TORM : Annual Report 2016

AN N UAL REPORT 201 6

TORM AT A GLANCE

A WORLD- LEADING

PURE-PLAY PRODUCT TANKER COMPANY

ONE OF THE WORLD'S LARGEST OWNERS AND OPERATORS

OF PRODUCT TANKERSTHAT TRANSPORT REFINED OIL PRODUCTS

TORM.COM

CUSTOMERS CONSIST OF

MAJOR INDEPENDENT OIL COMPANIES, STATE-OWNED OIL COMPANIES,

OIL TRADERS AND REFINERS

TORM PLC IS LISTED ON

COPENHAGEN

YEARS OF

TRACK RECORD

~3,000

SEAFARERS

277

LAND-BASED

EMPLOYEES

TORM

WORLD FLEET

10 (+4)

On the water Newbuildings

318

LR2

7

53

11

Handysize

LR1

MR

338

1,573

704

3

CHAIRMAN'S STATEMENT

4

HIGHLIGHTS 2017

PRODUCT TANKER MARKET

CORPORATE GOVERNANCE

INCOME STATEMENT

STRATEGIC REPORT

Chairman's statement 4 Key figures 6

TORM's restructuring, corporate reorganization 7 and impact on the Annual Report 2016

Highlights 8

Outlook 2017 10

Statement by the Executive Director 12

From exploration to end consumption 14 The TORM fleet 15

Strategic ambition and business model 16 The product tanker market 18

Key performance indicators 24

Corporate reorganization 26

Corporate social responsibility 27

Risk management 33 Financial review 2016 36

GOVERNANCE

Chairman's introduction 47

Corporate governance 48

Audit Committee Report 51

Risk Committee Report 54

Remuneration Committee Report 56 Investor information 70

Directors' Report 7 2

Statement of Directors' responsibilities 75

FINANCIAL STATEMENTS 2016

Consolidated income statement 78

Consolidated statement of comprehensive income 79

Consolidated balance sheet 80 Consolidated statement of changes in equity 82

Consolidated cash flow statement 83 Notes 84

Parent Company 2016 1 13

Independent auditor's report 120

Fleet overview 126

Glossary 128

TORM PLC · Birchin Court, 20 Birchin Lane · London, EC3V 9DU · United Kingdom · Tel.: +44 203 713 4560 · www.torm.com · VAT: 239 53 53 87 TORM 2016

4 Strategic Report

With the combination of a strong integrated operating platform,

a transparent governance structure and a solid balance sheet, I believe TORM provides an excellent platform for generating shareholder value within the product tanker segment. There is ample work to do as we work through this softer market environment, and I look forward to reporting on our progress throughout the coming year.

Chairman of the Board Christopher H. Boehringer.

In a year where product tanker rates weakened significantly, I am pleased to report that TORM maintained its position in the forefront of its industry with a commercial performance which was among the best of its peer group. As a pure-play product tanker company, this performance can be attributed to the Company's integrated operating platform, its

well-maintained fleet and its presence in all larger product tanker classes. With TCE earnings1)and cash flow at the top end of comparable industry players, I consider the solid 2016 results to be another step towards TORM's ambition to be the Reference Company within the product tanker industry.

INTEGRATED OPERATING PLATFORM

TORM puts customers first, and the Company's One TORM integrated operating platform ensures close cooperation between the commercial and technical divisions and provides the commercial management team with enhanced flexibility to service customers across vessel classes. TORM has a number of functions in-house which other players outsource, including full commercial management, full technical management as well as its S&P team. Having

an internal S&P team allows the Company to utilize its relationships with brokers, yards, banks and shipowners to track and execute on opportunities to grow and refresh the fleet, where this makes commercial sense.

TRANSPARENT GOVERNANCE

As part of its drive to become a Reference Company in the product tanker industry, TORM is very focused on maintaining a transparent governance structure with no

related party issues or conflicts of interest. This is considered a key benefit for all stakeholders and a prerequisite to creating an attractive vehicle for investors looking for exposure to this sector.

In this vein, on 15 April 2016, the Company undertook a corporate reorganization which included the establishment of a UK parent company, TORM plc. We believe that this step will improve the marketability of the Company by attracting a broader and more diversified international investor base and will facilitate an eventual dual listing in the United States. Amongst other things, the establishment of a UK company results in TORM reporting under the internationally recognized UK Corporate Governance Code, which entails comprehensive reporting and transparency requirements.

TORM plc was listed on Nasdaq Copenhagen on 19 April 2016 under the ticker "TRMD A".

SOLID CAPITAL STRUCTURE

Throughout 2016, TORM has maintained its strategic and financial flexibility. During the year, the Company extended its relationships with existing lenders and expanded the lender group. The new financing facilities totaling USD 271m announced in the second half of 2016 ensure a solid capital position going forward and allow TORM the flexibility to pursue investment opportunities where attractive.

1. See Glossary on pages 128-132 for definition of TCE earnings.

TORM 2016