TORM plc(TRMD) - 2019 Q4 - Annual Report

PART I ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS Information regarding the identity of directors, senior management, and advisers is not applicable for this report - Information regarding the identity of directors, senior management, and advisers is not applicable[28] ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE Information on offer statistics and expected timetable is not applicable for this report - Information on offer statistics and expected timetable is not applicable[29] ITEM 3. KEY INFORMATION This section provides key information about TORM plc, including selected financial data, capitalization, indebtedness, offer reasons, use of proceeds, and comprehensive risk factors A. Selected Financial Data This section presents TORM plc's selected historical financial and operating data, including consolidated income statement, balance sheet, and cash flow data from 2015-2019 Consolidated Income Statement Data (USD million) | (USD million, except share data) | 2019 | 2018 | 2017 | 2016 | 2015 | |:---|:---|:---|:---|:---|:---| | Revenue | 692.6 | 635.4 | 657.0 | 680.1 | 540.4 | | Operating profit/(loss) | 205.9 | 2.8 | 39.5 | (107.2) | 143.0 | | Net profit/(loss) for the year | 166.0 | (34.8) | 2.4 | (142.5) | 126.0 | | Basic earnings/(loss) per share, EPS (USD) | 2.24 | (0.5) | 0.0 | (2.3) | 2.4 | | Diluted earnings/(loss) per share, EPS (USD) | 2.24 | (0.5) | 0.0 | (2.3) | 2.4 | | Dividends per share (USD) | 0.10 | 0.00 | 0.02 | 0.40 | 0.00 | Consolidated Balance Sheet Data (USD million) | (USD million) | As of December 31, 2019 | As of December 31, 2018 | As of December 31, 2017 | As of December 31, 2016 | As of December 31, 2015 | |:---|:---|:---|:---|:---|:---|\n| Total assets | 2,003.9 | 1,646.6 | 1,867.4 | 1,714.4 | 1,571.3 | | Total liabilities | 996.2 | 855.5 | 891.4 | 867.2 | 790.7 | | Equity/net assets | 1,007.7 | 791.0 | 976.0 | 847.2 | 780.6 | | Cash and cash equivalents, including restricted cash | 72.5 | 134.2 | 168.3 | 127.4 | 76.0 | | Number of shares (excluding treasury shares), end of period (million) | 74.4 | 62.0 | 63.8 | 73.9 | 62.0 | Consolidated Cash Flow Data (USD million) | (USD million) | 2019 | 2018 | 2017 | 2016 | 2015 | |:---|:---|:---|:---|:---|:---|\n| From operating activities | 171.1 | 70.7 | 109.8 | 171.1 | 214.0 | | Used in investing activities | (322.8) | (175.6) | (113.7) | (119.4) | (158.8) | | (Used in)/from financing activities | 84.5 | 96.0 | 62.7 | (145.6) | 75.0 | | Total net cash flow | (67.2) | (8.9) | 58.8 | (93.9) | 130.2 | B. Capitalization and Indebtedness Information regarding capitalization and indebtedness is not applicable for this report - Information on capitalization and indebtedness is not applicable[33] C. Reasons for the Offer and Use of Proceeds Information on reasons for the offer and use of proceeds is not applicable for this report - Information on reasons for the offer and use of proceeds is not applicable[34] D. Risk Factors This section outlines various risks that could materially affect TORM plc's future performance, categorized by business, industry, company, indebtedness, and Class A common share investment Risks Related to Our Business and Our Industry This sub-section details risks inherent to the product tanker industry and TORM's operations, including market cyclicality, oversupply, geopolitical events, environmental regulations, and economic conditions - The product tanker sector is cyclical and volatile, leading to unpredictable changes in charter rates, vessel values, and profitability. TCE rates increased by 27% in 2019 to $16,526/day, up from $12,982/day in 2018[36] - TORM's revenues are substantially derived from the product tanker segment, making it vulnerable to adverse developments in this single market[40] - New IMO regulations, including the January 1, 2020 low sulfur fuel oil requirement, necessitate significant investments in scrubbers (estimated $1.0-$1.3 million per vessel) or the use of higher-cost compliant fuels. TORM has installed scrubbers on 20 vessels by end of 2019 and plans 27 more in H1 2020[53][76][72] - Geopolitical events, such as attacks on Saudi Arabian oil facilities and U.S. sanctions on COSCO Shipping subsidiaries, significantly impacted tanker rates in late 2019, causing a dramatic recovery in the broader tanker market[383][385] - Economic slowdowns in regions like Asia Pacific (e.g., China's GDP growth slowing to 6.1% in 2019 from 6.6% in 2018) and global trade protectionism (e.g., U.S.-China trade tensions) could negatively impact shipping demand and TORM's earnings[54][95] Risks Related to Our Company This sub-section addresses company-specific risks, including intense competition, reliance on volatile spot charters, customer concentration, financing challenges, an aging fleet, and potential tax liabilities - TORM operates in a highly competitive market, with a significant portion of its revenue (75% in 2019) derived from a limited number of customers, making it vulnerable to the loss of any major client[110][120][265] - The company's dependence on spot charters exposes it to significant fluctuations in freight rates, which can adversely affect earnings. MR spot market rates have historically ranged from $6,500 to $44,600 per day[111] - As of December 31, 2019, TORM had $246 million in available liquidity ($73 million cash, $173 million undrawn credit facilities) but faces $51 million in outstanding capital expenditures for newbuildings, highlighting the need for continued funding[121][440] - The average age of TORM's owned fleet was 10.8 years as of December 31, 2019, leading to potentially increased maintenance costs and decreased competitiveness compared to newer, more fuel-efficient vessels[126][127] - TORM is subject to U.S. federal income tax on U.S. source shipping income if it does not qualify for exemptions under Section 883 of the Code or applicable tax treaties, potentially incurring a 4% gross basis tax[142][145] Risks Relating to Our Indebtedness This sub-section highlights risks associated with TORM's significant financial debt, including limitations on funds, debt covenant restrictions, mandatory repayment triggers, and LIBOR volatility - As of December 31, 2019, TORM had $855 million in interest-bearing debt and $786 million in net interest-bearing debt, requiring a substantial portion of cash flows for debt service[169] - Debt facilities impose covenants (e.g., minimum liquidity, equity ratio, collateral maintenance) that restrict financial and operational flexibility, with non-compliance potentially leading to accelerated debt repayment[173][174] - The company is exposed to LIBOR volatility, with approximately 62% of outstanding interest-bearing debt hedged at 2.33% plus margin as of December 31, 2019. The proposed discontinuation of LIBOR beyond 2021 introduces uncertainty regarding future interest expenses and benchmark rates[181][183] Risks Relating to an Investment in Our Class A common shares This sub-section details risks for investors in TORM's Class A common shares, including ownership concentration, market liquidity, 'emerging growth company' status, dividend uncertainty, and potential dilution - Njord Luxco, an Oaktree affiliate, is the controlling shareholder, owning approximately 64.6% of Class A common shares and a Class C share with 350,000,000 votes, giving it significant control over board elections and certain Articles of Association amendments[189][190][554] - An active and liquid trading market for Class A common shares on Nasdaq New York may not develop or be sustained, potentially leading to price volatility and difficulty in transactions[194][205] - As an 'emerging growth company,' TORM benefits from reduced disclosure requirements, but this status might make its Class A common shares less attractive to some investors[196] - The Board of Directors has sole discretion over dividend declarations, and there is no guarantee of future dividend payments. The company's distribution policy aims to distribute 25-50% of net income semi-annually, but no dividends were declared in 2019[199][200] - As of the report date, 4,701,864 warrants and 2,228,230 Restricted Share Units (RSUs) were outstanding, which, if fully exercised, could result in the issuance of 6,930,094 additional Class A common shares, representing approximately 9% dilution[203][526] Risks Related to Being an English Company Listing Class A Common Shares This sub-section addresses risks from TORM's English incorporation and listing, including shareholder rights differences, enforcement of U.S. judgments, anti-takeover provisions, Brexit uncertainties, and compliance with UK data protection and anti-corruption laws - Shareholder rights are governed by English law, which may differ from those of U.S. corporations, potentially making it difficult for U.S. investors to enforce civil liabilities or U.S. judgments in the UK[209][210] - English law and TORM's Articles of Association contain anti-takeover provisions, such as advance notice procedures for shareholder approvals, which could delay or prevent changes in control[213] - The UK's withdrawal from the European Union (Brexit) creates significant uncertainty regarding future laws, regulations, and economic impacts, which could adversely affect TORM's financial performance[216] - TORM is subject to the UK Bribery Act, U.S. FCPA, and other anti-corruption and trade control laws. Non-compliance could lead to civil or criminal penalties, reputational harm, and significant legal expenses[222][225] - Uncertainties regarding tax policies in various jurisdictions (Denmark, U.S., UK) and the application of complex tax laws, including the BEPS project, could lead to changes in TORM's effective tax rate[226] ITEM 4. INFORMATION ON THE COMPANY This section provides detailed information about TORM plc, including its history, business overview, fleet, organizational structure, property, and the extensive environmental and other regulations governing its operations A. History and Development of the Company TORM plc, founded in 1889, is an English public limited company operating a fleet of 78 vessels for refined oil products, listed on Nasdaq Copenhagen and New York, with recent developments including a 2018 private placement, newbuilding acquisitions, and a 2020 refinancing - TORM plc was founded in 1889 as TORM A/S and became the publicly-held parent company in 2016 after a redomiciliation. It operates a fleet of 78 owned or chartered-in vessels[232][234] - The company's Class A common shares are listed on Nasdaq Copenhagen ('TRMD A') and Nasdaq New York ('TRMD')[232][235] - In January 2018, TORM completed a private placement of 11,920,000 Class A common shares for approximately $100 million, with Njord Luxco purchasing $70 million[237] - In early 2020, TORM agreed to purchase two scrubber-fitted LR2 newbuildings for $95 million, expected delivery in Q4 2021, and refinanced five existing loan agreements for $496 million, extending major debt maturities until 2026[238][239] - The Board recommended a dividend of $0.10 per share ($7.4 million total) for H2 2019 and approved up to $1.4 million in share repurchases, aligning with its distribution policy of 25-50% of net income[240] B. Business Overview This section provides an overview of TORM's business, including fleet composition, developments, employment strategy, customer base, competitive landscape, and extensive environmental, safety, and labor regulations Our Fleet As of the report date, TORM operates a fleet of 78 product tankers, including owned and chartered-in vessels across LR2, LR1, MR, and Handysize segments, with newbuildings and sale and leaseback arrangements - As of the report date, TORM operates a fleet of 78 vessels, comprising owned and chartered-in product tankers[242] - The fleet includes LR2, LR1, MR, and Handysize vessels, with varying build years from 1997 to 2019, and newbuildings expected in 2020 and 2021[243][245] - Several vessels are under financial lease arrangements, including sale and leaseback transactions with purchase options or obligations[246][247][248] Fleet Development TORM's 2019 fleet development included delivery of five MR newbuildings and four second-hand MR vessels, sale of eight older vessels, and significant investments in scrubber installations, with 30 vessels fitted and 17 more planned - In 2019, TORM took delivery of five MR newbuildings and four second-hand MR vessels, financing them through a new tranche of $81 million from the DSF Facility and a $73 million secured loan from ABN[249][250] - Eight older vessels (five MR, three Handysize) were sold in 2019 for approximately $65 million, with $35 million used to repay existing indebtedness[252] - TORM established a joint venture (ME Production China) for scrubber manufacturing and has installed scrubbers on 30 vessels, with 17 more planned by Q3 2020. Two LR2 newbuildings (expected Q4 2021) will also be scrubber-fitted[256] - In Q3 2019, TORM entered into sale and leaseback agreements for eight vessels, including four 2011 MR Vessels and four existing MR vessels (TORM Torino, TORM Titan, TORM Alice, TORM Alexandra)[257] Employment of Our Product Tanker Fleet TORM's primary strategy is to employ vessels in the global spot market to capitalize on hire rate increases, while also utilizing longer-term time charters or shorter-term charters and COAs for stable cash flows - TORM's strategy is to primarily employ vessels in the global spot market to leverage potential increases in product tanker hire rates[260] - The company may also utilize longer-term time charters for stable cash flows and high utilization, or shorter-term charters and COAs[260] Coverage For detailed information on fleet coverage and related key terms, refer to the 'Outlook 2020' and 'Glossary' sections of the Annual Report 2019 - For detailed information on fleet coverage and related key terms, refer to 'Outlook 2020' and the 'Glossary' in the Annual Report 2019[261] Management of Our Fleet TORM manages its fleet through an extensive in-house operating and management platform, handling commercial, administrative, and technical aspects for most owned vessels and all vessel sale and purchase activities - TORM utilizes an extensive in-house operating and management platform for commercial, administrative, and technical management of its fleet[234][263] - All vessel sale and purchase activities are conducted in-house, leveraging relationships with shipbrokers, shipyards, financial institutions, and other shipowners[234] Customers TORM generates revenue by transporting refined oil products and crude oil for major oil companies, state-owned oil companies, and international trading houses in the product tanker segment - Revenue is generated from transporting refined oil products and crude oil[264] - Key customers include major oil companies, state-owned oil companies, and international trading houses[264] Customer Concentration In 2019, TORM's top 20 customers accounted for approximately 75% of its total revenue, indicating significant customer concentration - In 2019, the top 20 customers contributed approximately 75% of total revenue[265] - No other single customer accounted for more than 2% of total revenues[265] Our Business Strategy For information on TORM's business strategy, refer to the 'Strategic Ambition and Business Model' and 'Value Chain in Oil Transportation' sections of the Annual Report 2019 - For details on business strategy, refer to 'Strategic Ambition and Business Model' and 'Value Chain in Oil Transportation' in the Annual Report 2019[266] The Product Tanker Industry Information on the product tanker industry is available in 'The Product Tanker Market' section of the Annual Report 2019, with associated risks detailed in 'Item 3. Key Information—D. Risk Factors' - Information on the product tanker industry is available in 'The Product Tanker Market' section of the Annual Report 2019[267] - Risks related to operating in this market are detailed in 'Item 3. Key Information—D. Risk Factors— Risks Related to Our Business and Our Industry'[267] Environmental and Other Regulations in the Shipping Industry TORM's operations are significantly impacted by complex international, national, and regional environmental and safety regulations, requiring substantial investments in equipment and operational changes, with non-compliance leading to increased costs and liabilities - TORM's vessels are subject to numerous international conventions (e.g., MARPOL, SOLAS, BWM Convention), national laws (e.g., U.S. OPA, CERCLA, CWA, VIDA), and regional regulations (e.g., EU directives) governing safety, security, and environmental protection[267][271][300][314] - Compliance with IMO 2020 sulfur regulations requires using low-sulfur fuels or installing exhaust gas cleaning systems (scrubbers). TORM has installed scrubbers on 30 vessels and plans 17 more by Q3 2020[274][256] - New ballast water management regulations (BWM Convention, U.S. VIDA) mandate the installation of treatment systems on all vessels by September 8, 2024, with estimated costs of $1.0-$1.3 million per vessel[288][313] - Greenhouse gas regulations, including the IMO's initial strategy to reduce emissions by 50% by 2050, could require significant financial expenditures for new emission controls or alternative energy sources[318][321] - Non-compliance with ISM Code or other IMO regulations can lead to increased liability, reduced insurance coverage, and denial of port access or detention[299] Risk of Loss and Liability Insurance TORM carries comprehensive insurance, including marine hull, war risks, and P&I, to mitigate operational risks, with pollution coverage of $1 billion per vessel per incident and additional reinsurance through the International Group - TORM maintains marine hull and machinery, war risks, and protection and indemnity (P&I) insurance for all its vessels to cover operational risks[338][339] - P&I insurance provides $1 billion per vessel per incident for pollution liability, with further coverage through the International Group's pooling agreement up to approximately $8.2 billion[339] - Despite extensive coverage, not all risks are insurable, claims may be rejected, and adequate coverage at reasonable rates is not always guaranteed[337] Permits and Authorizations TORM obtains all necessary permits, licenses, and certificates for its vessels, which vary by cargo, operating waters, crew, and vessel age, aiming for compliance, though new laws could increase costs or limit business - TORM holds all required permits, licenses, and certificates for its vessels, which are dependent on factors like cargo, operating waters, and vessel age[341] - The company aims for compliance, but new regulations could increase operational costs or restrict business activities[341] Competition TORM operates in a highly competitive and fragmented product tanker market, competing with major oil companies and independent owners based on price, vessel attributes, and reputation, with its owned fleet representing approximately 3% of the global product tanker fleet - The product tanker market is highly competitive and fragmented, with TORM competing against major oil companies and independent owners[342] - Competition factors include price, vessel location, size, age, condition, and operator reputation[342] - TORM's owned fleet represents approximately 3% of the global product tanker fleet (in dwt terms)[342] C. Organizational Structure TORM plc, incorporated in England and Wales, is the publicly listed parent company of TORM A/S, operating product tankers through wholly-owned subsidiaries with fleet management handled by global offices - TORM plc is the publicly listed parent company, incorporated in England and Wales, with TORM A/S as its wholly-owned subsidiary[343] - The Group owns and operates product tankers through separate wholly-owned subsidiaries[343] - Fleet management is performed by wholly-owned subsidiaries with offices in the UK, Denmark, India, the Philippines, Singapore, and the USA[343] D. Property, Plants and Equipment TORM plc's only owned properties are its vessels; it leases office space in multiple international locations, employing approximately 341 shore-based staff as of December 31, 2019 - TORM plc's only owned properties are its vessels[345] - The company leases office space in London, Hellerup (Denmark), Singapore, Houston (USA), Manila and Cebu (Philippines), Mumbai and New Delhi (India)[345] - As of December 31, 2019, TORM employed approximately 341 shore-based staff across its global offices[345][522] Patents, Licenses and Trademarks TORM holds no material patents and uses ordinary IT licenses, with registered trademarks for its name and logo in relevant jurisdictions, and owns primary domain names - TORM has no material patents and uses only ordinary IT licenses[346] - The company has registered trademarks for its name and logo in relevant jurisdictions (Denmark, EU, Bahrain, Brazil, Singapore, UAE, USA)[346] - Primary domains include www.torm.com, www.torm.dk, and www.torm.eu[347](index=347&type=chunk) ITEM 4A. UNRESOLVED STAFF COMMENTS There are no unresolved staff comments - There are no unresolved staff comments[348] ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS This section provides management's discussion and analysis of TORM plc's financial condition and results, including non-IFRS measures, operating results, liquidity, capital resources, and financing agreements for 2017-2019 Non-IFRS measures This section defines and reconciles TORM plc's key non-IFRS financial measures, including TCE earnings, Adjusted gross profit, Adjusted EBITDA, Net interest-bearing debt, and Loan-to-value (LTV) ratio, used to assess performance and financial health Non-IFRS Financial Measures (USD million) | (USD million) | 2019 | 2018 | 2017 | |:---|:---|:---|:---|\n| Time charter equivalent (TCE) earnings | 424.9 | 352.4 | 397.1 | | Adjusted gross profit (Net earnings from shipping activities) | 251.9 | 169.5 | 200.2 | | Adjusted EBITDA | 202.0 | 120.5 | 157.6 | | Net interest-bearing debt | 786.3 | 627.3 | 619.7 | | Loan-to-value (LTV) | 46.0% | 52.9% | 55.8% | - TCE earnings increased by $72.5 million (20.6%) from 2018 to 2019, reflecting improved freight rates[354][355] - Adjusted EBITDA increased by $81.5 million (67.6%) from 2018 to 2019, primarily due to higher freight rates[354][358] - Net interest-bearing debt increased by $159 million (25.3%) from 2018 to 2019, while the Loan-to-value (LTV) ratio improved from 52.9% to 46.0%[354][359][360] A. Operating Results This section details TORM plc's operating results for 2017-2019, highlighting revenue, TCE earnings, adjusted gross profit, adjusted EBITDA, and net profit/loss, noting a significant 2019 recovery driven by higher freight rates and an impairment reversal Income Statement Highlights (USD million) | (USD million) | 2019 | 2018 | 2017 | |:---|:---|:---|:---|\n| Revenue | 692.6 | 635.4 | 657.0 | | TCE earnings | 424.9 | 352.4 | 397.1 | | Adjusted gross profit | 251.9 | 169.5 | 200.2 | | Adjusted EBITDA | 202.0 | 120.5 | 157.6 | | Operating profit/(loss) | 205.9 | 2.8 | 39.5 | | Net profit/(loss) for the year | 166.0 | (34.8) | 2.4 | - Total revenue increased by $57 million (9.0%) in 2019 compared to 2018, primarily due to higher spot market freight rates[370] - TCE earnings increased by $73 million (20.7%) in 2019 to $425 million, driven by higher freight rates. Average TCE earnings per day for the fleet were $16,526 in 2019, up 27% from 2018[372][381][386] - Net profit for 2019 was $166 million, a significant increase from a net loss of $35 million in 2018, largely due to higher freight rates and a $114 million impairment reversal[375][379][419] - Operating expenses decreased by $7 million to $173 million in 2019, with average operating expenses per day decreasing by 0.3% to $6,371[412] - Total assets increased by $290 million to $2,004 million as of December 31, 2019, driven by an increase in vessels and capitalized dry-docking, partly offset by a decrease in cash[426] B. Liquidity and Capital Resources This section details TORM's liquidity and capital resources, including available cash, undrawn credit, and financing agreements, noting $72 million cash and $75 million undrawn credit as of December 31, 2019, and a $496 million refinancing in early 2020 - As of December 31, 2019, TORM had $72 million in cash and cash equivalents and $75 million in undrawn credit facilities, totaling $147 million in available liquidity[438] - Outstanding capital expenditures as of December 31, 2019, amounted to $51 million, primarily for newbuilding contracts and scrubber/ballast water treatment system installations[440] - In February 2020, TORM refinanced five existing credit facilities with new Syndicated Facilities Agreement ($386 million) and HCOB Facility ($110 million), totaling $496 million, extending major debt maturities until 2026[239][467][468][471] - As of December 31, 2019, TORM was in compliance with all financial covenants in its debt facilities, which include minimum liquidity, equity ratio, and collateral maintenance requirements[444] Capital Expenditures (USD million) | Capital Expenditures | 2019 | 2018 | 2017 | |:---|:---|:---|:---|\n| Acquisition of vessels and capitalized dry-docking | 81.3 | 162.7 | 103.1 | | Prepayments on newbuildings | 301.8 | 38.9 | 44.3 | | Total | 383.1 | 201.6 | 147.4 | C. Research and Development, Patents and Licenses, etc. Information regarding research and development, patents, and licenses is not applicable for this report - Information on research and development, patents, and licenses is not applicable[479] D. Trend Information For trend information, refer to 'The Product Tanker Market' and 'Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Our Industry' in the Annual Report 2019 - For trend information, refer to 'The Product Tanker Market' and 'Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Our Industry' in the Annual Report 2019[480] E. Off-Balance Sheet Arrangements As of December 31, 2019, TORM plc had no material off-balance sheet arrangements beyond those disclosed in the 'Contractual Obligations' section - As of December 31, 2019, TORM plc had no material off-balance sheet arrangements beyond those disclosed in 'Contractual Obligations'[481] F. Tabular Disclosure of Contractual Obligations For tabular disclosure of contractual obligations, refer to Note 18—'Contractual rights and obligations' in the Annual Report 2019 - For tabular disclosure of contractual obligations, refer to Note 18—'Contractual rights and obligations' in the Annual Report 2019[482] G. Safe Harbor For safe harbor provisions, refer to the 'Cautionary Statement Regarding Forward-Looking Statements' at the beginning of this annual report - For safe harbor provisions, refer to the 'Cautionary Statement Regarding Forward-Looking Statements' at the beginning of this annual report[483] ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES This section provides information on TORM plc's directors, senior management, and employees, including biographical details, compensation, board practices, and share ownership, outlining the Board structure, executive compensation, incentive schemes, and employment agreements A. Directors and Senior Management TORM plc's Board of Directors includes Christopher Helmut Boehringer (Chairman), David Neil Weinstein (Deputy Chairman), Torben Janholt, and Pär Göran Trapp, with key senior management including Jacob Balslev Meldgaard (CEO) and Kim Balle (CFO) - Christopher Helmut Boehringer serves as Chairman of the Board of Directors and is also Managing Director of Oaktree Capital Management (Intl) Limited[488] - David Neil Weinstein is the Deputy Chairman, appointed by the holder of the B Share, and a capital markets, governance, and reorganization specialist[489] - Jacob Balslev Meldgaard is the Executive Director and Chief Executive Officer of TORM A/S since April 2010[496] - Kim Balle serves as the Chief Financial Officer of TORM A/S since December 2019[497] - Board Observers, including employee representatives Rasmus Johannes Skaun Hoffmann and Lars Bjørn Rasmussen, and Annette Malm Justad and Jeffrey Scott Stein, can attend and speak at board meetings but cannot vote[486] B. Compensation TORM's remuneration policy includes fixed base salaries, cash bonuses, and executive fringe benefits, with a Long-Term Incentive Plan (LTIP) granting RSUs; in 2019, CEO Jacob Meldgaard received $2,208,000, and other Senior Management received $1,984,114 (including pensions) and $530,764 in cash bonuses - The remuneration policy for the Board of Directors and Senior Management Team includes fixed base salary, cash-based bonus incentives, and executive fringe benefits[502] - In 2019, CEO Jacob Meldgaard's aggregate compensation was $2,208,000[503] - Other Senior Management Team members (excluding CEO) received an aggregate compensation of $1,984,114 (including $115,880 for pensions) and $530,764 in cash performance bonuses in 2019[504][509] - The Long-Term Incentive Plan (LTIP) grants Restricted Share Units (RSUs) to employees and executives. In 2019, other Senior Management received 382,800 RSUs, vesting over three years with an exercise price of DKK 53.7[505][507] C. Board Practices The Board of Directors is responsible for TORM's strategy and supervises the Executive Director's day-to-day operations, with employment agreements for the CEO and Senior Management including notice periods and non-competition clauses - The Board of Directors is responsible for overall strategy and supervises the Executive Director, who handles day-to-day management[510][511] - The Executive Director (CEO) can be dismissed with 12 months' notice and can terminate with 6 months' notice, subject to global non-competition and non-solicitation clauses for 12 months with 100% base salary compensation[513][515] - Other Senior Management Team members have 9-12 months' dismissal notice and 4-6 months' termination notice, also subject to non-competition clauses with 100% base salary compensation[518][520] D. Employees As of December 31, 2019, TORM employed approximately 341 shore-based personnel across its offices in Denmark, India, the Philippines, and the United States, excluding seafarers - As of December 31, 2019, TORM employed approximately 341 shore-based staff[522] - Employees are located in offices in Denmark, India, the Philippines, and the United States[522] E. Share Ownership This section provides a table detailing Class A common shares and Restricted Share Units (RSUs) held by TORM's directors and Senior Management Team as of March 11, 2020, with Jacob Meldgaard holding a significant number Share and RSU Ownership (as of March 11, 2020) | Directors and Executive officers | Class A Common shares held | Unvested RSUs | Vested RSUs | |:---|:---|:---|:---|\n| Christopher H. Boehringer | 21,204 | | | | David Weinstein | 5,000 | | | | Göran Trapp | 12,820 | | | | Torben Janholt | 6,526 | | | | Jacob Meldgaard | 255,411 | 255,345 | 255,345 | | All other executive officers in the aggregate | * | 326,089 | 262,289 | - Jacob Meldgaard, the Executive Director, holds 255,411 Class A common shares and 255,345 vested and unvested RSUs[523] - Other executive officers collectively hold 326,089 unvested RSUs and 262,289 vested RSUs[523] ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS This section details TORM plc's major shareholders, particularly Njord Luxco as the controlling shareholder, and outlines related party transactions, including director and executive compensation, and transactions with a scrubber-producing joint venture A. Major Shareholders Njord Luxco, an Oaktree affiliate, is TORM plc's controlling shareholder, holding approximately 64.8% of Class A common shares and the sole Class C share with significant voting power, with outstanding warrants and RSUs potentially diluting shares by approximately 9% - Njord Luxco, an Oaktree affiliate, is the controlling shareholder, beneficially owning 48,252,053 Class A common shares, representing approximately 64.8% of outstanding shares as of December 31, 2019[527] - Njord Luxco also holds the sole Class C share, which carries 350,000,000 votes on specified matters, giving it approximately 93.8% of votes on those resolutions[527] - As of December 31, 2019, 4,701,864 warrants and 2,228,230 RSUs were outstanding, which, if fully exercised, could result in the issuance of 6,930,094 additional Class A common shares, representing approximately 9% of issued shares[526] - Cede & Co., a U.S. nominee, held 26,556,754 Class A common shares (35.7%) as of March 10, 2020[529] B. Related Party Transactions Related party transactions include compensation for directors and executive management, and $26.1 million in CAPEX transactions with ME Production China, a scrubber-producing joint venture, in 2019 - Remuneration of directors and executive management is disclosed in 'Item 6. Directors, Senior Management and Employees—B. Compensation'[530] - In 2019, TORM's transactions with its scrubber-producing joint venture, ME Production China, involved $26.1 million in CAPEX[532] - Oaktree affiliates, which manage the controlling shareholder Njord Luxco, have interests in other shipping businesses that may compete with TORM[531] C. Interest of Experts and Counsel Information regarding the interest of experts and counsel is not applicable for this report - Information on the interest of experts and counsel is not applicable[534] ITEM 8. FINANCIAL INFORMATION This section refers to 'Item 18. Financial Statements' for consolidated statements, covers legal proceedings, and outlines the company's distribution policy, noting discretionary dividends subject to Board approval and financial covenants A. Consolidated Statements and other Financial Information This sub-section directs readers to 'Item 18. Financial Statements' for consolidated financial statements, addresses legal proceedings not expected to materially impact the Group, and outlines a distribution policy allowing discretionary dividends up to 50% of net profit - Consolidated financial statements are provided in 'Item 18. Financial Statements'[535] - Current legal proceedings and disputes are not expected to have a material impact on the Group's financial position, results of operations, and cash flows[537] - The Board of Directors has sole discretion to declare and distribute dividends, with a policy to distribute up to 50% of net profit semi-annually, subject to Articles of Association, applicable law, and loan agreements[199][539] B. Significant Changes There are no significant changes to report - There are no significant changes to report[542] ITEM 9. THE OFFER AND LISTING This section provides details on the offer and listing of TORM plc's Class A common shares on Nasdaq Copenhagen and Nasdaq New York, clarifying that other securities like the B share, C share, and warrants are not listed A. Offer and Listing Details TORM plc's Class A common shares are traded on Nasdaq Copenhagen A/S ('TRMD A') and Nasdaq New York ('TRMD'), while the B share, C share, and warrants are not listed on any exchange - Class A common shares trade on Nasdaq Copenhagen ('TRMD A') and Nasdaq New York ('TRMD')[543] - The B share, C share, and warrants are not listed for trading on any exchange[543] B. Plan of Distribution Information regarding the plan of distribution is not applicable for this report - Information on the plan of distribution is not applicable[544] C. Markets TORM plc's Class A common shares are traded on Nasdaq Copenhagen A/S and Nasdaq New York - Class A common shares trade on Nasdaq Copenhagen A/S and Nasdaq New York[545] D. Selling Shareholders Information regarding selling shareholders is not applicable for this report - Information on selling shareholders is not applicable[546] E. Dilution Information regarding dilution is not applicable for this report - Information on dilution is not applicable[547] F. Expenses of the Issue Information regarding expenses of the issue is not applicable for this report - Information on expenses of the issue is not applicable[548] ITEM 10. ADDITIONAL INFORMATION This section provides additional information on TORM plc's share capital, corporate documents, material contracts, exchange controls, and comprehensive tax considerations for U.S., Danish, and UK holders, detailing share classes, outstanding warrants, RSUs, and tax implications A. Share Capital As of December 31, 2019, TORM plc's share capital consisted of 74,748,248 Class A common shares, one Class B share, and one Class C share, with the Class C share granting significant voting power, and outstanding warrants and RSUs potentially leading to future share issuances - As of December 31, 2019, TORM plc had 74,748,248 Class A common shares, one Class B share, and one Class C share outstanding[549] - The Class C share, held by Njord Luxco, carries 350,000,000 votes on specific matters, giving Njord Luxco significant control over board elections and certain Articles of Association amendments[554][556] - As of the report date, 4,701,864 warrants were outstanding, convertible into Class A common shares at DKK 95.24 per share, exercisable until July 13, 2020[562] - As of December 31, 2019, 2,228,230 Restricted Share Units (RSUs) were outstanding, entitling holders to acquire Class A common shares upon vesting, with exercise prices varying by grant year (e.g., DKK 53.7 for 2018 RSUs)[563][566][569] B. Memorandum and Articles of Association The description of TORM plc's Memorandum and Articles of Association is incorporated by reference from its 20-F Registration Statement - The Memorandum and Articles of Association are incorporated by reference from the 20-F Registration Statement[570] C. Material Contracts Material contracts outside the ordinary course of business are discussed in 'Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Our Financing Agreements' and 'Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions' - Material contracts are discussed in 'Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Our Financing Agreements' and 'Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions'[571] D. Exchange Controls Under UK law, there are currently no restrictions on capital export or import, including foreign exchange controls, affecting dividend remittances or other payments to non-resident holders of TORM's common shares - UK law currently imposes no restrictions on capital export/import or foreign exchange controls affecting remittances to non-resident shareholders[572] E. Taxation This section provides a comprehensive overview of U.S. federal, Danish, and United Kingdom tax considerations for TORM plc and its shareholders, covering operating income, vessel sales, distributions, and common share dispositions, including PFIC rules, exemptions, and withholding taxes - TORM's U.S. source shipping income may be subject to a 4% U.S. federal income tax if it does not qualify for exemptions under Section 883 of the Code or applicable U.S. income tax treaties[574][577][587] - TORM does not believe it is, nor expects to become, a Passive Foreign Investment Company (PFIC), based on its income from time and voyage chartering activities being considered active services income[139][603][604] - U.S. Individual Holders may be eligible for preferential U.S. federal income tax rates on dividends if TORM is a 'qualified foreign corporation' and other conditions are met, which TORM believes it satisfies[595][596] - Dividends paid from TORM A/S to TORM plc are generally exempt from Danish withholding tax if TORM plc owns at least 10% and qualifies under the EU Parent/Subsidiary Directive or a tax treaty, which TORM believes it does[627][630] - UK resident individual shareholders are subject to income tax on dividends, with the first £2,000 taxed at 0%, and higher rates (7.5%, 32.5%, 38.1%) applying to amounts exceeding this threshold[634][637] - Transfers of Class A common shares outside the Depository Trust Company system generally incur UK stamp duty and/or SDRT at 0.5%, while redeposits into the system may attract a higher rate of 1.5%[649][650] F. Dividends and Paying Agents Information on dividends and paying agents is not applicable for this report - Information on dividends and paying agents is not applicable[651] G. Statement by Experts Information regarding the statement by experts is not applicable for this report - Information on the statement by experts is not applicable[653] H. Documents on Display TORM plc files reports and information with the SEC, available on www.sec.gov, and shareholders can request copies from the company's Denmark office or visit its website - TORM plc files reports and information with the SEC, accessible at www.sec.gov[654](index=654&type=chunk) - Shareholders can request copies of filings from TORM plc's Denmark office or visit www.torm.com[654](index=654&type=chunk) I. Subsidiary Information Information regarding subsidiary information is not applicable for this report - Information on subsidiary information is not applicable[654] ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK For quantitative and qualitative disclosures about market risk, refer to Note 20—'Risks Associated with TORM's Activities' in the Annual Report 2019 - For market risk disclosures, refer to Note 20—'Risks Associated with TORM's Activities' in the Annual Report 2019[655] ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES Information regarding the description of securities other than equity securities is not applicable for this report - Information on the description of securities other than equity securities is not applicable[656] PART II ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES There are no defaults, dividend arrearages, or delinquencies to report - There are no defaults, dividend arrearages, or delinquencies[658] ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS There are no material modifications to the rights of security holders or use of proceeds to report - There are no material modifications to the rights of security holders or use of proceeds[659] ITEM 15. CONTROLS AND PROCEDURES This section details TORM plc's disclosure controls and procedures and management's annual report on internal control over financial reporting, confirming effectiveness as of December 31, 2019, with no material changes, and noting exemption from auditor attestation as an emerging growth company - TORM's disclosure controls and procedures were effective as of December 31, 2019, providing reasonable assurance of timely and accurate financial reporting[661] - Management assessed the effectiveness of internal controls over financial reporting as effective as of December 31, 2019, based on the COSO 2013 framework[663] - No material changes occurred in internal control over financial reporting during 2019[665] - As an emerging growth company, TORM is exempt from the auditor attestation report requirement for internal control over financial reporting[664] ITEM 16. [RESERVED] This item is reserved - This item is reserved[666] ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT Mr. Göran Trapp, Chairman of TORM's Audit Committee, is designated as an 'audit committee financial expert' and is independent according to SEC rules - Mr. Göran Trapp, Chairman of the Audit Committee, is an 'audit committee financial expert' and is independent per SEC rules[666] ITEM 16B. CODE OF ETHICS TORM has adopted 'Business Principles' as its code of ethics, applicable to all Group entities, employees, directors, and officers, with a copy filed as Exhibit 11.1 and available on the company's website - TORM has a code of ethics, 'Business Principles', applicable to all Group entities, employees, directors, and officers[667] - The Business Principles are filed as Exhibit 11.1 and available on www.torm.com[667](index=667&type=chunk) ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES For details on principal accountant fees and services, refer to Note 4 and the 'Audit Committee Report' in the Annual Report 2019 - For principal accountant fees and services, refer to Note 4 and the 'Audit Committee Report' in the Annual Report 2019[668] ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES There are no exemptions from the listing standards for audit committees to report - There are no exemptions from the listing standards for audit committees[669] ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS During the year ended December 31, 2019, there were no purchases of equity securities by TORM plc or its affiliated purchasers - No equity securities were purchased by the issuer or affiliated purchasers during the year ended December 31, 2019[670] ITEM 16F. CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT There is no change in the registrant's certifying accountant to report - There is no change in the registrant's certifying accountant[671] ITEM 16G. CORPORATE GOVERNANCE As a foreign private issuer, TORM plc is exempt from many Nasdaq New York corporate governance standards, adhering to English Law and the UK Corporate Governance Code, with key differences highlighted regarding director independence, committee composition, and shareholder approval requirements - As a foreign private issuer, TORM plc is exempt from many Nasdaq New York corporate governance standards, adhering instead to English Law and the UK Corporate Governance Code[672] - While Nasdaq requires a majority of independent directors, TORM's Board has three independent directors, and it may deviate from UK Corporate Governance Code requirements with explanation[673] - The Remuneration Committee is chaired by the Board Chairman, Christopher H. Boehringer, which deviates from the UK Corporate Governance Code's recommendation for an independent chair[674] - Shareholder approval for securities issuances and equity compensation plans follows English law, which differs from Nasdaq New York requirements[678][679] - TORM is required to produce Directors' Remuneration Reports annually, with a policy subject to a binding shareholder vote every three years and an annual advisory vote on implementation[681] ITEM 16H. MINE SAFETY DISCLOSURE Information on mine safety disclosure is not applicable for this report - Information on mine safety disclosure is not applicable[686] PART III ITEM 17. FINANCIAL STATEMENTS This section refers to 'Item 18. Financial Statements' for the required financial statements - Financial statements are provided in 'Item 18. Financial Statements'[688] ITEM 18. FINANCIAL STATEMENTS The financial statements required by this item accompany this annual report in the form of the Annual Report 2019 - The required financial statements accompany this annual report in the form of the Annual Report 2019[688] ITEM 19. EXHIBITS This section lists pages from the Annual Report 2019 incorporated by reference into this Form 20-F, including key figures, financial reviews, corporate governance, and audited consolidated financial statements, along with a comprehensive list of exhibits - Key sections from the Annual Report 2019, such as 'Key Figures', 'The Year in Review', 'Outlook 2020', 'Strategic Ambition and Business Model', 'TORM Fleet Overview', 'The Product Tanker Market', 'Financial Review 2019', 'Corporate Governance', and 'Investor Information', are incorporated by reference[691] - The audited consolidated financial statements, including the income statement, statements of comprehensive income, balance sheet, statements of changes in equity, and cash flow statement for 2017-2019, along with related notes, are incorporated from the Annual Report 2019[692] - A comprehensive list of exhibits, including the Memorandum and Articles of Association, share certificates, trust deeds, incentive plans, and certifications, is provided[694]