

basedonanoverallportfolioapproachandbyconsist-entlymaintainingastrongfinancialposition,thecompany’spolicyistobeinapositiontopurchaseandselltonnagewhenthetimingisconsideredoptimal.managementcontinuouslyevaluatessaleandpurchaseopportunitiesandrecommendsthesetotheboardofdirectorsbasedonprevailingmarketinformationandthecompany’slong-termmarketexpectations.

Withregardtotorm’snewbuildingprogramme,with21vesselsonorderatchineseshipyardsatyear-end,theyardshaveissuedguaranteesforthecompany’spre-paymentsmadethroughtheconstructionperiod.Allguaranteeshavebeenarrangedviastate-ownedbanks.Attheendof2007,prepaymentstotheseshipyardstotalledUSd257million.

bUnKerprIceFLUctUAtIonSthecompany’soperatingresultisaffectedbymove-mentsinthepriceoffueloilconsumedbythevessels–knownintheindustryasbunkers.

tocoverthisrisk,thecompanyhedgesthepriceofpartofitsbunkerrequirements.Withinthetankerpools,bunkerrequirementsarehedgedwhenacontractofaffreightmentcoveringseveralvoyageshasbeenconcludedatafixedfreightrate.coverageisusuallyprovidedforaperiodofupto12monthsforward.

Indecember2007,tormintroducedarollingbunkerhedgingprogrammeasasupplementtothehedgingactivitieswithinthepools.thepurposeoftherollingprogrammeistobuildupahedgepositionof20%ofthebunkerexposureasindependentofthecurrentforwardratesaspossible.thisisconsideredtobetheleastriskyapproachtostarthedginginaperiodofall-timehighbunkerforwardprices.tormwillbuybunkersabout40

timesforthecoming12monthsofabout0.5%oftheexposuretoreachthehedgepercentage.

bunkertradeissubjecttospecificriskpoliciesandguidelinesapprovedbytheboardofdirectorsincludingtradinglimits,segregationofdutiesandotherinternalcontrolprocedures.

Forbulkcarriers,thebunkerrequirementsaresimilarlyhedgedtomatchcargocontractcommitments,buttherequirementsaregenerallyless,giventhatthemajorityofearningsderivefromvesselscharteredoutontimecharter,wherethechartererisresponsibleforthepay-mentofbunkers.

operaTional risksgiventhepoliticalandmacroeconomicenvironment,theconditionswithintheshippingindustryandtherisksassociatedherewith,theboardandmanagementmakecertainstrategic,managerialandoperationalchoicesinsettingupthecompany’sobjectivesandthemeanstoachievethoseobjectives.operationalrisksarethoserisksassociatedwiththemanagementofthebusinessandtheday-to-dayoperations.

VeSSeLUtILIZAtIonInthetankersegment,tormisashipownerwithalargefleetofmoderndouble-hulledvessels.thecompany’sstrategicfocusistoprovideaqualityservicetocargoholders,whichrequiresustooperateprimarilyinthespotfreightmarket.consequently,vesselutilizationisasignificantriskfactor.

Inthebulksegment,tormdoesnothavethesameshort-termexposureasthevesselsarecharteredoutontimechartercontracts.

byoperatingandparticipatinginlargewell-establishedtankerpoolsandthroughthecarefulmatchingoffrontandbackhaulcargoes,thecompanyachievesanopti-malgeographicalcoverageandmarketpresenceandminimizesballasttimeandwaitingdays.onthisbasis,tormisabletomaximizeitsvesselutilizationandachievehigherandmorestableearningsthanthecompanywouldonitsown.

SAFeoperAtIonoFVeSSeLSgroundings,collisions,pollutionorsimilareventscanhaveseriousconsequences,andoperationofvesselsisconsequentlyheavilyregulatedbystatutorybodies.Sucheventscouldresultinfinanciallosses,intheshorttermthroughlossofhire,costofvesselrepairs,claimsandpenalties,andinthelongertermthroughlossofreputa-tioncausedbydelayandcustomerdissatisfaction.Inaddition,manycustomersincludingthemajoroilcom-panieshavesetupownstandardsrelatingtosafety,pro-

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tectionoftheenvironment,etc.thatthevessel,thecrewandtheland-basedoperationmustfulfilinordertobeallowedtotransportoilproductsforthem.Inspections,so-calledvettings,arecarriedoutbytheoilcompaniestoensurethattheirstandardsarefulfilled.

Ahighstandardofoperationisacornerstoneinthewaythattormconductsitsbusiness.tormhasdedicatedthenecessaryspecificresourcesandbuiltupgoodman-agementsystemstoensurethatthecompanyisincom-pliancewithbothstatutoryrequirementsandadditionalrequirementsfromcustomersconcerningoperationalprocedures,qualityandexperienceofseafarers,etc.officerseminarsareconductedseveraltimesayeartosecurethatthesea-basedstaffalwayshasthemostrecentknowledgeofregulationsandbestpractice.

Inordertodocumentandassistinmaintainingaconsistentlyhighstandardofoperations,thecompanyobservesthevoluntaryInternationalStandardssuchasISo14001andthecompliancewiththisstandardisauditedannuallybyLloyd’sregister.

thecompany’sQualitymanagementSystem(QmS)observestherequirementsofmandatoryandvoluntarystandards.

tormrecruitsseafarersfromfourdifferentgeographicalareasinordertobeabletoselectthebestqualifiedstaffandtoavoidunduerelianceonaspecificmanningsource.

Forfurtherdetailsonsecurityandquality,workingcon-ditionsandenvironment,pleaserefertopage38.

InSUrAncecoVerAgeInthecourseofthefleet’soperation,variouscasualties,accidentsandotherincidentsmayoccurthatmayresultinfinanciallossesfortorm.Forexample,nationalandinternationalrules,regulationsandconventionsmeanthatthecompanymayincursubstantialliabilitiesintheeventthatavesselisinvolvedinanoilspilloremissionofotherenvironmentallyhazardousagents.Inordertoreduceoreliminateanyfinanciallossand/orotherliabil-itythatthecompanymightincur,thefleetisinsuredagainstsuchriskstotheextentpossible.

thetotalinsuranceprogramcomprisesabroadcoverofriskinrelationtotheoperationofvesselsandtranspor-tationofcargoes,includingpersonalinjury,environmen-taldamageandpollution,third-partycasualtyandliability,hullandenginedamage,totallossandwar.Alloftorm’sownedvesselsareinsuredforanamountcorrespondingtotheirmarketvalueplusamargintocoveranyfluctuations.Liabilityrisksarecoveredinlinewithinternationalstandards.Allvesselsarefurthermoreinsuredforlossofhireforaperiodofuptoatleast90daysintheeventofacasualty.

Itistorm’spolicytocooperatewithfinanciallystronginternationalinsurancecompanieswitharatingofbbborbetter–presentlysome8-10companiesalongwithtwop&Iclubstodiversifyrisk.Attheendof2007,theaggregateinsuredvalueofhullandmachineryandinterestsforourownedvesselsandnewbuildingsamountedtoUSd5.7billion.thep&Iclubsaremem-bersoftheinternationallyrecognizedcollaboration,Internationalgroupofp&Iclubs,andthecompany’svesselsareinsuredwithapproximatelyUSd5billionwhichisthemaximumcoveroffered.p&Iclubsdifferfromtraditionalinsurancecompaniesastheparticipantsarejointlyliable.Incaseamemberwithdrawsfromaclub,thememberremainsliableforacertainnumberofyearsforclaimsarisenintheperiodpriortowithdrawal,unlesstheparticipantpaysareleasecall.thecompanydoesnotexpecttopayanyamountstop&Iclubsrelatingtotheperiodpriorto31december2007inadditiontotheagreedandannouncedpremiumpayments.

StAbILItYoFItSYStemStorm’sabilitytoservicethecustomersandoperatethevesselsisdependentontheaccesstoandcontinuedoperationofcertaincriticalItsystems,primarilyaves-seloperationssystemincludinginformationaboutvesselpositions,thecompany’sownagreementswithcustom-ersandotheragreementsmadeinthemarket,theelec-tronicmailingsystem,asystemrecordingestimatedandactualearningsonindividualvoyagesandthefinancialaccountingsystem.

AllItsystemsaremonitored,maintained,protectedanddevelopedsystematicallyandsafelyinaccordancewiththecompany’sinternalcontrolsystem“IncA”.theinternalcontrolsystemincludesanItsystemrecoveryplandetailinghowtheemployeesshouldreactandcon-tinuetoconductthebusinessincaseofanemergencyrenderingasysteminactive.theplanisdesignedtoallowtormtoresumebusinessactivitieswithinafewhoursofatotalsystemfailureandtocontinuebusinesswithoutinterruptionsinthecaseofmorelimitedsystemfailures.Itsystemsareadded,updated,developedandreplacedinaccordancewithasystemlifecyclemodel,whichisdesignedtoensurethatthecompany’sItsystemscanalwaysbeservicedunderlicenseandsupportagreementsandthatthetotalItplatformiscoherentandwellfunctionalatalltimes.

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coUnterpArtYrISKthecompany’screditrisksareassociatedpartlywithreceivables,cashandcashequivalentsandpartlywithderivativefinancialandcommodityinstrumentswithpositivefairvalue.themaximumcreditriskassociatedwithfinancialassetsisequaltothevaluesrecognizedinthebalancesheet.

themajorityoftorm’scustomersarecompaniesthatoperateintheoilindustry.Itisassessedthatthesecom-paniesinallessentialsarebeingaffectedbythesameriskfactorsasthoseidentifiedintorm’stankerdivision.

Amajorportionofthecompany’sfreightrevenuesisconcentratedonasmallgroupofcustomers.In2007,10customersaccountedfor64%offreightrevenues,andtwocustomersaccountedfor14%and10%offreightrevenues,respectively.

Financialinstrumentsareonlyenteredintowithmajorbankswithahighcreditratingandwithreputablepartnerswithasatisfactorycreditrating.tormonlytradesfreightandbunkerderivativeswithhighratedwellfoundedcounterpartsandforemost,directlywiththeparentcompany.thelargestcounterpartswithrespecttoFFAtradearemorganStanleyandtrafigura,whicheachaccountedfor10-15%ofthevolumestradedduring2007.thecreditriskislimitedwithallcounterpartsasvolumesarerelativelysmall.comparedtophysicalfixtures,thetrafigurafixturesduring2007compareto15physicalmrcargoesdistributedovertheyearwithamaximumriskoflossofapproximatelyUSd3.0million.Forcomparison,tormfixed19physicalcargoestotrafiguraduring2007inthemrbusinessareaalone.

thehighconcentrationofriskonafewcustomersrequiresstrictattentiontocreditrisk.tormhasacreditpolicyunderwhichacontinuedcreditevaluationofnewandexistingcustomerstakeplace.Forlongstandingcustomers,itisnormalpracticethatthepaymentoffreighttakesplaceafteravesselhasdischargedhercargo.Fornewer,smallerandlesswell-knowncustomers,thecompany’sfinancialriskislimitedbythefactthatmostoftenitisaconditionthatfreightispaidpriortothecargo’sdischargeor,alternatively,thatasuitableguaranteeisplacedinlieuthereof.

Unliketheproducttankermarket,thebulkmarketisveryfragmented.duetotherelativelylongcontractsinthebulkdivisionof12to24months,vesselsareonlycharteredouttolargecustomerswithasolidreputationthatarewell-knowntotormregardlessofwhetherahighercharterratecouldpotentiallyhavebeenobtainedfromothersmallerandunknowncustomers.

thecompany’sreceivablesthereforeprimarilyconsistofreceivablesfromcross-overvoyagesand,toalesserextent,ofoutstandingdemurrage.Forthepastfiveyears,thecompanyhasnotexperiencedanysignificantlossesinrespectofcharterpaymentoranyotherfreightagreements.

Withregardtothecollectionofdemurrage,thecompany’saveragestandsat95-97%whichisconsid-eredtobesatisfactorygiventhedifferencesininterpre-tationofevents.demurragerepresentsapproximately4%ofthetotalfreightearnings.

financial risksFinancialrisksrelatetothecompany’sfinancialpositionandthenatureofthecashflowsgeneratedbythebusi-ness.

LIQUIdItYrISKduetothecyclicalnatureoftheshippingindustryandthevolatilefreightrates,incomingcashflowsmayvarysignificantlyfromyeartoyearwhereastheoutgoingcashflowsmaynotbevariabletothesameextentandatthesametime.

Inordertosecuretorm’sabilitytoconductbusinessevenunderunfavourablemarketconditionsandtoreactquicklywhenbusinessopportunitiesarise,thecompanyaimstomaintainastrongfinancialposition.theprimaryobjectiveofthecompany’scapitalmanagementistoensurethatitmaintainsastrongcreditratingandhealthycapitalratiosinordertosupportitsbusinessandmaximizeshareholdervalue.tomanageitscapitalstructureandmakeadjust-mentstoit,inlightofchangesineconomicconditions,thecompanymayadjustthedividendpaymenttoshare-holders,returncapitaltoshareholdersorissuenewshares.nochangesweremadetothecapitalmanagementobjectives,policiesorprocessesduringtheyearsended31december2007and31december2006.

thecompanymonitorsthecapitalstructureusinggearingratios,primarilytheequityratio,whichisequitydividedbytotalassets.thecompany’spolicyistomain-tainanequityratioabove30%bothwhenexecutingshort-termbusinessactivitiesandwhenconsideringstrategicinitiativesandplanninglong-terminvestments.

ForeIgneXcHAngerISKtormreportsfinancialstatementsinUSdbecausethemajorityofthecompany’stransactionsaredenominatedinUSd.ForeignexchangeriskislimitedtothosecashflowswhicharenotdenominatedinUSd.theprimaryriskrelatestodKKbasedtransactionssuchaswagestodanishsea-basedstaff,salariestodanishland-basedstaff,otheradministrativeexpensesanddividendstothe

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shareholders.Furthermore,certaininstallmentsonnewbuildingsaredenominatedinJpYandaportion(approx.31%)ofthetechnicalexpensesaredenominatedinothercurrenciesthanUSd,mainlydKK(approx.23%).

Itisthecompany’spolicytominimizetheimpactofexchangeratefluctuationsonthefinancialstatementsandonthefinancialpositionofthecompany.dKKcashflowsarehedgedforaperiodofupto12monthsforwardtypicallybyenteringintoforwardforeignexchangecon-tracts.Asat31december2007,thetotalvalueofthecontractswasUSd1.4million.

othersignificantcashflowsinnon-USdrelatedcurren-ciesoccuroccasionallyandaretypicallyhedgedassoonastheybecomeknown.

Forwardforeignexchangecontractsandothercurrencycontractsaretradedsubjecttospecificriskpoliciesandguidelinesapprovedbytheboardofdirectorsincludingtradinglimits,segregationofdutiesandotherinternalcontrolprocedures.

IntereStrAterISKtorm’sinterestrateriskgenerallyrelatestoitsinterestbearingmortgagedebt.Allthecompany’sloansforfinancingvesselsaredenominatedinUSd,andmostcarryvariableinterest.

Incertaincases,thecompanyutilizesfinancialinstru-mentstomanagetheeffectsofinterestratechangesonearningsandcashresources.thecompanytypicallyusesinterestrateswaps,whichareenteredintoforperiodsofuptofiveyears,althoughtypicallyfortwotothreeyearswhenacceptableinterestratelevelscanbeobtained.Forshorterinterestratehedging,thecompanyfromtimetotimeusesFrAs.

theprofileoftheinstrumentsalwaysmatchesthepro-fileoftheparticularloaninquestion.Whenassessinginterestrateriskhedgingforitsloanportfolio,tormtakesintoconsiderationexpectedinterestratedevelop-mentsandfuturechangestothecompositionofthefleetinordertomeetongoingandfuturemarketexpectationsandrequirements.In2007,thecompanyenteredintointerestrateswapswithacontractvalueofUSd172million.

Interestrateswapsandotherinterestcontractsaretradedsubjecttospecificriskpoliciesandguidelinesapprovedbytheboardofdirectorsincludingtradinglimits,segregationofdutiesandotherinternalcontrolprocedures.

collision in gibralTarthetormgertrudwasinvolvedinacasualtyon12August2007whenshehadacollisionwiththegreek-owneddrycargovesselnewFlameoffgibraltar.Whereasbothvesselssufferedseverehulldamages,therefortu-natelywereneitherpersonalinjuriestothecrewofthevesselsnoranymajoroilpollution.thetormgertrudwasfullyladenatthetimeoftheinci-dent,andafterthecargoonboardwassafelytransferredtoanothervesselandcarriedontoitsdestination,thetormgertrudwasdockedataship-yardinportugalforrepairs.thevesselwasagaininserviceon26november2007aftersuccessfulcompletionofrepairs.thenewFlamesankpartlyafterthecollisionandhassubsequentlybeenundergoingsalvageattempts.thelossesinvolvingthetormgertrudandliabilitiesinconnectionwiththe

incidentarecoveredbyinsurance.

Torm’s DerivaTive financial insTrumenTsderivativefinancialinstrumentsaretradedbyspecificallyappointedemplo-yeesonlyandinaccordancewithtorm’spoliciesandprocedures.theyareonlyenteredintowithmajorbankswithhighcreditratingsandwithotherreputablepartnerswithadequatecreditratings.

tohedgeagainstrisksinrelationtofreightincomeandvoyagecosts,thecompanyprimarilyusesthefollowingderivativefinancialinstruments:

Forwardfreightagreement(FFA).Aforwardagreementtobuyorsellfuturefreightratesforagivenperiodandamountatapredeterminedprice.

Synthetictimecharter.Aforwardagreementtobuyorsellvoyageresults,i.e.freightratesandthecostsofportcalls,bunkerconsumptionandcom-missions,foragivenperiodandamountatapredeterminedprice.

bunkerhedgingcontract.Aforwardagreementtobuyorsellfuturebunkerpricesforagivenamountatapredeterminedprice.

tohedgeagainstinterestrateandexchangeraterisks,thecompanyprima-rilyusesthefollowingderivativefinancialinstruments:

Interestrateswaps.Aforwardagreementtosellfuturefloatinginterestratepaymentsforfixedratepaymentsforagivenperiodandamount.

Forwardexchangecontract.Aforwardagreementtobuyorsellacurrencyagainstpaymentinadifferentcurrencyforagivenamountatapredetermi-nedprice.

mostofthesederivativefinancialinstrumentsareshort-termwithadurationofupto12months.

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corporaTe governance

tormiscommittedtomaintainingahighstandardofcor-porategovernanceandbelievesthatthiscommitmentisconsistentwithandalsoadriverforachievingthecompany’sbusinessobjectivesandcreatingshareholdervalue.Itistorm’spolicytoensurethatthecompanyisatalltimesmanagedinanorderlyandpropermannercon-sistentwiththeregulationapplicableinthecountriesinwhichthecompanyoperatesandwiththecodesimposedbythestockexchangesonwhichthecompanyislisted.theprincipalentitiesinthecompanyarelocatedindenmark,India,theUSAandSingapore,andthecompanyislistedonomXthenordicexchangeindenmarkandonnASdAQintheUSA.

thecompanyhasthroughouttheyearcompliedwithalltherecommendationsforgoodcorporategovernancefromomXthenordicexchangeexceptforthefollowing:

• torm’sboardofdirectorsconsistsofsevenmem-bersofwhichfourareelectedattheAnnualgeneralmeetingandthreeareelectedbytheemployeesinaccordancewithdanishlegislation.twooftheboardmemberselectedattheAnnualgeneralmeetingareconsideredindependentasdefinedbytherecommen-dationswhiletwomembers,Stefanos-nikoZouvelosandgabrielpanayotides,arerelatedtothecompany’slargestshareholder,beltestShippingcompanyLtd.,andtheultimatebeneficiaryofthiscompany,respec-tively.theboardofdirectorsvaluesthecontributionandexpertiseofthetwomembers.

• Alltheboardmembersareelectedforafour-yearterm.theappropriatenessofthelengthoftheelec-tionperiodisevaluatedperiodically,anditistheopin-ionoftheboardofdirectorsthatthefour-yeartermcurrentlyconstitutesanappropriatebalancebetweenreplacementandcontinuity.

• theboardofdirectorscontinuouslyevaluatesit’sownperformancebutithasnotappliedastructuredevalua-tionprocessyet.duetoahighactivitylevel–alsofortheboardofdirectors–inconnectionwithinvestmentanddivestmentprojects,theimplementationoftheevaluationprocesswilltakeplaceduring2008.

tormhasthroughouttheyearcompliedwiththeUSSarbanes-oxleyActasitappliestoforeignprivateissuers.

theboardofdirectorsandmanagementbelievethatstrongcorporatevaluesarefundamentalinsecuringthatbehaviourandbusinesspracticesthroughoutthegroupareinalignmentwithtorm’sgovernancepolicies.during2007,aseriesofcultureandvaluesseminarswerecon-ductedatallgrouplocationstoreinforcethethreetormvaluesandtoembedthemintothecontextofdailytasksanddecision-making.

thecompanybelievesthatvaluefortheshareholdersandthecustomersmustbecreatedwithrespectforanddemonstrationofresponsibilityforemployees,businesspartnersandtheenvironment.therefore,tormhasanintegratedmanagementsystemforsafety,qualityandtheenvironment.pleaserefertopage38fordetailsoftorm’sapproachtoresponsibility.

Torm values

entrepreneurship-howwedevelop,growandimprove. •Wethinkofourselves,andbehave,asownersbybringingthe bestofourabilities,engagementandcreativitytotorm. •Wetakeinitiativeswithcommercialopportunitiesinmind. •Wevalueaculturethatencouragesanopenanddirectdialogue,

delegationofauthorityandan’opendoor’policyforstaffmembers.

professionalism–howwecreatetrust. •Westandbyallourcommitmentsandcanbereliedontodo so–‘ourwordisourbond’. •Wepreservetorm’sindustryreputation-beingafirstclass company-byactinginaprofessionalmannerineverythingwe undertake. •Weknowourjobanditsrelatedexpectations,weknowourmarket andkeepuptodatewiththelatesttrendsinordertocontinue being’thebestinthebusiness’. •Wemeasure,improveandperformtoobtainandpreserve excellenceinqualitywithintheshippingbusiness.

respect–howwebuildrelations. •Werespectall–customers,businesspartnersandcolleagues–

alike,andouraimistoestablishsustainablewin-winrelationships wheneverpossible.

•Wealwaysattempttounderstandtheotherperson’spointofview anddemonstratewillingnesstonegotiateingoodfaithandina respectfulmanner,beingatthesametimecommercialinthe approach. •Wesupportandhelpourcolleagues,alwaysrecognizingthatwe areamemberofateamwhichformstheheartoftheorganization.

The Board of Directors and Management in TORM believe that good corporate governance is a key element in the creation of shareholder value and in gaining the trust of customers, business partners and the financial markets.

JesperHolmark,SeniorVicepresident,corporategovernance,controlling&Accounting

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THe boarD of DirecTorsInaccordancewithdanishcompanylegislation,tormhasatwo-tiermanagementstructure.theboardofdirectorsisentirelycomprisedofpersonsnotinvolvedintheday-to-daymanagement.theboardofdirectorslaysoutclearpoliciesanddirectivesformanagement’simplementation.themanagementinturnimplementstheseguidelinesintheirday-to-daymanagement.thenon-executiveboardofdirectorsactsasasparringpartneraswellasacontrolbodyformanagement.nooneservesasamemberofboththeboardofdirectorsandmanagement,butmanagementnormallypartici-patesinboardmeetings.

theprimaryresponsibilitiesoftheboardofdirectorsaretosafeguardtheinterestsofshareholders,tosuper-visetheactivitiesofthecompanyandensurethatthecompanyisproperlymanagedinaccordancewiththearticlesofassociation,lawsandregulations,andtolaydownthecommercialobjectivesandthestrategicdevel-opmentofthecompany.

theboardofdirectorshaslaiddownclearmanagementguidelinesandacodeofethicsandconductsinordertoensurethatthecompanyismanagedandbusinessactivitiesarecarriedoutinaccordancewithprinciplesinwhichtrustworthinessandethicsareatthecore.theseprinciplesareatthefoundationofthecompanyandcon-tributetowardsthecreationofvalueforthecompanyandtherebyitsshareholders.

torm’sboardofdirectorsandmanagementhaveanongoingdialoguetocontinuallyimprovethemanage-mentofthecompany.theboardofdirectorsmeetsaminimumoffivetimesperannumaccordingtotherulesofproceduresfortheboardofdirectorsandmanagement.In2007,16boardmeetingswhereheldduetoahighactivitylevel.

maTTers reserveD for THe boarD of DirecTors:

1. Approvalofthecompany’svision,valuesand governanceframework.2. Approvalofthecompany’sstrategy,overallbusiness

objectivesandannualbudgets.3. ApprovalofAnnualreportandquarterlyfinancial

statements.4. recommendationofdividendpayments.5. Approvalofthecompany’spolicystatements, includingriskpolicyandfinancialpolicyaswellas

thereportingstructureforthese.6. Approvalofmaterialcapitalprojects,investments,

acquisitionanddisposalofvesselsorbusinessunits.7. Approvalofincentiveschemesforemployees.

boardmembersshallnormallyretireattheAnnualgeneralmeetingheldintheyearinwhichtheyattaintheageof65.theboardmemberselectedbytheemployeeshavethesamerights,obligationsandresponsibilitiesasthedirectorselectedattheAnnualgeneralmeeting.

ItistheopinionoftheboardofdirectorsthatpoliciesandguidelinesconcerningthemanagementofthecompanyanditsinteractionwithstakeholdersareinaccordancewiththerecommendationsforgoodcorporategovernancefromomXthenordicexchangeandarefor-malizedtoadegreethatisconsistentwiththesizeofthecompanyandthecomplexityofitsactivities.theboardofdirectorsregularlyevaluatesthework,resultsandcompositionoftheboardofdirectorsandmanagement.

meeTings aTTenDeD/HelD board audit committee remuneration

committee

nielseriknielsen(2) 16/16 3/3 christianFrigast(1),(2) 13/16 4/4 3/3peterAbildgaard(elected17April2007) 7/9 LennartArrias 14/16 margrethebligaard(elected17April2007) 6/9 ditlevengel(resigned29June2007) 6/11 pedermouridsen(resigned17April2007) 6/8 gabrielpanayotides(1) 15/16 2/4 Stefanos-nikoZouvelos 16/16

1)memberoftheAuditcommittee2)memberoftheremunerationcommittee

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THe auDiT commiTTeetheAuditcommitteemeetsatleasttwiceperannumandbothmanagementandtheauditorsusuallypartici-pateinthemeetings.In2007,fourmeetingswereheld.theAuditcommitteehastwomembers,whicharebothelectedbytheboardamongitsmembers.theAuditcommitteeperformsitsdutiesunderacharterapprovedbytheboardandassiststheboardwiththeoversightoffinancialreporting,internalcontrolsandauditingmat-tersaswellastheorganizationofworkandcomplaintshandlinginrelationtosuchmatters.

theworkoftheAuditcommitteeduring2007included:

1. monitoringofprogressandresultsofinternalcontrolactivities.

2. reviewofriskassessments.3. discussionoftheauditapproachfor2007withthe

auditorsandapprovaloftheauditengagementletter.4. reviewofengagementswithandfeestotheauditors

electedattheAnnualgeneralmeetingconcerningbothauditandnon-auditrelatedservices.

5. reviewofauditcommitteereportsfromtheauditors.6. reviewoftheauditors’independence.7. reviewofrelatedpartiestransactions.8. reviewofreportsfromtheexternalwhistleblower

serviceprovider.

theAuditcommitteeprovidesanoralreportonthecommittee’sactivitiestotheboardatleastatthefirstboardmeetingfollowinganAuditcommitteemeeting.

THe remuneraTion commiTTee anD remuneraTion policiestheremunerationcommitteemeetsatleasttwiceperannum.threemeetingswereheldduring2007.theremunerationcommitteehastwomembers,whoarebothelectedbytheboardamongitsmembers.theremunerationcommitteeassiststheboardwithreview-ingtheperformanceofmanagement,theremunerationtomanagementandthecompany’sgeneralremunera-tionpolicies.

Inordertoattract,retainandmotivatequalifiedexecu-tivemanagers,remunerationisbasedonthenatureandqualityofwork,valuecreationtothecompanyandremunerationatcomparablebusinesses.Itistheboard’sopinionthattheremunerationandthegeneraltermsofemploymentofmanagementareinaccordancewithmarketconditions.theamountsandcomponentsofremunerationtotheindividualmembersoftheboardandmanagementarepresentedinnote4.

Amongitsprimaryactivitiesin2007,theremunerationcommitteecarriedoutthefollowing:

1. Approvalofemploymenttermsandcompensationpackageforthecompany’sceo.

2. Approvalofemploymenttermsandcompensationpackageforthecompany’scoowitheffectfrom

6march2007.3. recommendationforapprovalbytheboardofan

incentiveschemecoveringallland-basedpersonnelinthecompanyaswellasallofficersemployedonpermanentcontracts.theschemeconsistsofbothcashandshareelementsandrewardsshort-termfinancialresultsaswellaslong-termshareholdervaluecreation.detailsoftheprogrammeandout-standingshareoptionsarepresentedinnote4.

4. Awardof1,087,362shareoptionsundertheincentiveschemeto331employees.

5. Approvalofgeneralprinciplesforthedistributionofestimatedbonustoleadingemployees.

inTernal conTrol anD risk managemenTWhiletheboardofdirectorsrecognizesthatithastheoverallresponsibilityforthecompany’sinternalcontrolandtheassessmentandmanagementofrisk,managementcarriesouttheidentificationandassess-mentofrisks,theoperationofaneffectiveinternalcon-trolsystemandtheinitiationofappropriatemitigatingaction.managementisalsoresponsiblefortheperiodi-calpresentationofmajorriskandchangeshereintotheAuditcommitteeandtheboard.theboardreviewsthemajorrisksanddiscussesriskdevelopmentswithmanagementasdeemedappropriateandatleastonceayear.majorrisksincludegeopolitical,financial,insuranceandenvironmentalissues.

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tormisobligedinconnectionwiththenASdAQlistingtocomplywithanumberofstandards,rulesandregula-tionsaimedatgoodcorporategovernanceundertheSarbanes-oxleyAct,coveringAmericanandforeignpri-vateissuers,ofwhichthemostimportantaretherequirementslistedinSection404.

torm’sSarbanes-oxleycomplianceprogrammeisexe-cutedandmonitoredintheInternalcontrolandAdministrationSystem(IncA).IncAisconsistentwiththerecognizedframeworkestablishedbythecommitteeofSponsoringorganizations(coSo)anditprovidesaclearaudittrailofchangesinriskassessmentsandinthedesignofcontrolsaswellasoftheresultsoftestsofinternalcontrols.tormmustensureatleastannuallybyactualtesting,thattherearenomaterialweaknessesintheinternalcontrols,whichcouldpotentiallyleadtoamaterialmisstatementinthefinancialreporting.IntheForm20-Ffor2006filedwiththeUSSecuritiesandexchangecommissionon26June2007,managementaswellastheauditorsconcludedthattherewerenomate-rialweaknessesduring2006andnoareasofconcernwereidentified.management’sconclusionandtheaudi-tor’sevaluationoftheinternalcontrolsandthetestingperformedbymanagementregarding2007willbeincludedintheForm20-Ffilingregarding2007whichisexpectedtobefiledinJune2008.Inadditiontosecurecompliancewiththerelevantlaws,tormbelievesthatthehighfocusoninternalcontrolsandriskmanagementcontributespositivelytoimprovetheefficiencyofthecompany’sbusinessproceduresandprocessesandtherebyearningsbothintheshortandlongterm.

WHisTlebloWer faciliTyAspartoftheinternalcontrolsystem,theboardhassetupawhistleblowerfacilityallowingemployees,businesspartnersandotherstofilecomplaintstoanindependentlawyer’sofficesolicitedbytheboardconcerningbreachesoflaws,regulationsandgoodbusinessconductbytormrepresentatives.generally,tormencouragesemployeesandotherstakeholderstopursuethefollowingissues:

1) Fraud,includingtheprovisionortheendorsementoffalseormisleadingstatementsaboutthecompany’saffairs.

2) criminaloffences.3) Violationsoflawsandregulations.4) Intentionalprovisionofincorrectinformationtopub-

licbodies.5) Unlawfulbehaviourinconnectionwithaccounting,

internalaccountingcontrolsorauditingmatters,includingbutnotlimitedto:a. Fraudordeliberateerrorinthepreparationor

maintenanceofanyfinancialstatementorfinan-cialrecordsofthecompany.

b. non-compliancewithinternalaccountingcontrols.c. misrepresentationorfalsestatementtoorbyan

employeeoraccountantregardingamattercon-tainedinthefinancialrecords,financialreportsorauditreportsofthecompany.

d. deviationfromfullandfairreportingofthecompany’sfinancialcondition.

6) Violationsoftorm’scodeofethicsandconduct.7) Intentionalsuppression,destructionormanipulation

ofinformationregardingthemattersdetailedin1)-6).

detailsofhowtosubmitcomplaintsarepubliclyavail-ableinenglishontorm’swebsiteandintranet,andcomplaintsmaybefiledanonymously.nocomplaintsweresubmittedthroughthisfacilityduring2007.

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sHareHolDer relaTions

torm’smanagementkeepsinregularcontactwiththefinancialmarketsthroughpresentations,investormeet-ingsandteleconferences,discussingperformance,strategyandthecompany’smanagement.thisisbasedonawishtokeepinvestorsfullyupdatedonimportanteventsinthecompanysoastocreateagoodfoundationfortheirassessmentoftormasaninvestmentobject,companyandborrower.throughthestockexchange,allinvestorsgainaccesstoprice-sensitiveinformationsimultaneously.

Inconnectionwiththecompany’sexternalfinancialreporting,theboardofdirectorsandmanagementdis-cussthemarkets’expectationsoftorm’sresultsandreceiveregularfeedbackfrominvestorsandanalystsontheirviewsofthecompany.

Forathree-weekperiodpriortothepublicationofquarterlyandannualfinancialstatements,communicationwithinvestors,analystsandthepressissubjecttospeciallimitations,however.

torm’ssharecapitalconsistsof72.8millionsharesofdKK5each.thesharesareissuedtobearerandlistedonomXthenordicexchangeandonnASdAQintheformofAmericandepositaryreceipts(Adrs).

torm’ssharepricedecreasedby4%in2007,standingat178.2attheendoftheyearagainstapriceof186.0attheendof2006.IncludingthedividendofdKK33.25pershare,theshareholdersreceivedatotalreturnof13.7%in2007.themarketcapitalizationofthecompany’ssharesthusdecreasedtodKK13billionattheend2007againstdKK13.5billionattheendof2006.theoveralldailyturnoveroftormsharesaveragedapproximatelydKK63million(USd12million)in2007.

thecompany’sregistrarisVærdipapircentralenA/S,HelgeshøjAllé61,p.o.box20,dK-2630taastrup,denmark.

sHareHolDerstormhad13,499registeredshareholdersasat31december2007,representing86.9%ofthesharecapital.Attheendoftheyear,approximately10%ofthesharecapitalhadbeenconvertedintoAdrs.

thefollowingshareholdershavereportedtothecompanypursuanttoSection29ofthedanishSecuritiestradingActthattheyownmorethan5%oftheshares:

beltestShippingcompanyLtd,cyprus 32.2%menfieldnavigationcompanyLimited,cyprus 20.0%A/SdampskibsselskabettormsUnderstøttelsesfond 6.3%Inaddition,tormholds4.9%treasuryshares

managemenT’s HolDings of Torm sHaresAttheendof2007,themembersoftheboardofdirectorsheldatotalof70,246shares,equivalenttoatotalmarketcapitalizationofdKK12.5million(USd2.5million).

themembersofmanagementheldatotalof12.600shares,equivalenttoamarketcapitalizationofdKK2.2million(USd0.4million).

Alltormemployeesarecoveredbyinsideinformationrules,andtheyhaveadutytoreportanysharetransac-tions.Allemployeesandtheirspousesandchildrenundertheageof18arelimitedtotradingsharesforafour-weekperiodafterthepublicationofprofitannouncements.

DiviDenDthecompany’sdividendpolicyisbasedonthefactthatupto50%ofnetprofitfortheyearcanbepaidasdividend,howeverthedividendmustalwaysbeconsideredinthelightofthecompany’scapitalstructure,thestrategicdev-lopment,futureobligations,markettrendsandshareholderinterests.

For2007,theboardofdirectorsrecommendstotheAnnualgeneralmeetingthatadividendofdKK4.5(USd0.89)persharebepaid(2006:dKK5.75(USd1.02)).thedividendpaymenttotalsdKK327.6million(USd64.5mil-lion),correspondingtoareturnof2.5%basedonthesharepriceattheendof2007.thedividendcorrespondsto42%oftheprofitfortheyearexcl.theproceedsfromthesaleofthenordenshares.IncludingtheextraordinarydividendofdKK27.5(USd5.1)persharepaidoutinSeptember2007,theaccumulateddividendfor2007was55%ofthenetprofitequivalenttodKK2,330million(USd434million).

TORM has one overall objective where our investors are concerned: Clear communication. Accordingly, TORM keeps existing and potential investors fully updated on important events and any milestones achieved by the Company. Private and institutional investors have access to the same information – at the same time.

TORM SHARE PRICE – COPENHAGEN 2007

TORM SHARE PRICE – NASDAQ 2007

TORM SHARE PRICE – COPENHAGEN 2007

TORM SHARE PRICE – NASDAQ 2007

56

THe folloWing analysTs cover THe Torm sHareAbgSundalcollierAlm.brandHentoncarnegiedanskeequitiesdnbFIHHandelsbankenJefferies&company,Inc.JyskebankKauptingnordeamarketsparetoSebenskildaStandard&poor’sSydbank

announcemenTs To omx THe norDic excHange in 2007

01 05march Annualreport200602 27march Shareholdinginnorden03 29march changeoftheboardofdirectors04 02April Saleoftorm’sshareholdinginnorden/Shareholdings02.04.200705 10April noticeofAnnualgeneralmeeting06 17April Sharebuy-backprogramme07 17April Annualgeneralmeeting08 17April AcquisitionofomIcorporation09 09may InterimreportFirstquarter200710 16may Sharesplit11 26may completionoftheAcquisitionofomIcorporation12 01June Sharecapitalandvotingrights13 08June completionoftheAcquisitionofomIcorporation14 20June Incentiveschemeforemployees15 29June Sharebuy-backprogramme16 29June ditlevengelresignsfromtheboard17 06July distributionofextraordinarydividendinlieuofsharebuy-backprogramme18 31July noticeofextraordinarygeneralmeeting19 03August tormtakesovercontrolofomIvessels20 14August extraordinarygeneralmeeting21 31August distributionofinterimdividend22 31August deferredreportingforthethirdQuarter200723 31August InterimreportFirstHalf200724 22november InterimreportthirdQuarter200725 17december tormfinancialcalendar2008

financial calenDar 2008

14march Annualreport200722April Annualgeneralmeeting09may Interimreport,FirstQuarter08August Interimreport,FirstHalf11november Interimreport,ninemonths

sHareHolDer relaTions

thomasAndersen,Vicepresident,Investorrelations&communications

58

59

FiNANCiAL

STATEMENTS

60

61

consoliDaTeD financial sTaTemenTs

Table of conTenTs

62 Financialreview 67 consolidatedincomestatement 68 consolidatedbalancesheet 70 consolidatedstatementofchangesinequity 71 consolidatedcashflowstatement 72 notes102 boardofdirectorsandmanagement106 management’sandauditors’report

financial revieW

netprofitfortheyearincreasedby238%toUSd792millionin2007fromUSd235millionin2006resultinginearningspershare(epS)ofUSd11.4in2007againstUSd3.4in2006.

InJune2007,tormacquiredtheUStankershippingcompanyomIcorporationina50/50jointventurewithteekay,andtheincomefromthisinvestmentwasrecognizedintorm’sconsolidatedfinancialstate-mentswitheffectfrom1June2007.thefinancialstatementsforomIareincludedintheconsolidatedfinancialstatementsinproportiontotheownershipsharebycombiningitemsofauniformnature.thevastmajorityoftheactivitiesweretransferredtotormandteekayrespec-tivelywitheffectfrom1August2007.thenetprofitfortheperiod1Juneto31July2007hasnotbeenallocatedtotorm’sreportablesegmentsandthenetprofitforthefewremainingactivitiesinomIafter31July2007havealsonotbeenallocatedtothesegments.theactivitiesthatweretransferredtotormat1August2007arerecognizedfullyinthetankerdivisionasfromthisdate.

theprofitbeforetaxfortheyearwasUSd804million,andexcludingrestructuringcostsinconnectionwiththeacquisitionofomIofUSd15million,theprofitbeforetaxofUSd819millionwasinlinewiththeexpectationsaccordingtothelatestannouncementofexpectedprofitfor2007.restructuringcostsprimarilycompriseretentionbonusestoemployeesandseverancepaymentstotheformermanagementinomI.

thenetprofitfor2007includesacapitalgainonthesaleofsharesindampskibsselskabetnordenA/SofUSd643million.excludinggainsfromsaleofcapitalinterestsandvesselsinbothyears,theprofitbeforetaxdecreasedby14%toUSd161millionin2007fromUSd187millionin2006.thelowerprofitcomparedto2006despiteasignificantincreaseinearningdayswasprimarilyduetolowerfreightratesintheLr2andmrbusinessareas,increasedexpensesanddepreciationperearningdayduetotheexpansionandrenewalofthefleetofownedandcharteredvessels,primarilythroughtheacquisitionofomIaswellasrestructuringcostsrelatingtothisacquisition.

torm’stotalassetsincreasedbyUSd878millionin2007toUSd2,967millionfromUSd2,089millionin2006.themostsignificantdevelop-mentsbehindthisincreaseweretheadditionofUSd88millioningood-willandanetincreaseinthecarryingamountofvessels,capitalizeddry-dockingandprepaymentsonvesselsofUSd1,222millionmainlyduetotheacquisitionofomI,adecreaseinotherinvestmentsduetothesaleofthesharesinnordenofUSd633millionandanincreaseincashandcashequivalentsofUSd85million.

theequitydecreasedbyUSd200millionin2007toUSd1,081millionfromUSd1,281millionin2006.thesignificantdecreaseinequitywasmainlyduetotheprofitfortheyearofUSd792million,lessthevalueadjustmentofthesharesinnordenrelatingtoprioryearsofUSd572millionandlessanextraordinarilyhighdividendpaidoutofUSd424million.torm’stotalliabilitiesincreasedbyUSd1,077millionin2007toUSd1,885millionfromUSd808millionin2006primarilyduetotheacquisitionofomI.

neT earnings from sHipping acTiviTiestorm’stotalnetrevenuein2007wasUSd819millionascomparedtoUSd604millioninthepreviousyear.torm’srevenuederivesfromtwosegments:thetankerdivisionandthebulkdivision.Inthemarketsinwhichthesedivisionsoperate,thetimecharterequivalent(tce)rates,definedasnetrevenuelessvoyageexpensesdividedbythenumberofavailableearningdays(daysavailableforservice)areusedtocomparefreightrates.Undertimechartercontractsthechartererpaysforthevoyageexpenses,whereastheshipownerpaysforthevoyageexpensesundervoyagechartercontracts.Achartererbasicallyhasthechoiceof

enteringintoeitheratimecharter(whichmaybeaone-triptimecharter)oravoyagecharter,andtormisneutraltothecharterer’schoice,becausethecompanywillbaseitseconomicdecisionsprimarilyupontheexpectedtceratesratherthanonexpectednetrevenues.theanaly-sisofrevenueisthereforeprimarilybasedonthedevelopmentintimecharterequivalentearnings.torm’stimecharterequivalentearningsin2007wereUSd645millioncomparedtoUSd455millionin2006.theincreaseinthetcewasprimarilyduetotheincreaseinearningdaysinthetankerdivisionmainlyasaresultoftheacquisitionofomI.

tAnKerdIVISIonrevenueinthetankerdivisionincreasedby30%toUSd640millionfromUSd494millionin2006,whereasthetimecharterequivalentearn-ingsincreasedbyUSd128millionor36%toUSd479millionin2007fromUSd351millioninthepreviousyear.

In2007,thedeliveryof2.5newbuildingsintheLr2businessareawastheprimaryreasonfortheincreaseinthenumberofavailableearningdaysby905daysor38%resultinginanincreaseinearningsofUSd26million.Freightratesthatwereonaverage13%lowerthanintheprevi-ousyeardecreasedearningsbyUSd12million.

IntheLr1businessarea,thecompanyaddedtenvesselsfromtheformeromIfleetandtookdeliveryof1.5newbuildings.thesewerethemostimportantfactorsbehindtheincreaseinthenumberofavailableearningdaysby1,654daysor38%fromthepreviousyear,resultinginanincreaseinearningsofUSd45million.theaveragefreightratesremainedatalevelslightlyabovethepreviousyearincreasingearningspositivelybyUSd1million.

Inthemrbusinessarea,theadditionof11vesselsfromtheformeromIfleetduring2007causedthenumberofavailableearningdaystoincreaseby1,670daysor26%,whichincreasedearningsbyUSd41mil-lion.theaveragefreightrateswere3%lowerthaninthepreviousyear,whichaffectedearningsnegativelybyUSd6million.

during2007,tormtookover11HandysizeproducttankervesselsfromtheformeromIfleet.duringtheperiodfromtakeoveron1Augustto31december2007,thisareashowed1,836availableearningdaysandachievedUSd31millioninearnings.

thenetincreaseinthetimecharterequivalentearningsinthetankerdivisioncanbesummarizedasillustratedinthetablebelow.

bULKdIVISIonInthebulkdivision,revenueincreasedby22%toUSd134millionfromUSd110millioninthepreviousyear,whereasthetimecharterequivalentearningsincreasedbyUSd23millionor22%toUSd128millionfromUSd105millionin2006.In2007,thefreightratesforbulkcarrierswereonceagainhighlyvolatile.However,tormcontinuedtopursueastrategyofhighcoverageinthebulksegment,primarilythroughoneyeartimechar-teragreements,andthemarketdevelopmentinfreightratesduring2007isthereforenotdirectlyreflectedinthecompany’searningsfor2007.

Freightratesinthepanamaxbusinessareawereonaverage33%higherthanin2006,increasingearningsbyUSd32million.Inthisbusinessarea,thecompanyaddedavesseltothefleetofownedvesselwhichwasalreadycharteredinandthereforedidnotaffectthenumberofavailableearningdays.thenetreductioninthenumberofavailableearningdaysfromothercharteredinvesselswas-4%or224daysfromthepreviousyear.Asaresult,thetimecharterequivalentearningsinthissegmentdecreasedbyUSd5million.

62

63

thenetincreaseinthetimecharterequivalentearningsinthetankerdivisioncanbesummarizedasillustratedinthetablebelow

earnings for the Tanker Division

USdmillion Handy mr lr1 lr2 un-allocated Total

timecharterequivalentearnings2006 - 160 120 69 2 351changeinnumberofearningdays 31 41 45 26 143changeinfreightrates - -6 1 -12 -17other 2 2timecharterequivalentearningsin2007 31 195 166 83 4 479

Un-allocatedearningscomprisefairvalueadjustmentoffreightandbunkersderivatives,whicharenotdesignatedashedges,andgainsandlossesonfreightandbunkersderivatives,whicharenotenteredforhedgepurposes.

thetablebelowsummarizestheearningsdataperquarterforthetankerdivision.

earnings data for the Tanker Division USd/day 2006 2007 2007 2007 2007 2007 % change Fullyear q1 q2 q3 q4 Fullyear Fullyear

lr2/aframax vessels Availableearningdays 2,401 717 767 906 916 3,306 38%tceperearningdays*) 28,641 26,838 29,073 21,841 23,227 24,988 -13% lr1/panamax vessels Availableearningdays 4,359 1,278 1,364 1,623 1,748 6,013 38%tceperearningdays*) 27,497 27,816 29,108 27,407 26,517 27,621 0% mr vessels Availableearningdays 6,499 1,643 1,652 2,284 2,590 8,169 26%tceperearningdays*) 24,627 24,676 28,143 22,941 21,702 23,949 -3% Handysize vessels Availableearningdays n.a. n.a. n.a. 732 1,104 1,836 n.a.tceperearningdays*) n.a. n.a. n.a. 16,129 17,121 16,726 n.a. *)tce=timecharterequivalentearnings=grossfreightincomelessbunker,commissionsandportexpenses.

thechangeinthetimecharterequivalentearningsinthebulkdivisioncanbesummarizedasillustratedinthetablebelow.

earnings for the bulk Division

USdmillion Handysize panamax Total

timecharterequivalentearnings2006 4 101 105changeinnumberofearningdays -4 -5 -9changeinfreightrates 0 32 32timecharterequivalentearnings2007 0 128 128

thetablebelowsummarizestheearningsdataperquarterforthebulkdivision.

earnings data for the bulk Division USd/day 2006 2007 2007 2007 2007 2007 % change Fullyear q1 q2 q3 q4 Fullyear Fullyear

panamax vessels Availableearningdays 5,196 1,205 1,222 1,258 1,287 4,972 -4%tceperearningdays*) 19.325 22.955 25.467 27.019 27.443 25.762 33%

*)tce=timecharterequivalentearnings=grossfreightincomelessbunker,commissionsandportexpenses.

64

financial revieW

operaTion of vesselsVesselscharteredinontimechartersdonotgiverisetooperatingexpensesfortormbutonlytocharterhirepayments.Ascomparedto2006,charterhireinthetankerdivisionincreasedbyUSd33mil-liontoUSd92millionin2007,whereascharterhirepaidinthebulkdivisionincreasedbyUSd11milliontoUSd59million.theincreaseinthetankerdivisionwasprimarilycausedbyasignificantincreaseinthenumberofvesselscharteredin,primarilyduetotheacquisitionofomI,whereasthedevelopmentinthebulkdivisionwascausedbyacombina-tionofanincreaseintheavailableearningdaysandhighertimecharterratescomparedto2006.

theoperatingexpensesfortheownedvesselsincreasedbyUSd49millionor64%toUSd127millionin2007.themostsignificantfactorbehindthisdevelopmentwastheincreaseinthenumberofoperatingdaysof3,985daysor31%,whichcausedanincreaseintheoperatingexpensesofUSd26million.theincreaseinthenumberofoperatingdayswasprimarilycausedbytheadditionofvesselsinthemrandLr1businessareasfromtheacquisitionofomIandtheadditionofnewbuild-ingsintheLr2businessarea.

thetotaloperatingexpenseswhicharenotallocatedonvesselsamountedtoUSd15millionin2007,ofwhichUSd4millionrelatedtothetankerdivision.theremainingUSd11millionrelatedtothevesselsinomIpriortotheirtransfertoeithertormorteekay.

operatingexpensesperoperatingdayincreaseby14%forthewholeownedfleetinthetwosegmentswhichcausedanincreaseintheoperatingexpensesofUSd10million.operatingexpensesareprimarilyincurredinUSdanddKK.theshareoftheexpensesincurredindKKwas23%in2007andtheincreaseintheaveragedKK/USdexchangeratecomparedto2006of8%causedanincreaseintheoperatingexpensesofUSd2million.

thetotalfleetofownedvesselsincurred145off-hiredaysin2007cor-respondingto9perthousandofthenumberofoperatingdayscomparedto69off-hiredaysin2006correspondingtofiveperthousandofthenumberofoperatingdays.ofthisincreaseinoff-hiredays,twospecificincidentsaccountfor26days.themrtankertormgertrudwasinvolvedinacollisionandtheLr1tankertormSignewasgrounded,andbothvesselshadtoundergomajorrepairs.Apartfromthesetwoincidents,thecompanyconsidersthelevelofoff-hiredaystobesatisfactory.

theaverageoperatingexpensesperoperatingdayincreasedbyUSd814or14%comparedto2006.theincreasewasprimarilycausedbyanincreaseinwagescostsperoperatingdayofUSd364toUSd3,380,cor-respondingtosixpercentagepointsofthetotalincrease.theincreasewasmainlyduetotheadditionoftonnageintheLr2segmentbeingregisteredinthedanishship’sregisterandsailingwithdanishofficerswhichonaveragereceivehigherwagesthantheremainingofficers.thehourlywagestoofficersshowedageneralincreaseof16%during2007calculatedasaweightedaverage,whichhasalsoaffectedthetotalwagescostsnegativelyjustasithasaffectedallothershippingcom-panies.Inaddition,theluboilcostsincreasedbyUSd139peroperatingdaytoUSd339peroperatingdaycorrespondingto2percentagepointsofthetotalincreaseof14%asaconsequenceoftherisingoilprices.InsurancecostsincreasedbyUSd148toUSd773peroperatingdaycorrespondingto3percentagepointsofthetotalincrease.theincreaserelatestolossofhireandisattributabletothetwoincidentswithtormgertrudandtormSigne.

aDminisTraTive expenses anD oTHer operaTing incomethetotaladministrativeexpensesincreasedfrom2006to2007byUSd34milliontoUSd69million.ofthisincrease,restructuringexpensesrelatingtotheacquisitionofomIamountedtoUSd15million,expensesrelatingtothenewincentiveschemeamountedtoUSd3million,expensestoconsultantsandadvisorsinconnectionwiththepaymentofextraordinarydividendandevaluationofseveralinvestmentprojectsamountedtoUSd3millionandthechangeinthedKK/USdexchangeratecausedanincreaseofUSd4million.themajorityoftheremainingpartoftheincreaseisattributabletotheacquiredactivitiesinomI.

otheroperatingincomeprimarilycomprisescharteringcommissionsreceivedbytorminconnectionwiththemanagementofthethreetankerpools.otheroperatingincomeamountedtoUSd15millionin2007comparedtoUSd10millionin2006.theincreasewasprimarilyrelatedtocommissionsfromtechnicalmanagementofthirdpartyvessels.InconnectionwiththesplitoftheomIactivitiesbetweentormandteekay,tormperformedtechnicalmanagementforanumberofteekayvesselsforashortperiodoftime.

financial income anD expensesnetfinancialitemsin2007wereUSd599millioncomparedtoUSd-1millionin2006.themostsignificantreasonforthechangeisthegainfromthesaleofthenordensharesofUSd643millioncomparedtoadividendfromnordenofUSd25millionin2006andanincreaseinnetinterestexpensesofUSd17milliontoUSd53millionin2007duetotheincreaseinnetinterestbearingdebtofUSd874millionduringtheyeartoUSd1,536millionfromUSd662millionin2006.

TaxtaxexpensesfortheyearamountedtoUSd13millioncomparedtoUSd7millionin2006.thetaxexpensesfor2007comprisecurrenttaxfortheyearofUSd16millioncomparedtoUSd5millioninthepreviousyear,areductionofdeferredtaxofUSd7millioncomparedtoanincreaseofUSd8millionin2006andanexpenseofUSd4millionduetoanadjust-menttotheestimatedtaxliabilitiesforthepreviousyearscomparedtoanincomeofUSd6millionin2006.thedeferredtaxliabilityasat31december2007wasUSd56millioncomparedtoUSd63millioninthepreviousyear.

Allsignificantdanishentitiesinthetormgroupenteredintotheton-nagetaxationschemewitheffectfrom2001andhavefiledtaxreturnsfor2001throughto2006.thecompanyhasfiledacomplaintregardingtheassessmentsbythetaxauthoritiesofthetaxreturnsfortheyears2001to2004andtheassessmentsfor2005and2006havenotbeencompleted.therecognizedcurrenttaxliabilitiesarethereforetoagreatextentbasedonmanagement’sjudgementregardingtheoutcomeofthecomplaintandtheassessment.tormpaidUSd10millionincorporationtaxonaccountin2007regardingtheseentities.

vessels anD Dry-DockingtheincreaseintangiblefixedassetsofUSd1,229milliontoUSd2,553millionin2007isattributabletothechangeinvesselsandcapitalizeddry-dockingandinprepaymentsonvessels,primarilyasaconsequenceoftheacquisitionofomI.thecarryingvalueofvesselsandcapital-izeddry-dockingincreasedbyUSd1,134milliontoUSd2,270million.theadditionofnewtonnageamountedtoatotalacquisitioncostofUSd1,200millionresultingfrom11mrtankersand10Lr1tankerstransferredfromomI,2.5Lr2tankernewbuildings,1.5Lr1tankernew-buildingsandapanamaxbulkcarrierbuiltin2004.Inaddition,twomrtankersarestillownedbyomIwhichtormownsjointlywithteekay.

65

thedevelopmentintheoperatingexpensescanbesummarizedasillustratedinthetablebelow.

USdmillion Tanker Division bulk Division operaTing cosTs Handy mr lr1 lr2 panamax Handy un-allocated Total

operatingexpenses2006 - 38.1 12.3 11.9 11.9 1.2 2.3 77.7changeinthenumberofoperatingdays 11.9 11.0 1.3 5.5 (2.1) (1.2) 26.4changeinexpensesperoperatingday - 4.3 1.7 3.7 0.7 - 10.4other 0 12.6 12.6operatingexpenses2007 11.9 53.4 15.3 21.1 10.5 - 14.9 127.1

thetablebelowsummarizestheoperatingdataforthecompany’sownedfleet.

USdmillion Tanker Division bulk Division operaTing Days Handy mr lr1 lr2 panamax Handy Total

operatingdaysin2006 - 5,835 2,298 2,067 2,474 306 12,980operatingexpensesperoperatingdayin2006 - 6,525 5,365 5,748 4,802 3,847 5,804operatingexpensesperoperatingdayin2007 6,467 7,098 6,071 6,976 5,135 - 6,618changeintheoperatingexpensesperoperatingdayin% n.a. 9% 13% 21% 7% n.a. 14%operatingdaysin2007 1,836 7,523 2,532 3,027 2,047 - 16,965-off-hiredays -0 -82 -10 -43 -10 - -145-daysindry-dock -0 -173 -84 -16 -77 - -350-earningdaysforvesselscharteredin 0 901 3,575 338 3,012 - 7,826earningdaysin2007 1,836 8,169 6,013 3,306 4,972 - 24,296

operatingexpensesperdayofUSd6,618andUSd5,804in2007and2006respectivelycanbedistributedontypesofcostsasillustratedinthefiguresbelow.

OPERATING COSTS 2006




66

financial revieW

novesselsweresoldduring2007.prepaymentsonvesselsincreasedbyUSd89milliontoUSd272millionduetoadditionalcostsrelatingtovesselsunderconstructionofUSd255millionlesstheabove-mentionednewbuildingdeliveriesofUSd166million.

totaldepreciationamountedtoUSd99millionin2007ascomparedtoUSd59millionin2006,anincreaseofUSd35million.theincreaseisduetotheexpansionandrenewalofthefleetduring2006and2007andtheamortisationofintangibleassetsacquiredintheomIacquisition.

Asat31december2007,torm’snewbuildingprogrammecomprised17tankervesselsandfourbulkcarrierstobedeliveredduring2008to2011,andthecontractualliabilitiesundertheprogrammeamountedtoUSd1,002million.

themarketvalueofthefleetandinvestmentprogramme(threeLr2tankernewbuildings,13mrtankernewbuildings,oneHandysizetankernewbuildingandfourpanamaxbulkcarriernewbuildings)exceededthecarryingvalueofthefleetincludingnewbuildingcontractsbyUSd1,578millionatyear-end.thisvaluationisbasedontheaverageofthreeinter-nationallyacknowledgedshipbrokers’valuations.

oTHer invesTmenTs (norDen)Inmarch2007,tormsoldit’sentireinvestmentinapproximately33%ofthesharesinnordenforasumofUSd704millionwherebythecompanyachievedagainofUSd643million.thecompanyholdsinvestmentsinotherentitieswithanaggregatecarry-ingamountofUSd11millionasat31december2007,ofwhichUSd3millionconcernsunlistedentities,whichisunchangedfromthepreviousyear.thecarryingamountoftheunlistedsharesconstitutestheestimatedfairvaluebasedonavailableinformation.

liQuiDiTy anD capiTal resourcestheinvestedcapitalincreasedbyUSd1,307milliontoUSd2,606millionasat31december2007fromUSd1,299millioninthepreviousyear.theincreasecanprimarilybeexplainedbytheacquisitionofomIandthefurtheradditionoftonnageduringtheyear.

equitydecreasedbyUSd200milliontoUSd1,081millionfromUSd1,281millionin2006.theconsiderablereductioninequityismainlyduetothenetprofitfortheyearofUSd792millionlessthevalueadjustmentofthecompany’sinvestmentinnordenattributabletopreviousyearsofUSd572millionandextraordinarilyhighdividendspaidoutduringtheyearofUSd424million.Asat31december2007,theequityratiowas36%comparedto61%asat31december2006.

thepaymentofthecompany’sobligationsunderloanagreements,alongwiththepaymentofcharterhireforchartered-invesselsandallothercommitmentsthattormhasenteredinto,arepaidoutofthecashgen-eratedbythecompany.totalcashandcashequivalentsamountedtoUSd118millionattheendof2007vs.USd33millionatthebeginningoftheyear,resultinginanetincreaseincashandcashequivalentsfromcashflowsfortheyearofUSd85millioncomparedtoanetdecreaseofUSd124millionin2006.theprimarysourcesofthecashflowwereprofitfromoperatingactivities,additionalborrowingandproceedsfromthesaleofthesharesinnorden,whichcontributedwithatotalofUSd2,717millionincash.

thecashflowswereprimarilyusedtofinancetheacquisitionofomIandfurtheradditionstothefleet,torepaymortgagedebtandbankloansandtopaydividendtoshareholdersduringtheyear,whichrequiredatotalofUSd2,665millionincash.

thecompany’soperationsgeneratedacashinflowofUSd205millioncomparedtoaninflowofUSd233millionin2006.

USd810millionwasinvestedintheacquisitionofomI.Inaddition,thecompanyinvestedUSd291millionintangiblefixedassetsduringtheyear,primarilycomprisingtheextensionofthefleet,comparedtoUSd262millionin2006.thecompanydidnotsellvesselsin2007,whereasthetotalcashinflowfromthesaleofvesselswasUSd145millionin2006.

thetotalcashinflowfromfinancingactivitiesamountedtoUSd243mil-lioncomparedtoacashoutflowofUSd239millionin2006.AdditionalborrowinggeneratedaninflowofUSd1,809millionforthefinancingoftheacquisitionofomI,thenewbuildingprogrammeandpurchaseofsecond-handvessels,whilerepaymentsonmortgagedebtandbankloansamountedtoUSd1,142million.dividendpaymentstotorm’sshareholders,whichin2007amountedtoUSd424million,alsoaffectedcashflowfromfinancingactivities.

Asat31december2007,tormhadenteredintocreditagreementswithleadingbankswithatotalcommitmentofUSd1,964million,ofwhichUSd1,657millionwasdrawn.ofthetotalborrowingsofUSd1,657mil-lion,USd1,532millionwasbearingvariableinterest.thecreditagree-mentsarededicatedtothefinancingofnewtonnageandtotheongoingfinancingofsomeoftheexistingvessels.

Forall21vesselsinthenewbuildingprogrammepaymentscorrespond-ingtoapproximately26%oftheaggregatecontractpricehavebeenmade.thetotaloutstandingcontractualcommitmentunderthenew-buildingprogrammeamountedtoUSd745millionasat31december2007.

tormisclosetofinalizingtherefinancingoftheoneyearUSd700mil-lionbridgefacilityobtainedinconnectionwiththeacquisitionofomI.

tormbelievesthatbasedonavailablecashandplannedinvestments,projectedoperatingcashflowsandfinancingcapacitythecompanyhassufficientcashflowtomeettheoperatingrequirements,cashflowobligationsandotherstrategicinitiativessetbythecompany’sboardofdirectors.tormalsobelievesthatthecurrentfleetstructure,basedontimechartersandownedvessels,providesthecompanywiththeflexibilitytoreacttochangesinmarketconditionsreducingtheexposuretonegativemarketdevelopments.

67

consoliDaTeD income sTaTemenT1 January - 31 December

USd‘000

note 2007 2006revenue 818,773 603,717portexpenses,bunkersandcommissions -176,702 -148,943Freightandbunkersderivatives 2,894 620 Time charter equivalent earnings 644,965 455,394 charterhire -160,207 -106,329operatingexpenses 4 -127,140 -77,624 gross profit (net earnings from shipping activities) 3 357,618 271,441 profitfromsaleofvessels 0 54,362Administrativeexpenses 4.5 -68,743 -34,594otheroperatingincome 14,787 9,839depreciationandimpairmentlosses 7.8 -98,681 -58,915 operating profit 204,981 242,133 Financialincome 9 677,451 39,473Financialexpenses 9 -78,210 -40,520 profit before tax 804,222 241,086 taxexpenses 11 -12,545 -6,574 net profit for the year 791,677 234,512 2007 2006 earnings per share *) earningspershare(USd) 25 11.4 3.4earningspershare(dKK)**) 62.3 20.1dilutedearningspershare(USd) 25 11.4 3.4dilutedearningspershare(dKK)**) 62.1 20.1

*) thecomparativefiguresarerestatedtoreflectthechangeinthedenominationofthecompany’ssharesfromdKK10persharetodKK5inmay2007.

**)calculatedfromUSdtodKKattheaverageUSd/dKKexchangeratefortherelevantperiod.

theaccompanyingnotesareanintegratedpartofthesefinancialstatements.

consoliDaTeD balance sHeeTaT 31 December

USd‘000

asseTs note 2007 2006

non-currenT asseTs

intangible assetsgoodwill 87,663 0otherintangibleassets 7,481 0 7 95,144 0 Tangible fixed assets Landandbuildings 4,169 374Vesselsandcapitalizeddry-docking 16 2,270,064 1,136,408prepaymentsonvessels 271,523 183,348otherplantandoperatingequipment 7,682 3,575 8 2,553,438 1,323,705financial assets otherinvestments 6 11,029 644,409otherfinancialassets 20 44,600 0 55,629 644,409 Total non-current assets 2,704,211 1,968,114 currenT asseTs

bunkers 19,823 12,134Freightreceivables,etc, 10 90,265 49,690otherreceivables 29,533 21,500prepayments 4,746 4,546cashandcashequivalents 117,984 33,035

Total current assets 262,351 120,905

ToTal asseTs 2,966,562 2,089,019 theaccompanyingnotesareanintegratedpartofthesefinancialstatements.

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USd‘000

eQuiTy anD liabiliTies note 2007 2006

eQuiTy

commonshares 12 61,098 61,098treasuryshares 12 -18,118 -18,118revaluationreserves 7,268 579,852retainedprofit 953,656 574,493proposeddividend 64,548 73,939Hedgingreserves 8,664 5,589translationreserves 4,114 3,993

Total equity 1.081,230 1.280,846 liabiliTies

non-current liabilities deferredtaxliability 11 55,588 62,787mortgagedebtandbankloans 14,16 884,579 639,065Acquiredliabilitiesrelatedtooptionsonvessels 20 12,200 0Acquiredtimechartercontracts 19 16,018 0Total non-current liabilities 968,385 701,852 current liabilities mortgagedebtandbankloans 14,16 768,871 55,902otherfinancialliabilities 1,072 0tradepayables 44,310 18,760currenttaxliabilities 14,437 4,575otherliabilities 15 60,086 26,004Acquiredtimechartercontracts 19 20,196 0deferredincome 13 7,975 1,080Total current liabilities 916,947 106,321 ToTal liabiliTies 1.885,332 808,173 ToTal eQuiTy anD liabiliTies 2.966,562 2.089,019 Accountingpolicies 1-2collateralsecurity 16guaranteeandcontingentliabilities 17contractualliabilities 18derivativefinancialinstruments 20Financialandcommercialrisks 21Financialinstruments 22relatedpartytransactions 23entitiesinthegroup 24earningspershare 25Appropriationonnetprofitfortheyearincl.proposeddividend 26cashflows 27Acquisitionofcompanies 28timechartercontracts 29purchaseoptionsonvessels 30 theaccompanyingnotesareanintegratedpartofthesefinancialstatements.

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consoliDaTeD sTaTemenT of cHanges in eQuiTy

USdmillion

gains/lossesrecognizeddirectlyinequity common treasury retained proposed revaluation Hedging translation total shares shares profit dividends reserves reserves reserves eQuiTybalance at 1 January 2006 61.1 -7.7 415.3 132.4 296.4 3.3 3.9 904.7 changes in equity 2006: exchangerateadjustmentarisingontranslation ofentitiesusingameasurementcurrency differentfromUSd 0.1 0.1reversalofdeferredgain/lossonhedge instrumentsatthebeginningoftheyear -3.3 -3.3deferredgain/lossonhedgeinstruments atyear-end 5.6 5.6reversaloffairvalueadjustmentonavailable forsaleinvestmentsatbeginningofyear -296.4 -296.4Fairvalueadjustmentonavailableforsale investmentsatyear-end 579.8 579.8netgains/lossesrecognizeddirectlyinequity 0.0 0.0 0.0 0.0 283.4 2.3 0.1 285.8profitfortheyear 234.5 234.5Total recognized income/expenses for the year 0.0 0.0 234.5 0.0 283.4 2.3 0.1 520.3purchaseoftreasuryshares,cost -10.4 -10.4disposaloftreasuryshares,cost 0.0 0.0dividendspaid -140.1 -140.1dividendspaidontreasuryshares 5.9 5.9exchangerateadjustmentondividendspaid -7.7 7.7 0.0exerciseofshareoptions 0.4 0.4proposeddividendsforthefinancialyear -73.9 73.9 0.0Total changes in equity 2006 0.0 -10.4 159.2 -58.5 283.4 2.3 0.1 376.1 equity at 31 December 2006 61.1 -18.1 574.5 73.9 579.8 5.6 4.0 1,280.8 changes in equity 2007: exchangerateadjustmentarisingontranslation ofentitiesusingameasurementcurrency differentfromUSd 0.1 0.1reversalofdeferredgain/lossonhedge instrumentsatbeginningofyear -5.6 -5.6deferredgain/lossonhedgeinstruments atyearend 8.7 8.7Fairvalueadjustmentonavailableforsaleinvestments 70.8 70.8transfertoprofitorlossonsaleofavailablefor saleinvestments -643.3 -643.3netgains/lossesrecognizeddirectlyinequity 0.0 0.0 0.0 0.0 -572.5 3.1 0.1 -569.3profitfortheyear 791.7 791.7Total recognized income/expenses for the year 0.0 0.0 791.7 0.0 -572.5 3.1 0.1 222.4extraordinarydividendspaid -369.3 -369.3extraordinarydividendspaidontreasuryshares 18.0 18.0dividendspaid -76.4 -76.4dividendspaidontreasuryshares 3.7 3.7exchangerateadjustmentondividendspaid -2.5 2.5 0.0Share-basedcompensation 2.0 2.0proposeddividendsforthefinancialyear -64.5 64.5 0.0Total changes in equity 2007 0.0 0.0 379.1 -9.4 -572.5 3.1 0.1 -199.6 equity at 31 December 2007 61.1 -18.1 953.6 64.5 7.3 8.7 4.1 1,081.2

theaccompanyingnotesareanintegratedpartofthesefinancialstatements.

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consoliDaTeD casH floW sTaTemenT

USd‘000

note 2007 2006

casH floW from operaTing acTiviTies

operatingprofit 204,981 242,133 Adjustments: reversalofprofitfromsaleofvessels 0 -54,362reversalofdepreciationandimpairmentlosses 98,681 58,915reversalofothernon-cashmovements 27 -1,433 6,020

dividendsreceived 1,317 26,401Interestreceivedandexchangerategains 16,216 10,096Interestpaid -73,164 -40,734Incometaxespaid -9,525 -3,153changeininventories,receivablesandpayables -31,865 -12,813 net cash inflow from operating activities 205,208 232,503 casH floW from invesTing acTiviTies Investmentintangiblefixedassets -290,555 -262,376Investmentinequityinterestsandsecurities 0 -14Acquisitionofenterprisesandactivities 28 -810,159 0Saleofequityinterestsandsecurities 736,868 241Saleofnon-currentassets 194 144,550 net cash outflow from investing activities -363,652 -117,599 casH floW from financing acTiviTies borrowing,mortgagedebtandotherfinancialliabilities 1,808,983 162,096repayment/redemption,mortgagedebt -1,141,640 -256,143dividendspaid -423,950 -134,140purchase/disposaloftreasuryshares 0 -10,410 cash inflow/(outflow) from financing activities 243,393 -238,597 net cash inflow/(outflow) from operating, investing and financing activities 84,949 -123,693 cash and cash equivalents, at 1 January 33,035 156,728 cash and cash equivalents, at 31 December 117,984 33,035ofwhichusedascollateral 0 0 117,984 33,035 theaccompanyingnotesareanintegratedpartofthesefinancialstatements.

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noTes

noTe 1

accounTing policiestheannualreporthasbeenpreparedinaccordancewiththeInternationalFinancialreportingStandardsasadoptedbytheeUandthedisclosurerequirementsfordanishlistedcompanies’financialreporting.

theannualreportalsocomplieswiththeInternationalFinancialreportingStandards(“IFrS”)issuedbytheInternationalAccountingStandardsboard(IASb).

thefinancialstatementsarepreparedinaccordancewiththehistori-calcostconventionexceptwherefairvalueaccountingisspecificallyrequiredbyIFrS.

thefunctionalcurrencyinallmajorentitiesisUSd,andthecompanyappliesUSdaspresentationcurrencyinthepreparationoffinancialstatements.

cHanges in accounTing policies anD presenTaTiontormhasimplementedIFrS8“operatingSegments”intheannualreportfor2007.thestandardreplacesIAS14andalignssegmentreportingwiththerequirementsofSFAS131underUSgAAp.

Inaddition,thecompanyhasimplementedIFrIc10“InterimFinancialreportingandImpairment”andIFrIc11“IFrS2–groupandtreasurySharetransactions”.

theimplementationoftheabovestandardandinterpretationshasnotaffectedtorm’sfinancialstatements.

accounTing sTanDarDs anD inTerpreTaTions noT yeT aDopTeDIASbhasissuedanamendmenttoIAS1“presentationofFinancialStatements”.themostnotablechangesincomparisontothecurrentversionofIAS1are:

• Arequirementthat”comprehensiveincome”ispresentedeitherinasinglestatementorintwostatements(anincomestatementandastatementofcomprehensiveincome,inwhichnetprofitfortheyearisincludedinoneline).thestatementofchangesinequitycannolongerincludeelementsofcomprehensiveincome,butonlythetotalofthisstatement.

• Whenchangesinaccountingpoliciesorrestatementshaveoccured,astatementoffinancialposition(balancesheet)atthebeginningofthecomparativeperiodispresented(i.e.twoyearscomparativefigures).

• Arequirementforinformationregardingthetaxeffectofeachitemin”othercomprehensiveincome”.

• Arequirementofdisclosureofamounts,whicharereclassifiedfromothercomprehensiveincometonetprofitfortheyear(“recycling”).

• theterminologyregardingthefinancialstatementsinaccordancewithIFrSischanged.

IASbhasissuedanamendmenttoIAS23”borrowingcosts”.thechangestoIAS23imply,thatthecompanyisrequiredtocapitalizebor-rowingcosts,thatrelatedirectlytoassetsacquisition,constructionorproductionofaqualifyingasset,includingvessels,aspartofthecostoftheasset.

tormexpectstoimplementthesechangeswhentheybecomeeffectivein2009.

theimplementationofIAS1willchangethepresentationofthefinancialstatements,whereastheimplementationoftheamendmenttoIAS23willnoteffectthefinancialstatements.

In2008,IASbhasissuedrevisedIFrS3“businesscombinations”,amendmentstoIAS27“consolidatedandseparatefinancialstatements”,amendmenttoIFrS2“Share-basedpayment:vestingconditionsandcancellations”,whichhavenotyetbeenendorsedbytheeU.theeffectoftheseamendmentsonthefinancialstatementsisyettobedetermined.

key accounTing policiesthemanagementconsidersthefollowingtobethemostimportantaccountingpoliciesforthetormgroup.

Participation in poolstormgeneratesitsrevenuefromshippingactivities,whichtoalargeextentareconductedthroughpools.totalpoolrevenueisgeneratedfromeachvesselparticipatinginthepoolsinwhichthegrouppartici-patesandisbasedoneithervoyageortimecharterparties.thepoolmeasuresnetrevenuesbasedonthecontractualratesandthedurationofeachvoyage,andnetrevenueisrecognizedupondeliveryofserviceinaccordancewiththetermsandconditionsofthecharterparties.

thepoolsareregardedasjointlycontrolledoperations,andthecompany’sshareoftheincomestatementandbalancesheetintherespectivepoolsisaccountedforbyrecognizingaproportionalshare,basedonparticipationinthepool,combiningitemsofuniformnature.thecompany’sshareoftherevenuesinthepoolsisprimarilydependentonthenumberofdaysthecompany’svesselshavebeenavailableforthepoolsinrelationtothetotalavailablepoolearningdaysduringtheperiod.

tormactsaspoolmanagerforthreepoolsinwhichthecompanyisparticipatingwithasignificantnumberofvessels.Aspoolmanagertormreceivesacharteringcommissionincometocovertheexpensesassociatedwiththisrole.thecharteringcommissionincomeiscal-culatedasafixedpercentageofthefreightincomefromeachcharteragreement.Ifthepooldoesnotearnanyfreightincome,tormwillnotreceiveanycommissionincome.thecommissionincomeisrecognizedintheincomestatementunder“otheroperatingincome”simultaneouslywiththerecognitionoftheunderlyingfreightincomeinthepool.

Cross over voyagesrevenueandtherelatedexpensesarerecognizedupondeliveryofserviceinaccordancewiththetermsandconditionsofthecharterparties.Forcrossovervoyages(voyagesinprogressattheendofareportingperiod)theuncertaintyandthedependenceonestimatesaregreaterthanforconcludedvoyages.thecompanyrecognizesapercentageoftheestimatedrevenueforthevoyageequaltothepercentageoftheesti-mateddurationofthevoyagecompletedonthebalancesheetdate.theestimateofrevenueisbasedontheexpecteddurationanddestinationofthevoyage.Voyageexpensesarerecognizedasincurred.Whenrecogniz-ingnetrevenue,thereisariskthattheactualnumberofdaysittakestocompletethevoyagewilldifferfromtheestimate,andfortimecharterpartiesalowerdayratemayhavebeenagreedforadditionaldays.thecontractforasinglevoyagemaystateseveralalternativedestination

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ports.thedestinationportmaychangeduringthevoyage,andtheratemayvarydependingonthedestinationport.changestotheestimateddurationofthevoyageaswellaschangingdestinationsandweatherconditionswillaffectthevoyageexpenses.

Demurrage revenues Freightcontractscontainconditionsregardingtheamountoftimeavail-ableforloadinganddischargingofthevessel.Iftheseconditionsarebreached,tormiscompensatedfortheadditionaltimeincurredintheformofademurragerevenue.demurragerevenuesarerecognizedupondeliveryofserviceinaccordancewiththetermsandconditionsofthecharterparties.

Uponcompletionofthevoyage,thecompanyassessesthetimespentinport,andademurrageclaimbasedontherelevantcontractualconditionsissubmittedtothecharterers.theclaimwilloftenbemetbycounterclaimsduetodifferencesintheinterpretationoftheagreementcomparedtotheactualcircumstancesoftheadditionaltimeused.basedonpreviousexperience,95%ofthedemurrageclaimsubmittedisrecognizedasdemurragerevenue.thecompanyreceivesthedemurragepaymentuponreachingfinalagreementoftheamount,whichonaverageisapproximately100daysaftertheoriginaldemurrageclaimwassubmitted.Ifthegroupacceptsareductionofmorethan5%oftheoriginalclaim,orifthechartererisnotabletopay,demurragerevenuewillbeaffected.

VesselsVesselsaremeasuredatcostlessaccumulateddepreciationandaccu-mulatedimpairmentlosses.costcomprisesacquisitioncostandcostsdirectlyrelatedtotheacquisitionupuntilthetimewhentheassetisreadyforuseincludinginterestexpensesincurredduringtheperiodofconstruction,basedontheloansobtainedforthevessels.Allmajorcomponentsofvesselsexceptfordry-dockingcostsaredepreciatedonastraight-linebasistotheestimatedresidualvalueovertheirestimatedusefullives,whichtormestimatestobe25years.thecompanyconsid-ersthata25-yeardepreciablelifeisconsistentwiththatusedbyothershipownerswithcomparabletonnage.depreciationisbasedoncostlesstheestimatedresidualvalue.residualvalueisestimatedasthelightweighttonnageofeachvesselmultipliedbyscrapvalueperton.theusefullifeandtheresidualvalueofthevesselsarereviewedatleastateachfinancialyear-endbasedonmarketconditions,regulatoryrequire-mentsandthecompany’sbusinessplans.thecompanyalsoevaluatesthecarryingamountstodetermineifeventshaveoccurredthatindicateimpairmentandwouldrequireamodificationoftheircarryingamounts.prepaymentonvesselsismeasuredatcostsincurred.

Dry-docking thevesselsarerequiredtoundergoplanneddry-dockingsforreplace-mentofcertaincomponents,majorrepairsandmaintenanceofothercomponents,whichcannotbecarriedoutwhilethevesselsareoperating,approximatelyevery30and60monthsdependingonthenatureofworkandexternalrequirements.thesedry-dockingcostsarecapitalizedanddepreciatedonastraight-linebasisovertheestimatedperioduntilthenextdry-docking.theresidualvalueofsuchcomponentsisestimatedatnil.theusefullifeofthedry-dockingcostsarereviewedatleastateachfinancialyear-endbasedonmarketconditions,regulatoryrequirementsandtorm’sbusinessplans.

Aportionofthecostofacquiringanewvesselisallocatedtothecom-ponentsexpectedtobereplacedorrefurbishedatthenextdry-docking.depreciationhereofiscarriedovertheperioduntilthenextdry-docking.Fornewbuildings,theinitialdry-dockingassetisestimatedbasedontheexpectedcostsrelatedtothefirst-comingdry-docking,whichisagainbasedonexperienceandpasthistoryofsimilarvessels.Forsecond-handvessels,adry-dockingassetisalsosegregatedandcapitalizedseparately,however,takingintoaccountthenormaldockingintervalsinthecompany.

Atsubsequentdry-dockingsthecostscomprisetheactualcostsincurredatthedry-dockingyard.drydockingcostsmayincludethecostofhiringcrewstoeffectreplacementsandrepairsandthecostofpartsandmateri-alsused,costoftravel,lodgingandsupervisionofcompanypersonnelandthecostofhiringthirdpartypersonneltooverseeadry-docking.dry-dockingactivitiesinclude,butarenotlimitedto,theinspection,serviceonturbocharger,replacementofshaftseals,serviceonboiler,replacementofhullanodes,applyingofantifoulingandhullpaint,steelrepairsandrefurbishmentandreplacementofotherpartsofthevessel.

Deferred taxAllsignificantdanishentitieswithinthegroupenteredthedanishtonnagetaxationschemeforabinding10-yearperiodwitheffectfrom1January2001andhavefiledtaxreturnsforthefiscalyears2001to2006.Underthedanishtonnagetaxationscheme,taxableincomeisnotcalculatedonthebasisofincomeandexpensesasunderthenormalcorporatetaxation.Instead,taxableincomeiscalculatedwithreferencetotheton-nageusedduringtheyear.thetaxableincomeforacompanyforagivenperiodiscalculatedasthesumofthetaxableincomeunderthetonnagetaxationschemeandthetaxableincomefromtheactivitiesthatarenotcoveredbythetonnagetaxationschememadeupinaccordancewiththeordinarydanishcorporatetaxsystem.

Iftheentities’participationinthedanishtonnagetaxationschemeisabandoned,oriftheentities’levelofinvestmentandactivityissignifi-cantlyreduced,adeferredtaxliabilitywillbecomepayable.Adeferredtaxliabilityisrecognizedinthebalancesheetateachperiodendandisaccountedforusingthebalancesheetliabilitymethod.thedeferredtaxliabilityrelatingtothevesselsismeasuredonthebasisofthedifferencebetweenthetaxvalueofthevesselsatthedateofentryintothetonnagetaxationschemeandthelowerofthecostandtherealizedorrealizablesalesvalueofthevessels.

oTHer accounTing policies

Consolidation principlestheconsolidatedfinancialstatementscomprisethefinancialstatementsoftheparentcompany,A/Sdampskibsselskabettormanditssubsidi-aries,i.e.theentitiesinwhichtheparentcompany,directlyorindirectly,holdsthemajorityofthevotesorotherwisehasacontrollinginterest.

entitiesinwhichthegroupexercisessignificantbutnotcontrollinginfluenceareregardedasassociatedcompaniesandarerecognizedusingtheequitymethod.

companieswhicharebyagreementmanagedjointlywithoneoremoreothercompaniesandthereforesubjecttojointcontrol(jointlycontrolledentities)areaccountedforusingproportionateconsolidation,wherebytheindividualitemsintheirfinancialstatementsareincludedinpropor-tiontotheownershipshare.

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noTes

theconsolidatedfinancialstatementsarepreparedonthebasisofthefinancialstatementsoftheparentcompany,itssubsidiariesandpropor-tionatelyconsolidatedcompaniesbycombiningitemsofauniformnatureandeliminatinginter-companytransactions,balancesandshareholdingsaswellasrealizedandunrealizedgainsandlossesontransactionbetweentheconsolidatedcompanies.thefinancialstatementsusedforconsolidationpurposesarepreparedinaccordancewiththecompany’saccountingpolicies.

Business combinationsnewlyacquiredorformedentitiesarerecognizedintheconsolidatedfinancialstatementsfromthedateofacquisitionorformation.thedateofacquisitionisthedateonwhichcontrolovertheentityiseffectivelytransferred.Soldorunwoundentitiesarerecognizedintheconsolidatedfinancialstatementsuntilthedateofthesaleortheunwinding.thedateofsaleorunwindingisthedatewhencontroliseffectivelytransferredtothirdparties.

businesscombinationsareaccountedforbyapplyingthepurchasemethod,wherebytheacquiredentities’identifiableassets,liabilitiesandcontingentliabilitiesaremeasuredatfairvalueattheacquisitiondate.restructuringcostsareonlyrecognizedintheacquisitionbalancesheettotheextentthattheyconstituteanobligationfortheacquiredentity.thetaxeffectoftherevaluationactivitiesisalsotakenintoaccount.thecostofabusinesscombinationismeasuredasthefairvalueoftheconsiderationpaidandthecostsdirectlyattributabletothebusinesscombination.

theexcess(goodwill)ofthecostofthebusinesscombinationoverthefairvalueoftheacquiredassets,liabilitiesandcontingentliabilitiesisrecognizedasanassetunderintangibleassetsandistestedforimpairmentatleastonceeveryyear.Ifthecarryingamountoftheassetexceedstherevocerableamountoftheassetitshouldbereducedtothelowerrecoverableamount.

Foreign currencies thefunctionalcurrencyofallsignificantentitiesincludingsubsidiariesandassociatedcompaniesisUSd,becausethecompany’svesselsoper-ateininternationalshippingmarkets,inwhichrevenuesandexpensesaresettledinUSd,andthecompany’smostsignificantassetsandliabilitiesintheformofvesselsandrelatedfinancialliabilitiesareinUSd.transactionsincurrenciesotherthanthefunctionalcurrencyaretranslatedintothefunctionalcurrencyatthedateofthetransactions.cash,accountsreceivableandpayableandothermonetaryitemsdenominatedincurrenciesotherthanthefunctionalcurrencyaretranslatedintothefunctionalcurrencyattheexchangerateprevailingatthebalancesheetdate.gainsorlossesduetodifferencesbetweentheexchangerateatthetransactiondateandtheexchangerateatthesettlementdateorthebalancesheetdatearerecognizedintheincomestatementunder“Financialitems”.

Anexchangerategainorlossrelatingtoanon-monetaryitemcarriedatfairvalueisrecognizedinthesamelineasthefairvalueadjustment.thereportingcurrencyofthecompanyisUSd.Uponrecognitionofenti-tieswithfunctionalcurrenciesotherthanUSd,thefinancialstatementsaretranslatedintoUSd.ItemsintheincomestatementaretranslatedintoUSdattheaverageexchangeratesfortheperiod,whereasbalancesheetitemsaretranslatedattheexchangeratesasatthebalancesheetdate.exchangedifferencesarisingfromthetranslationoffinancialstate-mentsintoUSdarerecognizedasaseparatecomponentofequity.onthedisposalofanentity,thecumulativeamountoftheexchangediffer-

encesdeferredintheseparatecomponentofequityrelatingtothatentityshallbetransferredtotheincomestatementaspartofthegainorlossondisposal.

Fair valuesAllfairvaluesoffinancialassets,liabilitiesandderivativefinancialinstrumentsarebasedonquotedmarketpricesorstandardpricingmodelsusingobservablemarketdata.

Derivative financial instrumentsderivativefinancialinstruments,primarilyinterestrateswaps,forwardcurrencyexchangecontracts,forwardfreightagreementsandforwardcontractsregardingbunkerpurchases,areenteredtohedgefuturecommittedoranticipatedtransactions.tormapplieshedgeaccountingunderthespecificrulesforcashflowhedgeswhenallowedandappro-priate.Inaddition,tormtakeslimitedpositionsinforwardfreightagree-mentsasasupplementtothecompany’sphysicalpositionsinvessels,whicharenotenteredforhedgepurposes.

derivativefinancialinstrumentsareinitiallyrecognizedinthebalancesheetatcostandaresubsequentlymeasuredattheirfairvalueasotherreceivablesorotherliabilitiesrespectively.

changesinfairvalueofderivativefinancialinstruments,whicharedesignatedascashflowhedgesanddeemedtobeeffective,arerecog-nizeddirectlyinequityunder“Hedgingreserves”.Whenthehedgedtransactionisrecognizedintheincomestatement,thecumulativevalueadjustmentrecognizedinequityistransferredtotheincomestatementandincludedinthesamelineasthehedgedtransaction.changesinfairvalueofaportionofahedgedeemedtobeineffectivearerecognizedintheincomestatement.

changesinfairvalueofderivativefinancialinstrumentsthatarenotdesignatedashedgesarerecognizedintheincomestatement.Whileeffectivelyreducingcashflowriskinaccordancewiththeriskmanage-mentpolicyofthecompany,interestrateswapswithcapfeaturesandcertainforwardfreightagreementsandforwardcontractsregardingbunkerpurchasesdonotqualifyforhedgeaccounting.changesinfairvalueofthesederivatefinancialinstrumentsarethereforerecognizedintheincomestatementunder“Financialexpenses”forinterestrateswapswithcapfeaturesandunder“Freightandbunkersderivatives”forforwardfreightagreementsandforwardbunkercontracts.changesinfairvalueofforwardfreightagreements,whicharenotenteredforhedgepurposes,arealsorecognizedunder“Freightandbunkersderivatives”.

Segment information tormconsistsoftwobusinesssegments:tankerandbulk.thisseg-mentationisbasedonthegroup’sinternalmanagementandreportingstructureinadditiontoevaluationofriskandearnings.transactionsbetweensegmentsarebasedonmarket-relatedpricesandareelimi-natedatgrouplevel.thegrouponlyhasonegeographicalsegment,becausethecompanyconsiderstheglobalmarketasawhole,andastheindividualvesselsarenotlimitedtospecificpartsoftheworld.

thesegmentincomestatementcomprisesrevenuesdirectlyattributabletothesegmentandexpenses,whicharedirectlyorindirectlyattributabletothesegment.Indirectallocationofexpensesisbasedondistributionkeysreflectingthesegment’suseofsharedresources.

thesegmentnon-currentassetsconsistofthenon-currentassetsuseddirectlyforsegmentoperations.

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currentassetsareallocatedtosegmentstotheextentthattheyaredirectlyattributabletosegmentoperations,includinginventories,out-standingfreight,otherreceivablesandprepayments.

Segmentliabilitiescomprisesegmentoperatingliabilitiesincludingtradepayablesandotherliabilities.not-allocateditemsprimarilycompriseassetsandliabilitiesaswellasrevenuesandexpensesrelatingtothecompany’sadministrativefunc-tionsandinvestmentactivities,includingcashandbankbalances,inter-estbearingdebt,incometax,deferredtax,etc.

Employee benefits Wages,salaries,socialsecuritycontributions,paidholidayandsickleave,bonusesandothermonetaryandnon-monetarybenefitsareaccruedintheyearinwhichtheemployeesrendertheassociatedservices.

Pension plansthegrouphasenteredintodefinedcontributionplansonly.pensioncostsrelatedtodefinedcontributionplansarerecordedintheincomestatementintheyeartowhichtheyrelate.

Sharebasedcompensationthemanagementandallland-basedemployeesandofficersemployedonpermanentcontracts(apartfromtrainees,apprenticesandcadets)thataredirectlyemployedbyA/Sdampskibsselskabettormpartici-pateinanincentivescheme,whichincludesgrantofsharesandshareoptions.theschemedoesnotprovidethechoicesofcashsettlementinsteadofshares.thefairvalueofthesharesandshareoptionsgrantedunderschemeismeasuredatthegrantdateandisrecognizedintheincomestatementasapersonnelexpenseunderadministrativeexpens-esandoperatingcostsoverthevestingperiod.thecounteritemisrec-ognizedinequity.thefairvalueismeasuredbasedontheblack-Scholesandthemontecarlomodels.

LeasesAgreementstocharterinvesselsandtoleaseotherproperty,plantandequipment,wheretormhassubstantiallyalltherisksandrewardsofownership,arerecognizedinthebalancesheetasfinanceleases.Leaseassetsaremeasuredattheloweroffairvalueandthepresentvalueofminimumleasepaymentsdeterminedintheagreements.

Forthepurposeofcalculatingthepresentvalue,theinterestrateimplicitintheleaseoranincrementalborrowingrateisusedasdiscountfactor.theleaseassetsaredepreciatedandwrittendownunderthesameaccount-ingpolicyasthevesselsownedbythecompanyorovertheleaseperioddependingontheleaseterms.

thecorrespondingleaseobligationisrecognizedasaliabilityinthebalancesheet,andtheinterestelementoftheleasepaymentischargedtotheincomestatementasincurred.

othercharteragreementsconcerningvesselsandotherleasesareclassifiedasoperatingleases,andleasepaymentsarechargedtotheincomestatementonastraight-linebasisovertheleaseterm.theobligationfortheremainingleaseperiodisdisclosedinthenotestothefinancialstatement.

Agreementstocharteroutvessels,wheresubstantiallyalltherisksandrewardsofownershiparetransferredtothelessee,areclassifiedasfinanceleases,andanamountequaltothenetinvestmentintheleaseisrecognizedandpresentedinthebalancesheetasareceivable.the

carryingamountofthevesselisderecognizedandanygainorlossondisposalisrecognizedintheincomestatement.

otheragreementstocharteroutvesselsareclassifiedasoperatingleasesandleaseincomeisrecognizedintheincomestatementonastraight-linebasisovertheleaseterm.

Sale and leaseback transactionsAgainorlossrelatedtoasaleandleasebacktransactionresultinginafinanceleaseisdeferredandamortizedinproportiontothegrossrentalonthetimecharterovertheleaseterm.

Againrelatedtoasaleandleasebacktransactionresultinginanoperatingleaseisrecognizedintheincomestatementimmediatelyprovidedthetransactionisagreedonmarkettermsorthesalespriceislowerthanthefairvalue.Ifthesalespriceexceedsthefairvalue,thedifferencebetweenthesalespriceandthefairvalueisdeferredandamortizedinproportiontotheleasepaymentsoverthelifeofthelease.Alossrelatedtoasaleandleasebacktransactionresultinginanoperatingleaseisrecognizedintheincomestatementatthedateoftransactionexceptifthelossiscom-pensatedbyfutureleasepaymentsbelowfairvalue,itisdeferredandamortizedinproportiontotheleasepaymentsoverthelifeofthelease.

income statement

RevenueIncome,includingrevenue,isrecognizedintheincomestatementwhen:• theincomecreatingactivitieshavebeencarriedoutonthebasisofa

bindingagreement,• theincomecanbemeasuredreliably,• itisprobablethattheeconomicbenefitsassociatedwiththetrans-

actionwillflowtothecompany,and• costsrelatingtothetransactioncanbemeasuredreliably.

revenuecomprisesfreight,charterhireanddemurragerevenuesfromthevesselsandgainsandlossesfromforwardfreightagreementsdesig-natedashedges.revenueisrecognizedwhenitmeetsthegeneralcriteriamentionedaboveandthestageofcompletioncanbemeasuredreliably.Accordingly,freight,charterhireanddemurragerevenuearerecognizedatsellingpriceupondeliveryofserviceinaccordancewiththecharterpartiesconcluded.

Port expenses, bunkers and commissionsportexpenses,bunkerfuelconsumptionandcommissionsarerecognizedasincurred.gainsandlossesfromforwardbunkercontractsdesignatedashedgesareincludedinthisline.

Freight and bunkers derivativesFreightandbunkersderivativesincludefairvalueadjustmentsandgainsandlossesonforwardfreightagreements,forwardbunkercontractsandotherderivatefinancialinstrumentsdirectlyrelatingtoshippingactivitieswhicharenotdesignatedashedges.

Charter hirecharterhireincludestheexpensesrelatedtothecharteringinofvesselsincurredinordertoachievethenetrevenuefortheperiod.

Operating expensesoperatingexpenses,whichcomprisecrewexpenses,repairandmainte-nanceexpensesandtonnageduty,areexpensedasincurred.

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Profit from sale of vesselsprofitorlossfromsaleofvesselsisrecognizedwhenthesignificantrisksandrewardsofownershiphavebeentransferredtothebuyer,anditismeasuredasthedifferencebetweenthesalespricelesssalescostsandthecarryingamountoftheasset.Administrative expensesAdministrativeexpenses,whichcompriseadministrativestaffcosts,managementcosts,officeexpensesandotherexpensesrelatingtoadministration,areexpensedasincurred.

Other operating incomeotheroperatingincomeprimarilycomprisescharteringcommissions,managementfeesandprofitsandlossesderivingfromthedisposalofother plant and operating equipment.

Depreciation and impairment lossesdepreciationandimpairmentlossescomprisedepreciationoffixedassetsfortheperiodaswellasthereductioninthevalueofassetsbytheamountbywhichthecarryingamountoftheassetexceedsitsrecoverableamount.Intheeventofindicationofimpairmentofvalue,thecarryingamountisassessedandthevalueoftheassetisreducedtoitsrecoverableamountequaltothehigherofvalueinusebasedonnetpresentvalueoffutureearningsfromtheassetsanditsnetsellingprice.therecoverableamountofgoodwillisassessedeveryyear.Financial incomeFinancialincomecompriseinterestincome,realizedandunrealizedexchangerategainsrelatingtotransactionsincurrenciesotherthanthefunctionalcurrency,realizedgainsfromotherinvestmentsandsecuri-ties,unrealizedgainsfromsecurities,dividendsreceivedandotherfinancialincomeincludingvalueadjustmentsofcertainfinancialinstru-mentsnotaccountedforashedginginstruments.Interestisrecognizedinaccordancewiththeaccrualbasisofaccountingtakingintoaccounttheeffectiveinterestrate.dividendsfromotherinvestmentsarerecog-nizedwhentherighttoreceivepaymenthasbeendecided,whichistypi-callywhenthedividendhasbeendeclaredandcanbereceivedwithoutconditions.

Financial expensesFinancialexpensescompriseinterestexpense,financingcostsoffinanceleases,realizedandunrealizedexchangeratelossesrelatingtotrans-actionsincurrenciesotherthanthefunctionalcurrency,realizedlossesfromotherinvestmentsandsecurities,unrealizedlossesfromsecuritiesandotherfinancialexpensesincludingvalueadjustmentsofcertainfinancialinstrumentsnotaccountedforashedginginstruments.Interestisrecognizedinaccordancewiththeaccrualbasisofaccountingtakingintoaccounttheeffectiveinterestrate.

TaxIndenmark,A/Sdampskibsselskabettormisjointlytaxedwithitsdanishsubsidiaries.theparentcompanyprovidesforandpaystheaggregatedanishtaxofthetaxableincomeofthesecompaniesbutrecoverstherelevantportionofthetaxespaidfromthesubsidiariesbasedoneachentity’sportionoftheaggregatetaxableincome.taxexpensesincludetheexpectedtaxincludingtonnagetaxofthetaxableincomefortheyearforthegroup,adjustmentsrelatingtopreviousyearsandthechangeindeferredtaxfortheyear.However,taxrelatingtoitemspostedinequityisposteddirectlyinequity.

balance sheet

Goodwillgoodwillismeasuredastheexcessofthecostofthebusinesscombina-tionoverthefairvalueoftheacquiredassets,liabilitiesandcontingentliabilitiesandisrecognizedasanassetunderintangibleassets.

goodwillisnotamortized,butistestedatleastonceeveryyearforimpairment.Ifthecarryingamountoftheassetexceedsitsrecoverableamount,theassetscarryingamountisreducedtothelowerrecoverableamount.goodwillisforimpairmenttestingpurposesallocatedtothosecash-generatingunits,towhichitrelates.

Other intangible assetsotherintangibleassetswereacquiredinconnectionwiththeacquisitionofomIandareamortizedovertheirusefullives,whichvaryfrom1to15years.

other plant and equipment

Landismeasuredatcost.buildingsaremeasuredatcostlessaccumulateddepreciationandaccu-mulatedimpairmentlosses.buildingsaredepreciatedonastraight-linebasisover50years.

operatingequipmentismeasuredatcostlessaccumulateddepreciation.computerequipmentisdepreciatedonastraight-linebasisoverthreeyears,andotheroperatingequipmentisdepreciatedonastraight-linebasisoverfiveyears.

Leaseholdimprovementsaremeasuredatcostlessaccumulatedamortizationandimpairmentlosses,andleaseholdimprovementsareamortizedonastraight-linebasisovertheshorterofthetermoftheleaseandtheestimatedusefullife.costcomprisesacquisitioncostandcostsdirectlyrelatedtotheacquisitionupuntilthetimewhentheassetisreadyforuse.

Financial assetsFinancialassetsareinitiallyrecognizedonsettlementdateatfairvalueplustransactioncosts,exceptforfinancialassetsatfairvaluethroughprofitorloss,whicharerecognizedatfairvalue.Financialassetsarederecognizedwhentherightstoreceivecashflowsfromtheassetshaveexpiredorhavebeentransferred.

Financialassetsareclassifiedas:• Financialassetsatfairvaluethroughprofitorloss.• Held-to-maturityinvestments.• Loansandreceivables.• Available-for-salefinancialassets.

Other investmentsotherinvestmentscomprisesharesinothercompaniesandareclas-sifiedasavailable-for-sale.Listedsharesaremeasuredatthemarketvalueatthebalancesheetdate,andunlistedsharesaremeasuredatestimatedfairvalue.Unrealizedgainsandlossesresultingfromchangesinfairvalueofsharesarerecognizedinequity.realizedgainsandlossesresultingfromsalesofsharesarerecognizedasfinancialitemsintheincomestatement.thecumulativevalueadjustmentrecognizedinequityistransferredtotheincomestatementwhenthesharesaresold.dividendsonsharesinothercompaniesarerecognizedasincomeintheperiodinwhichtheyaredeclared.

76

otherinvestmentsarepresentedasnon-currentunlessmanagementintendstodisposeoftheinvestmentswithin12monthsofthebalancesheetdate.Other financial assetsotherfinancialassetscomprisetorm’srightstoshareofgainonpur-chaseoptionsonvessels,whichwereacquiredaspartofomIandareclas-sifiedasderivatefinancialinstruments.therightsaremeasuredandrec-ognizedatfairvalueandthechangefortheperiodisrecognizedintheincomestatementunderfinancialincomeorexpenses.

Receivablesoutstandingfreightreceivablesandotherreceivablesthatareofacur-rentnature,expectedtoberealizedwithin12monthsfromthebalancesheetdate,areclassifiedasloansandreceivablesandpresentedascurrentassets.receivablesaremeasuredatthelowerofamortizedcostandnetrealizablevalues,whichcorrespondstonominalvaluelessprovisionforbaddebts.derivativefinancialinstrumentsincludedinotherreceivablesaremeasuredatfairvalue.

Impairment of assetsnon-currentassetsarereviewedtodetermineanyindicationofimpair-ment.Inthecaseofsuchindication,therecoverableamountoftheassetisestimatedasthehigheroftheasset’snetsellingpriceanditsvalueinuse.Ifthisamountislessthanthecarryingamountoftheasset,thecar-ryingamountisreducedtotherecoverableamount.theimpairmentlossisrecognizedimmediatelyintheincomestatement.

Forthepurposeofassessingimpairment,assetsaregroupedatthelowestlevelsforwhichthereareseparatelyidentifiablecashflows(cash-generatingunits).Forvessels,thecash-generatingunitisthetotalfleetofthecompany.

Bunkersbunkersandlubricantsarestatedatthelowerofcostandnetrealizablevalue.thecostisdeterminedbytheFIFo-methodandincludesexpendi-turesincurredinacquiringthebunkersandlubricantsanddeliverycostlessdiscounts.

Treasury sharestreasurysharesarerecognizedasaseparatecomponentofequityatcost.Uponsubsequentdisposaloftreasuryshares,anyconsiderationisalsorecognizeddirectlyinequity.

DividenddividendisrecognizedasaliabilityatthetimeofdeclarationattheAnnualgeneralmeeting.dividendproposedfortheyearismovedfrom“retainedprofit”andpresentedasaseparatecomponentofequity.

Provisionsprovisionsarerecognizedwhenthecompanyhasalegalorconstructiveobligationasaresultofpasteventsanditisprobablethatitwillleadtoanoutflowofresourcesthatcanbereliablyestimated.provisionsaremeasuredattheestimatedultimateliabilitythatisexpectedtoarisetakingintoaccountthetimevalueofmoney.

Acquired liabilities related to options on vesselAspartoftheacquisitionofomI,thecompanyacquiredcertainoptionobligationsrelatingtovesselscharteredoutontimechartercontracts.theoptionobligationsareclassifiedasderivativefinancialinstrumentsandarerecognizedatfairvalue.thechangefortheperiodisrecognizedintheincomestatementunderfinancialincomeorexpenses.

Acquired time charter contractsAspartoftheacquisitionofomI,thecompanyacquiredcertaintimechartercontractswhichhavetermsthatarelessfavorablethanthemarkettermsprevailingatthetimeoftheacquisition.thecompanyhasrecognizedaliabilitybasedontheestimatedfairvalueofthesecontractsandisamortizingthisliabilityovertheremainingtermofthecontracts.thechangefortheperiodisrecognizedintheincomestatementunderrevenue.

Other liabilitiesLiabilitiesaregenerallymeasuredatamortizedcost.mortgagedebtandbankloansrelatingtothefinancingofvesselsareinitiallymeasuredatnominalamountslesspremiumsandcostsincurredintheloanarrange-mentandsubsequentlyatamortizedcostwiththedifferencebetweentheloanproceedsandthenominalvaluebeingrecognizedintheincomestatementoverthetermoftheloan.derivativefinancialinstrumentsincludedinotherliabilitiesaremeasuredatfairvalue.

cash flow statementthecashflowstatementshowsthecompany’scashflowsandcashandcashequivalentsatthebeginningandtheendoftheperiod.

cashflowfromoperatingactivitiesispresentedindirectlyandisbasedonprofitbeforefinancialitemsfortheyearadjustedforprofitfromsaleofvessels,non-cashoperatingitems,changesinworkingcapital,incometaxpaid,dividendsreceivedandinterestpaid/received.

cashflowfrominvestingactivitiescomprisesdividendsreceivedandthepurchaseandsaleoftangiblefixedassetsandfinancialfixedassets.

cashflowfromfinancingactivitiescompriseschangesinlong-termdebt,bankloans,purchasesorsalesoftreasurysharesanddividendpaidtoshareholders.

cashandcashequivalentscomprisecashatbankandinhandandhighlyliquidbondswithatermtomaturitynotexceedingthreemonths.otherbondsandotherinvestmentsareclassifiedasinvestmentactivities.

earnings per sharebasicearningspershareiscalculatedbydividingtheconsolidatedprofitorlossavailabletocommonshareholdersbytheweightedaveragenumberofcommonsharesoutstandingduringtheperiod.treasurysharesarenotincludedinthecalculation.purchasesandsalesoftreasurysharesduringtheperiodareweightedbasedontheremainingperiod.

dilutedearningspersharearecalculatedbyadjustingtheconsolidatedprofitorlossavailabletocommonshareholdersandtheweightedaveragenumberofcommonsharesoutstandingfortheeffectsofallpotentiallydilutiveshares.Suchpotentiallydilutivecommonsharesareexcludedwhentheeffectwouldbetoincreaseearningspershareorreducealosspershare.

77

noTes

noTe 2

criTical accounTing esTimaTes anD JuDgemenTsthepreparationofconsolidatedfinancialstatementsinconformitywithIFrSrequiresmanagementtomakeestimatesandassumptionsthataffectthereportedamountsofassetsandliabilities,thedisclosureofcontingentassetsandliabilitiesatthedateofthefinancialstatementsandthereportedamountsofrevenuesandexpensesduringthereportingperiod.theseestimatesandassumptionsareaffectedbythewaytormappliesitsaccountingpolicies.Anaccountingestimateisconsideredcriticalif:theestimaterequiresmanagementtomakeassumptionsaboutmattersthatwerehighlyuncertainatthetimetheestimatewasmade;differentestimatesreasonablycouldhavebeenused;orifchangesintheestimatethatwouldhaveamaterialimpactonthecompany’sfinancialconditionorresultsofoperationsarereasonablylikelytooccurfromperiodtoperiod.managementbelievesthattheaccountingestimatesemployedareappropriateandresultingbalancesarereasonable.However,actualresultscoulddifferfromtheoriginalestimatesrequiringadjustmentstothesebalancesinfutureperiods.

managementbelievesthatthefollowingarethesignificantaccountingestimatesandjudgmentsusedinthepreparationoftheconsolidatedfinancial:

carrying amounTs of vesselsthecompanyevaluatesthecarryingamountsofthevesselstodeter-mineifeventshaveoccurredthatwouldrequireamodificationoftheircarryingamounts.thevaluationofvesselsisreviewedbasedoneventsandchangesincircumstancesthatwouldindicatethatthecar-ryingamountoftheassetsmightnotberecovered.Inassessingtherecoverabilityofthevessels,thecompanyreviewscertainindicatorsofpotentialimpairmentsuchasreportedsaleandpurchaseprices,marketdemandandgeneralmarketconditions.marketvaluationsfromlead-ing,independentandinternationallyrecognizedshipbrokingcompaniesareobtainedonasemi-annualbasisaspartofthereviewforpotentialimpairmentindicatory.Ifanindicationofimpairmentisidentified,theneedforrecognizinganimpairmentlossisassessedbycomparingthecarryingamountofthevesselstothehigherofthefairvaluelesscosttosellandthevalueinuse.

thereviewforpotentialimpairmentindicatorsandprojectionoffutureundiscountedanddiscountedcashflowsrelatedtothevesselsiscom-plexandrequiresthecompanytomakevariousestimatesincludingfuturefreightrates,earningsfromthevesselsanddiscountrates.Alloftheseitemshavebeenhistoricallyvolatile.

thecarryingamountsoftorm’svesselsmaynotrepresenttheirfair-marketvalueatanypointintimeasmarketpricesofsecond-handvesselstoadegreetendtofluctuatewithchangesincharterratesandthecostofnewbuildings.However,iftheestimatedfuturecashfloworrelatedassumptionsinthefutureexperiencechange,animpairmentofvesselsmayberequired.

therewerenoindicatorsofimpairmentnotedorimpairmentsofvesselsrecordedin2006or2007.

TaxAllsignificantdanishentitieswithinthegroupenteredthedanishton-nagetaxationschemewitheffectfrom1January2001andhavefiledtaxreturnsfor2001to2006.theassessmentofthetaxreturnsbythetaxauthoritieshasnotyetbeencompletedfor2005and2006andwehavefiledacomplaintregardingtheassessmentsfortheyears2001to2004.thetaxregulationsarehighlycomplex,andwhilethegroupaimstoensuretheestimatesoftaxassetsandliabilitiesthatitrecordsareaccurate,theremaybeinstanceswheretheprocessofagreeingthetaxliabilitieswiththetaxauthoritiescouldrequireadjustmentstobemadetoestimatespreviouslyrecorded.

Itisthegroup’sassessmentthatthereisuncertaintyastotheestimateoftaxespayableasof31december2007duetothelackofprecedentsthathaveinterpretedthetonnagetaxregulation.theestimateisbasedonscenarioanalysesanddiscussionswiththetaxauthorities,taxadvi-sorsandindustryorganizations,andtheuncertaintyprimarilyrelatestothesplitoftheactivitiesbetweenincomeandexpensesfromshippingrelatedactivities,whicharetaxedunderthetonnagetaxscheme,andincomeandexpensesfromotheractivities,whicharenottaxedunderthetonnagetaxscheme.

78

USdmillion

notnoTe 3 tanker bulk allocated Total 2007

consoliDaTeD segmenT informaTion

income sTaTemenT revenue 640.2 134.3 44.3 818.8portexpenses,bunkersandcommissions -164.5 -6.3 -5.9 -176.7Freightandbunkersderivatives 2.9 0.0 0.0 2.9Time charter equivalent earnings 478.6 128.0 38.4 645.0charterhire -92.4 -59.0 -8.8 -160.2operatingexpenses -105.9 -10.4 -10.9 -127.2gross profit/(loss) (net earnings from shipping activities) 280.3 58.6 18.7 357.6profit/(loss)fromsaleofvessels 0.0 0.0 0.0 0.0Administrativeexpenses -47.9 -7.2 -13.6 -68.7otheroperatingincome 14.5 0.0 0.3 14.8depreciationandimpairmentlosses -83.4 -6.5 -8.8 -98.7operating profit 163.5 44.9 -3.4 205.0Financialitems 599.2 599.2profit/(loss) before tax 595.8 804.2taxexpenses -12.5 -12.5net profit/(loss) for the year 583.3 791.7 balance sHeeT totalnon-currentassets 2,473.8 154.3 76.1 2,704.2totalassets 2,603.2 155.7 207.7 2,966.6totalliabilities 134.3 3.5 1,747.5 1,885.3 oTHer informaTion Additionstointangibleassetsandtangiblefixedassets 1,283.4 71.9 68.3 1,423.6Impairmentlossesrecognizedintheincomestatement 0.0 0.0 0.0 0.0reversalofimpairmentlossesrecognizedintheincomestatement 0.0 0.0 0.0 0.0

theactivitythattormownsina50/50jointventurewithteekayisincludedin”notallocated”.

duringtheyear,therehavebeennotransactionsbetweenthetankerandthebulksegments,andthereforealltherevenuederivesfromexternalcustomers.

79

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80

USdmillion

notnoTe 3, continued tanker bulk allocated Total 2006

consoliDaTeD segmenT informaTion

income sTaTemenTrevenue 494.0 109.7 0.0 603.7portexpenses,bunkersandcommissions -143.8 -5.1 0.0 -148.9Freightandbunkersderivatives 0.6 0.0 0.0 0.6Time charter equivalent earnings 350.8 104.6 0.0 455.4charterhire -58.5 -47.8 0.0 -106.3operatingexpenses -64.6 -13.1 0.0 -77.7gross profit/(loss) (net earnings from shipping activities) 227.7 43.7 0.0 271.4profit/(loss)fromsaleofvessels 3.1 51.3 0.0 54.4Administrativeexpenses -29.1 -5.5 0.0 -34.6otheroperatingincome 9.7 0.1 0.0 9.8depreciationandimpairmentlosses -50.8 -8.1 0.0 -58.9operating profit 160.6 81.5 0.0 242.1Financialitems -1.0 -1.0profit/(loss) before tax -1.0 241.1taxexpenses -6.6 -6.6net profit/(loss) for the year -7.6 234.5

balance sHeeT totalnon-currentassets 1,234.9 88.8 644.4 1,968.1totalassets 1,308.2 91.8 689.0 2,089.0totalliabilities 36.8 2.3 769.1 808.2

oTHer informaTion Additionstointangibleassetsandtangiblefixedassets 260.4 1.9 0.0 262.3Impairmentlossesrecognizedintheincomestatement 0.0 0.0 0.0 0.0reversalofimpairmentlossesrecognizedintheincomestatement 0.0 0.0 0.0 0.0 duringtheyeartherehavebeennotransactionsbetweenthetankerandthebulksegments,andthereforealltherevenuederivesfromexternalcustomers.

USdmillion

noTe 4 2007 2006

sTaff cosTs

Total staff costs Staffcostsincludedinoperatingexpenses 15.2 13.6Staffcostsincludedinadministrativeexpenses 39.0 22.7Total 54.2 36.3 staff costs comprise the following Wagesandsalaries 47.7 33.2Share-basedcompensation 2.3 0.0pensioncosts 3.3 2.9othersocialsecuritycosts 0.9 0.2Total 54.2 36.3

USd’000

noTe 4, continued

Hereof remuneration to the board of Directors and salaries to the management: board committee total remunera- remunera- short-term2007 tion tion benefits

nielseriknielsen 138 18 156christianFrigast 92 18 110peterAbildgaard(appointedon17April2007) 39 0 39LennartArrias 55 0 55margrethebligaard(appointedon17April2007) 39 0 39ditlevengel(resignedon29June2007) 28 0 28pedermouridsen(resignedon17April2007) 16 0 16gabrielpanayotides 55 0 55Stefanos-nikoZouvelos 55 0 55Total for 2007 517 36 553

Short-termbenefits Share- basedcom-2007 Salaries bonus pension pensation total

KlausKjærulff 1,036 2,341 100 326 3,803mikaelSkov 549 1,217 53 210 2,029Total for 2007 1,585 3,558 153 536 5,832

board committee total remunera- remunera- short-term2006 tion tion benefits

nielseriknielsen 126 0 126christianFrigast 84 0 84LennartArrias 50 0 50ditlevengel 50 0 50rexHarrington(resignedon19April2006) 15 0 15pedermouridsen 50 0 50gabrielpanayotides 50 0 50Stefanos-nikoZouvelos(appointedon19April2006) 35 0 35Total for 2006 460 0 460

Short-termbenefits Share- basedcom- 2006 Salaries bonus pension pensation total

KlausKjærulff 718 2,347 69 0 3,134Klausnyborg 373 0 36 0 409Total for 2006 1,091 2,347 105 0 3,543

employee information theaveragenumberofstaffinthegroupinthefinancialyearwas439(2006:353). themajorityofthestaffonvesselsarenotemployedbytorm. themembersofmanagementare,intheeventofterminationbythecompany,entitledtoaseverancepaymentofupto24months’salary. thepensionableageformembersofmanagementis62.

81

noTes

.

noTe 4, continued

incenTive scHeme for managemenT anD employeesIn2007,anIncentiveSchemewasestablishedforallland-basedemploy-eesandofficersemployedonpermanentcontracts(apartfromtrainees,apprenticesandcadets)thataredirectlyemployedinA/Sdampskibs-selskabettorm.Intotal,approximately331employeesareincludedintheprogramme.theboardofdirectorsarenotincludedinthepro-gramme.theprogrammecoversthefinancialyearsof2007,2008and2009.theprogrammeconsistsofbothbonusesandshareoptions. bonus thebonuswillbeawardedbasedontormachievingacalculatedroIc(returnonInvestedcapital)ineachfinancialyearcomparedtoeachyear’sbudgetedroIc.75%oftheachievedbonuswillbepaidincashand25%inshares,whichtheemployeeswillownprovidedthattheyarestillemployedbythecompanyafteraperiodoftwoyears.thenumberofsharesgrantedtotheemployeewilldependonthemarketpriceforthetormsharewhentorm’sAnnualreportforthegrantyearispublished.theindividualemployee’sshareofthebonuswillbebasedpartlyontheindividual’ssalaryandpartlyontheevaluationoftheindividual’sper-formance.theemployeewillreceivethebonusafterthepublicationoftorm’sAnnualreport.Forthefinancialyear2007,thetotalvalueofthebonusunderthisprogrammeamountstoUSd10.5million,ofwhichUSd8.2millionhasbeenrecognizedasanexpenseintheincomestatementin2007.oftheUSd8.2million,USd0.3millionrelatestosharesandUSd7.9millionrelatestocashbonus.theremainingpartofthetotalvalueofthebonuswillbeamortizedandexpensedovertheperiod2008-2010.Fromthetotalvalueofthebonusprogrammefor2007,USd2.5millionrelatestoshares. share options thenumberofshareoptionsgrantedduringthefinancialyear2007is1,087,362ofwhich5,829areforfeited.eachshareoptiongivestheemployeetherighttoacquireonetormshareofanominalvalueofdKK5.Itispresumedthatanequivalenttotalofshareoptionswillbeissuedin2008and2009.theshareoptionscanonlybesettledinshares.thecompany’sholdingoftreasurysharescovertheshareoptionpro-gramme.

theshareoptionsconsistof2elements:50%oftheshareoptionsaregrantedwithafixedexerciseprice(standardoptions).Fortheshareoptionsgrantedin2007,thepriceisdKK151.5pershare,(basedonthemarketpricewhentheAnnualreportfor2006waspublishedon5march2007)andforthefollowingyearsdKK162.5anddKK173.5respectivelyafteradjustmentfortheextraordinarydividendpaidoutinSeptember2007.

50%oftheshareoptionsaregrantedwithanexercisepricethatisdeter-minedultimatelywiththepublicationoftorm’sAnnualreportafterathreeyearperiod,i.e.forthegrantfor2007,inmarch2010.theexercisepriceisdeterminedbytherelativedevelopmentintorm’ssharepriceinrelationtoadefinedpeergroup(peergroupoptions).Ifthetormsharedevelopsrelative-lybetterthanthepeergroup,theshareoptionswillhaveavalue. Allshareoptionscanbeexercisedafterthreeyearsfromgrantandshouldbeatthelatestexercisedthreeyearslater,howeverobservingtherulesaboutinsidertrading.Forthe2007grant,shareoptionscanbeexercisedafterthepublicationoftheAnnualreportfor2009,inmarch2010,andshallbeexercisedbymarch2013atthelatest.theshareoptionswillbeinaccordancewithdanishlawandconditionsincludecontinuedemploymentinthecompanyuntiltheshareoptionshavevest-ed.In2007,anexpenseofUSd2.0millionregardingshareoptionshavebeenrecognizedintheincomestatement.

themarketvalueoftheshareoptionsgrantedin2007isbasedontheblack-ScholesandmontecarlomodelsandcalculatedatUSd10.9mil-lionasperthegrantday. thekeyassumptionsforthecalculationofthemarketvaluebasedontheblack-Scholesandmontecarlomodelsare:

• thesharepriceatthemeasurementdateisestimatedatdKK202.25persharebasedonthesharepriceatomXthenordicexchangeasper9August2007.

• theexerciseprice(beforeadjustmentforextraordinarydividends)isdKK179persharecorrespondingtothequotedsharepriceasof5march2007.

• theexercisepricewillbeadjustedforextraordinarytormdividends.• theexpecteddividendrateisestimatedat3%oftheequityper

annum.• thevolatilityonthetormshareisestimatedbasedonthecompany’s

historcalvolatilityandwasestimatedat36%andforthepeergroupat22%.

• theriskfreeinterestratebaseduponexpiryoftheoptionsis4.46%.• theoptionsareonaverageheldforaperiodof4.1year.• thecorrelationratebetweenpeergroupandtormis92.5%,based

onthecorrelationontheyearlyreturnforthehistoricalsharepricesduringthelasttenyears.

82

83

.

noTe 4, continued

changesinoutstandingshareoptionsareasfollows: numberof shareoptions 2007

share option programme - 2007 to 2009 management granted 328,349exercised 0Forfeited/expired 0notexercisedat31december2007 328,349

other employees granted 759,013transferredtoresignedemployees -41,614exercised 0Forfeited/expired -5,829notexercisedat31december2007 711,570 resigned employees granted 0tranferredfromotheremployees 41,614exercised 0Forfeited/expired 0notexercisedat31december2007 41,614 Total number of not exercised at 31 December 2007 1,081,533 Hereof:Shareoptionswithafixedexerciseprice 479,585Shareoptionswithanexercisepricebasedonpeergroup 601,948 Total number of share options that can be exercised at 31 December 2007 0

USdmillion

noTe 5 2007 2006

remuneration to the auditorsappointed at the annual general meeting Deloitte Auditfees 0.6 0.8Auditrelatedfees 0.2 0.0taxfees 0.0 0.1Feesforotherservices 0.1 0.0Total fees 0.9 0.9

noTes

84

USdmillion

noTe 6 2007 2006

oTHer invesTmenTscost:balanceat1January 64.5 64.5Additions 0.1 0.0disposals -60.9 0.0balanceat31december 3.7 64.5 value adjustment: balanceat1January 579.9 296.5exchangerateadjustment 2.4 42.2Valueadjustmentfortheyear 68.3 241.2disposals -643.3 0.0balanceat31december 7.3 579.9 carrying amount at 31 December 11.0 644.4 Hereoflisted 7.8 641.7Hereofunlisted 3.2 2.7 USdmillion

noTe 7 other intangible goodwill assets total inTangible asseTs cost: balanceat1January2007 0.0 0.0 0.0exchangerateadjustment 0.0 0.0 0.0Additions 0.0 0.0 0.0Additionsthroughbusinesscombination 87.6 13.4 101.0disposals 0.0 0.0 0.0transferredto/fromotheritems 0.0 0.0 0.0balanceat31december2007 87.6 13.4 101.0 Depreciation and impairment losses: balanceat1January2007 0.0 0.0 0.0exchangerateadjustment 0.0 0.0 0.0reversalofimpairmentlosses 0.0 0.0 0.0depreciationandimpairmentlossesfortheyear 0.0 5.9 5.9balanceat31december2007 0.0 5.9 5.9

carrying amount at 31 December 2007 87.6 7.5 95.1

theadditionofotherintangibleassetscompriseapoolcollaborationcontract,aseafarerdatabaseandnon-competeagreementswiththeformer omImanagement.AlltheseassetswereacquiredintheomIacquisition.thepoolcollaborationcontractwasfullyamortizedin 2007whenthecollaborationceased.theseafarerdatabasehasanestimatedlifeof15years,whereasthenon-compete agreementsareamortizedovertheirtermendingin2008.

85

USdmillion

noTe 7, continued impairmenT TesTing of gooDWill goodwillwithacarryingamountofUSd87.6millionwasacquiredinconnectionwiththeacquisitionofomIin2007andhasbeenallocatedtothetankerdivision.duringthefinancialyear,thecompanyassessedtherecoverableamountofthetankerdivisionanddeterminedthatthetankerdivisionandtheallocatedgoodwillwasnotimpaired.therecoverableamountofthetankerdivisionwasdeterminedbasedonavalueinusecalculationwhichusesfive-yearcashflowprojectionsbasedonfinanci-albudgetsapprovedbytheboardofdirectorsandadiscountrateof9.0%perannum.thediscountrateisbasedonariskfreeinterestrateof5.4%.managementbelievesthatanyreasonablypossiblechangeinthekeyassumptionsonwhichtherecoverableamountisbasedwouldnotcausetheaggregatecarryingamounttoexceedtheaggregaterecoverableamountofthetankerdivision.thekeyassumptionsusedinthevalueatusecalculationareasfollows:-thecashflowsarebasedonknowntonnageinthebudgetperiodonly.Additionsorsalesoftonnagearenotfactoredinasthetimingandeffectofsuchtransactionsarehighlyuncertain.However,additionswillonlybemadeifmanagementexpectstoachieveareturninexcessofthediscountrateappliedintheimpairmenttestandsaleswouldimprovethecashflows.

-theproducttankervesselshaveanexpectedusefullifeofatleast20years.giventhecurrentageprofileofthetankerfleet,theremaininglifeisatleast 15years.-Freightrateestimatesarebasedontheextensiveexperienceandknowledgeofthemarketembeddedinthetankerdivision.-operatingexpensesandadministrativeexpensesareexpectedtoincreaseby3%yearonyear.managementbelievesthesekeyassumptionstobereasonablyachievable.

USdmillion

noTe 8 Vesselsand prepay- otherplant Landand capitalized menton andoperating buildings dry-docking vessels equipment total Tangible fixeD asseTs cost: balanceat1January2006 1.3 1,230.0 97.4 6.1 1,334.8exchangerateadjustment 0.0 0.0 0.0 0.0 0.0Additions 0.0 93.3 166.3 2.7 262.3disposals -0.8 -119.6 0.0 -0.5 -120.9transferredto/fromotheritems 0.0 80.4 -80.4 0.0 0.0transferredtonon-currentassetsheldforsale 0.0 0.0 0.0 0.0 0.0balanceat31december2006 0.5 1,284.1 183.3 8.3 1,476.2 Depreciation and impairment losses: balanceat1January2006 0.4 163.6 0.0 3.8 167.8exchangerateadjustment 0.0 0.0 0.0 0.0 0.0disposals -0.3 -73.6 0.0 -0.3 -74.2reversalofimpairmentlosses 0.0 0.0 0.0 0.0 0.0depreciationfortheyear 0.0 57.7 0.0 1.2 58.9balanceat31december2006 0.1 147.7 0.0 4.7 152.5 carrying amount at 31 December 2006 0.4 1,136.4 183.3 3.6 1,323.7 Hereoffinanceleases 0.0 0.0 0.0 0.0 0.0 Hereoffinancialexpensesincludedincost 0.0 1.2 0.8 0.0 2.0

noTes

86

USdmillion

noTe 8, continued Vesselsand prepay- otherplant Landand capitalized menton andoperating buildings dry-docking vessels equipment total cost: balanceat1January2007 0.5 1,284.1 183.3 8.3 1,476.2exchangerateadjustment 0.0 0.0 0.0 0.0 0.0Additions 1.7 38.4 247.7 2.7 290.5Additionsthroughbusinesscombination 2.2 1,018.7 7.4 3.8 1,032.1disposals 0.0 -5.8 0.0 -0.5 -6.3transferredto/fromotheritems 0.0 166.9 -166.9 0.0 0.0transferredtonon-currentassetsheldforsale 0.0 0.0 0.0 0.0 0.0balanceat31december2007 4.4 2,502.3 271.5 14.3 2,792.5 Depreciation and impairment losses: balanceat1January2007 0.1 147.7 0.0 4.7 152.5exchangerateadjustment 0.0 0.0 0.0 0.0 0.0disposals 0.0 -5.8 0.0 -0.3 -6.1reversalofimpairmentlosses 0.0 0.0 0.0 0.0 0.0depreciationfortheyear 0.1 90.4 0.0 2.2 92.7balanceat31december2007 0.2 232.3 0.0 6.6 239.1 carrying amount at 31 December 2007 4.2 2,270.0 271.5 7.7 2,553.4 Hereoffinanceleases 0.0 0.0 0.0 0.0 0.0 Hereoffinancialexpensesincludedincost 0.0 1.8 0.9 0.0 2.7

At1october2006,thevalueoflandandbuildingsassessedfordanishtaxpurposesamountedtoUSd0.8million(carryingamountat31december2007USd0.4million)comparedwithUSd0.6millionat1october2005. Includedinthecarryingamountforvesselsandcapitalizeddry-dockingarecapitalizeddry-dockingcostsintheamountofUSd27.1million(2006:USd9.4million).Forinformationonassetsusedascollateralsecurity,pleaserefertonote16.InallmaterialaspectsthedepreciationsunderotherplantandoperatingequipmentofUSd2.2millionrelatetoadministration(2006:USd1.2million).

USdmillion

noTe 9

financial iTems 2007 2006

financial income Interestincomefromcashandcashequivalents 17.7 4.1gainonotherinvestments(available-for-sale) 643.3 0.0dividends*) 1.3 26.4Fairvalueadjustmentsonderivativefinancialinstruments 0.0 1.7exchangerateadjustmentsincludingnetgainsfromforwardexchangeratecontracts 15.1 7.3 677.4 39.5financial expenses Interestexpenseonmortgageandbankdebt 70.6 40.2Fairvalueadjustmentsonderivativefinancialinstruments 5.4 0.0otherinterestexpenses 3.0 1.1Hereofincludedinthecostoftangiblefixedassets -0.8 -0.8 78.2 40.5

Total financial items 599.2 -1.0

*)IncludesdividendonthenordensharesofUSd0.0millionin2007(2006:USd25.5million).

87

USdmillion

noTe 10 2007 2006

freigHT receivables, eTc. Analysisasat31decemberoffreightreceivablesetc.: freigHT receivables, eTc. neitherpastduenorimpaired 53.4 22.7due<180days 30.1 24.3due>180days 6.8 2.7Total freight receivables, etc. 90.3 49.7 Asat31december2007,freightreceivablesetc.includereceivablesatavalueofUSd1.5million(2006:USd1.5million), thatisindividuallydeterminedtobeimpairedtoavalueofUSd0.6million(2006:USd0.6million). movementsintheprovisionforimpairmentoffreightreceivablesetc.duringtheyearareasfollows: provision for impairmenT of freigHT receivables, eTc. balanceat1January 0.9 0.8provisionsfortheyear 0.0 0.2provisionsreversedduringtheyear 0.0 0.0provisionsutilizedduringtheyear 0.0 -0.1balance at 31 December 0.9 0.9 provisionforimpairmentoffreightreceivables,etc.hasbeenrecognizedintheincomestatementunder administrativeexpenses.theprovisionisbasedonanindividualassessmentofeachindividual receivable.

USdmillion

noTe 11 2007 2006

Tax expenses currenttaxfortheyear -15.8 -4.7Adjustmentsrelatedtopreviousyears -3.8 6.3Adjustmentofdeferredtax 7.1 -8.2Tax expenses -12.5 -6.6

reconciliaTion of THe effecTive corporaTion Tax raTe for THe year corporationtaxrateindenmark 25.0% 28.0%differencesintaxrates,foreignsubsidiaries -0.7% -3.0%Adjustmentoftaxrelatedtopreviousyears 0.5% -2.6%changeindeferredtaxduetoreductionofdanishcorporationtaxfrom28%to25% -0.8% -effectfromthetonnagetaxscheme -22.4% -19.7%effectivecorporatetaxrate 1.6% 2.7%

thecompanyparticipatesinthetonnagetaxschemeindenmark.participationinthetonnagetaxschemeisbindinguntil31december2010.

Underthedanishtonnagetaxscheme,theincomeandexpensesfromshippingactivitiesarenotsubjecttodirecttaxation.Insteadthetaxableincomeiscalcu-latedfrom:·thenettonnageofthevesselsusedtogeneratetheincomefromshippingactivities ·Arateapplicabletothespecificnettonnageofthevessel,basedonaslidingscale ·thenumberofdaysthevesselsareusedduringtheyear. thecompanyexpectstoparticipateinthetonnagetaxschemeafterthebindingperiodandataminimumtomaintainitscurrentinvestingandactivitylevel. paymentofdividendstotheshareholdersofA/SdampskibsselskabettormhasnotaxconsequencesforA/Sdampskibsselskabettorm.

USdmillion

noTe 11, continued 2007 2006

DeferreD Tax balanceat1January 62.8 54.6reductionofdanishcorporationtaxfrom28%to25% -6.7 -deferredtaxfortheyear -0.5 8.2balance at 31 December 55.6 62.8 essentiallyalldeferredtaxrelatestovesselsincludedinthetransitionaccountunderthedanishtonnagetaxscheme.

noTe 12 2007 2006 2007 2006 number number nominal nominal ofshares ofshares value value million million dKKmillion dKKmillion common sHares balanceat1January 36.4 36.4 364.0 364.0Sharesplit 36.4 - - -balance at 31 December 72.8 36.4 364.0 364.0

thecommonsharesconsistof72.8millionsharesatdenominationdKK5pershare.nosharescarryspecialrights.Allissuedsharesarefullypaid. Inmay2007,thedenominationofthecompany’sshareswaschangedfromdKK10persharetodKK5pershare.thenominalvalueofthecompany’scommonsharesremainedunchangeddKK364.0million,whereasthenumberofshareswerechangedfrom36.4millionsharesofdKK10eachto72.8millionsharesofdKK5each.Inmay2004,thecompanyincreasedthesharecapitalfromnominallydKK182.0milliontonominallydKK364.0millionthroughtheissueof18.2millionbonussharesofdKK10each.thebonusshareswereallottedtothecompany’sexistingshareholdersattheratioof1:1.beyondthis,nochangeshavebeenmadetothesharecapitalwithinthelastfiveyears. 2007 2006 2007 2006 2007 2006 number number nominal nominal %of %of ofshares ofshares value value share share (1,000) (1,000) dKKmillion dKKmillion capital capital

Treasury sHares*) balanceat1January 3,556.4 3,117.0 17.8 15.6 4.9 4.3purchase 0.0 455.6 0.0 2.3 0.0 0.6Sale 0.0 0.0 0.0 0.0 0.0 0.0Shareoptionsexercised 0.0 -16.2 0.0 -0.1 0.0 0.0balance at 31 December 3,556.4 3,556.4 17.8 17.8 4.9 4.9 *)thefiguresinthetableaboveandthedescriptionbelowareadjustedtoreflectthesharesplitinmay2007. At31december2007,thecompany’sholdingoftreasurysharesrepresented3,556,364shares(2006:3,556,364shares)atdenominationdKK5pershare,withatotalnominalvalueofUSd3.5million(2006:USd3.1million)andamarketvalueofUSd124.9million(2006:USd116.8million).theretainedsharesequatesto4.9%(2006:4.9%)ofthecompany’scommonshares. totalconsiderationinrespectofthepurchaseoftreasuryshareswasUSd0.0million(2006:USd10.4million),andforthesaleofsharesitwasUSd0.0million(2006:USd0.0million).Asthedisposaloftreasurysharesin2006wascarriedoutinconnectionwiththeexerciseofshareoptions,theconsiderationwasbasedonexercisepricesintheshareoptionprogramme.theholdingoftreasurysharesisheldasahedgeofthecompany’sshareoptionprogramme.

88

noTes

89

USdmillion

noTe 13 2007 2006 DeferreD income prepaidcharterhire 3.8 0.0other 4.2 1.1 8.0 1.1

USdmillion

noTe 14 2007 2006

morTgage DebT anD bank loans toberepaidasfollows: Fallingduewithinoneyear 768.8 55.9Fallingduebetweenoneandtwoyears 139.1 55.9Fallingduebetweentwoandthreeyears 69.1 68.5Fallingduebetweenthreeandfouryears 112.6 53.5Fallingduebetweenfourandfiveyears 107.7 53.5Fallingdueafterfiveyears 456.1 407.6 1,653.4 694.9 thepresentedamountstoberepaidareadjustedbydirectlyrelatedcostsarisingfromtheissuingoftheloansbyUSd3.2million(2006:USd2.9million).whichareamortizedoverthetermoftheloans.

USdmillion 2007 2006 2007 2006 Fixed/ effective effective Fair Fair maturity floating interest interest value value loan USd 2008 Floating 4.6% 6.2% 700.0 5.1USd 2009 Floating 4.6% 5.8% 70.0 15.0USd 2011 Floating - 6.2% 0.0 8.1USd 2011 Fixed 4.4% 4.4% 92.5 63.6USd 2012 Floating 5.2% - 16.7 0.0USd 2012 Fixed 4.4% - 32.1 0.0USd 2014 Floating 5.1% 5.2% 328.9 399.2USd 2015 Floating 5.0% 5.9% 190.3 206.8USd 2016 Floating 4.7% - 226.0 0.0Weighted average effective interest rate 4.7% 5.4% Fairvalue 1,656.5 697.8 thecompanyhasanearlysettlementoptiontorepaytheloans.partoftheloanswithfloatinginterestratehavebeenswappedtofixedinterestrate.pleaserefertonote20forfurtherinformationoninterestrateswaps. certainoftorm’sloanagreementscontainminimumrequirementstotheliquidityandsolvencyoftormandotherrestrictions,whichmaylimittorm’sabilityto:·engageinmergersoracquisitions.·changethemanagementoftorm’svessels.

Asof31december2007,tormcomplywiththeseminimumrequirementsandrestrictivecovenants.basedontorm’sexpectedfuturecashflow,investmentprogrammes,etc.tormexpectstocomplywiththerequirementsandcovenantsuntilthematurityoftheloanagreements.

pleaserefertothesection’managingriskandexposure’andnote21forfurtherinformationonfinancialrisks.

USdmillion

noTe 15 2007 2006

oTHer liabiliTies partnersandcommercialmanagements 1.0 1.8Accruedoperatingexpenses 6.3 6.3Accruedinterest 11.0 3.8Wagesandsocialexpenses 13.5 5.2derivativefinancialinstruments 4.9 6.2payablestojointventures 21.4 0.0miscellaneous,includingitemsrelatedtoshippingactivities 2.0 2.7 60.1 26.0

USdmillion

noTe 16 2007 2006

collaTeral securiTy collateral security for mortgage debt and bank loans: Vessels 956.5 682.9 956.5 682.9

thetotalcarryingamountforvesselsthathavebeenprovidedassecurityamountstoUSd1,033millionat31december2007(2006:USd744million). USdmillion

noTe 17 2007 2006

guaranTee anD conTingenT liabiliTies guaranteeliabilities 0.0 0.0 theguaranteeliabilityforthegroupislessthanUSd0.1millionandrelatestoguaranteeliabilitiestodanishShipowners’Association.

USdmillion

noTe 18 2007 2006 conTracTual liabiliTies - as lessee (operating leases) charter hire for vessels on time charter (incl. vessels not delivered): Fallingduewithinoneyear 177.6 129.4Fallingduebetweenoneandtwoyears 181.8 128.0Fallingduebetweentwoandthreeyears 147.9 115.4Fallingduebetweenthreeandfouryears 131.6 103.6Fallingduebetweenfourandfiveyears 120.0 99.4Fallingdueafterfiveyears 397.8 306.1 1,156.7 881.9Averageperioduntilredelivery(year) 4.1 4.9 Leaseshavebeenenteredintowithamutuallyirrevocableleaseperiodofuptoeightyears.certainleasesincludeanoptiontorenewforoneortwoadditionalyearsatatimeforuptothreeyearsand/orapurchaseoption.exerciseofthepurchaseoptionontheindividualvesselisbasedonanindividualassessment.certainleasesincludeaprofitsharingelementimplyingthattheactualcharterhiremaybehigher.

noTes

90

91

USdmillion

noTe 18, continued 2007 2006 newbuilding installments and exercised purchase options (purchase obligations): Fallingduewithinoneyear 273.5 191.3Fallingduebetweenoneandtwoyears 249.7 161.3Fallingduebetweentwoandthreeyears 207.2 179.7Fallingduebetweenthreeandfouryears 37.8 62.9Fallingduebetweenfourandfiveyears 0.0 18.0Fallingdueafterfiveyears 0.0 0.0 768.2 613.2other operating leases: Fallingduewithinoneyear 3.7 2.1Fallingduebetweenoneandtwoyears 3.6 1.9Fallingduebetweentwoandthreeyears 3.3 1.7Fallingduebetweenthreeandfouryears 3.1 1.7Fallingduebetweenfourandfiveyears 2.7 1.8Fallingdueafterfiveyears 5.2 3.7 21.6 12.9 otheroperatingleasesprimarilyconsistofcontractsregardingofficespacesandapartmentsaswellasIt-relatedcontracts. duringtheyear,charterhireexpenseshavebeenrecognizedintheincomestatementatUSd160.2million(2006:USd106.3million)ofwhichUSd4.2million(2006:USd7.1million)relatetoprofitsharingelements.otheroperatingleaseexpenseshavebeenrecognizedintheincomestatementbyUSd3.9million(2006:USd2.5million). conTracTual liabiliTies - as lessor (operating leases) charter hire income for vessels on time charter and bareboat charter (incl. vessels not delivered): Fallingduewithinoneyear 370.1 145.0Fallingduebetweenoneandtwoyears 151.2 41.0Fallingduebetweentwoandthreeyears 39.1 23.6Fallingduebetweenthreeandfouryears 13.7 6.1Fallingduebetweenfourandfiveyears 9.3 0.0Fallingdueafterfiveyears 8.6 0.0 592.0 215.7Averageperioduntilredelivery(year) 1.3 1.1

certainleasesincludeaprofitsharingelementimplyingthattheactualcharterhireincomemaybelower.

charterhireincomeforvesselsontimecharterandbareboatcharterisrecognizedunderrevenue.

neWbuilDing conTracTs Asat31december2007,tormhadcontracted21newbuildings(2006:17newbuildings)tobedeliveredduring2008to2011.Forall21vesselsthetotaloutstandingcontractualcommitmentamountedtoUSd745millionasat31december2007.Inadditiontormcalledanoptionin2007toacquireonepanamaxbulkcarrierontimecharterbuiltin2004,whichwillbedeliveredinthefirstquarterof2008.thecontractualliabilityrelatingtothisvesselamountedtoUSd23millionasat31december2007.

USdmillion

noTe 19

acQuireD Time cHarTer conTracTs thecompanyhasunderabusinesscombinationacquiredsometimechartercontractswhichhavebeenmeasuredatfairvalueandrecognizedasaliabilityasoftheacquisitiondate.thisliabilityisamortizedoverthelifeoftheunderlyingtimechartercontract,andisrecognizedasincomeunderrevenue.

thetablebelowshowstheamortization: USdmillion 2007 2006

amorTiZaTion of acQuireD Time cHarTer conTracTs Amortizationwithinoneyear 20.2 0.0Amortizationbetweenoneandtwoyears 12.2 0.0Amortizationbetweentwoandthreeyears 3.7 0.0Amortizationbetweenthreeandfouryears 0.1 0.0Amortizationbetweenfourandfiveyears 0.0 0.0Amortizationafterfiveyears 0.0 0.0 36.2 0.0 duringtheyear,amortizationofacquiredtimechartercontractshavebeenrecognizedasanincomebyUSd13,7million.

noTe 20

DerivaTive financial insTrumenTs thetablebelowshowsthefairvalueofthederivativefinancialinstruments: fair value Fairvalue at 31 Dec. at31dec. 2007 2006 Hedge accounting cash flows: Interestrateswaps -0.6 3.0bunkerhedge 3.3 -3.3ForwardFreightAgreements 6.0 5.9non hedge accounting: Forwardexchangeratecontracts 1.7 1.0Forwardrateagreement -0.2 0.0Interestrateswaps -2.0 3.5currencyoptions -0.3 0.4Forwardtobuyshares -0.3 0.0bunkerhedge -1.4 -1.5ForwardFreightAgreements 2.0 -2.3rightstoshareofgainonpurchaseoptionsonvessels 44.6 0.0Acquiredliabilitiesrelatedtooptionsonvessels -12.2 0.0 40.6 6.7

noTes

92

93

USdmillion

noTe 20, continued thetablebelowshowsrealizedamountsandfairvalueadjustmentsregardingderivativefinancialinstrumentsrecognizedintheincomestatementandequityin2007:

Incomestatement portexpenses, Freightand equity bunkersand bunker Financial Hedging revenue commissions derivatives items reserves

bunkerhedge - 0.9 0.0 - 6.6ForwardFreightAgreements 8.8 - 2.9 - 0.1Forwardexchangeratecontracts - - - 2.9 -Forwardrateagreement - - - -0.1 -Interestrateswaps - - - -0.7 -3.6currencyoptions - - - 0.1 -Forwardtobuyshares - - - -0.3 -Total 2007 8.8 0.9 2.9 1.9 3.1 pleaserefertothesection’managingriskandexposure’andnote21forfurtherinformationoncommercialandfinancialrisks. theinterestrateswapswithafairvalueofUSd-0.6million(2006:USd3.0million)aredesignatedashedgeaccountingtohedgeapartoftorm’sinterestpaymentsduringtheperiod2008to2009.thebunkerhedgecontractswithafairvalueofUSd3.3million(2006:USd-3.3million)aredesignatedashedgeaccountingtohedgeapartoftorm’sbunkerexpensesduringtheperiod2008to2009.theForwardFreightAgreementswithafairvalueofUSd6.0million(2006:USd5.9million)aredesignatedashedgeaccountingtohedgeapartoftorm’srevenueduringtheperiod2008to2009.thegainsorlossesonthesecontractswillberecognizedintheincomestatementwhenrealizedtogetherwiththehedgeditems.

USdmillion

noTe 21 financial anD commercial risks excHange raTe risk Allthingsbeingequal,achangeintheUSdexchangerateof1%inrelationtodKKwouldresultinachangeinprofitbeforetaxandequityasfollows: sensiTiviTy To cHanges in THe usD/Dkk excHange raTe 2007 2006

changesatanincreaseintheUSdexchangerateof1%inrelationtodKK:

changesinprofitbeforetax 0.8 0.7changesinequity 0.1 6.4 Atyear-end2006,tormhadforwardhedgingcontractsofUSd12millionagainstdKKinrespectofoperatingcostsfor2007.In2007,tormenteredintoexchangeratecontractsforthesaleofUSd451millionagainstdKKandsoldUSd25millionspotinordertocoverthedKKcashrequirementsforoperatingcostsanddivi-dendsin2007.Assuch,in2007spotandtermexchangecontractsforatotalofUSd488millionwereunwoundatanaverageexchangerateof5.57asagainsttheaverageexchangeratefortheyearofUSdagainstdKKof5.45.Furthermore,tormsoldUSd55millionwithvaluein2008atanexchangerateof5.24againstdKK.

In2007,tormenteredintospotcontractsforthepurchaseofUSd703millionagainstdKKinordertohedgethedKKproceedsfromthesaleofthenordensharesatanaverageexchangerateof5.51.In2007,withsettlementin2008,tormhadenteredintoanagreementtopurchaseput-optionsintheamountofUSd15millionagainstdKK.Withregardtotheput-options,tormcansellUSdtothecounterpartatanaverageexchangerateof5.02tothedKK.Additionalin2007,withsettlementin2008,tormhadenteredintoanagreementtosellacall-optionintheamountofUSd40millionagainstdKK.Withregardtothecall-option,tormisobligedtosellUSdtothecounterpartatanaverageexchangerateof5.50tothedKK.

tormapplieshedgeaccountingtocertainforwardforeignexchangecontracts.Hedgeaccountingisappliedsystematicallyandisbaseduponspecificpolicies.

noTes

94

USdmillion

noTe 21, continued inTeresT raTe risk tormhassignificantcashrequirementsassociatedwithlong-termdebtandtimecharters.thesepaymentsareinfluencedbychangesininterestrates.Inordertomanageinterestraterisks,financialinstrumentsareenteredtoswapthevariableinterestrateonaportionoftheborrowingsforfixedratedebt. Allthingsbeingequal,achangeintheinterestratelevelof1%pointontheunhedgedvariableinterestdebtwillresultinachangeintheinterestrateexpensesasfollows: sensiTiviTy To cHanges in inTeresT raTes 2007 2006

changesatincreaseintheinterestratelevelof1%-point:Increaseininterestrateexpenses 8.0 1.8 torm’sinterestbearingUSddebtdecreasedfromyear-end2006toyear-end2007byUSd959milliontoUSd1,657million.oftorm’smortgagedebtinUSdwithvariableinterestratesUSd761millionwillbeduewithina12monthsperiodandUSd314millionafter1–5years.theaverageeffectiveinterestrateisbetween4.0%and5.7%.

pleaserefertonote14forfurtherdetailsregardingourinterestbearingdebt. theportionoftheinterestswapshedgingtheUSdmortgagedebtwithmaturitywithin1yearwasUSd37millionandUSd146millionafter1-5years.theaverageeffectiveinterestrateswerebetween3.2%and4.7%.themarketvalueoftorm’sinterestrateswapswasUSd-2.6millionatyear-end2007(2006:USd6.5million).

Atyear-end,tormhadcovered50%ofitstotal2008interestcostsatanaveragerateof5.0%includingmargin.Fortheperiod2009-2010,thecoverageis22%.thefixedinterestdebthasanaverageperiodof2.5yearsremaining,expiringbetween2008and2013.

tormapplieshedgeaccountingtointerestrateswaps.Hedgeaccountingisappliedsystematicallyandisbaseduponspecificpolicies.

movemenT in bunker prices In2007,tormcovered23%ofitsbunkerrequirementsusingderivatives.Asat31december2007,tormhadhedgedthepricefor0.5%ofitsbunkerrequire-mentsfor2008,andthemarketvalueofthesecontractsasatyear-endwasUSd1.9million(2006:-4.8million).

tormapplieshedgeaccountingtocertainbunkerhedgecontracts,primarilycontractscoveringperiodsof12monthsorlonger.Hedgeaccountingisappliedsystematicallyandisbaseduponspecificpolicies. Allthingsbeingequal,apricechangeof1%pertonofbunkeroilwouldleadtothefollowingchangeinexpenditurebasedontheexpectedbunkerconsumption:

sensiTiviTy To cHanges in THe bunker prices 2007 2006changesatanincreaseinthebunkerpricesof1%perton: changesinbunkerexpenses 1.4 1.0 movemenT in freigHT raTes tormapplieshedgeaccountingtocertainFFAcontracts,primarilycontractscoveringperiodsof12monthsorlonger.Hedgeaccountingisappliedsystematicallyandisbaseduponspecificpolicies.

pleaserefertopage12intheannualreportforinformationonmovementinfreightrates.

95

USdmillion

noTe 22 2007 2006

financial insTrumenTs

caTegories of financial asseTs anD liabiliTies as DefineD in ias 39:

loans and receivablesFreightreceivables,etc. 90.3 49.7otherreceivables 14.9 8.5cashandcashequivalents 118.0 33.0Total loans and receivables 223.2 91.2 available-for-sale financial assets otherinvestments 11.0 644.4Total available-for-sale financial assets 11.0 644.4 Derivative financial instruments (assets) otherfinancialassets(heldfortrading) 44.6 0.0otherreceivables(heldfortrading) 3.8 3.1otherreceivables(hedgeaccounting) 9.3 9.4Total derivative financial instruments (assets) 57.7 12.5 financial liabilities measured at amortized cost mortgagedebtandbankloans 1,653.5 695.0tradepayables 44.3 18.8otherliabilities 41.7 15.0Total financial liabilities measured at amortized cost 1,739.5 728.8 Derivative financial instruments (liabilities) Acquiredliabilitiesrelatedtooptionsonvessels(heldfortrading) 12.2 0.0otherliabilities(heldfortrading) 4.3 2.0otherliabilities(hedgeaccounting) 0.6 3.8Total derivative financial instruments (liabilities) 17.1 5.8

thefairvalueofthefinancialassetsandliabilitiesaboveequalsthecarryingamountexceptformortgagedebtandbankloansforwhichthefairvaluecanbefoundinnote14.

USdmillion

noTe 23

relaTeD parTy TransacTions

themembersofthecompany’sboardofdirectorsandSeniormanagement,nearrelativestothesepersonsandcompanieswherethesepersonshavecontrolorexercisesignificantinfluenceareconsideredasrelatedparties. mr.nielseriknielsen,chairmanoftheboardofdirectors,isapracticingpartnerinthelawfirmbech-bruun.bech-bruunhasrenderedlegalassistanceduringthefinancialyearasoneofanumberoflawfirms.thefirm’sfeeofUSd0.3million(2006:USd0.3million)isbasedupontheamountoftimespentbythefirm. mr.Stafanos-nikoZouvelos,memberoftheboardofdirectors,isgeneralmanagerofbeltestShippingcompanyLimited.tormhasduringtheyearpaidUSd6.8million(2006:USd8.5million)toanentityownedbybeltestShippingcompanyLimitedunderatimecharteragreementinvolvingoneproducttankervessel. therehavebeennoothertransactionswithsuchpartiesduringthefinancialyear. managementremunerationisdisclosedinnote4. Itisconsideredthatnosinglepersonhascontroloverthegrouportheparentcompany.

noTes

96

noTe 24

enTiTies in THe group parent company: A/Sdampskibsselskabettorm denmark investments in subsidiaries*): tormSingapore(pte)Ltd. 100% Singapore republicanShippingLLc 100% marshallIslandsAmazonShippingLLc 100% marshallIslands rhoneShippingLLc 100% marshallIslandsnechesShippingLLc 100% marshallIslands rosettaShippingLLc 100% marshallIslandstormnorgeAS 100% norway SanJacintoShippingLLc 100% marshallIslandstormShipping(germany)g.m.b.H. 100% germany SaoneShippingLLc 100% marshallIslandsLongrange1A/S 100% denmark tevereShippingLLc 100% marshallIslandsmediumrangeA/S 100% denmark thamesShippingLLc 100% marshallIslandsLr1managementK/S 100% denmark trinityShippingLLc 100% marshallIslandsmrmanagementK/S 100% denmark WabashShippingLLc 100% marshallIslandscharenteShippingLLc 100% marshallIslands ottawaShippingLLc 100% marshallIslandsFoxShippingLLc 100% marshallIslands tamarShippingLLc 100% marshallIslandsgaronneShippingLLc 100% marshallIslands rubyShippingLLc 100% marshallIslandsHorizonShippingLLc 100% marshallIslands gangesShippingLLc 100% marshallIslandsKansasShippingLLc 100% marshallIslands LibratankersShippingLLc 100% marshallIslandsLoireShippingLLc 100% marshallIslands tiberShippingLLc 100% marshallIslandsmadisonShippingLLc 100% marshallIslands omImarineServiceLtd. 100% delawaremoselleShippingLLc 100% marshallIslands omIHoldingLtd. 100% mauritiusohioShippingLLc 100% marshallIslands omcILtd. 100% IndiaplatteShippingLLc 100% marshallIslands omIcrewingServiceLtd. 100% bermudainvestments in legal entities included as jointly controlled entities*): Longrange2A/S 50% denmark Ugland&tormShipowningApS 50% denmarkLr2managementK/S 50% denmark omIcorporation 50% marshallIslandsttShipowningK/S 50% denmark brazosShippingLLc 50% marshallIslandstorghatten&tormShipowningApS 50% denmark HorizonShippingLLc 50% marshallIslandsUtShipowningK/S 50% denmark tormSHIppIng(pHILS.),Inc. 25% philippines

Furthermore,tormisparticipatinginanumberofjointventuresprimarilythemrpool,theLr1poolandtheLr2poolwhicharenotlegalentities.theinvestmentsinthesejointventuresareincludedasinvestmentsinjointlycontrolledoperations.

thefollowingrepresentstheincomeandexpensesreflectedintheconsolidatedincomestatementandthesummarizedbalancesheetdatathatisreflectedintheconsolidatedbalancesheetfortheyearended31december,2006and2007inaccordancewithIFrSassociatedwithjointlycontrolledentities:

USdmillion 2007 2006

totalincome 57.5 16.4totalexpenses -54.2 -11.8net profit for the year 3.3 4.6

non-currentassets 114.1 17.0currentassets 33.6 3.9

non-currentliabilities 0.0 15.8currentliabilities 5.4 0.2

*)companieswithactivityinthefinancialyear.

97

USdmillion

noTe 25 2007 2006

earnings per sHare netprofitfortheyear(USdmillion) 791.7 234.5 million shares Averagenumberofshares 72.8 72.8Averagenumberoftreasuryshares -3.6 -3.4Averagenumberofsharesoutstanding 69.2 69.4dilutiveeffectofoutstandingshareoptionsandrestrictedshares 0.2 0.0Averagenumberofsharesoutstandingincl.dilutiveeffectofshareoptions 69.4 69.4 earningspershare(USd) 11.4 3.4 dilutedearningspershare(USd) 11.4 3.4

thecomparativefiguresarerestatedtoreflectthechangeinthedenominationofthecompany’ssharesfromdKK10persharetodKK5inmay2007.

noTe 26 2007 2006

appropriaTion of neT profiT for THe year incl. proposeD DiviDenD

proposedappropriationofnetprofitfortheyearintheparentcompany,A/Sdampskibsselskabettorm: proposeddividend 64.5 73.9retainedprofit 709.0 114.5netprofitfortheyear 773.5 188.4 totalequityintheparentcompany,A/Sdampskibsselskabettorm: commonshares 61.1 61.1treasuryshares -18.1 -18.1revaluationreserves 7.3 579.8retainedprofit 874.1 513.1proposeddividend 64.5 73.9Hedgingreserves 8.7 5.6translationreserves 5.9 6.0totalequity 1,003.5 1,221.4 proposeddividendpershare(USd)*) 0.9 1.0dividendpersharepaid(USd)*) 6.1 1.9

thedifferencebetweenproposeddividendpershareinUSdin2006anddividendpersharepaidinUSdin2007relatestotheextraordinarydividendpaidin2007andthechangeintheUSd/dKKexchangerateasthedividendispaidindKK.

*)thecomparativefiguresareadjustedtoreflectthesharesplitinmay2007.

USdmillion

noTe 27 2007 2006

casH floWs reversal of other non-cash movements: Amortizationofacquiredassetsandliabilities -13.7 0.0Adjustmentsonderivativefinancialinstruments -1.9 3.9exchangerateadjustments 12.8 1.7otheradjustments 1.4 0.4Total reversal of other non-cash movements -1.4 6.0

noTes

98

USdmillion

noTe 28

acQuisiTion of companies thecompanyandteekaythroughtheirjointlyownedentityomahaInc.acquiredomIcorporation(omI)on8June2007.themajorityofomI’sassetsandliabi-litieswasdividedequallybetweenthecompanyandteekayon1August2007.thepartiesintendtodividetheremainingassetsandliabilitiesequallyaswell.

theacquistionof50%ofomIwasrecognizedasaninvestmentinajontventurebyproportionateconsolidation,whiletheassetsandliabilitiesacquiredfromomIon1August2007wasrecognizedusingthepurchasemethod.cashwasonlypaidinthe50%acquisitionofomIon8June2007.

thedetailsoftheomIacquisitionareasfollows(torm’sshare):

Acquired Acquired voting Acquisition Acquisition ownership instruments pricenameandprimaryactivity date % % USdmillion

omIcorporation,Stamford,connecticut,USA-Ashipping companyintheenergytransportationsector 8June2007 50 50 910.9 thecompanydidnotparticipateinmergersoracquisitionsin2006.

thefollowingtablesummarisesthepreliminaryfairvaluesoftheassetsacquiredandtheliabilitiesassumedbythecompanyon1August2007:

FairvalueUSdmillion bookvalue adjustment Fairvalue Intangibleassets 7.5 5.9 13.4tangiblefixedassets 581.2 382.6 963.8otherfinancialassets 0.0 44.8 44.8Freightreceivables,etc. 30.0 0.0 30.0otherreceivables 3.0 0.0 3.0prepayments 9.7 0.0 9.7cashandcashequivalents 41.9 0.0 41.9mortgagedebtandbankloans -261.4 -14.7 -276.1Acquiredliabilitiesrelatedtooptionsonvessels 0.0 -12.2 -12.2otherfinancialliabilities 0.0 -2.1 -2.1tradepayables -13.2 0.0 -13.2Acquiredtimechartercontracts 0.0 -46.0 -46.0otherliabilities -58.1 0.0 -58.1deferredincome -4.5 0.0 -4.5net assets acquired 336.1 358.3 694.4goodwill 87.7consideration 782.1

99

USdmillion

noTe 28, continued

thetablebelowsummarisesreconcilesthe8June2007cashpaymentfortheinvestmentinomIandthevalueoftheacquiredassetsandliabilitieson1August2007. USdmillion Fairvalue

cost of acquisition from joint venture 1 august 2007 782.1 tangiblefixedassetsstillownedbyjointventure 68.3movementsintheperiodfrom8Juneto31July2007: Shareofnetresult -4.6marketablesecuritiessold 28.5otherrepayment 36.6 consideration paid in cash for 50% of omi 8 June 2007 910.9cashandcashequivalents,acquired8June2007 -100.7net cash outflow 810.2 theacquisitionbalancesheetasper8June2007hasbeenpreparedonaprovisionallybasis.thefinalreviewofassetsandliabilitiestransferredtotormandteekayandpaymenthereofhasnotyetbeencompleted.

ofthenetprofitfortheyearforthegroupofUSd792millionareUSd20millionattributabletoincomegeneratedbyacquiredassetsandassumedliabilities.IfomIhadbeenacquiredwitheffectof1January2007,therevenuewouldhavebeenUSd929millionandnetprofitfortheyearUSd834million.Itisthemanage-ment’sassessmentthattheseproformafiguresreflectthelevelofearningsforthegroupaftertheacquisitionandthatthefiguresconstituteabasisforcom-parisoninsubsequentfinancialyears.

thepreparationtheproformafiguresforrevenueandprofitfortheyearisbasedonactualearningsfortheperiodandthefairvaluesusedintheacquisitionbalancesheetandtheeffecthereofonearnings,includingdepreciationontangiblefixedassetsandintangibleassets.

100

a

noTes

100

USdmillion

noTe 29

Time cHarTer conTracTs At31december2007,tormhadenteredintothefollowingtimechartercontractsaslessee:

theabove-mentionedtimechartercontractsareincludedinthecontractualliabilitiesinnote18.thenoteabovedoesnotincludetwobareboatcontractswhichexpiremedio2010fixedatanaveragedailyfreightrateofUSd14,004whichisincludedinnote18.

Year/ numberof AveragedailyVesseltype operatingdays freightrates USd 2008: Lr2 373 24,551Lr1 3,930 20,775mr 270 16,864Sr 720 22,500panamax 3,270 17,3762009: Lr2 360 24,500Lr1 3,735 20,177mr 1,740 15,859Sr 690 22,500panamax 2,775 15,8572010: Lr2 360 24,500Lr1 2,475 20,395mr 2,160 15,908Sr 30 22,500panamax 3,150 15,4942011: Lr2 360 24,500Lr1 1,830 20,880mr 2,160 15,908panamax 3,240 15,4872012: Lr1 1,125 20,510mr 2,160 15,908panamax 3,960 15,810

Year/ numberof AveragedailyVesseltype operatingdays freightrates USd

2013: Lr1 240 20,656mr 2,160 15,908panamax 4,155 16,1702014: mr 1,905 15,796panamax 3,720 15,9732015: mr 1,575 15,746panamax 3,210 16,0042016: mr 360 15,900panamax 2,205 16,3392017: mr 315 15,900panamax 1,800 16,4762018: panamax 1,530 16,7672019: panamax 720 17,4502020: panamax 630 17,450

101

a

101

USdmillion

noTe 30

purcHase opTions on vessels At31december2007,tormhadthefollowingpurchaseoptionsonvessels: exerciseyear/ number Averageage AverageoptionVesseltype ofvessels ofvessels, exerciseprice years at31dec.2007 USdmillion 2008: panamax 2.0 3.0 22.6Kamsarmax*) 2.0 0.0 50.02009: Lr1**) 0.5 3.0 15.5panamax 1.0 3.0 23.02011: Lr1**) 0.5 5.0 14.2panamax 1.0 3.0 28.72012: mr***) 1.0 3.0 38.4panamax 1.0 3.0 26.52013: panamax 3.0 4.3 32.62014: mr 1.0 5.0 32.1panamax 1.0 5.0 45.02015: panamax 1.0 5.0 35.42016: panamax 1.0 5.0 39.82017: panamax 2.0 5.0 39.42018: panamax 1.0 7.0 39.8 At31december2006,tormhadpurchaseoptionson14vessels. *) eachoptioncanbeexercisedifthemarketpriceforthevesselexceedstheoptionpricebyminimumUSd2million.thereisa50/50profitsharingonthedifferencebetweenthemarket

priceandtheoptionprice.

**) tormholds50%ofthepurchaseoptiononthevessel,andthereforethestatedoptionpriceisfor50%ofthevessel.

***)thestatedoptionpriceistheminimumoptionpriceforthevessel.

boarD of DirecTors

niels erik nielsenborn:14-03-48 tormshares:5,360 re-election:2011n.e.nielsenbecamechairmanoftorminApril2002andhasbeenaboardmembersinceSeptember2000.n.e.nielsenisapartnerofthelawfirmbech-bruunandholdsaLawdegreefromtheUniversityofcopenhagen.n.e.nielsenismemberoftorm’sremunerationcommitteeandaboardmemberofthefollowingcompanies:

• AmagerbankenAktieselskab.• AmbuA/S.• charleschristensenA/S.• cimberAirHoldingA/S.• danica-elektronikA/S.• gammelrandSkærvefabrikA/S.• gpVIndustriA/S.• IntermailA/S.• mezzaninKapitalA/S.• peleHoldingA/S.• p.o.A.ejendommeA/S.• SatairA/S.• ScF-technologiesA/S.• WeibelScientificA/S.withsubsidiarycompanies.

special competencies:• generalmanagementaschairmanofotherlistedcompanieswith globalactivities.• Specialistincompanylaw.

cHrisTian frigasTborn: 23-11-51 tormshares:5,704 re-election:2011AmemberoftheboardsinceSeptember2000.mr.FrigastbecamedeputychairmaninApril2002.HeisthemanagingdirectorofAxcelA/Sandholdsanm.Sc.(econ)fromtheUniversityofcopenhagen.christianFrigastismemberoftorm’sAuditcommitteeandremunerationcommitteeandaboardmemberofthefollowingcompanies:

• AxcelmanagementA/S.• IddesignA/S.• noanoaApS.• royalScandinaviaA/S.

special competencies:• generalmanagementaschairman.• boardmemberofprimarilynon-listeddanishandinternational companies.• Financing.• mergesandacquisitions.peTer abilDgaarDborn:21-04-65 tormshares:4,968 re-election:2011AmemberoftheboardsinceApril2007,representingtheemployeesoftormontheboard.mr.AbildgaardisemployedbytormasgeneralmanagerforQualityandVettingandhasbeenwiththecompanysince1987.

special competencies:• memberofIntertanko’sVettingcommittee.• currentlystudyingforanmbAinShippingandLogistics.

lennarT arriasborn:17-07-48 tormshares:680 re-election:2011AmemberoftheboardsinceApril2003,representingtheemployeesoftormontheboard.mr.Arriasisemployedbytormasacaptainandhasbeenwiththecompanysince1992.

special competencies:• Worldwideseaservicessince1965withexperiencefromgeneral, refrigerated,containerandprojectcargoesaswellasdrybulkand tankercargo.

margreTHe bligaarDborn:18-05-68 tormshares:4,570 re-election:2011AmemberoftheboardsinceApril2007,representingtheemploy-eesoftormontheboard.ms.bligaardisemployedbytormasHrconsultant,Hrprojectsandhasbeenwiththecompanysince1989.

special competencies:• 16years’experiencewithtankercharteringandoperations.• Strategywork.• currentlystudyingforanmbAatHenleymanagementcollege.

gabriel panayoTiDesborn:14-01-55 tormshares:48,864 re-election:2011AmemberoftheboardsinceSeptember2000.mr.panayotideshasbeenengagedintheownershipandoperationofshipssince1978.HehasabachelorsdegreefromthepireausUniversityofeconomics.mr.panayotidesismemberoftorm‘sAuditcommitteeandaboardmem-berofthefollowingcompanies:

• excelmaritime(listedonnYSe).• bureauVeritasandLloydsregisterofShippingclassificationsociety greekcommittee.

special competencies:• boardexperiencefromotherlistedcompanies.• Shipmanagment–shipowning.

sTefanos-niko Zouvelosborn:20-07-55 tormshares:100 re-election:2010AmemberoftheboardsinceApril2006.generalmanagerofbeltestShippingcompanyLtd.mr.Zouvelosholdsanm.Sc.inQuantitativeeconomicsfromtheUniversityofStirling,Scotland.

special competencies:• Financialmanagementinshipping.• over20yearsinshipping.

102

senior managemenT managemenT

klaus kJærulff born:30-01-52presidentandchiefexecutiveofficersinceSeptember2000.KlausKjærulffhasworkedfortormsince1976.From1997to2000,heheadedthecompany’stankerandbulkdivisionsasexecutiveVicepresident,andfrom1981to1997hewasVicepresidentinchargeofthetankerdivision.Heisaboardmemberofthefollowingcompanies:

•danishShipowners’Association.•AssuranceforeningenSKULd.•thetradecouncilofdenmark.•norskVeritasråd.•Iccdenmark.

mikael skovborn:03-07-63chiefoperatingofficersincemarch2007.mikaelSkovhasworkedfortormsince1984.From2000to2007,heservedasexecutiveVicepresidentfortorm’stankerdivision.Heisaboardmemberofthefollowingcompanies:

•SyddanskUniversitet–InstituteformaritimeresearchandInnovation.

esben poulssonpresidentandceo,tormSingapore

anDers engHolmexecutiveVicepresident,tankerdivision

claus usen JensenexecutiveVicepresident,technicaldivision

Jan mecHlenburgexecutiveVicepresident,ShipowningandSale&purchasedivision

Torben bagerSeniorVicepresident,Finance

søren cHrisTensenSeniorVicepresident,bulkdivision

Jesper HolmarkSeniorVicepresident,Accounts

kim rasmussenSeniorVicepresident,bulkdivision

cHrisTian riberSeniorVicepresident,Hr

104

managemenT’s anD auDiTors’ reporT

sTaTemenT by THe boarD of DirecTors anD managemenT on THe annual reporT

theboardofdirectorsandmanagementhavepresentedandadoptedtheAnnualreportofA/Sdampskibsselskabettormforthefinancialyearended31december2007.

theAnnualreporthasbeenpreparedinaccordancewithInternationalFinancialreportingStandardsasadoptedbytheeUandadditionaldanishdisclosurerequirementsforlistedcompanies.

WeconsidertheaccountingpoliciesappliedtobeappropriatefortheAnnualreporttogiveatrueandfairviewofthegroup’sandtheparent’sfinancialpositionat31december2007andoftheirfinancialperform-anceandtheircashflowsforthefinancialyearthenended.

WerecommendthattheAnnualreportisadoptedattheAnnualgeneralmeeting.

copenhagen,14march2008

boarD of DirecTors: managemenT:

nielseriknielsen, KlausKjærulffchairman ceo

christianFrigast mikaelSkovdeputychairman coo

peterAbildgaard

LennartArrias

margrethebligaard

gabrielpanayotides

Stefanos-nikoZouvelos

THe inDepenDenT auDiTors’ reporT To THe sHareHolDers of a/s DampskibsselskabeT Torm

WehaveauditedtheannualreportofA/Sdampskibsselskabettormforthefinancialyearended31december2007.theannualreportcomprisesthestatementbymanagementontheannualreport,themanagement’sreview,theincomestatement,thebalancesheet,thestatementofchangesinequity,thecashflowstatementandthenotestothefinancialstatements,includingtheaccountingpolicies.theannualreporthasbeenpreparedinaccordancewithInternationalFinancialreportingStandardsasadoptedbytheeUandadditionaldanishdisclosurerequirementsforlistedcompanies.

managemenT’s responsibiliTy for THe annual reporTmanagementisresponsibleforthepreparationandfairpresentationofanannualreportinaccordancewithInternationalFinancialreportingStandardsasadoptedbytheeUandadditionaldanishdisclosurerequirementsforlistedcompanies.thisresponsibilityincludes:design-ing,implementingandmaintaininginternalcontrolrelevanttotheprepa-rationandfairpresentationofanannualreportthatisfreefrommaterialmisstatement,whetherduetofraudorerror,selectingandapplyingappropriateaccountingpolicies,andmakingaccountingestimatesthatarereasonableinthecircumstances.

auDiTor’s responsibiliTy anD basis of opinionourresponsibilityistoexpressanopiniononthisannualreportbasedonouraudit.WeconductedourauditinaccordancewithdanishandInternationalStandardsonAuditing.thosestandardsrequirethatwecomplywithethicalrequirementsandplanandperformtheaudittoobtainreasonableassurancewhethertheannualreportisfreefrommaterialmisstatement.

Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresintheannualreport.theproceduresselecteddependontheauditor’sjudgement,includingtheassessmentoftherisksofmaterialmisstatementoftheannualreport,whetherduetofraudorerror.Inmakingthoseriskassessments,theauditorconsidersinternalcontrolrelevanttotheentity’spreparationandfairpresentationofanannualreportinordertodesignauditproceduresthatareappro-priateinthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheentity’sinternalcontrol.Anauditalsoincludesevaluatingtheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesmadebymanagement,aswellasevaluatingtheoverallpresentationoftheannualreport.

Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourauditopinion.

ouraudithasnotresultedinanyqualification.

opinionInouropinion,theannualreportgivesatrueandfairviewofthegroup’sandtheparent’sfinancialpositionat31december2007andoftheirfinan-cialperformanceandtheircashflowsfortheyearthenendedinaccord-ancewithInternationalFinancialreportingStandardsasadoptedbytheeUandadditionaldanishdisclosurerequirementsforlistedcompanies.

copenhagen,14march2008

DeloiTTeStatsautoriseretrevisionsaktieselskab

erikHolstJørgensen KirstenAaskovmikkelsenStateAuthorizedpublicAccountant StateAuthorizedpublicAccountant

106

P A R E N T C O M P A N y

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litie

s

mortgag

ede

btand

ban

kloan

s

9,11

750,62

539

,342

trad

epa

yable

28,948

17

,351

currentta

xlia

bilities

13,986

4,27

0otherliab

ilitie

s

10

32,306

24

,068

Tota

l cur

rent

liab

ilitie

s

82

5,86

585

,031

To

tal l

iabi

litie

s

1,575

,390

59

6,59

5

ToTa

l eQ

uiT

y a

nD

lia

bil

iTie

s

2

,578

,846

1,817

,948

Accoun

tingpo

licies

1

collateralsecurity

11

gua

rantee

and

con

tinge

ntliab

ilitie

s

12con

tractualliab

ilitie

s

13derivativefin

ancialinstrumen

ts

14

Fina

ncialintrumen

ts

15

related

partytran

sactions

16cashflo

ws

17

th

eaccompa

nyingno

tesarean

integrated

parto

fthe

sefina

ncialstatemen

ts.

ba

lan

ce s

Hee

Ta

T 31

Dec

emb

er

USd

million

gains

/lossesrecogn

ized

directlyinequ

ity

revalua-

transla

com

mon

treasury

retained

proposed

tion

Hedging

tion

shares

shares*)

profit

dividend

sreserves

reserves

reserves

total

eQu

iTy

bal

ance

at 1

Jan

uary

200

661.1

-7.7

400.0

132.4

296.4

3.2

6.0

891.4

chan

ges

in e

quity

200

6:

exch

ange

ratead

justmen

tarising

ontran

slation

ofe

ntitiesusing

am

easu

remen

tcurrenc

y

differen

tfromUSd

0.0

0.0

reversalofd

eferredga

in/losson

cashflo

w

hed

gesatbeg

inning

ofyea

r

-3.2

-3.2

deferredga

in/losson

cashflo

whed

ges

atyea

r-en

d

5.6

5.6

reversaloffairvaluead

justmen

tonavailable

fo

rsaleinvestmen

tsatthe

beg

inning

ofthe

yea

r

-296.4

-296.4

Fairvalue

adjus

tmen

tonavailableforsale

investm

entsatyea

r-en

d

579.8

579.8

netgains

/lossesrecogn

ized

directlyinequ

ity

0.0

0.0

0.0

0.0

283.4

2.4

0.0

285.8

profitfo

rtheyear

188.4

188.4

Tota

l rec

ogni

zed

inco

me/

expe

nses

for

the

year

0.0

0.0

188.4

0.0

283.4

2.4

0.0

474.2

purch

aseoftrea

surysha

res,cost

-10.4

-10.4

dividen

dspaid

-140.1

-140.1

dividen

dspaidon

trea

surysha

res

5.9

5.9

exch

ange

ratead

justmen

tondivide

ndspa

id

-7.7

7.7

0.0

exerciseofsha

reoptions

0.4

0.4

propo

seddivide

ndsforthefin

ancialyea

r

-73.9

73.9

0.0

Tota

l cha

nges

in e

quity

200

60.0

-10.4

113.1

-58.5

283.4

2.4

0.0

330.0

eq

uity

at 3

1 D

ecem

ber

2006

61.1

-18.1

513.1

73.9

579.8

5.6

6.0

1,221.4

chan

ges

in e

quity

200

7:ex

chan

geratead

justmen

tarising

ontran

slation

ofe

ntitiesusing

am

easu

remen

tcurrenc

y

differen

tfromUSd

-0.1

-0.1

reversalofd

eferredga

in/losson

cashflo

w

hed

gesatth

ebe

ginn

ingofth

eyear

-5.6

-5.6

deferredga

in/losson

cashflo

whed

ges

atyea

r-en

d

8.7

8.7

Fairvalue

adjus

tmen

tonavailable

fo

rsaleinvestmen

ts

70.8

70.8

tran

sferto

profitoflosson

saleofavaila

ble

fo

rsaleinvestmen

ts

-643.3

-643.3

netgains

/lossesrecogn

ized

directlyinequ

ity

0.0

0.0

0.0

0.0

-572.5

3.1

-0.1

-569.4

profitfo

rtheyear

773.5

773.5

Tota

l rec

ogni

zed

inco

me/

expe

nses

for

the

year

0.0

0.0

773.5

0.0

-572.5

3.1

-0.1

204.1

extrao

rdinarydivide

ndpaid

-369.3

-369.3

extrao

rdinarydivide

ndpaidon

trea

surysha

res

18.0

18.0

dividen

dspaid

-76.4

-76.4

dividen

dspaidon

trea

surysha

res

3.7

3.7

exch

ange

ratead

justmen

tondivide

ndspa

id

-2.5

2.5

0.0

Share-ba

sedcompe

nsation

2.0

2.0

propo

seddivide

ndsforthefin

ancialyea

r

-64.5

64.5

0.0

Tota

l cha

nges

in e

quity

200

70.0

0.0

360.9

-9.4

-572.5

3.1

-0.1

-217.9

eq

uity

at 3

1 D

ecem

ber

2007

61.1

-18.1

874.1

64.5

7.3

8.7

5.9

1,003.5

*)pleaserefertonote11

inth

econs

olidated

fina

ncialstatemen

tsfo

rfurthe

rinform

ationon

trea

surysha

res.

theaccompa

nyingno

tesarean

integrated

parto

fthe

sefina

ncialstatemen

ts.

sTa

Tem

enT

of

cHa

ng

es in

eQ

uiT

y

110

THe parenT company

USd

’000

2007

2006

note

cas

H f

loW

fr

om

op

era

Tin

g a

cTiv

iTie

s

ope

ratin

gprofit

157,36

518

0,47

7

Adjustmen

ts:

reversalofp

rofitfrom

saleofvessels

-19,33

7-34,77

2reversalofd

epreciationan

dim

pairmen

tlosses

48,445

44

,996

reversalofo

thernon

-cashmovem

ents

17

13

,033

5,88

9

dividen

dsreceived

8,07

828

,501

Interestreceivedan

dexch

ange

ratega

ins

26,341

9,52

1Interestpaid

-57,40

2-26,72

9Incometaxespa

id

-9,439

-3,085

cha

ngeininventories,accou

ntsreceivab

lesan

dpa

yables

-13,66

6-20,42

0

net

cas

h in

flow

/(ou

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ope

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g ac

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153,41

818

4,37

8

cas

H f

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fr

om

inve

sTi

ng

acT

iviT

ies

Investmen

tintang

iblefixedassets

-207

,999

-223

,351

Investmen

tineq

uityinterestsan

dsecu

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s

-977

,244

-1,187

Saleofe

quityinterestsan

dsecu

ritie

s

79

1,84

8

0Lo

ansan

drepa

ymen

tofloa

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sub

sidiariesan

dassociated

com

panies

-266

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29

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38,194

63

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n

et c

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inflo

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outf

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) fro

m in

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ing

activ

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-621

,731

-131

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ca

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ro

m f

ina

nci

ng

acT

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borrowing,m

ortgag

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btand

otherfina

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1

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3,09

6rep

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mption,m

ortgag

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bt

-840

,610

-162

,673

dividen

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-423

,950

-134

,140

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ase/disp

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0-10,41

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cash

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activ

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53

2,41

8-174

,127

n

et c

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inflo

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) fro

m o

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ting,

in

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and

finan

cing

act

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64,105

-120

,923

ca

sh a

nd c

ash

equi

vale

nts,

at 1

Jan

uary

24,795

14

5,71

8

cash

and

cas

h eq

uiva

lent

s, a

t 31

Dec

embe

r

88

,900

24

,795

ofw

hich

usedascollateral

00

88

,900

24

,795

theaccompa

nyingno

tesarean

integrated

parto

fthe

sefina

ncialstatemen

ts.

cas

H f

loW

sTa

Tem

enT

su

pp

lem

enTa

ry

acc

ou

nTi

ng

po

lici

es f

or

TH

e p

ar

enT

com

pa

ny

Inadd

ition

toth

eaccoun

tingpo

liciesforthegroup

aspresen

tedinnote1inth

econs

olidated

fina

ncialstatemen

ts,the

paren

tcom

pany,

A/Sdam

pskibs

selska

bett

orm,app

liesthefollo

wingsu

pplemen

taryaccou

ntingpo

licies.

fore

ign

curr

enci

esex

chan

geratega

insorlossesonintercom

panybalan

ceswith

sub

sidiaries,which

arecon

side

redapa

rtofthe

investmen

tintheen

tity,

arerecogn

ized

directlyinequ

ity.

inve

stm

ents

in s

ubsi

diar

ies

and

join

tly c

ontr

olle

d en

titie

sInvestmen

tinsu

bsidiaries,associatedcompa

niesand

jointlycontrolle

den

titiesarerecogn

ized

and

mea

suredinth

efin

ancialstate-

men

tsofthe

paren

tcom

panyatcosta

ndclassified

asno

n-cu

rren

tassets.dividen

dsarerecog

nizedun

derfin

ancialincome.

USd

million

not

e 2

2007

2006

sTa

ff c

os

Ts

To

tal s

taff

cos

ts

Staffcostsinclud

edinope

ratin

gexpe

nses

15,2

13.6

Staffcostsinclud

edinadm

inistrativeexpe

nses

27.3

20.4

total

42.5

34.0

sta

ff c

osts

com

pris

e th

e fo

llow

ing

Wag

esand

salaries

36.8

31.0

Share-ba

sedcompe

nsation

2.3

0.0

pen

sion

costs

3.2

2.8

othersocialsecuritycosts

0.2

0.2

total

42.5

34.0

empl

oyee

info

rmat

ion

theaverag

enu

mbe

rofstaffinth

eparen

tcom

panyinth

efin

ancialyea

rwas364(2006:327).

man

agem

entrem

unerationisdisclosed

innote4inth

econs

olidated

fina

ncialstatemen

ts.

USd

million

not

e 3

2007

2006

rem

uner

atio

n to

the

audi

tors

app

oint

ed a

t the

ann

ual g

ener

al m

eetin

g

D

eloi

tte

Au

ditfee

s

0.5

0.8

Auditrelated

fees

0.2

0.0

taxfees

0.0

0.1

Feesfo

rothe

rservices

0.1

0.0

Tota

l fee

s, D

eloi

tte

0,8

0.9

no

Tes

111

THe parenT company

USd

million

n

ote

4

Investment

Investment

injointly

total

other

in

controlled

invest-

invest-

subsidaries

activities

ments

ments

fin

an

cia

l a

ss

eTs

cost

:

balan

ceat1

Jan

uary2006

25

.7

0.0

25.7

64.5

Additio

ns

1.2

0.0

1.2

0.0

dispo

sals

-0.4

0.0

-0.4

0.0

balan

ceat3

1decem

ber2006

26.5

0.0

26.5

64.5

valu

e ad

just

men

t:

balan

ceat1

Jan

uary2006

0.0

0.0

0.0

296.5

exch

ange

ratead

justmen

t

0.0

0.0

0.0

42.2

Valuead

justmen

tforth

eyear

0.0

0.0

0.0

241.2

dispo

sals

0.0

0.0

0.0

0.0

balan

ceat3

1decem

ber2006

0.0

0.0

0.0

579.9

ca

rryi

ng a

mou

nt a

t 31

Dec

embe

r 20

06

26

.5

0.0

26.5

644.4

cost

:

balan

ceat1

Jan

uary2007

26

.5

0.0

26.5

64.5

Additio

ns

97

7.2

0.0

977.2

0.0

dispo

sals

-87.7

0.0

-87.7

-60.9

balan

ceat3

1decem

ber2007

916.0

0.0

26.5

3.6

va

lue

adju

stm

ent:

balan

ceat1

Jan

uary2007

0.0

0.0

0.0

579.9

exch

ange

ratead

justmen

t

0.0

0.0

0.0

2.4

Valuead

justmen

tforth

eyear

0.0

0.0

0.0

68.3

dispo

sals

0.0

0.0

0.0

-643

.3balan

ceat3

1decem

ber2007

0.0

0.0

0.0

7.3

carr

ying

am

ount

at 3

1 D

ecem

ber

2007

91

6.0

0.0

916.0

10.9

Hereo

flisted

7.8

Hereo

funlisted

3.1

Alisto

fcom

paniesinth

egroup

isfo

undinnote24

atp

age96

inth

ean

nualrep

ort.

no

Tes

USd

million

not

e 5

Ve

sselsan

d

otherplant

La

ndand

capitalized

prepa

ymen

tsan

dop

erating

build

ings

dry-do

cking

onvessels

equipm

ent

total

Tan

gib

le

fi

xeD

as

seT

s

co

st:

balan

ceat1

Jan

uary200

61.3

876.6

97.4

5.9

981.2

exch

ange

ratead

justmen

t0.0

0.0

0.0

0.0

0.0

Additio

ns

0.0

91.9

128.9

2.4

223.2

dispo

sals

-0.8

-78.2

0.0

-0.4

-79.4

tran

sferredto/fromotheritem

s0.0

79.7

-79.7

0.0

0.0

balan

ceat3

1decem

ber20

06

0.5

970.0

146.6

7.9

1,125.0

D

epre

ciat

ion

and

impa

irm

ent l

osse

s:

balan

ceat1

Jan

uary200

60.4

108.8

0.0

3.8

113.0

exch

ange

ratead

justmen

t0.0

0.0

0.0

0.0

0.0

Additio

ns

0.0

0.0

0.0

0.0

0.0

dispo

sals

-0.3

-50.7

0.0

-0.3

-51.3

reversalofimpa

irmen

tlosses

0.0

0.0

0.0

0.0

0.0

dep

reciationfortheyear

0.0

43.8

0.0

1.1

44.9

balan

ceat3

1decem

ber20

06

0.1

101.9

0.0

4.6

106.6

ca

rryi

ng a

mou

nt a

t 31

Dec

embe

r 20

06

0.4

868.1

146.6

3.3

1,018.4

Hereo

ffinan

cialexpen

sesinclud

edincost

0.0

1.1

0.8

0.0

1.9

cost

:

balan

ceat1

Jan

uary200

70.5

970.0

146.6

7.9

1,125.0

exch

ange

ratead

justmen

t0.0

0.0

0.0

0.0

0.0

Additio

ns

1.6

13.9

189.9

2.6

208.0

dispo

sals

0.0

-28.5

0.0

-0.5

-29.0

tran

sferredto/fromotheritem

s0.0

117.8

-117.8

0.0

0.0

balan

ceat3

1decem

ber20

07

2.1

1,073.2

218.7

10.0

1,304.0

D

epre

ciat

ion

and

impa

irm

ent l

osse

s:

balan

ceat1

Jan

uary200

70.1

101.9

0.0

4.6

106.6

exch

ange

ratead

justmen

t0.0

0.0

0.0

0.0

0.0

dispo

sals

0.0

-9.8

0.0

-0.3

-10.1

reversalofimpa

irmen

tlosses

0.0

0.0

0.0

0.0

0.0

dep

reciationfortheyear

0.0

47.1

0.0

1.4

48.5

balan

ceat3

1decem

ber20

07

0.1

139.2

0.0

5.7

145.0

c

arry

ing

amou

nt a

t 31

Dec

embe

r 20

07

2.0

934.0

218.7

4.3

1,159.0

Hereo

ffinan

celeases

0.0

0.0

0.0

0.0

0.0

Hereo

ffinan

cialexpen

sesinclud

edincost

0.0

1.7

0.7

0.0

2.4

At1octob

er200

6thevalueofland

and

buildings

inden

markassessed

fordan

ishtaxpu

rposesamou

nted

toUSd

0.8m

illion(carryingam

ountat3

1decem

ber20

07

USd

0.4m

illion)com

paredwith

USd

0.6m

illionat1octob

er200

5.

Includ

edinth

ecarrying

amou

ntfo

rvesselsan

dcapitalized

dry-docking

arecap

italized

dry-docking

costsinth

eam

ountofU

Sd15.3million(200

6:USd

7.2m

illion).

pleaserefertonote11

forinform

ationinrelationtoassetsus

edfo

rcolla

teralsecurity.

112

THe parenT company

USd

million

not

e 6

2007

2006

fin

an

cia

l iT

ems

fi

nanc

ial i

ncom

e

Interestincomefrom

cashan

dcash

equ

ivalen

ts

25.0

3.5

gainon

otherinvestmen

ts(availa

ble-for-sale)

643.3

0.0

dividen

ds*

1.3

26.4

dividen

dsfrom

sub

sidiaries

6.8

2.1

Fairvalue

adjus

tmen

tsonde

rivativefin

ancialinstrumen

ts

0.0

1.5

exch

ange

ratead

justmen

tsinclus

ivene

tgains

from

forw

ardexch

ange

ratecontracts

15

.3

7.5

69

1.7

41.0

fina

ncia

l exp

ense

s

Impa

irmen

tlosseson

sub

sidiaries,associatedcompa

niesand

jointlycontrolle

den

tities

0.0

0.2

Interestexpen

seonmortgag

ean

dba

nkdeb

t

56

.4

26.2

Fairvalue

adjus

tmen

tsonde

rivativefin

ancialinstrumen

ts

5.4

0.0

otherinterestexpen

ses

2.8

1.0

Hereo

finc

lude

dinth

ecostoftan

giblefixed

assets

-0.6

-0.7

64

.0

26.7

Tota

l fin

anci

al it

ems

627.7

14.3

*Inc

lude

sdivide

ndonthenorden

sha

resofUSd

0.0m

illionin200

7(200

6:USd

25.5million).

USd

million

not

e 7

2007

2006

frei

gH

T r

ecei

vab

les

, eTc

.

Analysisasat31decem

beroffreigh

treceivables,etc.:

fr

eig

HT

rec

eiva

ble

s, e

Tc.

neitherpastd

uenorim

paired

30

.4

22.1

due

<180days

23.8

20.2

due

>180days

4.8

2.7

totalF

reightreceivables,etc.

59.0

45.0

Asat3

1decem

ber2007,freightreceivables,etc.inc

lude

sreceivab

lesatavalue

ofU

Sd1.3m

illion(200

6:USd

1.4m

illion),

thatisindividu

allydetermined

tobeim

paired

toavalue

ofU

Sd0.5m

illion(200

6:USd

0.6m

illion).

movem

entsinth

eprovisionforim

pairmen

toffreightreceivablesetc.duringtheyearareasfollo

ws:

movem

entsinth

eprovisionforim

pairmen

toffreightreceivables,etc.duringtheyearareasfollo

ws:

USd

million

2007

2006

pr

ovi

sio

n f

or

imp

air

men

T o

f fr

eig

HT

rec

eiva

ble

s, e

Tc.

balan

ceat1

Jan

uary

0.8

0.8

provision

sfortheyear

0.0

0.0

provision

sreversed

duringtheyear

0.0

0.0

provision

sutiliseddu

ring

theyear

0.0

0.0

balan

ceat3

1decem

ber

0.8

0.8

provision

forim

pairmen

toffreightreceivables,etc.hasbee

nrecogn

ized

inth

eincomestatem

entu

nder

administrativeexpe

nses.the

provision

isbased

onan

individu

alassessm

ento

feachindividu

alreceivable.

no

Tes

USd

million

not

e 8

2007

2006

Tax

currentta

xfortheyear

-14.8

-4.5

Adjustmen

tsrelated

topreviou

syears

-3.8

6.3

Adjustmen

tofd

eferredtax

7.1

-8.2

taxexpe

nses

-11.5

-6.4

ef

fect

ive

corp

orat

e ta

x ra

te

1.5%

3.3%

thecom

panypartic

ipatesinth

etonn

agetaxsche

meinden

mark.partic

ipationinth

etonn

agetaxsche

meisbinding

until31

decem

ber20

10.

Und

erth

edan

ishtonn

agetaxsche

me,th

eincomean

dexpe

nsesfrom

shipp

ingactivitiesarenotsub

jectto

directtaxation.

Instea

dthetaxableincomeiscalcu

latedfrom

:

·the

netto

nnag

eofth

evesselsus

edto

gen

eratetheincomefrom

shipp

ingactivities

·Arateap

plicab

leto

thesp

ecificne

tton

nage

ofthe

vessel,ba

sedon

aslid

ingscale

·the

num

berofdaysthevesselsareus

edduringtheyear.

thecom

panyexpectsto

partic

ipateinth

etonn

agetaxsche

meafterthebind

ingpe

riod

and

ata

minim

umto

maintainits

currentinvestingan

dactivitylevel.

thedifferen

cebetwee

ntheeffectivecorporatetaxrate1.5%(200

6:3.3%)and

thecorporationtaxrate

inden

mark25

%(200

6:28%

)primarilyrelatesto

thetonn

agetaxsche

me.

paymen

tofd

ividen

dsto

thesh

areh

olde

rsofA

/Sdam

pskibs

selska

bett

ormhasnotaxablecons

eque

ncesfo

rA/Sdam

pskibs

selska

bett

orm.

20

07

2006

Def

err

eD T

ax

deferredtaxat1Jan

uary

62.8

54.6

red

uctio

nofdan

ishcorporationtaxfrom

28%

to25%

-6.7

0.0

deferredtaxfortheyear

-0.4

8.2

Def

erre

d ta

x at

31

Dec

embe

r

55.7

62.8

essentiallyallde

ferred

taxrelatestovesselsinclud

edinth

etran

sitio

naccoun

tund

erth

etonn

agetaxsche

me.

USd

million

not

e 9

2007

2006

mo

rTg

ag

e D

ebT

an

D b

an

k l

oa

ns

toberepa

idasfollo

ws:

Fa

lling

due

with

inone

yea

r

750.6

39.3

Falling

due

betwee

non

ean

dtw

oyears

121.0

39.4

Falling

due

betwee

ntw

oan

dthreeyears

51.1

51.9

Falling

due

betwee

nthreean

dfouryea

rs

94.5

36.9

Falling

due

betwee

nfourand

fiveyea

rs

89.6

36.9

Falling

due

afterfiveyea

rs

337.7

283.7

1,444.5

488.1

thepresen

tedam

ountstoberepa

idareadjus

tedbydirectlyrelatedcostsarised

from

theissu

ingofth

eloan

sbyUSd

2.8m

illion(200

6:USd

2.9m

illion).

which

areamortized

overtheterm

ofthe

loan

s.

113

THe parenT company

USd

million

n

ote

9, c

ontin

ued

2007

2006

20

07

2006

Fixed/

effective

effective

Fair

Fair

maturity

floating

interest

interest

value

value

lo

an

USd

20

08

Floa

ting

4.6%

6.2%

70

0.0

5.1

USd

20

09

Floa

ting

4.6%

5.8%

70.0

15.0

USd

20

11

Floa

ting

-6.2%

0.0

8.1

USd

20

11

Fixed

4.4%

4.4%

92.5

63.6

USd

20

12

Floa

ting

5.2%

-

16.7

0.0

USd

20

12

Fixed

4.4%

-

32.1

0.0

USd

20

14

Floa

ting

5.1%

5.2%

310

.0

399.2

USd

20

16

Floa

ting

4.7%

-

226

.0

0.0

Wei

ghte

d av

erag

e ef

fect

ive

inte

rest

rat

e

4.7%

5.1%

Fa

irvalue

1,44

7.3

491.0

th

eparen

tcom

panyhasanea

rlysettlemen

toptiontorep

ayth

eloan

s.

parto

fthe

loan

swith

floa

tinginterestrateha

vebee

nsw

appe

dtofixedinterestrate.

certainofthe

torm’sloan

agree

men

tscon

tainm

inim

umreq

uiremen

tsto

theliq

uidityand

solvenc

y

ofth

ecom

panyand

otherrestrictio

ns,w

hich

maylimitou

rab

ilityto

:•en

gage

inm

erge

rsoracqu

isition

s.•cha

ngetheman

agem

ento

fthe

com

pany’svessels.

Asof31decem

ber2

007thecom

panycom

plyw

iththeseminim

umre

quire

mentsand

restric

tivecovenants.basedonthecom

pany’sexpectedfuture

cashflow

,investm

entprogram

mes,etc.w

eexpectthattherequ

irementsand

covenantsiscom

pliedun

tilthematurityoftheloanagreements.

pleaserefertoth

esection’m

anag

ingriskand

exposure’and

note21

inth

econs

olidated

fina

ncialstatemen

tsfo

rfurthe

rinform

ationon

fina

ncialrisks.

USd

million

not

e 10

2007

2006

oTH

er l

iab

iliT

ies

partnersan

dcommercialm

anag

emen

ts

1.0

1.8

Accrue

dop

eratingexpe

nses

2.2

5.9

Accrue

ddry-do

ckingcosts

0.0

0.0

Accrue

dinterests

8.0

3.5

Wag

esand

socialexpen

ses

9.4

5.1

derivativefin

ancialinstrumen

ts

4.7

6.2

payab

lestojointven

tures

2.3

0.0

miscella

neou

s,includ

ingite

msrelatedtoshipp

ingactivities

4.7

1.6

32

.3

24.1

USd

million

not

e 11

2007

2006

coll

aTe

ra

l s

ecu

riT

y

co

llate

ral s

ecur

ity fo

r m

ortg

age

debt

and

ban

k lo

ans:

Ve

ssels

747

.3

476.0

74

7.3

476.0

thetotalcarryingam

ountfo

rvesselsthathavebe

enprovide

dassecurityamou

ntsUSd

784

million(200

6:USd

546

million).

USd

million

not

e 12

2007

2006

gu

ar

an

Tee

an

D c

on

Tin

gen

T li

ab

iliT

ies

gua

rantee

liab

ilitie

s

0.0

0.0

thegu

aran

teelia

bilityfortheparen

tcom

panyislessth

anUSd

0.1m

illionan

drelatestogua

rantee

liab

ilitie

stodan

ishSh

ipow

ners’A

ssociatio

n.

no

Tes

USd

million

not

e 13

2007

2006

con

Tra

cTu

al

lia

bil

iTie

s -

as

les

see

(ope

ratin

g le

ase)

char

ter

hire

for

vess

els

on ti

me

char

ter

(incl

. ves

sels

not

del

iver

ed):

Falling

due

with

inone

yea

r

151.4

151.7

Falling

due

betwee

non

ean

dtw

oyears

155.8

155.7

Falling

due

betwee

ntw

oan

dthreeyears

142.5

143.1

Falling

due

betwee

nthreean

dfouryea

rs

131.6

110.4

Falling

due

betwee

nfourand

fiveyea

rs

120.0

99.4

Falling

due

afterfiveyea

rs

397.8

306.1

1,099.1

966.4

Averag

epe

riod

untilrede

livery(yea

r)

4.3

5.0

Leaseshavebe

enentered

intowith

am

utua

llyinterm

inab

leleasepe

riod

ofu

pto8yea

rs.c

ertainleasesinclud

ean

optiontoren

ewfo

ron

eortw

oad

ditio

nalyea

rsat

atim

eforup

toth

reeyearsan

d/orapurch

aseop

tion.exerciseofth

epu

rcha

seoptionon

theindividu

alvesselisba

sedon

anindividu

alassessm

ent.certainleases

includ

eaprofitsh

aringelem

entimplying

thatth

eactualcha

rterhiremaybehigh

er.

n

ewbu

ildin

g in

stal

lmen

ts a

nd e

xerc

ised

pur

chas

e op

tions

(pur

chas

e ob

ligat

ions

):

Fa

lling

due

with

inone

yea

r

204.8

163.1

Falling

due

betwee

non

ean

dtw

oyears

134.1

143.1

Falling

due

betwee

ntw

oan

dthreeyears

135.2

93.6

Falling

due

betwee

nthreean

dfouryea

rs

37.8

18.0

Falling

due

betwee

nfourand

fiveyea

rs

0.0

18.0

Falling

due

afterfiveyea

rs

0.0

0.0

511.9

435.8

oth

er o

pera

ting

leas

es:

Falling

due

with

inone

yea

r

2.2

1.8

Falling

due

betwee

non

ean

dtw

oyears

2.3

1.9

Falling

due

betwee

ntw

oan

dthreeyears

2.1

1.8

Falling

due

betwee

nthreean

dfouryea

rs

2.0

1.7

Falling

due

betwee

nfourand

fiveyea

rs

2.0

1.8

Falling

due

afterfiveyea

rs

2.2

3.6

12.8

12.6

otherope

ratin

gleasesprimarilycon

sistofcon

tractsreg

arding

officesp

acesand

apa

rtmen

tsaswellasIt-related

con

tracts.

duringtheyearcha

rterhireexpe

nseshavebe

enrecog

nizedinth

eIncomeStatem

entb

yUSd

161

.2m

illion(200

6:USd

123

.9m

illion)ofw

hich

USd

4.2m

illion(200

6:

USd

7.1m

illion)reg

ards

profitsha

ring

elemen

ts.o

therope

ratin

gleaseexpe

nseshavebe

enrecog

nizedinth

eincomestatem

entb

yUSd

2.7m

illion(200

6:USd

2.2

million).

USd

million

2007

2006

con

Tra

cTu

al

lia

bil

iTie

s -

as

les

so

r (o

pera

ting

leas

e)

cha

rterhireincomeforvesselson

timech

arteran

dba

rebo

atcha

rter(inc

l.no

tdelivered

vessels):

Falling

due

with

inone

yea

r

213.9

101.3

Falling

due

betwee

non

ean

dtw

oyears

71.6

27.2

Falling

due

betwee

ntw

oan

dthreeyears

21.9

9.9

Falling

due

betwee

nthreean

dfouryea

rs

13.6

0.0

Falling

due

betwee

nfourand

fiveyea

rs

9.3

0.0

Falling

due

afterfiveyea

rs

8.6

0.0

338.9

138.4

Averag

epe

riod

untilrede

livery(yea

r)

1.2

1.0

cha

rterhireincomeforvesselson

timech

arteran

dba

rebo

atcha

rterisrecog

nizedun

derrevenu

e.

neW

bu

ilD

ing

co

nTr

acT

s

Asat3

1decem

ber20

07th

ecom

panyhad

con

tracted15

new

build

ings

(200

6:13ne

wbu

ildings

)tobe

delivered

during20

07to

201

1.Forall15

vesselsth

etotalout-

stan

ding

con

tractualcom

mitm

enta

mou

nted

toUSd

512

million.

114

THe parenT company

not

e 14

Der

iva

Tive

fin

an

cia

l in

sTr

um

enTs

thetablebe

lowsho

wsthefairvalue

ofthe

derivativefin

ancialin

strumen

ts:

Fairvalue

Fairvalue

USd

million

at31dec.2007

at31dec.2006

Hed

ge a

ccou

ntin

g

cash

flow

s:

Interestratesw

aps

-0.6

3.0

bun

kerhe

dge

3.3

-3.3

Forw

ardFreigh

tAgree

men

t

6.0

5.9

non

hed

ge a

ccou

ntin

g:

Fo

rwardexch

ange

ratecontracts

1.7

1.0

Interestratesw

aps

-2.0

3.3

currenc

yop

tions

-0.3

0.4

Forw

ardtobuysha

res

-0.3

0.0

bun

kerhe

dge

-1.4

-1.5

Forw

ardFreigh

tAgree

men

t

2.0

-2.3

8.4

6.5

thetablebe

lowsho

wsrealized

amou

ntsaswellasfairvalue

adjus

tmen

tsreg

arding

derivativefin

ancialinstrumen

tsrecog

nizedinth

eincomestatem

enta

ndequ

ityin2007:

In

comestatem

ent

portexpenses,

Freigh

tand

equity

bunkersand

bunkers

Financial

Hedging

USd

million

revenue

commissions

derivative

sitems

reserves

bun

kerhe

dge

-0.9

0.0

-6.6

Forw

ardFreigh

tAgree

men

t

8.8

-2.9

-0.1

Forw

ardratecon

tracts

--

-2.9

-Fo

rwardrateagree

men

t

-

--

0.1

-Interestratesw

aps

--

--0.7

-3.6

currenc

yop

tions

-

--

0.1

-Fo

rwardtobuysha

res

--

--0.3

-To

tal 2

007

8.8

0.9

2.9

2.1

3.1

pleaserefertoth

esection‘m

anag

ingriskand

exposure’and

note21inth

econs

olidated

fina

ncialstatemen

tsfo

rfurthe

rinform

ationon

fin

ancialrisks.

theinterestratesw

apswith

afa

irvalue

ofU

Sd-0.6million(2006:USd

3.0m

illion)aredesigna

tedashed

geaccou

ntingtohed

geapart

ofth

ecom

pany’sinterestpaymen

tsduringthepe

riod

2008to2009.

thebu

nkerhed

gecon

tractswith

afa

irvalue

ofU

Sd3.3m

illion(2006:USd

-3.3million)aredesigna

tedashed

geaccou

ntingtohed

gea

partofthe

com

pany’sbun

kerexpe

nsesduringthepe

riod

2008to2009.

theFo

rwardFreigh

tAgree

men

tswith

afa

irvalue

ofU

Sd6.0m

illion(2006:USd

5.9m

illion)aredesigna

tedashed

geaccou

ntingto

hedg

eapa

rtofthe

com

pany’sreven

ueduringthepe

riod

2008to2009.

thega

insorlossesonthesecontractswillberecogn

ized

inth

eincomestatem

entw

henrealized

toge

therwith

thehe

dged

item

s.

no

Tes

USd

million

not

e 15

20

07

2006

fin

an

cia

l in

sTr

um

enTs

caTe

go

rie

s o

f fi

na

nci

al

as

seT

s a

nD

lia

bil

iTie

s a

s D

efin

eD in

ias

39:

loan

s an

d re

ceiv

able

s

Lo

anstosub

sidiaries

162.4

22.9

Loan

stojointlycontrolle

den

tities

127.0

0.0

Freigh

treceivables,etc.

59.0

45.0

otherreceivables

20.5

8.1

cashan

dcash

equ

ivalen

ts

88.9

24.8

Tota

l loa

ns a

nd r

ecei

vabl

es

457.8

100.8

a

vaila

ble-

for-

sale

fina

ncia

l ass

ets

otherinvestmen

ts

10.9

644.4

Tota

l ava

ilabl

e-fo

r-sa

le fi

nanc

ial a

sset

s

10.9

644.4

Der

ivat

ive

finan

cial

inst

rum

ents

(ass

ets)

otherreceivables(h

eldfortrad

ing)

3.8

2.9

otherreceivables(h

edge

accou

nting)

9.3

9.4

Tota

l der

ivat

ive

finan

cial

inst

rum

ents

(ass

ets)

13.1

12.3

fina

ncia

l lia

bilit

ies

mea

sure

d at

am

ortis

ed c

ost

mortgag

ede

btand

ban

kloan

s

1,444.5

488.1

trad

epa

yables

28.9

17.4

otherliab

ilitie

s

18.2

13.2

Tota

l fin

anci

al li

abili

ties

mea

sure

d at

am

ortis

ed c

ost

1,491.6

518.7

Der

ivat

ive

finan

cial

inst

rum

ents

(lia

bilit

ies)

otherliab

ilitie

s(heldfortrad

ing)

4.1

2.0

otherliab

ilitie

s(hed

geaccou

nting)

0.6

3.8

Tota

l der

ivat

ive

finan

cial

inst

rum

ents

(lia

bilit

ies)

4.7

5.8

thefairvalue

ofthe

fina

ncialassetsan

dlia

bilitiesab

oveeq

ualsth

ecarrying

amou

ntexcep

tform

ortgag

ede

btand

ban

kloan

sforwhich

thefairvalue

can

befoun

dinnote9.

USd

million

not

e 16

2007

2006

rel

aTe

D p

ar

Ty T

ra

ns

acT

ion

s

Subsidiariesand

jointlycon

trolleden

titiesarecons

idered

asrelatedpa

rtiesinre

latio

ntoth

epa

rentcom

panyA/Sdam

pskibsselska

bet

torminadd

ition

toth

erelatedpa

rtiesdisclosedinnote23toth

econs

olidated

fina

ncialstatemen

ts.the

follo

wingtran

sactions

took

place

betweenA/Sdam

pskibsselska

bett

ormand

sub

sidiairiesand

jointlycon

trolledactivitiesduringtheyear:

Servicesprovide

dbyA/Sdam

pskibs

selska

bett

orm

23.3

11.2

AssetssoldbyA/Sdam

pskibs

selska

bett

orm

87.7

0.0

Servicesprovide

dbysub

sidiariesan

djointlycontrolle

dactivities

37.5

32.5

148.5

43.7

theserviceprovided

betwee

nthepa

rtiesarealld

irectlyrelatedtoth

egroup

’sshipp

ingactivities.

USd

million

not

e 17

2007

2006

cas

H f

loW

s

rev

ersa

l of o

ther

non

-cas

h m

ovem

ents

:Fa

irvalue

adjus

tmen

son

derivativefin

ancialinstrumen

ts

-1.9

3.9

exch

ange

ratead

justmen

ts

12.6

1.6

otheradjus

tmen

ts

2.3

0.4

totalreversalofo

thernon

-cashmovem

ents

13.0

5.9

115

glossary

20-F: AnnualreportfiledwiththeUSSecuritiesandexchangecommission(Sec)

Adr: Americandepositoryreceipt.proofofownershipof(theequivalent)ofoneshare.AdrsareusedbyforeigncompanieswishingtolistonAmericanstockexchanges.

AdS: AmericandepositaryShares.SharesregisteredwithSecandkeptincustodywithabankassecurityfortheAdrsissued.

Aframax: Avesselwithacargocarryingcapacityof80,000–100,000dwt.

Assetmanagement: Acquisitionandownershipofassets(ships),whichmaybedisposedofatanoptimaltimewithaviewtogeneratingaone-offprofit–asopposedtoprofitsderivedfromoperatingtheasset.

bareboat: Seeb/b.

b/b: bareboat.Aformofcharterarrangementwherebythechartererisresponsibleforallcostsandrisksinconnectionwiththevessel’soperation.

bulk: drycargo–typicallycommoditiessuchasgrain,coal,ironore,etc.

bunker: Fuelwithwhichtorunaship’sengines.

capesize: bulkcarrierwithacargocarryingcapacityof120,000-200,000dwt.

classificationsociety: Independentorganization,whichthroughverificationofdesign,construction,buildingprocessandopera-tionofvesselsensurethatthevesselsatalltimesmeetalonglistofrequirementstoseaworthiness,etc.Ifthevesselsdonotmeettheserequirements,insuranceandmortgagingthevesselwilltypicallynotbepossible.

coA: contractofaffreightment.Acontractthatinvolvesanumberofconsecutivecargosatpreviouslyagreedfreightrates.

coating: theinternalcoatingsappliedtothetanksofa producttankerenablingthevesseltoloadrefined oilproducts.

demurrage: Achargeagainstthechartererofashipfordelayingthevesselbeyondtheallowedfreetime.thedemurrageratewilltypicallybeatalevelequal

totheearningsinUSd/dayforthevoyage.

dKK: danishKroner.

drycargo: Seebulk.

dwt: deadweighttons.thecargocarryingcapacityofaship.

FFA: ForwardFreightAgreement.Afinancialderivativeinstrumentenablingfreighttobehedgedforwardatafixedprice.

gAAp: generallyacceptedaccountingprinciples.

Handymax: bulkcarrierswithacargocarryingcapacityof 40-60,000dwt.

Handysize: bulkcarrierswithacargocarryingcapacityof 20-40,000dwt.

IAS: InternationalAccountingStandards.

IFrS: InternationalFinancialreportingStandards.

Imo: Internationalmaritimeorganisation.

Lr1: Longrange1.Aspecificclassofproducttankerswithacargocarryingcapacityof60,000–80,000dwt.

Lr2: Longrange2.Aspecificclassofproducttankerswithacargocarryingcapacityof80,000–110,000dwt.

mr: mediumrange.Aspecificclassofproducttankerswithacargocarryingcapacityof40,000–60,000dwt.

opA-90: oilpollutionAct1990.USenvironmentallawimple-mentedfollowingthegroundingofexxonValdezinAlaska.

opec: organizationofthepetroleumexportingcountries.

panamax: Avesselwithacargocarryingcapacityof60,000–80,000dwt.thebiggestvesselallowedtopassthroughthepanamacanal.

p&Iclubs: protection&Indemnityclub.

pool: Agroupingofshipsofsimilarsizeandcharacteri-stics,ownedbydifferentowners,butwhicharecommerciallyoperatedjointly.thepoolmanagerismandatedtochartertheshipsoutforthemaximumbenefitofthepoolasawhole.earningsareequali-zedtakingaccountofdifferencesinships’specifica-tions,thenumberofdaystheshipshavebeenreadyforcharter,etc.

producttanker: Avesselsuitablefortradingcleanpetroleumproductssuchasgasoline,jetfuelandnaphtha.

Sec: USSecuritiesandexchangecommission.

Sr: Shortrange.Aspecificclassofproducttankerswithacargocarryingcapacityof20,000–40,000dwt.

t/c: timecharter.Anagreementcoveringthecharteringoutofavesseltoanenduserforadefinedperiodoftime,wheretheownerisresponsibleforcrewingthevessel,butthecharterermustpayportcostsandbunker.

tce: Seet/cequivalent.

timecharter: Seet/c.

t/cequivalent: thefreightreceivableafterdeductingportexpenses,consumptionofbunkerandcommissions.

Un: theUnitednations.

not

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116

fleeT overvieWaT 31 December 2007

Tankers oWnersHip DWT builT lr2 m.t. tormHeLene 100% 99,999 1997m.t. tormKrIStInA 100% 105,001 1999m.t. tormgUdrUn 100% 101,122 2000m.t. tormIngeborg 100% 99,999 2003m.t. tormVALborg 100% 99,999 2003m.t. tormmArgretHe 100% 109,672 2006m.t. tormmArIe 100% 109,672 2006m.t. tormmArgIt 100% 109,672 2007m.t. tormmette 100% 109,672 2007m.t. tormmArInA 50% 109,672 2007 lr1 m.t. tormSArA 100% 72,718 2003m.t. tormeStrId 100% 74,999 2004m.t. tormemILIe 100% 74,999 2004m.t. tormISmInI 100% 74,999 2004m.t. tormSIgne 100% 72,718 2005m.t. tormSoFIA 100% 72,718 2005m.t. tormUgLAnd 50% 74,999 2007m.t. tormVentUre 100% 74,999 2007

mr m.t. tormALIce 100% 44,999 1995m.t. tormgotLAnd 100% 44,999 1995m.t. tormAgnete 100% 47,165 1999m.t. tormgUnHILd 100% 44,999 1999m.t. tormAnne 100% 44,990 1999m.t. tormnecHeS 100% 47,052 2000m.t. tormcLArA 100% 45,999 2000m.t. tormcecILIe 100% 44,946 2001m.t. tormAmAZon 100% 47,275 2002m.t. SAnJAcInto 100% 47,038 2002m.t. tormmArY 100% 45,990 2002m.t. tormVItA 100% 45,940 2002m.t. tormcAroLIne 100% 44,946 2002m.t. tormgertrUd 100% 45,940 2002m.t. tormgerd 100% 45,940 2002m.t. tormtHYrA 100% 45,990 2003m.t. tormFreYA 100% 45,990 2003m.t. moSeLLe 100% 47,024 2003m.t. roSettA 100% 47,015 2003m.t. tormcAmILLA 100% 44,990 2003m.t. tormcArInA 100% 44,990 2003m.t. HorIZon 100% 46,955 2004m.t. tormHeLVIg 100% 44,990 2005m.t. tormrAgnHILd 100% 44,990 2005m.t. tHAmeS 100% 47,035 2005m.t. WAbASH 100% 46,893 2006m.t. KAnSAS 100% 46,922 2006m.t. repUbLIcAn 100% 46,893 2006m.t. pLAtte 100% 46,920 2006

Tankers oWnersHip DWT builT srm.t. mAdISon 100% 35,828 2000m.t. trInItY 100% 35,834 2000m.t. rHone 100% 35,751 2000m.t. cHArente 100% 35,751 2001m.t. oHIo 100% 37,274 2001m.t. LoIre 100% 37,106 2004m.t. gAronne 100% 37,178 2004m.t. SAone 100% 37,106 2004m.t. FoX 100% 37,006 2005m.t. teVere 100% 36,990 2005 bulkers panamax m.v. tormmArtA 100% 69,638 1997m.v. tormbALtIc 100% 69,614 1997m.v. tormmArLene 100% 69,548 1997m.v. tormrotnA 100% 75,971 2001m.v. tormtInA 100% 75,966 2001m.v. tormAnHoLt 100% 74,195 2004m.v. tormbornHoLm*) 100% 75,950 2004

*)expecteddeliverymarch2008

117

neWbuilDingsaT 31 December 2007

Tankers oWnersHip DWT expecTeD Delivery

lr2 m.t. tormmArIAnne-dALIAn1100-30 100% 110,000 Q22008m.t. tormmAren-dALIAn1100-31 100% 110,000 Q32008m.t. tormmAtHILde-dALIAn1100-32 100% 110,000 Q42009

mr m.t. tormLotte-nbguangzhou05130016 100% 52,000 Q12009m.t. tormASLAUg-nbguangzhou06131034 100% 50,500 Q12010m.t. tormALeXAndrA-nbguangzhou06130041 100% 50,500 Q12010m.t. tormLAUrA-nbguangzhou05130013 100% 52,000 Q22008m.t. tormLoUISe-nbguangzhou05130020 100% 52,000 Q22009m.t. tormLAnA-nbguangzhou05130021 100% 52,000 Q22009m.t. tormALmenA-nbguangzhou06131035 100% 50,500 Q22010m.t. tormAgnete-nbguangzhou06130042 100% 50,500 Q22010m.t. tormLILLY-nbguangzhou05130017 100% 52,000 Q32009m.t. tormAASe-nbguangzhou06131036 100% 50,500 Q32010m.t. tormAmALIe-nbguangzhou06130043 100% 50,500 Q32010m.t. tormLene-nbguangzhou05130015 100% 52,000 Q42008m.t. tormALIce-nbguangzhou06131033 100% 50,500 Q42009

sr m.t. tormgYdA-nbHyundaimipo2111 100% 37,000 Q12009

bulkers kamsarmax

m.v. nbtsuneishiZhoushan-SS063 100% 82,100 Q42010m.v. nbtsuneishiZhoushan-SS064 100% 82,100 Q12011m.v. nbtsuneishiZhoushan-SS065 100% 82,100 Q22011m.v. nbtsuneishiZhoushan-SS066 100% 82,100 Q22011

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dk- 2900 hELLERUP, dENMARkTELEPhONE: +45 39 17 92 00

TELEFAx: +45 39 17 93 93E-MAiL: [email protected]

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