ANNOUNCEMENT NO. 14 - 2007
20 June 2007
Incentive scheme for employees
In TORM's Annual Report 2006, the Company announced that it would establish an
Incen-tive Scheme for its employees. The Board of Directors has approved the
full programme, whose content includes the following
· All land based employees and officers employed on permanent contracts (apart
from trainees, apprentices and cadets) that are directly employed by A/S
Damp-skibsselskabet TORM, in total approximately 365 employees, are included in
the programme. The Board of Directors are not included in the programme.
· The programme covers the financial years of 2007, 2008 and 2009.
· The programme consists of both bonuses and share options.
· The bonus will be awarded based on TORM achieving a calculated ROIC (Return
on Invested Capital) in each financial year compared to each year's budgeted
ROIC.
75% of the achieved bonus will be paid in cash and 25% in shares, which the
em-ployee will own provided that that they are still employed by the Company
after a period of 2 years.
The individual employee's share of the bonus will be based partly on the
individ-ual's salary and partly on the evaluation of the individual's
performance. The em-ployee will receive their bonus after the publication of
TORM's Annual Report.
If TORM achieves its expected ROIC for the financial year for 2007, a total
bonus amount of USD 9.5 million will be available, which is similar to the
total amount paid in bonuses for the financial year of 2006. If the ROIC is
higher or lower, then the amount available for bonuses will be adjusted
accordingly.
· The maximum number of share options under the allotment in the financial year
2007 is 1,029,300, which each gives the employee the right to acquire one TORM
share of a nominal value of DKK 5. It is presumed that an equivalent total of
share options will be issued in 2008 and 2009.
· The share options consist of 2 elements:
50% of the share options are granted with a fixed exercise price. For the
share options granted in 2007, the price is DKK 179 per share, (based on the
market price when the Annual Report for 2006 was published on 5 March 2007) and
for the following years, DKK 190 and DKK 201 respectively.
50% of the shares options are granted with an exercise price that is determined
ul-timately with the publication of TORM's Annual Report after a 3 year period,
i.e. for the allotment of 2007, in March 2010. The exercise price is determined
by the rela-tive development in TORM's share price in relation to a defined
peer group*). If the TORM share price develops relatively better than the peer
group, then the share options will have a value.
*) The peer group consists of the following companies: Dampskibselskabet
“NORDEN” A/S, Overseas Shipholding Group, Omega Navigation Enterprises Inc.
(Class A), Frontline Ltd., Teekay Shipping Corporation, Tsakos Energy
Navigation Ltd., General Martime Coopera-tion, Brostrom AB (B-SHS).
· All share options can be exercised after 3 years from allotment and should be
at the latest exercised 3 years later. For the 2007 allotment, share options
can be exercised after the publication of the Annual Report for 2009, in March
2010, and shall be exer-cised by March 2013 at the latest.
· The share options will be in according to Danish law and conditions include
continued employment in the Company until the share options have vested.
· The market value of the share option programme is based on the Black-Scholes
model and calculated at USD 9.4 million for 2007.
· TORM's holding of treasury shares is sufficient to cover the programme for
the 3 year period.
Contact N. E. Nielsen, Chairman, tel.: +45 72 27 00 00, mobile: +45 25 26 33 43.
About TORM
TORM is one of the World's leading carriers of refined oil products and has
significant activi-ties in the bulk market. The Company operates more than to
100 modern and secure ves-sels, most of them in pool co-operation with other
respected shipping companies, sharing TORM's commitment to safety,
environmental responsibility and customer service.
TORM was founded in 1889 and has constantly adapted itself and benefited from
the signifi-cant changes characterizing shipping. The Company conducts business
all over the World and is headquartered in Copenhagen, Denmark. TORM's shares
are listed in Copenhagen (ticker TORM) as well as on NASDAQ (ticker TRMD). For
more information, visit www.torm.com.
SAFE HARBOUR STATEMENT - FORWARD LOOKING STATEMENTS
Matters discussed in this release may constitute forward-looking statements.
Forward-looking statements reflect our current views with respect to future
events and financial performance and may include statements concerning plans,
objectives, goals, strategies, future events or performance, and underlying
assumptions and other statements, which are other than statements of historical
facts.
The forward-looking statements in this release are based upon various
assumptions, many of which are based, in turn, upon further assumptions,
including without limitation, management's examination of historical operating
trends, data contained in our records and other data available from third
parties. Although TORM believes that these assumptions were reasonable when
made, because these assumptions are inherently subject to significant
uncertainties and contingencies which are difficult or impossible to predict
and are beyond our control, TORM cannot assure you that it will achieve or
accomplish these expectations, beliefs or projections.
Important factors that, in our view, could cause actual results to differ
materially from those discussed in the forward-looking statements include the
strength of world economies and currencies, changes in charter hire rates and
vessel values, changes in demand for “tonne miles” of crude oil carried by oil
tankers, the effect of changes in OPEC's petroleum production levels and
worldwide oil consumption and storage, changes in demand that may affect
attitudes of time charterers to scheduled and unscheduled dry-docking, changes
in TORM's operating expenses, including bunker prices, dry-docking and
insurance costs, changes in governmental rules and regulations including
requirements for double hull tankers or actions taken by regulatory
authorities, potential liability from pending or fu
ture litigation, domestic and international political conditions, potential
disruption of shipping routes due to accidents and political events or acts by
terrorists.
Risks and uncertainties are further described in reports filed by TORM with the
US Securities and Exchange Commission, including the TORM Annual Report on Form
20-F and its reports on Form 6-K.
Attachment: Calculation in accordance with Black-Scholes
The market value of the share programme is calculated on the basis of the
Black-Scholes model. The key assumptions for the calculation of the market
value are:
· The exercise price is adjusted for Torm dividends
· The volatility on the Torm share was estimated at 34% and for the Peer Group
at 26 %
· The risk free interest rate based upon expiry of the options was 3.85%
· The quoted share price as of 5 March 2007 was DKK 179 per share.
· The options are in average held for a period of 4½ year
· The correlation rate between Peer Group and TORM is 92.5%
